Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. Joe, Tracy, Uh Bitcoin,
Speaker 1: I think we could just leave it there. Let's just
Speaker 1: bring on the guest. No, we actually could. Let's just
Speaker 1: do it, Okay. Today we're going to be talking about bitcoin,
Speaker 1: cryptocurrency having another big year. As Tracy says, no need
Speaker 1: for intro, no need for banter here, let's just jump
Speaker 1: right into it. I love that, all right. So we're
Speaker 1: going to be speaking with a veteran of the industry
Speaker 1: to the to the extent that such a thing can
Speaker 1: even be described, uh these days. We're gonna be speaking
Speaker 1: to Melton Demure's. She's the chief strategy officer at coin Shares,
Speaker 1: very visible, very big follow on, someone great to follow
Speaker 1: on Twitter, media, etcetera. Melton, thank you very much for
Speaker 1: joining us. Hey, great to be here, Thanks for having me.
Speaker 1: If you're a veteran, right, it's okay, it's it's heard
Speaker 1: at this point, right. I mean what you said is correct.
Speaker 1: You know, I've been in this industry for six years now. Um,
Speaker 1: if six years makes one a veteran, you know, I
Speaker 1: think it just speaks to how young this industry is. Yeah,
Speaker 1: I mean I think I read this weekend that it
Speaker 1: was just the twelve anniversary of the Bitcoin white paper.
Speaker 1: So I guess that means literally half of the time
Speaker 1: that the industry has been in existence, you've been involved
Speaker 1: in it. And I mean and arguably, you know, in
Speaker 1: one personally, I started interacting with bitcoin, like the way
Speaker 1: you bought or you didn't buy bitcoin. You would go
Speaker 1: to a website to bitcoin faucet, you know, by bitcoin
Speaker 1: on Craigslist. You would send money to Japan to buy
Speaker 1: bitcoin on on cox. So arguably, you know, the industry
Speaker 1: didn't really exist really until or so. So I know
Speaker 1: we skipped the intro and I think that's in odd
Speaker 1: thoughts first, but it kind of it kind of speaks to, um,
Speaker 1: I guess, the craziness of the year that bitcoin has
Speaker 1: actually had. So I'm looking at the chart right now,
Speaker 1: bitcoin is hovering around thirteen thousand, and the amazing thing
Speaker 1: about bitcoin, I guess, is just how many times it
Speaker 1: seems to have come back from the dead in some
Speaker 1: way or the other. And I will admit, as a
Speaker 1: journalist who has been covering the space for a long time,
Speaker 1: I think at this point, I've written at least three
Speaker 1: obituaries for bitcoin um in one way or another. I
Speaker 1: think I did one in like two thousand twelve, and
Speaker 1: maybe another one in in two thousand seventeen or two
Speaker 1: thousand eighteen. Why has it come back this year? Look,
Speaker 1: Bitcoin as as an asset right behaves UM in a
Speaker 1: cyclical manner. There are shorter sort of cycles that occur,
Speaker 1: and then there's a larger secular trend which has sort
Speaker 1: of been up into the right because in each successive
Speaker 1: high Bitcoin hits a higher high UM and the lows
Speaker 1: are not quite as the prior quite as low as
Speaker 1: the prior lows. So I think what you're seeing here
Speaker 1: is Bitcoin operates typically you know we've seen so far,
Speaker 1: isn't it roughly to your cycles? Although it seems like
Speaker 1: that pace is now in increasing and as a result,
Speaker 1: you know, there's sort of short term interim cyclical behavior,
Speaker 1: but a larger term secular trend that obviously myself and
Speaker 1: many other people in the industry building firms are are
Speaker 1: looking for UM and tracking against. What what do you
Speaker 1: do there? Yeah? So Quin shares a great question, Joe.
Speaker 1: We are a financial services firm. We are best known
Speaker 1: as an asset manager. We manage one point one billion
Speaker 1: in assets in the form of publicly listed exchange traded products.
Speaker 1: They're traded throughout Europe under the XPT Provider brand. Uh
Speaker 1: So we've been in that business for about five years.
Speaker 1: We're also in the trading business, venture capital business, and
Speaker 1: a variety of other financial services products. That's what we do.
Speaker 1: So one thing I'm curious about, given given the role
Speaker 1: that you just described, I keep seeing bitcoin described as
Speaker 1: a diversification strategy this year, especially for corporate treasurers. Is
Speaker 1: that something that you're actually seeing in the marketplace at
Speaker 1: the moment. Yeah, so, so we've actually done a lot
Speaker 1: of research on bitcoin as a portfolio diversifier. I think
Speaker 1: it's certainly true that in March, um, you know, investment
Speaker 1: committees corporate treasures around the world looked at the makeup
Speaker 1: of their portfolio and realized something probably needs to change.
