WEBVTT - What the Crypto Crash Means for ETFs 0:00:05.600 --> 0:00:13.080 Welco A trillions. I'm Joel Webber and I'm Eric Belchiers. Eric, 0:00:13.080 --> 0:00:15.880 you went down Under to Australia, but while you went 0:00:15.920 --> 0:00:19.640 down under, crypto seemed to go down under. I'm curious, 0:00:19.800 --> 0:00:21.960 while you were on your trip, which was a work 0:00:22.400 --> 0:00:27.000 E t F inspired travel abroad, how much did people 0:00:27.040 --> 0:00:28.760 want to talk about crypto not E t F s 0:00:28.920 --> 0:00:31.120 A little bit. Obviously, I'm there for the e t 0:00:31.240 --> 0:00:33.440 F market and it's not as big of a deal there. 0:00:33.479 --> 0:00:35.480 I just felt like the mental thing was more about 0:00:35.520 --> 0:00:37.960 the e t F market and Australian equities and that 0:00:38.040 --> 0:00:40.400 kind of thing. But certainly came up. But where I 0:00:40.440 --> 0:00:42.240 noticed that the most was on my Twitter feed. I 0:00:42.240 --> 0:00:44.880 would go to bed, and when you wake up in Australia, 0:00:45.000 --> 0:00:47.560 say six thirty seven, it's three thirty four pm in 0:00:47.560 --> 0:00:49.840 the US, so I would get to see a whole 0:00:49.920 --> 0:00:52.720 day's news flow, And of course there was always one 0:00:52.800 --> 0:00:55.480 or two new nuggets of like horrendous details about f 0:00:55.560 --> 0:00:59.120 t X, the crypto exchange that halted redemptions, halted withdrawals 0:00:59.160 --> 0:01:02.960 and allegedly used customer funds, and Sam Bankman freed who 0:01:04.120 --> 0:01:05.800 you know, it was the face of crypto he was 0:01:05.840 --> 0:01:08.560 supposed to be like this disheveled tech nerd that like 0:01:08.640 --> 0:01:11.479 you could trust versus say, the Wall Street slick people. 0:01:11.880 --> 0:01:15.600 And this was a whole image covered on many, many magazines, 0:01:15.640 --> 0:01:19.840 many TV shows, And for this to be a complete implosion, 0:01:20.640 --> 0:01:23.440 I think is I can't overstate how brutal it is 0:01:23.480 --> 0:01:26.000 for Crypto because of how popular he was and how 0:01:26.680 --> 0:01:28.760 how much media exposure he had. Plus the other thing 0:01:28.880 --> 0:01:32.320 is having come from investor relations in crisis communications that 0:01:32.360 --> 0:01:34.400 were to affirmed there for a couple of years. What 0:01:34.480 --> 0:01:36.040 you want with bad news is just get it all 0:01:36.040 --> 0:01:39.080 out quick and let the news flow take something else 0:01:39.200 --> 0:01:42.880 to Two days later, this comes out drip drip, drip, 0:01:43.040 --> 0:01:45.600 drip drip every new day. We're on like week three 0:01:45.640 --> 0:01:49.000 now and there's still new details. This is bad, This 0:01:49.080 --> 0:01:50.960 could be. I'm not gonna say it's the death blow 0:01:51.000 --> 0:01:54.000 for Crypto, but it is a devastating punch which I'm 0:01:54.040 --> 0:01:57.000 I'm really wanting to talk about this. So we're gonna 0:01:57.000 --> 0:01:59.960 be joined by James Seifert from bloom We're gonna Telligent 0:02:00.120 --> 0:02:02.840 and Katie Gryfield from Broomberg News. We spent in the 0:02:03.000 --> 0:02:05.639 in the good times, we spent a lot of time 0:02:05.800 --> 0:02:10.639 talking about crypto and bitcoin et F s, and then 0:02:10.760 --> 0:02:13.519 now we've hit not only a crypto winner, but maybe 0:02:13.880 --> 0:02:16.000 a crypto nuclear winner is what a lot of people 0:02:16.040 --> 0:02:18.200 were calling it. So I think it's worth us talking 0:02:18.240 --> 0:02:20.160 about this again and what it might mean for e 0:02:20.240 --> 0:02:23.040 t maybe a crypto coma. And the question is will 0:02:23.040 --> 0:02:30.560 it wake up this time on Jilliance? What the SBF? 0:02:32.760 --> 0:02:35.360 Katie James, welcome back to Jillian's. Thanks for having me, 0:02:35.680 --> 0:02:39.440 Happy to be here. Okay, Katie, it felt like the 0:02:39.480 --> 0:02:43.600 E t F world was really excited about bitcoin. How 0:02:43.639 --> 0:02:46.040 does it feel now? I mean, if you think back 0:02:46.080 --> 0:02:48.720 a year ago, I feel like we were talking about 0:02:48.720 --> 0:02:52.160 all time highs. We had just gotten the futures Bitcoin 0:02:52.240 --> 0:02:55.320 et F out the door to your sec here's another application. 