WEBVTT - The Future of Bitcoin Futures ETFs 0:00:06.360 --> 0:00:09.320 Welcome to Trillions. I'm Joel Webber and I'm Eric belchionis 0:00:12.520 --> 0:00:16.639 Eric in Business Week. Recently, we UM had an interview 0:00:16.720 --> 0:00:21.279 and story with SEC Commissioner Gary Ginsler, which you know 0:00:21.320 --> 0:00:24.760 I sort of helped initiate, and one of the main 0:00:24.800 --> 0:00:27.240 things that I just wanted to understand was what the 0:00:27.400 --> 0:00:31.600 SEC is going to do about a potential bitcoin ETF. 0:00:31.920 --> 0:00:35.720 What about his comments resonated with you. Yeah, so we've 0:00:35.720 --> 0:00:40.560 been tracking this for oh seven years now. I called 0:00:40.560 --> 0:00:42.960 to Kentucky Derby for e t F nerds since the 0:00:42.960 --> 0:00:46.159 Winkelvoss filed in I believe it was when bitcoin was 0:00:46.200 --> 0:00:50.080 trading at by the way, UM, the all these e 0:00:50.159 --> 0:00:52.760 t s have been followed with the SEC, and you know, 0:00:52.800 --> 0:00:56.120 when you look at what really has taken place over 0:00:56.120 --> 0:00:57.920 those years, it's all been e t F that would 0:00:57.920 --> 0:01:01.080 track bitcoin like the way g l D tracks gold. 0:01:01.120 --> 0:01:04.280 So that would be a physically backed even though people 0:01:04.360 --> 0:01:07.160 mocked me for saying physically on Twitter, but it's physically 0:01:07.160 --> 0:01:09.280 backed as you can get. In other words, it would 0:01:09.319 --> 0:01:12.120 store the bitcoin and track the spot price the way 0:01:12.160 --> 0:01:16.560 g l D tracts gold. However, Gamsler has come in 0:01:16.600 --> 0:01:19.679 and we thought he would be a little more lenient 0:01:19.680 --> 0:01:22.319 on bitcoin because he was an expert in it um. 0:01:22.360 --> 0:01:24.080 But he has come in and really been a little 0:01:24.120 --> 0:01:28.760 concerned about approving physically back bitcoin ETFs because they are 0:01:29.319 --> 0:01:33.479 filed under the Securities Act of three, which is a 0:01:33.520 --> 0:01:37.840 looser rule than the Act, which is a more has 0:01:37.880 --> 0:01:41.080 more protections. That's what all your mutual funds and most 0:01:41.120 --> 0:01:44.160 e t f s are registered under. So there's a 0:01:44.160 --> 0:01:46.040 lot more protections in there, and I think he feels 0:01:46.080 --> 0:01:49.000 more comfortable if an e t F that track Bitcoin 0:01:49.000 --> 0:01:51.840 were fall into there. So the only way to go 0:01:52.440 --> 0:01:55.520 through the forty Act and be bitcoin is to use futures. 0:01:55.680 --> 0:01:59.760 What happened in the days after we published that story. Yeah, 0:01:59.760 --> 0:02:01.760 So since he said that in the story came out, 0:02:01.800 --> 0:02:05.480 there has been I believe there's now five bitcoin ETFs 0:02:05.560 --> 0:02:08.000 that are now filed that would track futures under the 0:02:08.000 --> 0:02:11.359 forty So there's almost like a new Kentucky Derby forming 0:02:11.440 --> 0:02:14.360 in the shadow of the bigger one, and it sounds 0:02:14.360 --> 0:02:17.680 like that's what's you know. If all goes well and 0:02:17.720 --> 0:02:20.160 he is a man of his word, it will probably 0:02:20.200 --> 0:02:24.600 see these futures ets approved in November UM as early 0:02:24.680 --> 0:02:27.639 as November at least, and uh, that's what we're gonna get. 0:02:27.720 --> 0:02:29.919 So we should really look into how they work. And 0:02:30.480 --> 0:02:34.079 we have two people on today who literally run bitcoin 0:02:34.200 --> 0:02:37.600 future strategies into fun structure, so I think we could 0:02:37.600 --> 0:02:39.480 get real inside look at how they're going to work 0:02:39.520 --> 0:02:42.400 in the pros and cons of them. Okay, So joining 0:02:42.480 --> 0:02:46.519 us for this episode Steve Hawkins of Horizon Ets. He's 0:02:46.560 --> 0:02:49.320 coming back on You may remember him from the SHREWM 0:02:49.360 --> 0:02:51.799 episode a couple of months ago. And then Simmy and 0:02:51.880 --> 0:02:54.600 Hyman at pro Shares, who just a couple of weeks 0:02:54.639 --> 0:02:59.919 ago launched one of these future strategy this time on Trillions. 