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Speaker 1: Welcome to trillions.

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

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Speaker 3: Eric, lots of things happening in the world. You and

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Speaker 3: I were talking about things that have happened this year

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Speaker 3: that have been significant, though, and there's been, you know,

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Speaker 3: for the most part, not that much volatility. But you

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Speaker 3: want to one thing that has been really interesting since

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Speaker 3: the beginning of the year, how bitcoin has just been

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Speaker 3: on a tear. How much do you think ETFs have

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Speaker 3: had to do with that?

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Speaker 2: Certainly, Look, I've i get booed at on Twitter when

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Speaker 2: I tell the bitcoin people that bitcoin would be trading

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Speaker 2: at thirty thousand dollars if warn't for the ETFs. So

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Speaker 2: right now bitcoin's around seventy thousand, and they don't like

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Speaker 2: to hear that. But I'm telling you, when black Rock

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Speaker 2: filed for the ETF last June, it was like basically

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Speaker 2: a year ago. It went up eighty percent on the anticipation.

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Speaker 2: Then when it launched there was a little pullback, but

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Speaker 2: it ripped further. So I think it's up something like

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Speaker 2: forty percent since then, so it's eighty plus forty. A

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Speaker 2: lot of the forty percent was based on how the

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Speaker 2: ets were taking in money, and this past couple of weeks,

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Speaker 2: it's been crazy. Like this whole area is to quote

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Speaker 2: the Paul Abdul song two steps forward, one steps back,

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Speaker 2: which I don't know if you guy, it's a deep

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Speaker 2: cut from like.

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Speaker 1: The eighties right there. I know that I know the cut.

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Speaker 1: What does it mean here? I'm gonna I want to

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Speaker 1: hear you great question.

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Speaker 2: Ye I forgot I went too far off the highway.

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Speaker 2: I don't know where I am.

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Speaker 1: Yeah. No, so.

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Speaker 2: That is really funny. That's naturally funny. I get what

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Speaker 2: you're saying. Hold on, okay, now I'm gonna answer that question.

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Speaker 1: Yeah.

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Speaker 2: So what I mean is like there's like two or

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Speaker 2: three weeks of like intense flow, and then there's a

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Speaker 2: little pullback. Then there's like a week or two where

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Speaker 2: there's some outflows. Then there's like two or three weeks

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Speaker 2: or a month of inflows, and so it's two steps forward,

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Speaker 2: one step back this whole time. But you are netting

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Speaker 2: twenty four billion in new net money, even beyond the

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Speaker 2: GBTC outflows. So twenty four billion, just to put that

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Speaker 2: into context. James and I safered on my team, we

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Speaker 2: thought these would get ten to fifteen billion in their

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Speaker 2: first year, so they're already nine billion beyond our upper band.

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Speaker 2: So I think that what happened here was just that

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Speaker 2: there was a lot of investors out there who were afraid,

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Speaker 2: even if they were casually interested, they were afraid because

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Speaker 2: of the FTX downfall. Who can you give your money

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Speaker 2: to in order to get this exposure. Well, long comes

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Speaker 2: black Rock and Fidelity, and it's like, oh, I know

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Speaker 2: these I can use all their products. I completely trust them.

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Speaker 2: So the ETFs brought trust and that was totally missing.

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Speaker 2: Not only that you got low fees and high liquidity,

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Speaker 2: So this is like major So it's not just that

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Speaker 2: there was a little rally. I just think this is

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Speaker 2: a a really powerful vehicle that a lot of people

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Speaker 2: just trust and like to use for this exposure. So

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Speaker 2: I'm not surprised as successful, but it's a little beyond

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Speaker 2: what I thought. And so there's been all these interesting

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Speaker 2: products now coming out that are ancillary. They aren't spot bitcoin,

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Speaker 2: but they do something similar and those are hits too.

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Speaker 2: So there's a bit of a feeding frenzy for anything

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Speaker 2: that's sort of Bitcoin related, and that's.

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Speaker 3: What we're going to talk about today because that ancillary

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Speaker 3: products sure there's bitcoin, but there's also things like micro strategy,

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Speaker 3: and there's been multiple entrants and you when the first

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Speaker 3: one came out, you call it, Bloomberg Intelligence called it

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Speaker 3: most Volatile ETF.

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Speaker 1: How come and how does micro strategy fit into all

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Speaker 1: of this?

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Speaker 2: Yeah, you know, we've used the phrase hot sauce plenty

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Speaker 2: of times on this show. This is like a ghost pepper.

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Speaker 2: This is the ghost pepper of the hot sauce bucket.

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Speaker 1: Okay, this is.

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Speaker 2: Where you invest in it and you film yourself on

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Speaker 2: YouTube seeing how you react to It's very VOLTAIGJOL. So

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Speaker 2: to give you some numbers, we're talking like one hundred

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Speaker 2: and seventy one hundred and eighty percent volatility. To put

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Speaker 2: that into context, the S ANDP is like ten to

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Speaker 2: eleven percent, so it's like sixteen times the volatility of

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Speaker 2: the SMP. But there is definitely people who are hungry

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Speaker 2: to trade, and so this pushes the envelope on volatility.

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Speaker 2: But at the same time, it's not just some random stock.

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Speaker 2: It's a stock that a lot of the crypto world

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Speaker 2: really enjoys trading. And so if you think about it,

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Speaker 2: this was actually a clever way to make a four

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Speaker 2: x bitcoin ETF because MicroStrategy is two times the volatility

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Speaker 2: a bitcoin and highly correlated, and these are two x MicroStrategy,

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Speaker 2: so you're looking at a four x bitcoin ETF, which

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Speaker 2: is again a powerful concept because there's not just people

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Speaker 2: using this product. People like leverage bitcoin trading all over

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Speaker 2: the world. It's very popular. There's all kinds of derivatives

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Speaker 2: being used. So this again the ETF industry is famous

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Speaker 2: for democratizing stuff that might be happening elsewhere. So here

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Speaker 2: you have again a democratization of a very leverage trade

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Speaker 2: on bitcoin, which is popular elsewhere. So I'm not totally

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Speaker 2: shocked that's popular here. But these two products were instant

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Speaker 2: hits to the point where they're both around the top

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Speaker 2: one two percent in terms of all ETFs in volume.

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Speaker 2: I mean, so in other words, they launch and they're

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Speaker 2: instantly in the top one two percent most traded. That's crazy.

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Speaker 3: All right, We're gonna speak with Sylvia Jablonski, who's the

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Speaker 3: CEO and CIO at Defiance ETF's particular mst X, which

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Speaker 3: launched in August this time on trillions.