0:02:55.360 --> 0:02:57.720 Maybe you miss my last one. Yeah, for sure, people 0:02:57.720 --> 0:03:01.120 are like, okay, this was the last needed step. Now 0:03:01.120 --> 0:03:02.679 we're going to get a spot pitcoinn e t F. 0:03:03.200 --> 0:03:06.400 You also had all these crypto ish products launched, just 0:03:06.520 --> 0:03:08.720 dozens of them, and then worldwide you have all these 0:03:08.760 --> 0:03:12.000 actual crypto e t p s. You look at where 0:03:12.000 --> 0:03:17.320 we are now November two, and it's a totally different picture. 0:03:17.560 --> 0:03:20.440 And we've seen that big pipeline that I just talked 0:03:20.440 --> 0:03:23.440 about is dried up, and are there hopes for a 0:03:23.520 --> 0:03:25.360 spot bitcoin e t F at this point it doesn't 0:03:25.400 --> 0:03:28.320 feel like it. Well, let me say this before we 0:03:28.320 --> 0:03:30.960 get to that. I agree, it's things don't look good 0:03:31.000 --> 0:03:35.200 right now, but James doesn't an e t F fix this. 0:03:35.640 --> 0:03:37.920 If the spotted Bitcoin e t F had been approved, 0:03:37.920 --> 0:03:40.080 like we were all saying the SEC should, and you 0:03:40.120 --> 0:03:42.920 were in this, you probably wouldn't have felt much you 0:03:42.960 --> 0:03:45.360 could have. There's no way your funds would have been 0:03:45.440 --> 0:03:49.000 like frozen, and and the ones that traded seemed to 0:03:49.040 --> 0:03:51.880 trade find so it seemed like we were actually right 0:03:51.920 --> 0:03:55.680 by by encouraging the SEC to approve a spot pitcoin 0:03:55.720 --> 0:03:57.440 e t F. Yeah. I mean, if you had money 0:03:57.440 --> 0:04:00.880 at ft X or block Fire wherever, jet Genesis that's 0:04:00.880 --> 0:04:03.320 frozen right now, you would have much preferred to have 0:04:03.400 --> 0:04:06.400 your money in a bitcoin et F, which you can 0:04:06.440 --> 0:04:09.240 do it through future ZTF. But that's the that's not 0:04:09.320 --> 0:04:11.000 exactly what people want. People want to spot and they 0:04:11.040 --> 0:04:13.120 went to these other areas and right now they're in trouble. 0:04:13.120 --> 0:04:14.920 And if you had an et F that was regulated 0:04:14.920 --> 0:04:17.400 by the SEC under the thirty three Act, we wouldn't 0:04:17.440 --> 0:04:19.919 be having as much of a conversation, but no matter what, 0:04:19.960 --> 0:04:22.080 people would have lost a lot of money because there 0:04:22.160 --> 0:04:23.560 was a lot of money on this even before we 0:04:23.560 --> 0:04:26.400 were looking at a spot bitcoin ETF approval worth mentioning 0:04:26.640 --> 0:04:30.159 that there are those future based products that you you 0:04:30.480 --> 0:04:33.320 just alluded to, how have they stood up in all 0:04:33.360 --> 0:04:37.599 of us? So actually they've done tremendously well. Their bidass 0:04:37.600 --> 0:04:40.640 spreads have stayed very tight um, the trading has gone 0:04:40.640 --> 0:04:42.800 through the roof. Biddoh is now the one a very 0:04:42.880 --> 0:04:45.520 highly traded et F. It's more more traded than GBTC, 0:04:45.640 --> 0:04:48.920 which didn't seem possible last year, so it's it's traded 0:04:49.000 --> 0:04:50.960 very well, traded tightly, and honestly, one of the big 0:04:50.960 --> 0:04:53.320 things we were worried about for potential with bitcoin future 0:04:53.400 --> 0:04:55.240 et F s is as has been talked about on 0:04:55.240 --> 0:04:57.960 the show many times, and when you trade futures there's 0:04:58.080 --> 0:05:01.039 the potential for backward backwardation and contango. So you you 0:05:01.080 --> 0:05:03.599 have to sell a contract every month essentially, So if 0:05:03.640 --> 0:05:05.920 you're selling the contract, and you're