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Speaker 1: Bokn or chillions.

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Speaker 2: I'm Joel Webber and I'm Eric Belchunas.

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Speaker 1: Eric, we got a vip here today, we do.

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Speaker 2: I'm excited about this one.

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Speaker 1: Who is it?

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Speaker 2: We got Blackrocks head of Digital Assets, Robbie Mitchnick, and

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Speaker 2: I have been told and we've seen him as like

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Speaker 2: the guy internally who has really turned Blackrock into this

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Speaker 2: sort of bitcoin force. And not only has he done that,

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Speaker 2: but since the bitcoin ETFs have launched, especially ibit, I bit,

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Speaker 2: Blackrocks offering, Yeah, that's their bitcoin ETF. And as an analyst,

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Speaker 2: I've never seen anything like this. This has to be

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Speaker 2: like a golf analyst tracking Tiger Woods in the late nineties.

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Speaker 1: What is this?

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Speaker 2: What is going on here? Let me give you some

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Speaker 2: number stroll. So before I Bit, the fastest ETF to

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Speaker 2: get to ten billion dollars in assets was jp e Q,

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Speaker 2: which did it in six hundred and forty seven days. Okay,

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Speaker 2: it's like three years. I Bit did it in forty

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Speaker 2: nine days, and Fidelity no slouch, did it in seventy seven.

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Speaker 2: So think about that. Just let that absorb. That is insane, right.

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Speaker 2: Another one, if you look at Blackrocks ETFs globally they

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Speaker 2: have over one thousand, like one thousand and forty four

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Speaker 2: something like that. IBID is taken in more money than

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Speaker 2: any of them. IBID is taken in eighteen percent of

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Speaker 2: all of black Rocks global flows this year, unreal for

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Speaker 2: a new launch or unreal for any ETF. Even IVV

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Speaker 2: doesn't pull off those numbers. And then when we look

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Speaker 2: at the ETFs in the US, you're to date flows,

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Speaker 2: IBID is number two overall. Only VU, the stud of

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Speaker 2: all studs, VU is above IBIT this year, so it's

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Speaker 2: top one percent in volume. Again, this is after four

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Speaker 2: months on the market, and we see thirteen f's come in,

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Speaker 2: which is reported holders. There's already two hundred and sixty

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Speaker 2: reported holders of this. Normally a new ETF and their

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Speaker 2: first thirteen F season will see anywhere from zero till

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Speaker 2: five if they're lucky. So again, this is like breaking

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Speaker 2: records by quantum leap style.

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Speaker 1: And here we are with the guy who came to

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Speaker 1: Blackrock and said, let's do something a little different. Okay,

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Speaker 1: So joining us on this episode of Trillions Robbie Mitchnick,

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Speaker 1: head of Digital Assets at Blackrock, and also James Safert,

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Speaker 1: an ETF analyst with Bloomberg Intelligence, this time on Trillions.

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Speaker 1: Blackrocks Bitcoin believer Robbie James, Welcome to Trillions.

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Speaker 3: Thanks for having me, Thanks so much for having me on,

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Speaker 3: and I appreciate the intro. I actually feel like I'm

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Speaker 3: the one with celebrities here because we've all been watching

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Speaker 3: Eric and James.

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Speaker 4: Your guys, their head don't do it.

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Speaker 1: So James is a somewhat of a regular on the podcast.

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Speaker 1: Robbie obviously so thrilled to have you here. Have you

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Speaker 1: asked Larry Fink for a raise yet? No? No, okay,

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Speaker 1: all right, so maybe it's like in the course somebody

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Speaker 1: just gave Yeah.

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Speaker 2: By the way, I saw Larry Fink on Fox Business.

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Speaker 2: I never see him mention tickers. I mean, because he's

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Speaker 2: got a thousand of them, but it's like having a

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Speaker 2: thousand kids you don't really bring up. He talks Macro

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Speaker 2: a lot, but he was beaming. He's the biggest launch

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Speaker 2: ever I been. But it's rare again seeing him talk

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Speaker 2: about the ticker. I'm like, that must be a big

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Speaker 2: deal internally if the big man's talking about it.

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Speaker 5: Yeah.

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Speaker 3: I think he's brought a lot of insight and thought

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Speaker 3: leadership to this right, you think about we talk at

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Speaker 3: Blackrock a lot about being a student of the markets,

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Speaker 3: being a student of technology, and Larry's kind of the

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Speaker 3: ultimate embodiment of that. So you see that in his

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Speaker 3: journey on this, and obviously he brings a ton of

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Speaker 3: geopolitical and historical context to it.

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Speaker 1: So Eric ran through some stats about the launch in

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Speaker 1: the intro there. But let's rewind the clock a little bit.

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Speaker 1: When did you first spot the opportunity and go, Okay,

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Speaker 1: we got bitcoin and we got Blackrock. How do I

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Speaker 1: bring those two things together?

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Speaker 3: Well, I joined actually in the summer of twenty eighteen,

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Speaker 3: so coming up on six years now, and I had

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Speaker 3: been at business. I totally fluked into this internship at

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Speaker 3: a company I hadn't heard of and nobody had heard

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Speaker 3: of at the time called Ripple, And that was twenty seventeen,

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Speaker 3: and I interviewed for that internship in April of seventeen.

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Speaker 5: XRP was a two cents.

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Speaker 3: Their crypto tooken when I started eight weeks later in June,

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Speaker 3: it was a twenty eight cents, and three months after

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Speaker 3: I left in January to go back to finish my MBA,

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Speaker 3: it was at three dollars, and so that explosive journey

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Speaker 3: obviously incredible fortuitous fun timing, and I knew at that

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Speaker 3: point I had to do something in this space. The

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Speaker 3: opportunity was just too great and too exciting, and it

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Speaker 3: was apparent to me that Blackrock had a lot of

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Speaker 3: potential to be a transformative force in the space. And

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Speaker 3: so August twenty eighteen, I started as full time employee

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Speaker 3: number one in the digital assets realm.

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Speaker 5: And it's been a fun couple of years.

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Speaker 1: Who hired you?

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Speaker 3: It was really Rob Goldstein in effect, that's who I

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Speaker 3: first met with it at Blackrock, and we had a

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Speaker 3: good conversation. I think some of my ideas were probably

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Speaker 3: a little premature, let's say, at that time.

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Speaker 4: But what were they Well, you know, you might guess,

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Speaker 4: but you know, if you think about twenty eighteen, or

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Speaker 4: at that time was twenty seventeen, the idea that we

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Speaker 4: would do a bitcoin ETF would have been totally premature, right,

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Speaker 4: You did not have the institutional infrastructure, you did not

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Speaker 4: have the regulatory clarity, You frankly didn't.

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Speaker 3: Have a lot of interest from our clients in this

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Speaker 3: at that time. So as you track through time our

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Speaker 3: journey there was a confluence of factors over the years

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Speaker 3: that evolved to get us to where we are today.

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Speaker 1: You were pitching an ETF, a bitcoin ETF even before

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Speaker 1: you were hired.

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Speaker 3: I don't think I was as reckless as outright pitching it,

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Speaker 3: because I know how that probably would have gone at

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Speaker 3: that time. It really wasn't the time, right, But I

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Speaker 3: would be lying if I didn't think that at some

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Speaker 3: point this was the thing that could happen at What

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Speaker 3: better place for her to do that than black Rock?

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Speaker 1: If you could have taken the internal temperature with one

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Speaker 1: of those internal thermometers at Blackrock for what the temperature

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Speaker 1: for crypto or digital assets in general was at that

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Speaker 1: time you were starting, what do you think it was?

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Speaker 3: What was the I think it was pretty similar to

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Speaker 3: just about every large traditional financial institution at that time, right,

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Speaker 3: We had so predating me. The firm had begun exploring

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Speaker 3: blockchain in twenty sixteen, and I think correctly at the

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Speaker 3: time came to the view that this technology and certainly

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Speaker 3: the asset class was nowhere near ready for prime time

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Speaker 3: and for our clients. And that was accurate, right, And

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Speaker 3: there's been a bunch externally.

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Speaker 5: Very importantly that's.

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Speaker 3: Evolved over the years that brought that temperature up to

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Speaker 3: obviously a much warmer level.

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Speaker 1: So it was not ice cold, because it was just

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Speaker 1: warm enough that they could hire you. So like cold.

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Speaker 5: Certainly not ice cold.

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Speaker 3: There was a recognition that this could be a thing, right,

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Speaker 3: that it's time hadn't come.

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Speaker 2: So what's interesting to me is Larry Fink is a

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Speaker 2: major name, just like Jamie Diamond, and a lot of

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Speaker 2: his peers generally were not into bitcoin. And there is

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Speaker 2: an interview with Anthony Scaramucci on I Think It Was

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Speaker 2: The Wolf of All Streets podcast and he says that

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Speaker 2: he had a private meeting with Larry in late twenty

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Speaker 2: twenty one where Larry says bitcoin sucks and Scamochie says,

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Speaker 2: I think you're wrong. You should do some research, and

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Speaker 2: then Scamucci says it was a young kid named Robbie

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Speaker 2: who came into Blackrock with the idea of creating a

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Speaker 2: bitcoin et have he orange pill Larry, And I'm going

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Speaker 2: to give Larry a lot of credit because he actually

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Speaker 2: did the homework. It takes a smart leader to pridefully

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Speaker 2: say bitcoin sucks and then twenty four months later say

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Speaker 2: you know what, I've got this wrong. Blackrock needs to

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Speaker 2: be part of this? Is that mostly true?

