WEBVTT - He's Half ETF, Half Crypto: One Man's Quest to Bring Progress to the Universe 0:00:05.760 --> 0:00:08.600 Welcome to trillions. I'm Joel Webber and I'm Eric Belchier. 0:00:08.760 --> 0:00:13.720 Is Eric. We're gonna talk about something that's not actually 0:00:13.720 --> 0:00:18.160 an easy f today yet yet that's that's the key word, 0:00:18.160 --> 0:00:21.480 and that's the word everybody is hinging on yet. And 0:00:21.760 --> 0:00:26.120 the what we're talking about is bitcoin and cryptocurrencies and uh, 0:00:26.160 --> 0:00:30.120 this intense and that's with the Capital I race to 0:00:30.400 --> 0:00:32.440 come out with the first Bitcoin et F which may 0:00:32.479 --> 0:00:35.800 or may not happen, and we've had some rejections already. Yeah, 0:00:36.120 --> 0:00:39.559 it looks pretty pessimistic right now, but the energy and 0:00:39.600 --> 0:00:43.080 excite message, you know, I've equated it to the Cannonball Run, 0:00:43.159 --> 0:00:46.080 which was this is a movie where they whoever could 0:00:46.080 --> 0:00:48.720 get to New York to l A the fastest got 0:00:48.720 --> 0:00:51.919 a million dollars. So some people tried to go in ambulances, 0:00:52.000 --> 0:00:56.000 some people took Lamborghini's, some people dressed up as priests 0:00:56.360 --> 0:00:59.440 just to get through the cops and whatnot. The filings 0:00:59.440 --> 0:01:01.920 for Bitcoin and remind me of that. You see all 0:01:02.000 --> 0:01:05.880 kinds of deviations and tricks and ways that they're trying 0:01:05.880 --> 0:01:09.200 to appeal to the SEC's concern and so far there's 0:01:09.240 --> 0:01:13.560 been twenty six filings eleven alive today, But it's been 0:01:13.600 --> 0:01:15.840 just a crazy sort of derby to try to get 0:01:15.880 --> 0:01:18.320 out to be first. Then if you are first, it's 0:01:18.400 --> 0:01:21.200 probably going to be uh at least the billion dollar 0:01:21.280 --> 0:01:23.480 e t F, if not a ten billion dollar fund. 0:01:23.640 --> 0:01:25.760 And one of the guys in the cannonball run is 0:01:25.800 --> 0:01:28.720 actually here with us today, one of the newest entrants 0:01:28.840 --> 0:01:31.960 who has a very clever and interesting way to try 0:01:32.000 --> 0:01:34.280 to get through the sec His name is Matt Hogan. 0:01:34.440 --> 0:01:37.440 He's at bit Wise Asset Management. How do you know, Matt. 0:01:38.480 --> 0:01:41.520 Matt is kind of an e t F analyst pioneer. 0:01:42.120 --> 0:01:44.720 When I was started covering ETFs in two thousand and six, 0:01:45.160 --> 0:01:47.000 there really was no model for being an e t 0:01:47.160 --> 0:01:50.880 F analyst except for Matt Hogan, Dave Nateigg, and a 0:01:50.920 --> 0:01:53.480 couple of guys who kind of aren't around anymore. Um. 0:01:53.520 --> 0:01:55.280 But Matt and Dave in particular had an e t 0:01:55.400 --> 0:01:59.080 F podcast and I listened to it religiously. They were 0:01:59.080 --> 0:02:01.960 talking about flow in and out of junk bond ETFs 0:02:02.080 --> 0:02:05.640 ten years before anyone else cared, and I learned a 0:02:05.640 --> 0:02:08.000 lot from them. And so Matt has also went off 0:02:08.080 --> 0:02:11.480 to basically run the inside et F conference which is 0:02:11.520 --> 0:02:14.520 that we've been there. Yeah, that's the way I went 0:02:14.560 --> 0:02:16.640 and recorded all the people and you found you got 0:02:16.720 --> 0:02:19.119 obsessed in the ice cream truck from Deutsche Bank. I mean, yeah, 0:02:19.840 --> 0:02:24.600 not um, some of the marketing is getting really crazy there. 0:02:24.639 --> 0:02:28.560 But Matt essentially is one of the most well known 0:02:28.639 --> 0:02:32.080 E t F analysts and thought leaders in the space, 0:02:32.200 --> 0:02:35.000 and boom about I don't know, six months to a 0:02:35.080 --> 0:02:39.399 year ago, dude went crypto. He went crypto soccer. Let's 0:02:39.400 --> 0:02:45.040 talk to him on this week's episode. Matt Hogan, who 0:02:45.040 --> 0:02:48.840 went crypto? Okay, so, just in case you've never heard 0:02:48.840 --> 0:02:52.200 of the bitcoin, it's this thing. It went up really 0:02:52.200 --> 0:02:55.160 really high and then it came down. And that was 0:02:55.200 --> 0:02:58.720 when Matt was like, this seems like a good idea. Yeah, yeah, 0:02:58.960 --> 0:03:02.200 you literally went in when bitcoin came down in what January? 