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Speaker 1: Do you want volatility?

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Speaker 3: We got some volatility, Sylvia. Welcome back to trillions because

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Speaker 3: you have. As you reminded us, you have been here before.

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Speaker 4: I have, and thank you for having me again.

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Speaker 3: Great to have you back and in a new capacity

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Speaker 3: because I think last time you were not at Defince,

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Speaker 3: you were at Directions, and that was a number of

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Speaker 3: years ago. So welcome back to the podcast. Eric called

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Speaker 3: your product ghost pepper. How do you feel about that?

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Speaker 4: I feel good about that.

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Speaker 5: I actually which may be surprising to some, but I

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Speaker 5: actually think that that's an accurate description, right, and and

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Speaker 5: it could be you know, the range of descriptions for

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Speaker 5: Levered u versytfs in general, right, you have some that

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Speaker 5: are that are kind of like mildly spicy, and then

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Speaker 5: they go all the way off to ghost pepper. And

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Speaker 5: I would say that we're on the ghost pepper side.

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Speaker 5: So it's it is sort of the perfect recipe though

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Speaker 5: for a LEVERTYTF product. You have this high level of volatility,

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Speaker 5: as Eric mentioned, and you know a lot of a

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Speaker 5: lot of interest due to the underlying sector being crypto related,

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Speaker 5: and you know, low and behold it. It really did

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Speaker 5: take off. The good thing though, is that it's kind

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Speaker 5: of being used the way it's supposed to do. You

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Speaker 5: kind of see that volume in that turnover being quick,

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Speaker 5: you know, a day less than a day things like this,

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Speaker 5: and so in that sense, it's kind of okay that

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Speaker 5: it's ghost Pepper.

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Speaker 3: Yeah, so when did you get the idea to be like,

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Speaker 3: you know, what we need is to effectively do what

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Speaker 3: Eric said, we need to go four x bitcoint Where

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Speaker 3: did you first identify that that would be a thing

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Speaker 3: that you would want to do.

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Speaker 5: So this might be super interesting too, but the initial

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Speaker 5: name of our company, like when you look at the

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Speaker 5: founding documents, it was Crypto Beta LLC. And when we

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Speaker 5: were at you know, Direction working with Levered n versus

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Speaker 5: ETF products, the chairman and original founder Matt Belski was

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Speaker 5: talking about, you know how he was going to go

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Speaker 5: leave and start a crypto company basically, and it was

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Speaker 5: you know, sort of just way too soon. That was

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Speaker 5: that was a period of time where crypto was just

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Speaker 5: you know, taking off, but there was no sense that

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Speaker 5: you could put it in an ETF. You could put

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Speaker 5: it in like a democratized ropper that you know, a

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Speaker 5: black Rock was going to be launching a product on it.

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Speaker 5: You just couldn't get it out basically, right. And so

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Speaker 5: you know, for years we've tried to get into the

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Speaker 5: crypto game, but it was oftentimes that you know, we

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Speaker 5: were either too late or not the first mover when

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Speaker 5: it came to a bitcoin ETF or a levered bitcoin ETF.

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Speaker 5: And we knew that we couldn't compete with the likes

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Speaker 5: of a massive institution like black Rock, and so we

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Speaker 5: just started looking and thinking to ourselves, like, okay, what's

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Speaker 5: so bitcoin did really well, they're levered inmverse ETFs, there

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Speaker 5: are single stock ETFs.

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Speaker 4: Where can we play? What else is crypto related?

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Speaker 5: And we started looking at the performance of just the

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Speaker 5: micro strategy stock as compared to bitcoin and bitcoin ETFs.

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Speaker 5: And you know, throughout history we call it like four

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Speaker 5: x leverage, right, but throughout history it's been like six

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Speaker 5: times the performance of crypto in in trending markets or

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Speaker 5: three times kind of depending on you know, when you

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Speaker 5: run that comp and we saw the stock, we were like, okay,

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Speaker 5: the stock is up three hundred percent, right, and it's

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Speaker 5: it's a crypto company. It's it's democratized crypto built into

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Speaker 5: an equity, and so we thought, get this to market

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Speaker 5: levered up best crypto play.

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Speaker 3: Ever, let's break that down just a little bit though,

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Speaker 3: in case somebody's not familiar with micro Strategy or it's

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Speaker 3: business model. I don't know if it has a business

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Speaker 3: model so much as it is just a vehicle for

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Speaker 3: bitcoin at this point, right, can you explain that?

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Speaker 5: Yeah, so micro Strategy was kind of historically this this

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Speaker 5: software company, right, and you can argue that they play

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Speaker 5: an AI which I do think, you know, kind of

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Speaker 5: helps they have that.

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Speaker 4: Overall AI theme.

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Speaker 5: But Michael Salor's goal was always to kind of scoop

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Speaker 5: up as much bitcoins as humanly possible. And we just

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Speaker 5: heard them announce that, you know, over the next three

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Speaker 5: years you're going to be raising another forty two billion,

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Speaker 5: which is, you know, I think more than they actually

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Speaker 5: have in total right now of bitcoin. And so what

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Speaker 5: they try to do is create this this access point

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Speaker 5: for investors to buy their stock and have more crypto

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Speaker 5: exposure than they could ever get on their own, right, Like,

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Speaker 5: can you imagine having you know, forty two billion of

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Speaker 5: exposure to bitcoin? You can't do that on your own, right.

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Speaker 5: And and the fact that it's a stock, the fact

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Speaker 5: that it's you know, traded in the marketplace, it has liquidity,

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Speaker 5: it has transparency, you can get in and out of

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Speaker 5: it whenever you want. You know, people started buying it

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Speaker 5: to have exposure to bitcoin, and you know, then we

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Speaker 5: also noticed that people started trading it in and out

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Speaker 5: short term, and so we thought there would be appetite

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Speaker 5: to put leverage on it. And that's you know, kind

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Speaker 5: of how the ETF was born.

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Speaker 2: Now, one thing interesting about this, and you know, we

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Speaker 2: call it the hot sauce arms race because there is

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Speaker 2: a lot of competition out there for this area. One

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Speaker 2: well one reason is, you know, they charge a little

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Speaker 2: more in the fees here and you just need one hit.

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Speaker 2: You know, we had Will Rindon Joel you know his

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Speaker 2: two X Navidia ETF. Guess how much money that makes

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Speaker 2: a year. I'll tell you sixty million dollars. You can

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Speaker 2: see the magnet to do this as opposed to like

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Speaker 2: trying to go into the core and complete against compete

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Speaker 2: against black Rock and Vanguard. So I totally get it.