selling a contract at 0:05:05.920 --> 0:05:07.560 one price and you have to buy a contract at 0:05:07.560 --> 0:05:10.480 a higher price, that constantly eats away at your returns 0:05:11.000 --> 0:05:13.200 UM and the year and a half leading up to 0:05:13.240 --> 0:05:16.640 the Bitcoin Futures et F approval, the rolling that front 0:05:16.680 --> 0:05:19.880 on future contract would have underperformed spot bitcoin itself by 0:05:19.880 --> 0:05:22.320 a hundred and eighty percent over a year and a half, 0:05:22.360 --> 0:05:24.280 which is a lot. So we were worried. We didn't 0:05:24.279 --> 0:05:26.520 think it would be quite that bad. Futures have become 0:05:26.560 --> 0:05:29.320 more institutionalized, more efficient, but we were worried that it 0:05:29.360 --> 0:05:31.479 could be ten twelve percent a year based on what 0:05:31.520 --> 0:05:33.160 we were seeing in the markets. But what happened in 0:05:33.160 --> 0:05:36.240 the futures market for bitcoin, everything flattened out. There's bury 0:05:36.320 --> 0:05:38.480 any curve. At some point there was a tiny bit 0:05:38.480 --> 0:05:41.640 of backwardation which actually aids in the performance. So we've 0:05:41.640 --> 0:05:44.479 only seen over the last year since this thing launched, 0:05:44.480 --> 0:05:47.679 Like Katie mentioned, it's only underperformed by about one point 0:05:47.680 --> 0:05:50.520 eight one point nine percent on spot market. And these 0:05:50.520 --> 0:05:53.000 things charge basis points, so you take out half of 0:05:53.040 --> 0:05:55.480 that and it's basically tracking within a percentage point of 0:05:55.520 --> 0:05:59.680 Spot Bitcoin. The problem is it's down so that one 0:05:59.720 --> 0:06:02.480 point eight I mean, that's like UM does probably little 0:06:02.520 --> 0:06:04.760 to uh, I guess sue the people who might have 0:06:04.800 --> 0:06:07.800 bought it, So working great unless you are invested in 0:06:07.880 --> 0:06:11.440 there basically, but talk a little bit. Bid Oh one 0:06:11.520 --> 0:06:13.760 year old. You guys wrote a story about it. You 0:06:13.800 --> 0:06:15.640 actually wish that a happy birthday on t F. I 0:06:15.720 --> 0:06:19.280 q it was I share a birthday with Yeah, that's cute. 0:06:19.279 --> 0:06:21.919 I'm a lot older. But what's your take on biddo 0:06:22.040 --> 0:06:24.280 and how it's held up since then? I will say 0:06:24.320 --> 0:06:27.800 it almost feels like there's this very delicious irony here 0:06:27.839 --> 0:06:30.680 that the spot Bitcoin e t F, or rather the 0:06:30.720 --> 0:06:32.680 future is back to eq t F s have performed 0:06:33.160 --> 0:06:35.800 so well, and I've spoken to a lot of E 0:06:35.880 --> 0:06:38.480 t F people, some in this room who have said that, 0:06:38.560 --> 0:06:40.839 you know, this is why we should have a Spot 0:06:41.120 --> 0:06:43.839 e t F for all the problems or the potential 0:06:43.839 --> 0:06:46.159 problems that would have been avoided that James went through. 0:06:46.240 --> 0:06:50.159 But if you're Gary Gensler, who's one of his underlying 0:06:50.200 --> 0:06:53.960 problems is the exchanges, he's you know, made a point 0:06:53.960 --> 0:06:57.320 of that, and we're talking about this fantastic blow up 0:06:57.360 --> 0:07:00.600 of one of the biggest exchanges, I don't think this 0:07:00.680 --> 0:07:02.960 moves the needle in a in a good way for 0:07:03.040 --> 0:07:05.800 the Spot Bitcoin et F crowd um and one of 0:07:05.800 --> 0:07:07.920 the reasons we said that they should approved a spot 0:07:07.920 --> 0:07:11.080 Bitcoin e TF is that it would all these market 0:07:11.080 --> 0:07:14.040 makers who are not dumb. These are highly sophisticated people 0:07:14.040 --> 0:07:16.240 with a lot of money at play. They would have 0:07:16.840 --> 0:07:19.040 knows their way into these exchanges a bit, and it's 0:07:19.080 --> 0:07:21.680 possible they would have sniffed out some problems with f 0:07:21.760 --> 0:07:24.400 t X long before and not used it. But even 0:07:24.440 --> 