Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg Tumble Down the Park across asset reporter at Bloomberg.
Speaker 1: This week on the show, Well it finally happened. Bitcoin
Speaker 1: exchange traded fun hit the market this week, and the
Speaker 1: excitement was enough to push the biggest cryptocurrency to a
Speaker 1: new record high, also causing vill Donna to wear her
Speaker 1: fingertips off with all the writing shod to do about it.
Speaker 1: But anyway, what does this milestone mean for crypto and
Speaker 1: what should we expect next? We'll get into it with
Speaker 1: the head of business development at a major digital asset
Speaker 1: exchange who previously spent about two decades in the et
Speaker 1: F industry. But first, Bill Donna, I need to catch
Speaker 1: up on your vacation last week. Uh, listeners will be
Speaker 1: very interest didn't this because Dona spent the week in
Speaker 1: Boca Raton, Florida, and I believe visited our old pal
Speaker 1: Sarah Ponzac, the former co host of the show, Danna.
Speaker 1: I've heard a rumor that Sarah is cruising around Boca
Speaker 1: in like a white Lexus with cold seats. Now we
Speaker 1: in the Northeast. We have heated seats to keep our
Speaker 1: butts warm. Apparently Sarah needs cold seats in Florida. I've
Speaker 1: never heard of such a thing. Is that Is that true? Yeah,
Speaker 1: it's true. I have no idea where that you've got
Speaker 1: this rumor from. I mean, but it's true, and I
Speaker 1: had never heard of it before. Everybody in Florida basically,
Speaker 1: like of Floridians have white cars because of the heat.
Speaker 1: And I guess cooling seats are the next, you know,
Speaker 1: top feature, and Sarah has it. Did you get to
Speaker 1: try out the cooling seat that Sheila is samp I didn't. Actually,
Speaker 1: this is fun. I sat in her back seat with
Speaker 1: her doggie. So yeah, she has a cute little pup.
Speaker 1: She has an adorable Sarah. Anyway, Uh, how to tell
Speaker 1: us about this guest this week. I'm very excited for
Speaker 1: this guest. I think we got a lot to talk about.
Speaker 1: He's the most perfect guest for this week. I'm so
Speaker 1: happy he can join us. It's Dave Abner. He's the
Speaker 1: global head of business development at crypto Exchange Gemini and
Speaker 1: welcome to the podcast. Hi, thanks for having me filled
Speaker 1: out and might great to meet you, well, I want
Speaker 1: to start off with just a little bit about you
Speaker 1: and your career. I know you and I have chatted before,
Speaker 1: but just to give our audience a view of you know,
Speaker 1: your career and what you've done in your life, because
Speaker 1: you do straddle this et F and crypto world very
Speaker 1: very well, so if you can just give us a
Speaker 1: sense of some of the work you've done. I actually
Speaker 1: spent two decades in the e t F world before
Speaker 1: I came to the crypto world. And what's funny is
Speaker 1: that I actually got into e t f s from
Speaker 1: closed end funds. So I was a closed end fund
Speaker 1: trader and I ran the closed end fund trading business
Speaker 1: at bear Stearns in the nineties. And when e t
Speaker 1: f s came onto the scene in the late nineties,
Speaker 1: they were funds, they traded on exchange. People didn't really
Speaker 1: know what else to do with them, so they naturally
Speaker 1: called the close down fund trader. First. That was me,
Speaker 1: and that instantly became pretty you know, maybe not instantly,
Speaker 1: but slowly became my next venture. Right. I realized the
Speaker 1: difference early between trying to arbitrage closed down funds and
Speaker 1: saw how readily available that was in the e t
Speaker 1: F world. ETF world was growing, although it was very
Speaker 1: small back then, and I progressed into that and I
Speaker 1: I was a trader and I ran bear Stearns Global
Speaker 1: e t F business for about eight years. Then I
Speaker 1: went to BMP Paraba to build an et F trading business,
Speaker 1: and then I had an opportunity to switch sides and
Speaker 1: I did. I switched. I joined wizdarm Triasset Management in
Speaker 1: two thousand eight April first, two thousand eight and auspicious
Speaker 1: state to join any firm because it was like the
Speaker 1: beginning of the end really um and I spent ten
Speaker 1: years or eleven years building up Wisdom Trees et F
Speaker 1: business and then at the end of that the last
Speaker 1: two years we were getting into crypto as a firm
Speaker 1: and I was getting deeper into it. We ended up
Speaker 1: launching the first bitcoin e E t P in Sweden
Speaker 1: in and then that was my my entry into the space.
Speaker 1: And then when I wanted to go really full full bore,
Speaker 1: I joined Gemini about a year ago. So I see
Speaker 1: a lot and we'll talk about this. I see a
Speaker 1: lot of parallels between the growth of the ETF industry
Speaker 1: and where we are with crypto today. So I'm excited
Speaker 1: to talk about it. That's when you went full laser eye.
Speaker 1: I guess right, yeah, I haven't. I haven't adjusted my
Speaker 1: Twitter feed to be laser eyed. I'm still on my
Speaker 1: my My pandemic puppy is my is my picture there.