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Speaker 1: Was the pill actually orange or was it a different code?

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Speaker 3: I think there's probably a little bit of hyperbole in that,

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Speaker 3: But like I said, we talk all the time about

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Speaker 3: being students of them mark markets and students of technology,

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Speaker 3: and Larry's the ultimate embodiment of that and his journey

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Speaker 3: in this space and the work he did in the

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Speaker 3: study through various sources. It shows up in how insightful

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Speaker 3: he is now when he speaks on the topic.

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Speaker 6: When you're talking about joining and you're interviewing, they're looking

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Speaker 6: up blockchain. That's around the time that Larry Fink's famous

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Speaker 6: quote about an index of money laundering came out. Could

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Speaker 6: you just walk us through before we move on to

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Speaker 6: talk about the actual ETF What was the actual process

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Speaker 6: of going from that view in twenty eighteen to twenty

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Speaker 6: twenty one, still saying it sucks to like all right,

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Speaker 6: actually I'm changing my mind, Like what were the milestones

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Speaker 6: along the way? What did you see internally or even

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Speaker 6: with Larry specifically that led us to getting Blackrock filing?

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Speaker 1: Yeah, and then also.

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Speaker 2: FTX was part of this. I had to think that

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Speaker 2: almost would take you down a few pegs or set

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Speaker 2: you back.

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Speaker 3: So first, I think the approach here has always been

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Speaker 3: very client focused and very long term right. So, certainly

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Speaker 3: FtF was a bad event for the industry, but our

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Speaker 3: focus was much longer term in nature than anyone company

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Speaker 3: or market cycle. Where it started in twenty eighteen after

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Speaker 3: I mentioned that initial work that happened in twenty sixteen,

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Speaker 3: So twenty eighteen where we really spent our time and

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Speaker 3: energy was applications of blockchain technology, and that was consistent

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Speaker 3: with most of the banks and another large traditional finance firms.

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Speaker 3: So exploring a dozen or fifteen different use cases of

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Speaker 3: how you can use blockchain and the data synchronicity benefits

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Speaker 3: across our business and for our clients, and by and large,

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Speaker 3: most of those use cases across the industry did not work.

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Speaker 3: We actually hit on a couple that were pretty interesting

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Speaker 3: and delivered some value, but you didn't see the sort

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Speaker 3: of broad based adoption of blockchain of everything right that

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Speaker 3: some people thought would happen. That was an important period though,

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Speaker 3: for learning, for building comfort, for understanding the technology, and

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Speaker 3: as factors of evolved. Starting with I would say twenty twenty,

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Speaker 3: you really started to see an uptick in client interest,

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Speaker 3: you know, kind of in the post COVID aftermath, and

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Speaker 3: there's widespread money printing. Obviously bitcoin went up thirteen x.

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Speaker 3: You also had a huge amount of venture capital coming

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Speaker 3: too the space, right if at almost one hundred billion

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Speaker 3: dollars in venture financing the last four years. And that's

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Speaker 3: also brought with it a lot of credible human capital

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Speaker 3: too from big tech, from financial services backgrounds. And so

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Speaker 3: you saw this institutionalization of the infrastructure of the degree

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Speaker 3: that would enable us to potentially build solutions for clients

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Speaker 3: that we could be confident in and have conviction that

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Speaker 3: we could build to a black Rock and I Shares

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Speaker 3: quality standard. And the last piece is the regulatory environment

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Speaker 3: slowly but surely did moderate over time, right. And so

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Speaker 3: when you put those together and then lay that against

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Speaker 3: what we were doing at the time, first in crypto,

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Speaker 3: so we think about this space across three buckets in

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Speaker 3: digital assets, three pillars crypto.

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Speaker 5: Stable coins, and tokenization.

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Speaker 3: So in crypto foundationally, we built a partnership with coinbas

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Speaker 3: Prime starting in twenty twenty one. That was a technology

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Speaker 3: focused partnership building their trading and custody capabilities and workflows

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Speaker 3: into our Aladdin Investment system, so that Black Croc or

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Speaker 3: any of Aladdin's other clients who wanted to get exposure

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Speaker 3: to crypto as part of the whole portfolio could do that.

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Speaker 3: We also concurrently developed this private Bitcoin trust, which was

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Speaker 3: really a starting point for us being an asset manager

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Speaker 3: in the space, and that was focused on large US

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Speaker 3: institutional clients, but it was a key solution that we

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Speaker 3: felt was solving part of the problem that our clients

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Speaker 3: were experiencing.

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Speaker 5: Think about stable coins.

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Speaker 3: We started managing the USDC Reserve or a part of

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Speaker 3: it in twenty twenty one. That relationship grew significantly in

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Speaker 3: twenty twenty two where we became the primary non bank

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Speaker 3: manager of that three billion ish reserve today and invested

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Speaker 3: in Circle and started to become a technology collaborator with

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Speaker 3: them as well because of the potential we see for

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Speaker 3: stable coins.

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Speaker 5: And then finally tokenization.

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Speaker 3: We did some private tokenization work with JP Morgan on

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Speaker 3: their Onyx platform in twenty twenty one that laid the

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Speaker 3: foundation for us to ultimately do our first public blockchain

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Speaker 3: tokenization earlier this year. So those are all the key

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Speaker 3: pieces that ultimately paved the way.

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Speaker 2: For Understood But and this reminds you of what's going

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Speaker 2: on in JP Morgan, but again, all that's happening. While

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Speaker 2: the CEO does say some things that seem to be contradictory,

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Speaker 2: but clearly he's also has to service clients, and he's well,

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Speaker 2: this is fine, we're serving clients. But personally I don't

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Speaker 2: get it because we do see JP Morgan. Jamie Diamond

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Speaker 2: is basically slams it like every other week, and yet

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Speaker 2: JP Morgan is one of the big aps for ibit

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Speaker 2: and some people are like that hypocritical, but yeah, it's

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Speaker 2: pretty much par for the course for a lot of

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Speaker 2: firm this is the whatever business they're in, Like, they

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Speaker 2: can't ignore clients, right, So you could actually be in

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Speaker 2: the business without your CEO being all in.

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Speaker 3: Yes, although thankfully Larry's been super supportive of this, right.

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Speaker 3: I think he recognizes the level of interest from clients,

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Speaker 3: and I think importantly the level of frustration that we

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Speaker 3: felt from a lot of our clients, which was if

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Speaker 3: you want to access crypto or bitcoin directly, that's been

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Speaker 3: very hard for most of our clients. With the institutional

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Speaker 3: or wealth advisory, right, it's different for retail. Retail has

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Speaker 3: their own challenges too, but for financial advisors and for institutions,

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Speaker 3: almost impossible practically to hold bitcoin directly. So what they

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Speaker 3: do They went to alternative exposure vehicles, and a lot

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Speaker 3: of those didn't go well right. They were often high fee,

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Speaker 3: high risk, underperform the price of bitcoin in some cases

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Speaker 3: all three right, and so there was this frustration. There

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Speaker 3: are other clients who missed the opportunity entirely. Bitcoin turned

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Speaker 3: out to be the best performing asset in the world

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Speaker 3: the last ten years, so that was also a bad outcome.

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Speaker 3: So I think that recognition that we were in a

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Speaker 3: position to solve a real frustration for our clients definitely

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Speaker 3: motivated the firm.

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Speaker 2: I'm going to go to twenty twenty three now is

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Speaker 2: that okay, Okay, I'm on vacation in Kpe. May I'm

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Speaker 2: doing my thing. I try to stay off the internet,

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Speaker 2: and I try to stay off work email, and I

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Speaker 2: see my Twitter's blowing up because coin Desk puts out

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Speaker 2: a story saying black Rock's about to follow for a

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Speaker 2: bitcoin etf. I remember quot shooting. I said, this can't

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Speaker 2: be real, ken it. I didn't want to totally shut

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Speaker 2: it down because coin desk is pretty good. They've had

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Speaker 2: some scoops about four hours later at four in the afternoon.

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Speaker 2: Bang there it is. So my vacation, thank you, was

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Speaker 2: messed up for the next couple of days. But it

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Speaker 2: was exciting. I was like, what why would they file?

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Speaker 2: Like I always thought Blackrock would come out after there's

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Speaker 2: a couple filings and they get launched, and you come

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Speaker 2: out a year later because you don't need to be

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Speaker 2: early you're Blackrock. But you were like leading the way

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Speaker 2: and there was no real I mean, as far as

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Speaker 2: I was concerned, our odds were one percent that SEC

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Speaker 2: would approve one and that day, on that day, on

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Speaker 2: that day, and they immediately went to fifty because blackrocks Blackrock.

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Speaker 2: And so the whole thing was what does Blackrock know?

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Speaker 2: And then there was these conspiracy theories that like Larry

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Speaker 2: was talking to like Gary and the head of the SEC.

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Speaker 1: Or a lot of conspiracy things.

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Speaker 2: Yeah, there was a lot. It was like, well, remember,

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Speaker 2: Blackrock is a big time company. You helped bail out

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Speaker 2: the whole economy basically with buying bonds with the FED

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Speaker 2: in twenty twenty. So Blackrock is like just a monster company,

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Speaker 2: different than any other company. In my opinion, this wouldn't

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Speaker 2: have been as big as Fidelity or even Vanguard filed it.

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Speaker 2: So anyway, everybody went crazy. The internet blew up. I mean,

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Speaker 2: you broke the internet that day. I wasn't sure. I

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Speaker 2: didn't know. I was like, maybe they saw Greyscale lawsuit

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Speaker 2: and you saw that, Hey, maybe the SEC's going to lose.