0:07:26.080 if they even if f t X had a problem, 0:07:26.080 --> 0:07:28.240 there's multiple exchanges, so they would be able to source 0:07:28.280 --> 0:07:31.360 liquidity elsewhere. And I think that's the world. The story 0:07:31.480 --> 0:07:33.960 is an e t F kind of takes away that 0:07:34.120 --> 0:07:37.000 that risk of one of these exchanges having an implosion 0:07:37.000 --> 0:07:39.440 in halting redemptions. I will say f t X was 0:07:39.520 --> 0:07:41.960 the trading platform in the crypto world. Everyone wanted to 0:07:42.000 --> 0:07:44.080 use f t X because of the way they did liquidations, 0:07:44.120 --> 0:07:47.360 because of how efficient the trading was. So there were 0:07:47.400 --> 0:07:49.320 institutions that were caught up in that. But yeah, like 0:07:49.360 --> 0:07:51.000 you were mentioning in the in the e t F world, 0:07:51.040 --> 0:07:54.880 you have the Jaine Streets, the vertu uh Susquehanna, Ken Griff, 0:07:54.880 --> 0:07:56.680 the Citadel. These people are all in here. They are 0:07:56.720 --> 0:07:59.160 the biggest money in the world and they are trading. 0:07:59.360 --> 0:08:02.000 They make Mark it's more efficient when they trade. That said, 0:08:02.040 --> 0:08:03.840 they might have been using fd X because there's plenty 0:08:03.840 --> 0:08:05.560 of institutions that had money on f t X that 0:08:05.600 --> 0:08:07.360 we now know. They don't know how much money they're 0:08:07.360 --> 0:08:09.960 going to get back, if any at all, and not 0:08:10.360 --> 0:08:14.720 small amounts of money, big figures, millions of dollars. Okay, 0:08:14.760 --> 0:08:18.400 So Eric, what are the odds that the SEC wades 0:08:18.480 --> 0:08:24.920 into this and ever ever ever approves a spot bitcoin ETF. So, 0:08:25.440 --> 0:08:28.560 on one hand, this is devastating to crypto in general, 0:08:28.680 --> 0:08:30.560 and I don't know if you could say, well, this 0:08:30.640 --> 0:08:32.560 is probably just prolonged to spot bitcoin e f TF 0:08:32.640 --> 0:08:36.000 because this proves Gensler sort of worries. On the other hand, 0:08:36.480 --> 0:08:38.800 this could fast track regulation, and we all know that 0:08:38.880 --> 0:08:42.600 was the one thing Ginzler needed to satisfy him for 0:08:42.640 --> 0:08:45.640 approving to spot bitcoin ETF. Then he would feel more comfortable. 0:08:45.679 --> 0:08:49.360 So maybe this actually gets it going. Um, And I 0:08:49.400 --> 0:08:53.920 think the question is, let's just say hypothetically there's regulation. 0:08:54.000 --> 0:08:56.360 Maybe Biden says to Gensler gets something going, or even 0:08:56.360 --> 0:08:59.199 says the Congress get some regulations out and Agains is 0:08:59.240 --> 0:09:00.920 happy they prove us up at twenty t F. Let's 0:09:00.920 --> 0:09:02.680 just say that all happens in a year. Probably not, 0:09:02.720 --> 0:09:06.400 but let's just say it does. Will advisors ever come back. 0:09:06.440 --> 0:09:08.200 I know they trust the E t F and they 0:09:08.240 --> 0:09:10.480 would certainly be like, this is probably gonna be better 0:09:10.480 --> 0:09:14.559 for me than an exchange. But is crypto so um 0:09:14.600 --> 0:09:17.880 I guess mutilated and the reputation so bad in the 0:09:17.960 --> 0:09:22.079 toilet that doesn't even matter anymore. Yeah, I would say 0:09:22.240 --> 0:09:24.480 Eric and I were on the record we thought was 0:09:24.480 --> 0:09:27.080 a realistic opportunity. This was granted over a year ago 0:09:27.080 --> 0:09:30.120 when we first started saying that. I still think isn't 0:09:30.120 --> 0:09:32.840 off the table for the reasons Eric mentioned. My over 0:09:32.920 --> 0:09:36.760 under was basically September two, end of Q three um 0:09:36.840 --> 0:09:38.560 I part of that was that I thought there was 0:09:38.640 --> 0:09:42.000 tail risk or tail potential for like some sort of 0:09:42.200 --> 0:09:44.360 big regulation to come in and US get like an 0:09:44.360 --> 0:09:46.520 earlier approval than we expected, maybe like Q one or 0:09:46.600 --> 0:09:49.360 Q two of this year, based on like some regulatory guidelines. 