Speaker 1: Welcome Atralian's. I'm Joel Webber and.
Speaker 2: I'm Eric Belchunas.
Speaker 3: Eric, we talked about crypto a lot, and a lot
Speaker 3: of that is about Bitcoin, but one that we haven't
Speaker 3: come back to basically since the ETFs launched is Ether
Speaker 3: and Ether If you have been paying attention, or maybe
Speaker 3: if you haven't, Ether is having a heck of a year.
Speaker 1: What's going on?
Speaker 2: Yeah, Well, when Ether launched one year ago, it launched
Speaker 2: right into a downturn. And that's not it's hard to
Speaker 2: get assets if you if your performance is awfulver off
Speaker 2: the bat ask any issue or that. So not only
Speaker 2: did it have to follow Bitcoin, which is.
Speaker 1: Tough, like most successful ETF launch ever.
Speaker 2: Yeah, it really, I mean the shoes that it was
Speaker 2: trying to fill were just too big. It felt very disappointing,
Speaker 2: and then it had a rally. There's a couple narrative
Speaker 2: things that will go over the help get it going.
Speaker 2: Sover in the past three months, it's doubled, it's up
Speaker 2: one hundred percent the coin. So once that got started,
Speaker 2: people started buying the ETF and amazingly, these e three
Speaker 2: ETFs basically double their assets in July alone, just one
Speaker 2: month double. They've got about twenty billion now. And a
Speaker 2: great fun fact is that if you remove the bitcoin
Speaker 2: ETFs and pretend they didn't exist, Black Rocks E three
Speaker 2: ETF would be the fastest ETF to ten billion in
Speaker 2: the history of ETFs. Wow, it's just I equated to
Speaker 2: having to play with Michael Jordan in the eighties and nineties,
Speaker 2: like Reggie Miller, great player, another era. He probably gets
Speaker 2: a couple of rings, but he happened to play with Jordan.
Speaker 2: And even with all that, there's still only thirteen percent
Speaker 2: of the assets the bitcoin ETFs have, so at least
Speaker 2: they're doing something though, you know, we think they should
Speaker 2: probably get around twenty percent, so they're on their way
Speaker 2: to earning that market share. That's sort of like silver
Speaker 2: to gold. It's like they're the silver to bitcoins.
Speaker 1: Gold, the Regie Miller to the Michael Jordan.
Speaker 3: They are.
Speaker 1: And you're going to get so much comment on that.
Speaker 1: On sociable, I can't wait.
Speaker 2: And you know, Ether is interesting to me because the
Speaker 2: pitch for it is totally different than Bitcoin. It's more
Speaker 2: like we had a note we referred to it as
Speaker 2: feeling like a nineties tech stock, like the very early
Speaker 2: days of this new possible thing that could really change
Speaker 2: tech and the Internet basically, and we'll see how it
Speaker 2: pans out. And there's a lot of things to talk
Speaker 2: about here, but yeah, definitely interesting area of the market
Speaker 2: having a moment. And the reason we covered so much
Speaker 2: is those numbers are ridiculous. So I know people are like,
Speaker 2: you know, if you're not into it, you're probably like,
Speaker 2: why do you cover it so much? But I'm like,
Speaker 2: these numbers are crazy? All right?
Speaker 3: To join us on this episode, we've got Matt Hogan,
Speaker 3: who's the chief investment officer of bit Wise Asset Management.
Speaker 3: Before he went full crypto, he was an ETF guy,
Speaker 3: as well as Isabelle Lee Cross outset reporter with bloogrig News.
Speaker 1: This time on trillions Ether. Matt, Isabelle, welcome back to Trillions.
Speaker 4: We're very excited to be here.
Speaker 5: Yeah, one hundred percent excited to join.
Speaker 1: Matt.
Speaker 3: It's been a while since we had you on and
Speaker 3: you're you know that full crypto transformation happened, and I'm
Speaker 3: curious a lot has gone up in the crypto world.
Speaker 1: Why have you not retired already?
Speaker 5: Wow? Straight at it. You know, Look, I think it's
Speaker 5: I think it's still inning too in crypto land. I
Speaker 5: think we're just getting started. I think if you're listening
Speaker 5: to the SEC, they're telegraphing that the crypto boom is
Speaker 5: ahead of us, not behind us. So I'm going to
Speaker 5: keep building. We'll retire eventually.
Speaker 3: Okay, So a lot has happened in the Trump administration
Speaker 3: two point zero at the SEC. We've had bitcoin ETF's approved.
Speaker 3: We've had these Ethereum ETFs approved, which we talked a
Speaker 3: little bit about here. What what do you see on
Speaker 3: the ground. How do you distinguish between what's happened with
Speaker 3: Bitcoin and what's happened with Ether?
Speaker 5: And it's yeah, so Bitcoin, you know, remember the first
Speaker 5: Bitcoin ETF was filed in twenty thirteen, so we had
Speaker 5: ten plus years of pent up demand for an asset
Speaker 5: that was easy to understand. It was digital gold. And
Speaker 5: so it came to the market and it crushed all records.
