Bankless - What's Next for Crypto ETFs, ETFs vs DATs, Crypto ETF Explosion & Institutional Inflows | James Seyffart

Episode Date: September 25, 2025

James Seyffart from Bloomberg Intelligence joins to break down the state of crypto ETFs and their explosive growth.  We cover the rise of Bitcoin and Ethereum ETFs, the debate between ETFs and DATs, and the institutional inflows reshaping the market. James explains how advisors, hedge funds, and sovereign wealth funds are participating, the regulatory hurdles around staking ETFs, and why basket products may be the next big wave.  We also explore the implications of tokenized ETFs, the S&P 500’s gatekeeping of crypto companies, and what to watch for in the coming months as approvals and new products hit the market. ------ TIMESTAMPS 0:00 Intro 1:18 DATs vs ETFs 6:18 DATs Final Equilibrium  9:21 ETFs 1-Year Check-in 23:42 Crypto Indexes 30:41 ETF Approval Process 41:03 Solana ETF 44:17 BTC & ETH ETFs 56:11 What’s Driving the Price? 59:39 Crypto Companies in the S&P 1:07:17 Blackrock Tokenized ETFs? 1:13:59 Key Outcomes 1:19:14 Closing & Disclaimers ------ RESOURCES James Seyffart https://x.com/JSeyff  https://www.linkedin.com/in/jamesseyffart  Bloomberg Intelligence https://www.bloomberg.com/professional/products/bloomberg-terminal/research/bloomberg-intelligence/  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

We're looking at literally over 100 ETFs in the crypto world coming to market in the next 6 to 12 to 18 months. Wow. A quick note before we get into the episode with James. Sometimes on bankless, we record episodes and then we release them at a later time. And in that window of time between recording and release, things can happen in the world that are relevant to the episode in question. That happened on this episode. The SEC approved the generic listing standards for ETFs. And what that does is it kind of changes the game.

for how crypto ETFs can come to be. It streamlines the process. It makes it just much more open to the free market rather than having to go through a rigorous step-by-step approval process with significant oversight from the SEC. So we now have more free listing standards for crypto ETFs. It's a good thing. James talks about this on the podcast,

but none of us in the podcast actually know that that actually ended up getting approved. And so we are missing that context that you, the listener, has. So this will make listening to the episode just a little bit more clear. so let's go ahead and get right into the episode with James right now. We got James safer back on the program. James is probably our favorite ETF commentator. No shade to his partner.

Oh, wow. Belchunis is going to be upset. James just comes on more podcast. James, how you doing? I'm good. How are you guys doing? Good, good, good, good, good, good, good, good, good. Okay, so roughly, give or take, we're about like a year and a half into the ETFs. A bunch of conversations are still to be had, especially with the emergence of Dats.

I'm kind of wondering if, like, Dats and ETFs are in conflict with each other. Maybe that's the first question to start with. Are these things fighting? Is it Dats versus ETFs? You know, I don't think so. It's like saying are gold ETFs competing with gold miner ETFs? I mean, I know they're not exactly the same thing. I mean, maybe more app comparison with Bitcoin miners,

but I just view it as another way to access it. It's almost like, do not know and quote me on this directly, but like I think of these things as potentially banks. I do think some of the MNAVs on the Dats like have gotten out of control. But like should they be worth more than book value if they're actually actually able to generate yield, particularly in tokens like Ethan Salana, that makes sense.

Particularly if you're salarer, you're actually able to tap into these other markets and generate more underlying Bitcoin into your share price. Like, you should probably trade, I can make the argument pretty staunchly that you should trade at a premium. I know some people say, like,

these are closed-in funds, and they're like, most closed-in funds do trade at a discount. I think it's more like banks. They usually trade it some little multiple to book value because they're able to use leverage, financial system, what have you, to generate yield and profit.