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Speaker 2: We should file now. So my question to you is

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Speaker 2: what drove the filing that day at that time versus say,

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Speaker 2: just waiting a while until the SEC comes around and

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Speaker 2: then you can come in a little later and do

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Speaker 2: your thing.

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Speaker 4: Yeah.

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Speaker 3: Well, I think that we were ready and our clients

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Speaker 3: were ready, right, that was the big thing. We had

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Speaker 3: laid out all those foundational pieces from the technology side

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Speaker 3: with Coinbase in Aladdin, from the Bitcoin private trust side,

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Speaker 3: and had conviction that we could deliver an ey shares

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Speaker 3: quality product in this space, and it was increasingly clear

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Speaker 3: that our clients hungered for that. Right that, at the

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Speaker 3: end of the day is what it was.

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Speaker 2: You knew that you could decrease friction and cost, which

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Speaker 2: is sort of what Larry did say on Fox Business

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Speaker 2: when he went on and I agree, I mean, ETFs

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Speaker 2: are so good at that. I get it again. It

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Speaker 2: was just a little bit of a shock. We figured

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Speaker 2: usually the first one to throw in their hat is

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Speaker 2: like a van Eck or a grayscale. It was like

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Speaker 2: Blackrock playoffs.

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Speaker 3: So I will say, you know, I maybe downplayed what

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Speaker 3: Scaramouchi said your question earlier, but to his credit he

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Speaker 3: did in the summer of twenty two when we launched

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Speaker 3: the private Bitcoin Trust, he connected the dots and said,

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Speaker 3: I think this is a precursor to them doing an ETF,

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Speaker 3: which was a pretty good call.

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Speaker 1: Yeah.

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Speaker 6: I mean, like you said, our expectation was like people

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Speaker 6: like Vanguard and Blackrock are nextually, Like Vanguard's never going

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Speaker 6: to happen, but Blackrock we think that will probably happen.

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Speaker 6: But we didn't think he'd be first or in with

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Speaker 6: the first guys. So you talk about clients wanting this,

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Speaker 6: I guess what are the client questions you're fielding or

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Speaker 6: what were the questions like six months ago versus what

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Speaker 6: are the questions now? What type of conversations are you

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Speaker 6: happening with those clients that wanted you to do this?

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Speaker 3: A lot pretty steadily through you know, we're four months

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Speaker 3: in now, We've had hundreds of conversations across our client base, right,

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Speaker 3: You could think of kind of our main distribution channels

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Speaker 3: and investor direct which right out of the gate they

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Speaker 3: were buying. There no hurdles to them getting access. That's

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Speaker 3: been I think the largest source of flows for sure,

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Speaker 3: second being wealth advisory channel and third being institutional, and

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Speaker 3: those latter two really operate on a longer timescale. Right,

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Speaker 3: There's a much longer, as you guys know, education, research,

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Speaker 3: diligence journey that underpins their process. So it's a lot

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Speaker 3: of conversations with our wealth advisory partners with home offices

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Speaker 3: who are considering the approval process for this because many

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Speaker 3: of those platforms it's available unsolicited today. Right, you guys

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Speaker 3: have covered this in the past, but not on a

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Speaker 3: solicited basis. So that's the process that they're going through.

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Speaker 3: And then institutional, when this happened, it restarted in many

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Speaker 3: cases those conversations of crypto or bitcoin, should we be

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Speaker 3: invested in this?

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Speaker 5: Right that in some cases.

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Speaker 3: That firm has been having those conversations in twenty one

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Speaker 3: and twenty say, for some of they hadn't had it yet,

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Speaker 3: but this was a moment where they said, okay, we

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Speaker 3: better figure out what this thing is and how it

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Speaker 3: fits the portfolio. And that's kind of the education that

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Speaker 3: we've been doing.

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Speaker 2: Let's go to advisors for a second. When we saw

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Speaker 2: the first inflows and the trade sizes for IBIT, it

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Speaker 2: looks small. It looked like a bunch of minos biting

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Speaker 2: right occasionally a big bite, right, big trade. The thirteen

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Speaker 2: f's showing that there are advisors buying a couple hedge funds.

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Speaker 2: No major institutions yet. But when you look at all ETFs,

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Speaker 2: I think advisors are like seventy percent of the assets.

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Speaker 2: Like they're the biggest users of ETFs generally. And there's

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Speaker 2: been this sort of debate on Twitter lately about whether

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Speaker 2: the boomer advisors are really coming. And let's bring up

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Speaker 2: this part about solicited versus unsoliciteds So what you're saying

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Speaker 2: now is that only if a client goes to the

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Speaker 2: advisor says I need this, can they buy it. But

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Speaker 2: over time the advisor will be able to solicit it

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Speaker 2: to their clients. And where are we what inning are

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Speaker 2: we on the solicit sure?

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Speaker 5: Sure?

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Speaker 3: So the standard process for new ETFs right is typically

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Speaker 3: a multi year journey from launch to actually being approved

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Speaker 3: for solicitation, right, And so I think what's happened here.

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Speaker 3: Given some of the historic demand that we've seen around

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Speaker 3: this that you talked about, Eric, there's been an acceleration

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Speaker 3: of that process for a lot of these home office

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Speaker 3: platforms at the Wealth Advisor. So that's a long journey.

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Speaker 3: There's a very intensive diligence process that goes into that.

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Speaker 3: There's also an education process, and so we're going through

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Speaker 3: that with them. Some will be faster than others, that's

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Speaker 3: just the nature of it, but certainly over the coming

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Speaker 3: months we would expect to see some of those approvals

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Speaker 3: come online. The institutional piece is interesting. You mentioned that,

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Speaker 3: remember on the thirteen apps that says of March thirty first,

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Speaker 3: So over the last couple of weeks you've started to

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Speaker 3: see some of those institutional conversations come to fruition. And

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Speaker 3: I think people forget with an investor direct. People say, Okay, well,

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Speaker 3: that's like small dollar retail. Not necessarily we have within

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Speaker 3: that bucket a number of very large positions, right, So

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Speaker 3: we're talking about many of our holders are in the

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Speaker 3: ultra high net worth category holding in some cases nine

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Speaker 3: figure positions, right. And what we've found, we've been surprised

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Speaker 3: by some of the ways that this that ibit has

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Speaker 3: resonated with investors, even large existing bitcoin holders. One of

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Speaker 3: them that we found is very large holders like the

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Speaker 3: fact that one it's extremely liquid, right, ibit trades ibit

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Speaker 3: USD larger than many of the crypto exchanges in the

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Speaker 3: world that's been around for a long time, and you

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Speaker 3: don't have to show your hand in moving bitcoin to

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Speaker 3: an exchange, right. So Wales hate the fact that people

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Speaker 3: monitor the blockchain for when bitcoin is being moved from

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Speaker 3: large wallets to exchanges. They don't have to tip, and

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Speaker 3: so we've seen actually a lot of very large bitcoin

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Speaker 3: holders coming to the product for that reason.

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Speaker 2: It is really interesting. In my first book, which I'll

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Speaker 2: Plug your Institutional ETF Toolbox, which Joel's read eighteen times,

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Speaker 2: I remember institutions love the anonymity. They love that. They

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Speaker 2: also love liquidity, anonymity and freedom, and it sounds like

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Speaker 2: that's what you're talking about. The liquidity had to come

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Speaker 2: and you're trading a billion a day, which is that

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Speaker 2: that's what they need. So that's interesting that I do

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Speaker 2: agree institutions will bite probably more on on that. That's

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Speaker 2: why I think you're like the GLD, there can only

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Speaker 2: be one super mega liquid one, it looks like you're

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Speaker 2: going to be a Fidelities is pretty liquid, and the

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Speaker 2: others are pretty liquid, but none are in like the

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Speaker 2: top twenty most traded every day consistently like ibit, So

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Speaker 2: you get liquidity, jol. That's when that's like the best

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Speaker 2: big fish. Yeah, it's like chumming the water.

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Speaker 6: So you talked about these whales and people buying ibit,

437
00:22:48,200 --> 00:22:50,920
Speaker 6: I mean, what percentage allocations of a portfolio you're seeing?

438
00:22:50,960 --> 00:22:52,800
Speaker 6: Are you seeing people like you you always hear everyone

439
00:22:52,880 --> 00:22:55,000
Speaker 6: saying one to five percent or something? Are you seeing

440
00:22:55,000 --> 00:22:56,960
Speaker 6: people doing way more than that is? Are you actually

441
00:22:56,960 --> 00:22:58,520
Speaker 6: seeing the one to three percent when you're talking to

442
00:22:58,520 --> 00:23:01,320
Speaker 6: these clients, Like, how are clients looking at ibit and

443
00:23:01,440 --> 00:23:02,439
Speaker 6: just bitcoin in general?

444
00:23:02,920 --> 00:23:07,600
Speaker 3: Yeah, I think that's probably the most intensive part of

445
00:23:07,960 --> 00:23:11,199
Speaker 3: our conversations and the education journey right now, frankly. And

446
00:23:11,600 --> 00:23:15,320
Speaker 3: it varies by investor type and risk references, et cetera.

447
00:23:15,480 --> 00:23:16,160
Speaker 5: Right, So there's no.