Speaker 5: As you guys talked about. It pulled in thirty six
Speaker 5: trillion dollars in its first year. It was six times
Speaker 5: as large as the second fastest growing ETF of all time.
Speaker 5: It was massive. Ethereum launched, I would say too soon, right,
Speaker 5: It launched five or six months after the Bitcoin ETF,
Speaker 5: people were still digesting bitcoin. As as mentioned, it launched
Speaker 5: into a difficult market for Ether. The underlying asset wasn't
Speaker 5: performing well, the community was in somewhat disarray, it didn't
Speaker 5: have an obvious growth youth case. But it's now has
Speaker 5: all of those things and as a result, we saw
Speaker 5: five point four billion dollars in flows in July. To
Speaker 5: put that number in context, remember that Ether is one
Speaker 5: fifth the size of bitcoin, so that's akin to saying
Speaker 5: twenty seven billion dollars in flows in the Bitcoin ETF.
Speaker 5: From a relative size perspective, it's absolutely massive, and I
Speaker 5: actually think it's going to accelerate or continue throughout the
Speaker 5: end of the year.
Speaker 1: Where are those flows coming from.
Speaker 5: I think they're coming from people who bought the Bitcoin ETF.
Speaker 5: I think a lot of it's coming from financial advisors
Speaker 5: and family offices who bought the Bitcoin ETF. And this
Speaker 5: is not a new story. If you talk to any
Speaker 5: crypto investor pre ETF, probably the first asset they bought
Speaker 5: was bitcoin, and then twenty percent of them became Bitcoin
Speaker 5: maxis and that's all they wanted to do, and the
Speaker 5: other eighty percent eventually moved down to buy ethereum maybe
Speaker 5: nine to twelve months later. It's actually a story as
Speaker 5: old as Satoshi. It's been happening in crypto for years,
Speaker 5: and I think that's what's happening here. So people who
Speaker 5: bought the Bitcoin ETF now want to diversify. There are
Speaker 5: only other choices in Ethereum ETF. It has a good
Speaker 5: narrative with stable coins and regulation. Why not add that
Speaker 5: to the portfolio. I think that's what we see a
Speaker 5: bit wise, and I assume that's what other ETF issuers
Speaker 5: are seeing as well.
Speaker 1: Isabelle. I know you've been covering this a lot for
Speaker 1: Bloomberg News. What else has jumped out to you?
Speaker 4: I think what Matt said is really good food for thought,
Speaker 4: because when Ether ETF's launch in July, we were almost like,
Speaker 4: I don't want to say we were making fun of
Speaker 4: how they're not getting inflows, but that's what we were thinking, like, man,
Speaker 4: this is really so paltry compared to the just monster
Speaker 4: flows we've seen in bitcoin ETFs. But then almost yeah, almost,
Speaker 4: and then at one point I think we even saw
Speaker 4: outlows when you look at them in aggregate because of
Speaker 4: the black rock Ether fun and then now it's really
Speaker 4: interesting how you saw really this influx of cash in
Speaker 4: July and to everyone's earlier point, Like, for instance, as
Speaker 4: soon as February to July second, we were seeing outflows
Speaker 4: when it comes to black rocks Ether the biggest Ether
Speaker 4: ETFs out of among the twenty related ETFs. But then
Speaker 4: after that, for the whole month of July, we've just
Speaker 4: been seeing inflows after inflows. So really, I think it's
Speaker 4: this perfect storm of regulatory clarity momentum and just really
Speaker 4: corporate companies piling into it. You see a lot of
Speaker 4: eater treasury companies popping up.
Speaker 2: By the way, one more metaphor. When I would be
Speaker 2: on these podcasts of these crypto people, I would be like,
Speaker 2: they'd be like, oh, do you think Ether will be
Speaker 2: a hit, And I'm like, it's tough. It's like, you know,
Speaker 2: Bitcoin is the headliner. It's like having to follow the headliner.
Speaker 2: It's like Sister Hazel having to follow Nirvana, which is
Speaker 2: a if you know nineties rock you know that would
Speaker 2: be no one would be left on in the crowd.
Speaker 2: And so now when Ether takes and flows, all these
Speaker 2: ethereum people tag me and they're like, sister Hazel. Is
Speaker 2: it still, sister, Hazel, It's a whole thing. They're very proud. Anyway,
Speaker 2: that's side go ahead.
Speaker 4: That's true because when you explain it to people have
Speaker 4: no idea what cryptocurrencies are. Like my parents, Bitcoin is easy,
Speaker 4: it's digital gold. But what is the elevator pitch of ether?
Speaker 5: The elevator pitch now it's the rails for stable coins
Speaker 5: and tokenization. But actually that is that's the big thing.
Speaker 5: I mean, we do. I think it's fifteen thousand meetings
Speaker 5: a year with financial advisors about crypto. After the Bitcoin
Speaker 5: ETF launched, it was easy to come in and say
Speaker 5: Bitcoin is like digital gold. The US has thirty six
Speaker 5: trillion dollars in debt. Don't you want to buy this?