0:03:00.480 --> 0:03:06.600 A look into the Future of Bitcoin Futures ecs. Simmey 0:03:06.639 --> 0:03:09.720 and Steve, Welcome to Trillians, Thanks for having me. Thank 0:03:09.760 --> 0:03:12.079 you for having me again. Mat. Okay, Simmey and I 0:03:12.120 --> 0:03:14.840 want to start with you because this your your product 0:03:14.919 --> 0:03:17.919 came out literally just a couple of weeks ago. How 0:03:18.040 --> 0:03:20.040 did you come up with this idea because it was 0:03:20.120 --> 0:03:24.040 something that you put in motion obviously months ago. Well, 0:03:24.080 --> 0:03:26.560 we've actually been uh you know, focused on the on 0:03:26.639 --> 0:03:29.880 the bitcoin space for quite a while. Um, but we did. Indeed, 0:03:29.919 --> 0:03:31.840 we're very proud A couple of weeks ago to be 0:03:31.960 --> 0:03:35.880 the first market to bring the first bitcoin exposure in 0:03:35.920 --> 0:03:39.800 a mutual fund. It's ticker btc f X. That's our 0:03:39.920 --> 0:03:43.760 Bitcoin strategy pro fund. We have both pro shares et 0:03:44.000 --> 0:03:48.160 f s and pro funds mutual funds at our organization UH. 0:03:48.240 --> 0:03:51.480 And this is indeed a strategy that utilizes futures for 0:03:51.600 --> 0:03:55.280 exposure to bitcoin and puts that in a forty act 0:03:55.360 --> 0:03:58.080 mutual fund, as Eric was indicating, and I always like 0:03:58.160 --> 0:04:00.840 to be careful with e C SEC lane which the 0:04:01.080 --> 0:04:04.160 strategy was allowed to come to market. Remember, the SEC 0:04:04.280 --> 0:04:06.960 doesn't approve anything, they allow things to come to market. 0:04:07.040 --> 0:04:09.320 But we were really excited to be first on this one. 0:04:10.160 --> 0:04:12.360 And so let me ask you how this works. Right, 0:04:12.440 --> 0:04:16.080 So this filing is called a Bitcoin Strategy fund, which 0:04:16.160 --> 0:04:18.440 is what all of the new filings are sort of called. 0:04:18.839 --> 0:04:21.320 And they're all active, right, So this is an active strategy. 0:04:22.040 --> 0:04:24.800 How does it A typical future z et F like UM, 0:04:25.080 --> 0:04:27.320 you know, natural gas or something would take the front 0:04:27.360 --> 0:04:30.160 two months probably and then just try to roll them 0:04:30.200 --> 0:04:32.599 constantly to keep exposure. Does this go beyond those front 0:04:32.640 --> 0:04:35.200 two months? Does it use other funds like some of 0:04:35.240 --> 0:04:39.000 these UH filings are saying they can use futures and 0:04:39.279 --> 0:04:42.400 or other funds like presumably a Canadian Bitcoin fund or 0:04:42.480 --> 0:04:45.039 something um So, can you just really take us through 0:04:45.440 --> 0:04:47.880 how the strategy works and what it holds. Sure, So 0:04:49.080 --> 0:04:52.280 the basic intendency to use the front month contracts for 0:04:52.400 --> 0:04:57.080 exposure and the benefit of that historically is that the 0:04:57.240 --> 0:05:01.680 correlation voluntility and beta of those front month contracts to 0:05:02.520 --> 0:05:06.640 spot bitcoin is really high. Now we are an active funds, 0:05:06.680 --> 0:05:09.480 so that means we do have some ability around the 0:05:09.600 --> 0:05:14.200 margin to manage the role. You know, you've got a 0:05:14.320 --> 0:05:15.960 roll from at the end of the month, you got 0:05:16.040 --> 0:05:17.440 a roll to the next month. So we have some 0:05:17.520 --> 0:05:19.840 ability as an active fund to say, oh, we see 0:05:19.880 --> 0:05:21.800 a lot of liquidity today, we're gonna roll a little 0:05:21.839 --> 0:05:24.120 more than we intended a little less tomorrow. And there 0:05:24.240 --> 0:05:25.880 is a little bit of a room around the edges 0:05:25.960 --> 0:05:29.320 to think about, you know, where the collateral behind the margin, 0:05:29.440 --> 0:05:33.960 the the uh the futures contracts are invested. But still 0:05:34.040 --> 0:05:36.600 the primary intent for the exposure is to be invested 0:05:36.640 --> 0:05:39.600 in those front month contracts. So how's it going so far? 0:05:39.760 --> 0:05:42.719 Because obviously this is something that as Eric said, he's 0:05:42.760 --> 0:05:45.520 been watching for seven years. There's been a ton of 0:05:45.560 --> 0:05:48.440 people interested in it, you come out with something that 0:05:48.800 --> 0:05:52.360 is a close approximation of what everybody is gonna be. Uh, 0:05:52.760 --> 0:05:57.360 moving towards and instant feedback. How's it going. It's going 0:05:57.400 --> 0:05:59.880 pretty well from our perspective. We've seen the flows started 0:05:59.920 --> 0:06:02.800 to come in. Uh. And look, it's also been a 0:06:02.880 --> 0:06:05.520 period where where you know, bigcoin is on the rise, 0:06:05.600 --> 0:06:08.000 so that brings some extra highballs and the fund is 0:06:08.040 --> 0:06:10.040 doing what it's supposed to do, and we're seeing some 0:06:10.200 --> 0:06:12.920 nice flows, and um, I just want to get wonky 0:06:13.000 --> 0:06:15.000 real quick. I know Steve's waiting in the wings, but 0:06:15.040 --> 0:06:17.640 we just got to get through this mutual fund real quick. Um, 0:06:18.440 --> 0:06:21.520 this mutual fund. Right, So a lot of the filings 0:06:21.600 --> 0:06:24.520 that are coming into the SEC will say something along 0:06:24.560 --> 0:06:27.720 the lines of we're going to attrack futures and potentially 0:06:27.800 --> 0:06:31.760 some other funds that whole bitcoin and I guess that 0:06:31.920 --> 0:06:34.080 and I think some of you mentioned o t c s, 0:06:34.240 --> 0:06:37.800 o CC trusts, which would mean GBTC, does this one 0:06:37.960 --> 0:06:41.040 hold any of those? Was that in the language, And 0:06:41.279 --> 0:06:44.719 do we think that Genzler will actually filter out ones 0:06:44.800 --> 0:06:47.200 that have that? And because now we're seeing filence come 0:06:47.240 --> 0:06:50.000 in and just say just futures um and there's some 0:06:50.120 --> 0:06:52.160 talk that those are the ones will approve any thoughts 0:06:52.200 --> 0:06:55.760 on all that, So I don't want to sort of 0:06:56.080 --> 0:06:58.680 guess as to what the sec might do or what 0:06:58.800 --> 0:07:01.320 they're sort of signaling. But you know, back to my 0:07:01.480 --> 0:07:05.240 earlier point, because we are active, that means we do 0:07:05.400 --> 0:07:08.400 have a sum ability to think about how the cash 0:07:08.520 --> 0:07:11.880 is invested, particularly the margin behind those those contracts, so 0:07:11.920 --> 0:07:14.120 we can use a few things other than cash. Again, 0:07:14.160 --> 0:07:17.240 it's not the dominant intent of the strategy that the 0:07:17.440 --> 0:07:21.280 strategy parts perspectives indicates a focus on those front run 0:07:21.400 --> 0:07:23.720 traffic contracts, but there's a little bit of ability to 0:07:23.800 --> 0:07:26.360 think about where the where the cash is sitting. And 0:07:26.480 --> 0:07:32.080 just to be clear, the Act requires funds that hold securities, 0:07:32.200 --> 0:07:34.760 whereas you can fall into the thirty three Act and 0:07:34.880 --> 0:07:38.280 not hold securities. And bitcoin isn't a security, right, so 0:07:38.440 --> 0:07:41.960 you file into the forty Act because you're not. Futures 0:07:41.960 --> 0:07:45.160 aren't securities either, But you get the margin and you 0:07:45.360 --> 0:07:48.440 buy treasuries with them, and then presumably that's what you're holding. 0:07:48.760 --> 0:07:50.880 Therefore you get through. Am I right on that or 0:07:51.000 --> 0:07:54.760 am I missing anything? I'm gonna focus on. I think 0:07:54.880 --> 0:07:58.520 what's important to the investor in the distinction between the 0:07:58.600 --> 0:08:01.800 forty and the thirty three Act, because for for folks 0:08:01.800 --> 0:08:05.280 who are tuning in UH thirty three, the thirty three 0:08:05.320 --> 0:08:11.760 Act is a common structure for commodity exposure as compared 0:08:11.840 --> 0:08:15.400 to the forty Act structure, which by these are named 0:08:15.440 --> 0:08:17.120 for the year in which they were they were put 0:08:17.200 --> 0:08:21.080 in place, nineteen thirty three and nineteen forty The key distinction. 