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Speaker 2: Like and there's a you know, definitely a market for this.

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Speaker 2: So when you guys came out, you were one point

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Speaker 2: five X and then tuttle and then you launched that

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Speaker 2: one point seventy five X, which again is still pretty volatile,

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Speaker 2: given how volatile micro strategy is. But then Tuttle filed

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Speaker 2: for two X Matt Tuttle and t Rex and then

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Speaker 2: you guys launched. You get all this money really quickly,

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Speaker 2: all this volume. He launches, and I'm like, rarely, if

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Speaker 2: you're like four weeks late on a hit product, it's over,

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Speaker 2: Like you cannot it's the chip has failed. It's very difficult.

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Speaker 2: But he launched and kind of tied you. You both

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Speaker 2: got an equal amount of assets and volume, and then

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Speaker 2: you filed and now you're two X. I guess what

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Speaker 2: all took shape there? And is point two five x

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Speaker 2: extra volatility really that much of a deal breaker?

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Speaker 5: I mean, so there's a little more to this story.

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Speaker 5: So actually we we had originally filed for two X, right,

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Speaker 5: And there are different rules that you have to meet

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Speaker 5: in order to launch an ETF at a specific leverage point.

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Speaker 5: We call that basically called a var test, and it's

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Speaker 5: kind of you know this this inside baseball stuff where

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Speaker 5: you know, you have to kind of like prove what

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Speaker 5: the value at risk is with the basket and the

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Speaker 5: index that you're comparing yourself to is and things like this,

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Speaker 5: and so there were you know, there are periods of

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Speaker 5: time before we launched where we wouldn't have passed the

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Speaker 5: bar test based on the index that we had been

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Speaker 5: using to you know, submit for var and so we filed.

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Speaker 5: We were approved at one point seventy five, but we

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Speaker 5: were right there with two beta, right, and then we

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Speaker 5: kind of thought to ourselves, like, let's get this product

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Speaker 5: out because this is hot sauce and people are going

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Speaker 5: to want this and trade this, and you know, and

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Speaker 5: as soon as we got it out, our clients and

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Speaker 5: traders started saying, you know, we want two X, we

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Speaker 5: want two X. And at that point the rex filing

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Speaker 5: was out there, right, we assumed that they were going

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Speaker 5: to launch the ETF, And before they launched the ETF,

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Speaker 5: we actually filed to update the leverage point to to beta.

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Speaker 5: But you know that takes sixty days, right, so their

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Speaker 5: launch came before our left change. And so I think

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Speaker 5: it was this interesting race, right because we knew we

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Speaker 5: had to get out because we also knew that the

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Speaker 5: two X wouldn't come into effect, you know, before they launched.

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Speaker 5: So we had the one point seven out, we gathered

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Speaker 5: all the assets. They came out with two and basically

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Speaker 5: everything our clients said was true that people prefer the

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Speaker 5: higher leverage point, and then you saw our inflows slow

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Speaker 5: down a little bit. You saw them kind of take over.

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Speaker 5: And now we've changed to two X and over the

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Speaker 5: last couple of days we're getting a little bit more

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Speaker 5: in terms of inflows than they are. So, you know,

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Speaker 5: long story short, I think the two beta mattered and

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Speaker 5: we're like, you know, sometimes we get praised for it

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Speaker 5: and sometimes we get criticized for it, but we're very

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Speaker 5: nimble as an ETF provider, like we don't take our

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Speaker 5: you know, we actually had the ticker I bit and

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Speaker 5: it was a short block ETF and it was out

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Speaker 5: around the time that you know FTX collapse, and you know,

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Speaker 5: all of this stuff happened. That ETF was up thirty

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Speaker 5: percent every other day and nobody traded it, right, and

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Speaker 5: we kind of knew, like, Okay, the market doesn't market

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Speaker 5: doesn't want this, and we moved on from it. You know,

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Speaker 5: Blackrock has that to Kurnah went a little better for them.

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Speaker 5: But you know what I would say is we knew that,

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Speaker 5: like we had come up with this awesome product, but

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Speaker 5: you know, the people wanted more, so we gave them more.

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Speaker 1: How much has the Trump trade factored into what these enplosive.

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Speaker 4: Books likes you think, you know, I think it's like

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Speaker 4: anything else.

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Speaker 5: I always find this conversation so interesting, you know, when

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Speaker 5: it comes to like what's the what's the playbook for

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Speaker 5: the election, because like usually nothing happens for for if

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Speaker 5: you if you look like a six months to a

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Speaker 5: year out in the stock market, it kind of like

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Speaker 5: reverts to the mean after whatever reaction is there for

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Speaker 5: a couple of days, and then maybe as policies start

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Speaker 5: changing and things like that, you see, you know, you

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Speaker 5: see things happen over years. But there's certainly this this

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Speaker 5: thought that you know, Trump is obviously like Republican government

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Speaker 5: will be you know, less focused on regulations and things

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Speaker 5: like this. Maybe there's the there's more room for crypto

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Speaker 5: to grow and there's more leniency to have crypto you know,

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Speaker 5: invested upon different platforms and things like this. So and

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Speaker 5: the fact that he went to the crypto conference and

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Speaker 5: said I love crypto quinn, I think that's going to

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Speaker 5: help micro strategy. I think that's going to help bitcoin.

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Speaker 3: When you think about where the year began, or even

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Speaker 3: let's go back even slightly longer. I mean, Eric mentioned

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Speaker 3: Sam Bakeman freed and the FTX thing. Yes, to be

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Speaker 3: where we are now and see the you know, the

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Speaker 3: crypto rally be where it's at. When did you think

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Speaker 3: you might, you know, looking ahead here there might be

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Speaker 3: something more that the world needed that could be a

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Speaker 3: micro strategy x ETF.

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Speaker 5: I mean right then, you know, Eric said it like

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Speaker 5: the minute that those ETFs came out, all of a sudden,

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Speaker 5: there was there was this massive loss of just trust

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Speaker 5: right in crypto from retail investors and then for sure

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Speaker 5: institutional types of players that have you know, rigorous due

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Speaker 5: diligence and they probably had to get they're probably told

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Speaker 5: like get out of this now, right, But I think

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Speaker 5: you know, he made the point like as soon as

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Speaker 5: it became like democratized and it became launched by companies

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Speaker 5: that people trust, Fidelity, black Rock, we just knew and

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Speaker 5: right away we were like filing for things and trying

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Speaker 5: to find ways to get exposure to crypto and this

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Speaker 5: was you know a great idea that we landed on here.