Speaker 5: If you had to get into let me explain how
Speaker 5: the bitcoin blockchain and the Ethereum blockchain are fundamentally different,
Speaker 5: and how value accruis in the ethereum. You just forget it.
Speaker 5: It's impossible. Part of it is it now has that
Speaker 5: easy story. Ethereum is the rails for stable coin and tokenization.
Speaker 5: If you're bullish on that, you're bullish on eth and
Speaker 5: people buy it based on that premise.
Speaker 3: How do you feel about Eric's metaphors for sister Hazel
Speaker 3: and Reggie. Are you going to use those with potential clients?
Speaker 4: This?
Speaker 2: Is it the second best or is there no second best?
Speaker 5: I love it. I think I think it's a different sport.
Speaker 5: I think that would be the more accurate metaphor, would
Speaker 5: be a a Michael Jordan Messi metaphor. I say, okay, Emailer,
Speaker 5: but you know, I'm also courting the eth vote on
Speaker 5: crypto Twitter, so I need I need.
Speaker 1: That you might be doing a more diplomatic version than Eric.
Speaker 5: Yeah. Yeah.
Speaker 2: And also I also once I referred to Ether as
Speaker 2: small potatoes and that I get that a lot too.
Speaker 2: They're there anyway. Listen, I was reading up on Ether.
Speaker 2: You know what's interesting to me is Bitcoin came out,
Speaker 2: and it makes sense. Bitcoin is really for security. It's
Speaker 2: like built like a tank, right, it's like just for
Speaker 2: uh indestructible money. And there's a scarce amount twenty one
Speaker 2: million only. But the blockchain people thought we could do
Speaker 2: something some other things on this maybe have speed and
Speaker 2: in this case make it so anybody can like program
Speaker 2: their own smart contracts so they to bitcoin for everything.
Speaker 2: So when you think about it being the rails for
Speaker 2: tokenization and stable coins. Can you explain how that works?
Speaker 2: Try to use a visual if you can, because they
Speaker 2: call it DeFi Web three. So it really is a
Speaker 2: new version of the Internet. So is my nineties tech stock?
Speaker 2: Is it kind of like that should be looked at
Speaker 2: because then you have these other blockchains like Salana that
Speaker 2: are competing with ether and so it feels very much
Speaker 2: like the race for land in the nineties for the
Speaker 2: Internet to me, except crypto versions. And is that a
Speaker 2: good way to look at it?
Speaker 5: Yeah, I think that's a good way to look at it. Right.
Speaker 5: Bitcoin is a tank, it's a way to store wealth.
Speaker 5: Ethereum is a platform that lets you move wealth. An
Speaker 5: analogy that I think helps people. You think of the
Speaker 5: New York Stock Exchange. If you're a company, you list
Speaker 5: shares on the New York Stock Exchange, and to a degree,
Speaker 5: it benefits every time someone transacts in those shares. If
Speaker 5: you want to issue a stable coin, you have to
Speaker 5: issue it on a blockchain. Ethereum is the blockchain on
Speaker 5: which the majority of or the largest share of stable
Speaker 5: coins are issued, and then every time it moves on
Speaker 5: that blockchain, Ethereum accrues a little bit of revenue. So
Speaker 5: it's sort of like New York Stock Exchange for stable
Speaker 5: coins and for tokenization. It's a new financial switching infrastructure.
Speaker 2: So real quick, how does it monetize this? Because one
Speaker 2: of the things that I have sort of been seeing
Speaker 2: is that they don't want to People don't want to
Speaker 2: pay a lot, Like, how does is it going to
Speaker 2: sell advertising? I mean, how does it actually make money?
Speaker 2: So I get that it's a popular public ledger, but
Speaker 2: how does it turn that into cash? And is that
Speaker 2: something that the ether token will be riffing off of
Speaker 2: or do you even need cash flow for this to work?
Speaker 5: Yeah? Absolutely, it's a cash flow drive an asset. So
Speaker 5: right now, Eric, there's about one hundred and twenty million
Speaker 5: ethereum in existence. That's it, and each year about one
Speaker 5: percent new eth is issued, so let's call it one
Speaker 5: point two million new eth. Every time you issue a
Speaker 5: stable coin or conduct a transaction on ethereum, you have
Speaker 5: to pay a fee that's denominated in eth, and that
Speaker 5: fee is destroyed. It's removed forever, so that reduces supply.
Speaker 5: You can think of it a little bit like a
Speaker 5: share buyback. But the more activity there is, the more
Speaker 5: that supply demand dynamic tilts in favor of less supply
Speaker 5: and more demand. The idea is that if over time
Speaker 5: the majority of the world's stocks and bonds and cash
Speaker 5: move over ethereum, there'll be so many transactions, so much activity,
Speaker 5: that there'll be a huge amount of value in this ecosystem.