and what have you. So that's the way I think about it. I'm obviously not a data analyst. I don't think they're competitors. And honestly, I think like if you look at what Tom Lee, you guys have talked about it a bunch on this podcast, what he's done for the Heath narrative has, it's definitely been positive for Ethereum ETFs. Like it's been there's been a symbiotic relationship, if you will, when you look at what's gone on with the flows and the eth ETFs over the last few months. Okay, James, that's nice of you to say that about DATs. I think that companies appreciate that for sure. But can you be an ETF purist for just a minute and talk some shit

about DATs? Right? Because isn't the whole thing with ETFs? Like it is the most capital efficient purest way to get access to the underlying assets. And something like a DAT just adds additional costs, additional strategic advice. Some of these... The technical word

is encumbrance. Well, yeah. I guess. And it's like, you know, some of these Dats are former life sciences companies. Some are gaming companies and you're kind of resurrecting them out of the corpse of these entities. So talk some shit. Like, what are the bad side of a dad? Yeah, if you want me to talk, I can talk shit. Like, one of the things that you kind of think at there that you didn't say is like some of these companies are like just taking over

old like corporate entities and like what if there's lawsuits and other things that happened that are completely unrelated to everything that happened because it's a corporate entity that existed prior to it becoming a dad, right? So that's one issue. Two, like you're dependent on the, you know, the executive committee, what have you to like actually execute the plan that they've set forward and do things properly and take care of things properly, that's also obviously a potential hindrance. There's no guarantee there. There's also some pros to it, but like from my point of view, like if you just want exposure to the asset, like the ETF is going to give you beta to the asset. Now, if we're talking Ethereum for now, we can get into this later, like,

also in the US, there's no staking. So like that's actually not that great if you're looking at an Ethereum. Like you're giving up, you know, the three plus percent yield, whatever it may be right now for staking Ethereum. So that's plus one for the dash, but that's going to change in the next possibly month or two, right? So then that goes away. So, I mean, yes, you're paying a small fee, 20 bips to get exposure to this, get beta exposure, but it's way simpler. Advisors are probably way more likely to lean on the ETF side of things. Like my view is these DACOs have kind of taken over a little bit of the, you know, the all-coin narrative. Like, this is where people have gone. This is where the leverage is gone. This is where like the over bubble feeling I get when I look

at what's gone on in the last couple of bubbles in crypto, I feel like it's gone to DATs right now, whereas NFTs, ICO things in the past. That's not to say that, like, I think all of these dats are going to be problems. But if we come five years from now, I will be actually shocked if we don't have a few of these things that end up coughing up whatever coins or tokens they were holding because of something that happened, whether they get into a spiral of, like, you know, trading at discounts. There's going to be a lot of M&A, I think, potentially in the next downturn, who knows how quickly that's going to happen.

But, yeah, at ETS, like, they're simple. And one thing you need to realize is, like, they're backed, by like, they're so regulated, like so obscenely regular. Everyone likes to talk about these concerns and they point the prospectus like, look, they're planning to like change the token. They're trying to fork it. And like, it's like, no, those are just like 37 pages of risks that they went through back and forth line by line with the SEC to make sure that they're disclosing.

So if something happens to this product that wasn't disclosing those risks, if you're an investor in that ETF, you can sue. And you be like, you never disclose this as a risk that I could potentially run into. So like that's basically what ETFs are set out to do. They're supposed to the safest way to get exposed. to an asset. They're an efficient way to get exposure to an asset. So if you just want exposure to the asset,

you don't want to gamble or, well, I guess technically you are gambling a little bit if you're buying some of these longer tail assets. But like it's just the pure beta exposure that you're going to get. So yeah, I'll stop there, but that's the way I look at it. Even as this debt meta does continue,

I think it's going to be a while until we, the industry, find what is the equilibrium, the final equilibrium of Dats. I think people, like understanding that Michael Saylor and strategy has been around for four plus years buying Bitcoin. So the Bitcoin dat of strategy has been around for a while.

So that has some lendy. All the other ones, not so much. There's like a couple Bitcoin dats that are older than two years. But like the debt phenomenon is like a six month old phenomenon to be gracious. And so we really haven't seen what a final equilibrium is like, do you have any opinions on like, is there really a there there with dats? Like are these a true novel financial? primitive that we are locked.