448
00:23:16,200 --> 00:23:19,040
Speaker 3: Kind of one size fits all, but we're doing a

449
00:23:19,080 --> 00:23:21,879
Speaker 3: lot of education with our clients around that, and I

450
00:23:21,880 --> 00:23:24,240
Speaker 3: would say one to three percent is probably the most

451
00:23:24,280 --> 00:23:27,840
Speaker 3: typical range for those who who are allocating.

452
00:23:28,720 --> 00:23:31,640
Speaker 2: And we talk about allocations, how is it being positioned,

453
00:23:31,680 --> 00:23:35,040
Speaker 2: because I see people who will there's all a big spectrum.

454
00:23:35,240 --> 00:23:37,800
Speaker 2: There's the hardcore people who are all in this is

455
00:23:37,880 --> 00:23:40,720
Speaker 2: like their religion. They think sixty forty is a scam.

456
00:23:40,840 --> 00:23:42,760
Speaker 2: Will move them aside for a second they're a special

457
00:23:44,680 --> 00:23:46,639
Speaker 2: Then they're sort of the more normal sixty forty ors

458
00:23:46,640 --> 00:23:49,000
Speaker 2: who are like, yeah, I don't want to kick myself

459
00:23:49,000 --> 00:23:50,760
Speaker 2: if this goes to a million, so they buy one

460
00:23:50,840 --> 00:23:54,719
Speaker 2: two percent. I would consider that hot sauce. Now, some

461
00:23:54,760 --> 00:23:57,520
Speaker 2: of the bitcoin issuers will try to sell this as

462
00:23:57,520 --> 00:24:01,280
Speaker 2: something that lowers your overall portfolio volatility. It's like digital gold.

463
00:24:01,640 --> 00:24:04,680
Speaker 2: But if you compare bitcoin to gold, bitcoin makes gold

464
00:24:04,680 --> 00:24:07,240
Speaker 2: look like a money market fund. To me, bitcoin would

465
00:24:07,280 --> 00:24:10,119
Speaker 2: be like double black diamond ski slope, whereas gold is

466
00:24:10,160 --> 00:24:13,800
Speaker 2: like the bunny slope in terms of volatility. Have you

467
00:24:14,880 --> 00:24:17,320
Speaker 2: are people understanding that it's hot sauce. The one thing

468
00:24:17,359 --> 00:24:19,240
Speaker 2: I fear is that they look at it as gold,

469
00:24:19,320 --> 00:24:22,000
Speaker 2: but it's not going to move like gold, and that

470
00:24:22,040 --> 00:24:24,000
Speaker 2: they need to make sure that they are ready for

471
00:24:24,040 --> 00:24:26,200
Speaker 2: this roller coaster ride. Is that how do you brace

472
00:24:26,280 --> 00:24:26,679
Speaker 2: them for this?

473
00:24:27,480 --> 00:24:30,480
Speaker 3: Certainly that's part of the education journey. But I think Eric,

474
00:24:30,520 --> 00:24:33,680
Speaker 3: you've hit on what is probably the most important debate

475
00:24:34,000 --> 00:24:37,320
Speaker 3: in the space right now when we think about investment

476
00:24:37,359 --> 00:24:42,200
Speaker 3: thesis risk portfolio construction. Is the nature of bitcoin's risk

477
00:24:42,800 --> 00:24:46,159
Speaker 3: and the reason I think it has so many people

478
00:24:46,200 --> 00:24:50,359
Speaker 3: confused is bitcoin has this duality to it.

479
00:24:50,720 --> 00:24:50,960
Speaker 5: Right.

480
00:24:51,600 --> 00:24:56,680
Speaker 3: On the one hand, it's a novel technology disruption, right.

481
00:24:57,880 --> 00:25:02,560
Speaker 3: It is potentially a global payment instrument, right, It's very

482
00:25:02,600 --> 00:25:05,960
Speaker 3: early in that journey. It is something that on that

483
00:25:06,080 --> 00:25:09,840
Speaker 3: basis as a sort of technology play and a beta

484
00:25:09,840 --> 00:25:13,119
Speaker 3: of some sorts to blockchain adoption, you would expect it

485
00:25:13,160 --> 00:25:18,800
Speaker 3: to be highly volatile, correlated and would look more like

486
00:25:19,440 --> 00:25:20,960
Speaker 3: tech or VC in a portfolio.

487
00:25:21,080 --> 00:25:21,240
Speaker 5: Right.

488
00:25:21,880 --> 00:25:26,280
Speaker 3: And on the other hand, it is a global, non sovereign,

489
00:25:26,320 --> 00:25:32,240
Speaker 3: scarce decentralized, global monetary alternative of sorts, right. And so

490
00:25:32,280 --> 00:25:36,359
Speaker 3: that's where the digital goal thesis comes from. And there

491
00:25:36,920 --> 00:25:39,240
Speaker 3: you would also expect it to be volatile because it's

492
00:25:39,280 --> 00:25:42,080
Speaker 3: early and it's adoption on that journey, But you expect

493
00:25:42,119 --> 00:25:45,320
Speaker 3: it to be uncorrelated and a potential hedge to some

494
00:25:45,440 --> 00:25:50,880
Speaker 3: of these rich factors inflation, monetary debasement, geopolitical et cetera. Right,

495
00:25:51,520 --> 00:25:54,480
Speaker 3: And that's where the tension comes in because how you

496
00:25:54,520 --> 00:25:56,639
Speaker 3: think about it in a portfolio depends very much on

497
00:25:56,680 --> 00:25:59,520
Speaker 3: which of those narratives prevails. I think the direction of

498
00:25:59,520 --> 00:26:04,000
Speaker 3: travel is increasingly towards the latter, because fundamentally, over a

499
00:26:04,040 --> 00:26:06,679
Speaker 3: longer term, I think that's the bigger component of what

500
00:26:06,800 --> 00:26:09,720
Speaker 3: drives bitcoin. But it's gonna have short term episodes where

501
00:26:09,720 --> 00:26:12,000
Speaker 3: there's a lot of noise around that, so people certainly

502
00:26:12,000 --> 00:26:13,760
Speaker 3: have to be ready for that ride.

503
00:26:13,840 --> 00:26:17,480
Speaker 2: I thought of the best catchphrase for it. It's like gold,

504
00:26:17,640 --> 00:26:20,240
Speaker 2: but as a teenager, you know it's out the party,

505
00:26:20,359 --> 00:26:23,320
Speaker 2: bring all the rules, expect your car to get stolen

506
00:26:23,320 --> 00:26:24,719
Speaker 2: in the middle of the night, like all that kind

507
00:26:24,760 --> 00:26:27,240
Speaker 2: of stuff. It's not going to be dull, right, Gold

508
00:26:27,320 --> 00:26:29,159
Speaker 2: is eight thousand years old. This is like gold is

509
00:26:29,200 --> 00:26:30,040
Speaker 2: like a seventeen year.

510
00:26:29,920 --> 00:26:32,680
Speaker 6: Old role to be fair, the common phrase that people

511
00:26:32,760 --> 00:26:34,640
Speaker 6: meant and including me, for many years, have been using

512
00:26:34,760 --> 00:26:37,439
Speaker 6: is a call option of store value asset, which is

513
00:26:37,520 --> 00:26:43,520
Speaker 6: like a monocle Pooh or super smart one, but like

514
00:26:44,160 --> 00:26:46,080
Speaker 6: a call option in store of value asset is what

515
00:26:46,119 --> 00:26:47,480
Speaker 6: a lot of people have been referring to it.

516
00:26:47,520 --> 00:26:50,040
Speaker 2: As the other description I heard that I thought resonated

517
00:26:50,080 --> 00:26:52,920
Speaker 2: was some guy, this retail person on Twitter, just the

518
00:26:52,960 --> 00:26:56,000
Speaker 2: regular guys like, it's like the Second Amendment for money,

519
00:26:56,680 --> 00:26:58,760
Speaker 2: which I thought about it. I thought about it. I'm like,

520
00:26:58,800 --> 00:27:01,160
Speaker 2: I get that it's like protect from your own government

521
00:27:01,840 --> 00:27:05,560
Speaker 2: from devaluing the currency, which honestly sends wealth right up

522
00:27:05,600 --> 00:27:09,040
Speaker 2: to the top. And so this idea of like devaluation

523
00:27:09,119 --> 00:27:11,920
Speaker 2: and you have something to protect yourself from it. How

524
00:27:12,000 --> 00:27:17,360
Speaker 2: much does that resonate with advisors versus just simple Hey man,

525
00:27:17,480 --> 00:27:19,320
Speaker 2: this thing is cool. I don't want to miss out if.

526
00:27:19,240 --> 00:27:23,000
Speaker 5: It goes to a million. It's some of each.

527
00:27:23,720 --> 00:27:27,040
Speaker 3: But I think that in the US and Europe in particular,

528
00:27:27,880 --> 00:27:30,399
Speaker 3: that first piece is a little bit harder to grasp.

529
00:27:30,680 --> 00:27:32,680
Speaker 5: Right. The US has enjoyed this.

530
00:27:33,080 --> 00:27:37,480
Speaker 3: Incredible run of the post World War two era, basically

531
00:27:37,560 --> 00:27:43,040
Speaker 3: eight decades of pretty remarkable stability and prosperity, right, And

532
00:27:43,200 --> 00:27:48,760
Speaker 3: that is an outlier in human history, in financial history,

533
00:27:49,520 --> 00:27:53,840
Speaker 3: and so it's harder to grasp why you would have

534
00:27:53,920 --> 00:28:01,480
Speaker 3: to worry about the debasement of money or political dysfunction, destabilization,

535
00:28:01,560 --> 00:28:05,640
Speaker 3: et cetera for an American, specifically those of an older generation.

