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Before we get into the episode, a quick reminder that this podcast is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. If you are enjoying On RAMP media content, please like subscribe and share as it goes a long way in helping others find the signal through the noise. Now for a word from on RAMP. On RAMP is a Bitcoin asset management platform built on multi institution custody leveraging our partnership with Bit Go and their 10 plus year track record in securing assets and Coincover, the premier digital asset risk mitigation company on ramps. Multi institution custody is a segregated institutional grade vault requiring two of three institutions at any point in time to sign once a client's unique permissions have been met at on RAMP we understand that your Bitcoin journey is a multi generational pursuit catalyzed by the ideals of perseverance, aspiration and legacy. That's why we're proud to introduce on RAMP Heritage, a suite of private client services dedicated to ensuring your Bitcoin legacy is preserved and passed on, embodying the true essence of wealth that goes beyond mere numbers. If you would like to learn more, please schedule a consultation. What you're telling me is that music is about to stop, and we're going to be left holding the biggest bag of odorous extremism ever assembled in the history of Darkness. 1974, 198792972000, and whatever we want to call this. It's all just the same thing over and over. We can't help ourselves. I say when we sell, hey, I say when we. Sell. We're live, gentlemen. What a week. What time to be alive? What a week. It's feeling exhilarated. Feel like bad boys in the Bitcoin space, huh? I. I I don't feel any different. I don't. Feel Jesse, you're Jesse. This Stanford MBA turned into a bad boy by association in the Bitcoin. Space. That's right. I don't feel any different than I did last week, but suddenly government seems to like what I'm interested in a little bit less. It's a timely week for Hong to join. You got a, you know, Hong Kong ETFs, you got the the Hoseki announcement for the attestation. So a lot of, a lot of good stuff happening. But then also, yeah, a lot of interesting dynamics happening at the state level and their interest in Bitcoin and money service, business and money transmission, yeah. Absolutely. Seeing the senator Cynthia Lomas put out that tweet of like come and get it I thought was still kind of encouraging in a way like that those types of memes of like, come and get it, like what are you gonna ban math or people memorizing 12 words in their in their brain type of energy always existed. But ultimately these things do require a lot of people to believe in it to have real resistance and political power. And I do think I'm grateful that we are taking on this fight now than like four years ago or eight years ago or yeah this having this epoch feels like there's enough understanding and broad kind of awareness of the value and there is a lot of people that are holding it as well. So yeah, we're we're more kind of prepared than ever to I think take on some of these fights, so. Yeah, it's. Kind of beautiful. It's kind of beautiful how Bitcoin grows just ahead of you know what it needs to be in order to to keep ahead of the threats to be large enough to overcome the barriers that pop up. And you know, to your point, like 4-8 years ago, maybe this doesn't work out well. But I, you know, I, I am heartened by how many people in power and particularly in the financial sector, like with the ETFs. And you know, now we have the likes of BlackRock on Team Bitcoin, And that that's that's gonna be enough for us to, you know, stick up for freedom of speech and property rights. I think, I don't know though. I mean I as what's I represent firms in Wall Street et cetera. I don't know if those firms are what we can really depend on. I think ultimately what we depend on is like the the open source developers that are doing ready to code and maintaining code bases for kind of interest beyond just their financial motivations. And a community of people that maintain the network, run nodes, do self custody, use Bitcoin as money in a way that kind of brings sovereignty themselves. And that's like the that foundation and that foundation being possible and continuing to be possible. I think it's a premise and then everything kind of builds on top of that. Yeah. That's and that's that's very powerful. Coming from your position you should, you should introduce yourself after. I'll just say yeah, we just jumped in, but this notion of it's everything, right, Like it's the banks that just came out that are holding you know shares and ETFs and their influence. But then to your point and where it's powerful is because you you have vested interest in the existing market structure that requires you know custodians and all the things that are the opposite of what you described. But in the day, I think what Bitwise very been very interested in being a native firm to the industry and recognizing that there's certain ways that you can map financial products to the protocol that benefit everybody. And that's what we've seen a lot of Wall Street traditional players have been, have gone away from. And there's this other dynamic. And Marty, I want to just drop this because if we want to pick it up on at some point during this episode and I won't name the name. But if you remember a few years ago, we're sitting at coffee with a notable person building this space and he referenced that the way Bitcoin wins is not via like privacy tools. Like people say we can all go and there's not a stance on privacy tools or not and being anonymous, it is by having a movement and people mobilizing around a movement because that's what's powerful. So rather than being secretive and hiding, you're out there and you're basically explaining this is what we're doing, this is what we're building. Similar to how long opened up. I haven't seen that tweet, but Lum is saying come and take it like, look, this is what we're here. Because this maps to everything constitutional, whether it's like a commodity and Bitcoin and all the things free speech and all the things that we know that there's nothing wrong that we're doing foundationally. I think it's that's the story and the narrative that we want to like rally behind versus like some of the other things that are happening. I think they're relevant, but it's getting people and the preservation of wealth and all the things we know that are being built here. That's like how we get a movement around that and preserving people's capital and storing it versus like some of the other I think things that get kind of like lost in the shuffle. Yeah, come and take it. And I agree. I think. I think we need both though. I think we need the tools, the code that enable people to preserve their privacy against an encroaching states that wants more control over individuals. But also we should not be afraid to be unabashed advocates for Bitcoin, which represents freedom and sovereignty in the digital age, particularly as it pertains to money. I mean, we took, I mean last week's episode with Peruvian bull right before. I mean recorded that on Wednesday, Tuesday or Wednesday last week before anything that before everything that happened last week, towards the end of last week, began to happen. And to juxtapose that conversation with how we're starting this conversation today, it's hilarious because it is abundantly clear that the incumbent financial system is woefully overburdened with debt. The central banks of the world and the governments are losing control both of their monetary and fiscal policies. And individuals and in aggregate societies around