Speaker 1: Now that we're entering into November and coming close to
Speaker 1: the end of the year, we're in a really interesting
Speaker 1: sort of environment. Um. First, you know, I used to
Speaker 1: work in corporate treasury before I got into bitcoin, so
Speaker 1: part of me feels an affinity for corporate treasurers around
Speaker 1: the world who are looking at the universe of investimbal assets.
Speaker 1: And at the end of the day, you know, when
Speaker 1: I was in corporate treasuring in I was at Exxonmobile,
Speaker 1: and I recall at that point in time, our cost
Speaker 1: of capital was effectively zero, meaning we could borrow at
Speaker 1: very very low rates, and that environment I think continues
Speaker 1: to persist for many corporates, particularly in the US, and
Speaker 1: then we could deploy that capital um in terms of
Speaker 1: you know, opportunities to to earn yield on that capital.
Speaker 1: We could actually deploy that capital into the treasury market,
Speaker 1: into the RPE market and earn a fairly healthy return
Speaker 1: three to five percent with very minimal risk. That environment
Speaker 1: doesn't exist anymore. For corporate treasures were in a zero
Speaker 1: interest rate environment. Target inflation is two to two point
Speaker 1: five percent, And so you know, for a treasure who's
Speaker 1: looking at opportunity cost, the idea of losing two percent
Speaker 1: per year to inflation while holding treasuries that yield effectively zero,
Speaker 1: or holding ten years that maybe yield you know what
Speaker 1: was it to to two point five percent, that's not
Speaker 1: really an attractive proposition. So I think across the board,
Speaker 1: treasures investors, people who have capital to allocate, or who
Speaker 1: have cash that they're trying to deploy towards productive uses,
Speaker 1: which at this point I think is is most investors
Speaker 1: they're looking at the universe of options and they need
Speaker 1: something different. Right, we've seen gold how to break out.
Speaker 1: I think a lot of investors, particularly individual investors as
Speaker 1: well as some institutional investors, have been allocating into gold
Speaker 1: as a diversifier. And I think what's been interesting to observe.
Speaker 1: You know, if you as you've mentioned, bitcoin has been
Speaker 1: through numerous cycles. It's been through up, ups and downs.
Speaker 1: I think historically, one of the core arguments we've always
Speaker 1: heard when we speak to institutions, corporates, and investors about
Speaker 1: bitcoin is concerns around its volatility, concerns around its cyclical nature,
Speaker 1: concerns around on its lack of correlation or now it's
Speaker 1: correlation to macro markets. And I think for the first time,
Speaker 1: what's happened is bitcoin doesn't exist in a bubble. It
Speaker 1: operates in a larger market, operates in a larger political
Speaker 1: and social environment. For the first time, bitcoin actually is
Speaker 1: less volatile than equities, and so I think in many ways,
Speaker 1: a lot of the thinking around how to approach portfolio
Speaker 1: construction has started to shift as investors and allocators look
Speaker 1: at the reality of the situation. And so I would
Speaker 1: say this narrative of bitcoin being a portfolio diversifier is
Speaker 1: certainly something we're hearing more of, but I would just
Speaker 1: caveat that by saying, you know, by no means is
Speaker 1: this the prevalent mindset. I think as we look at
Speaker 1: most firms and and most of our clients, it's really
Speaker 1: only a small handful who have taken the leap into bitcoin.
Speaker 1: I think for many though, bitcoin still feels in many
Speaker 1: ways reputation sationally risky, and many firms, particularly asset managers,
Speaker 1: are still waiting for validation from a blue chip firm
Speaker 1: that will normalize sort of the entry into bitcoin. So,
Speaker 1: by no means do I think there's a wall of
Speaker 1: institutional money that's just going to start buying up bitcoin. So,
Speaker 1: just on that note, a really practical question, but if
Speaker 1: you were a corporate treasurer, how would you actually allocate
Speaker 1: into bitcoin at the moment, what's the most efficient way
Speaker 1: of doing it? Yeah, so I think other variety of
Speaker 1: ways of doing it. The way it's been done to
Speaker 1: date is uh, spot buying so UM. Fortunately, micro Strategy
Speaker 1: and Square both wrote up a brief documents on how
Speaker 1: they entered the bitcoin market. So what we've seen is
Speaker 1: most treasures spot buying and then uh SO buying on
Speaker 1: the open market using a sort of a time weighted
Speaker 1: average price UM over a specific duration, and then custody
Speaker 1: ing the bitcoin with a custode and that specializes in
Speaker 1: a long term storage of bitcoin. However, UM in the
Speaker 1: middle of this month, we're gonna be hosting a crypto
Speaker 1: credit summit where we'll be focusing on the emergence of
Speaker 1: a credit market around crypto assets, particularly UM in relation
Speaker 1: to people utilizing bitcoin to earn yield um through lending
Speaker 1: it out to people to trade, so they're a variety
Speaker 1: of other ways. On the trading side, you know, we
Speaker 1: look a lot at arbitrage opportunities between the futures forward
Speaker 1: curve and stop markets and sort of playing that arbitrage,
Speaker 1: I think is an interesting way to gain short term
Speaker 1: exposure without having so much long term risk. We also
Speaker 1: see people buying structured products like our xpt provider product.