Like it was a technological discovery or a financial discovery that we humanity made or is it just animal spirits coming up with ways to like create financial instruments that don't necessarily need to be created. I don't know if you have an opinion on that. I'm going to be a boring podcast guest on this one because I think it's a little bit of both.

I mean, if you're saying, going to sit here and say what Sailor has done hasn't been ingenious and amazing and like fascinating to watch and it's been a feat of financial engineering what he's done with his converts and the preferred stock, you're lying to yourself. It's been truly impressive. Isn't it like the next coming

of how everything is going to work? I wouldn't go that far. I mean, I think of these as banks without FDIC insurance and things along those lines in the crypto world. Potentially these things could become, you know,

I don't know, treasury companies that like actually do things with the underlying assets. I mean, that's what a lot of these eth dats are supposed to be doing. This is what the sole dats are going to be doing.

They're actually going to be putting assets to work on chain, potentially earning returns and yields in the same way that I think of a bank would be putting their assets to work by lending and different things like that. So I think like, again, I don't think this is the next coming of anything else. I think there is a there.

Is it overhyped right now and things getting a little bit too crazy and frothy from like what I hear and what I'm seeing and the way people are talking with these things as though like this is the new paradigm of the way that finance is going to work? Yeah, that's a little too far. So like I'm like in the middle ground here where like I'm not also saying there's a complete garbage and trash. Like I really don't think that's the case. if you're buying these things at like 4XMNAV,

okay, maybe that's a problem. Like, I don't know. I'm not sure I would be doing that. You better have some good inside information for why you're doing that. But if you're buying at a multiple that's like not insane, you know, less than two or I don't know what number it would actually sit at, I haven't done enough research.

But like I said, I think there's a good argument to me made that these things could trade at a slight premium to the underlying MNAV if they can, you know, like sailors tapping into all these other markets and buying exposure to Bitcoin and giving people like toned up or toned down exposure to Bitcoin. You're going to have all these eth companies theoretically doing some of the same stuff,

putting that eth capital to work and the underlying and earning a yield, even if it's just the staking yield or something more, like there could be value there. Does it worth four times, is it worth four times the underlying value of the assets they hold? I don't think so. So, yeah, I mean, I'm sorry for giving like a non-fund,

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We'll get some spice on some other topics. How about that, James? Actually, let's do this. Since it's been at least 12 months since we've had you on, let's do a one-year check-in on the ETFs. And we'll start with maybe Bitcoin and then we'll go to Eith and the others. So it was January 11th, 2024, when the Bitcoin ETF first launched. So we are more than a year later, 18 months plus.

How's it going? I mean, about as good as you could possibly hope. I mean, recently it hasn't been perfectly hot the last couple months in this way that it has been. But I mean, you look at the Bitcoin ETS, they are the biggest launch of all times, specifically I shares I bit. But like you have gray scale, fidelity, bitwise, all these other guys that have had tremendous, tremendous success on both Bitcoin I need. But if we're just talking about Bitcoin here, I mean, these things have taken in over 55 billion in assets since launch. I mean, it's relatively

unheard of. And that includes like tens of billions of outflows from GBTC. So like if you take out GBTC, which was like kind of moving things around, I mean, the amount of money has come in here is unlike anything we've ever seen. And then like, I know we're just talking about Bitcoin here, but if you look at the Ethereum ETF launch, it hadn't been great for a while. We're just over a year from that. but like if you look at the assets, particularly what's happened over the last three months, that's like pretty much the second biggest launch of all time. So granted,

it doesn't really touch what's happened with Bitcoin or what happened with Bitcoin in the first year. But like these are tremendous successes. They are extremely wicked, liquid. Institutions are coming online. You can see that via 13F holdings. It's largely still retail and advisor driven, but I mean, institutions are coming online.