the world need a solution to a problem created by governments and central banks. And Bitcoin provides that solution. And we shouldn't be afraid to advocate for that solution and advocate for using it in a sovereign fashion. I I think personally, when you add up everything from Samurai, the DOJ response to the tornado cash motion, to dismissal, the FBI warning that came out right after Samurai Roger Burr's arrest cash app under attack, it it seems like moves of desperation. Everything all at once in a basically strong arm attempt to scare the shit out of everybody to to keep them away from building this sovereign technology. And to me that signals it's similar to a wounded animal that is trying to project strength, that it's most vulnerable when it's most vulnerable. And so, well, it is very scary and there are people that are rightfully scared out there with all these actions. I think you should read between the lines and notice that the state, particularly in the United States, is very vulnerable right now. And I think they recognize that Bitcoin is an exit valve that people are going to opt into and they're trying to scare people away from the exits and keep them in the ship to go down with the ship. My heart really goes out to the depths that are mostly just building open source tools that they think are good for people and people's privacy and there's having to make very hard decisions. Phoenix Wallet leaving the US? Heartbreaking, but you can't really blame them. That's the hard part. I think, like, I think it's easy to say that like, oh why don't you take a stance and blah blah blah. But like a lot of them, yeah. If you, if you look at Phoenix particularly, I think they had something like $100 million where they have something like $100 million tied up in lightning channels. So that's a lot of capital at stake. So again, I agree with you, you can't can't fault them. No, they're not the ones that fault. Yeah, it is. It is disheartening to see kind of the scare tactics really bring a lot of scare to these people that are just trying to build tools for individual property. But that's just the world that we live. In it it's a little the timing is a little funny to me Hong, because you and I were at the MIT Bitcoin Expo a couple weeks ago. We we had lunch together and and got to chat then and I was on a a privacy and custody panel and we were talking about the importance of privacy tools and you know and and whether or not they're legal and and obviously the perspective of the panel was that there are some Gray areas but overall privacy is is protected And then Fast forward a couple weeks and and suddenly there's moves against developers who are just trying to produce open source privacy tools for people to you know utilize if they if they you know if they want it's kind of kind of a bit of a shock in terms of the timing right there but but Hong we we we we need to let you introduce yourself here and all the great work that you've been doing. Yeah. Yeah. Oh, amazing. Yeah. Hello everyone. Thanks for inviting me to share about About the Wise and my Journey. I'm the CTO and Co founder of Bitwise, started the firm with my Co founder Hunt Reportsley who was the CEO together seven years ago and we've been on a journey to to be a bridge between Bitcoin and the Tri fi world. So, so making it easier for people to get exposure to Bitcoin from the existing kind of traditional financial system. I know it kind of ties to kind of the stuff that we're talking about. But I think my view and our view has always been that it is still valuable to make it easier for people to have their first taste and first step into Bitcoin. We think of it more and more as like a top of funnel, increasing that top of funnel and making it safer and more efficient and effective. Yeah, we've been on that journey for the past seven years. We've worked on the Bitcoin ETF for the past six years until it was launched this year. So it's an incredible moment for our firm and excited to see it out live. And yeah, my background is in software security. I'm from Korea. I did software security research in the Korean military for a few years and then started the firm with Bitwise with yeah Hunter, my Co founder. We're talking about 60 person firm offices in San Francisco and New York and all based in US Yeah, we're primarily focused in the US market. And and and I have to compliment you guys. You know we talked to a lot of people about Bitcoin and the most common, the most common charts that get brought up are from Bitwise. And you know when when we're talking to to folks and they and they want to you know say hey I saw this cool presentation and look and look at this particular chart, what do you think about this? More often than not it's from Bitwise. So you guys are are doing great work about promoting Bitcoin as an asset class and being at the front of the ETF charge right now. Yeah I think what's really impactful and I didn't know you're gonna come out with that take Hong transparently of like the self custody and and all that dynamic is that you you understand it like you fundamentally grok it in the sense of that has to exist in the in the same way as like I don't think on the other side of that people would say on the hardcore bitcoins I would say well like ETFs or pulled asset vehicles don't need to exist and I foundation I fundamentally don't think that's true. I think they both play off of each other right like you can't have a scalable there's not a scalable way for people to get all 8 billion or however number large cohort 100 million to get exposure in the same way that if if that's the only position I think you guys recognize it probably a lot of the ETF for hiders don't believe that if it was all there that's that's the same set. Yeah, yeah, yeah. We totally don't have to be done under brush. I think maybe just making that clear at the top of the conversation was helpful is that I totally believe that everyone that is willing and capable of doing self custody should go in that direction. But I believe in increasing the top of the funnel making it easier for the for people to have take the first step to start carrying and paying attention to Bitcoin because they have some financial exposure to it. If if all yeah just because we provide ETF and and they are custodial solutions doesn't mean that like that is what I think is what everyone should be doing or with all of their Bitcoin. The the main goal is like, let's put it this way like we're we're trying to increase ultimately there people go down a rabbit hole and we're trying to get people to enter that rabbit hole and to make it right now the like before ETFs, the world where we're living in, it's like OK, how does someone buy Bitcoin? Well, you have to open up an account at like Cleanbase or etcetera. And then you need to go through all this like onboarding and then you need to usually wire money. And then that's when you can like finally buy $1000 or $10,000 worth of Bitcoin. And if you can make that conversation into, OK, I'm convinced. But then I just open up Schwab or Fidelity and then get $100, a $1000 or $1,000,000 depending on what your wealth level is with the with the two two taps, that's just so much easier And it will it the conversion of like the amount of people that will like, take the first step can be increased tenfold. And I think that's what we're seeing. I think people underestimated like, oh, it's still like it like you can buy the Queen so many different ways. Like why do we need an ATF? Well, we saw that about $12 billion net of GBTC outflows flowed in the first three months. There's like $12 billion that we're like, I'm I'm like thinking about doing it, but it's like a little too hard that I'm not like going to go through all that like opening up accounts and buying money and managing another thing. And we would rather have those dollars engaged and convert over to being in the economic zone of Bitcoin rather than the economic zone of Fiat. And of course it is still not the most ideal thing and if everyone had the Bitcoin in in Bitcoin ETS, then the Bitcoin of the system and network would not work and it would not be any different from gold. But I think there is definitely room and value for the spectrum of of kind of where people can begin and where people can to end up. And and always there's people that are going to be earlier part of their journey and always more dollars that are still stuck in the old system and making it incrementally easier for those dollars to change position is still very valuable. Can you double down on some of that like you mentioned the long road, I think we all have known, you know, Marty has been around for a very long time and and the ETF, what was it, the Winklevi since like 2012 we're trying or whatever of like 20? 