0:03:02.240 --> 0:03:04.280 I think I'm largely responsible for the fall, at least 0:03:04.280 --> 0:03:07.280 at least responsible. Now. There's nothing like jumping in trying 0:03:07.280 --> 0:03:09.840 to catch a falling knife. So so, what what did 0:03:09.880 --> 0:03:12.480 you see? What did I see? It's I'll answer that 0:03:12.520 --> 0:03:14.240 in two ways because there are two sides to it. 0:03:14.400 --> 0:03:17.160 So on the one hand, it's not like I had 0:03:17.200 --> 0:03:19.680 just jumped into the crypto space. I had been following 0:03:19.680 --> 0:03:21.760 it for a long time. We had actually had the 0:03:21.800 --> 0:03:24.360 Winkelvy Twins at our conference. I think in twenty you 0:03:24.400 --> 0:03:26.640 can't talk about bitcoin without talking about that. You have 0:03:26.720 --> 0:03:30.320 to talk about They're always, they're always both. The's never 0:03:30.400 --> 0:03:32.160 one that's well, you always have to see one but 0:03:32.480 --> 0:03:35.280 and then you can just factor it. But um, so 0:03:35.320 --> 0:03:37.840 I had been I've been interested in the technology. I 0:03:37.840 --> 0:03:41.080 think there's a legitimate case for a non sovereign store value. 0:03:41.160 --> 0:03:43.920 I think some of the smart contracting technology is interesting, 0:03:43.960 --> 0:03:47.520 important and possibly transformative. But I had gotten sort of 0:03:47.560 --> 0:03:50.200 to the end of what I wanted to accomplish for 0:03:50.240 --> 0:03:51.680 the core of what I was doing in E t 0:03:51.880 --> 0:03:53.720 F s right, as Eric said, when I got into 0:03:53.760 --> 0:03:55.800 E t F, there was no framework for analyzing E 0:03:55.880 --> 0:03:58.600 t F, there was no one following flows. Dave Nodding 0:03:58.680 --> 0:04:01.520 and I built the first et rating system. I probably 0:04:01.560 --> 0:04:04.240 gave an E t F one on one presentation. You're 0:04:04.280 --> 0:04:08.400 like Eric, Eric, I'm pri Eric. That's right. He's a better, younger, 0:04:08.640 --> 0:04:10.880 more handsome version of him. He's the Woody Guthrie to 0:04:10.960 --> 0:04:20.360 my Bob, kind of generous, all supportive. Um But but 0:04:20.800 --> 0:04:22.480 I was looking at what to do next, and what 0:04:22.520 --> 0:04:24.760 I wanted to do. What I love to do is 0:04:24.800 --> 0:04:27.760 I love taking things that are complex and opaque and 0:04:27.760 --> 0:04:31.359 that people don't understand and trying to help make them simple, 0:04:31.440 --> 0:04:34.600 easy and digestible for investors, particularly when I think it 0:04:34.640 --> 0:04:37.760 can have a positive impact on investor portfolios. So I 0:04:37.800 --> 0:04:40.159 looked at all the things that were out there. Actually 0:04:40.240 --> 0:04:43.080 ended up with two things I was really considering. One 0:04:43.160 --> 0:04:46.520 was crypto. The other were options strategies, both of which 0:04:46.560 --> 0:04:49.400 I think can be additive to portfolios. But Crypto had 0:04:49.480 --> 0:04:53.560 the most potential for sort of transformative effect, the most 0:04:53.600 --> 0:04:58.880 interesting disruptive potential, and also the worst existing analytics and 0:04:59.080 --> 0:05:01.560 educational material reals surrounding it. And I thought I could 0:05:01.560 --> 0:05:06.600 help explain crypto to UH, to investors, to advisors, to institutions, 0:05:06.600 --> 0:05:08.359 to family offices, and that's what I've been doing for 0:05:08.400 --> 0:05:10.839 the last six months. I'm guessing you have had a 0:05:10.880 --> 0:05:12.840 lot of meetings. I have had a lot of one 0:05:12.920 --> 0:05:16.120 understands what's going on, and everyone wants to learn. Everyone 0:05:16.200 --> 0:05:20.000 will take your meeting to talk about crypto. That's absolutely true, UH, 0:05:20.000 --> 0:05:22.320 and you get you get from people who love it, 0:05:22.760 --> 0:05:24.880 and