0:08:21.120 --> 0:08:23.600 As an investor, there is a real benefit to being 0:08:23.640 --> 0:08:26.400 in a forty Act, and that is perhaps most importantly 0:08:26.480 --> 0:08:30.720 the avoidance of the annoying K one. Most thirty three 0:08:30.800 --> 0:08:34.160 Act funds will generate a K one. You gotta deal 0:08:34.200 --> 0:08:36.520 with that when you file your taxes. When you're in 0:08:36.640 --> 0:08:39.360 forty acts space, get plain old ten ninety nine. So 0:08:39.800 --> 0:08:44.400 that's probably the most salient difference from an investor's perspective. Okay, Steve, 0:08:44.559 --> 0:08:47.079 I want to bring you in here, um because in 0:08:47.160 --> 0:08:50.480 addition to to the shroom conversation that we've had with you, 0:08:50.640 --> 0:08:53.880 you're also in the bitcoin space, which basically sounds like 0:08:53.920 --> 0:08:58.920 a pretty fun job. How do you get what you read? Okay, 0:08:59.240 --> 0:09:01.640 may want it to so what you read on the 0:09:01.720 --> 0:09:06.319 thirty three forty Acts and what's your distinction, Well, I 0:09:06.360 --> 0:09:08.120 mean I would I would just step back for a 0:09:08.160 --> 0:09:10.559 second and look at it from our perspective. So we 0:09:10.679 --> 0:09:15.040 launched our Bitcoin Features Index tracking EKF back in April 0:09:15.120 --> 0:09:17.280 this year. We were in a race with a few 0:09:17.320 --> 0:09:21.079 other um I would say digital let's call it digital currency, 0:09:21.360 --> 0:09:25.640 uh eric from a digital not physical asset perspective. Um. 0:09:25.800 --> 0:09:28.720 So we had our synthetic futures based product. They had 0:09:28.760 --> 0:09:33.440 their digital asset hole in the physical digital currency themselves, 0:09:33.960 --> 0:09:37.400 and we really thought that our regulators in Canada were 0:09:37.400 --> 0:09:39.240 actually gonna go down the same route as what the 0:09:39.360 --> 0:09:42.360 SEC has said. And so we believe that we were 0:09:42.400 --> 0:09:44.360 going to be able to get the first bitcoin ECF 0:09:44.480 --> 0:09:48.280 to market here in North America using futures as the 0:09:48.400 --> 0:09:51.679 underlying asset class rather than the physical digital currency. We 0:09:51.760 --> 0:09:53.480 just did really didn't think that they could get there 0:09:53.840 --> 0:09:55.959 on the market making and all of the sort of 0:09:56.360 --> 0:10:00.880 issues around liquidity that could occur directly with the holding 0:10:00.960 --> 0:10:04.160 the digital asset in the e t F custody account, 0:10:05.000 --> 0:10:07.319 if you can even call it that, and getting like 0:10:07.440 --> 0:10:12.400 the regulators themselves understanding the custody and the risks around 0:10:12.559 --> 0:10:15.800 custody of the digital asset themselves, and I think that's 0:10:15.920 --> 0:10:18.680 exactly what has you know, been holding up the SEC 0:10:18.840 --> 0:10:21.280 for very very long with all of the comment letters 0:10:21.320 --> 0:10:25.440 that we've seen on the pasta on the physical bitcoin filing. 0:10:25.559 --> 0:10:28.600 So that's why we went really hard down the route 0:10:28.640 --> 0:10:32.280 of the futures based et F here and and obviously 0:10:32.400 --> 0:10:37.199 the regulators approved the physical digital asset e t F 0:10:37.520 --> 0:10:41.559 before the futures and we were quote unquote novel and 0:10:41.840 --> 0:10:44.319 uh um, so we we had to go down that 0:10:44.400 --> 0:10:47.320 road and we uh you know, launched about a month 0:10:47.520 --> 0:10:51.600 after them. The physical products themselves are a little bit 0:10:51.679 --> 0:10:54.280 over a month. And you know, from our pay from 0:10:54.320 --> 0:10:57.319 our take, we really truly believe that futures is the 0:10:57.400 --> 0:11:02.200 best place for from this asset class to get exposure. Still, um, 0:11:02.360 --> 0:11:06.480 we believe that you know, all of the market the 0:11:06.559 --> 0:11:09.319 