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Speaker 1: Hello, and welcome to another edition of the Odd Lots Podcast.

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Speaker 1: I'm Tracy Allaway and I'm Joe Wisenthal. So Joe. They

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Speaker 1: say the best way to learn about something is to

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Speaker 1: actually do it right, or the best way to understand

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Speaker 1: something is to try to do it yourself. I have

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Speaker 1: heard people say that, and I think that it's definitely true.

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Speaker 1: In my experience. You only get so much from reading

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Speaker 1: about something or talking about something, and then you try

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Speaker 1: to do it and you learn a ton. Well why

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Speaker 1: why do you bring this up? Well? Sometimes I think

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Speaker 1: in finance and markets, we talk about complicated or sort

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Speaker 1: of abstract topics and the best way for people to

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Speaker 1: learn about them would be if we went out and

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Speaker 1: tried our hands at them ourselves. But given its finance

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Speaker 1: and markets, that's difficult and or in some cases illegal.

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Speaker 1: So you're saying, we're not going to do an episode

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Speaker 1: where we go out and launch a trading operation or

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Speaker 1: anything like that. No, we're not. But we're gonna do

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Speaker 1: the next best thing, which is we're going to have

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Speaker 1: a guest come on and talk about his specific experience

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Speaker 1: trying to set up a bitcoin exchange traded fund. I

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Speaker 1: am very excited about this. Of course, this was a

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Speaker 1: huge topic late last year, so many different companies rushing

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Speaker 1: to try to be the first with a e t

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Speaker 1: F that gave people direct exposure to bitcoin. It was

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Speaker 1: fascinating to watch. It still hasn't happened yet, but that

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Speaker 1: exact process, I agree. I think it is still shrouded

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Speaker 1: in mystery for most people, how you go about it

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Speaker 1: and what it actually takes to get there. So the

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Speaker 1: great thing about this conversation, in my opinion, it's not

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Speaker 1: necessarily the emphasis on bitcoin. It's the emphasis on the

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Speaker 1: e t F structure and how you would apply that

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Speaker 1: to a new type of asset. And I should also say,

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Speaker 1: as a bonus, we have an extra guest on our

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Speaker 1: thoughts today. That is Rachel Evans. She is our e

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Speaker 1: t F guru for Bloomberg News. She covers all sorts

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Speaker 1: of e t F. She's going to be in on

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Speaker 1: the conversation and to begin with before we bring on

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Speaker 1: our main guest, she's going to help us lay out

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Speaker 1: well the lay of the land really when it comes

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Speaker 1: to E t S. So Rachel, let's start with you.

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Speaker 1: Thank you so much for coming on. Thank you guys

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Speaker 1: for having me. So I guess the first question to

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Speaker 1: you is we talk about building a Bitcoin e t F.

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Speaker 1: It's been a multi year attempt. Why has it been

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Speaker 1: so difficult? So with bitcoin e t F, I mean,

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Speaker 1: it basically takes us back to what it takes to

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Speaker 1: create a successful exchange trade of fund. First, of of course,

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Speaker 1: you need to have a great idea. Now with Bitcoin,

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Speaker 1: people feel like they have a great idea. But the

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Speaker 1: next step in that process is trying to get approval

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Speaker 1: from the Securities and Exchange Commission, the regulator for e

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Speaker 1: t f s to actually be able to launch that.

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Speaker 1: And now the sec has really been dragging its feet

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Speaker 1: a list a bit on this for for market participants anyway,

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Speaker 1: because they have some serious concerns about how Bitcoin would

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Speaker 1: operate within an exchange trade of fund. Now what this

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Speaker 1: kind of comes down to, it in essence, is really

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Speaker 1: kind of the back office operations of an exchange trade

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Speaker 1: of fund um. To make an e t F actually work,

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Speaker 1: there are three key aspects that you need to have

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Speaker 1: in place. The first is kind of the fairly sort

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Speaker 1: of vanilla back office type arrangements. This is kind of

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Speaker 1: the custodian the board that kind of monitors um. You

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Speaker 1: know how the manager is actually doing and make sure

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Speaker 1: that the e t F is on target. And that's

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Speaker 1: something that I think on the custody side they've kind

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Speaker 1: of had concerns about, but that the second and the

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Speaker 1: third kind of pillars are really kind of where the

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Speaker 1: sec has actually had issues. That's kind of on the

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Speaker 1: authorized participant side of things, which sounds a lot like jargon,

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Speaker 1: right and and it is, but basically, the authorized participant

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Speaker 1: is the gatekeeper for e t F, so they are

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Speaker 1: pretty much the most import autant person when it comes

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Speaker 1: to making an exchange trade of fund work. What they

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Speaker 1: do is that when you decide to buy an e

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Speaker 1: t F, you give your cash to your broker via

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Speaker 1: any of the many online platforms that you have. That

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Speaker 1: cash then wends its way through to the hands of

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Speaker 1: an authorized participant, who is the one that actually goes

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Speaker 1: out and buys the stock or the bonds or the

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Speaker 1: commodity that then gets put into the fund, and the

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Speaker 1: fund manager will then manage the same process happens on

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Speaker 1: the way out that the fund is going to give

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Speaker 1: you your money back. The security is goes to the

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Speaker 1: authorized participant, who then sells those securities in the market.