I just want to talk about how great it 0:05:24.920 --> 0:05:27.919 is to people who think it's actually worth less than zero, 0:05:28.000 --> 0:05:31.599 which is an interesting perspective. So that that spread that 0:05:31.720 --> 0:05:34.800 margin between those two sides, you could say that there's 0:05:35.200 --> 0:05:39.200 um full crypto, maybe a little half crypto, and then 0:05:39.279 --> 0:05:42.719 just anti crypto. Let me jump in on this um 0:05:42.800 --> 0:05:45.240 to go full crypto, I think is when you see 0:05:45.279 --> 0:05:48.279 somebody sit down and try and say something like your 0:05:48.320 --> 0:05:51.440 mind is like in the horse in the Age of Horses, 0:05:51.920 --> 0:05:55.400 and I'm talking about cars, like kind of weird stuff 0:05:55.440 --> 0:05:58.440 like that, like evangelism, hardcore, the kind of stuff that 0:05:58.480 --> 0:06:00.800 I think sort of scares the sec especially when you 0:06:00.839 --> 0:06:03.000 bring in like monetary policy and all kinds of stuff 0:06:03.000 --> 0:06:08.560 like that. Right, yea overthrow, absolutely absolutely so. And people 0:06:08.600 --> 0:06:11.040 who are predicting bitcoin prices will be a million dollars 0:06:11.040 --> 0:06:14.560 and six months are how bigcoin? Where are you on zero? 0:06:15.720 --> 0:06:19.200 How crypto? How crypto? Give us a rating? Well, I'm 0:06:19.240 --> 0:06:25.080 probably middle crypto. I'm probably middle crypto, probably probably crypto, 0:06:26.000 --> 0:06:28.800 which is to say, I believe that it has the 0:06:28.839 --> 0:06:32.320 potential to have transformative effects on various parts of the 0:06:32.320 --> 0:06:34.960 financial ecosystem, and I believe it has the potential to 0:06:35.000 --> 0:06:38.120 be a legitimate store value, but those aren't proven, and 0:06:38.160 --> 0:06:40.800 there's a potential that those don't pan out. And let 0:06:40.880 --> 0:06:43.240 me ask one question about this. I think that the 0:06:43.360 --> 0:06:46.480 energy and the resilience of bitcoin is really what has 0:06:46.520 --> 0:06:48.680 gotten me to be someone of a believer. Every time 0:06:48.720 --> 0:06:51.280 it should be dead, it comes back to life and 0:06:51.320 --> 0:06:54.680 you meet people. It's got such a underworld that's enthusiastic. 0:06:54.720 --> 0:06:56.240 It does remind me of ets in a way, or 0:06:56.240 --> 0:06:59.440 passive investing. Here's the one problem I have, Like say, 0:06:59.560 --> 0:07:02.720 marijuana is on the rise in terms of investing, I 0:07:02.800 --> 0:07:06.039 literally smell more pot on the streets lately. I can 0:07:06.520 --> 0:07:08.760 literally smell it or see it, like when these things 0:07:09.480 --> 0:07:12.360 emerge from the underground. Normally you can like see them 0:07:12.360 --> 0:07:15.000 around you in your life. I'm still yet to meet 0:07:15.040 --> 0:07:18.679 anybody or know anybody that's used bitcoin as a currency, 0:07:18.720 --> 0:07:21.040 and I thought I would. Yeah, I don't think it 0:07:21.160 --> 0:07:23.280 is a currency. I think I think you're expecting the 0:07:23.280 --> 0:07:26.280 wrong thing, Eric, because there are various reasons it's not 0:07:26.320 --> 0:07:29.000 a currency. The transaction rate is slow. It's actually a 0:07:29.040 --> 0:07:32.200 taxable event every time you buy something with bitcoin. So 0:07:32.240 --> 0:07:34.200 if you went to buy a cup of coffee with bitcoin, 0:07:34.440 --> 0:07:36.720 that would be a capital gains taxable event. That's not 0:07:36.760 --> 0:07:39.520 an experience anyone wants to have, So you're never if 0:07:39.560 --> 0:07:41.840 you're expecting to see it in your daily life and 0:07:41.920 --> 0:07:45.640 you live outside of South Park in San Francisco, uh, 0:07:45.800 --> 0:07:48.040 you will not have that experience. Now, if you want 0:07:48.040 --> 0:07:50.120 to come out to my office and go out and 0:07:50.160 --> 0:07:52.280 buy a latte with ethereum, you can do it. But 0:07:52.360 --> 0:07:55.880 that's a unique bubble situation. So what what you should 0:07:55.880 --> 0:07:58.240 expect to see is you should expect to see it 