The volume is strong. The options trading is extremely strong. They're extremely liquid derivatives options. which is very good for getting institutions in. Like one of the things that you guys have talked about with other people, like having derivatives on there to like hedge your exposure upside or downside and going to something super volatile is something institutions are very much looking forward to, right? They want to know and set some limits and guardrails of like how bad things can get

and having liquid derivatives options is there. So, I mean, no matter how you slice it, whatever metric you look at, the amount of coins, accumulated, the amount of assets, the flows, the performance of the tokens since launch, it's all been tremendously successful and anyone trying to downplay it and is like out of their mind essentially. So there's people in TradFi.

They're like, oh, it's still, yeah, it's nothing. They still, it's, I feel like I'm in 2018 people talking about this space when I talk to certain people in Tratify. Wait, wait, wait, so what are they saying? Like, the haters still. Eating babies, no value. No value?

No value? There's no reason to hold these things. And I'm like, you don't need value. It's just vibes. This is, you know. Okay, can ask you about the compilation of the holders? So you said the word institutions. You also said at first it's been kind of independent managers, maybe RIAs.

So what is the compilation of the holders of these Bitcoin and Ethereum ETFs now? And when you say institutions, like institutions can mean a lot of different things. What do you mean by the word institutions? What institutions are holding these things? and what percent are they allocated to them? Yeah, so I can share my screen, actually, if we want to do this. Oh, yeah. You got some Bloomberg Terminal, right?

Yeah, yeah, yeah, yeah. It's a $30,000 podcast right now. Yeah, they're just going to be tables that I've created in Excel, so they're not that spicy. $30,000 tables, you know? Even more. So this is what we know from the end of June. Like, I know everyone here is like, I like to see what's going on chain this minute.

unfortunately 13Fs are reported quarterly and then a 45-day delay. So this date is as of the middle of August. That is so slow. It's so slow. It's painful to look at. What is by design? If you're a hedge fund, like there are reasons, one of the reasons that people love ETFs, like not just for like, you know, the simplicity, the cheapness, the liquidity,

there's anonymity. If you're an institution and you're buying like a huge name, like you part of what you want to be able to do is get in and out and not have to worry about people knowing what you're doing. So that's another reason why, like, there's, there's pros and cons to any sort of anonymity and opakness, right? Yeah. There's, there's some problems with knowing exactly what wallet is doing, what on chain. You can track exactly what certain people are doing.

And hedge funds don't want people knowing that, right? So this is the Bitcoin. Yeah, we still need pre-op privacy at the layer one. Yeah, yeah, yeah. Yeah, exactly. Yeah, yeah, yeah. So this is what it looks like. This is the known, known AUM.

This is like 34 billion that we know in the Bitcoin ETFs. as of the end of June that this number is almost certainly higher. It only accounts for like, I think the number is like 26 or 27% of the assets in the Bitcoin ETFs. So the rest is going to be either people who don't have to file a 13F,

which is like could be international filers or mostly retail is what I think. I think it's a lot of retail people just holding in their own IRA, things like that. But it's the biggest holder aside from investment advisors, which actually some hedge funds

technically get qualified as investment advisors don't ask me why. What is that category? So this is the top category. category is investment advisor at 17 billion of the 33 billion that's tracked through these filings. So that's the top. An investment advisor, what is that? Yeah, I mean, most of it is going to be your registered investment advisors.

So anybody who's offering advice to the end retail, some of it, so there are some hedge funds and some other institutions that are technically registered advisors. Like if you look at like state sheet global advisors, I don't know exactly what they're registered on the 13F filings, but like they might fall under there. So there's some catch-all in the investment advisor, but most of those assets are going to be people that are actually allocating money on behalf of their end clients. So if you have like a wealth manager, a wealth planner,

and he's allocating money for you, and they're using a platform like a wirehouse or a wealth platform, Raymond James, anything along those lines, you're probably going to fall under the Investive Advisor framework, Stiefel Nicholas, stuff like that, right? So that is... They hold a lot of funds, right? I think we have Matt Hogan on the podcast,

from Bitwise talked about this in the past. And I don't know how many trillions. I can't recall it off the top of my head, but it's many trillions in investment advisors that just manage capital. In the U.S. alone, it's tens of trillions. I think probably near 30 trillion, something like that.