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Speaker 1: And gives you your money back. So basically they are

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Speaker 1: the middleman, and the SEC is a little bit concerned

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Speaker 1: about how that might work with bitcoin. There's then of

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Speaker 1: the third pillar, and this is really related to the

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Speaker 1: fact that e t f s are something that you

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Speaker 1: can invest in for the long term or you can trade.

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Speaker 1: So the third pillar for for ecfs is the market

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Speaker 1: makers who are really dealing with e t f s

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Speaker 1: on the secondary market. So the thing that's really important

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Speaker 1: for these guys is that they do something called arbit Now.

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Speaker 1: Arbitrage is very important to to e t f s

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Speaker 1: because it makes sure that the price of the e

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Speaker 1: t F doesn't diverge too significantly from the actual value

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Speaker 1: of the e t F. Now, the way that the

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Speaker 1: market makers go about doing this is that if they

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Speaker 1: see that the shares of the e t F A

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Speaker 1: are trading more than the underlying securities, and what they

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Speaker 1: might do is they will go into the market, buy

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Speaker 1: up for all the underlying securities, take them to that

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Speaker 1: authorized participant, get some shares for the e t F

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Speaker 1: and then sell them at that higher price. They've basically

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Speaker 1: been able to buy something cheap and sell it high

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Speaker 1: and lock in that profit. Now that is not only

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Speaker 1: great for them because they take that margin, it's also

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Speaker 1: really good for investors because it makes sure that the

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Speaker 1: price of the e t F doesn't diverge too far

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Speaker 1: from the actual value of the securities. Tracy, I just

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Speaker 1: learned a lot from that answer about e t f s,

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Speaker 1: all kinds of stuff I didn't already know about how

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Speaker 1: they work. Well, I mean, I think we have the

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Speaker 1: essential building blox for the next leg of our conversation,

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Speaker 1: which is our main beust. Greg King, the CEO of

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Speaker 1: rex Shares and someone who has actually attempted to begin

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Speaker 1: a bitcoin based e t F. So Greg, thank you

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Speaker 1: for coming on all thoughts, Hey, Tracy, Joe, Rachel, good

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Speaker 1: to be here. So Greg, Before we get into the

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Speaker 1: specifics of the bitcoin et F endeavor and your journey

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Speaker 1: to get there, why don't you tell us a little

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Speaker 1: bit who you are? What's your background? What is rex Shares?

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Speaker 1: I mean, I think, uh, there are a lot of

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Speaker 1: some well known brands in the e t F space,

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Speaker 1: But what is your firm and how did you get there?

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Speaker 1: There are there are so many new entrants in the space,

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Speaker 1: right I I started back when there were I don't know,

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Speaker 1: just a handful of et F companies. But my journey

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Speaker 1: into e F started when I was at Barkley's so

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Speaker 1: early two thousand's, and Barkley's was already with with I Shares,

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Speaker 1: the sort of eight pound gorilla in the space, and

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Speaker 1: was developing all kinds of new asset classes, mainly commodities,

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Speaker 1: and so I was on a project with them to

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Speaker 1: develop some of the first commodity exchange traded products. That's

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Speaker 1: how I got in, and like a lot of things

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Speaker 1: in life, is sort of just happened unintentional. And then

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Speaker 1: I got to know a little bit about the et

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Speaker 1: F space and was fascinated and start to dig and

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Speaker 1: do a little more and work on more projects with

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Speaker 1: Barclay's and kind of one thing led to another. It's

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Speaker 1: been fourteen years or so, and during that time I

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Speaker 1: worked for a bank, Swiss Bank Credit Space, developing some products.

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Speaker 1: Previously founded and sold a company called Velocity Shares, which

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Speaker 1: we sold to Janice Capital, and so rex Shares is

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Speaker 1: my next company. We wanted to focus on democratizing access,

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Speaker 1: right I. I sort of believe that investors um the

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Speaker 1: e t F is a great tool for democratizing access

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Speaker 1: to new asset classes or new investment strategies. You know,

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Speaker 1: as we're going to talk about there's there's lumps along

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Speaker 1: the way, but that's what REX is all about. You

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Speaker 1: mentioned democratizing access to assets. I wonder how that applies

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Speaker 1: to bitcoin specifically, because of course, one of the selling

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Speaker 1: points of bitcoin is, you know, it's this decentralized currency

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Speaker 1: and anyone can buy it. So walk us through how

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Speaker 1: exactly you came up with the idea to apply the

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Speaker 1: E t F structure to bitcoin. So I remember I

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Speaker 1: was on a business trip in Washington, d C. Actually,

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Speaker 1: and I came across I don't know if the I

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Speaker 1: was at a conference and the session was that very

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Speaker 1: entertaining or something, and I was flipping through the news

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Speaker 1: and I read an article on bitcoin. It was sort

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Speaker 1: of late two thousand thirteen. Bitcoin was having a big

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Speaker 1: run up, and I remember I think I had heard

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Speaker 1: of it before, but hadn't really paid that much attention.