Speaker 1: In the US, the Gray Scale Bitcoin trust is popular.
Speaker 1: Canada has its own bitcoin et F, so there are
Speaker 1: number of structured products that are now emerging, and then
Speaker 1: the last option is through a fund um And in
Speaker 1: those sort of fund world we see variety of different strategies.
Speaker 1: A lot of them are very much of venture strategy,
Speaker 1: where they may have and our location to bitcoin and tokens.
Speaker 1: Some are a quant driven strategy, whether actively trading around
Speaker 1: bitcoins volatility, or maybe bitcoin and other highly liquid assets.
Speaker 1: So they are a variety of different ways. But to date,
Speaker 1: what we've seen on the corporate side at least is
Speaker 1: primarily spot buying and then putting that bitcoin with a
Speaker 1: custodian m So, so many questions, right, here's one that
Speaker 1: so Tracy mentioned in the beginning as a journalist, she's
Speaker 1: maybe written three obituaries. Thank you for making that point again, Joe,
Speaker 1: thank you, But Tracy, you're probably gonna write like two
Speaker 1: or three more before all's said and done, So do
Speaker 1: you print those out? Well? So, this is the interesting thing,
Speaker 1: all right, this is the interesting thing. I've written three
Speaker 1: obituaries for bitcoin, but each obituary for bitcoin has been
Speaker 1: about the death of a bitcoin for a particular purpose.
Speaker 1: And this is what really interests me in crypto, because
Speaker 1: when it started, it was all about you know, disintermediation,
Speaker 1: all about not trusting the central bank, and then fast
Speaker 1: forward to and now everyone's talking about intermediation and how
Speaker 1: they want big asset managers to get into the space.
Speaker 1: So I'm sure in a year or two I'll probably
Speaker 1: be writing the obituary for that particular idea. But it's
Speaker 1: always a different sort of facet of bitcoin comes up. Yeah,
Speaker 1: And look, I think this evolution of the narrative is
Speaker 1: a function of the world changing and Bitcoin's place in
Speaker 1: the world changing. Right again, I think the hard part
Speaker 1: here is Bitcoin doesn't exist in the isolated vacuum. Right
Speaker 1: as the world changes, so does the market, So do
Speaker 1: other asset classes, so does bitcoin, And so I think
Speaker 1: the hard part it is and and the interesting part
Speaker 1: for me, like, I think we're finally in a in
Speaker 1: a market narrative where bitcoin actually starts to make sense.
Speaker 1: We've been in a bowl market for the last eleven years, really,
Speaker 1: since the last financial crisis. When the Bitcoin white Paper
Speaker 1: was written and I was a little baby leaving college,
Speaker 1: I thought I was going to be an investment banker.
Speaker 1: That didn't happen, so I ended up working in the
Speaker 1: energy industry, which maybe in a way, I turned out
Speaker 1: to be a good choice because I ultimately ended up
Speaker 1: in bitcoin. But look, this is the first time that
Speaker 1: we're watching bitcoin in a down market. You know, we've
Speaker 1: had two back to back quarters of economic contraction. I
Speaker 1: think we can officially say we're now in our recession,
Speaker 1: and I think bitcoin's behavior in our session is very
Speaker 1: different than bitcoin's behavior in a booming macro mark good.
Speaker 1: So all of these sort of narratives coming together constantly
Speaker 1: are changing Bitcoin's form and fun function in the broader
Speaker 1: economic system that we're we're all a part of. So
Speaker 1: I think, um, you know this, this evolution of narrative
Speaker 1: is going to continue until bitcoin reaches a point of maturity,
Speaker 1: and that may take another three, five, seven, ten years.
Speaker 1: Here's something, here's like a contradiction that I see that
Speaker 1: I help me wrap my head around it with a bitcoin.
Speaker 1: So it's like, there's this just this incredible industry, community, movement,
Speaker 1: culture associated It's extremely impressive. On the other hand, and
Speaker 1: in a way, you know, it's it's extraordinarily large in
Speaker 1: a sense. According I'm looking um at one of the
Speaker 1: measures right now that the total value of all outstanding bitcoin.
Speaker 1: Sometimes it's called the market cap is two billion. That's
Speaker 1: a lot. On the other hand, that's like a sort
Speaker 1: of medium sized software I p O these days, or
Speaker 1: maybe a little bit bigger than some like red hot
Speaker 1: cloud company. Yeah, And so like is Bitcoin bigger small?