14. 2014, like what that road was like and then the kind of surprising things that have happened in the past, call it three to six months, both maybe positive and negative or just anything that stands out on things that since these have been approved, what you guys are been pleasantly surprised at and also maybe even less so. Yeah. So it's it was really like a decade and 10 years of the industry looking to launch of the Queen Chef and the SEC has been denying them year after year. Bitwise is kind of amongst the issuers. Finally ended up launching the 20 tips with the lost ones ultimately stepped off. Amongst the issuers that are currently here, we've been working on it for the longest for six years. We had three different filings along those six years and yeah the last one was the one that was approved. I think there is a bit of a meme that like oh like between ETF sub were suddenly launched when BlackRock showed up and the reality of the matter is that it it wasn't like that. It wasn't like oh finally Wall Street is interested in an SEC kind of caved The the vested interest to try to kind of push Bitcoin away from and keep it away from the people are much stronger than kind of what an individual company like BlackRock kind of showing up and and push over the line. The reality of how how things happened was that it the ridiculousness of kind of like the goal posts that kept moving on the SEC side piled up and at some point just Grayscale decided to sue the SEC. And that lawsuit went up to the second second appeals court in DC, and three very respected judges ruled unanimously that. The FEC was on the wrong side here, that they were acting arbitrarily and capriciously and if you read that order, the final order, it's just scathing. But you just couldn't imagine that that's what the 3:00 and if judges of their level were writing about the national financial regulator. But the the BlackRock filing was around in August. But and and the the order came out in October, but reality is, is that around May or so there was an oral hearing that was available to the public. And if you listen to that, it was very clear that the judges were going to rule in favor of grayscale. They were like whenever the SEC lawyer said anything they were like Oh my God, what are you saying? Like you're not not making any sense like how can you have approved the futures products and not prove the spot products in this kind of very arbitrary way. And so it's more more like the BlackRock kind of saw that listened to that and then decided that they wanted to have a piece of the pie. And then but really it's that the judicial system ruled the that the SEC was acting in bad faith here and then they had to approve a product. And I think that lesson is a little bit timely in the current moment because I think even I, when I started bit wise, I think I had a certain kind of rosy view of how the world worked and how regulation worked and how the political system worked and that you just keep working in in good faith. We did so much research like, like we had probably over over 30 meetings with the SEC over those six years and hundreds of pages of research that we published publicly and more privately and just did everything that we were asked to do. And ultimately that had no bearing on this outcome. And I think that's just a very sobering reality of how the world works and that sometimes you just have to go again. It's a really sad reality, but sometimes you have to go against the national financial regulator in the United States to to get to what is fair. Not even asking for something that is completely favour us for us, but just to get fair treatment for Bitcoin as as every other asset. And yeah, so that was kind of the journey and I think probably the biggest kind of a lesson that I took away from from from going through that journey. We can talk more about the launch, but yeah. Yeah, very interesting. When when you talk about the futures product that the the SEC did approve that that was back in, was that, was that 2017? Yeah, so that was right at the top in 2017 there there was some speculation. There's always been some speculation since then that the existence of the futures product potentially gave a vehicle for large interest to short. What's your perspective on that because you would be closer to that information. Yeah, that's CME futures. Yeah. Just to clarify. Yeah. Mixing 2 things up. Yeah, CME futures, which is the kind of regulated futures contracts, started trading in 2017, you're right. But the specific thing that the court was pointing out that the SEC had no kind of consistency over is that I think in 2020 or so they approved, well 2021, they approved a ETF based on the futures products. So the holdings of the Bitcoin ETF, for example. BITO is the largest product by pro shares, holds the futures contracts as the underlying and it is an ETF that is regulated and trades on stock exchanges and the SEC approved and the SEC was making arguments around, oh, we can't approve a spot between ETF because the markets can be manipulated etcetera, etcetera. And the court's opinion was OK, markets might be manipulated etcetera, etcetera. But if that's the case, then why were you OK with the futures product? And you're saying that spot product is not not OK And there's just like a number of these things that are kind of inconsistent. And that's kind of, yeah, yeah, the main thing that ultimately was like so obviously not consistent that the court ruled against the FC CS disapproval of small products. And I guess I mean maybe this is impossible question for you to answer, but do you think that that was self-serving that that there was some interest in having a futures product in order to potentially stymie Bitcoin's growth by being able to to short more effectively? Or do you think that was just like a random thing where for whatever reason they they justified futures and they couldn't come around to accept the spot? No, I I I think what you need to kind of like when when thinking about kind of regulators etcetera, I think we like the reality is that the people in the leadership positions of those those agencies do change and administrations do change and the BITOO and also even within just one time period of like let's say Genzer's time, the beginning of Genzer's time and now is a very different climate like pre FTX and post FTX the the kind of the way that the Democratic Party engages with Bitcoin has changed a lot. So I think a product that is futures based that most people know, it's not going to have as much of kind of like the blockbuster success that spot products have. I think it was less threatening