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Speaker 1: You know, price action tends to tend to focus the mind.

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Speaker 1: We saw last year as we saw last year in spades.

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Speaker 1: So within the span of of a couple hours, I

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Speaker 1: decided to open an account with coin base and buy

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Speaker 1: some bitcoin, and so I personally got involved in bitcoin then,

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Speaker 1: and it wasn't on my radar for purposes of product development.

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Speaker 1: It just was it just seemed like, you know, those

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Speaker 1: worlds were too far apart. But shortly thereafter, or some

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Speaker 1: time around then, of course, the Winklevoss filed for an

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Speaker 1: e t F and uh, you know, if you were

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Speaker 1: in the E t F world, you saw that and

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Speaker 1: it was like, wow, okay, here we go. But knowing

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Speaker 1: something about how these things get done, I thought, well,

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Speaker 1: that's you know, that's gonna have a lot of hurdles

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Speaker 1: to overcome, and you know, just watched from a distance.

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Speaker 1: But for me, that the turning point was in two

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Speaker 1: thousand fifteen when the CFTC you know ruling. I think

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Speaker 1: that it was a it was some sort of enforcement

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Speaker 1: action against one of the early exchanges that in the

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Speaker 1: course of making that ruling, the CFTC basically said, hey,

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Speaker 1: bitcoin is a commodity and therefore, you know, we're its regulator.

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Speaker 1: And that's when the light bulb went off for me

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Speaker 1: that I saw a route to an e t F

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Speaker 1: that perhaps didn't necessarily involve bitcoin itself, but futures contracts,

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Speaker 1: something that was regulated by the CFTC, and of course

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Speaker 1: there were no bitcoin futures, but now we actually have them,

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Speaker 1: and last year we did see the launch of two

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Speaker 1: bitcoin futures that are currently trading. Yeah. Yeah, it took

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Speaker 1: a while for that to develop, but for for us,

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Speaker 1: that was the kind of the first glimmer of Okay,

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Speaker 1: I see, I see a path here. Because physical bitcoins

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Speaker 1: are just so intangible, it seemed like it would take

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Speaker 1: a while for everyone to get comfortable. I want to

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Speaker 1: ask before we talk too much about the specific process

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Speaker 1: of getting the bitcoin e t F off the ground,

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Speaker 1: I want to ask about the business of running a

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Speaker 1: niche e t F company in this world where we

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Speaker 1: have these huge eight pound gorillas like I shares and

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Speaker 1: so there are obviously some strategies that are well known

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Speaker 1: and well trodden, whether it's just sort of indexing strategies

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Speaker 1: against the SMP five hundred, or emerging market strategies or

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Speaker 1: country specific strategies or factor strategies buying low volatility stocks

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Speaker 1: in a basket. In the world of sort of very small,

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Speaker 1: sort of startup E t F companies, what is the

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Speaker 1: goal is it to find something that becomes the next

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Speaker 1: mega E t F? Like, how do you think about

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Speaker 1: these sort of upsides and downsides of the business and

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Speaker 1: the general opportunities. I could answer that question for a while,

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Speaker 1: but you know, I think actually the bigger companies are

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Speaker 1: the ones these days that really need to look for

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Speaker 1: the mega hits to move the needle. Uh. The smaller

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Speaker 1: companies can actually survive with with much smaller niche products

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Speaker 1: and so um. But it is it is more difficult

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Speaker 1: there are so many players out there. UM. The way

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Speaker 1: we look at it is we have to believe in

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Speaker 1: something and and believe that it's going to add value

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Speaker 1: to the market. Just generally, that's something that investors want,

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Speaker 1: something that hasn't been done before, hasn't been done in

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Speaker 1: a way that we think we can do it, and

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Speaker 1: uh and and where there's a demand. Right. So, but

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Speaker 1: if you don't, if you don't have that drive to

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Speaker 1: to kind of discover these opportunities and really work towards them,

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Speaker 1: then it's a difficult place. So when did you decide

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Speaker 1: that that your idea for investing in bitcoin um individually

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Speaker 1: could actually be transferred into something that would work as

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Speaker 1: an exchange trade of funds for a variety of investors.