Speaker 1: Because on the one hand, like it's extraordinary, on the
Speaker 1: other hand, like it's like a regular like sort of
Speaker 1: like middle of the stock Joe, I mean, Joe, you
Speaker 1: answered the question. Bitcoin's teeny tiny apple has enough spare
Speaker 1: cash on its balance sheet to buy the entire Bitcoin
Speaker 1: market cap. Bitcoin's teeny tiny, right, And if we look
Speaker 1: at the universe of assets and asset allocators, that coin
Speaker 1: continues to be miniscule in relation to where it started.
Speaker 1: Bitcoin's massive. Right, Everything is is relative. I mean I
Speaker 1: remember Bitcoin trating at two fifty dollars and we were like,
Speaker 1: oh my god, and we just broke a billion dollar
Speaker 1: market cap, like this is huge. Um, So like everything's relative.
Speaker 1: But again, I think this is part of the challenge.
Speaker 1: It's sort of a chicken and egg problem. Until Bitcoin's
Speaker 1: market cap gets larger and the market gets farmer, liquid
Speaker 1: market gets deeper, you're not going to see people allocating
Speaker 1: to bitcoin in size because the market cap is simply
Speaker 1: too small, right, So this is actually this leads to
Speaker 1: something that I wanted to ask, which is can bitcoin
Speaker 1: b both a viable financial asset and one that's expected
Speaker 1: to largely go up in value and a method of
Speaker 1: payment at the same time. I think this is a
Speaker 1: great question, Tracy, and I think here again, what's great
Speaker 1: about bitcoin is, uh, so much of the way people
Speaker 1: articulate bitcoin is really tied to their personal view and
Speaker 1: their personal beliefs. And what's interesting is that one asset
Speaker 1: can have so many different permutations, so many different characterizations
Speaker 1: UM that that lend themselves to whoever is sort of
Speaker 1: you know, doing the pontificating. In my view, I don't
Speaker 1: need to use my bitcoin um to pay for coffee, right.
Speaker 1: I think one of the criticisms of bitcoin has been like, oh,
Speaker 1: you can't pay for coffee using bitcoin. Well, great, because
Speaker 1: I don't want to say, spend my bitcoin on coffee.
Speaker 1: It's really really not my intention holding bitcoin. There are
Speaker 1: a lot of other cryptocurrencies UM and in particular even
Speaker 1: US dollar assets that are blockchain based that will allow
Speaker 1: me to buy my coffee. So when I think about
Speaker 1: bitcoin for for me personally, and I think for many
Speaker 1: allocators that we talked to. The view on bitcoin is
Speaker 1: this is really more like a savings account, right, This
Speaker 1: is really more like a savings technology. And the majority
Speaker 1: of people who are holding bitcoin, who are using bitcoin,
Speaker 1: at least in today's instantiation, are not using it for
Speaker 1: transactional purposes necessarily, They're using it as a store value
Speaker 1: and as a form of sound money and so Um again,
Speaker 1: I do think that narrative has shifted over over time.
Speaker 1: In the past, I certainly have used bitcoin to pay
Speaker 1: for things. In the future, I may use bitcoin to
Speaker 1: favor things. Sometimes it's actually cheaper and faster to use
Speaker 1: bitcoin than it is to use my bank account, which
Speaker 1: is really fascinating and very sad in a way that
Speaker 1: in the your twenty you know, in this fintech boom,
Speaker 1: it's it's still incredibly difficult to to send money. Um.
Speaker 1: But look, I think, you know, beauties in the eye
Speaker 1: of the beholder. In my view, most investors are not
Speaker 1: buying bitcoin with the intention of spending it in the future.
Speaker 1: It's really about having a savings technology. It's about having
Speaker 1: the ability to sort of remove your assets from the
Speaker 1: existing financial system. Um and Joe, I definitely recognize the
Speaker 1: point you've made earlier that you know, in today's bitcoin environment,
Speaker 1: everyone's becoming an intermediary. So in a way, you know,
Speaker 1: it's slightly antithetical to the original stated goal of bitcoin,
Speaker 1: which was to minimize the role of intermediaries in our
Speaker 1: financial lives. What happened in up the end of March
Speaker 1: with bitcoin, and because you know, obviously the all of
Speaker 1: all of financial markets sort of collapse, but bitcoin, you know,
Speaker 1: for all to talk about, bitcoin is a diversifier. I
Speaker 1: think it had one of its biggest short term still
Speaker 1: off either. Ever, do you feel like you have a
Speaker 1: good handle on how the volatility that we saw in
Speaker 1: market overall translated into sort of like liquidations and margin
Speaker 1: calls from this asset asset that's very, uh, sort of
Speaker 1: apart from traditional financial markets. Yeah. Look, I think what
Speaker 1: happened at the end of March is symptomatic of how
Speaker 1: people act in times of crisis. People panicked, right, and
Speaker 1: in a time when everything's going down, you're panicking, you're
Speaker 1: trying to sell everything that's not bolted down. And bitcoin, right,
Speaker 1: just like every other asset, is highly salable, highly liquid.