or like less of a problem to like, approve that. And also the political climate was very different. And then things change and then goal posts change and priorities change. So the reality, Yeah, yeah, it kind of exposes that like if the decisions aren't really made on a consistent kind of rule based on law, but rather is made more on kind of where the political direction is leaning, then it's very hard for it to be consistent. And from the court's perspective, looking at that is very frustrating. So I think that's why we're, we're having a lot of success in the judicial system because the court is looking for consistency and a kind of agency actions that move in based on the political wind. It's very hard to be consistent. Yep. And maybe switching gears back to the approval would be very curious like on your side what you guys have seen from because there's a lot of different narratives around it's retail, it's pent up institutional adoption, You know the RA's are coming like what you guys have seen since then. And then because you've been out in the market so long telling the story of Bitcoin, how is the narrative changed around like lack of interest, you know, FUD that comes up and is it still consistently the same, it's just every it's, you know, different formats of it or is or they have they gotten past certain things and is it new stuff, like curious how the all those conversations are tying together now? Yeah, a lot of good questions just to so post launch we we're now about three to four months. In the first month there was immediately a fair amount of success where there was about 9 billion of inflows into the new products and but there was a lot leaving GBTC. So about 3 billion was net new and people and everyone kind of recognized that as successful. But ultimately that people thought that was kind of the end of like, OK, we had some kind of like big latent demand and then it kind of applied it down. But then I think month two and three was really surprising for people where the GBTC outflows roughly started to catch a plateau, but then the inflows into the new products continued in full force. And then we saw another $10 billion of net new dollars even despite the outflows come into these products. And the most recent months, I I think end of April, things have quieted down a fair amount and now we're kind of at a bit of a steady state. And so it's really like in some ways to think about the Bitcoin ETS moment. I like, I think we otherwise often talk about it as like an IPO moment. I think people think of it. There's a tendency to think about it as like an event like, oh, it happened and went like in any type of market event. But the reality that is that it is more like a state change. It's more like a company going public where like before the IPO it's all private market liquidity. And then after the IPO you have access to public market liquidity always. And I think that is closer to the ETF moment for Bitcoin. So that Bitcoin now has access to public market kind of liquidity and public investors being able to access it in the same way that they access any other assets. And that capability can live with us forever. And also I think that's really exciting as like someone who wants for bitcoiners because always in kind of market mania whenever that is in 2017 or 2021 etcetera, always The thing is people just want to buy Bitcoin, but their way to access it, the the avenues become bottlenecked and then things start to break like GBTC was an example of that. It had so high premiums that like people started creating hedge funds to trade that and then those hedge funds blew up and then we have three AO Capital, we have Luna and then all the that problem in our hands. FTX is another example. I think people just want to buy Bitcoin but then it's not simple and straightforward. So then people set up scam operations to take that those dollars and then we had a problem that we had. So what's really exciting about the between ETF one and from my perspective is that forever what we have now is that we don't have any trouble kind of the net new dollars coming into the space that that just simply want to buy Bitcoin. Schwab infidelity is not going to have trouble taking in $10 billion over a few months. Even if that was $100 billion that's not a problem. And so and and and what we've seen is that we've like since then markets moved up about 50% in prices and we're here like no fuss, no crazy scams popping up, no things breaking down. And I think that's kind of one exciting aspect of the Bitcoin at the moment that I think about. You asked about who's buying. I think largely a lot at the beginning was self-directed retail investors. And even though those that cohort has had ways to access to space for a long time, ultimately people still do have retirement accounts, 401 KS or people that still had some more money in the brokerage account and hadn't kind of made the move to move it over to Coinbase or so. And and and those dollars kind of easily moving over to the coin ETFSI think was a large part of what the $12 billion were. Another category is our actually kind of main client base is actually wealth managers like financial advisors and financial advisors. Market breaks off in many different ways, but there's kind of an independent financial advisors they're called RI as that don't aren't tied to any kind of platform or Home Office and they can just make decisions by themselves about which products to buy. Those Rias have been moving into Bitcoin ETFs pretty, pretty quickly And and then the kind of the where a lot of the other dollars is, is in kind of the wire houses like Morgan Stanley or or UBS or Wells Fargo etcetera or these kind of larger banks broken. The other platforms, those platforms are still very much in due diligence. We've had a few kind of really the earliest movers make some moves there after like two or three months of due diligence and those are finally starting to land. But really that's those channels still have not mostly been live yet. So it's kind of crazy to think about from kind of the Bitcoiner perspective when we're on Twitter and like the Bitcoin ETF is so old news. But for the largest kind of wealth management platforms, they usually do diligence with products for like 6 to 12 months and they're like sprinting towards it and like putting Bitcoin ETS in private queue. But still largely have not gone through that yet. So we're having kind of the first conversations with that those worlds just now and just to kind of put into perspective like why that is important, I think we, we we in the in the US and kind of in the investable dollars world let's say kind of self-directed individuals managed about four to $5 trillion and that's a lot of money and that's but still it's not the largest pool of money and that's mostly the money that's been engaging with Bitcoin so far. Another four or five times larger than that, about 20 trillion or so is ultimately managed wealth. So people that ultimately delegate the wealth kind of investment decisions to financial advisors and that pool ultimately like has largely been unable to access Bitcoin because if if it's hard for like individuals to access or like open up accounts and do all these things, if you have like 30 or 50 clients, you're not opening up coin based accounts for each of them. So. So then that has been a large kind of roadblock for that audience and kind of the ECS makes it very easy to fit into the work flows. So yeah, anyways, that that was kind of trying to paint, paint a picture a bit about how how we think about what what's kind of like the meaningful state change here, the audiences that have taken the first step, but kind of the exciting road ahead