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Speaker 1: So in two thousand and fifteen, when the CFTC came

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Speaker 1: on the scene. We started to say, all right, well,

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Speaker 1: you know, how far are we away from a futures contract.

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Speaker 1: We visited a number of the futures exchanges and and

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Speaker 1: really started to understand you know, who's out there, who's

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Speaker 1: working on this. Uh. Index providers are also important, um.

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Speaker 1: The exchanges in for example, the CME was developing an

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Speaker 1: index which at the time you know, was not publicly announced. UM.

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Speaker 1: So we just tried to learn the ecosystem. We also

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Speaker 1: decided to approach the SEC and speak to them about

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Speaker 1: this off the record, and even though futures didn't exist,

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Speaker 1: we generally got favorable kind of remarks from them. They

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Speaker 1: they thought, okay, well this would sort of help address

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Speaker 1: some of the concerns that we have regarding physical bitcoin.

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Speaker 1: So when you embarked on that process, you know Rachel

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Speaker 1: mentioned earlier these three necessary ingredients for the et F structure,

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Speaker 1: the custodian, the authorized participants, and the market makers. When

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Speaker 1: you were in the early stages of your idea, did

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Speaker 1: you go out and talk to potential custodians or aps

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Speaker 1: or market makers. We did. We talked to a few

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Speaker 1: of the market makers and they were active in in

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Speaker 1: physical trading of bitcoin already. So there's a few firms

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Speaker 1: that have been that that sort of do E t

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Speaker 1: F market making that were early in cryptocurrency trading. Um,

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Speaker 1: so we knew that there would be support from at

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Speaker 1: least a few market makers, which is which is critical.

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Speaker 1: As Rachel pointed out, without that, you know, you don't

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Speaker 1: really get too far. The custody piece though, skipping back

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Speaker 1: up to her first sort of back office category, um,

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Speaker 1: that is the part that that kind of really gets

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Speaker 1: cleaned up with the futures contract. Right, everyone can custody, uh,

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Speaker 1: you know, a CRME or c a listed future, but

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Speaker 1: customing these you know ones and zeros, you know, a

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Speaker 1: little bit trickier. Yeah, it was just gonna ask exactly that,

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Speaker 1: because without the futures you could theoretically have an E

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Speaker 1: t F that held the private keys of bitcoins. Right,

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Speaker 1: but this just sort of makes it much easier, so

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Speaker 1: you don't have to worry about getting hacked or all

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Speaker 1: those other things. Yeah, yeah, that's right, and this is

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Speaker 1: you know a couple of years ago. So really I

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Speaker 1: think even the custody of the physical bitcoin, and when

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Speaker 1: I say physical bitcoin, I you know, it's how physical

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Speaker 1: is it really? But the private keys, even the technology

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Speaker 1: there was not where it is today. I think that's

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Speaker 1: come a long ways as well. But thinking through the

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Speaker 1: ecosystem that Rachel explained, we just thought that a derivatives

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Speaker 1: contract would be would be the way to do this.

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Speaker 1: If you look at other e t F s right say,

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Speaker 1: for example, we we already had bitcoins of commodity, and

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Speaker 1: if you look at gold, the way that the et

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Speaker 1: ups have been done is to hold the physical gold.

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Speaker 1: That's great, and everybody's comfortable with that process. That works well.

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Speaker 1: If you look at oil, however, the e t F

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Speaker 1: don't hold physical oil. They just roll oil futures contracts.

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Speaker 1: Same for natural gas, etcetera. So with commodities you really

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Speaker 1: have to look at the characteristics of the underlying and

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Speaker 1: in some cases it's just more pragmatic to hold the

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Speaker 1: futures contract as a proxy for the underlying. So we

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Speaker 1: thought that this cleaned up several of those issues really

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Speaker 1: pretty nicely. So Greg, I gotta ask you said, you

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Speaker 1: went to the sec uh, you got an initially what

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Speaker 1: seemed to be a favorable response. Um, what happened after that?

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Speaker 1: After that we sort of had to hurry up and

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Speaker 1: wait because the futures didn't exist, So we uh focused

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Speaker 1: on a few other things and and kept trying to

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Speaker 1: encourage the futures ecosystem, for lack of a better term,

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Speaker 1: to populate with contracts. So being helpful, we did speak

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Speaker 1: to a number of exchanges and helped however we could,

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Speaker 1: but it took a while, you know, they was the

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Speaker 1: bulk of last year, and then as we know, in

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Speaker 1: in December we had a couple of contracts that finally launched.