Speaker 1: I haven't modified it yet. But you know what that
Speaker 1: I'm curious about, giving all your experience in the business
Speaker 1: and wisdom Tree obviously specializing in some sort of innovative
Speaker 1: e t f s, you know, the hedged European equities,
Speaker 1: that sort of thing, you know, kind of pushing the
Speaker 1: envelope there in some of the strategies. To me, the
Speaker 1: big question is, all right, when the I guess it
Speaker 1: was the Winklevoss twins who originally sort of floated the
Speaker 1: idea of a bitcoin e t F. However many years ago,
Speaker 1: you know, and back then, um, it made a lot
Speaker 1: of sense to want to put it into an et
Speaker 1: F because buying and sort of providing the custody of
Speaker 1: bitcoin was a lot trickier back then. You know, the
Speaker 1: famous amount Cox hack, you know, and and bitcoin while
Speaker 1: it's we're being compromised left and right. Now we've gotten
Speaker 1: to the phase where you know, your firm, Gemini, coin Base,
Speaker 1: all the other exchanges are available to purchase bitcoin. You
Speaker 1: can even buy it on Venmo and PayPal. You can
Speaker 1: buy it at the coin star machines at the supermar market.
Speaker 1: So at my point, bit it's just very easy and
Speaker 1: presumably a lot more secure to buy and hold bitcoin
Speaker 1: than it was years ago. And so I wonder how
Speaker 1: much demand is uncorked by uh bitcoin et s. I mean,
Speaker 1: obviously this one is just the futures et F, but
Speaker 1: presumably if we get a spot you know et F
Speaker 1: as well. Um, how much demand uh sort of uncorked
Speaker 1: by being able to buy it as an ETF now?
Speaker 1: Or is it you know, going to cannibalize the demand
Speaker 1: that's already in place in the traditional places to buy it.
Speaker 1: And the reason I ask is, I'm wondering, No, we've
Speaker 1: obviously seen this, this pop in the price of bitcoin
Speaker 1: coinciding with with the launch of the CTF, and I'm wondering,
Speaker 1: how you know sustainable that is to sort of be
Speaker 1: this this new spiggot of demand for bitcoin or whether
Speaker 1: we sort of cannibalize demand that's already there. That's a
Speaker 1: that's a new record for you for length of question Mike, Yeah,
Speaker 1: that's my thing. Okay, so I'll just talk for the
Speaker 1: rest of the podcast. Right, try to pull that all
Speaker 1: apart and answer. Let's go back to the beginning from me, right,
Speaker 1: the um. We really have to give the Wigglebox Twins
Speaker 1: a lot of credit here. They were so far ahead
Speaker 1: of the curve with their filing in and I think
Speaker 1: it was when their first filed for bitcoin e t
Speaker 1: F that like nobody even really thought that would Like
Speaker 1: they were like, what what you know? Most of the
Speaker 1: e t F industry, all of the investment community was like,
Speaker 1: what what's the bitcoin e tf Nobody knew anything that
Speaker 1: they what they were even talking about? Right, they were
Speaker 1: denied time and time again, uh from the SEC, right,
Speaker 1: like four or five times they were denied. Now, let's
Speaker 1: think about that. What were they trying to do, right,
Speaker 1: They were trying to make bitcoin investable for people. They
Speaker 1: kept getting denied with their e t F and so
Speaker 1: they actually what they do. They turned around and they
Speaker 1: went out and built Gemini. Gemini didn't exist when they
Speaker 1: first filed. So they said, Okay, we think this is
Speaker 1: going to be a valuable thing for the American public,
Speaker 1: for the global public. We think this is the future
Speaker 1: of financial products, and we think this should be accessible.
Speaker 1: So they went out and they built Gemini, which is like,
Speaker 1: you know, the most highly regulated, probably the most secure
Speaker 1: storage facility for bitcoin and other cryptocurrencies on the planet today.
Speaker 1: And it's actually easy to use via the exchange and
Speaker 1: via the app, and it's it's expanding as a global
Speaker 1: crypto platform. Right. Um, you're you're so the if I
Speaker 1: take all of your sort of questions and I boil
Speaker 1: them down to do we really need an e t
Speaker 1: F today, the answer is, in general, for most investors, no,
Speaker 1: it's really easy to open a Gemini account and get
Speaker 1: access to cryptocurrencies or to open it, you know, like
Speaker 1: you said, use other any of these other venues to
Speaker 1: get through. But there are and what I've learned in
Speaker 1: the industry, there are two things. Um, money moves really
Speaker 1: slowly in this industry. People don't change investment products, you know, readily. Right,
Speaker 1: So if you think about like we talked about the
Speaker 1: growth of the TF industry, it's it's twenty years later
Speaker 1: and they're at ten trillion dollars. The last sort of
Speaker 1: fur to six trillion, or you know, the real money
Speaker 1: moved in the last five to seven years. It took
Speaker 1: fifteen years for people to even think about putting ETFs
Speaker 1: in their portfolios right and using new products, launching going
Speaker 1: into new platforms to access cryptocurrencies is hard for a
Speaker 1: lot of people. So accessing bitcoin via and e t
Speaker 1: F is a great sort of gateway for people to
Speaker 1: get their feet wet and start investing in the cryptocurrency arena.