0:09:49.400 --> 0:09:52.120 There was a lot of movement in Congress. Ironically, f 0:09:52.200 --> 0:09:54.280 t X was trying to change the way things were happening, 0:09:54.280 --> 0:09:56.720 which would have made their markets regulated by the CFTC, 0:09:56.880 --> 0:09:59.600 which could have satisfied it. Obviously that's not happening. So 0:09:59.640 --> 0:10:02.360 I think all those tail risk events of potentially having 0:10:02.440 --> 0:10:06.559 an early UM move move towards regulation, getting more regulatory 0:10:06.600 --> 0:10:09.560 clarity are gone. So I don't know that the September 0:10:10.679 --> 0:10:12.520 is going to happen anymore, but I don't think it's 0:10:12.559 --> 0:10:15.560 completely gone. As Eric mentioned, this could bring more regulation, 0:10:15.640 --> 0:10:18.280 more demand for Congress to step in and do something here. 0:10:25.679 --> 0:10:28.680 But what about the ultimate question here, which is will 0:10:28.880 --> 0:10:33.160 would investors come back if there were a regulated entity 0:10:33.240 --> 0:10:35.840 like a spot bitcoin ETF. That's like the big rallying 0:10:35.920 --> 0:10:40.959 bull cry right that it'll unlock this previously untapped type 0:10:40.960 --> 0:10:44.240 of investor. But at this point I'm not sure that. Yeah, 0:10:44.240 --> 0:10:47.839 But is the untapped market turned off? That's a great 0:10:47.920 --> 0:10:51.480 question if you think about who would be using a 0:10:51.559 --> 0:10:55.240 spot Bitcoin e t F trying to put it into 0:10:55.679 --> 0:10:58.680 you know, perhaps accounts that they can't go out and 0:10:58.840 --> 0:11:02.839 have a cold wallet ness sat right, that's somebody would 0:11:02.840 --> 0:11:06.120 want to get in low and watch it didn't should 0:11:06.120 --> 0:11:10.040 go higher. So I think I think if that product existed, 0:11:10.800 --> 0:11:14.200 somebody would be willing to dabble in it, and the 0:11:14.200 --> 0:11:16.240 whole point of it would be that it would be safe. 0:11:16.520 --> 0:11:21.040 I don't think there's any political win here for anybody 0:11:21.080 --> 0:11:23.920 to touch this. So I don't see that I'm barish 0:11:24.000 --> 0:11:27.319 on your call for I don't. I don't. I think 0:11:27.320 --> 0:11:30.320 it's just a lose lose. It just looks nasty. So 0:11:30.679 --> 0:11:33.360 right now, at least I wouldn't see anybody willing to 0:11:33.360 --> 0:11:36.720 weigh in. It's too radioactive. Make any clarity here, Yeah, 0:11:36.760 --> 0:11:40.600 that's that's the That's why I are still low. But 0:11:40.920 --> 0:11:44.120 there is perceivably a path, but I would still stick 0:11:44.160 --> 0:11:46.280 to lower. It's definitely radioactive. Right now, I don't think 0:11:46.280 --> 0:11:48.120 it like if Gensler were to approve a spotic when 0:11:48.160 --> 0:11:50.040 E t F. Right now, I can't like he's obviously 0:11:50.080 --> 0:11:51.959 not going to go anywhere near it. But a few 0:11:51.960 --> 0:11:54.040 months from now, I do think there's going to be 0:11:54.040 --> 0:11:57.000 a call from people in Congress, from regulators and legislators 0:11:57.040 --> 0:12:00.800 to to do something about regulation the cryptocurrencies ACE. So, 0:12:00.800 --> 0:12:02.400 so we are about to talk about something and I 0:12:02.400 --> 0:12:04.800 want to come back to it, which is g BTC. 0:12:05.360 --> 0:12:07.920 If we we said it earlier, what is it and 0:12:08.000 --> 0:12:11.240 what makes it really interesting? Right now? Gbtcson over the 0:12:11.280 --> 0:12:15.199 counter trust that does it. It's almost like a closed 0:12:15.280 --> 0:12:17.960 end fund um where so it's it doesn't trade. There's 0:12:18.000 --> 0:12:19.719 no arbitrage, so it doesn't trade near the n A 0:12:19.800 --> 0:12:22.880 V of Bitcoin's once traded a huge premium and now 0:12:22.880 --> 0:12:26.000 it's at a huge discount. I think forty two closed 0:12:26.000 --> 0:12:28.760 at forty