Speaker 5: There'll be consistent supply pressure and strong demand, and that
Speaker 5: will push the price up.
Speaker 4: I feel like that's exactly what people should stop doing,
Speaker 4: maybe or start doing. Not trying to think of ether
Speaker 4: in terms of bitcoin, but something completely different. I'm looking
Speaker 4: at it in terms of ether treasury because so many
Speaker 4: people are asking us, Okay, why is it different? Why
Speaker 4: make an ether treasury? But I think for ether treasury,
Speaker 4: what makes it attractive is that it has yield and
Speaker 4: it's more similar to a money market fund rather than
Speaker 4: like you. And again the digital goal of the scarcity,
Speaker 4: because Ether obviously is in scars, it's not finite, you
Speaker 4: can keep the making. In fact, we know who the
Speaker 4: founders are as opposed to do bitcoin, so I feel
Speaker 4: like it's just completely different. At least that's how I
Speaker 4: try to explain it very simplistically to sources.
Speaker 5: I think that's exactly right. It is completely different. You
Speaker 5: could even argue that it belongs in different asset classes.
Speaker 5: People debate whether crypto is an asset class. I could
Speaker 5: argue that bitcoin should belong in the commodity space and
Speaker 5: ether is actually a technology service. It's driven primarily by revenue.
Speaker 5: That's not perfect, but it may be closer than assuming
Speaker 5: that there's the same thing. Just because they're both crypto assets,
Speaker 5: they're used for very different purposes.
Speaker 2: Today, let's go over stable coins, because when people out
Speaker 2: there think about crypto sometimes, especially in like New York City,
Speaker 2: they kind of a it's like, oh, it's a Trump thing,
Speaker 2: I'm not into it. But stable coins to me, are
Speaker 2: the most progressive technology I've seen in a long time.
Speaker 2: If you're living in an emerging market under one of
Speaker 2: these autocratic dictators, they just crap on the currency all
Speaker 2: day long, and the currency has twenty five percent inflation
Speaker 2: a year or worse. They used to go into dark
Speaker 2: alleys to try to get dollars because they make they
Speaker 2: go to work, make money, they don't want to keep
Speaker 2: it in their own currency, so they want dollars or bitcoin.
Speaker 2: Stable coins are just literally dollars on the blockchain that
Speaker 2: all you need is an Internet connection, right, So I
Speaker 2: had heard that it's possible stable coins supersede bitcoin completely
Speaker 2: and the dollar keeps running around the world as the
Speaker 2: reserve currency, versus bitcoin taking that path and challenging all
Speaker 2: of the currencies for dominance. What's your take on that.
Speaker 5: I think both will happen. Actually, so, I do think
Speaker 5: the existence of stable coins will extend the dollar's role
Speaker 5: as a reserve currency in the world, because you're going
Speaker 5: to crypto dollarize to borrow Nick Carter's term, huge parts
Speaker 5: of the world, because if you're somebody in one of
Speaker 5: those countries, you'd rather hold dollars than your local currency.
Speaker 5: And if you can get it from your cell phone,
Speaker 5: you absolutely will, particularly if it's in a way that
Speaker 5: the government can't seize it. And it's more than that,
Speaker 5: if you're conducting business between two countries with imperfect financial architecture,
Speaker 5: you can use US quality financial rails with instantaneous settlement
Speaker 5: at low fees, using stable coins instead of routing through
Speaker 5: local banks. It is hugely progressive and hugely valuable for
Speaker 5: the world. So yeah, I think that's the direction of travel. Ultimately,
Speaker 5: I think bitcoin gets a seat at the world's reserve currency.
Speaker 5: Table in the same way that gold has a small
Speaker 5: seat at that table as well. I think bitcoin is
Speaker 5: a better version of gold and it fills that role.
Speaker 5: But I do think stable coins extend the dollars position
Speaker 5: as the world's reserve currency. It's one of the ironies
Speaker 5: of crypto that's going to end up helping the dollar
Speaker 5: maintain its position for longer than it would have otherwise.
Speaker 4: I do think so, because I don't. I think it's
Speaker 4: apples and orange like stable coins are meant to represent
Speaker 4: a digital fee at currency, and your faith is on
Speaker 4: the company backing it, like Visa, for instance, has been
Speaker 4: slowly integrating stable coins into their systems, and I feel
Speaker 4: like we'll be hearing more and more blue chip companies
Speaker 4: say that whereas bitcoin is, it's on.
Speaker 1: The blockchain, a different asset.
Speaker 4: A different to Matt's point.
Speaker 3: Yeah, So, Matt, how do you think about what that
Speaker 3: stable coin race is going to look like? Is it a.
Speaker 1: Different version of rails or is it something else entirely?
Speaker 3: And we're starting to live in, you know, a multi
Speaker 3: dimensional world.
Speaker 5: Yeah, I mean there are probably two races worth talking about.
Speaker 5: One is what is the infrastructure on which it moves?