on the kind of larger pools of dollars that are opening up to Bitcoin trying to access through these products. Thanks for tuning in. If you're interested in exploring any of these topics further, or want to learn more about how we can help you secure a new or existing Bitcoin allocation, get in touch with our team at on rampbitcoin.com. We look forward to supporting you on your Bitcoin journey. That was awesome. I love how you characterize it as a state change. I think on this show we've we've talked about how it's kind of before ETFs and after ETFs. It's going to be a major demarcation in the life of Bitcoin. From my point of view, that was mostly because of the narrative in Tradify and in the broader society about Bitcoin. Because we've lived for 15 years in a world where Bitcoin, whenever it's talked about in Tradify or in the media has been, you know, negative. It's it's, it's always been about how it's, you know, illicit drug money on the Internet and what not. And then now we live in a world where Wall Street is incentivized to promote Bitcoin ETFs and talk about how it makes sense for anybody's portfolio. And you know, that has a cumulative effect that has a societal level effect over time as the Overton window about Bitcoin shifts from this is, you know, risky drug money on the Internet to oh, this makes this is digital gold and everyone should own it And you know that that before ETF after ETF is that state change. I think that's an even better metaphor for yes. One thing I want to be clear though is that like state change on liquidity or like financial access is is what I'm what I'm putting. Ultimately the value of Bitcoin isn't coming from the ease of financial access. I think the value of Bitcoin has always been there as a mutual sovereign kind of non government money that is that is global and interoperable and and that has always been the case. But it was, it was always kind of up against a a, a kind of a tougher challenge to to grow as kind of its economic bandwidth because it had, it was kind of unfairly limited to private market liquidity. And then and then now we're just figuring out like, oh, now it just is able to get out of that discrimination and be on evil even footing with gold, even footing with real estate. Like you've been able to buy Reit's real estate in in ETFs forever. You can buy out gold and ETS forever. Like it's just on an even playing field now and in public market liquidity. And that is exciting. But yeah, also just wanted to clarify. Yeah, yeah. The public market liquidity part is, is, is a is a such an important part of of understanding why the ETFs are huge. The the other thing I wanted to dig in there though is like it. It has been interesting trying to understand the behavior of how customers are engaging with the ETFs. Because big question for me was has been will the ETFs exhibit the same kind of reflexivity of demand that we have seen with Bitcoin in general in the past on Coinbase or whatever crypto exchanges. And you know, very, very interesting that you know obviously we saw the GBTC outflows and then a really good month or so for all of the ETFs with a ton of inflows. And then in the last month where the price has been stuck at prior all time high around you know high 60s. Now for the last week or so, we've had like very little inflows, 0 net flows in Black rocks product in, in particular for the last four days I think. And so that sort of to me says that we are seeing the classic reflexivity of like when the price is going up, there's more demand and when the price is not going up, there's less demand, Which I, you know, I I think it's been a philosophical question of like what type of demand will flow into the ETFs? Is it is it baby boomers who have, who are sitting on a bunch of wealth and then they keep hearing about Bitcoin going up and they tell their wealth manager, you know what, it's time let's buy some Bitcoin? Or is it the the RI as who are saying we're going to, we're going to slowly, methodically scale into Bitcoin for you? And that's kind of independent of whatever's going on recently with the price of Bitcoin. Any any thoughts there? Yes, definitely I I I think it's a blend of all the above where in some cases it's going to be a client saying that I just want exposure to Bitcoin. Like I've been convinced like my friend has been talking to me about this and I want to hold this thing. In some cases we're we're starting to see real kind of model portfolio allocations. So given kind of advisory firm can have a new view about the macro and say that that Bitcoin deserves to exist in model portfolios 2 percent 5% etcetera and they just have discretion over their their clients assets and they move in and that kind of it's just kind of a a consistent allocation. But then another reality is that ETS are also trading vehicles for like hedge funds and so. So if a if a existing kind of track five hedge funds that is like I wasn't really going to do much here because I like I don't want to set up another infrastructure to trade Bitcoin and open up these accounts if these like shady crypto exchanges and then now they have the asset. Readily available in the existing infrastructure and then as they trade everything else, as they trade gold, real estate, oil, they can just trade Bitcoin and and then so those types of flows and activity is merging into it as well. The reality that like the ETF is like a very kind of neutral vehicle that kind of all sorts of people can, can, can trade in and kind of move in and out from. So we'll see a lot of different behavior that kind of is, is ultimately mixed into the final inflows and outflows that show up. But but as a blend, I would say there's a good chance ultimately the the kind of advisory channel, the financial advisors or even individuals like mostly they're buying and a lot of people are buying them like the retirement accounts etcetera. These are sticky dollars. So I I I do think that that on balance it would be less reflexive and more kind of steady because it's just more of a portfolio allocation than like oh shit like my friend told me about this and like I have this app now and this app sent me an like of alerts that says prices going up let me buy. So more people it. It's kind of a more steady kind of portfolio allocation type of of dollars net than I think the the existing kind of retail crypto exchanges. I mean another aspect that is nice is that it's also yeah not part of that kind of like there is a, there is a way in which retail crypto exchanges are a little bit more casino like like they show you price charts like they they send you notifications like it's it's it's not just Bitcoin like they see all these like coins there and then kind of feel like we need to something else is going up and like you should buy that etcetera and none of that exists in the Bitcoin ETF world or like a brokerage like the you you can decide whether to buy it or not but it's kind of, it's a little bit more kind of like calm world in a way. So I think, I think that is also a plus. That's the thing that, that's the thing that was like kind of naive personally. And I think even just us being native of the industry, it's like we really wanted Bitcoin. So we figured out how to go buy it and it wasn't that hard. You had to sell some assets or move them over to a a Coinbase or whatever the app is and figure out how to buy and then move it to self custody. That progression for something that they may want a little position in. So they just naturally are like ask her, I don't want it. You have to really want it in a similar way. Like I think about it as like a Bovada or like some gambling website. You have to really want to go and find out how to gamble