five on Friday and going down. Yeah, and 0:12:28.800 --> 0:12:32.120 that's crazy. That's a that's a steep discount. And g 0:12:32.240 --> 0:12:35.360 BTC was, which is, by the way, the gray scale 0:12:35.480 --> 0:12:37.839 Bitcoin Trust. Yeah, a lot of people had used this 0:12:37.880 --> 0:12:40.240 because there was no spoty TF. I think a lot 0:12:40.240 --> 0:12:42.000 maybe they didn't even understand that it could have these 0:12:42.000 --> 0:12:44.440 steep discounts. But it's kind of a bummer if you 0:12:44.440 --> 0:12:46.680 went in anywhere near that premium or if it was 0:12:46.880 --> 0:12:48.440 close to the n A V and now you're down. 0:12:49.240 --> 0:12:51.400 Even if bitcoin was flat, it just would be a 0:12:51.400 --> 0:12:54.200 bummer to lose. That's why. Which is great. So bitcoin 0:12:54.520 --> 0:12:57.199 is at one price. Yeah, Hi, if you're in this thing, 0:12:58.679 --> 0:13:01.280 off whatever that spot price right, So actually have some 0:13:01.360 --> 0:13:05.200 sizes here. I was just looking this up. Um in 0:13:05.360 --> 0:13:10.560 rough terms, since the end of g BTC is up 0:13:10.679 --> 0:13:13.959 something like a thousand percent, but bitcoin itself is up 0:13:14.000 --> 0:13:16.960 over three thousand percent, So this thing has lagged and 0:13:17.040 --> 0:13:21.600 lagged and lagged. Discount is staggering, but when you put 0:13:21.600 --> 0:13:24.400 it that way, it's even more dramatic. Yeah, and but 0:13:24.559 --> 0:13:27.280 a lot of the lagging happened on the downturn too, 0:13:27.360 --> 0:13:29.320 and so I think I look one point where bitcoin 0:13:29.400 --> 0:13:31.440 was flat and you were down like a bunch, and 0:13:31.880 --> 0:13:33.959 that would really hurt. Uh. It's if you're up a 0:13:33.960 --> 0:13:36.440 thousand percent you can still kind of sleep at night, 0:13:36.480 --> 0:13:39.120 I think, But it's when you're down and bitcoin is 0:13:39.120 --> 0:13:42.360 flat or something like that, which is can be frustrating 0:13:42.679 --> 0:13:45.440 and maybe you can't get your money out either. Right, Yeah, 0:13:45.559 --> 0:13:47.800 well you could sell it, but again you would be 0:13:47.840 --> 0:13:50.640 selling it. It would be like buying something and then 0:13:50.920 --> 0:13:55.400 you know you want to sell it discount or the 0:13:55.440 --> 0:13:58.640 ideas you weighed around potentially comes up, or if Gray 0:13:58.679 --> 0:14:00.319 scales trying to convert it to an each if that 0:14:00.320 --> 0:14:03.320 would completely close that gap. Some people are buying GBT 0:14:03.440 --> 0:14:06.760 so ce for that hope. They feel like it's almost 0:14:06.760 --> 0:14:10.160 like a call option on them converting to an et F, 0:14:10.200 --> 0:14:13.480 which would give you just like that, and that's a 0:14:13.520 --> 0:14:15.679 that's a could would be great trade, right, but that's 0:14:15.720 --> 0:14:17.760 the risk and doesn't look like that slightly. But James 0:14:18.200 --> 0:14:21.880 recently looked into this and Gray scales owners are having 0:14:21.960 --> 0:14:23.560 a bit of a problem. So now there's a whole 0:14:23.560 --> 0:14:26.520 debate on whether GBTC will will be forced to liquidate 0:14:26.880 --> 0:14:31.120 or could have problems UM and and solvency potential with 0:14:31.200 --> 0:14:32.840 the people who own them. So, James, why don't you 0:14:32.880 --> 0:14:37.680 go into that whole scene right now? So let me 0:14:37.720 --> 0:14:40.280 take a step back. Digital Currency Group is the owner 0:14:40.280 --> 0:14:43.320 of gray Scale. They own two hundred some odd other companies. 0:14:43.720 --> 0:14:46.120 One of the two big companies that most people know 0:14:46.200 --> 0:14:49.320 in the crypto world are gray Scale, which operates GBTC, 0:14:49.720 --> 0:14:52.000 and Genesis, which is basically a prime broker. They were 0:14:52.040 --> 0:14:55.920 the first institutionalized prime broker in the cryptocurrency space. Right now, 0:14:55.960 --> 0:14:59.320 Genesis had some unknown exact exposure to the ft X 0:14:59.360 --> 0:15:02.160 blow up. Right now, Genesis and d c G are 0:15:02.160 --> 0:15:05.040 trying to raise money. It's been reported by multiple sources 0:15:05.040 --> 0:15:06.920 that they're trying to raise a billion dollars or so 0:15:07.000 --> 0:15:11.680 in emergency financing UM. Genesis could potentially be heading towards something. 