Speaker 5: Because you can issue stable coins on eth on, Solana,
Speaker 5: on Tron, on XRP, on many different blockchains, So what
Speaker 5: is the one that people gravitate to and does that
Speaker 5: share change over time? I think what we see in
Speaker 5: the world today is the two leaders are actually Ethereum
Speaker 5: in Tron, and it's geographically determined, with Tron dominating in
Speaker 5: Asia and Ethereum in Western markets. It wouldn't surprise me
Speaker 5: if that's the case going forward, but they'll certainly be competition,
Speaker 5: and I wouldn't count Solana out. The other one is
Speaker 5: who will win is the issuer of these stable coins.
Speaker 5: Remember this is an enormously profitable business because stable coins
Speaker 5: don't pay interest. So a company like Tether, which is
Speaker 5: behind the largest stable coin in the world, usd T
Speaker 5: I think, made four point five billion dollars last quarter,
Speaker 5: which was, you know, more than Goldman Sachs. I mean,
Speaker 5: I may have that precise number wrong, but it's in
Speaker 5: that order of magnitude. I think you're gonna see all
Speaker 5: the major financial institutions issue stable coins and compete with
Speaker 5: cryptonative companies like Circle and Coinbase and Tether, and it
Speaker 5: will be interesting to see. I have my views on
Speaker 5: who will win but we'll find out in the next
Speaker 5: few years.
Speaker 4: Is that for the benefit of the world though that
Speaker 4: there are so many stable coins issued by a lot
Speaker 4: of different companies, and like the US dollar, there's just
Speaker 4: one and that's at a full face of the US government.
Speaker 5: Yeah, these are all private lookthrough vehicles to that. As
Speaker 5: long as there's an extremely liquid interchange market, I think
Speaker 5: it's for the benefit of the world. If you just
Speaker 5: had one issuer, they'd be likely to abuse their position
Speaker 5: in a way that competition wouldn't allow. So I like
Speaker 5: that there will be multiple I think it'll probably be
Speaker 5: an oligopoly with a few big providers. But look, I'm
Speaker 5: pro competition. I'm anti CBDC, which is the sort of
Speaker 5: government issued version of a stable coin, and I think
Speaker 5: I think the market will sort itself out well.
Speaker 2: And just to be clear, you buy the stable coin,
Speaker 2: right the dollar you buy, just like an ETF, gets
Speaker 2: put into a some kind of a collateral basket or
Speaker 2: reserve that is one for one to the stable coin.
Speaker 2: Because there was the big blow up right with terror Luna,
Speaker 2: where they look these tokens that these intermediaries put out
Speaker 2: screw that man. They use the token as collateral it's like, Oh,
Speaker 2: I made this magic token, I'm gonna use a collateral.
Speaker 2: Please tell me. They won't do that. Here, they're going
Speaker 2: to actually use dollars or treasuries.
Speaker 5: They'll use treasuries. Yeah, thank you. The Genius Act stable
Speaker 5: coin bill that just got signed into law requires it
Speaker 5: to be short term treasuries. So back to one for one.
Speaker 5: The lunar thing was a crazy experiment. You know, we
Speaker 5: never owned it a bit wise, and obviously it was
Speaker 5: going to fail. It was self referentially going to fail.
Speaker 5: So the new stable coins under the Genius Act will
Speaker 5: be one for one back by short term treasuries. I
Speaker 5: would argue that they'll be safer than traditional bank accounts.
Speaker 2: Imagine that though, oh here you want a dollar. Here,
Speaker 2: here's your digital dollar. I'll take my dollar, do something
Speaker 2: with it. Maybe I'll buy a nice car, and then
Speaker 2: I'll again make the error coin. That is that's that's
Speaker 2: now what your dollars based on.
Speaker 1: You would call it the you'd call it the Reggie coin.
Speaker 2: By the way, this whole idea of these intermediaries, who
Speaker 2: are usually under the age of thirty, I have this
Speaker 2: overall theme that the adults have arrived, whether it's the ETFs,
Speaker 2: people like you, the government SEC. It just feels like,
Speaker 2: are we maybe beyond this sort of massive scam part
Speaker 2: of the crypto era, because I just don't see any
Speaker 2: of this happening anymore. But man, it happened pretty regularly before. Honestly,
Speaker 2: the black rock eto all ETFs, it kind of we've seen.
Speaker 2: There's like a turning point, I think, and then a
Speaker 2: bunch of other things happened. Does that give you more
Speaker 2: confidence that it's now a mainstream, mature and safer.
Speaker 5: Huge, huge amount of more confidence. Right when you refuse
Speaker 5: to regulate something, which was essentially what we did in
Speaker 5: the past, you create the space for these scams and frauds.
Speaker 5: You get the space for something like Luna, or you
Speaker 5: create the space for something like FTX. I do think
Speaker 5: the market is more safe. I think there'll be fewer
Speaker 5: blow ups. And actually you can see that in the numbers.
Speaker 5: If you look at bitcoins volatility. Since the ETF launched,
Speaker 5: it's actually been below about half of the mag seven stocks.