Speaker 1: Now there's a big problem with that actually, because it
Speaker 1: took you know, we're talking about eight years for the
Speaker 1: SEC to approve a Bitcoin futures et F. And that's
Speaker 1: basically like you've got this castle full of cryptocurrencies. They
Speaker 1: just open the gate, but they actually won't even let
Speaker 1: you into the rest. You can you can stand at
Speaker 1: the gate, which is what bitcoin is. It's the gateway,
Speaker 1: and but you can't go anywhere else. And and it's
Speaker 1: unclear how long it's going to take to see other products.
Speaker 1: So what I really think is when you talk about
Speaker 1: is there going to be a news figat of demand, yes,
Speaker 1: I think, uh, the doors open for a whole new
Speaker 1: swath of investors who might not want to go directly
Speaker 1: to a platform, who want to use bitcoin in a
Speaker 1: specific account or alongside of portfolio et F s UM.
Speaker 1: So there is new demand coming, but it's going to
Speaker 1: be limited because what they're gonna do, what they're gonna
Speaker 1: want is broader exposure. So they're gonna probably use the
Speaker 1: e t F and then say oh I want more,
Speaker 1: and then pursue other ways to get access to the
Speaker 1: wider cook the landscape. That's where I think about it.
Speaker 1: I'm going to pull a mic and ask a two
Speaker 1: part question, and I get the right to do that
Speaker 1: because I never do that, Mike, But to two parts
Speaker 1: that is amateurs your part, Yeah, all right, Yeah, that
Speaker 1: was great, But I wanted to ask you. A lot
Speaker 1: of people have called the launch of the Futures Back
Speaker 1: TTF fund a watershed moment, and then I also have
Speaker 1: people who call me and say it's not a watershed moment,
Speaker 1: don't call it that. So I'm wondering where you would
Speaker 1: fall in in that description. And then the second part
Speaker 1: is you you were talking about you know, this opens
Speaker 1: it up to a whole new base of investors, So
Speaker 1: I'm wondering who who that basis? Is it for the
Speaker 1: retail crowd? Our retail investors do anticipate will they be
Speaker 1: buying the e t F. Okay, Uh, great questions, two
Speaker 1: parts I can manage. I'll actually probably remember both. So
Speaker 1: let's start with watershed moment um. It is a watershed moment. Uh,
Speaker 1: this is unique, right, This is US regulators acknowledging bitcoin
Speaker 1: and saying this is an investable asset. We will approve
Speaker 1: a product to make it available for you. Right, Like
Speaker 1: you know, there have been funds available, they've been they've
Speaker 1: been unregulated, they haven't worked like an e t F.
Speaker 1: This is a fund that looks like a lot of
Speaker 1: what investors are using in their portfolios today, and that's
Speaker 1: helpful for them. So I think it's a watershed moment
Speaker 1: in that sense. Right. I think this is that that
Speaker 1: acceptance is important because I think it will lead to
Speaker 1: greater regulation on the industry going forward. It is, and
Speaker 1: like I said before, it's sort of this is the
Speaker 1: beginning of an entirely new segment of investable assets and
Speaker 1: the new investors. There is absolutely a crop of investors.
Speaker 1: I don't call them retail I actually don't like the
Speaker 1: name retail right. Direct investors are one thing, it's we
Speaker 1: should get away from using the term retail. Right. Direct
Speaker 1: investors are already buying bitcoin in the robin Hood accounts,
Speaker 1: They're buying it in PayPal, they're buying it on Gemini
Speaker 1: in coin based direct investors are not going to be
Speaker 1: the new investors to bitcoin because they actually realize they
Speaker 1: don't need to pay basis points or two hundred basis
Speaker 1: points to on bitcoin directly. They can do it um.
Speaker 1: The new set of investors, though, is the huge swath
Speaker 1: of money in advised accounts in the US. Advisors control
Speaker 1: really most of the money in this country, and they
Speaker 1: run generally now that ten jillion dollars is et F
Speaker 1: portfolios that they are building for investors, and those investors
Speaker 1: are not going out and selecting their own ets. They're
Speaker 1: generally advisor lead and advisors who were building those portfolios
Speaker 1: are now going to incorporate bitcoin. Many of them are
Speaker 1: using s m A s and have built procedures already
Speaker 1: to get to bitcoint But for a huge swath of
Speaker 1: them who really couldn't be bothered or didn't have the time,
Speaker 1: or we're waiting for the regulatory approval, this will be
Speaker 1: a new path for them to say five percent of
Speaker 1: our portfolio should be in crypto assets. It's the best
Speaker 1: performing asset over the last you know, one, three, five,
Speaker 1: and ten year periods, we need to incorporate a piece
Speaker 1: of them. So I think there is this new swap
Speaker 1: of investors that will commit you know, Dave with UH
Speaker 1: ETFs that hold futures. There's always this issue of the
Speaker 1: role you know, and the cost of rolling in the
Speaker 1: futures further out the curve um. Especially when you look
Speaker 1: at the bitcoin futures curve, it's in contango upper least sloping,
Speaker 1: meaning the prices in the further out months or or
Speaker 1: higher than the much higher than the UH near months um.