But again, that's across stocks, bonds, cash, you know, other trusts, private assets, things along those lines. But the number, like, BitWise has been pushing this pretty hard. It's something that we talk, I've talked about on your guys podcast. I mean, it's been a while. But one of the biggest growth areas I saw for these assets

as advisors, right? Like they are the number one users of ETS. They are by far the largest users of any type of ETFs. And as we predicted, they are the largest known holders, aside from retail, in the Bitcoin and Ethereum ETS. So, yeah, I mean, this is basically most likely long-term buying a hold in that top line. Now, part of that is going to be, you know, they have set allocations, whether it's like they're

looking for a 5% allocation or 3% or what have you, whatever that number is. So one of the things that I've said, I've been saying for a long time, these institutions, these advisors, they're going to dampen the vol of these assets, I think, which has happened to an extent with Bitcoin, maybe not with Ethereum just yet. But basically what happens, if they put a 5% allocation and then it goes to 15% because it goes up, they're going to sell as it goes up. But the same thing's going to happen as it goes down. If they have a 5% allocation, you know, when eth is at 4,500, it drops down to 2000 or whatever, they're going to buy up again to get back to that allocation unless they change their allocation goals. So they're not being traders. They're not trading. They're just holding their allocation steady. And the byproduct of that is their... They're much more disciplined, right? Yeah.

And a byproduct of holding the allocation steady at the same number is the volatility dampens. Is that right? Theoretically. And also, like, you get to smooth the return over time because you're buying the dips and you're selling the highs. But also, you've got to realize, like, you could be selling into massive rallies, which is bound to happen as well in a strategy like this, particularly with assets like Bitcoin and ETH that have.

that have extremely volatile upsides, right tails, which is rather unique to those asset classes. But the second biggest holder here that I do want to do with is hedge funds. I mean, there's some people, there's some assets in there that are probably more longer term allocated to, you know, they're betting on Bitcoin. But for the most part, those are short term, like momentum driven or mostly basis trades, I believe.

Basis trade is huge. In Bitcoin, it's gone down a little bit, but in theory, I think it's still pretty big because it's pretty juicy yield right now. And that's basically where you sell, the futures contract, whether it's the current month or the next month, and then you go along the spot ETF. So it's a lot easier to do it on Tradfai Rails with the ETFs now because you don't have to worry about going into Defy Rails or a different exchange or a crypto exchange specifically to get

that sort of exposure. And it's a Delta neutral position. Whether or not those flows are actually driving prices, it's a huge debate I've had and seen along crypto Twitter and in telegram chats and things like that. But yeah, those are the next biggest users. They were the biggest whole. until recently, actually. For people who can't see this, that is the next in line. So the first in line is investment advisors with 17 billion of the 33. Hedge fund managers are number two with $9 billion. And then after that is brokerages.

Yeah. And then it's a long tail kind of after that, you know, banks and such. But brokerages after that, is that just retail? Yeah, for the most part, it's probably just retail. All this stuff kind of gets wonky. I would say more some of the big, I can actually pull up so we can scroll down. So this is the actual whole. holder names. So if you want to look at them, the top holders as of the end of June are Millennium, Jane

Street, Brevin Howard, Goldman Sachs, Horizon Kinetics. Horizon Kinetics is actually like a fund manager. They have some private funds and ETFs as well. But Millennium, Jane Street, they are probably almost certainly like using this as market making or some sort of basis trade. There's no way to know exactly what these guys are doing it. Again, things aren't as transparent in the Tradfai world as they are in the defy world. I see one name on this. James, Emirate of Abu Dhabi, United Arab Emirates. Is this where you start to get? Because I was asking the question of where are the institutions in this?

But it's somebody like Emirate of Abu Dhabi, United Arab Emirates. Is this like a sovereign wealth fund stepping in? Is that end of an institution? Yeah, that's that sovereign wealth fund that came in, I think. It was announced. I don't remember exactly when it was announced. But earlier this year it came out, it was a big news story that, you know, UAE is one of their sovereign wealth funds was buying big into the Bitcoin ETS.