Speaker 5: It's been the lowest it's ever been. Volatility has been squashed,
Speaker 5: and I think that's because better regulation just removes some
Speaker 5: of the risks. So it's not just a vibes thing
Speaker 5: you're pointing out, Eric, It's actually reflected in the data.
Speaker 5: It's a less risky investment. Still plenty risky, lots of volatility,
Speaker 5: still very new, unproven, but fewer of those blow ups
Speaker 5: that have sort of defined the first fifteen years of crypto.
Speaker 1: We've got a lot of places so far.
Speaker 3: I do want to bring us back to ethereum and
Speaker 3: ETFs and Matt, it's been a while since we actually
Speaker 3: talked to you about ETFs, but since you started there
Speaker 3: and then went full crypto, when you look back on ETFs,
Speaker 3: how do you feel about them?
Speaker 5: I mean, they're great. They've saved Americans billions of dollars.
Speaker 5: They've made investing cheaper, more tax efficient. They let my
Speaker 5: father buy the same investment as sovereign wealth funds that
Speaker 5: invest in ETFs and hedge funds that invest in ETFs.
Speaker 5: They've been an enormous democratizing tool. I think the analogy
Speaker 5: I tied to crypto, which is what I've made before,
Speaker 5: is people didn't trust ETFs either. Right. They were weapons
Speaker 5: of mass destruction. They were going to destroy the bond market.
Speaker 5: They were going to collapse American entrepreneurial spirit and now
Speaker 5: they're the apple Pie investing. I think the same thing
Speaker 5: is going to happen to crypto. Love ETFs. I think
Speaker 5: they'll be here for a while. They're great financial technology
Speaker 5: and I love seeing ETFs and crypto. Clyde.
Speaker 2: We had you on maybe four or five years ago,
Speaker 2: and I said, you know, because I had that phrase,
Speaker 2: half crypto, full crypto, and I said, how what percent
Speaker 2: crypto are you? And I think you said fifty five percent?
Speaker 2: What is that percentage? Now?
Speaker 5: Oh, I'm full crypto, full cryptoire.
Speaker 1: You're gone.
Speaker 2: And by the way, you can never come back, right,
Speaker 2: it's like Hotel California, Like, but I've never seen anybody
Speaker 2: go into the crypto world, whether it's investment or their
Speaker 2: career and like come back.
Speaker 5: No, we're going to drag all of finance into crypto.
Speaker 5: You know, it used to be you were an internet
Speaker 5: company or a physical company. Now now it's just a company.
Speaker 5: You're the same things. It's gonna be. There's not gonna
Speaker 5: be crypto finance companies. We're pulling everybody, including JP Morgan,
Speaker 5: kicking and screaming into the crypto market.
Speaker 1: I liked your hedge though, of like the ETFs will
Speaker 1: be with us for a while.
Speaker 2: Well, let's go over this because I know, you know,
Speaker 2: because like there's all these like tokenization people who are
Speaker 2: predicting like everything's everything's token. Reminds me that everything's computer,
Speaker 2: everything's token. Okay, Relax. ETFs still record launches, record flows,
Speaker 2: and last year was really tough to top, and they're
Speaker 2: gonna top them. And the market's not even up that much. Clearly,
Speaker 2: it's still hot, red hot here. But this idea that
Speaker 2: the Ethereum blockchain is going to allow people to just
Speaker 2: buy these tokens that are based on stocks and ETFs
Speaker 2: and indexes and it will render ETFs, it'll be a
Speaker 2: competitor at ETFs, even the stock exchange. I don't know.
Speaker 2: I get it for people in emerging markets who don't
Speaker 2: have access. But do you really think the whole mainstream
Speaker 2: en shalada of stocks and ETFs and the exchanges are
Speaker 2: gonna be sucked over to web three and Ethereum and
Speaker 2: all this like are are ETF's possibly gonna start to
Speaker 2: plateau this year and then start to over the next fifteen.
Speaker 5: Well, I don't think over the next fifteen. I think
Speaker 5: it's going to take a while the direction of travel
Speaker 5: is ultimately in favor of tokenization, and I think ETFs
Speaker 5: will sort of dematerialize in the ip of the index
Speaker 5: being separated from the hands on asset management, which won't
Speaker 5: need to be in an ETF rapper. But this is
Speaker 5: going to take a long time. This is like you
Speaker 5: and I calling the end of mutual funds. You know,
Speaker 5: fifteen years ago mutual funds still have trillions of dollars
Speaker 5: of assets. But I don't think it's right that we're
Speaker 5: at the end of financial innovation. I don't think we
Speaker 5: got to the ETF and then we're done. It's perfect.
Speaker 5: I think there is another phase, which is sort of
Speaker 5: direct asset ownership. I think tokens can unlock that, but
Speaker 5: the timeline is going to take a while. But I
Speaker 5: would say if you read Paul Atkins's recent speech on
Speaker 5: Project Crypto, where he talked about the rise of super
Speaker 5: apps that allow you to to cross all categories of assets,
Speaker 5: I think that is pointing the way to an eventual
Speaker 5: post ETF future. But it's not. We're not peaking this year.