Speaker 1: And it even looks like the CTF is gonna sort
Speaker 1: of bump up against its limits on how many futures
Speaker 1: that can hold at the you know, the CFTC rules.
Speaker 1: All this is kind of leading people to worry that
Speaker 1: that this thing is not going to track UH at
Speaker 1: least spot the price of spot bitcoin as closely as
Speaker 1: as maybe uh, you know, it would be hoped what
Speaker 1: what you're thinking on that as far as the sort
Speaker 1: of the perils of a futures based et FU when
Speaker 1: it comes to tracking the spot asset price closely. You
Speaker 1: you you you you lead the question with the answer
Speaker 1: I think really right, like those are you know, future
Speaker 1: space ttfs are not new. There are a lot of
Speaker 1: them trading in the market. We know exactly how they trade.
Speaker 1: We know how futures work. They do trade at contango,
Speaker 1: they trade in sometimes intergradation. There are limits to how many,
Speaker 1: so quick growth can be can be detrimental potentially to
Speaker 1: the funds. These are all things that UM come into
Speaker 1: play when you are trading a future spaceed TTF. So
Speaker 1: if I go, if I put my e t F
Speaker 1: had on. When we were at the et F Fisher room,
Speaker 1: we were explaining to people, you know what you should
Speaker 1: be thinking about when you're buying e t F s.
Speaker 1: Structure mattered right. For years, Black Rock and all the
Speaker 1: other issuers were spent, you know, millions of dollars in
Speaker 1: marketing explaining to investors how structure matters a lot. This
Speaker 1: is what you need to be aware of, aware of
Speaker 1: if it's a future space TTF, if it's a physical
Speaker 1: et F. These things are incredibly important in understanding what
Speaker 1: your future potential returns will be. And this is all
Speaker 1: about UM. You know, it's funny right the SEC is
Speaker 1: talking about they went this path focused on investor protections,
Speaker 1: but what do investors really want. They really want an
Speaker 1: experience where they can read the label of an e
Speaker 1: t F and and I don't mean the small print
Speaker 1: on the label because they're never going to read that.
Speaker 1: They want to read the title and understand what they're buying.
Speaker 1: And they want to get returns that look like the
Speaker 1: underlying asset that they're trying to get. So when you
Speaker 1: buy bitcoin, if you look at your e t F
Speaker 1: returns on a Bitcoin futures et F, they could be
Speaker 1: potentially very different. And I look at the gray scale
Speaker 1: funds is a good example of this. Right, the only
Speaker 1: way to access bitcoin in a fund before the futures
Speaker 1: et F and US has been the gray scale fund.
Speaker 1: The returns of bitcoin and the gray scale bitcoint fund
Speaker 1: are extremely different, like hundreds of percent different, right, you know,
Speaker 1: hundreds of basis points different. Excuse me, Right, So I
Speaker 1: don't think the returns between a future space ETF and
Speaker 1: bitcoin will be as dramatically different, but there is the
Speaker 1: potential for those two things to diverge. And that means
Speaker 1: there is the potential one day for an investor to
Speaker 1: look at think they bought a bitcoin at et F,
Speaker 1: look at the price of bitcoining and it's change and performance,
Speaker 1: and look at their e t F and see two
Speaker 1: different numbers in the performance. That's the problem, right, that's
Speaker 1: the whole risk with this, and that's what we try
Speaker 1: and avoid in building good investment products. And look, sometimes
Speaker 1: you're just subject to the regulatory environment. And this is
Speaker 1: the best that an investor can get today based on
Speaker 1: the regulations. But you know, they could have gone a
Speaker 1: lot further. In my month, argument for a physically backed
Speaker 1: bitcoin e t F and if we were to see one,
Speaker 1: what are the propects when potentially might we see one
Speaker 1: approved by the SEC? The best argument is um that
Speaker 1: the like all of the all of the underlining mechanics,
Speaker 1: underlying mechanics of custodying bitcoin safely, providing you know, security
Speaker 1: and um execution and clearing those trades, everything already works
Speaker 1: and has been proven to work for a bitcoin e TF.
Speaker 1: Gemini is actually the largest provider of infrastructure to bitcoin
Speaker 1: e t F providers on a global basis. If you
Speaker 1: look at our nearest neighbor, Canada, we are the infrastructure
Speaker 1: of all of the Canadian bitcoin and the theory ets.