Speaker 1: So we saw a lot of sell off in in
Speaker 1: bitcoin because people were trying to take risk off the table.
Speaker 1: They were uncertain, you know, they were fearful of the future.
Speaker 1: So we saw broad based sell off. I think what
Speaker 1: happened in bitcoin that exacerbated the sell off, you know,
Speaker 1: we saw it if you present and drop in a
Speaker 1: twenty four hour period, was the result of the fact,
Speaker 1: you know, in bitcoin. And one of the things that's
Speaker 1: unique a round about the bitcoin market structurally is the
Speaker 1: derivatives market um in many ways has outpaced the spot market,
Speaker 1: and in many ways the forward curve as driving what's
Speaker 1: happening in the spot market. So I call this the
Speaker 1: tail wagging the dog in a way. So right now
Speaker 1: bitcoin is in contango, right, but for a long time,
Speaker 1: bitcoin futures were in backwardation, meaning bitcoin in December was
Speaker 1: cheaper than holding bitcoin today. And so there are a
Speaker 1: number of different firms in the bitcoin ecosystem that are
Speaker 1: that that spread between the future expected price of bitcoin
Speaker 1: in today's price of bitcoin was interesting that happened in
Speaker 1: March in the midst of the sell off. I think
Speaker 1: a lot of people had been positioned into bitcoin, going
Speaker 1: into sort of this expected financial contraction. A lot of
Speaker 1: people are like, Okay, this is Bitcoin's time to shine,
Speaker 1: you know, it's it's an uncorrelated asset. Bitcoin is going
Speaker 1: to do incredibly well, just like gold. And when that
Speaker 1: didn't happen, what you saw was sort of a cascade
Speaker 1: of liquidations that then further dragged down the price. And
Speaker 1: so um, one of the benefits those a lot of
Speaker 1: weekends got taken out of the market, a lot of
Speaker 1: that cell pressure was removed. But I do think, you know, um,
Speaker 1: a lot of people are expecting bitcoin to behave on
Speaker 1: a very short term cycle, and the me to react
Speaker 1: very quickly to money printing like inflation doesn't happen overnight.
Speaker 1: So I think part of its people just understanding that
Speaker 1: this market cycle, this market narrative will take much longer
Speaker 1: than expected to play out because inflation hasn't even come
Speaker 1: close to setting in yet. Do you think the inflation
Speaker 1: hedge is still a big reason that people are buying
Speaker 1: crypto even though we've had years and years and years
Speaker 1: at this point of central banks undershooting their inflation. Inflation
Speaker 1: is coming, Tracy, It's just a matter of time. It's
Speaker 1: right around the corner, haven't you heard? But Joe and
Speaker 1: Tracy like, look, this is the great thing I love
Speaker 1: the high quote, which is, um, the purpose of economics
Speaker 1: is teaching men how little they understand. Right, So right,
Speaker 1: I've but shared the quote, but it's something like this,
Speaker 1: which you know, I studied economics and math and you
Speaker 1: know you you pontificate, but you know there's always the wrinkle. Look, um,
Speaker 1: I hate to use this phrase, but like, we're unprecedented time.
Speaker 1: I think nobody has a crystal ball and if they did,
Speaker 1: you know, they certainly would be trading it instead of
Speaker 1: talking about it on a podcast. But look, at the
Speaker 1: end of the day, we haven't seen this before. And
Speaker 1: to your point, right, we've we've printed a lot of money, um,
Speaker 1: inflation hasn't really set in. I think it's it's more
Speaker 1: likely that we'll have deflation um rather than inflation. So
Speaker 1: I do you think the inflation narrative is important around bitcoin?
Speaker 1: If we look at you know, the Paul Tutor Jones
Speaker 1: of the world, if we look at the micro strategies
Speaker 1: and squares of the world, if we look at this
Speaker 1: developing narrative around bitcoin is an effective portfolio diversifier and
Speaker 1: bitcoin is an effective hedge in the current market environment.
Speaker 1: Much of that narrative is in fact centered around um
Speaker 1: bitcoin's behavior in an inflationary period and the fact that
Speaker 1: bitcoin is a deflationary asset by by nature, and there
Speaker 1: are no asteroids we can mine for more bitcoin. I'm
Speaker 1: like unlike gold because asteroid mining is the thing that
Speaker 1: also comes up on regular basis. What about um solar
Speaker 1: powered satellites that get extremely cheap energy that could happen, right, Yeah, totally.