Speaker 5: ETF facets are going to keep going up for you know,
Speaker 5: another five to ten years.
Speaker 2: But Joel, you know, Nate Dracy, friend of the show.
Speaker 2: He has a company called ETF Store. He changed the name.
Speaker 2: Yeah luckily our our podcast trillions. Yeah, we could cover anything.
Speaker 2: We're good to go.
Speaker 1: What's the name.
Speaker 2: Nova Das It was like at least he didn't call
Speaker 2: it the token store. That would have hurt.
Speaker 5: He's going full crypto too, He's going, you're covered with
Speaker 5: trillions where you know we are?
Speaker 4: We Go is a great name.
Speaker 2: Although my title senior ETF analyst, you.
Speaker 1: Have to change it to.
Speaker 2: Senior.
Speaker 4: That's fair to Eric's point, to push your tokenize everything,
Speaker 4: I understand it. It's really for faster transaction, reduced costs.
Speaker 4: But then in my inbox almost every day I get
Speaker 4: a tokenization pitch, and you just it's been a struggle
Speaker 4: to weed out which is noise and which are true efforts.
Speaker 4: I mean, firms like black Rock and Franklin Templeton, they
Speaker 4: have been pushing into this space to tokenize funds or
Speaker 4: really create infrastructure around that. But for others, I'm just
Speaker 4: not sure if they're just trying to get on with
Speaker 4: what's hot or whether this are real, genuine.
Speaker 1: Yeah, what's real, Matt, what's real?
Speaker 5: I think real is pilot projects, and the idea that
Speaker 5: tokenization will win eventually. A little bit of real is
Speaker 5: tokenized treasury funds that trade on the weekends. That's finding
Speaker 5: real use as marketable collateral. But we're very early on tokenization.
Speaker 5: The whole tokenization markets like twenty billion dollars in assets
Speaker 5: under management. I Unlike stable coins, which I think will
Speaker 5: ramp really quickly, tokenization is still going to take a while.
Speaker 5: There's still some regulatory hard yards to go there. But
Speaker 5: the pilot project phase is an exciting phase. I would
Speaker 5: say the hit rate on projects is going to be
Speaker 5: low at this phase because we haven't defined exactly how
Speaker 5: it will all work. But you see things like the
Speaker 5: Canton network doing interesting work with THETCC. You see black
Speaker 5: Rock building on tokenization, but you should think of it
Speaker 5: as experimentation. We're not main main time. This is not
Speaker 5: game time on tokenization. It's the experiment and learned phase.
Speaker 2: Ethereum is one blockchain, but then Solon is another. I
Speaker 2: went to a Slona event this year.
Speaker 3: I was actually, I'm interested in Solana too, which I
Speaker 3: was like, pending ETFs, right.
Speaker 2: Yeah, they got ets and there's a tron ETF coming
Speaker 2: out Avalanche Cardano Solana, and the Solana event that I
Speaker 2: was at was pretty you know, booming like and so
Speaker 2: what's going to happen? Is there going to be this
Speaker 2: race for the prize? Obviously a basket may make sense
Speaker 2: for investors, but how many? How many can win?
Speaker 3: Yeah, especially since you know Ethereum it took a year
Speaker 3: after launch to get to a point where it's seeing
Speaker 3: this right, So what about how many times can we
Speaker 3: replicate something like that?
Speaker 5: Look, I'm going to talk my book. You know, we
Speaker 5: create the first crypto index fund. We're trying to turn
Speaker 5: it into an ETF. I think that will be the
Speaker 5: second biggest category after bitcoin.
Speaker 1: Shocker.
Speaker 5: Yeah, I know, I know, but I mean it because
Speaker 5: who knows who's going to win. These are all software
Speaker 5: programs that are optimized in interesting ways to be the
Speaker 5: most efficient and most scalable. Ethereum has one vision on
Speaker 5: how to build an efficient blockchain. Solana has a different vision.
Speaker 5: Other assets have different visions. It's really hard to know
Speaker 5: who will win. I imagine it'll be again an oligopoly.
Speaker 5: I imagine this will look a lot like the traditional software market,
Speaker 5: where there's Microsoft and Oracle and Salesforce and every once
Speaker 5: in a while a new company like Slack or Snowflake
Speaker 5: emerges that enters the big leagues, but mostly it's a
Speaker 5: a handful of big providers that stick around for years.
Speaker 5: There are network effects in crypto that are important, but
Speaker 5: I don't think it'll be just one. I'd be surprised
Speaker 5: if it.
Speaker 3: Was just one.
Speaker 2: The other thing is, if we're going to do all
Speaker 2: this business of the blockchain and a smart contract is
Speaker 2: like the computer telling you who's right and wrong and
Speaker 2: whether it works. Who are you going to call when
Speaker 2: something goes wrong? I mean sometimes on on Twitter that
Speaker 2: there something will happen and a couple people will come
Speaker 2: to the conclusion that centralization has its benefits. You can
Speaker 2: call somebody like decentralization, I get it. Who you know?