0:07:58.280 --> 0:08:01.360 fulfilling the role that gold has an investors portfolio as 0:08:01.400 --> 0:08:03.880 a non sovereign store value. You should expect to see 0:08:03.920 --> 0:08:05.720 it start to chip away at the parts of the 0:08:05.720 --> 0:08:10.840 financial ecosystem that are so grossly overpriced and indulgent, like 0:08:10.840 --> 0:08:14.160 like international transfers of money and remittances where Western Union 0:08:14.240 --> 0:08:16.400 is charging eight or nine percent and you can do 0:08:16.440 --> 0:08:19.960 that with crypto for pennies and instantaneous settlement. It's always 0:08:20.040 --> 0:08:23.320 the case that new technologies disrupt the fattest part of 0:08:23.320 --> 0:08:26.280 the ecosystem where they can have a ten x reduction 0:08:26.360 --> 0:08:30.320 in costs. That that starts at international remittances. It might 0:08:30.400 --> 0:08:33.040 start at international trade transfer, it might start things like 0:08:33.240 --> 0:08:36.280 s grow for smart contracts, all of which are wildly overpriced. 0:08:36.400 --> 0:08:39.160 So you're gonna see it in a professional setting long 0:08:39.240 --> 0:08:41.160 before you see it in a sort of retail setting. 0:08:41.160 --> 0:08:44.520 I think retail settings could be ten years from now. 0:08:44.640 --> 0:08:47.280 But let's take this investing now. Okay, so let's say 0:08:47.280 --> 0:08:50.080 it's used as a commodity. I want in. I read 0:08:50.120 --> 0:08:53.079 a book on cryptocurrencies on on a plane ride or 0:08:53.120 --> 0:08:56.440 bitcoin rather and the details to get a wallet and 0:08:56.480 --> 0:08:59.400 set it up. We're pretty numbing. They turned me off. 0:08:59.440 --> 0:09:01.400 It was too complicated. So I get the need for 0:09:01.440 --> 0:09:04.000 a fund? What is that? What you do? Now? You 0:09:04.080 --> 0:09:05.480 have a fund? It's not an e t F for 0:09:05.520 --> 0:09:07.760 a mutual fund, obviously, it said, what a private fund 0:09:07.760 --> 0:09:10.120 that offers a convenient way for people to get exposure? 0:09:10.160 --> 0:09:12.200 Key talk about that. Yeah. Sure, So we launched the 0:09:12.200 --> 0:09:15.520 first cryptocurrency index fund. It's called the Hold ten Private 0:09:15.559 --> 0:09:19.520 Index Fund. It's available to all accredited investors, anyone with 0:09:19.559 --> 0:09:21.520 two hundred thousand dollars a year and income or a 0:09:21.520 --> 0:09:25.760 million dollars in assets. It holds importantly, not just bitcoin, 0:09:26.080 --> 0:09:29.920 but the top ten cryptocurrencies weighted by market cap. Uh. 0:09:29.960 --> 0:09:32.880 Those capture about eight to eighty five percent of the market. 0:09:32.960 --> 0:09:37.200 What are those ten. What are those ten? They are bitcoin, ethereum, blight, cooin, 0:09:37.320 --> 0:09:41.640 bitcoin cash, MA, narrow Dash. I'm leaving out a few. Ripple. 0:09:41.880 --> 0:09:44.960 Ripple is in there, absolutely, and they change that proves 0:09:45.160 --> 0:09:48.760 only when you can rattle all those off. I think 0:09:48.800 --> 0:09:53.120 it might through. Yeah intentionally. Yeah, the seven was waiting 0:09:53.160 --> 0:09:55.360 for you to suggest ripple and then agreeing that it 0:09:55.480 --> 0:09:58.320 was in um No. But I think that's really important, right, 0:09:58.400 --> 0:10:01.920 Like buying just bitcoin would be like buying just a 0:10:02.080 --> 0:10:03.959 o L during the start of the tech boom. This 0:10:04.080 --> 0:10:06.040 is an early stage technology. We don't know who the 0:10:06.080 --> 0:10:08.120 winners would be. It could be that the first move 0:10:08.320 --> 0:10:11.199 like Amazon dominates. It could be that bitcoin is my 0:10:11.320 --> 0:10:13.400 space and there's a Facebook that you have to emerge. 