efficiency of market making and how an e t F 0:11:09.480 --> 0:11:14.480 actually works is best through underlying futures exposure in the 0:11:14.520 --> 0:11:17.000 et F. And that's both long and also we you know, 0:11:17.080 --> 0:11:21.480 we launched uh inverse bitcoin shortly after that because we're 0:11:21.559 --> 0:11:23.960 giving these things as trading vehicles and if people want 0:11:24.000 --> 0:11:26.920 to use them as trading vehicles, um, then we believe 0:11:27.000 --> 0:11:29.959 that the futures is really the best place to go, 0:11:30.080 --> 0:11:33.320 and that's why we agree with the SEC in that regard. Well, 0:11:33.960 --> 0:11:37.160 but let's let's dive into this. So unfortunately came out 0:11:37.200 --> 0:11:40.240 a month after the physically backed ones um. And but 0:11:40.960 --> 0:11:43.880 whether you're looking at the gold area where the futures 0:11:43.920 --> 0:11:46.599 gold ETF has one percent of the assets in the 0:11:46.720 --> 0:11:48.640 physically back gold ETFs like g l D and i 0:11:48.760 --> 0:11:52.480 AU in your case, this one has about one percent 0:11:52.640 --> 0:11:56.439 of what the physically backed big et F has in Canada, 0:11:56.760 --> 0:12:00.319 it's a very almost exact parallel, which basically shows the 0:12:00.360 --> 0:12:03.800 same thing people just wanted physically backed. But you're saying 0:12:03.840 --> 0:12:07.160 that futures are better. Um, seems against the grain. Like 0:12:07.559 --> 0:12:10.559 even someone I know you want to say, I want 0:12:10.640 --> 0:12:13.599 people to use the bitcoin futures at F, but like 0:12:13.800 --> 0:12:16.560 it just seems like nobody would agree with that. Well 0:12:16.640 --> 0:12:20.240 one first to market, eric, Right, So if if our 0:12:20.360 --> 0:12:23.440 big right here's ETF was first to market, you would 0:12:23.520 --> 0:12:28.640 not be seeing a hundred to one from an assets perspective, right. Um, 0:12:28.840 --> 0:12:32.040 it's just underling becoen exposure that they were going for, 0:12:32.280 --> 0:12:35.520 and it was who was providing the first and access 0:12:35.559 --> 0:12:38.160 to it in a liquid vehicle that could be traded 0:12:38.240 --> 0:12:40.240 on the exchange every day. I mean, we had a 0:12:40.320 --> 0:12:43.599 closed end fund here in Canada or a couple of 0:12:43.640 --> 0:12:46.120 closed in funds that had over a billion dollars of assets, 0:12:46.559 --> 0:12:50.400 and you know they were trading at premium to the 0:12:50.520 --> 0:12:52.599 net asset value every day. Guess what happened to that 0:12:52.720 --> 0:12:55.320 premium on the day that a bitcoin ETF got listed. 0:12:55.600 --> 0:12:58.520 It's now trading at a ten percent discount, right like, 0:12:58.760 --> 0:13:01.680 because the people don't want to be locked up into 0:13:01.920 --> 0:13:04.880 a vehicle that they can't trade in and out of 0:13:04.960 --> 0:13:07.760 on a regular basis. And you know, when you look 0:13:07.760 --> 0:13:09.599 at the efficiency of what et f s do in 0:13:09.640 --> 0:13:12.800 the marketplace, market makers have to trade this. They have 0:13:12.920 --> 0:13:14.760 to provide a bid us spread and they have to 0:13:14.800 --> 0:13:17.800 be able to hedge that exposure and actively trade that 0:13:18.040 --> 0:13:20.679 hedge as they buy and sell units in the marketplace. 0:13:21.080 --> 0:13:25.600 What are they hedging against any bitcoin et F right now, 0:13:25.800 --> 0:13:30.000 whether it be physical or future space. They are using 0:13:30.080 --> 0:13:32.959 futures because that's the only vehicle that they can trade 0:13:33.040 --> 0:13:37.480 intra day to hedge their underlying buying and selling activity. 0:13:37.840 --> 0:13:41.120 And guess what if your futures bas ETF and your 0:13:41.160 --> 0:13:45.200 market maker is using futures to hedge their exposure. They're 0:13:45.240 --> 0:13:50.680 getting one to one direct contra you know, contraining UH exposure. 