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Speaker 1: But does it matter that it's still not clear what

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Speaker 1: it's really for?

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Speaker 5: So you know, we get this question a lot, like

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Speaker 5: sometimes we'll talk so much about the rise of crypto

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Speaker 5: and then somebody will say, hey, what is it?

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Speaker 4: What do we do with it?

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Speaker 2: Again?

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Speaker 5: You know, why why is it here? And I think

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Speaker 5: it goes back to, you know, like there are two things.

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Speaker 5: One you can be and you can be an investor

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Speaker 5: because you believe in the utility of it. You believe

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Speaker 5: that it will be used in some way, whether it's

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Speaker 5: for trade, whether it's you know, digital gold, whether it's

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Speaker 5: an inflation hedge, whether it's because it's good to have

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Speaker 5: this decentralized asset away from central banks. And those are

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Speaker 5: you know, kind of like good reasons that people buy

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Speaker 5: into why they should hold trade by crypto. And then

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Speaker 5: there are other people that will just, you know, kind

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Speaker 5: of flat out tell us, I still have no idea

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Speaker 5: if any of that will actually come to fruition, but

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Speaker 5: I see that this is an asset class with a

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Speaker 5: high level of momentum and volatility, and so I trade

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Speaker 5: it for the technical reason. And you know, even like

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Speaker 5: the largest institutional clients will tell us like, my five percent,

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Speaker 5: you know, and you guys talk about this stuff a

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Speaker 5: lot too, right, five percent of your portfolio is to

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Speaker 5: have some fun talitate to an asset class that might

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Speaker 5: not be along your map and take a gamble at it.

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Speaker 2: Yeah, no, the bitcoin is what is it for? I

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Speaker 2: went through a lot of this, you know, as a

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Speaker 2: tourist in that world. But I think also one thing

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Speaker 2: that opened my eyes was like in other countries, especially

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Speaker 2: the emerging markets, like the governments have just annihilated their

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Speaker 2: currencies like they're worth nothing. The US does that to

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Speaker 2: a degree, but it's not as pressing of a need here.

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Speaker 2: I just think over time, it's something that the government

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Speaker 2: cannot mess with because it is truly decentralized, and people

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Speaker 2: like to have a little of something that they can't

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Speaker 2: you know, mess with, you know, because obviously printing money

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Speaker 2: is a very easy way to solve problems, and so

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Speaker 2: I get that. I also think that it's sixteen years old, right,

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Speaker 2: The white paper was sixteen years ago, written by Satoshi,

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Speaker 2: and so I do call crypt bitcoin gold as a teenager,

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Speaker 2: you know, where they used to make those movies like

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Speaker 2: Young Einstein and stuff like that. This is like young gold.

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Speaker 2: So it's sixteen years old. You know, it's got attitude,

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Speaker 2: it's stealing the car, it's very volatile. So I just

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Speaker 2: think it's kind of the best of both worlds. You've

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Speaker 2: got this store of value. But you've got something that's

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Speaker 2: hot saucy in whereas gold is very boring. It can

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Speaker 2: go up, but it does. It's not a volatile which

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Speaker 2: is a plus for some people, but in this case,

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Speaker 2: I just think the hot sauce volatility is a feature,

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Speaker 2: not a bug in this case. Speaking of that, one

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Speaker 2: thing you guys have on mst X and MSTU, which

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Speaker 2: is tuttles is options. So think about this roll. You

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Speaker 2: can't get options on spot bitcoin ETFs. We do think

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Speaker 2: they'll be approved in the next couple of months, but

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Speaker 2: right now you can't do it. But you can get

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Speaker 2: options on what is effectively for x bitcoin, which just

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Speaker 2: shows you how sometimes regulation isn't as logical as you'd

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Speaker 2: like it to be. I mean, if you add the

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Speaker 2: volume of you two together, you trade like as much

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Speaker 2: as Netflix every day. I mean, this is clearly there

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Speaker 2: is a market to trade in this stuff, and I

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Speaker 2: wondered if you want to talk a little bit about how,

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Speaker 2: like who uses the options, what that's for, and how

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Speaker 2: that market has grown.

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Speaker 5: Also, Yeah, sure, And another great point to just add

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Speaker 5: to what you said about, you know, kind of like

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Speaker 5: the teenager and gold, is that the two are also

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Speaker 5: in scarcity, right, there's a limited quality, limited quantity in

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Speaker 5: the world of both you know gold and crypto, which

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Speaker 5: is you know, digital gold, and I think that's why

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Speaker 5: they sometimes get married together. But so in terms of

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Speaker 5: the options, I think, you know, we have investors using

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Speaker 5: them for many many reasons, Like first it's to you know,

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Speaker 5: hedge their crypto exposure, whether it's Bitcoin exposure, whether it's

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Speaker 5: micro strategy exposure, whether it's exposure to our actual ETF.

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Speaker 5: Other times it's finding ways to get more leverage on

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Speaker 5: the leverage GTFU, and other times it's to actually you know,

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Speaker 5: get exposure to an underlying you know, crypto index. And

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Speaker 5: so the options growth has been massive. I actually have

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Speaker 5: never seen I don't think and this is like, you know,

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Speaker 5: coming from a past where I covered like nugget and

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Speaker 5: dust and like highly voltaile ETFs, I don't think I've

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Speaker 5: ever seen options lists so quickly on an ETF in

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Speaker 5: my career. And that doesn't mean that that's right, but

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Speaker 5: they happened incredibly quickly. They came out incredibly quickly, whether

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Speaker 5: it was like the weeklies, the monthlies, and you know,

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Speaker 5: so I think it's just another tool that allows you know,

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Speaker 5: traders to kind of manage this exposure. But I feel

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Speaker 5: like the options are used mostly by and I could

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Speaker 5: be wrong about this. I think like it's picking up

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Speaker 5: with retail, but just seeing the size of trays and

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Speaker 5: things like that, I think a lot of it is

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Speaker 5: like market makers too on the options. Yeah.

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Speaker 2: No, to me, options are like like a bunch of

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Speaker 2: new colors to paint with. Like it's it just gives

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Speaker 2: you more. You can sculpture what you want a little more.

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Speaker 2: I get it. It's just gives you other dimension to

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Speaker 2: your investment. So you you definitely get get a little

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Speaker 2: of that artist there. I know, thank you. I've dabble.