0:10:13.440 --> 0:10:16.240 So having a diversified exposure is I think a better 0:10:16.280 --> 0:10:19.800 outcome for investors. And we make it easy, relatively cheap 0:10:19.880 --> 0:10:22.400 in the crypto space and convenient for people to do 0:10:22.520 --> 0:10:24.560 that by investing in our fund. And we have hundreds 0:10:24.559 --> 0:10:27.400 of investors and millions of dollars in assets. How similar 0:10:27.440 --> 0:10:29.480 do you think what we just lived through with the 0:10:29.559 --> 0:10:34.080 bitcoin going to twenty thousand and last December and then 0:10:34.240 --> 0:10:36.599 coming down and you know who knows where it is 0:10:36.679 --> 0:10:38.960 and where it will go. How similar do you think 0:10:39.000 --> 0:10:44.400 that was to to I don't think it was similar 0:10:44.440 --> 0:10:50.720 to in that in everyone had an overweight to technology 0:10:50.760 --> 0:10:54.719 and their portfolios, and today, um, almost no one has 0:10:54.760 --> 0:10:57.240 an overweight to crypto and their portfolios. There are the 0:10:57.480 --> 0:11:00.120 dent crypto people that do, but our estimate it in 0:11:00.160 --> 0:11:02.800 our fund as people have but about two point three 0:11:02.880 --> 0:11:05.960 percent of their liquid net worth invested in the crypto markets, 0:11:06.000 --> 0:11:09.040 which is not the same case as it was in technology. 0:11:09.160 --> 0:11:13.160 So look, crypto has had I think it's six or 0:11:13.200 --> 0:11:16.480 more draw downs. This is actually not abnormal. Even if 0:11:16.520 --> 0:11:19.240 you look back at some other sort of speculative assets 0:11:19.280 --> 0:11:21.160 that were reborn, like gold after we went off the 0:11:21.200 --> 0:11:24.000 gold standard, it had large ups and downs. Um, I 0:11:24.040 --> 0:11:26.760 don't think that was. I think we're actually a long 0:11:26.840 --> 0:11:28.760 way from that sort of hysteria. I think that was 0:11:28.840 --> 0:11:40.400 maybe you just described what sounds like a good as 0:11:40.480 --> 0:11:42.600 a class for a hedge fund. Right. It goes up 0:11:42.640 --> 0:11:46.319 and down, It's very volatile. There's some concerns. This is 0:11:46.360 --> 0:11:48.959 what the SEC is concerned about. Should what you just 0:11:49.120 --> 0:11:54.880 describe be democratized via the et F? Oh? Absolutely absolutely, yeah, 0:11:57.240 --> 0:11:58.679 But let let me let me let me, let me 0:11:58.840 --> 0:12:01.920 let pretend on the se C commissioner. Sure, yeah, okay, 0:12:02.160 --> 0:12:06.280 it's just got really interested in, Mr SEC commission I 0:12:06.320 --> 0:12:08.240 don't know what my lawyers would say about this, UM 0:12:08.480 --> 0:12:11.000 I would say two things, right. So, so first, on 0:12:11.080 --> 0:12:13.840 the one hand, people already are getting access to crypto 0:12:13.960 --> 0:12:16.719 and bitcoin, not just through funds like ours, but there 0:12:16.760 --> 0:12:19.120 are more accounts at coin based than there are at 0:12:19.160 --> 0:12:22.640 Charles Schwap. So people are accessing this space with limited 0:12:22.760 --> 0:12:26.280 education in unregulated vehicles at an expanding rate, and if 0:12:26.320 --> 0:12:27.839 we wait long enough, that number is just going to 0:12:27.920 --> 0:12:29.880 get bigger and bigger. All of those people would be 0:12:30.000 --> 0:12:33.000 better in a vehicle that have been vetted and approved 0:12:33.080 --> 0:12:37.240 by the SEC, with requirements around disclosure, with clarity around 0:12:37.280 --> 0:12:39.719 trading costs, all the other factors that come with that. 0:12:40.080 --> 0:12:43.120 So that's that's that's one big piece of it. The 0:12:43.200 --> 0:12:45.840 other big piece of it is why should investors want 0:12:45.920 --> 0:12:47.959 this in the first place? And the answer to that 0:12:48.160 --> 0:12:51.480 is just math. If you take away the emotion from crypto, 0:12:51.720 --> 0:12:54.360 if you stop thinking about it as this asset, that's 0:12:54.600 --> 0:12:57.079 people are a pent in or down the rabbit hole 0:12:57.160 --> 0:12:59.679 or whatever, and you just look at the data. It 0:12:59.840 --> 0:13:04.720 is a highly liquid, high return, high potential risk, low 0:13:04.840 --> 0:13:08.520 correlated asset. That's a magic combination. And even a one 0:13:08.559 --> 0:13:12.440 percent allocation to crypto in your portfolio if you rebalanced 0:13:12.480 --> 0:13:16.200 it the way an institution would since would have