0:13:51.080 --> 0:13:55.760 When that happens with a bitcoin digital currency physically back ETF, 0:13:56.559 --> 0:13:59.680 they're trading futures against it, there's gap and there's always 0:13:59.720 --> 0:14:03.439 going to be gap risk in that regard, and you know, 0:14:03.640 --> 0:14:06.480 it is what it is from that perspective, and so 0:14:06.640 --> 0:14:11.199 we believe that again as the market sort of UH 0:14:11.840 --> 0:14:15.680 evolves here and becomes matures from a from a market 0:14:15.720 --> 0:14:19.400 efficiency perspective in trading bitcoin, there's more bigcoin products out there, 0:14:19.720 --> 0:14:25.080 we believe that investors will lean towards where markets are 0:14:25.200 --> 0:14:27.480 more efficient from a trading perspective, and the e t 0:14:27.640 --> 0:14:30.080 F should trade it more efficiently. You know, we can 0:14:30.200 --> 0:14:34.120 accept futures UM and deliver features as part of the 0:14:34.360 --> 0:14:37.240 creation redemption baskets again making it more efficient for the 0:14:37.880 --> 0:14:40.760 UM liquidity providers in the marketplace. So it's it's a 0:14:40.920 --> 0:14:51.240 very very different asset. I'm not a trader, I'm a 0:14:51.360 --> 0:14:55.400 norm e UM futures isn't something I normally think about 0:14:55.600 --> 0:14:58.520 touching UM. So how does this market work? What do 0:14:58.600 --> 0:15:02.120 I need to know about it? Who listed them? How 0:15:02.240 --> 0:15:04.240 big of a market place are we talking about here? 0:15:04.360 --> 0:15:06.520 Can you guys break that down for me, so I'll 0:15:06.520 --> 0:15:10.840 start with you. Yeah, so among the benefits of the 0:15:10.920 --> 0:15:15.760 futures market is the regulation. The futures market UH is 0:15:15.840 --> 0:15:18.040 governed by the c m E and the c FTC. 0:15:18.440 --> 0:15:21.320 There is a central clearinghouse that you know, ensures that 0:15:21.880 --> 0:15:23.960 you know trades are not the folded upon and that 0:15:24.080 --> 0:15:26.520 those are really important aspects. Again, we can't be in 0:15:26.560 --> 0:15:28.720 the mind of the SEC, but we know what the 0:15:29.560 --> 0:15:32.640 what the advantages are. And exactly the Steve's point, the 0:15:32.800 --> 0:15:37.280 more that there are opportunities for for bitcoint exposure, the 0:15:37.400 --> 0:15:40.920 more volume and the more liquidity we see in these markets. 0:15:41.000 --> 0:15:44.040 But even in and and so, you know, simply you're 0:15:44.080 --> 0:15:47.520 buying a futures contract for what the market thinks the 0:15:47.600 --> 0:15:49.480 price of big point would be a month from now. 0:15:49.760 --> 0:15:52.200 And as we as I mentioned, the tracking of that 0:15:52.280 --> 0:15:55.920 has been pretty close to spot. But everybody likes to 0:15:55.960 --> 0:15:58.920 talk about role cost. That's everybody's favorite thing to talk about. 0:15:59.040 --> 0:16:01.280 It was any and Eric was gonna ask me, So 0:16:01.760 --> 0:16:03.800 I'm just I will throw a couple of comments I 0:16:03.880 --> 0:16:06.160 think before you even ask. He's so upset he didn't 0:16:06.160 --> 0:16:08.560 get to ask it. So I'll just pretend he asked it. 0:16:08.680 --> 0:16:13.960 So think about this, he's in my head. In bitcoin 0:16:14.080 --> 0:16:15.960 spot bitcoin, I think it was up about three d 0:16:16.120 --> 0:16:20.040 and five per cent. If you looked at a strategy 0:16:20.240 --> 0:16:24.480 that you know, approximated rolling one month contracts, you would 0:16:24.520 --> 0:16:27.720 have gotten about two eighty five. So everybody goes, oh 0:16:27.840 --> 0:16:31.560 my god, there was roll cost. The market was up 0:16:31.680 --> 0:16:35.120 three oh five. I mean, the only way there's meaningfully 0:16:35.200 --> 0:16:39.400 positive role cost is when market participants think the thing 0:16:39.680 --> 0:16:43.680 is going up. That's first principles in jargon e terms, 0:16:44.000 --> 0:16:48.000 the future is the unbiased estimator of the future spot price. 