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Speaker 1: Of course, by that time there were a lot of

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Speaker 1: people interested because I think the buzz preceded the you know,

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Speaker 1: the actual launch. Yeah, tell us a little bit about

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Speaker 1: last year, because obviously the second half, or really the

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Speaker 1: fourth quarter of seventeen, it was just an absolute frenzy

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Speaker 1: for bitcoin and other cryptocurrencies, and there were numerous applications

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Speaker 1: for bitcoin e t f s. Everybody wants one. I

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Speaker 1: think everybody knows how big the SPDR Gold Fund is

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Speaker 1: become truly democratized the way people could invest in gold.

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Speaker 1: Now it's one of the biggest e t f s

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Speaker 1: in the world. Talk us to us about that sort

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Speaker 1: of frenzy and competition and what really happened over the

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Speaker 1: last few months. Yeah, it was. It was a really

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Speaker 1: interesting time and and obviously speaking from a product development perspective,

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Speaker 1: it was interesting and but also at the same time,

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Speaker 1: the price was just really cranking and it was on

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Speaker 1: TV all day. You know, we just it was. It

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Speaker 1: was surreal in the sense that you know, in learning more,

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Speaker 1: if you if you go back a year trying to

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Speaker 1: find articles or trying to find clips or or different

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Speaker 1: research on bitcoin, it was sparse, and then by the

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Speaker 1: end of the year it was just everywhere and every

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Speaker 1: everybody had an opinion on it. But I think what

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Speaker 1: happened is there was a press release, I think that

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Speaker 1: one of the exchanges was going to launch, and you know,

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Speaker 1: we had not filed anything publicly because, as I mentioned there,

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Speaker 1: there's sort of no point to do that quite yet

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Speaker 1: if the futures don't exist. Um, and so we we

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Speaker 1: had just sort of been waiting. We'd had our discussions

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Speaker 1: of the SEC but people started to file, so you know,

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Speaker 1: we thought, well, we the environment might be changing quickly,

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Speaker 1: so let's go ahead and file as well. Um. And

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Speaker 1: you know, we weren't. We weren't the first and we

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Speaker 1: weren't the last. And there were a lot of filings

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Speaker 1: that came through, but ultimately the sec UH decided on

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Speaker 1: a couple of different occasions to really asked people to

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Speaker 1: take a step back, and I think they, you know,

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Speaker 1: they were clearly getting bombarded and just wanted to to

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Speaker 1: basically slow things down. I think to put that all

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Speaker 1: in context, when we actually had the most kind of

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Speaker 1: e t F filings out there, it was more than

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Speaker 1: I think it was seventeen or even more than that.

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Speaker 1: So the SEC was really kind of being bombarded by

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Speaker 1: all these filings that all wanted a bitcoin ETFC the

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Speaker 1: physical as physical as you can get. All the futures.

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Speaker 1: Is the expectation that in worthy SEC to give a

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Speaker 1: green light at some point that all of them would

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Speaker 1: get approved, or that some of them would be approved,

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Speaker 1: or do people think maybe one or two would be

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Speaker 1: approved and those would be the big winners? Like how

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Speaker 1: do how does the SEC think about these situations where

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Speaker 1: lots of entities are competing for the exact same roughly

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Speaker 1: the same thing. Yeah, that's a great question. So and

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Speaker 1: there's a lot of nuance here because there are different

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Speaker 1: divisions of the sec um. There is the CFTC, which

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Speaker 1: is totally separate regulator um, and there's some I guess

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Speaker 1: diversion of opinion in terms of where those boundaries end.

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Speaker 1: But specifically with respect to ETFs, you basically have two kinds. Right.

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Speaker 1: Your typical ETF is is what we call a forty

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Speaker 1: Act fund. Right, it's an investment company. It's basically a

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Speaker 1: mutual fund that has applied for certain exemptions that allow

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Speaker 1: it to trade like a stock. That's essentially how we

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Speaker 1: t fs really started. But then you have and and

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Speaker 1: keeping in mind that bitcoins a commodity, you have a

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Speaker 1: lot of e t f s. They're they're actually not

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Speaker 1: forty Act funds at all. They're filed under the thirty

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Speaker 1: three Act, and they don't have an investment manager. So

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Speaker 1: what happens is that and strictly speaking, there's probably four

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Speaker 1: or five permutations of this. So if you're filing a product,

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Speaker 1: it's going to go to the regulator that governs that

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Speaker 1: particular type of product, and in all cases it might

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Speaker 1: lead to a different department. And that sounds a little

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Speaker 1: I guess, um, you know, silly, but the reality is

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Speaker 1: that there are bodies of law that govern different types

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Speaker 1: of investments differently, and that's just kind of the way

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Speaker 1: the the ecosystem has evolved here since, you know, since nineties,

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Speaker 1: and it hasn't changed a whole lot. So the letter

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Speaker 1: that got sent out was sent by the Division of

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Speaker 1: Investment Management at the SEC, and that division is specifically

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Speaker 1: concerned with forty Act funds. There are a number of

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Speaker 1: filings that are still in and they basically don't have