boosted 0:13:16.240 --> 0:13:20.920 your sharp ratio by on a portfolio. So historically it's 0:13:20.960 --> 0:13:24.360 been a great portfolio, diverse fire at very low levels, 0:13:24.679 --> 0:13:27.640 and we think all investors, not just rich investors who 0:13:27.920 --> 0:13:30.280 qualify for our funds, should have have the ability to 0:13:30.320 --> 0:13:34.480 access that. Mistress Easy, what do you say to that, Well, 0:13:34.640 --> 0:13:37.800 I personally agree. I'm very liberal with this. I just 0:13:37.960 --> 0:13:40.679 think that it's going to be called a bitcoin fund 0:13:41.000 --> 0:13:44.920 that you're totally not, Mistress ec I know which is good. Now, 0:13:44.960 --> 0:13:48.679 I'm Hester Pierce here. Hester Pierce is the commissioner that 0:13:49.040 --> 0:13:51.760 has dissented from the rest of the commission on this, 0:13:52.600 --> 0:13:55.559 and I agree, and I called a wolf and wolf's clothing. 0:13:56.040 --> 0:13:59.079 It's literally called a bitcoin fund. People know at this point, No, 0:13:59.240 --> 0:14:02.400 it's kind of uh, look, it's not large cap stocks, 0:14:03.160 --> 0:14:05.319 it's e t f s like the oil fund. I 0:14:05.360 --> 0:14:07.079 know you work at John hilland now that to me 0:14:07.200 --> 0:14:10.400 are a wolf in sheep's clothing. Um. I also think 0:14:10.480 --> 0:14:13.120 that there's triple leveraged e t F that are more 0:14:13.200 --> 0:14:15.679 volatile than a bitcoin et F would be. And I 0:14:15.800 --> 0:14:18.559 think that it's in the best interest of the providers 0:14:18.600 --> 0:14:20.560 of these e t F to make it work. And 0:14:20.640 --> 0:14:23.560 if you and Matt as you know, when the e 0:14:23.680 --> 0:14:26.680 t F structure rocks, you can throw anything in there 0:14:26.760 --> 0:14:28.960 and it will be the best deal possible because it's 0:14:29.000 --> 0:14:32.720 going to bring in the richest, deepest liquidity from these 0:14:32.760 --> 0:14:35.800 market makers who will just figure out the best way 0:14:35.840 --> 0:14:39.200 to arbitrage. They will bring liquidity to those exchanges. In fact, 0:14:39.240 --> 0:14:42.440 the e t F you could argue, will will help 0:14:43.120 --> 0:14:45.720 clean up and add more liquidity to the exchanges. So 0:14:46.000 --> 0:14:48.040 it's almost like a build it and and the e 0:14:48.160 --> 0:14:50.400 t F is actually what should be the proactive thing here, 0:14:50.840 --> 0:14:53.320 not the reactive ten years down the road. I mean, 0:14:53.400 --> 0:14:56.520 I will add I will just say in the SEC's defense, 0:14:56.880 --> 0:14:59.960 they are being very thoughtful about it, very cautious about 0:15:00.000 --> 0:15:02.960 the questions that they're raising. Right, so they recently rejected 0:15:03.040 --> 0:15:06.320 the winklevoss Is application for crypto et F. The questions 0:15:06.360 --> 0:15:09.160 that they raised in those objections are legitimate questions that 0:15:09.280 --> 0:15:12.640 deserve very clear answers. I've actually been hugely impressed how 0:15:12.800 --> 0:15:15.000 fast they've come up to speed on the crypto space 0:15:15.080 --> 0:15:18.880 from say a year ago. They're dedicating real resources to it. So, um, 0:15:19.080 --> 0:15:20.760 I think they will get there. I think it is 0:15:20.760 --> 0:15:23.320 a matter of when and not if. But they're actually 0:15:23.320 --> 0:15:26.800 doing a good job asking good questions distill their reservations 0:15:26.920 --> 0:15:29.320 down to a few points. Well, so you have to 0:15:29.360 --> 0:15:31.760 think about that. There's probably two sets of reservations that 0:15:31.800 --> 0:15:34.720 are worth talking about. There's the rejection of the Winklevoss 0:15:34.760 --> 0:15:38.320 application as one, and then there's the earlier letter from 0:15:38.480 --> 0:15:41.320 Dahlia as another. So the rejection of the Winklevoss application 0:15:41.400 --> 0:15:45.040 had to do largely with the integrity of the underlying 0:15:45.120 --> 0:15:49.280 markets and the ability to prove that crypto or bitcoin 0:15:49.360 --> 0:15:54.560 in that case trades cleanly and with no market manipulation. Remember, 0:15:55.000 --> 0:15:59.200 crypto exchanges are largely lightly regulated or not regulated at all, 0:15:59.320 --> 0:16:02.600 and the SEC is concerned that those markets may be manipulated. 