0:16:48.400 --> 0:16:51.480 So yeah, I mean, if it's up three oh five 0:16:51.520 --> 0:16:53.840 and you've got two eighty five, I don't think anybody's 0:16:53.880 --> 0:16:57.520 gonna be so worried about that. In a more normalized environment, 0:16:57.840 --> 0:17:00.160 it's very likely roll costs would be smaller. And the 0:17:00.240 --> 0:17:01.960 more of us that get involved in this, the more 0:17:02.040 --> 0:17:04.800 liquid the stuff is. That being said, I think ultimately 0:17:04.880 --> 0:17:07.480 there will be many different ways to get exposure. And 0:17:07.560 --> 0:17:10.000 also this these point, they all come with costs. We 0:17:10.240 --> 0:17:12.879 know how big that premium and discount is to the 0:17:13.040 --> 0:17:15.639 thing or things that are trading over the counter. We 0:17:15.760 --> 0:17:18.480 don't even it's it's hard to even get your hands 0:17:18.520 --> 0:17:22.080 around the opaqueness of the transaction cost if you're trying 0:17:22.119 --> 0:17:25.159 to get a digital wallet. So there's no freeway to 0:17:25.200 --> 0:17:27.800 get exposure. It's like the stickers on all on all 0:17:27.920 --> 0:17:30.320 the you know, on all the e T s. You 0:17:30.359 --> 0:17:33.080 know you you cannot get the exact return of the 0:17:33.160 --> 0:17:38.680 theoretical index. It doesn't exist. Eric, are you gonna try 0:17:38.800 --> 0:17:43.119 and ask a question about world costs? Now? Send it 0:17:43.200 --> 0:17:45.600 my way, Eric, send it my way. And yeah, okay, 0:17:45.680 --> 0:17:49.320 So yeah, look, I agree, that's a very good point. 0:17:49.440 --> 0:17:52.080 I mean, you're up to eighty five. We we always 0:17:52.080 --> 0:17:54.960 say that about the shiny object lane. Nobody cares about 0:17:55.000 --> 0:17:57.520 fees over there, because if you hit it, you're you're 0:17:57.600 --> 0:17:59.679 you're you're tripling the S and P like arc right, 0:17:59.720 --> 0:18:02.760 nobody cares they charge whatever. So many five basis points, um, 0:18:03.440 --> 0:18:06.040 So I get it. I think maybe let's put it 0:18:06.119 --> 0:18:10.000 into proportion of the fact that when physically backed e 0:18:10.119 --> 0:18:12.760 T f s, if they were to come out, probably 0:18:12.840 --> 0:18:16.720 would track more of that upside but also the downside. 0:18:16.800 --> 0:18:19.040 So I don't know, it just seems to me that 0:18:19.359 --> 0:18:21.520 in general, and I'm not Look, the futures are a 0:18:21.600 --> 0:18:25.920 fine way to get exposure to many different areas. Typically, though, 0:18:26.040 --> 0:18:28.400 if you can get it the physical physically back way, 0:18:28.440 --> 0:18:29.920 people tend to prefer it like we went up in 0:18:30.000 --> 0:18:33.320 Canada and just discussed that and in gold. Um. But 0:18:33.600 --> 0:18:37.119 the idea I think is just that humans that are 0:18:37.200 --> 0:18:40.399 investors generally just want something that tracks the price, you 0:18:40.440 --> 0:18:42.919 know that, they just want the Kelly Blue Book value, 0:18:43.000 --> 0:18:45.960 like just don't complicate this for me. That would be 0:18:46.040 --> 0:18:49.199 my one pushback on that. But to your point, if 0:18:49.240 --> 0:18:51.400 there's nothing else in the market, like if Steve's fund 0:18:51.440 --> 0:18:54.399 had gotten out a month before the physically backed I 0:18:54.480 --> 0:18:57.120 think he would have been bigger, had liquidity and been 0:18:57.560 --> 0:19:00.879 been stronger. So in Simeon's case, let's say these futures 0:19:00.920 --> 0:19:05.360 et f s come out, um and they're out for well, 0:19:05.440 --> 0:19:07.240 let's let's just start there. How do you think the 0:19:07.320 --> 0:19:11.119 SEC is going to approve or allow these? Are they 0:19:11.160 --> 0:19:12.920 gonna put out like all four or five at once? 0:19:13.000 --> 0:19:15.800 Will they pick some? How much do you attention and 0:19:15.880 --> 0:19:18.240 assets do you think they'll get relative to let's say 0:19:18.240 --> 0:19:20.680 a physically back to e t F getting introduced, which 0:19:20.760 --> 0:19:22.960 we think would be ten billion dollars within a month. 