online to make it make sense. And most people just aren't there. They're not going to like go that they're going to D jet into gambling or go and try to find how to buy Bitcoin versus if it's in a brokerage account and you can click a button. It's a natural like first order and you touched on like change of state. It's like when you change states, you change planets, you have to acclimate to the new environment before you kind of go and and start to like size in. So it makes complete sense that we kind of like have this state change. You have a having you see like what's you know currently happening on the like more you know, geopolitical government side of things. So you're going to have this volatility, but over time that state will consistently go up and to the right with larger pools coming in. Another thing I'll. Just add is that ETF is ultimately again like not the thing that is generating value here or or or or like. It is not what makes the asset valuable. So it's flows will come in when more people believe Bitcoin is valuable and flows will go out when when when more people believe that it is not. And there's a natural reflexivity to people's beliefs because like when the price is going up, more people are tended into believing it. But ETS is not the thing that convinces some someone they're like, oh, Bitcoin is now valuable. So I think we will just see kind of inflows and outflows ebb with the whole market and ETS is what makes it easier for people to dabble and kind of move in and out in in some ways. But, but yes, it will just kind of be part of the whole reflectivity that that that already exists. And just one more thing to that that I would say is to kind of just like highlight that a little bit is that I think the the even the state change, I think there's there's a sense that we have kind of like oh, because the state change has been made like everyone that kind of would allocate as a result of that would have already done so or not. But as I said, like the large platforms still very much early due to diligence and like gold ETF I think is a good example. GLG launched as the first gold US ETF in 2004 and had like a blockbuster success in the first week brought in about like a billion or so in inflows in the first three days. And that was like more than any other ETF in the past and it broke all records. And then in the next kind of three months or so, it brought in maybe another 300 million. So like it kind of looked like, OK, we brought in a million at at the beginning and the next three months brought in like another 300 million or so. And then like, OK, now this thing is over. The reality is that for the next 8 years, it had positive inflows that were mostly growing. So the the next year it had like 3 billion inflows and next year it had like 5 billion inflows and then it got to 10 and then it got to like 15 and it just like kept going for another eight years until it had its first outflow year. So I think when when a thing goes through a state change as kind of like accessing public market liquidity, not everyone decides and not everyone makes moves immediately. It just is a trickle to kind of saturate that market. Like oh, the thing becomes from going from not possible to possible then kind of saturating that whole opportunity in the gold case took about a decade and Bitcoin usually things move faster, but it's still going to take years. So I think to see the full extent of like the net new dollars that will flow into this, this asset class as a result of public market liquidity, I think we're very early in the innings and each cohort will like have a different moment in which they they take the big step or they might kind of wait until there's like another mania to to decide to like prioritize this thing. But but it's just going to be a long road ahead and I think that's a good thing. Yeah, Yeah. It's it's it's an encouraging thing that even with kind of a small amount of engagement is already kind of the has brought in a meaningful amount of kind of economic bandwidth to the network and that we still have a large pool of dollars that we haven't touched totally it. It's really it's it's so beautiful how it's playing out. And like if you can really just see how this continues through the combination of the the cumulative effect of the ETFs being out there and Wall Street talking positively about Bitcoin and it becoming part of society. At the same time that the halvings keep occurring, increasing scarcity keeps causing the price to drift upwards post halving in the 1212 to 18 months post halving triggering the bull market and enforcing the next cohort. The next slice of the bull of the the bell cover of technology adopters to pay attention to finally dip a toe. And they probably dip a toe with the ETF. And then maybe they move on to self custody as they get further down the rabbit hole and learn more about this asset. And just those two trends playing out of of increasing access to the global pools of capital that are sitting in analog assets to date. You know, whether that's equities, bonds, real estate or whatever. ETFs are a. Big part of that story. Increasing access to that world of value at the same time that bitcoins in endogenous mechanics will keep driving the price higher through increasing scarcity and forcing the next slice to pay attention and make that switch themselves, yes. Given that we're kind of all saying positive things about ETFs, I I think it's also worth kind of noting the negatives and one of the one of the main product flaws at the moment is, is the fact that you can't withdraw in clients, yeah. And. That's something that I'm really hopeful that we can improve upon soon. Because if not, then the games will lead them to be people to be stuck. They might learn more, they might kind of want to do self custody, but then being stuck in the ETF product, the vehicle because of the vehicle structure would be much worse than exchanges. And so yes, the only aspect that the FCC has made kind of incredibly arbitrary decisions on, they've said in kind creations and redemptions and all these types of things are common and and available in all of the commodity ETFs, like in gold, you can do that. There are gold ETFs where if you say that you want to withdraw in the actual gold coins and they will send those gold coins to your door. So it's not that inclined redemption should not be possible or they're they should be illegal or it's impossible to for the ETF structure to support those things. But just the SEC at the moment has made a kind of an arbitrary line saying that inclined redemptions in in kind of spot Bitcoin form should not be allowed and that it has to go through cash. And that's kind of kind of if you put it into perspective of the whole thing of like this all the actions that are being taken against self custody and kind of kind of the software and peer-to-peer transactions. Then it kind of makes sense that that is position that the government is taking. But it But it is an arbitrary position and we need to fight for it. What what about the other side? We. We were missed you, you were gracious enough to bring out some of the the negatives. So the other one would be custody and and 90% of the ETFs being with a single custodian. How do you guys think about that in like long term? Yeah. That the total aspect is definitely a problem but but but I I think that like I can go at it closer to we we still think that custodial services are have kind of a role to play in the onboarding step Like if somebody's buying like Bitcoin on river and they're buying like $50.00 or $100 like does it really make sense that we force them to like buy a buy a hardware wallet and like go through cold storage all these