Speaker 1: So there are you know, there's a bunch of products
Speaker 1: up there. They're doing really well, and they've already proven
Speaker 1: the model that a physical bitcoin et F works. So
Speaker 1: it's very clear to me that I think that's the
Speaker 1: next step. And you asked about like when might we
Speaker 1: see that. I saw that gray scale file to convert
Speaker 1: to an e t F. I mean, no brainer, that
Speaker 1: should happen immediately. There's no reason why the SEC shouldn't
Speaker 1: follow up disapproval with a physical bitcoin e t F
Speaker 1: approval in the very near future. UM. So you know,
Speaker 1: I would hope you might see something by the end
Speaker 1: of this year, even we have two months left. UM.
Speaker 1: But if I were being more conservative, I would say
Speaker 1: the first quarter, excuse me, next year, we would see
Speaker 1: some approval. Beyond that, I mean, it's just getting ridiculous.
Speaker 1: There's no reason to not approve this at this point.
Speaker 1: I think one of the more fascinating innovations of crypto
Speaker 1: in recent years has been the notion of earning some
Speaker 1: kind of yield on your holding, you know, whether through
Speaker 1: lending products or staking that sort of thing. Obviously, quin
Speaker 1: Base made a lot of headlines with the Wells notice
Speaker 1: they got from the SEC basically warning that they're they're
Speaker 1: lending product. Um. Essentially could violate securities laws. Um. Also,
Speaker 1: I did a piece looking at just the notion of
Speaker 1: staking and even in the risk factors that at coin base. Um.
Speaker 1: You know, there's not a lot of clarity according to
Speaker 1: them about um how staking fits into the securities laws
Speaker 1: as well. I know, you know, Gemini offers chances to
Speaker 1: earn on your holdings through lending and staking. You know,
Speaker 1: is this a risk to Gemini doing that too? You
Speaker 1: know is obviously coin bases a public company, so they're
Speaker 1: bound to get more scrutiny from the sec But has
Speaker 1: the thinking that Gemini changed it all about these products
Speaker 1: given the coin based wells. Notice, so the think he
Speaker 1: hasn't changed because we have a different approach to the
Speaker 1: business in general. Right, Gemini takes a very very conservative
Speaker 1: stance with regards to regulation and everything we do. We
Speaker 1: do from a ask first before we move forward, right,
Speaker 1: we don't. We don't do first and then ask for forgiveness,
Speaker 1: and we don't sort of you know, come off with
Speaker 1: you know, we we are trying to be and we
Speaker 1: already are this sort of you know, collaborators with the
Speaker 1: regulators to bring something to market that works within their eyes. Right,
Speaker 1: So we are you know, we're a New York trust
Speaker 1: company regulated by the New York Apartment Financial Services, qualified custodian.
Speaker 1: All of these things are We are already incredibly highly
Speaker 1: regulated and we're very confident that our product has been
Speaker 1: vetted deeply by our regulators. We um and on that note, right,
Speaker 1: like if you if you get back to it, we're
Speaker 1: we've got more than four billion dollars in our earned product.
Speaker 1: People are coming to us every day looking for higher return,
Speaker 1: not just on their bitcoin, but also on their stable coins. Right.
Speaker 1: So Gemini dollar is a stable coin that tracks, that
Speaker 1: replicates the US dollar basically. And what's important is you
Speaker 1: asked if you mentioned the risk right, the risk factors,
Speaker 1: and there's not a lot of clarity. It gets back
Speaker 1: to just understanding in general what's happening in the financial markets.
Speaker 1: Right in the crypto asset arena and the cryptocurrency world,
Speaker 1: it's hard to actually get banking partners right, So there's
Speaker 1: a there's a limited funnel on access to dollars and
Speaker 1: back again to facilitate lending and borrowing. So there's demand.
Speaker 1: And on top of that, we have what's called pre
Speaker 1: funded trading across all of the exchanges. So if you
Speaker 1: want to trade on Gemini, you need to pre fund,
Speaker 1: You need to have money on the exchange to trade.
Speaker 1: Same thing for every other exchange out there. So if
Speaker 1: you're a trading firm and you're pursuing trading on a
Speaker 1: bunch of different exchanges, you need to borrow assets and
Speaker 1: set them on the exchanges so that you can have them.
Speaker 1: This has created incredible yields for both dollars and for
Speaker 1: cryptocurrencies because there's demand to borrow, because the trading firms
Speaker 1: will use those assets and generate even more money for
Speaker 1: themselves and then pay back those borrows. I actually think
Speaker 1: as long as you're on the major venues, we see
Speaker 1: the risks of doing this as very low. It's a
Speaker 1: very it's a standard business that looks exactly like traditional finance, right.
Speaker 1: I think stock loan in traditional financial services. This looks
Speaker 1: exactly like that, right. So it's a it's a it's
Speaker 1: not something that is completely new. It's it's similar, different words, right,
Speaker 1: staking versus stock loan, but a lot of this is
Speaker 1: very similar, and I think it's uh, it's gonna be
Speaker 1: very It's going to continue to grow in that sense,
Speaker 1: because if you think about we're talking about bit woin
Speaker 1: et F Storry, Mike, but the you know, you were
Speaker 1: asking like what's the best way to hold bitcoin, sort
Speaker 1: of like do you want to hold the e t
Speaker 1: F or do you want to hold bitcoin directly? Well,
Speaker 1: if you hold bitcoin directly and you put it in
Speaker 1: gemin iron, you can earn one and a half percent
Speaker 1: on your bitcoin holdings with no fee on the holding.