Speaker 2: These big internet companies have too much power, the government
Speaker 2: has too much power. But you know, when you're on
Speaker 2: the free decentralized platforms, is it? Is it a fragile
Speaker 2: system because of the lack of people you can call
Speaker 2: when something goes wrong.
Speaker 5: Well, let me, this is an ETF show, so let
Speaker 5: me make an analogy to ETFs. One of the big
Speaker 5: criticisms early in ETFs is what if you messed up trading.
Speaker 5: When you buy a mutual fund, at the end of
Speaker 5: the day, it's push button easy. You get nab based execution.
Speaker 5: You can't muck it up. What if you put in
Speaker 5: a market order for an ETF and you get blown
Speaker 5: out on the spread. The reason we tolerated that risk
Speaker 5: in ETFs is you got a huge number of advantages
Speaker 5: in order for taking more personal responsibility. Crypto is the same.
Speaker 5: Money moves instantly, it moves frictionalsly, It moves it maybe
Speaker 5: one hundredth of the cost, but you have to take
Speaker 5: on the personal responsibility for doing it right. The short
Speaker 5: answer to your question is there is no one to call.
Speaker 5: But the longer answer is maybe we should decouple sort
Speaker 5: of fraud and accident from the core transaction. Right now,
Speaker 5: if you go and buy a coffee at Starbucks, part
Speaker 5: of the fee you're paying on your visa card is
Speaker 5: what if you want to reverse that transaction. But no
Speaker 5: one's reversing their transaction at Starbucks. It's just assigning more
Speaker 5: personal responsibility. And I think if you think of that
Speaker 5: ETF example versus mutual funds, that's the same thing as
Speaker 5: the existing system versus crypto. You take on more personal
Speaker 5: responsibility and you get huge benefits as a result. Is
Speaker 5: it perfect? Of course not Well, some people want the
Speaker 5: old version, of course, but people should have the choice
Speaker 5: and it can be much more efficient and better.
Speaker 2: I mean, Joel has sent his frappuccino back when they
Speaker 2: don't put half and half in it. So I've seen that.
Speaker 3: They're just saying there's always one ticket to Americano. Totally
Speaker 3: black can't go round, Matt. We always ask a question,
Speaker 3: which is a favorite ETF ticker other than your own?
Speaker 3: I'm going to modify it slightly. My question for you
Speaker 3: is favorite crypto related ETF other than anything?
Speaker 5: Yet you're in other thing other than anything bit wise issues. Yeah,
Speaker 5: I have to talk about a friend's ETF. Yeah, let
Speaker 5: me think about that. That's a hard one, do you
Speaker 5: What am I going to say? You said it?
Speaker 2: Yeah, I'm gonna type it so Jule can see it,
Speaker 2: and then.
Speaker 5: Okay, I don't know what I'm going to say. To
Speaker 5: be honest, our products are better, but I'm glad that
Speaker 5: black rock products exist.
Speaker 3: Oh, Eric was wrong?
Speaker 5: What did you say?
Speaker 3: Eric?
Speaker 2: I thought you were going to say total? Which was
Speaker 2: the van Eck? I love? Yeah, I love it too, silly.
Speaker 5: It's just niche. When you're launching an ETF, you need
Speaker 5: to appeal to a community. That's a smart way to
Speaker 5: appeal to a community. Yeah, we compete in most markets
Speaker 5: in the ETF space, so there are not many that
Speaker 5: I'm envious of. But this is the early phase. I
Speaker 5: want everyone to win. I'm happy with everyone.
Speaker 3: If there was an ETF crypto ETF, that's a top
Speaker 3: your jealousy list, what would that be?
Speaker 5: Oh? The black Rock products for sure? Yeah, I mean, god,
Speaker 5: we're twenty percent cheaper, they're twenty times bigger. That makes
Speaker 5: no sense to me. But we'll get them a vent.
Speaker 2: That's good. He had that in his back pocket.
Speaker 1: You might have said that one before.
Speaker 2: I know that thing is a machine.
Speaker 4: Yeah, I bet I would say it's mine too. And
Speaker 4: a fun fact is it's inching closer to GLD in
Speaker 4: terms of total assets. So I think that's poetic.
Speaker 2: It's almost a foregone conclusion.
Speaker 3: All right, Matt Isabelle, thanks for joining us on trillions,
Speaker 3: Thanks for having me, Thanks for listening to Trillions. Until
Speaker 3: next time. You can find us on the Bloomberg terminal,
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Speaker 3: Hit us up on social I'm at Joel Weber Show,
Speaker 3: He's at Eric Faulcini's. Trillions is produced by Magnus Hendrickson.
Speaker 3: Brendan Newman is our executive producer. Sage Bauman is the
Speaker 3: head of Bloomberg Podcast