0:16:02.640 --> 0:16:05.280 And the way to overcome those concerns is through greater 0:16:05.440 --> 0:16:10.080 data and analysis of of of pricing across different markets, 0:16:10.160 --> 0:16:12.520 of of volume trends, etcetera. And so what what they 0:16:12.560 --> 0:16:14.800 sort of hinted was, if this stuff comes into the 0:16:14.960 --> 0:16:17.360 light that might change it, but the way it stands now, no, 0:16:17.800 --> 0:16:20.240 that's that's correct. They want to see more trading on 0:16:20.360 --> 0:16:23.560 more highly regulated exchanges. That's the direction the industry is going. 0:16:23.720 --> 0:16:27.160 I also think additional data analysis around the trading that's 0:16:27.160 --> 0:16:30.240 going on in those exchanges. That particular application also is 0:16:30.280 --> 0:16:33.280 focused on a single exchange. There's actually a broad ecosystem 0:16:33.360 --> 0:16:36.360 of crypto exchanges, so um, I think I think that 0:16:36.440 --> 0:16:41.040 will overcome. The earlier letter that the SEC wrote in 0:16:41.200 --> 0:16:44.200 January or December of this year also looked at things 0:16:44.720 --> 0:16:48.560 like custody, like accurately striking a NAV, like pricing in 0:16:48.600 --> 0:16:51.160 the crypto space, all of which our questions, I will say, 0:16:51.640 --> 0:16:53.360 and one of the things we're excited to talk to 0:16:53.440 --> 0:16:55.720 the SEC about. Those are questions that we deal with 0:16:55.840 --> 0:16:57.800 in our own fund on a daily basis. UM, So 0:16:57.920 --> 0:17:01.200 we have some experience with that, but but they're legitimate questions. UM. 0:17:01.320 --> 0:17:03.400 You know. One of the reasons I am also in 0:17:03.520 --> 0:17:05.919 favor of an e t F is that the current 0:17:06.359 --> 0:17:08.720 product out there that people are using in place of 0:17:08.760 --> 0:17:10.960 an e t F. In fact, Schwab even puts it 0:17:11.000 --> 0:17:14.440 in their et F category is g BTC, which is 0:17:14.600 --> 0:17:17.360 a I think it's called the Bitcoin Investment Trust. It's 0:17:17.359 --> 0:17:20.600 a private trust traded over the counter, and last time 0:17:20.640 --> 0:17:24.680 I checked, the premiums were between fift and it's sort 0:17:24.680 --> 0:17:26.760 of like a closed then fund in a way. So 0:17:26.840 --> 0:17:28.920 in other words, bitcoin could go up and you could 0:17:28.920 --> 0:17:31.040 go down simply because people sell out of the fund. 0:17:31.480 --> 0:17:34.800 Because there's a fixed amount of shares trading. It seems 0:17:34.800 --> 0:17:37.920 to me that that should factor in because you're gonna 0:17:37.920 --> 0:17:40.200 get more and more people piling into something that is 0:17:40.359 --> 0:17:43.399 really flawed, and an e t F would probably i've 0:17:43.480 --> 0:17:46.320 heard maybe traded a premium of one to two with 0:17:46.480 --> 0:17:48.159 the kind of market makers that would be involved. What 0:17:48.200 --> 0:17:51.080 do you think of that? I couldn't agree more. Uh, 0:17:51.200 --> 0:17:54.320 And our analysis of the arbitrage possibility in the depth 0:17:54.400 --> 0:17:57.160 of market in the crypto space, not just for bitcoin, 0:17:57.280 --> 0:17:59.920 but but across the largest assets in the crypto space 0:18:00.200 --> 0:18:03.040 suggest it will trade at spreads that are around the 0:18:03.119 --> 0:18:05.719 average for the e t F industry, which is somewhere 0:18:05.760 --> 0:18:09.040 between ten and twenty basis points, and that premiums will 0:18:09.080 --> 0:18:13.119 depend on the direction of of of trading and interest. Um. 0:18:13.200 --> 0:18:16.960 It's absolutely true. GBTC proves that people want to buy 0:18:17.080 --> 0:18:21.000 exchange traded crypto. They are buying a flawed vehicle in 0:18:21.119 --> 0:18:23.480 that it trades at a large premium and discount. We 0:18:23.640 --> 0:18:26.600 know from the closed end funds, the history of closed 0:18:26.680 --> 0:18:29.399 end funds that buying closed end funds when they're trading 0:18:29.440 --> 0:18:32.680 at large premium is not a winning strategy, and so 0:18:32.920 --> 0:18:34.760 it would be better if investors could buy at a 0:18:34.840 --> 0:18:38.119 fair price. And there's two Bitcoin e t n s 0:18:38.160 --> 0:18:42.160 in Sweden which I've covered a lot. They do find 0:18:42.320 --> 0:18:45.560 they trade it pretty small premiums. They've seen flows in 0:18:45.600 --> 0:18:47.160 and out. They've been around for a couple of years. 