Speaker 1: And look, one of the great things that bitcoin is,
Speaker 1: it's a money batteries. So places in the world where
Speaker 1: there's cheap access to alternative energy that cannot be utilized
Speaker 1: for industry and creation of economic value, those regions of
Speaker 1: the world are now looking at bitcoin as an effective
Speaker 1: monetary battery, right, a way of transforming stranded alternative energy
Speaker 1: into monetary energy in the form of bitcoin. So, in
Speaker 1: all seriousness, and I actually do think that's a pretty interesting,
Speaker 1: pretty interesting avenue to be explored. In all seriousness. I
Speaker 1: want to go back to something you said um earlier,
Speaker 1: because I think it's probably the most sort of like provocative,
Speaker 1: controversial thing in this whole conversation and the thing that
Speaker 1: I'll piste a lot of people off. Potentially you said, uh,
Speaker 1: as far as you can tell outside if you're there,
Speaker 1: there really is not that much. The wall of institutional money,
Speaker 1: the big title wave that everyone thinks it's coming any
Speaker 1: day now or all these huge funds are going to
Speaker 1: allocate like two percent and the bitcoin is going to
Speaker 1: go to the moon. Um, you don't think it's really happened.
Speaker 1: I don't think it's happening right now. I think it's
Speaker 1: going to continue to be a slow trickle. Like at
Speaker 1: the end of the day, you have to remember, there's
Speaker 1: a process that someone goes through. Right now, the part
Speaker 1: of the cycle we're in is people are okay entertaining
Speaker 1: conversations about bitcoin, which wasn't the case even a year ago.
Speaker 1: The world's largest banks are recognizing, like, hey, it's okay
Speaker 1: to entertain a conversation about bitcoin. But you have to remember,
Speaker 1: um that at the end of the day, right someone
Speaker 1: being willing to learn and someone actually making decision to
Speaker 1: do something, they're two very different things. And I think again,
Speaker 1: you know, you look at the people who are allocating
Speaker 1: capital by and large. You know, Warren Buffett didn't invest
Speaker 1: in tech stocks until what like the late two thousands.
Speaker 1: You know, people aren't paid to take a high level
Speaker 1: of risk. That's not their function. Most people are in
Speaker 1: the role of preserving capital rather than pursuing growth, particularly
Speaker 1: intentionially high risk assets. So I think again, just the
Speaker 1: incentive structure that's in place for institutional asset managers isn't necessarily,
Speaker 1: you know, to be out on the frontier taking risk.
Speaker 1: They're learning about it, they're educating their clients about it,
Speaker 1: they're looking at different opportunities to provide access. But I
Speaker 1: don't think anyone's racing out to buy bitcoin quite yet,
Speaker 1: and I think it's going to continue to take time.
Speaker 1: And the bitcoin market also is going to continue to evolve. Right.
Speaker 1: It really has even possible until to buy bitcoin options
Speaker 1: in in size right, and today the size the option market,
Speaker 1: you know is multiple billions of dollars a day are
Speaker 1: are traded. So the fact that the market is still
Speaker 1: really mature, the fact that people are still early in
Speaker 1: their learning process, the fact that there are only small
Speaker 1: number of companies that can even cater to institutions, I
Speaker 1: think all of these are just indicative of the fact
Speaker 1: that it's still early um. And at the end of
Speaker 1: the day, I think part of what's also changing is
Speaker 1: the the p the clientele um of large asset managers
Speaker 1: is starting to change, right. I think you see this
Speaker 1: with um, you know, the acquisition of of e Trade, uh,
Speaker 1: the acquisition of some of these fin techs and retail
Speaker 1: oriented brokerage platforms like asset management is looking at avenues
Speaker 1: for for growth in higher margin products and services, and
Speaker 1: it could very well be that crypto provides that that avenue.
Speaker 1: But I think the format takes will not look or
Speaker 1: feel anything like Bitcoin in its sort of pure form um.
Speaker 1: It'll sort of be, you know, a bitcoin depository your seat,
Speaker 1: like you get an I owe you for for a
Speaker 1: slice of bitcoin. So there's one other thing that has
Speaker 1: outperformed even Bitcoin this year, and that is ethere um um.
Speaker 1: And and this sort of gets to you even better
Speaker 1: than Bitcoin. But this kind of also gets to a
Speaker 1: criticism that you hear about cryptocurrency is quite a lot,
Speaker 1: which is that even though bitcoin itself, um, the supply
Speaker 1: Bitcoin is limited and it's deflationary, you have all these
Speaker 1: competing coins, and you have competing cryptocurrencies that could basically
Speaker 1: start at any time and then take off in one
Speaker 1: way or another. Why do you think ethereum has outperformed
Speaker 1: this year? Yeah? Um, I think ethereums out performance is
Speaker 1: um very simple. Ethereum this year has had a breakout
Speaker 1: year because of the rise of UM something called defy
Speaker 1: or decentralized finance. Basically, it's UM using the sort of
Speaker 1: smart contract programmable money feature of ethereum to create all
Speaker 1: of these entirely blockchain based investment contracts and interest generating
Speaker 1: opportunities UM. And the way this actually surfaces, and it's
Speaker 1: interesting to look at if you look at the velocity
Speaker 1: of ethereum right the velocity of ethereum is much higher
Speaker 1: right now than the velocity of Bitcoin, meaning on average
Speaker 1: um ether's total market cap, the amount of Ether out
Speaker 1: on the market is traded and turned over on a
Speaker 1: faster clip than than Bitcoin. And what this means is
Speaker 1: people are actively out in the market using Ether much
Speaker 1: much more. And I think there's also been a really
Speaker 1: interesting consumptive demand for Ether where the way you interact
Speaker 1: with a lot of these contracts is by utilizing ethereum
Speaker 1: as the asset that you sort of post is collateral
Speaker 1: to earn yield in these new tokens UM. And so
Speaker 1: again I think it's really been a breakout your for
Speaker 1: the functionality and sort of this emerging use case of
Speaker 1: ethereum and and it's technology and the ecosystem of assets
Speaker 1: built on top of ethereum. Bitcoin doesn't have that, right.