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Speaker 1: an access to the Division of Investment Management. UM. So,

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Speaker 1: so a letter was sent back in January by Dahlia

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Speaker 1: blast Um and the Investment Management division of the SEC

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Speaker 1: regarding the bitcoin funds that had come to them seeking approval. UM,

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Speaker 1: Can you tell us a little bit about what that

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Speaker 1: letter said regarding their concerns? Sure. Yeah, that was a

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Speaker 1: sort of an industry wide letter that came out and

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Speaker 1: they articulated I think it was like thirty eight different

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Speaker 1: questions in that letter. UM. Really as a as a

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Speaker 1: letter to the I c I and really all mutual

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Speaker 1: fund or forty Act fund providers that ask them questions

397
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Speaker 1: regarding valuation policies around bitcoin, uh, custody issues around bitcoin

398
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Speaker 1: arbitrage mechanics with the market making community. Essentially, I thought

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Speaker 1: it was helpful to understand where they're coming from. So

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Speaker 1: it's a little bit of an extraordinary move. You don't

401
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Speaker 1: typically see something like that, But they essentially put down

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Speaker 1: on paper all of their issues and I think a

403
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Speaker 1: number of them had, at least in our communication with them,

404
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Speaker 1: already been addressed. But I think this was their way

405
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Speaker 1: of saying to the industry formally and very you know,

406
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Speaker 1: sort of loudly, here is what we're concerned about. And

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Speaker 1: and they said it very clearly. Until these issues are addressed,

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Speaker 1: we don't think it's appropriate to file for these products.

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Speaker 1: So each provider got their own version of that letter.

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Speaker 1: We got one privately as well that was tailored to

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Speaker 1: our our products, and each provider, I assume we are

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Speaker 1: is responding to the SEC. It's just happening outside of

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Speaker 1: the registration process. That was going to be my question.

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Speaker 1: So these letters get sent out in January. I realized

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Speaker 1: it's only um four or five months since then. But

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Speaker 1: it seems like virtually every day that passes, there's another

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Speaker 1: financial institution that's tiptoeing into the crypto space, or at

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Speaker 1: least says they are. So are we any closer to

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Speaker 1: alleviating some of the SEC's concerns? Are we any closer

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Speaker 1: to getting you know, a real group of potential authorized participants,

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Speaker 1: market makers and especially custodians who might be able to

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Speaker 1: do those I think we are actually so. Um. The

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Speaker 1: market makers have been there for a while. I think

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Speaker 1: the futures volume, for example, is one of their concerns.

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Speaker 1: I think that's developing nicely. Um. The staff has been

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Speaker 1: responsive in terms of our private dialogues, so it's not

427
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Speaker 1: like that they're not focused on this. I think they

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Speaker 1: just needed to slow down the timeline. I don't want

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Speaker 1: to predict obviously the timeline, um, but I do think

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Speaker 1: that progress is being made, and to your point, just

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Speaker 1: industry wide, there continue to be resources poured into this,

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Speaker 1: just from all over the place. Yeah. One thing that's

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00:23:30,359 --> 00:23:35,720
Speaker 1: striking in your recounting of the early history is things

434
00:23:35,800 --> 00:23:38,800
Speaker 1: that we may not think about as having been important

435
00:23:38,880 --> 00:23:43,320
Speaker 1: bits of infrastructure. So you talk about an early attempt

436
00:23:43,400 --> 00:23:48,119
Speaker 1: to create a bitcoin price index, which of course is

437
00:23:48,160 --> 00:23:51,520
Speaker 1: probably important for some sort of reference for a future,

438
00:23:51,720 --> 00:23:56,280
Speaker 1: which then becomes important for obviously the custodial aspect of

439
00:23:56,520 --> 00:23:59,520
Speaker 1: an e t F. So right now, when you look

440
00:23:59,560 --> 00:24:02,320
Speaker 1: at the lay escape and we see, oh, there's a

441
00:24:02,400 --> 00:24:05,760
Speaker 1: new trading desk at expert or there's new something. These

442
00:24:05,920 --> 00:24:08,360
Speaker 1: all are sort of even if we don't really think

443
00:24:08,400 --> 00:24:12,080
Speaker 1: of it that directly, bits of infrastructure that are coming

444
00:24:12,080 --> 00:24:15,959
Speaker 1: in place that could see theoretically, uh support of an

445
00:24:16,000 --> 00:24:19,879
Speaker 1: eventually TS. Yeah, there are a lot of building blocks

446
00:24:19,960 --> 00:24:22,560
Speaker 1: that need to need to happen. And I was as

447
00:24:22,600 --> 00:24:24,239
Speaker 1: you were talking, I was thinking about a house. Right.