Speaker 1: Versus if you hold bitcoin in the futures e t F,
Speaker 1: you're paying points and you're getting no yield on the surface.
Speaker 1: So it's you know, you need to think carefully about structure.
Speaker 1: So Dave, just to wrap it all up, I know
Speaker 1: at the start of the conversation you were saying you
Speaker 1: see a lot of similarities between the e t F
Speaker 1: world and the crypto world, and so I'm hoping you
Speaker 1: can tell us about those similarities and whether or not
Speaker 1: it can tell us the growth of the e t
Speaker 1: F industry, can tell us anything about the potential growth
Speaker 1: of the industry. Yeah, so great question. It's probably one
Speaker 1: of my favorite questions because I feel like I'm sort
Speaker 1: of like back to the future. You know, ten years
Speaker 1: ago we were educating institutions how to implement e t
Speaker 1: F s into their portfolios. Right. And today we're doing
Speaker 1: the same thing. I'm going out and speaking to the
Speaker 1: largest institutions on the planet and my team, and we
Speaker 1: are educating them on how they can start to implement
Speaker 1: cryptocurrencies into their portfolios. Right, And it's uh. You know,
Speaker 1: so I wrote the UH in two thousand nine, I
Speaker 1: wrote the t the first edition of the et F Handbook,
Speaker 1: which was designed to take the details that are happening
Speaker 1: in the market and presented in a way that institutional
Speaker 1: managers can understand the markets enough so that they can
Speaker 1: start to implement ets into their portfolios. And I think
Speaker 1: it was you know, it's widely used around the industry
Speaker 1: and by institutional investors when they're building et F portfolios,
Speaker 1: like how the mechanics of these products work. We were
Speaker 1: at the same sort of that was two thousand nine
Speaker 1: when I when I sort of published that, we're at
Speaker 1: the same stage as I think in cryptocurrency land, like
Speaker 1: institutions are. You know. I like to say that Gemini,
Speaker 1: actually we don't need keypads on our phones. Our phones
Speaker 1: are so busy that we we actually make no outgoing
Speaker 1: phone calls. Right, People institutions are calling us on a
Speaker 1: daily basis asking for you know, they're not even ready
Speaker 1: to implement yet. They're still at the education stage for
Speaker 1: a lot of this, right, so they understand bitpoint very well.
Speaker 1: But this is a there's a very broad spectrum of
Speaker 1: of cryptocurrencies and there's a lot to learn and they
Speaker 1: need to get up the curve. And we're spending a
Speaker 1: ton of resources that educating institutions around this business. Well,
Speaker 1: speaking of that acating vill Donna, I think it's time
Speaker 1: to educate the listeners on some crazy things. But first
Speaker 1: I got Dave, I have to get one thing out
Speaker 1: of you before we switched to crazy things. We'll not
Speaker 1: to notice you're wearing a University of Pennsylvania shirt. I
Speaker 1: believe your daughter goes to pen that's right, sophomore. So
Speaker 1: there's a requirement on this show that if you have
Speaker 1: any sort of filled out the connection, you have to
Speaker 1: give us your favorite cheese steak pick in the city,
Speaker 1: brother Lee Love, So where do you go for your
Speaker 1: cheese steaks? There's no question, Abner's Cheese Steaks. It's right
Speaker 1: by the campus. It's the best, No, no no relation.
Speaker 1: I take it all right, all right, he's not talking
Speaker 1: his book. That's the same. That's the second Abner's recommendation
Speaker 1: we've gotten. That's interesting. You know, I confess I've never
Speaker 1: tried them. I'm not in that part of the Philly much.
Speaker 1: But next time I'm definitely gonna hit Abners. Let's take
Speaker 1: a road trip. Let me know, all right for sure
Speaker 1: stand clearer of the craziest things we saw in mark
Speaker 1: gets this week. Now let's hit those crazy things. I'm
Speaker 1: gonna break with tradition. I'm gonna go first because I
Speaker 1: really want to hear Dave's take on my crazy thing.