And they put a bunch of money into Ibit. So we're starting, but like you go down, you go LPL financial, you can see ARC investment on there. So like, these are all the biggest holders. It's kind of a who's who of Wall Street, but there aren't a ton of, you know, pensions or endowments that are investing here, but there are some. So we'll see. And that's what you mean by institutions, like sovereign wealth funds, pensions, endowments. Is that more the institutional side to you? So technically, if you're on Bloomberg, the institutional side would include those advisors too.

So like the things are broken down to institutions versus retail, really. for the most part in the way that we look at things. And it's not just me, it's like Bloomberg as a whole. But I would also make the argument that like investment advisors are like kind of in the middle. Like in my head, I don't think of them as institutions like a big bank or a private equity fund or a hedge fund or something along those lines. But they kind of are an institution in the sense they're professional investors.

They're not just like you or I sitting at home trading on our, you know, Schwab or Fidelity accounts. I guess the question is we've had people like Eric Peters on the podcast recently, who's the CIO of Coinbase asset management. And he said things like, look, guys, the big institutional money. When I say institutions, what I mean is sovereign wealth funds, super large pensions, that type of capital hasn't even entered yet. It's barely entered. I think like if anyone is bigger than you, they're an institution. And if anyone's smaller than you, their retail. And look, Eric Peters is very high up the list. Yeah, I mean, right? Your size is not size.

Yeah. I guess the question of when we see this list, who are the buyers that haven't entered yet that you think are going to enter? Is it more Abu Dhabis of the world, sovereign wealth funds and pensions? Is that the group that has yet to be reached? So I would say two things. One, I think advisors are still very early. Most advisors don't have exposure to this thing for their clients to these assets, whether it's Bitcoin or ETH, or any of these other long tail of assets.

I think we're going to get basket ETFs, which I think advisors will be big buyers of, which won't be buying these things directly, but they're going to be buying a basket of the underlying assets, and they'll be getting exposure that way as well. So I think, like, I still think advisors are early. Like, there's still plenty of wire houses. You had Matt Hogan on here that haven't turned these things on yet.

There's, like, three levels, right? Like, you either are allowed to do it and recommend it to your clients, or you're allowed to buy it solely if your clients meet all these bunch of criteria or your clients specifically requests to get exposure. And then there's still platforms that, like, no matter what you do, you can't buy any sort of crypto-related exposure or ETF. So I think most of the buying for the ETF specifically is probably still going to come from the wirehouse brokerage advisor types of network. The institution stuff is interesting because ETFs over the years have become more used by those

institutions. But what institutions, those pensions, endowments, they don't like to play in the public pool that is ETFs. They tend to like to have like their own specialized relationships. a separately managed account, things along those lines. So honestly, I wouldn't be surprised if we do get those endowments and pensions, the sovereign wealth funds down the line that come in, they might not necessarily be buying through these ETFs. They might be doing it directly with a Coinbase institutional custody relationship or Gemini or, you name BitGo, crypto, you name it, anything else.

They might not show up in these holders, so we wouldn't be able to see it as publicly. Because, again, sometimes they don't want people to know what they're doing. And if you buy it through an ETF, if you're big enough, you're going to have to file a report to the SEC. Can you comment for a minute on the, you said baskets of assets haven't even entered yet. And so like right now we have ETFs like the Bitcoin ETF

or the Ethereum ETF or Solani ETFs on down and these are all like single asset ETFs. The idea of buying an indecis, like S&P 500 or something, is you get the top 500 companies in the S&P. And so it's kind of an index in your, weighted across these things over time. There's nothing really like that for crypto. I don't know if that's what you're implying when you see baskets because whenever I've seen basket type proposals,

that always seem like just like arbitrary and kind of stupid. Like I feel like as a, if I was an investment advisor, I'd want to just like assemble my own basket, right? Maybe I want X percent Bitcoin, X percent ETH. And why would I buy someone who's just doing an 80, 20 for me? That feels a little silly. The last thing I want is a basket of crypto assets to be picked. for me because crypto does not have enough good assets. Right. Exactly. Or like,