536
00:28:06,119 --> 00:28:10,119
Speaker 3: The reality is around the world, there's about four billion

537
00:28:10,320 --> 00:28:15,920
Speaker 3: people who live in some sort of non democratic regime, right,

538
00:28:16,520 --> 00:28:20,040
Speaker 3: You've got about two billion people who live in hyperinflationary

539
00:28:20,160 --> 00:28:24,679
Speaker 3: or severe inflationary monetary regime. So for those people, this

540
00:28:24,840 --> 00:28:28,720
Speaker 3: is very real and they've lived it. For Americans, it

541
00:28:28,760 --> 00:28:33,600
Speaker 3: can be a little bit more amorphous that this concept.

542
00:28:37,880 --> 00:28:39,280
Speaker 6: When you guys are talking about this, what do you

543
00:28:39,360 --> 00:28:41,480
Speaker 6: view the what do you think it's correlated to or

544
00:28:41,680 --> 00:28:44,880
Speaker 6: inversely correlated to? Are you looking at the dollar real rates?

545
00:28:44,960 --> 00:28:47,120
Speaker 6: Like what inflation? How do you guys talk about this

546
00:28:47,160 --> 00:28:49,840
Speaker 6: with clients? From a correlation's point of view, you've danced

547
00:28:49,840 --> 00:28:51,320
Speaker 6: around with a lot of this talk.

548
00:28:51,360 --> 00:28:51,960
Speaker 1: Let's dive right.

549
00:28:52,240 --> 00:28:57,160
Speaker 3: The correlation is super super important, right, because volatility is volatility, right,

550
00:28:57,320 --> 00:29:00,720
Speaker 3: And because it's so volatile, we're not recommend it in

551
00:29:00,840 --> 00:29:03,640
Speaker 3: large concentrations in a portfolio because then the volatility really

552
00:29:03,720 --> 00:29:07,200
Speaker 3: starts to add to risk. But at smaller concentrations, the

553
00:29:07,240 --> 00:29:14,200
Speaker 3: correlation becomes the key factor. And fundamentally, from a macro perspective,

554
00:29:14,720 --> 00:29:19,360
Speaker 3: you can sum up most of Bitcoin's correlation where it

555
00:29:19,440 --> 00:29:22,400
Speaker 3: exists to so called risk assets.

556
00:29:22,720 --> 00:29:24,000
Speaker 5: Based on real interest rates.

557
00:29:24,200 --> 00:29:28,160
Speaker 3: Right, Bitcoin is massively short real interest rates, it is

558
00:29:28,760 --> 00:29:32,440
Speaker 3: short nominal rates, and it is long inflation expectations. You

559
00:29:32,480 --> 00:29:35,440
Speaker 3: look at the charting of this, it's quite striking, and

560
00:29:35,520 --> 00:29:37,520
Speaker 3: of course the alternative way of thinking about it is

561
00:29:37,640 --> 00:29:42,280
Speaker 3: versus the dollar, and bitcoin is also very inversely exposed

562
00:29:42,280 --> 00:29:44,360
Speaker 3: to the dollar, and of course the dollar and real

563
00:29:44,400 --> 00:29:46,760
Speaker 3: interest rates have their own pretty tight correlation. So that

564
00:29:46,840 --> 00:29:50,320
Speaker 3: explains most of the correlation that exists, because fundamentally, on

565
00:29:50,360 --> 00:29:53,040
Speaker 3: other metrics, you'd expect that correlation to be low or

566
00:29:53,040 --> 00:29:54,840
Speaker 3: even in some ways the negative.

567
00:29:55,600 --> 00:29:58,600
Speaker 6: So the pitch should be basically inversely correlated to real

568
00:29:58,680 --> 00:30:00,920
Speaker 6: rates expectations that but.

569
00:30:00,960 --> 00:30:02,160
Speaker 2: Also the volatility.

570
00:30:02,280 --> 00:30:04,240
Speaker 6: You talk about volatility as a bug, but I almost

571
00:30:04,440 --> 00:30:05,880
Speaker 6: I think of it more as a feature. If you

572
00:30:05,880 --> 00:30:07,480
Speaker 6: look at any of this research, if you do any

573
00:30:07,480 --> 00:30:11,080
Speaker 6: sort of semblance of regular rebalancing, whether it's quarterly, semi annually,

574
00:30:11,160 --> 00:30:13,760
Speaker 6: or annually, if you can manage to sell when it's

575
00:30:13,760 --> 00:30:15,920
Speaker 6: a little bit, when it's going way high through the

576
00:30:15,960 --> 00:30:19,080
Speaker 6: roof and these massive bull markets, and buy after it's

577
00:30:19,080 --> 00:30:21,800
Speaker 6: collapsed eighty percent, which happens pretty much every single cycle,

578
00:30:22,040 --> 00:30:24,440
Speaker 6: that's where a lot of this sharp ratio seems to

579
00:30:24,440 --> 00:30:26,479
Speaker 6: come from any back test analysis that I've done, so

580
00:30:26,880 --> 00:30:28,960
Speaker 6: is that the pitch you're giving to these advisors do

581
00:30:29,000 --> 00:30:31,280
Speaker 6: this put in an allocation and just rebalance it and

582
00:30:31,360 --> 00:30:32,760
Speaker 6: make sure you do it properly.

583
00:30:32,840 --> 00:30:35,120
Speaker 3: Well, I think that market timing is easier said than

584
00:30:35,160 --> 00:30:38,080
Speaker 3: done right because sometimes it may look like the top

585
00:30:38,120 --> 00:30:40,040
Speaker 3: and it's not yet, and sometimes it may look like

586
00:30:40,080 --> 00:30:41,240
Speaker 3: the bottom and there's a.

587
00:30:41,280 --> 00:30:42,160
Speaker 5: Ways to go yet.

588
00:30:42,200 --> 00:30:45,240
Speaker 3: So historically, for bitcoin, the best way to trade it

589
00:30:45,280 --> 00:30:48,120
Speaker 3: was to buy and hold it for a long period.

590
00:30:48,200 --> 00:30:50,120
Speaker 3: The people who had the discipline to do that over

591
00:30:50,120 --> 00:30:54,200
Speaker 3: the last ten years fifteen years did extraordinarily well. So

592
00:30:54,240 --> 00:30:57,480
Speaker 3: we're certainly not trying to advocate market timing.

593
00:30:57,280 --> 00:30:59,719
Speaker 6: For Sorry, I just meant regular rebalancing, which I know

594
00:30:59,760 --> 00:31:02,160
Speaker 6: like bitcoin believers here out there listening to that, and

595
00:31:02,200 --> 00:31:03,320
Speaker 6: that's like blasphemous.

596
00:31:03,560 --> 00:31:07,440
Speaker 2: Well, let's talk about behavior, because I frequently debate this.

597
00:31:07,720 --> 00:31:10,040
Speaker 2: When the bitcoin ets were taking your money, all of

598
00:31:10,080 --> 00:31:15,440
Speaker 2: the degens were thrilled. They're basically celebrating, and then they

599
00:31:15,480 --> 00:31:19,000
Speaker 2: top off a little. There's other sellers. The ETF flows

600
00:31:19,000 --> 00:31:21,960
Speaker 2: seem to be somewhat driving the price, but there's definitely

601
00:31:22,080 --> 00:31:24,520
Speaker 2: the ETF flows have the price going up, and then

602
00:31:24,520 --> 00:31:27,280
Speaker 2: you can tell there's actually like whales selling or somebody else,

603
00:31:27,360 --> 00:31:29,680
Speaker 2: like clearly it's not the ETFs. Then the price kind

604
00:31:29,680 --> 00:31:32,560
Speaker 2: of flat lines and the ETF flows follow, which is normal,

605
00:31:33,080 --> 00:31:34,800
Speaker 2: but in the past sell off there's been like a

606
00:31:34,880 --> 00:31:37,320
Speaker 2: month of like shaky flows. I think it's added up

607
00:31:37,360 --> 00:31:39,480
Speaker 2: to about three percent of total assets, so not a lot,

608
00:31:40,160 --> 00:31:44,360
Speaker 2: but everybody's all, look, the boomers have lettuce hands. Yeah,

609
00:31:44,600 --> 00:31:46,280
Speaker 2: and I'm like, first of all, it's three percent of

610
00:31:46,320 --> 00:31:48,680
Speaker 2: the assets. Second of all, ETFs or hotels, people come

611
00:31:48,680 --> 00:31:50,640
Speaker 2: in and out. It's the way it is. And then

612
00:31:50,960 --> 00:31:53,840
Speaker 2: I do think that ETF investors are usually heads up.

613
00:31:53,840 --> 00:31:55,959
Speaker 2: If you're smart enough to know what an ETF is

614
00:31:56,000 --> 00:31:58,520
Speaker 2: and use it, you've probably used one before, and you

615
00:31:58,560 --> 00:32:01,120
Speaker 2: probably have this as a small occasi. This isn't like

616
00:32:01,360 --> 00:32:04,680
Speaker 2: the whole enchilada, so you can stomach more volatility. So

617
00:32:05,400 --> 00:32:07,880
Speaker 2: my view is there will be some outflows, but over

618
00:32:07,920 --> 00:32:10,280
Speaker 2: time I think these are more diamond hand investors than

619
00:32:10,800 --> 00:32:13,000
Speaker 2: some think. Is that true?