Speaker 1: And that was Get ready, Dave, take some notes. Now
Speaker 1: this will be an easy question, at least an easy
Speaker 1: number of questions packed into this. But on Thursday, UH
Speaker 1: real eye popping move in the price of bitcoin on
Speaker 1: finances US Exchange UH fellas low Is likes something like
Speaker 1: an eight seven percent plunge. Only on that one. Exchange
Speaker 1: and Finance eventually came out with a statement and said, well,
Speaker 1: one of our institutional traders had a bug in one
Speaker 1: of their algorithms, UM, and that's what caused it. Dave,
Speaker 1: what I wondered of you is UM. Obviously that's a
Speaker 1: crazy thing to happen. And you know, there's certain sort
Speaker 1: of guardrails built into the stock market over years too
Speaker 1: allow them to bust trades that are obvious, the erroneous
Speaker 1: or circuit breakers to prevent that that sort of dramatic
Speaker 1: plunge out of nowhere. And at the same time, we
Speaker 1: have seen coin bays come out with sort of their
Speaker 1: proposals to regulate the industry, including what that they wanna
Speaker 1: self regulatory and s R s r OH organization created
Speaker 1: similar to the stock market, where the sort of the
Speaker 1: industry polices itself. But I'm wondering how you see the
Speaker 1: market structure and where it needs to go. You know,
Speaker 1: is is this a feature or a bug that someone
Speaker 1: can pick off bitcoin for because of a bad altgo
Speaker 1: on an exchange? Where do you think something needs to
Speaker 1: happen sort of a consolidated tape like we have in
Speaker 1: the stock market, um, where everyone knows the sort of
Speaker 1: the real price of bitcoin. Where do you see that
Speaker 1: sort of market structure issue going, if if anywhere? Great question.
Speaker 1: I think it is a it is a highlight of
Speaker 1: a crazy thing this week, um, but it's also something
Speaker 1: that happens in the US markets quite a bit actually.
Speaker 1: So remember the biggest one that we ever talked about
Speaker 1: was the flash crash, right two, and that really brought
Speaker 1: attention to what happens here in a world with i'll
Speaker 1: go trading and no stop losses and things like that.
Speaker 1: And after the two, after the two thousand ten flash crash,
Speaker 1: there was a big backlash and people, a lot of
Speaker 1: people came out and said, e t f s are
Speaker 1: ruining the market, They're causing these market anomalies. And in
Speaker 1: the end it was decided, no, that wasn't that wasn't
Speaker 1: the case. It was a systems issue that caused the
Speaker 1: market anomaly, and they worked on fixing the system. There
Speaker 1: wasn't any real regulation brought into place after that. We've
Speaker 1: tightened up a few things in terms of trade away
Speaker 1: rules and things like that, but nothing nothing really sort
Speaker 1: of no dramatic fixed to the market structure. But things
Speaker 1: systems got better, and also we education of investors got better.
Speaker 1: So one of the things that was highlighted and then
Speaker 1: the flash crash was that advisors were using stop losses
Speaker 1: and stop losses and they would not stop limits stop
Speaker 1: loss limits, so they were stop loss markets. So they
Speaker 1: got triggered and then everything sort of uh, waterfalled down
Speaker 1: and we moved to a we moved to world where
Speaker 1: advisors don't do that anywhere that you stop lost limits
Speaker 1: often right to protect themselves against that. This is the
Speaker 1: same thing like we've this is this is sort of
Speaker 1: you know, the Binance thing was a fat finger basically,
Speaker 1: you know, except there was no finger anymore. It's computer
Speaker 1: system that did it. The ALGA was bad. Um I
Speaker 1: I sort of agree we um. I think getting to
Speaker 1: a self regulated place for the industry that nobody wants
Speaker 1: this to happen. They still will always continue to happen,
Speaker 1: but I think our market structure is going to look
Speaker 1: a lot more like traditional market structure over time, and
Speaker 1: the biggest firms and especially forms like Gemini, we have
Speaker 1: protections in place to protect against this, so that you know,
Speaker 1: these these types of things don't happen. But in the
Speaker 1: crypto space and now in the world right like it's
Speaker 1: so easy to build an exchange that these things it's
Speaker 1: it's it's still very early. What I find fascinating that
Speaker 1: you talk about market structure right think about where we're going.
Speaker 1: The crypto exchanges, they trade twenty four hours every day,
Speaker 1: seven days a week when they do. If you think
Speaker 1: about even upgrading, Um, like when we do systems upgrades,
Speaker 1: when the New York Stock Exchanges, the systems upgrade, but
Speaker 1: it's great. They closed at five o'clock on Friday, They've
Speaker 1: got forty eight hours to fix it before they open again.
Speaker 1: We do upgrades on the fly on our system, right,
Speaker 1: so we've had to develop mechanics to be able to
Speaker 1: upgrade the system just exactly as we're running. Right. Um,
Speaker 1: So that's the thing to think about in terms of
Speaker 1: market structure, Right, we have to build towards a world
Speaker 1: where we're going to be running markets seven all the time,
Speaker 1: and we're gonna have to think about low liquidity periods
Speaker 1: depending on you know, where the volume is happening, whether
Speaker 1: it's in Asia or whether it's in the US. These
Speaker 1: are a lot of things that are coming that we're
Speaker 1: gonna have to think about as we go. Sorry, long answer,
Speaker 1: short question maybe, But well that's fascinating because, as you say,
Speaker 1: those upgrades, even though they do have time to implement
Speaker 1: them when they are turned on there there, or they
Speaker 1: used to be anyway, so often the source of anomalies
Speaker 1: and and uh, you know, sort of wild moves in
Speaker 1: the market, so uh wait to do it on the fly.