okay, here's something I actually would probably buy is if somebody could give me all of the top 50 crypto assets inside of a basket. I'd probably buy that. 50 different crypto assets? Yeah, I'd probably do that because then you get things like hype

when they're kind of entering and that like, but there's no product that allows you to basically do that in Tradfide because what are these security? Who knows what they are? Anyway, basket of crypto assets, you think that's going to be a big deal? What am I missing? I think it's going to be massive. So exactly what you described. So BitW from BitW, GLC from Grays, GLC from Grayscale, which granted GDLC only holds the top five. Bitwise only holds the top 10. But there's filings for top 20. There will be a whole bunch out there. There's filings for like top 10x Bitcoin, things like that, which I think might make sense. So one thing I would say is you're right. There are going to be people out there that are like, I want to choose what I have exposure to in this space. But you also, you too need to realize you are so far in the weeds. Like the average advisor like, here's crypto and it's just like, oh, that's Bitcoin. Or like, oh, I've heard of this Ethereum thing.

They have no idea what the rest of this is. And they're like, I just want some sort of beta exposure to this space. So maybe they're going to buy a Bitcoin ETF and then a basket product or maybe Bitcoin and ETH and then a basket product of something else. But if you're an advisor, like you want your exposure and you're going to look at this and you know, you're going to try to get beta exposure to this asset class. Are we at the point, James, where we can actually do a basket of the top? Like even the top 10, right, from a regulatory perspective, of course, you got Bitcoin,

you've got Eith, you've got XRP, then you have BNB, then you have Solana, then you have Dogecoin, then you have Tron, then you have Cardano. Like, is that okay with the SEC to put all of that? Most of those already have ETFs. I guess. I guess now it's okay. Four of them. We're no longer in a Gensler world.

Yeah. So in Europe, there's some of these basket products. Here in the U.S., they're closed end trusts, gray scales product and Bitwise's product. You also have hashtags that have filed to, like, add these other coins to their product. So basically it will be the hashtag NASDAQ as well. I think it tickers NCIQ. So like that'll come online too as soon as it's allowed.

I mean, technically speaking, the SEC approved GDLC to convert into an ETF. And then there was a stay order that stopped it from becoming an ETF. Now there's like- GDLC again is what? The gray scale digital large cap fund. And then BitW is the top 10. And that had the same thing. It was approved in August and then was given a state order.

I mean, I don't know if we want to go down this rabbit hole, but like it's not very clear exactly what happened there because like you went through this long process. The SEC wrote it this long approval document for why they were approving it. And basically what it leaned on was we don't yet have rules for these things other than Bitcoin and Ethereum. But as long as the allocation to these other crypto assets. assets is below 15%, you can launch them. And both of those products have, it's 80 plus 80, 90% Bitcoin and Ethereum, right? And they approved it. But still, somebody at the SEC, either the

commission decided as a group, we're not ready to launch these until we come up with some generic listing standards or crypto framework from the SEC, or someone was like, I'm just, I just don't want these to go live and stopped it. And there's a big debate about it. And that's with our new SEC, right, our new super crypto-friendly SEC, because that just happened this summer. And they were, they were even slowing it down. Yeah. So there's, I'll lay other two theories. One theory is right now, one of the things the SEC is working very closely on is they're

working with the exchanges and the issuers to come up what's called with generic listing standards that basically says if the asset meets like these three or four or five bullet points, you can just launch it as an ETF. Like we don't need to go through this 19B4 process with 240, 260 days of like back and forth deciding on individual assets. Like they don't have the time to do that for, you know, 200 crypto assets. over the next seven years. So they're coming up with rules,

which is how most of the ETF world works today, we're like, if you meet these criteria and everything and we don't stop you, you can just launch the ETF in 75 days or what have you. So they're working on that, right? So the SEC is working closely on those generic listing standards. We should hear, we would probably see a delay on that next this week or it could actually go live somehow.