448
00:24:24,280 --> 00:24:26,800
Speaker 1: You go in the house and switch on the lights

449
00:24:26,960 --> 00:24:30,040
Speaker 1: and you know, wash your hands or whatever, and everything

450
00:24:30,160 --> 00:24:34,240
Speaker 1: works right. But without those systems electrical or plumbing or

451
00:24:34,400 --> 00:24:36,960
Speaker 1: whatever it is, it's just it's not really a fully

452
00:24:37,040 --> 00:24:41,639
Speaker 1: functioning house. So there was a lot of UM. I

453
00:24:41,960 --> 00:24:43,760
Speaker 1: I think there was a lot of interest obviously because

454
00:24:43,800 --> 00:24:46,960
Speaker 1: bitcoin is such a phenomenal thing and it's it's so

455
00:24:47,160 --> 00:24:49,960
Speaker 1: new and and and it's it's so interesting to a

456
00:24:50,000 --> 00:24:54,240
Speaker 1: lot of people. But the capital markets infrastructure just wasn't there,

457
00:24:54,400 --> 00:24:56,479
Speaker 1: and it's getting built out, and I think it's um

458
00:24:56,680 --> 00:24:59,560
Speaker 1: it's only a matter of time. So obviously we'll see

459
00:24:59,600 --> 00:25:02,480
Speaker 1: what happened. It is on the development of the bitcoin

460
00:25:02,560 --> 00:25:05,440
Speaker 1: etf at all the different companies trying to get that out.

461
00:25:06,040 --> 00:25:09,760
Speaker 1: Your firm wreck Shares is not just doing a bitcoin ETF.

462
00:25:09,880 --> 00:25:14,080
Speaker 1: You also have a filing out for a blockchain e

463
00:25:14,280 --> 00:25:18,600
Speaker 1: t F. What could you say about the other irons

464
00:25:18,640 --> 00:25:22,760
Speaker 1: in the fire seth week the yeah, sure, the So

465
00:25:22,840 --> 00:25:26,480
Speaker 1: the bitcoin ETF technically we withdrew, but we're talking to

466
00:25:26,560 --> 00:25:28,000
Speaker 1: them on the side. That's actually why I can talk

467
00:25:28,040 --> 00:25:30,639
Speaker 1: about it uh now, is because we're not in the

468
00:25:30,720 --> 00:25:34,800
Speaker 1: filing process. But we do have a blockchain ETF that

469
00:25:34,880 --> 00:25:37,919
Speaker 1: we're hoping to launch in the upcoming weeks. We're excited

470
00:25:37,920 --> 00:25:41,560
Speaker 1: about that because we think investors want exposure to this technology,

471
00:25:42,119 --> 00:25:46,480
Speaker 1: and we've partnered with um, a portfolio manager who runs

472
00:25:46,640 --> 00:25:48,840
Speaker 1: a crypto hedge fund, so he's going to be an

473
00:25:48,920 --> 00:25:52,359
Speaker 1: active manager for this e t F, which is a

474
00:25:52,359 --> 00:25:55,000
Speaker 1: little unusual in et F land. Usually you're following a

475
00:25:55,080 --> 00:25:58,280
Speaker 1: passive index, but this is taking the active approach and

476
00:25:58,359 --> 00:26:01,480
Speaker 1: trying to get exposure to companies you've got some form

477
00:26:01,560 --> 00:26:06,640
Speaker 1: of blockchain exposure or cryptocurrency related activity. That's that's material.

478
00:26:07,160 --> 00:26:10,920
Speaker 1: Got it, alright, So both the potential bitcoin et F

479
00:26:11,040 --> 00:26:14,639
Speaker 1: and a blockchain e t F maybe on the way. Okay,

480
00:26:14,760 --> 00:26:19,560
Speaker 1: so special thanks to our bonus guest for this episode,

481
00:26:19,720 --> 00:26:23,240
Speaker 1: Rachel Evans. She's a reporter at Bloomberg News. She covers

482
00:26:23,280 --> 00:26:25,400
Speaker 1: all things et F and also thank you to Greg

483
00:26:25,560 --> 00:26:28,800
Speaker 1: King's CEO of wreck Shares for sharing your story. Thanks

484
00:26:28,840 --> 00:26:43,359
Speaker 1: so much, Thank you both. Thank you so Joe. I

485
00:26:43,480 --> 00:26:46,520
Speaker 1: really enjoyed that conversation because I like talking about the

486
00:26:46,640 --> 00:26:48,520
Speaker 1: nuts and bolts of e t f s, whereas I

487
00:26:48,560 --> 00:26:50,520
Speaker 1: don't really like talking about the nuts and bolts of

488
00:26:50,560 --> 00:26:54,399
Speaker 1: bitcoin and blockchain so much. To be honest, no, I agree.