620
00:32:14,240 --> 00:32:17,800
Speaker 3: Well, certainly our client base I think is taking more

621
00:32:17,840 --> 00:32:21,120
Speaker 3: of a long term buy and hold view than a

622
00:32:21,160 --> 00:32:25,440
Speaker 3: lot of the sometimes frivolous trading activity that happens more

623
00:32:25,440 --> 00:32:31,520
Speaker 3: broadly in crypto markets. Ultimately, the ETFs are an access vehicle, right,

624
00:32:31,560 --> 00:32:34,800
Speaker 3: They're an efficient, comedian access vehicle that has taken away

625
00:32:34,800 --> 00:32:38,360
Speaker 3: frictions from some portions of the market that historically may

626
00:32:38,400 --> 00:32:41,120
Speaker 3: have liked or wanted to participate in bitcoin who couldn't,

627
00:32:41,160 --> 00:32:43,880
Speaker 3: and now they are and I think ultimately that's making

628
00:32:43,920 --> 00:32:45,840
Speaker 3: the market more efficient and more liquid.

629
00:32:46,920 --> 00:32:50,400
Speaker 6: So talking about an access vehicle. We've talked about institutions

630
00:32:50,440 --> 00:32:53,120
Speaker 6: a lot, but like thirteen fs, we'veeen granted, there's still

631
00:32:53,160 --> 00:32:55,440
Speaker 6: some time left before they all file, but like, when

632
00:32:55,600 --> 00:32:58,400
Speaker 6: are the institutions coming? I mean, forever you've been hearing

633
00:32:58,440 --> 00:33:01,880
Speaker 6: people on crypto Twitter and elsewhere saying the institutions are coming.

634
00:33:01,880 --> 00:33:04,280
Speaker 6: I heard is coming, But when are the institutions coming?

635
00:33:04,320 --> 00:33:08,360
Speaker 2: I think crypto twitter also thinks advisors or institutions. Crypto

636
00:33:08,360 --> 00:33:11,320
Speaker 2: Twitter thinks anybody without like a coinbase account is like

637
00:33:11,360 --> 00:33:12,360
Speaker 2: an institution.

638
00:33:12,160 --> 00:33:14,840
Speaker 5: Right, I think some parts of crypto Twitter.

639
00:33:14,840 --> 00:33:17,560
Speaker 2: Yeah, they just think someone wearing like pleated khaki pants

640
00:33:17,560 --> 00:33:21,760
Speaker 2: to golfs that's like the institution for them. Well, I'm

641
00:33:21,800 --> 00:33:26,160
Speaker 2: talking about pensions. Someone said someone said bitcoin ETFs are

642
00:33:26,200 --> 00:33:29,160
Speaker 2: for your parents. That was like, I forget what article did,

643
00:33:29,160 --> 00:33:30,760
Speaker 2: but that I thought that was a pretty accurate. This

644
00:33:30,840 --> 00:33:32,800
Speaker 2: is the boomer The boomers are coming.

645
00:33:33,080 --> 00:33:36,320
Speaker 3: We talked about those three buckets, right, and investor, direct,

646
00:33:36,520 --> 00:33:39,920
Speaker 3: advisory and institutional It's just just the longest timescale for sure.

647
00:33:40,120 --> 00:33:45,000
Speaker 3: There's a very significant research, education, diligence process that is

648
00:33:45,160 --> 00:33:48,920
Speaker 3: going into it, and I think that we're still very

649
00:33:48,960 --> 00:33:51,200
Speaker 3: early on that journey. Obviously, there are a handful of

650
00:33:51,200 --> 00:33:54,480
Speaker 3: institutions who over the years, very small number who allocated

651
00:33:54,520 --> 00:33:58,120
Speaker 3: to bitcoin directly, who overcame the pretty significant frictions to

652
00:33:58,480 --> 00:33:58,800
Speaker 3: do that.

653
00:33:59,440 --> 00:34:00,960
Speaker 5: A little bit larger number.

654
00:34:00,680 --> 00:34:05,120
Speaker 3: Who allocated to the sector, to the technology or asset

655
00:34:05,160 --> 00:34:08,360
Speaker 3: class more broadly, typically through funds. Venture funds were a

656
00:34:08,360 --> 00:34:11,399
Speaker 3: popular way to do it, But it's still early. What

657
00:34:11,440 --> 00:34:14,960
Speaker 3: I can say is there's plenty who are on that

658
00:34:15,920 --> 00:34:19,440
Speaker 3: research journey, and that's part of the education that we're

659
00:34:19,640 --> 00:34:20,719
Speaker 3: doing every day.

660
00:34:21,600 --> 00:34:24,120
Speaker 1: What do you think is next for the crypto industry

661
00:34:24,400 --> 00:34:27,960
Speaker 1: as a whole? I mean, not that we have ETFs trading,

662
00:34:28,160 --> 00:34:29,880
Speaker 1: what does it mean for the rest of the industry.

663
00:34:30,680 --> 00:34:34,160
Speaker 3: You know, obviously there's a much longer tail of crypto

664
00:34:34,200 --> 00:34:39,360
Speaker 3: assets than bitcoin or bitcoin and ether. For us, for

665
00:34:39,520 --> 00:34:44,319
Speaker 3: our clients, their interest overwhelmingly has been in bitcoin, a

666
00:34:44,360 --> 00:34:47,520
Speaker 3: little bit in ethereum, and not a whole lot in

667
00:34:47,800 --> 00:34:51,080
Speaker 3: that longer tail of ten thousand plus assets, So I

668
00:34:51,120 --> 00:34:53,960
Speaker 3: think it's important to make that distinction between the two.

669
00:34:54,040 --> 00:34:57,560
Speaker 3: Certainly there's some great projects out there in that larger

670
00:34:57,960 --> 00:35:00,600
Speaker 3: group of assets, but there's also been a lot of

671
00:35:00,640 --> 00:35:04,279
Speaker 3: pretty frivolous projects, right, A lot of tokens that have

672
00:35:04,360 --> 00:35:06,960
Speaker 3: been flashing the pan and they've come and gone, and

673
00:35:06,960 --> 00:35:09,400
Speaker 3: there's been you know, hype associated with them that hasn't

674
00:35:09,400 --> 00:35:12,080
Speaker 3: been backed up by real economic substance. So it's going

675
00:35:12,160 --> 00:35:14,399
Speaker 3: to be a long journey for some of the rest

676
00:35:14,400 --> 00:35:18,239
Speaker 3: of crypto to really start establishing product market fit and

677
00:35:18,440 --> 00:35:22,440
Speaker 3: economic use cases before they start to cross that chasm

678
00:35:22,520 --> 00:35:25,759
Speaker 3: into what we've seen obviously Bitcoin become.

679
00:35:25,640 --> 00:35:27,440
Speaker 1: So bitcoin maximalists.

680
00:35:28,400 --> 00:35:34,359
Speaker 3: Bull maximus would be a little stronger, but certainly it's

681
00:35:34,440 --> 00:35:36,680
Speaker 3: unique and it's where it is today.

682
00:35:36,760 --> 00:35:38,879
Speaker 2: We've seen when they launched bitcoin and ether together, whether

683
00:35:38,920 --> 00:35:40,920
Speaker 2: it's futures or like in Hong Kong, they launched both

684
00:35:40,920 --> 00:35:43,400
Speaker 2: at the same time. I think e've got fifteen percent

685
00:35:43,520 --> 00:35:47,080
Speaker 2: of the assets twenty over twenty twenty. Yeah, I think

686
00:35:47,080 --> 00:35:49,160
Speaker 2: it was a little less. He's more bullish than I

687
00:35:49,400 --> 00:35:52,560
Speaker 2: it was. I tot you funny is to me, Bitcoin

688
00:35:52,640 --> 00:35:55,440
Speaker 2: is the headliner and eth coming out next if it

689
00:35:55,440 --> 00:35:57,799
Speaker 2: ever gets approved would be like the opening Act coming

690
00:35:57,840 --> 00:36:01,799
Speaker 2: out after So I just mostly focused mentally on the

691
00:36:01,800 --> 00:36:05,640
Speaker 2: bitcoin ETFs. I think eth also speaks to what I

692
00:36:05,680 --> 00:36:08,239
Speaker 2: was going to ask you next, which is tokenization, And

693
00:36:08,360 --> 00:36:11,800
Speaker 2: I wanted to ask you about that because when Larry's

694
00:36:11,800 --> 00:36:13,799
Speaker 2: on Fox, he does talk about the bitcoin ETF, then

695
00:36:13,800 --> 00:36:17,239
Speaker 2: he pivots to tokenization. Now, are you talking about tokenizing

696
00:36:17,760 --> 00:36:21,320
Speaker 2: everything so that Microsoft shares and even your own ETFs

697
00:36:21,320 --> 00:36:24,239
Speaker 2: are tokenized? Or we just talking about tokenizing things that

698
00:36:24,280 --> 00:36:28,040
Speaker 2: are hard to get like artwork or farmland in Iowa

699
00:36:28,120 --> 00:36:32,040
Speaker 2: where you can just now places ETFs can't go. What

700
00:36:32,080 --> 00:36:33,640
Speaker 2: are we looking at in ten years?

701
00:36:34,800 --> 00:36:36,680
Speaker 3: So I think if we go back to that three

702
00:36:36,680 --> 00:36:40,319
Speaker 3: pillar frame where crypto stable coins, tokenization is by far

703
00:36:40,480 --> 00:36:43,400
Speaker 3: the least developed of those three right now from an

704
00:36:43,400 --> 00:36:47,000
Speaker 3: industry perspective. Right that said, there's a lot of excitement

705
00:36:47,040 --> 00:36:51,440
Speaker 3: around it because the potential future state and I don't.