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Speaker 1: Yeah, I can tell it's another dimension there.

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Speaker 2: Eric, we're gonna have bring your art to work day

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Speaker 2: that maybe we don't even want to know. Maybe some

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Speaker 2: things are vets left at home. One thing that me

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Speaker 2: and my team have debated so is that these were

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Speaker 2: such both of them were such an instant hit, and

433
00:22:04,560 --> 00:22:07,919
Speaker 2: it's weird normally like even the two X Navidia ETF,

434
00:22:07,960 --> 00:22:10,359
Speaker 2: which is really popular, it took like a couple months

435
00:22:10,400 --> 00:22:12,320
Speaker 2: for it to start to trade over like a million

436
00:22:12,359 --> 00:22:14,879
Speaker 2: dollars a day. You guys are in the hundreds of

437
00:22:14,880 --> 00:22:18,159
Speaker 2: millions after a week or two, it's weird. And so

438
00:22:18,359 --> 00:22:22,520
Speaker 2: we were wondering, is this because these are ghest pepper

439
00:22:22,640 --> 00:22:26,000
Speaker 2: like volatility, like they have just pushed the volatility boundary

440
00:22:26,000 --> 00:22:29,959
Speaker 2: to another place, or is it just the crypto crowd

441
00:22:30,040 --> 00:22:34,440
Speaker 2: loves trading around micro strategy, Like what's the bigger attraction

442
00:22:34,720 --> 00:22:38,200
Speaker 2: the heightened volatility? Again, it's the most volatile ETF in

443
00:22:38,240 --> 00:22:42,480
Speaker 2: America or the crypto part. Like, if let's say there

444
00:22:42,520 --> 00:22:44,919
Speaker 2: was a stock more volatile the micro strategy and you

445
00:22:45,000 --> 00:22:47,639
Speaker 2: two x that, do you think it would be a

446
00:22:47,720 --> 00:22:50,000
Speaker 2: hit just the same or is this more of a

447
00:22:50,000 --> 00:22:52,920
Speaker 2: as we said at the beginning, a spillover effect from

448
00:22:53,040 --> 00:22:54,360
Speaker 2: the popularity of bitcoin.

449
00:22:55,160 --> 00:22:55,919
Speaker 4: I think both.

450
00:22:56,040 --> 00:22:58,760
Speaker 5: So I do think that if you launched a more

451
00:22:58,840 --> 00:23:00,960
Speaker 5: volatile stock it would take oft in a similar way

452
00:23:01,080 --> 00:23:05,600
Speaker 5: because volatility for leverty like this, especially the secret sauce.

453
00:23:05,640 --> 00:23:08,199
Speaker 5: I think for a LEVERTYTF is kind of like a

454
00:23:08,280 --> 00:23:13,520
Speaker 5: retail sentiment and volatility of the underlying and a lot

455
00:23:13,560 --> 00:23:16,800
Speaker 5: of the ETFs that have that recipe have taken off.

456
00:23:17,600 --> 00:23:19,840
Speaker 5: The second thing is I think at first, when single

457
00:23:20,119 --> 00:23:23,560
Speaker 5: name leverage ETFs came out, it was kind of like

458
00:23:23,800 --> 00:23:25,879
Speaker 5: ho hum, right, we didn't see anything happened for a

459
00:23:25,880 --> 00:23:28,920
Speaker 5: little while. Like, I mean, there are a few of

460
00:23:28,960 --> 00:23:30,639
Speaker 5: them out there that are so good that still haven't

461
00:23:30,640 --> 00:23:33,800
Speaker 5: taken off. And I think that it's a newer concept

462
00:23:33,880 --> 00:23:37,119
Speaker 5: for retail investors to look at these single stock ETFs

463
00:23:37,119 --> 00:23:38,919
Speaker 5: and get into them. So I think part of it

464
00:23:39,000 --> 00:23:41,400
Speaker 5: is like seeing the success of that INNA video one

465
00:23:41,480 --> 00:23:43,040
Speaker 5: kind of opened up that marketplace.

466
00:23:43,080 --> 00:23:46,480
Speaker 4: But you know, absolutely, like number one, I think.

467
00:23:46,359 --> 00:23:49,960
Speaker 5: It's because it's crypto related and it's micro strategy, and

468
00:23:49,960 --> 00:23:52,880
Speaker 5: as Michael Saylor and number two, I think it's volatility.

469
00:23:52,920 --> 00:23:55,040
Speaker 5: At number three, I think it's because people have started

470
00:23:55,040 --> 00:23:57,960
Speaker 5: to embrace single name leverage gtfs. Like, think about all

471
00:23:57,960 --> 00:24:00,840
Speaker 5: of this time since that first single name ATYTF had

472
00:24:00,840 --> 00:24:03,960
Speaker 5: been filed, like nobody really put that much out into

473
00:24:03,960 --> 00:24:06,000
Speaker 5: the market, right, and now the filings have picked up

474
00:24:06,000 --> 00:24:07,919
Speaker 5: like crazy. I mean, your heart, it's hard to find

475
00:24:08,320 --> 00:24:10,920
Speaker 5: a name that doesn't exist. I mean we're always looking

476
00:24:10,920 --> 00:24:13,320
Speaker 5: at it and we're like, you know, dang, every ETF

477
00:24:13,359 --> 00:24:16,840
Speaker 5: is taken, right, So it's just also grown in popularity

478
00:24:16,840 --> 00:24:17,400
Speaker 5: and awareness.

479
00:24:17,400 --> 00:24:19,040
Speaker 4: I think also.

480
00:24:18,880 --> 00:24:21,240
Speaker 1: Helps that market as generally the market.

481
00:24:21,560 --> 00:24:24,359
Speaker 5: Yeah, yeah, yeah, totally risk on Yeah, risk on and

482
00:24:24,359 --> 00:24:25,680
Speaker 5: and all that rates coming down.

483
00:24:25,800 --> 00:24:27,400
Speaker 4: I mean that's part of the part of it too.

484
00:24:28,840 --> 00:24:33,120
Speaker 2: Yeah, no, no doubt. This stuff definitely has more you see,

485
00:24:33,119 --> 00:24:36,480
Speaker 2: more products and more volume in a bull market.

486
00:24:36,760 --> 00:24:37,080
Speaker 1: Yeah.

487
00:24:37,119 --> 00:24:41,639
Speaker 2: That said, you know, like the triple leveraged cues have

488
00:24:41,760 --> 00:24:45,560
Speaker 2: hung around through many downturns. So if you get enough

489
00:24:45,640 --> 00:24:48,440
Speaker 2: volume in an ETF, you're pretty much set for life.