Speaker 1: Bitcoin has Lightning, which is sort of a payments technology
Speaker 1: that's built on top of bitcoin, but bitcoin doesn't have
Speaker 1: this whole ecosystem of programmable financial assets built on top
Speaker 1: of it. And so I think this has been really
Speaker 1: interesting trying to observe. We're certainly watching it closely. Our
Speaker 1: largest product is obvious their Bitcoin tracker, but our Ether
Speaker 1: tracker now has over two d fifty million in a
Speaker 1: u M and continues to grow. So I think the
Speaker 1: interest in in ethereum growing has been really great for
Speaker 1: the space. And look, at the end of the day,
Speaker 1: you know, we're very excited about there being multiple assets
Speaker 1: that people are going to allocate to. However, when it
Speaker 1: comes to institutions, I think bitcoin is going to be
Speaker 1: the stasset they get comfortable with, just because it has
Speaker 1: had such a long history. I think a lot of
Speaker 1: the data that exists around bitcoin and and uh, understanding
Speaker 1: the bitcoin network and the security of the bitcoin network
Speaker 1: is is much more robust. And then if we look
Speaker 1: particularly at market infrastructure, bitcoin options volumes and are ten
Speaker 1: times out of ethereum options volumes. So I think while
Speaker 1: there's a lot of interest in ethereum from people who
Speaker 1: are native to the space and who are deploying ether
Speaker 1: in the space and sort of these consumptive new find
Speaker 1: finance applications that create effectively liquidity sync for Ether, I
Speaker 1: think Bitcoin continues sort of dominate the narrative when it
Speaker 1: comes to the quote unquote institutional market, which I think
Speaker 1: is the one that we track more closely UM in
Speaker 1: our day to day at cooin shares. Is there ever
Speaker 1: gonna be a UM a US Bitcoin e t F
Speaker 1: or by the time that will exist, do you think
Speaker 1: that bitcoin will be easily purchasable on enough different platforms
Speaker 1: everywhere that it won't really be necessary. Yeah, this is
Speaker 1: the question we ask ourselves as well, Joe, I think, Um,
Speaker 1: at the end of the day, you know, US bitcoin ETF,
Speaker 1: we haven't seen it yet. It does not look promising
Speaker 1: right now, I think, Uh, you know, SEC chairman Jake
Speaker 1: Clayton has repeatedly stated that, you know, it's very unlikely
Speaker 1: under his tenure that we see such a product come
Speaker 1: to market. But at the end of the day, you know,
Speaker 1: E t s are a huge part of the ussset
Speaker 1: management market and um, you well, we've observed, certainly from
Speaker 1: having our product in the European market which n t
Speaker 1: N it's fully clatteralized. With the underlying is people really
Speaker 1: like having the ability to buy digital assets in their
Speaker 1: retirement account, right, particularly if this is a secular bet.
Speaker 1: The ability to point click and buy exposure to bitcoin
Speaker 1: or ether or basket of assets in my tax advantaged
Speaker 1: savings account right an investment account, that that's really a
Speaker 1: active um today. Their number of firms like Kingdom Trust
Speaker 1: which is a large custodian um, and a handful of
Speaker 1: others for providing people with the ability to buy bitcoin
Speaker 1: in their four oh one case and with their I
Speaker 1: rash still very nascent. I do think a U S
Speaker 1: Bitcoin ETF will be impactful. I do think though we're
Speaker 1: seeing more and more avenues developing, and I'm not sure
Speaker 1: you know how many folks will be left who want
Speaker 1: to buy bitcoin but are unable to you know, come
Speaker 1: to three years from now when the SEC gets to
Speaker 1: point where it's ready to approve such a product. But
Speaker 1: what we are seeing right is other jurisdictions are innovating.
Speaker 1: Other jurisdictions are launching bitcoin ETFs and structured bitcoin products,
Speaker 1: and at the end of the day, you know, it's
Speaker 1: only a matter of time until we see one of
Speaker 1: those asset managers perhaps successfully cross listing in in the US.