0:18:47.280 --> 0:18:49.960 They made it through that huge spike up and the 0:18:50.080 --> 0:18:54.080 draw down. Um is that not enough of an incubator 0:18:54.200 --> 0:18:56.879 for the SEC? I think it's a great proofpoint of 0:18:57.000 --> 0:18:59.440 what crypto can do. But remember the SEC doesn't care 0:18:59.480 --> 0:19:02.840 what's going on in other markets. They're concerned about protecting 0:19:03.000 --> 0:19:06.760 US investors. And again they're asking good questions. So what 0:19:06.880 --> 0:19:08.840 I think people are making a mistake when they see 0:19:08.920 --> 0:19:11.480 these rejections is assuming that this is the end of 0:19:11.520 --> 0:19:13.920 the road, that there is no way around these objections. 0:19:13.960 --> 0:19:16.200 I don't think that's true at all. The crypto space 0:19:16.320 --> 0:19:19.560 moves at an extraordinary pace, the pace that which market 0:19:19.600 --> 0:19:22.800 makers are entering crypto. Six months ago, there were very 0:19:22.840 --> 0:19:25.399 few major market makers. Now we have Jane Street, we 0:19:25.440 --> 0:19:29.840 have Susquehannah Goldman, saxes in Um. The spaces evolving very rapidly. 0:19:29.920 --> 0:19:32.879 I think these objections will be overcome quickly and not 0:19:33.080 --> 0:19:35.320 at the slow pace that some people project. So let's 0:19:35.320 --> 0:19:38.040 talk about that. Because there's outstanding applications that will be 0:19:38.560 --> 0:19:41.040 discussed in the near future. What do you think their 0:19:41.040 --> 0:19:44.080 opportunities are? Where? And where's the white space that the 0:19:44.200 --> 0:19:46.720 SEC hasn't addressed yet? And if I could, I'll just 0:19:46.800 --> 0:19:48.760 read a couple them off, right. So there's the Van 0:19:48.840 --> 0:19:52.639 Eck solid x bitcoin trust, which could be decided on 0:19:52.760 --> 0:19:57.600 in a month or less. There's yours, there's Granite Shares Bitcoin, 0:19:57.760 --> 0:20:00.639 Granite Share short bitcoin, and then Direct has a couple 0:20:01.080 --> 0:20:03.880 one time and two times which are leveraged, which obviously 0:20:04.040 --> 0:20:06.520 probably stand a snowball's chance of hell unless one of 0:20:06.560 --> 0:20:11.000 the other ones get US approved first. Uh who's the favorite? Well, well, 0:20:11.040 --> 0:20:13.320 I can't. I can't talk about any particular filing. I'm 0:20:13.320 --> 0:20:16.720 not going to handicap any particular filing, including our own, 0:20:17.080 --> 0:20:19.560 so I can't. I'm not gonna make a singular prediction. 0:20:19.680 --> 0:20:22.040 What I'll say is that we believe and the reason 0:20:22.080 --> 0:20:24.680 that we filed for a product, that the preconditions to 0:20:24.720 --> 0:20:28.000 allow an e t F to trade UM exists today. Right, 0:20:28.080 --> 0:20:30.399 So we think we can strike a nav accurately. We 0:20:30.440 --> 0:20:33.880 think we can price crypto accurately. We think the underlying 0:20:33.920 --> 0:20:35.960 markets are sound. Otherwise we wouldn't have filed for an 0:20:36.000 --> 0:20:37.680 e t F. I think it's just a matter of 0:20:38.119 --> 0:20:41.480 how long and how much data the SEC requires to 0:20:41.640 --> 0:20:44.679 support that to get that launched. So I don't know, Uh, 0:20:44.840 --> 0:20:47.120 I don't know which of those applications will be filed first. 0:20:47.160 --> 0:20:50.680 We're broadly supportive of any crypto et F getting launched 0:20:50.720 --> 0:20:54.040 into the market. We think that an index based product 0:20:54.080 --> 0:20:56.800