490
00:24:48,440 --> 00:24:50,400
Speaker 2: I think you guys are both good for a long time.

491
00:24:50,920 --> 00:24:52,520
Speaker 2: Some of the other ones I think are going to close.

492
00:24:53,200 --> 00:24:57,480
Speaker 3: What about for UH traders when you when you kind

493
00:24:57,480 --> 00:24:59,440
Speaker 3: of have a chance to like see how the products

494
00:24:59,520 --> 00:25:03,320
Speaker 3: being you are there things that make you wins or

495
00:25:03,520 --> 00:25:07,400
Speaker 3: also that you're like, wow, that was like exactly how

496
00:25:07,440 --> 00:25:08,199
Speaker 3: you could have used it?

497
00:25:08,280 --> 00:25:08,440
Speaker 1: Right.

498
00:25:08,520 --> 00:25:10,320
Speaker 3: I'm curious when you when you have a chance to

499
00:25:10,320 --> 00:25:12,760
Speaker 3: see that, what's your assessment then?

500
00:25:13,160 --> 00:25:14,360
Speaker 4: So if you asked me.

501
00:25:14,359 --> 00:25:18,240
Speaker 5: This question, and like, like I kind of got into

502
00:25:18,240 --> 00:25:19,760
Speaker 5: this business in two thousand and eight, into the leven

503
00:25:19,800 --> 00:25:21,560
Speaker 5: number CTF business. So if you had asked me this

504
00:25:21,680 --> 00:25:25,200
Speaker 5: question like twenty eleven, twenty twelve, it would be it

505
00:25:25,240 --> 00:25:29,080
Speaker 5: would be a WinCE for sure. I think that you know,

506
00:25:29,119 --> 00:25:31,760
Speaker 5: the education at that point was pretty nascent. There were

507
00:25:31,880 --> 00:25:34,160
Speaker 5: investors coming into the products that didn't understand how to

508
00:25:34,520 --> 00:25:35,200
Speaker 5: trade them.

509
00:25:35,520 --> 00:25:38,199
Speaker 4: I mean, now I feel like everyone gets it.

510
00:25:38,240 --> 00:25:40,320
Speaker 5: Like the lever numbers, CTF providers have done such an

511
00:25:40,359 --> 00:25:43,879
Speaker 5: awesome job putting the education out there. The platforms have

512
00:25:44,040 --> 00:25:46,399
Speaker 5: the hey trade at your own risk, you know. So

513
00:25:46,440 --> 00:25:48,520
Speaker 5: the biggest thing is, like, do people understand that they

514
00:25:48,560 --> 00:25:51,080
Speaker 5: have to make a decision both on the direction of

515
00:25:51,119 --> 00:25:53,920
Speaker 5: the market and the direction of volatility, right because range

516
00:25:53,920 --> 00:25:56,760
Speaker 5: bound volatility is terrible for these things. Right, So when

517
00:25:56,760 --> 00:25:58,000
Speaker 5: you have range brown vall you want to be a

518
00:25:58,080 --> 00:26:00,920
Speaker 5: day trader. When you have a trend, trend is your friend.

519
00:26:00,960 --> 00:26:02,359
Speaker 5: You can hold it for a little bit longer. But

520
00:26:02,440 --> 00:26:05,600
Speaker 5: like every day understand that, yes, compounding is working in

521
00:26:05,640 --> 00:26:06,119
Speaker 5: your favor.

522
00:26:06,200 --> 00:26:07,400
Speaker 4: But you're you know, kind.

523
00:26:07,200 --> 00:26:10,639
Speaker 5: Of now have have more you know, apples in the

524
00:26:10,640 --> 00:26:12,720
Speaker 5: barrel than you did the day before. So I think

525
00:26:12,760 --> 00:26:17,240
Speaker 5: that I'm kind of like comfortable now with with you know,

526
00:26:17,320 --> 00:26:19,199
Speaker 5: kind of believing that the education is out there and

527
00:26:19,240 --> 00:26:21,960
Speaker 5: people know how to use the products, and we don't

528
00:26:21,960 --> 00:26:24,239
Speaker 5: promote them, and you know, we don't promote them as

529
00:26:24,240 --> 00:26:27,240
Speaker 5: like long term investments. No levern you know, like tunnel

530
00:26:27,280 --> 00:26:29,600
Speaker 5: doesn't do a direction, doesn't do appro Chares doesn't do it,

531
00:26:29,640 --> 00:26:32,439
Speaker 5: and so I think, like the education's out there. And

532
00:26:32,480 --> 00:26:34,359
Speaker 5: by the way, there's like this is so interesting because

533
00:26:34,359 --> 00:26:36,120
Speaker 5: around the time of the derivative's role, we.

534
00:26:36,080 --> 00:26:37,080
Speaker 4: Did so much work to.

535
00:26:39,040 --> 00:26:41,040
Speaker 5: You know, kind of like provide input on what we

536
00:26:41,119 --> 00:26:44,080
Speaker 5: thought levern Niversity tfs were and like the risk level

537
00:26:44,160 --> 00:26:44,840
Speaker 5: and things like that.

538
00:26:45,119 --> 00:26:46,200
Speaker 4: I mean, there's way.

539
00:26:46,000 --> 00:26:49,600
Speaker 5: More leverage and other things and other like even like

540
00:26:49,600 --> 00:26:52,000
Speaker 5: like fixed income products and futures and things like this

541
00:26:52,119 --> 00:26:54,960
Speaker 5: than there are in you know, levern Nuniversity tfs. And

542
00:26:55,000 --> 00:26:57,840
Speaker 5: also you know, they don't take up that much of

543
00:26:58,520 --> 00:27:00,840
Speaker 5: the daily trading. Like at the open the clothes people

544
00:27:00,840 --> 00:27:03,280
Speaker 5: thought that the rebalance must be you know, half of

545
00:27:03,320 --> 00:27:05,639
Speaker 5: the day's volume. It was like two percent. It was

546
00:27:05,640 --> 00:27:07,359
Speaker 5: not even two percent. It was like between one and

547
00:27:07,400 --> 00:27:10,439
Speaker 5: two percent. And so I think a lot of that

548
00:27:10,560 --> 00:27:12,840
Speaker 5: is now out there, and I'm kind of like less

549
00:27:12,840 --> 00:27:14,520
Speaker 5: surprised now people using them.