706
00:36:51,200 --> 00:36:52,800
Speaker 5: Know whether this will be realized.

707
00:36:52,800 --> 00:36:56,439
Speaker 3: I don't think anyone really knows, but certainly possible of

708
00:36:56,680 --> 00:37:01,560
Speaker 3: a world where a blockchain digital asset token becomes the

709
00:37:01,600 --> 00:37:07,759
Speaker 3: primary format for the majority of investment assets and securities.

710
00:37:07,840 --> 00:37:12,840
Speaker 3: Right that's a possibility, and that is a really interesting

711
00:37:12,840 --> 00:37:17,960
Speaker 3: world in a lot of ways, or something that becomes global, universal,

712
00:37:18,200 --> 00:37:23,319
Speaker 3: digitally native, transparent, instantaneously transferable, programmable, all these attributes of

713
00:37:23,760 --> 00:37:27,680
Speaker 3: tokenization that are behind why there's so much optimism for

714
00:37:27,719 --> 00:37:30,560
Speaker 3: it and for us, it's a story of how does

715
00:37:30,640 --> 00:37:35,160
Speaker 3: this increase access and lower costs for our investors. The

716
00:37:35,719 --> 00:37:40,760
Speaker 3: substance today, though, is that tokenization has not yet taken

717
00:37:40,800 --> 00:37:44,640
Speaker 3: off at scale in any meaningful way, right, and so

718
00:37:44,719 --> 00:37:46,960
Speaker 3: there's a lot of work happening. I think what you

719
00:37:47,080 --> 00:37:50,040
Speaker 3: need to see is a coalescence around what are the

720
00:37:50,080 --> 00:37:52,440
Speaker 3: right asset classes to start with? Forget about where we're

721
00:37:52,440 --> 00:37:54,200
Speaker 3: going to finish and what's going to be included in that.

722
00:37:54,400 --> 00:37:56,399
Speaker 3: Where do we start so that we can say there's

723
00:37:56,400 --> 00:37:58,840
Speaker 3: a geography, there's an asset class that we used to

724
00:37:59,360 --> 00:38:02,360
Speaker 3: trade and an issue this way, and now we primarily

725
00:38:02,440 --> 00:38:06,400
Speaker 3: do it using a digital asset token and then having

726
00:38:06,680 --> 00:38:10,440
Speaker 3: the custody and the trading and the regulatory support infrastructure

727
00:38:10,719 --> 00:38:11,920
Speaker 3: to actually make that happen.

728
00:38:12,080 --> 00:38:13,560
Speaker 5: We're just early in that journey.

729
00:38:13,760 --> 00:38:15,960
Speaker 1: Let me ask similar question in a different way, which

730
00:38:15,960 --> 00:38:17,480
Speaker 1: is there anything that the ETF can't do?

731
00:38:22,600 --> 00:38:26,200
Speaker 3: ETS is a pretty good wrapper. It's popular for a reason.

732
00:38:26,719 --> 00:38:28,200
Speaker 3: I haven't thought about that question though.

733
00:38:28,480 --> 00:38:31,640
Speaker 2: I think some of the crypto crowd underrates the disruptive

734
00:38:31,719 --> 00:38:34,239
Speaker 2: ability of the ETFs. I think they think crypto is

735
00:38:34,280 --> 00:38:38,040
Speaker 2: the big disruptor of everything. But ETFs, I think are

736
00:38:38,080 --> 00:38:41,479
Speaker 2: gonna push down costs from the exchanges. If you're doing

737
00:38:41,520 --> 00:38:44,839
Speaker 2: direct indexing for advisors, you're probably charging one percent. You're

738
00:38:44,880 --> 00:38:49,120
Speaker 2: going to get pushed down. There's nothing like a highly liquid,

739
00:38:49,480 --> 00:38:51,759
Speaker 2: cheap ETF, and the US is full of them, and

740
00:38:51,800 --> 00:38:54,880
Speaker 2: these are already at twenty to thirty basis points with

741
00:38:54,920 --> 00:38:59,640
Speaker 2: a billion dollars in liquidity. I can't overstate how powerfully

742
00:38:59,640 --> 00:39:03,280
Speaker 2: attract act of that is to every investor. We're probably

743
00:39:03,280 --> 00:39:05,319
Speaker 2: going to see people come over from other countries who

744
00:39:05,360 --> 00:39:09,040
Speaker 2: are big investors just to get that. It's just hard

745
00:39:09,080 --> 00:39:10,719
Speaker 2: to compete with that.

746
00:39:11,000 --> 00:39:14,840
Speaker 3: Yeah, So what's interesting, you know, comparing the ETF and

747
00:39:14,920 --> 00:39:18,480
Speaker 3: a digital asset token as a rapper. If you look

748
00:39:18,520 --> 00:39:21,160
Speaker 3: at the two things. Two major announcements we had this

749
00:39:21,239 --> 00:39:24,960
Speaker 3: year obviously i BIT in digital asset space and our

750
00:39:25,160 --> 00:39:30,160
Speaker 3: tokenized yield fund on a public blockchain, and they do the.

751
00:39:30,080 --> 00:39:35,800
Speaker 5: Opposite of each other. Yeah, which is i BIT takes

752
00:39:36,320 --> 00:39:37,800
Speaker 5: a crypto.

753
00:39:37,400 --> 00:39:39,839
Speaker 3: Asset underlying investment and puts it in a trad FI

754
00:39:39,960 --> 00:39:45,040
Speaker 3: rapper an ETF wrapper, right, And a tokenized fund takes

755
00:39:45,239 --> 00:39:48,000
Speaker 3: a trad FI underlying investment and puts it in a

756
00:39:48,040 --> 00:39:51,560
Speaker 3: crypto wrapper. And you might say, well, that's contradictory, but

757
00:39:51,600 --> 00:39:54,120
Speaker 3: it's really not, because what it's a reflection of is

758
00:39:54,280 --> 00:39:58,960
Speaker 3: across our client base there are various stages of their

759
00:39:59,000 --> 00:40:05,040
Speaker 3: evolution and have very different preferences around infrastructure and access method,

760
00:40:05,080 --> 00:40:08,080
Speaker 3: et cetera. And so for a lot of our clients,

761
00:40:08,160 --> 00:40:10,800
Speaker 3: certainly the majority of our client the ETF is a

762
00:40:10,920 --> 00:40:14,160
Speaker 3: much more efficient convenient way to access something like bitcoin.

763
00:40:15,080 --> 00:40:17,920
Speaker 5: And for some of our clients who are now.

764
00:40:18,080 --> 00:40:21,320
Speaker 3: Crypto fluent or they're active in digital asset world and

765
00:40:21,360 --> 00:40:25,279
Speaker 3: they're used to blockchain wallets and settling on chain, they

766
00:40:25,320 --> 00:40:27,360
Speaker 3: love the idea of having a black rock fund that

767
00:40:27,560 --> 00:40:32,719
Speaker 3: is digitally native, instantly transferable, et cetera. So both are

768
00:40:32,760 --> 00:40:35,640
Speaker 3: happening in parallel, and perhaps one day we see a

769
00:40:35,640 --> 00:40:37,520
Speaker 3: convergence that's the best of both, but I think that's

770
00:40:37,560 --> 00:40:38,279
Speaker 3: a long way off.

771
00:40:38,719 --> 00:40:41,960
Speaker 6: We're coming up on a deadline for some spot theorerem ETFs.

772
00:40:42,400 --> 00:40:44,319
Speaker 6: You guys have an active filing, but what are the

773
00:40:44,320 --> 00:40:46,319
Speaker 6: prospects internally. Do you think we're going to get an

774
00:40:46,320 --> 00:40:47,480
Speaker 6: ethereum spot ETF.

775
00:40:47,840 --> 00:40:50,600
Speaker 5: Given it's an active perspectus, I can't comment.

776
00:40:50,640 --> 00:40:52,799
Speaker 2: If they don't get approved, there'll be five hundred and

777
00:40:52,840 --> 00:40:57,800
Speaker 2: seventy five and two approvals. That's it, look it, hey, man, here's.

778
00:40:58,000 --> 00:40:59,080
Speaker 5: Sure it's never come up.

779
00:40:59,320 --> 00:40:59,840
Speaker 1: Yeah.

780
00:41:01,320 --> 00:41:03,520
Speaker 6: People were like, BlackRock's not going to file if they

781
00:41:03,560 --> 00:41:05,239
Speaker 6: think they could get denied. In my mind, I was like,

782
00:41:05,280 --> 00:41:07,839
Speaker 6: Blackrock doesn't care well if they get denied in their

783
00:41:08,400 --> 00:41:10,719
Speaker 6: record is they're trying to get it approved. Do you

784
00:41:10,760 --> 00:41:13,760
Speaker 6: guys talk about the idea like, we can't tarnish our record.

785
00:41:14,000 --> 00:41:17,400
Speaker 5: We're a lot more focused on the client out.

786
00:41:18,080 --> 00:41:20,000
Speaker 2: The number out there, which Fox never gave me credit.