Speaker 1: It really makes you, you know, makes you worry about that,
Speaker 1: at least makes me. I worry a lot to you,
Speaker 1: I don't know. No, well, look I should, I should,
Speaker 1: I should just um look, doing on the fly. It's
Speaker 1: just the way everything is done right now, Right, Amazon
Speaker 1: doesn't shut down, uh to fix systems, right, nobody, nobody's
Speaker 1: gonna be willing to accept that in today's world. And
Speaker 1: I should talk about just a little bit more about
Speaker 1: the regulation of the market. Right. We worked very closely
Speaker 1: with the regulators on this. We want our market to
Speaker 1: look and feel two investors like they are as safe
Speaker 1: and protected as the markets that they are used to
Speaker 1: dealing in. Right, that's our goal. That's that's Gemini is
Speaker 1: sort of that's our blood, right, Like, that's what we do.
Speaker 1: So that's our that's our plan there. Like I can't
Speaker 1: believe you take away from that answer wasn't but that
Speaker 1: Dave said that we're going to have markets. Yeah, Dona
Speaker 1: can't wait for this is my scariest thing. Why is
Speaker 1: that scary? That's amazing? Dona think about it. Right, You're
Speaker 1: you're a reporter, You're that you're busy reporting all day long,
Speaker 1: you don't have time to trade your portfolio. You should
Speaker 1: be but you should be able to go home and
Speaker 1: buy and sell stocks in your portfolio. But the problem
Speaker 1: is every time you get home from work, everything is closed,
Speaker 1: so you're putting in like orders to buy for the
Speaker 1: next day or something like that. You should be able
Speaker 1: to go home on the weekends and update your portfolio
Speaker 1: with things that are trading in real time. Reason, we'll
Speaker 1: make it. We'll make her cover the market on the weekends, right,
Speaker 1: that's the That's the reason. It's scary for me because
Speaker 1: I would never get to go home. But that was
Speaker 1: one of my craziest things a couple of weeks ago.
Speaker 1: If listeners remember where there is a company that is
Speaker 1: trying to do this, Um my craziest thing does not
Speaker 1: ask you to answer a question, Dave uh. And I'm
Speaker 1: actually going out into space with with mine kind of
Speaker 1: which which I've done before because it's interesting to me.
Speaker 1: But there was a great Bloomberg article about Elon Musk
Speaker 1: potentially becoming the very first trillionaire, and a lot of it,
Speaker 1: a lot of that new amassing of money is supposed
Speaker 1: to be on the back of SpaceX and some of
Speaker 1: the space deep space exploration and and other things that
Speaker 1: SpaceX likely could be doing in the future. A trillionaire
Speaker 1: our lifetime. Who would have ever thought he's an amazing,
Speaker 1: amazing guy. I listened to a podcast with him the
Speaker 1: other day about how he's planning on really thinking. I mean,
Speaker 1: I think he's thinking clearly about colonizing Mars, and I
Speaker 1: love it, like it's so exciting for our children and
Speaker 1: our grandchildren. That's gonna be amazing. That's why I love
Speaker 1: the space stories. That's good one. Vell Data, that's a
Speaker 1: good one. How about you, Dave, what's the craziest thing
Speaker 1: you've seen this week? Look, I think it's the topic
Speaker 1: of the day. Right, A major record was broken this week, right,
Speaker 1: the fastest et F launched to get your billion dollars.
Speaker 1: This herald is the beginning of the crypto era for
Speaker 1: e t f s. But even more than that, the
Speaker 1: ability for investors to really delve into the crypto markets
Speaker 1: in in sort of ever new expanding ways. I think
Speaker 1: it's exciting, really exciting. Yeah, well that I know it's
Speaker 1: exciting for our own Eric Calcuna here at Bloomberg he
Speaker 1: got to know big Twitter war with someone about how
Speaker 1: much how many inflows he expected into the bitcoin ETFs.
Speaker 1: It's looking like I forgot what his number was, but
Speaker 1: it's look everyone took the under and it's looking like
Speaker 1: he's gonna win. He bet a dinner at the restaurant
Speaker 1: of choice, which Dave, I think Eric would probably go
Speaker 1: for Abner's cheesesteaks. That's he's a filly guy too. I
Speaker 1: know we've talked about it. I love Eric. He's a
Speaker 1: good friend of mine, UM, and I think he likes
Speaker 1: Avner's actually, so he's spoken favorably and he's on point
Speaker 1: with his predictions on the temp market. I don't think
Speaker 1: there's there's not too many people that that rival Eric
Speaker 1: in his knowledge of this market today. He's awesome. His
Speaker 1: predictions are really good. Yeah, it's cool with that. I
Speaker 1: think that's all of our time for the week. Dave,
Speaker 1: really appreciate you joining us this week. UM historic week.
Speaker 1: I guess you could say, uh in the the wacky
Speaker 1: history of bitcoint, and hopefully we can have you back
Speaker 1: again to UH talk all things crypto. Awesome. Thank you
Speaker 1: so much for having me. It's been great. What goes up?
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal, website and app, or wherever
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Speaker 1: Radio What Goes Up is produced by topur Foreheads. The
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Speaker 1: See you next time.