things like not really. I think there is a step kind of even in in like the the like financial transactional sense. Like I think we we want to get to a world where everyone is running like lightning nodes and such in in a self solving way. But that requires a lot of of upfront investment to open up channels and and and pay the unchanged fees for that. And I think that like the direction that mutiny wallet for example is going makes a lot of sense to me in the sense that in in the beginning you can use E cash through like like vetiments, federations and such. And if you're just like putting in $100 balance to send like some some few dollars to your friends or whatever for payments then that's kind of fine like like that. But when you are you, you are actually saving up and you have more and then like you're you're actually just in a Bitcoin economy and you're paying rent through it etcetera etcetera and you're really the the the volume and your your balance grows then definitely you should you should consider if the kind of custodial convenience and trust assumptions is what you want to live in. But but there there is kind of a reality of that custodial experience at the beginning of the funnel enabling kind of the financial transaction cost to be lower to make it easier for someone to take that first step of $100 or $1000 without without incurring all the costs of being fully custodial, self custodial. And I think I think about ETS in a very similar way. Like, is there a value in being a river or a Coinbase or a kind of that, that type of custodial first step that you can, you can dabble into? Yeah. And I think ETFs are the ultimate, easiest first step that you can make at someone's take. You don't have to open up accounts. You don't have to wire money. It's just already there where all of your rest of your money is. You don't have to worry about any kind of new system that you need to learn besides just building some conviction about Bitcoin. And then you can take the first step and then and then ideally if that balance grows like you you you learn more, you buy more, you learn more, you buy more and the price goes up And at some point you're sitting on an an amount of Bitcoin that you're like why like I I have these new different beliefs and I have so much of my net worth in this thing like and and they can take it off of the of the ETF and kind of inclined to draw away. Then I think it has now just kind of blended into the same kind of on ramp like on ramp and off ramp that we we kind of think of as the existing custodial services and they do have a role in kind of the journey that the people play currently. Unfortunately they can be stopped with capital gains and that is definitely an aspect that I think is, is problematic and we should try to improve upon. But I don't necessarily think that the existence of custodial kind of first steps is bad. Stepping stones, Yeah and and and Hong. So we just. We've seen. The now the Hong Kong ETFs being launched and correct me if I'm wrong, but they are going, they do allow in kind redemption and it seems like that is a differentiator, a competitive edge perhaps that that Hong Kong ETFs would have over AUS based ETFs in in the global capital landscape. Do you think that that will require a a response from the US? How do you see that playing out? Not not, not really. It's. Just the reality is that the financial markets US is king. US is not not self-conscious or insecure about any other market. It's just the order of magnitude larger than anything else. Hong Kong Europe you can play to any market and it just doesn't compare And the SEC and the and the financial regulators in the US don't think that they take cues from anyone else like every other financial regulator does. Like I'm from Korea. The Korean financial regulators are always looking at U.S. financial regulators and looking at oh like what are they doing? Like what are they doing on all these different things. And like I would guess that there's a a Bitcoin ETF in Korea. It's more likely now because we have one in the US but the US financial regulators do not think that they have peers and and rather that that they just make their own minds. And the whole world has had Bitcoin spot ETF for many, many years and that had no, no bearing on whether the ACC thought it that it was justified or not or or or worthy or not. And they ultimately kept rejecting until they were forced to approve fund by the court. So like just the like it's just not comparable and it doesn't really have much of an effect on what the ACC think. Yeah, it's a fight that's going to have to be won. Through different means rather than natural competitive forces, Yeah, I mean the. The, the, the, the reality. Is that we we we think that the US has all these problems and they it does and it's like struggling and and it is but the reality is that it's it's still doing so much better than than anywhere else. Like the US financial markets are stronger than any other market and that trend has actually been in the upward direction than in the downward direction. So with all the problems that it has, it still is so dominant that it's not really feeling any competitive pressure like, oh, we should change our regulatory approach because we're under this competitive pressure must be nice to be king. Yeah, yeah. I guess that's the question is. The way to the monetary and fiscal malfeasance and the overall hubris at some point lead to a collapse. I mean they're they're making it very hard. ET FS had the struggle. Obviously we had the attacks in the last week, but Bitcoin is an idea. As time has come, people will get it. There will be bumps in the road. There will be hurdles to overcome. A bit wise, this that very well working at this for for more than six years and it's exciting time to be live. I'm very happy to be here right now, even though it's chaotic, excited to be here. One thing that I just like highlight about in in in the kind of broader conversation that we're having, I think it's so important to support our open source devs. And I think it in in some ways that it's kind of crazy to me that that is a controversial thing sometimes these days it feels but like we've been working on this thing for six years and like we've been gas lit so many times. So Tim, I didn't really believe it when I when everyone well it was like looking like it was going to get approved and I had a really hard time believing it. But then ultimately when it was like becoming sure that it's happening. I think one of the first things that I gravitated towards trying to make sure that we can built into the product of our ETF was that it would have a profit sharing with the the devs. And I think that's that kind of like tragedy of the Commons where a lot of people hold Bitcoin but then nobody feels that they are kind of they should pick up the bill in in funding the development and maintenance and security of the work that is that's just necessary for the networking asset to exist. Is is, is a thing. And in in some ways it's a thing that an ETF like structure can actually be a bit helpful in because just the way that it exists, it pulls a lot of the Bitcoin together and we take fees, so we already take fees, so, so then sharing those fees to a direction that helps everyone's Bitcoin become more secure and resilient is just good for everyone, including ourselves. And so, yeah, we decided to share 10% of our profits to to devs and put a fair amount of thought into it. I I think I understand all the concerns that people have, but so we decided to do it through organizations, nonprofit organizations that already do that rather than us making arbitrary decisions about who which dev to donate to. We chose