787
00:41:20,000 --> 00:41:22,200
Speaker 2: But that's okay. Yeah, But it wasn't to say they're

788
00:41:22,239 --> 00:41:23,719
Speaker 2: focused on it was just to say this is how

789
00:41:23,760 --> 00:41:26,799
Speaker 2: powerful and not messing around this company is, right. That

790
00:41:26,920 --> 00:41:29,600
Speaker 2: is some record right speaking of that, like the in

791
00:41:29,719 --> 00:41:32,279
Speaker 2: kind versus cash creations, just to get wonky in kind

792
00:41:32,280 --> 00:41:34,600
Speaker 2: would be ideal for the industry, but SEC would only

793
00:41:34,600 --> 00:41:37,600
Speaker 2: allow cash creations for these spot ETFs. Looks like they're

794
00:41:37,600 --> 00:41:39,600
Speaker 2: doing fine. It wasn't a big deal, but I know

795
00:41:39,680 --> 00:41:41,959
Speaker 2: in kind is what you wanted and others you didn't

796
00:41:42,000 --> 00:41:45,200
Speaker 2: get it, which proves that Blackrock isn't dictating things. Do

797
00:41:45,239 --> 00:41:46,840
Speaker 2: we think do you think we'll get in kind in

798
00:41:46,880 --> 00:41:48,000
Speaker 2: the next year or two?

799
00:41:49,200 --> 00:41:51,600
Speaker 3: I hope at some point our views on it were

800
00:41:51,600 --> 00:41:54,680
Speaker 3: all public in the SEC discussions that we had with

801
00:41:54,760 --> 00:41:58,120
Speaker 3: them on it. And ultimately what we're focused on is

802
00:41:58,880 --> 00:42:03,359
Speaker 3: it's even more from a market structure perspective, better for

803
00:42:03,400 --> 00:42:06,600
Speaker 3: investors that way. And there are a lot of clients,

804
00:42:06,640 --> 00:42:12,080
Speaker 3: frankly who have large Bitcoin positions and they would like

805
00:42:12,120 --> 00:42:14,920
Speaker 3: to hold some or all of that in an ETF,

806
00:42:15,600 --> 00:42:18,920
Speaker 3: but without in kind, they would have to incur a

807
00:42:19,000 --> 00:42:22,560
Speaker 3: tax realization, and so there's some eagerness from those folks

808
00:42:22,640 --> 00:42:23,359
Speaker 3: to have that.

809
00:42:24,120 --> 00:42:27,200
Speaker 6: Crenshaw, who's one of the commissioners, was the I've heard

810
00:42:27,280 --> 00:42:29,719
Speaker 6: is the driving force behind us having castreats and not

811
00:42:29,800 --> 00:42:30,439
Speaker 6: having in kind.

812
00:42:30,440 --> 00:42:31,680
Speaker 1: Who's a Democratic commissioner.

813
00:42:31,960 --> 00:42:34,440
Speaker 6: So depending on what happens in November with the election,

814
00:42:34,600 --> 00:42:36,520
Speaker 6: like all these questions could be completely different.

815
00:42:36,719 --> 00:42:38,040
Speaker 1: Yeah, could be moot because I think.

816
00:42:37,920 --> 00:42:40,839
Speaker 6: A Republican administration will be much more amenable to in

817
00:42:40,920 --> 00:42:42,640
Speaker 6: kind transactions.

818
00:42:43,080 --> 00:42:45,400
Speaker 1: What did you learn about yourself through this?

819
00:42:48,480 --> 00:42:50,840
Speaker 3: I was expecting that one. Now, I think that so

820
00:42:51,480 --> 00:42:56,360
Speaker 3: patience was not something that I would say I necessarily

821
00:42:56,400 --> 00:42:59,799
Speaker 3: have a lot of, but I have maybe a little

822
00:42:59,800 --> 00:43:01,880
Speaker 3: bit more than I thought I didn't. I think that

823
00:43:02,600 --> 00:43:06,680
Speaker 3: for big things to happen in an industry, you have

824
00:43:06,800 --> 00:43:08,520
Speaker 3: to be very patient.

825
00:43:08,920 --> 00:43:10,960
Speaker 5: Right, These things take time.

826
00:43:11,080 --> 00:43:13,560
Speaker 3: Obviously, you know, the digital asset space has had a

827
00:43:13,600 --> 00:43:17,839
Speaker 3: pretty seismic shift over the last decade. But in any

828
00:43:17,840 --> 00:43:20,279
Speaker 3: given year, people might have said, oh, this is all

829
00:43:20,440 --> 00:43:23,239
Speaker 3: not happening fast enough. And if we look back on

830
00:43:23,320 --> 00:43:26,719
Speaker 3: where we've come as an industry and as a firm.

831
00:43:26,880 --> 00:43:29,239
Speaker 5: You know what we've been able to do. I think

832
00:43:29,320 --> 00:43:30,359
Speaker 5: it's actually pretty cool.

833
00:43:30,480 --> 00:43:33,960
Speaker 1: Capital one question, what's in your crypto wallet?

834
00:43:35,000 --> 00:43:38,040
Speaker 5: Oh? Boy, there's obviously some bitcoin there.

835
00:43:38,320 --> 00:43:39,840
Speaker 1: Is it? Or bitcoin?

836
00:43:40,200 --> 00:43:40,680
Speaker 5: It's both?

837
00:43:40,840 --> 00:43:41,600
Speaker 1: Okay, it's both.

838
00:43:41,719 --> 00:43:45,279
Speaker 3: Yeah, there's some eat there. And what's in beyond that?

839
00:43:45,560 --> 00:43:51,759
Speaker 3: I'm not going to say, probably for the best not

840
00:43:51,800 --> 00:43:52,120
Speaker 3: to answer.

841
00:43:52,160 --> 00:43:54,640
Speaker 2: The rest of any XRP people are the craziest.

842
00:43:54,680 --> 00:43:55,400
Speaker 1: Can we agree on that?

843
00:43:55,760 --> 00:43:56,720
Speaker 5: Yes, no comment.

844
00:43:57,719 --> 00:44:00,759
Speaker 2: When they put that foge XRP thing out and I said,

845
00:44:00,800 --> 00:44:02,520
Speaker 2: I called you guys, and they said this is not true.

846
00:44:02,520 --> 00:44:04,560
Speaker 2: I said, it's not true. The price went down to

847
00:44:04,600 --> 00:44:07,719
Speaker 2: normal again, and for a week they just dragged me.

848
00:44:08,680 --> 00:44:12,200
Speaker 2: They were like this suiting. It was longer than a yeah,

849
00:44:12,239 --> 00:44:12,800
Speaker 2: they refused to.

850
00:44:14,080 --> 00:44:16,480
Speaker 3: I mean that there are some pretty intense elements to

851
00:44:16,520 --> 00:44:18,560
Speaker 3: a lot of these token fan bases.

852
00:44:18,880 --> 00:44:20,400
Speaker 5: That's not just XRP.

853
00:44:20,600 --> 00:44:22,320
Speaker 1: All right, And then we got to talk about the

854
00:44:22,320 --> 00:44:24,279
Speaker 1: ticker for a second. We always asked at the end

855
00:44:24,320 --> 00:44:27,959
Speaker 1: of the show, is what's your favorite ETF ticker other

856
00:44:28,000 --> 00:44:30,560
Speaker 1: than your own? I bet also pretty good. I want

857
00:44:30,560 --> 00:44:33,480
Speaker 1: to ask if there was any other tickers that were

858
00:44:33,480 --> 00:44:35,000
Speaker 1: in consideration that Black Rock.

859
00:44:35,120 --> 00:44:37,560
Speaker 5: Well, you hated the ticker, Eric, the first you dragged us.

860
00:44:37,960 --> 00:44:39,520
Speaker 2: I bit was fine. The first one was not going

861
00:44:39,560 --> 00:44:42,360
Speaker 2: to save as a BONDIETF in Europe. It was like IBTC.

862
00:44:42,680 --> 00:44:45,960
Speaker 3: Yeah, it's too many consonants.

863
00:44:46,000 --> 00:44:47,880
Speaker 2: You gotta have a vowel in there, man, it's like

864
00:44:48,160 --> 00:44:50,279
Speaker 2: a fortune. Give me a vowel and you can make

865
00:44:50,280 --> 00:44:51,680
Speaker 2: it a verb and it's even better.

866
00:44:51,760 --> 00:44:54,520
Speaker 3: But yeah, I would say, I don't know. I so

867
00:44:54,600 --> 00:44:57,440
Speaker 3: I grew up in Toronto and I gotta go with

868
00:44:58,239 --> 00:45:00,960
Speaker 3: cow and MoU. Yeah, it just good ones cows one

869
00:45:00,960 --> 00:45:03,040
Speaker 3: of ours. Moo is a van Eklin. But you know,

870
00:45:03,080 --> 00:45:05,239
Speaker 3: my cousin's growing up north of the city. They had

871
00:45:05,360 --> 00:45:09,200
Speaker 3: had this great farm and they raised cows. You know,

872
00:45:09,280 --> 00:45:11,680
Speaker 3: had fun hanging out up there and have a lot

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Speaker 3: of fun memories, all right.

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Speaker 1: Robbie Minchick of Blackrock, thanks so much for joining us.

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Speaker 5: Thank you, this is fun.

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Speaker 1: Thanks for listening to Trillions until next time. You can

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Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,

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00:45:31,160 --> 00:45:33,560
Speaker 1: or wherever else you'd like to listen. We'd love to

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00:45:33,640 --> 00:45:36,960
Speaker 1: hear from you. We're on Twitter. I'm at Joel Webber Show.

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Speaker 1: He's at Eric Altuna's. This episode of Trillions was produced

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Speaker 1: by Magnus Hendrickson. Bye