550
00:27:14,760 --> 00:27:19,560
Speaker 3: All Right, Sylvia, how many products ETFs have you brought

551
00:27:19,560 --> 00:27:22,600
Speaker 3: into existence? And where would you rank this one when

552
00:27:22,600 --> 00:27:25,920
Speaker 3: you step back and think about your your trophies, your

553
00:27:26,200 --> 00:27:27,000
Speaker 3: hall of trophies.

554
00:27:27,200 --> 00:27:29,959
Speaker 5: Yeah, I mean it's hard to say, Like I'm not

555
00:27:30,000 --> 00:27:33,159
Speaker 5: one to like take credit for for the ETFs that

556
00:27:33,160 --> 00:27:34,880
Speaker 5: our firms have launched, because there's so much like whether

557
00:27:34,880 --> 00:27:37,440
Speaker 5: it's a direction or defiance, Like there's so much back

558
00:27:37,480 --> 00:27:40,000
Speaker 5: and forth, you know, amongst like a million people who

559
00:27:40,040 --> 00:27:44,239
Speaker 5: work at the company, I would say we've had like

560
00:27:44,280 --> 00:27:48,679
Speaker 5: a defiance. We've had a sixty percent hit rate in

561
00:27:48,800 --> 00:27:52,960
Speaker 5: terms of you know, ETFs that become profitable, the ones

562
00:27:53,000 --> 00:27:54,600
Speaker 5: that you know some of them, some of the ETFs

563
00:27:54,640 --> 00:27:57,639
Speaker 5: we have are you know having you know, they're in

564
00:27:57,680 --> 00:28:00,199
Speaker 5: the ETF graveyard because they weren't profitable and people and

565
00:28:00,280 --> 00:28:03,159
Speaker 5: trade them. But I mean, this is this is definitely

566
00:28:03,160 --> 00:28:05,280
Speaker 5: our number one. This is definitely our number one.

567
00:28:05,840 --> 00:28:07,800
Speaker 2: One. Other interesting thing about this, so we have two

568
00:28:08,119 --> 00:28:12,359
Speaker 2: X micro strategy here, but before these existed, believe it

569
00:28:12,440 --> 00:28:15,639
Speaker 2: or not, they had three X micro strategy in Europe. Yeah,

570
00:28:15,720 --> 00:28:18,520
Speaker 2: Europe's kind of weird, like they they're just I don't know,

571
00:28:18,560 --> 00:28:22,040
Speaker 2: the rules are just really relaxed for anything outside that

572
00:28:22,160 --> 00:28:25,720
Speaker 2: usid's program. So anyway, they have a lot of crazy

573
00:28:25,760 --> 00:28:29,440
Speaker 2: stuff over there, but nobody cares. Nobody's sure eight Ethnosi

574
00:28:29,440 --> 00:28:30,879
Speaker 2: it's and I always talk about how it's just the

575
00:28:30,920 --> 00:28:33,960
Speaker 2: wrong market you launch something like that over here. Man,

576
00:28:34,400 --> 00:28:37,560
Speaker 2: Look out right, So there's there's like a five.

577
00:28:37,480 --> 00:28:38,640
Speaker 1: X q's in Europe.

578
00:28:39,360 --> 00:28:43,960
Speaker 2: Have you looked at Europe for like ideas or I

579
00:28:44,040 --> 00:28:47,240
Speaker 2: just puts your take on like how the US culture

580
00:28:47,440 --> 00:28:49,920
Speaker 2: is just so much the appetite so much bigger for

581
00:28:50,000 --> 00:28:53,320
Speaker 2: this than in Europe where they have this and then some.

582
00:28:53,840 --> 00:28:55,920
Speaker 5: Yeah, it's so interesting because I've you know again, I've

583
00:28:55,960 --> 00:28:58,280
Speaker 5: been like in lever number CTF for a long time now,

584
00:28:58,320 --> 00:29:01,080
Speaker 5: and I've traveled around the world, you know, whether it's

585
00:29:01,120 --> 00:29:03,160
Speaker 5: marketing products, are trying to get them listed on foreign

586
00:29:03,240 --> 00:29:05,000
Speaker 5: exchanges and things like this, and I can tell you

587
00:29:05,040 --> 00:29:10,560
Speaker 5: that like Asia ETF lovers all around Asia, you know,

588
00:29:10,720 --> 00:29:16,000
Speaker 5: you had like like Mexico loves leverage in Europe. Like

589
00:29:16,400 --> 00:29:20,000
Speaker 5: I mean, I've been part of this too, listing leverage ETFs.

590
00:29:19,480 --> 00:29:21,720
Speaker 4: On the exchange there, on exchanges there.

591
00:29:22,080 --> 00:29:24,320
Speaker 5: None of them ever took off and they were they were,

592
00:29:24,360 --> 00:29:26,480
Speaker 5: you know, two three four billion dollars ETFs in the

593
00:29:26,560 --> 00:29:30,280
Speaker 5: US and when we listed them overseas, nothing happened. So

594
00:29:31,000 --> 00:29:33,560
Speaker 5: you know, I don't know, it's it's interesting to me,

595
00:29:33,680 --> 00:29:36,360
Speaker 5: but we like it's funny because when we were gonna

596
00:29:36,400 --> 00:29:38,080
Speaker 5: launch mycrostrategy, we kind of looked at that and we

597
00:29:38,080 --> 00:29:40,240
Speaker 5: were like, well that's there, and it's it's like this

598
00:29:40,280 --> 00:29:43,120
Speaker 5: thing could could this thing flop because nobody's even touched

599
00:29:43,120 --> 00:29:47,000
Speaker 5: that thing. And yeah, it's just I just think that

600
00:29:47,040 --> 00:29:49,840
Speaker 5: there's a different level of risk appetite. There's a different

601
00:29:50,080 --> 00:29:52,000
Speaker 5: you know. I think that the mindset there is a

602
00:29:52,000 --> 00:29:54,200
Speaker 5: little bit different. It's kind of like say for retirement

603
00:29:54,240 --> 00:29:58,280
Speaker 5: forever here it's do that. But also you know, also

604
00:29:58,360 --> 00:30:00,520
Speaker 5: like retail loves training and day train and we have

605
00:30:00,600 --> 00:30:04,520
Speaker 5: like a big, you know, social media culture now around trading.

606
00:30:04,640 --> 00:30:07,800
Speaker 5: So I just think that they're I don't want to

607
00:30:07,800 --> 00:30:12,080
Speaker 5: say behind, but you know, the popularity has has fallen

608
00:30:12,160 --> 00:30:14,760
Speaker 5: behind the US and Asia for sure.