0:15:11.880 --> 0:15:14.600 They're definitely in a liquidity or solvency crisis, So we 0:15:14.600 --> 0:15:16.200 don't know what's gonna happen. There could be news by 0:15:16.240 --> 0:15:18.160 the time this drops that something big has happened in 0:15:18.160 --> 0:15:20.360 the space, so a lot of people are concerned about 0:15:20.360 --> 0:15:23.600 some sort of contagion risk with Genesis going into getting 0:15:23.600 --> 0:15:27.040 into trouble, which brings DCG into trouble, which leaves people 0:15:27.120 --> 0:15:30.400 unknown to what's going to happen to g BTC. Now 0:15:30.440 --> 0:15:33.240 in the in the documents of GBDC, they specifically state 0:15:33.680 --> 0:15:37.640 that if the sponsor goes has goes into insolvent, or 0:15:37.720 --> 0:15:41.160 goes into insolvency or files for bankruptcy, then the trust 0:15:41.240 --> 0:15:44.200 will be liquidated unless fifty of the shares vote to 0:15:44.280 --> 0:15:46.720 like transfer to a new sponsor like go to I 0:15:46.720 --> 0:15:49.280 don't know Goldman or coin Base or some other person 0:15:49.280 --> 0:15:52.120 that would sponsor this trust, um. But that means if 0:15:52.160 --> 0:15:54.480 they if this if Gray Scale does go bankrupt, which 0:15:54.520 --> 0:15:56.360 I don't see any way that that happens right now 0:15:56.360 --> 0:15:58.040 because of the amount of money they're bringing in on 0:15:58.080 --> 0:16:01.360 all these trusts. But again, a b DCG sells off 0:16:01.480 --> 0:16:04.200 Gray Scale as an investment to raise capital, I don't 0:16:04.200 --> 0:16:05.360 know if they would want to do that. This is 0:16:05.360 --> 0:16:08.360 one of the crown crown jewels of their portfolio. Um. 0:16:08.440 --> 0:16:10.840 But essentially it comes bound to the fact that if 0:16:10.880 --> 0:16:14.320 GBTC has to sell uh has to liquidate, they're going 0:16:14.360 --> 0:16:16.000 to sell the bitcoin in the open market. It's not 0:16:16.040 --> 0:16:17.520 a lot of people seem to think like, oh, I'm 0:16:17.520 --> 0:16:19.040 just gonna get the bitcoin back that I have a 0:16:19.080 --> 0:16:21.560 pro rad to share. No, the documents are very clear 0:16:21.600 --> 0:16:23.520 that you would get they would sell the bitcoin in 0:16:23.520 --> 0:16:25.240 the open market and give you a prograd to share 0:16:25.240 --> 0:16:28.600 of those sales. So there's a theory out there that 0:16:29.160 --> 0:16:33.200 d c G is actually shorting bitcoin and buying GBTC 0:16:33.880 --> 0:16:38.160 knowing they're gonna liquidate and they're gonna pocket. Well, So 0:16:38.320 --> 0:16:39.960 that's a theory out there. But I mean, we know 0:16:40.040 --> 0:16:42.440 for a fact that they were buyers of GBTC big 0:16:42.440 --> 0:16:45.440 buyers in Q two of two. They were buyers in 0:16:45.520 --> 0:16:47.400 Q one, There are buyers in Q two, and they 0:16:47.400 --> 0:16:50.280 were actually sellers in Q three, and I'm assuming they're 0:16:50.320 --> 0:16:52.440 also sellers now in Q four. There's no way to 0:16:52.440 --> 0:16:54.600 know for sure, but I'd be willing to bet that 0:16:54.640 --> 0:16:57.640 they're probably selling some shares. But there's also they can't 0:16:57.680 --> 0:17:00.720 just sell. There's the GBDC. It's what's it's a it's 0:17:00.720 --> 0:17:03.280 a rule one a offering, which like we're going to 0:17:03.360 --> 0:17:04.800 get way into the weeds. We don't have to get 0:17:04.840 --> 0:17:08.040 into that. But it's not regulated on the closed in 0:17:08.119 --> 0:17:11.080 funds you talked about. But under one A, if you're 0:17:11.080 --> 0:17:13.680 a related party, which d c G is, you can 0:17:13.720 --> 0:17:17.720 only sell one percent of the shares outstanding that every 0:17:17.720 --> 0:17:20.199 three months. So they it's not like they can just 0:17:20.320 --> 0:17:23.080 dump this on the street immediately. They have to sell slowly. 