Speaker 1: Wouldn't surprise me. We've certainly seen that unful before a
Speaker 1: coin shares, and you know, it's it's been interesting to
Speaker 1: see what the response been like from from regulators. But
Speaker 1: at the end of the day, other jurisdictions Germany, Switzerland, Canada,
Speaker 1: as I mentioned, even in Japan are providing consumers with
Speaker 1: the ability to buy exposure to bitcoin in a trusted,
Speaker 1: easy way through their existing brokerage account, and I think
Speaker 1: that continues to be really important channel for the US investors,
Speaker 1: and I think it's a real shame that it doesn't
Speaker 1: exist any other things that you think are sort of
Speaker 1: top of mine for you before we go. Look, I
Speaker 1: think it's it's been a crazier it's going to continue
Speaker 1: to be a crazier, Tracy. I look forward to reading
Speaker 1: the next Bitcoin obitually I'll sing it, yeah, you should
Speaker 1: get some some good quotes in there. But look, um,
Speaker 1: it's it's been such an interesting six years, um, and
Speaker 1: I'm sure that the next six years will be even
Speaker 1: wilder than my wildest dreams. So I'm excited. Great, well,
Speaker 1: we'll have you back in a uh six years. The
Speaker 1: Melton thank you so much for joining us. Thanks to
Speaker 1: thanks tasty, that great thanks. That's fun. You know, Tracy,
Speaker 1: I thought you you made a really interesting observation talking
Speaker 1: about how bitcoin obituaries over time aren't necessarily obituaries of
Speaker 1: the currency itself, but all the different use cases that
Speaker 1: we've heard, you know, payments cut out, visa, smart contracts, etcetera,
Speaker 1: all of those sort of fade, and I think Meltip
Speaker 1: sort of corroborted that, which is that there are sort
Speaker 1: of like this like narrative is I don't know if
Speaker 1: the word I'm looking for. It's like it's like, over time,
Speaker 1: various narratives fail and then we're sort of like left
Speaker 1: with like some core thing. In these days, everyone talks
Speaker 1: about it as a savings technology. Yeah, you know, having
Speaker 1: had that conversation, I think I have to I have
Speaker 1: to confess something to eacho Oh, I think I'm actually
Speaker 1: bullish on bitcoin. But you know what it's because yeah,
Speaker 1: I know, breaking news, but I think I'm bullish on
Speaker 1: bitcoin because I'm bullish on people's I guess cognitive dissonance
Speaker 1: or the market's ability to generate narratives for this particular
Speaker 1: asset place, because I realized, no matter what happens to bitcoin,
Speaker 1: there are so many people who are committed to it
Speaker 1: at this point, so many careers that are sort of
Speaker 1: writing on it, and a lot of money that's writing
Speaker 1: on it, that something else will always step into take
Speaker 1: its place. You know, people will find a new bull
Speaker 1: case for it or a new use case for it,
Speaker 1: no matter what happens. So I guess I'm bullish on
Speaker 1: people's create civity for justifying cryptocurrency, and therefore I am
Speaker 1: bullish on cryptocurrency itself. This is really big. I think
Speaker 1: we've gotta title this. This is the conversation that turned
Speaker 1: Tracy bullish on bitcoin. But I actually think what you
Speaker 1: say is like logical, Like at some point it's like
Speaker 1: enough obituaries get written and then they don't really like
Speaker 1: pan out, or like bitcoin survives or manages to find
Speaker 1: a new narrative and picks up new people and picks
Speaker 1: up new institutional avenues of money that it doesn't seem
Speaker 1: like it's going anywhere, and then is melted pointed out,
Speaker 1: is it's like still pretty small. So I think I
Speaker 1: think you make a good point, and I think this
Speaker 1: is a really historic moment for bitcoin that is happening
Speaker 1: right now. It's the perfect the most modern financial asset,
Speaker 1: I think, because everyone can just project their own sort
Speaker 1: of dreams for an ideal economy and social system and
Speaker 1: financial system onto bitcoin. So yeah, that's how thinking about
Speaker 1: it now. This is pretty big. Well, well done to
Speaker 1: our guest for convincing it that's too big. Um, shall
Speaker 1: we leave it there? Let's leave it there. This has
Speaker 1: been another episode of the All Thoughts podcast. I'm Tracy Alloway.
Speaker 1: You can follow me on Twitter at Tracy Alloway and
Speaker 1: I'm Joe Wisn'tal. You can follow me on Twitter at
Speaker 1: the Stalwart. And you should follow our guest on Twitter,
Speaker 1: Melton de Mirrors. She's at melt Underscore dem follow our
Speaker 1: producer Laura Carlson at Laura M. Carlson, followed the Bloomberg
Speaker 1: head of podcast for Incesca Levi at Francesco Today and
Speaker 1: check out all of our podcasts under the handle at podcasts.
Speaker 1: Thanks for listening three years year