three open, Sacks, HRF, and Brink rather than one. Because one, if we the product grows for a lot then that can also kind of create biases and they're all no strings attached to donations. And that was stated from the beginning in the press release and has been consistent in, in, in with with all the orbs. And so that I think was was something that we took very seriously and put a fair amount of time into leading up to the launch in in arranging with all those organizations. And yeah, I I believe very strongly that. It's important and it's a differentiator for our product I think as well. So if if people have been meaning to want to support devs and they just kind of like haven't don't have an easy or didn't didn't act on it, and they have some between ETF and their 401K or something or their or their retirement accounts, then I think our ETF, unlike the other top three by Black and Fidelity and aren't are supporting devs. So I'd love people to consider that feature as well. Yeah, Justin, we're on the. We're on the hook. Matt's been pinging us about. You know we need to support Open Sats, but we'll have to pick one because Stan Druckenmiller isn't backing us. So we we we have to pick one out of three. We can't do we can't do all three hung the to start. But. All jokes aside. Insanely to your point, it's crazy. You have to bring it up simply because if the tools don't exist, this thing doesn't work. Found like full stop and Marty alluded to you when wrapping up is that things are very positive. We have to look at what they're doing, not what they're saying. And So what they're doing here or what's been seen is the ETFs exist, banks are stepping in, central banks are stepping in. And that if you mirror this, I like the analogies to like it's obviously a different order of magnitude, but similar with piracy and Torrentine in like the late 90s and early 2000s and that the infrastructure and the technology is there, You cannot stop it now. You have to develop the tools around it and map it to the world. And now it's here, it's never leaving and it's certain parties that are doing things, whether it's malicious. And we can debate if it's malicious and how you tout it and how you get licensed. Like we still have to exist in the rule of law. But at the end state this isn't going anywhere. These things exist. There's capital markets forming, there's revenue being derived from it. And so now we just have to figure out how to make it to make sure that it's commercial from a large scale. But we've already played this out via open source software and tools, and that's where I think ties into your point about like the developers, the software providers, we have to like Lean In and provide services and value around it because that's how this thing makes it to the other side also just. Lastly, like leveraging the the capabilities that are like core to the the the Bitcoin blocks. Like like things like proof of reserves should be table states like every ETF should be published with addresses and the kind of taking advantage of the inherent properties of Bitcoin that you can privately secure them but also be publicly auditable. What about multi? What about multi Institution that's native? We can get into that. About no Marty, Marty yesterday. I was just just, yeah, yeah, yeah, yeah, yeah. Please help. Convince the SEC that multi institutions to custody is is the thing that is possible. But anyways, yeah, like I, I think we should always be pushing for what's what's what's natively possible and not kind of yeah, that that's also an aspect which I'm I'm, I'm proud and excited about our ETF is that we can be the the kind of champion of those things and push the boundaries and envelope in the conversation about like, oh, you can do it. You can do it for reserves. Like you can't say that you can't when, when, when there's $2 billion product out there that is doing it. And the kicker is you're incentivized to do it because. It's the best product. It's not about ideologic. It's ideological. It's literally you show your reserves now you can prove that you have the asset. Yeah, I think you guys. Definitely have to align with us. I think it's, yeah, it's in our self-interest as well. Yeah, you guys are partying with Hoseki to do that. Correct, Yes. So we. Do just publish the addresses directly on our ETF site as well. But currently Quinn based doesn't have a way of allowing us to sign back signatures to say that attest to the fact that those addresses are owned by us. We're just making a claim. So then Coinbase kind of extends that attestation in a in a private format to Huzeki and then Huzeki is saying that yes these addresses that the wife claims to have or is indeed at least in in their private kind of verification with with Coinbase true. So they're they're kind of bridging the part of the the trust model that's currently cannot be done in a public kind of trustless way. It's it's just a limitation that the Coinbase custody has you should be able to sign and take messages but let's put that at the moment. So it's kind of a a way to bridge that and still give more kind of public audit ability to people that's very. Commendable in both parts. The profit share with open source devs with no string attached contributions and then leveraging bitcoins native properties to trail Blaze improve to the rest of the financial industry. That's getting acclimated with Bitcoin that there's a new way to do things. This is a new asset, new Ledger and new accounting system that gives you more powers that were not possible in the previous financial system, the incumbent financial system like we are building a whole new it's not, it's not gold. Like it's it's a different thing and we should like leverage the the, the ways and that it's different and treat it differently. Not just yeah, it's if it's just the same number on a chart it's like everything else. Yeah, well hung. Really appreciate you joining us today. This was a fascinating conversation. I think you're an example of somebody who's doing things the right way and is approaching Bitcoin with what I would argue is the earnest philosophy and really understands why this asset exists in the 1st place and the power that it has to give not only institutions but individuals as well. And it's good to know that at the layer of the world where the ETFs are being created and distributed, there's individuals like you that really grok this stuff because we need people like you in positions of power within the world of traditional finance. We're trying. We have about 5%. Market share, I mean we have 2 billion in assets when Black Rock has 15 and and Fidelity has 8. And so you know we're we're we're trying to survive and and continue to be relevant and so that we can champion these these values and still build a profitable business of ourselves that we can continue to do that sustainably for for a long time. And so yeah it's it's it's ruthless like public markets are ruthless and that kind of the incumbents competing with them is also not an easy task but that's what we're here to do. So I'm excited that we have kind of a foothold and are at the table in the major leagues and that we can try to compete and to demonstrate that people do care about these features and that people do care about the ethos and that that you can build a better Bitcoin business doing so. Hell yeah, Hell yeah, brother. Appreciate you joining, Han. Thank you of course. Enjoy the rest. Of your day. Jesse, you want to end with? Anything. No, no. That was great. I'm we're all on the same team doing you know trying to trying to get the right values of Bitcoin to to be celebrated, embraced, adopted, and for those values to win. Next week.
Transcript source: fountain