0:17:23.119 --> 0:17:25.359 If they are selling, I'm assuming based on what's happening 0:17:25.400 --> 0:17:28.119 with Genesis and d CG that they're likely selling a 0:17:28.119 --> 0:17:30.159 little bit to try to raise money. But we we 0:17:30.200 --> 0:17:32.199 don't know exactly what's going on behind the scenes. This 0:17:32.280 --> 0:17:33.800 is very opaque. This is not like the E d 0:17:33.920 --> 0:17:36.240 F world where we know exactly what's going on. I 0:17:36.280 --> 0:17:40.960 have a word, speculation. This is just it feels so 0:17:41.160 --> 0:17:43.840 all of this feels so speculative. It's hard to throw 0:17:44.080 --> 0:17:49.080 thing about throwing money into this and this whatever this is. Yeah, 0:17:49.080 --> 0:17:51.040 it's hard to earn money here you go. It feels 0:17:51.040 --> 0:17:55.120 a little black gone, gone, gone gone. I've spent more 0:17:55.200 --> 0:18:00.360 time on Signal and in Twitter d M s over 0:18:00.400 --> 0:18:02.920 the past two weeks then I have in any other 0:18:02.960 --> 0:18:05.720 period as a journalist. But have a question for James, 0:18:05.760 --> 0:18:10.200 so wait, I understand why DCG was buying shares of GBTC. 0:18:10.520 --> 0:18:13.239 A lot of letters here. Why were they? Why were 0:18:13.280 --> 0:18:15.680 they selling? Do you think that was just to raise cash? 0:18:15.960 --> 0:18:19.119 Why would DCG be selling shares of GBTC. I don't know. 0:18:19.200 --> 0:18:21.000 There's no way to know exactly why they're selling, but 0:18:21.040 --> 0:18:22.919 they owned a ton of it, so there's no reason, 0:18:23.000 --> 0:18:25.119 like if they need to get unloaded a little bit 0:18:25.119 --> 0:18:26.600 off of their balance sheet, or they just don't want 0:18:26.600 --> 0:18:28.679 to have that much exposure. They're going to sell slowly 0:18:28.720 --> 0:18:32.680 over time. They're probably trying to limit the market impact 0:18:32.720 --> 0:18:34.560 of that selling. Who who knows? We don't know why 0:18:34.600 --> 0:18:37.000 they're selling, but we know they they're the largest holder 0:18:37.080 --> 0:18:39.960 by far. They own more shares of GPDC than any 0:18:40.000 --> 0:18:43.440 individual entity has owned of GBDC in its history. UM, 0:18:43.480 --> 0:18:45.720 so it's not like they're just unloading tons and tons 0:18:45.720 --> 0:18:47.680 of shares. It's a very small amount that they sold 0:18:47.680 --> 0:18:51.600 in Q three. Can I ask another speculation question, Cathy 0:18:51.680 --> 0:18:57.160 would bought GBDC shares last week? And I never got 0:18:57.160 --> 0:18:59.800 a satisfying answer. Why Maybe you could speculate about that? 0:19:00.480 --> 0:19:04.440 So when she bought bitcoin was around sixteen thousand, seventeen 0:19:04.480 --> 0:19:07.840 thousand dollars per bitcoin. GBTC at the time was trading 0:19:07.840 --> 0:19:10.720 at a forty two ish percent discount, maybe more during 0:19:10.720 --> 0:19:13.639 the day. So I recently saw a GBTC was trading 0:19:13.680 --> 0:19:16.240 over a fifty discount. So there are times in a 0:19:16.359 --> 0:19:18.200 day where it goes crazy. So she could have seen 0:19:18.200 --> 0:19:20.199 one of those times and it was like, basically, if 0:19:20.240 --> 0:19:22.720 you're buying at that discount, you're buying exposure to bitcoin. 0:19:22.880 --> 0:19:25.639 At like I said, it's seventeen thousand dollars, you're getting 0:19:25.640 --> 0:19:28.080 it nine thou five hundred dollars. That's what your exposure 0:19:28.119 --> 0:19:30.040 is at this type of discount. So she might have 0:19:30.080 --> 0:19:32.359 just said this, She's definitely believe in bitcoin. We know 0:19:32.400 --> 0:19:34.119 that for sure, so she probably just thought this was 0:19:34.160 --> 0:19:36.280