0:19:24.520 --> 0:19:27.760 So one let's look at physical gold versus a digital 0:19:27.840 --> 0:19:32.000 currency wallet, right, and who custodies that, how has it held? 0:19:32.440 --> 0:19:35.800 Is their risk to that underlying asset. Can somebody hack 0:19:36.240 --> 0:19:40.399 your vault at Fort Knox and remove your gold and 0:19:40.520 --> 0:19:43.119 sell it somewhere else? This is not gold finger anymore, right, 0:19:43.200 --> 0:19:47.399 But cybersecurity and hacking is like, this is something we 0:19:47.480 --> 0:19:49.160 have to live with for the rest of our lives. 0:19:49.400 --> 0:19:51.280 And will somebody be able to at some point in 0:19:51.359 --> 0:19:56.720 time hack Gemini Trust and figure out how to take 0:19:56.840 --> 0:19:59.960 money out of the digital currency e t F? That's there, 0:20:00.560 --> 0:20:03.479 you know what, I don't know, but I'm not going 0:20:03.520 --> 0:20:06.359 to take that chance, and I'm not if I'm invested 0:20:06.359 --> 0:20:09.320 in my gold physical goal EPF. I know that I'm 0:20:09.359 --> 0:20:12.359 not going to lose my physical gold anywhere, at any time, 0:20:12.760 --> 0:20:16.120 under any circumstances unless somebody misplaces it, which I don't 0:20:16.119 --> 0:20:18.159 think can happen either, because you know, we have a 0:20:18.320 --> 0:20:21.639 very very strong settlement cycle and way of trading gold 0:20:21.960 --> 0:20:25.480 and physical gold, even gold futures. But with digital currencies, 0:20:25.520 --> 0:20:28.440 when you're dealing with you know, exchanges that are getting 0:20:28.480 --> 0:20:31.480 hacked from time to time, You're dealing with custody arrangements 0:20:31.480 --> 0:20:33.920 which you're getting hacked from time to time, you're dealing 0:20:33.960 --> 0:20:36.760 with a lot of unknowns, as Simeon was saying, with 0:20:36.880 --> 0:20:40.200 respect to the actual trading of the fit you know, 0:20:40.280 --> 0:20:42.520 of the digital bitcoin, and it will be very very 0:20:42.600 --> 0:20:45.920 interesting when sort of we have interim financial statements coming 0:20:45.960 --> 0:20:50.600 out right now for the physical uh bitcoin ets here 0:20:50.600 --> 0:20:54.560 in Canada, and we really don't know that underlying trading 0:20:54.640 --> 0:20:58.639 costs and custody costs and flow through costs until we 0:20:58.800 --> 0:21:02.280 get This will be the first public reporting period for 0:21:02.520 --> 0:21:04.840 those et f s, so it'll be very very different 0:21:04.880 --> 0:21:07.680 from that perspective. I also wanted to say, like also 0:21:07.760 --> 0:21:10.840 to Simeon's point, when you're looking at the backwardation in 0:21:10.920 --> 0:21:15.080 contango of you know, the features curves for bitcoin, you know, 0:21:15.240 --> 0:21:18.680 since the inception of the bitcoin futures back to it 0:21:18.880 --> 0:21:22.880 wasn't really only until like the last twelve months, even 0:21:23.000 --> 0:21:26.560 less like ten months where we saw this huge sort 0:21:26.600 --> 0:21:32.040 of you know, contango effect which started creating tracking air 0:21:32.240 --> 0:21:35.679 between sort of BTC one on a long term basis 0:21:36.640 --> 0:21:39.680 versus uh spot Bitcoin. And to Simeon's point, like we 0:21:39.800 --> 0:21:45.200 created a five day rolling features index and you know, 0:21:45.320 --> 0:21:48.200 on a one year basis right now we're about you know, 0:21:48.359 --> 0:21:53.239 thirty five percent behind. Um. You know that three hundred uh, 0:21:53.560 --> 0:21:58.479 you know three and one percent return of BTC one right, 0:21:58.640 --> 0:22:01.240 and you know our role in futures. There's a cost 0:22:01.320 --> 0:22:03.680 to it, and it's only really been in the last 0:22:03.800 --> 0:22:06.879 year since bitcoin has been going straight up from your 0:22:06.920 --> 0:22:10.880 point of ars to sixty. Something's going to happen during 0:22:10.920 --> 0:22:13.760 that period. From a from a contango perspective, in the 0:22:13.840 --> 0:22:17.120 future is curve. It's just you know, reality. But when 0:22:17.200 --> 0:22:20.680 you normalize it, and when you normalize gold to gold, 0:22:20.760 --> 0:22:23.720