489
00:26:54,480 --> 00:26:57,359
Speaker 1: I I feel the same way because there's been a

490
00:26:57,440 --> 00:27:03,120
Speaker 1: million bitcoin conversation We've had them on this podcast specifically,

491
00:27:03,760 --> 00:27:07,719
Speaker 1: but using bitcoin as a lens through which you can

492
00:27:07,880 --> 00:27:12,159
Speaker 1: understand this process in this massive industry and the unique

493
00:27:12,320 --> 00:27:18,040
Speaker 1: challenges that bitcoin poses with regards to custody and the

494
00:27:18,200 --> 00:27:21,600
Speaker 1: arbitrage and all that stuff. I learned a ton just

495
00:27:21,760 --> 00:27:24,240
Speaker 1: about the mechanics of e t f s and the

496
00:27:24,800 --> 00:27:28,040
Speaker 1: regulatory aspect that I definitely didn't know about before. Yeah,

497
00:27:28,119 --> 00:27:30,480
Speaker 1: and I guess it's worth pointing out that learning about

498
00:27:30,480 --> 00:27:32,359
Speaker 1: the mechanics of e t f s actually helps you

499
00:27:32,720 --> 00:27:36,479
Speaker 1: learn about potential strengths and weaknesses in the structure. Uh.

500
00:27:36,600 --> 00:27:38,840
Speaker 1: You hear all the time about this idea that maybe

501
00:27:38,920 --> 00:27:41,080
Speaker 1: e t f s aren't going to work one day,

502
00:27:41,280 --> 00:27:43,800
Speaker 1: and what people are worried about there is that maybe

503
00:27:43,960 --> 00:27:48,320
Speaker 1: the market makers or the ap s won't do their jobs. Essentially,

504
00:27:48,840 --> 00:27:50,920
Speaker 1: you know, one day they won't do the arbitrage, maybe

505
00:27:51,000 --> 00:27:53,719
Speaker 1: because the market is so volatile that they don't want

506
00:27:53,760 --> 00:27:55,920
Speaker 1: to come in and take that sort of risk. But

507
00:27:56,040 --> 00:27:57,760
Speaker 1: on the other hand, a lot of people in the

508
00:27:57,840 --> 00:28:00,399
Speaker 1: E t F industry would say, well, if you understand

509
00:28:00,440 --> 00:28:03,359
Speaker 1: how that works, it's very, very unlikely that we're ever

510
00:28:03,480 --> 00:28:06,400
Speaker 1: going to encounter a day when a big AP which

511
00:28:06,480 --> 00:28:09,280
Speaker 1: is essentially a large bank doesn't want to make money.

512
00:28:09,480 --> 00:28:12,960
Speaker 1: So it helps to understand both sides. Yeah, absolutely, And

513
00:28:13,040 --> 00:28:15,080
Speaker 1: of course something that you've done a lot of reporting

514
00:28:15,160 --> 00:28:19,359
Speaker 1: on is you hear about this, particularly with h bond

515
00:28:19,440 --> 00:28:22,360
Speaker 1: E t F which people fear that the underlying are

516
00:28:22,520 --> 00:28:25,840
Speaker 1: a liquid or don't trade or don't price enough. Some

517
00:28:25,960 --> 00:28:28,880
Speaker 1: of the people get anxiety every couple of years about

518
00:28:28,920 --> 00:28:31,960
Speaker 1: junk bond e t f s, and so understanding that

519
00:28:32,200 --> 00:28:36,320
Speaker 1: exact mechanics really illuminates what it is that people get

520
00:28:36,359 --> 00:28:39,800
Speaker 1: concerned about. Yes, how I learned about bond e t

521
00:28:40,000 --> 00:28:45,280
Speaker 1: f s through the mechanism of a bitcoin exchange traded fund. Okay, well,

522
00:28:45,440 --> 00:28:48,280
Speaker 1: this has been another edition of the Odd Lots podcast.

523
00:28:48,400 --> 00:28:50,920
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

524
00:28:50,960 --> 00:28:54,080
Speaker 1: Tracy Alloway and I'm Joe Wiser though you can follow

525
00:28:54,160 --> 00:28:57,000
Speaker 1: me on Twitter at The Stalwart and you should follow

526
00:28:57,080 --> 00:29:01,360
Speaker 1: our producer so for Foreheads at for has T, as

527
00:29:01,400 --> 00:29:04,880
Speaker 1: well as the Bloomberg head of podcast, Francesca Levy. She's

528
00:29:04,920 --> 00:29:08,160
Speaker 1: at at Francesca Today, as well as our guests follow

529
00:29:08,360 --> 00:29:12,760
Speaker 1: Rachel Evans at Rachel Evans Underscore and Why. And our

530
00:29:12,840 --> 00:29:15,800
Speaker 1: guest Gregg isn't on Twitter, but his company Wreck Shares

531
00:29:16,040 --> 00:29:19,200
Speaker 1: is on Twitter at rec Share. Thanks for listening