609
00:30:15,520 --> 00:30:15,800
Speaker 1: Joel.

610
00:30:15,800 --> 00:30:19,280
Speaker 2: I was actually in Europe recently and I have my

611
00:30:19,440 --> 00:30:23,160
Speaker 2: Hot Sauce PowerPoint slide which has like literally these Tabasco

612
00:30:23,240 --> 00:30:26,800
Speaker 2: containers with different Hot sauces in there. And when I

613
00:30:26,840 --> 00:30:28,800
Speaker 2: got to that section, I could tell like they just

614
00:30:29,640 --> 00:30:33,520
Speaker 2: they weren't. I could just feel they're like, I don't

615
00:30:33,520 --> 00:30:35,960
Speaker 2: really get a lot of this, And I said, this

616
00:30:36,000 --> 00:30:37,880
Speaker 2: is sort of like sports gambling, And I said, you

617
00:30:37,920 --> 00:30:40,479
Speaker 2: guys have gambling on your phones, you know. They just

618
00:30:40,600 --> 00:30:43,600
Speaker 2: like it's just a different culture there. You're right, Asia

619
00:30:43,640 --> 00:30:45,640
Speaker 2: though they love this stuff. In fact, they might even

620
00:30:45,680 --> 00:30:48,240
Speaker 2: be more into this than we are in certain Asian countries.

621
00:30:49,880 --> 00:30:53,960
Speaker 2: So it's just interesting sort of insight there into what

622
00:30:54,120 --> 00:30:57,840
Speaker 2: works in different countries. But I think it's interesting, like

623
00:30:57,880 --> 00:31:01,080
Speaker 2: if you launched a three x micro strategy here, I mean,

624
00:31:01,160 --> 00:31:03,800
Speaker 2: it would probably be a bigger hit than the two x.

625
00:31:03,920 --> 00:31:07,400
Speaker 4: Oh we would have if we could, but derivatives rule.

626
00:31:08,440 --> 00:31:12,000
Speaker 2: Could you launch an ETN that's three x, because like

627
00:31:12,160 --> 00:31:14,640
Speaker 2: reck Shares has a couple three x energy etns.

628
00:31:14,800 --> 00:31:17,959
Speaker 5: Yeah, you know you could, But we've just found that,

629
00:31:18,000 --> 00:31:20,440
Speaker 5: like if you look at the assets and the levered ETFs,

630
00:31:20,480 --> 00:31:23,080
Speaker 5: they're just so much higher than they are in the etns,

631
00:31:23,080 --> 00:31:25,960
Speaker 5: and people worry about, you know, the counterparty risk, and

632
00:31:26,000 --> 00:31:28,600
Speaker 5: with this particular it's you know, it's hard to get

633
00:31:28,800 --> 00:31:32,360
Speaker 5: challenging to get swap exposure on very volatile underlying assets

634
00:31:32,400 --> 00:31:34,280
Speaker 5: and then so to get a bank to give you

635
00:31:34,320 --> 00:31:37,480
Speaker 5: a note on something you know as ghost peppery as

636
00:31:37,520 --> 00:31:38,640
Speaker 5: this is just challenging.

637
00:31:40,080 --> 00:31:41,320
Speaker 4: So I just don't know that.

638
00:31:41,720 --> 00:31:44,680
Speaker 5: You know, it would it would be like for that reason,

639
00:31:44,680 --> 00:31:46,080
Speaker 5: I think people would be worried about the risk of

640
00:31:46,080 --> 00:31:48,520
Speaker 5: the counterparty. We might not even find a counterparty, and

641
00:31:48,760 --> 00:31:50,600
Speaker 5: you know, the ETF is just a better vehicle for

642
00:31:50,640 --> 00:31:51,120
Speaker 5: this stuff.

643
00:31:51,360 --> 00:31:54,200
Speaker 3: What other ghost peppers are you thinking about growing in

644
00:31:54,240 --> 00:31:54,680
Speaker 3: your garden.

645
00:31:56,120 --> 00:31:58,720
Speaker 5: I can't tell you what we're doing just because it's

646
00:31:58,760 --> 00:32:02,000
Speaker 5: not public yet. But in the next two weeks yeah,

647
00:32:02,080 --> 00:32:03,840
Speaker 5: no for sure, but in the next two weeks where

648
00:32:03,960 --> 00:32:07,680
Speaker 5: you'll see some filings from Defiance and one of them

649
00:32:07,960 --> 00:32:12,880
Speaker 5: is inspired by mister Eric Valchunis himself. And I've been

650
00:32:12,880 --> 00:32:14,760
Speaker 5: like dying to tell what it is, but I can't because.

651
00:32:14,520 --> 00:32:14,960
Speaker 4: It's not file.

652
00:32:15,040 --> 00:32:17,200
Speaker 5: Yeah, but but keep an eye out because I think

653
00:32:17,240 --> 00:32:19,400
Speaker 5: it'll be it'll blow your mind.

654
00:32:21,080 --> 00:32:24,320
Speaker 2: What it is. How do I talk about it doesn't exist?

655
00:32:26,320 --> 00:32:26,760
Speaker 1: I don't know.

656
00:32:26,920 --> 00:32:27,440
Speaker 4: You'll get it.

657
00:32:27,680 --> 00:32:29,320
Speaker 5: As soon as you see the filing you'll be like,

658
00:32:29,360 --> 00:32:31,680
Speaker 5: that's it. That's the one, the one that's mine.

659
00:32:32,440 --> 00:32:36,080
Speaker 1: I'll ask him. Sylvia Jablonski thanks for joining us on Trillions.

660
00:32:35,800 --> 00:32:43,360
Speaker 4: Again, Thank you for having me, Thanks.

661
00:32:43,160 --> 00:32:46,040
Speaker 3: For listening to Trillions until next time. You can find

662
00:32:46,080 --> 00:32:50,720
Speaker 3: us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,

663
00:32:51,360 --> 00:32:53,800
Speaker 3: or wherever else you'd like to listen. We'd love to

664
00:32:53,840 --> 00:32:57,160
Speaker 3: hear from you. We're on Twitter I'm at Joel Webber Show.

665
00:32:57,560 --> 00:33:02,200
Speaker 3: He's at Eric Baltunas. This episode of Trillions was produced

666
00:33:02,200 --> 00:33:03,240
Speaker 3: by Magnus and Rickson.

667
00:33:04,120 --> 00:33:05,200
Speaker 1: Bye