They could be ready to go on those generic listing standards. Otherwise, they need to go through this process that Bitcoin went through, that Ethereum went through and get approved. GDLC, Gray Scales, Digital Large Cap, BitW, BitW, BitWis, 10. They went through that process. They got approval orders, and still, the SEC plucked it. Now, what happened with those approval orders, I don't know if you remember this, like they were approved by, shoot, I forget the word, but basically they delegated

authority, which is like the SEC staff can just do things. They don't need to get the commission approval to do 100% of their actions, because if they had to get like a SEC vote, commission vote to do everything, nothing would get done. So basically the staff can just do things for the most part. That's what they did with these. They obviously worked with the commission in some regard to write these these approval notices. And then still, but when you do things by delegated authority, it just takes one commissioner to say, no. Stop that.

I want to vote on this. I want to look at it. We're not ready to approve these yet. And then you have to go through this whole process to actually vote and approve them. And that same yanking out of line and not letting them go live happen for both Grayscale and Bitwise. Now, the theory is either A, the SEC was like, we're not ready with these genetic listing standards, we're working on it. We don't want to let these things go live yet until like they're ready to go. That doesn't make much sense to me because, like I said, there was all this language about why they were letting them go as long as they meet the specific criteria, as long as they have, you know, only up to 15% in assets other than Bitcoin and Eath.

Like, I don't know why you go through that process if you're just going to yank it. Maybe you do. The other theory is that Crenshaw, who's on her way out at the SEC, for some reason yanked these out and just briefed it. She grieved it. Yeah. A last little middle finger, I guess, to the industry, because she disagrees with what's happening right now at the SEC. I'm going to go with that out.

Never know, probably. Wow, wow. James, I want to back up a little bit. You talked about how some advisors have different tiers of, like, acceptability for presenting crypto to their customers. There's like, you can totally sell this thing. That's probably the Bitcoin and E3.TFs. Other products are hidden by request.

I'll call this kind of like the thawing of crypto in Tradfyes, like there's this thawing period that, okay, first the products exist, then the products are presented to some people, then later on it's more palatable. How far through that thawing process are we? Are we still in the early stages of crypto product palatibility for investment advisors selling to their clients? And when can we just expect these crypto advisors to be selling our bags more aggressively to the rest of the world.

I mean, we're still really early. I mean, I'm talking to some of these gate. We call them gatekeepers at these platforms. And some of the biggest platforms are still just not okay with allowing these just yet. Wow. Like Van Eck is one of them, right? Van Eck doesn't allow these?

No, Van Eck. Vanguard. Vanguard, excuse me. Vanguard is a whole different animal. Sorry to my friends at Vanek. Yes, Vanguard is what I meant. Van Eck's PFP on Twitter is a pudgy penguin. Yeah, never mind.

It's far down about supporting. Vanguard. And Vanguard really, I mean, they're still popularized. They don't have this, yeah. Yeah, they popularize some ETS, but would they be one of the platforms that you're referring to? So, Vanguard's a little different than what I'm talking about specifically, but they are exactly one of them, right? So they don't allow any sort of buying or trading exposure to crypto ETS on their platform.

The difference with Vanguard is that, like, they do have some advisors there, but for the most part, I'm talking about the big banks, like the Bank of America, Merrill, the Bank of America, Merrill Lynch's of the world that have trillions of dollars of assets and things along those lines, the different wirehouses, they still, for the most part, are on the know or in that yellow range. But they're coming online, but we're still early. Like maybe second or third inning, if we're going to use a baseball analogy of getting all of these tens of trillions of dollars of platforms from wealth management platforms to say yes. But they're still not there yet.

They're still waiting for more. There's still people that don't believe in this space at all or at least thinks it's highly overvalued and so they don't want to expose their clients to it. So I think we, in the next couple years, we could get where most of these are at least in that middle ground where like the client asked for it, you can buy it or if the client has like a certain ability and willingness to take risk and they have a certain level of assets on their platform, then you can buy some level of it. But we're not, for the most part, these huge platforms, they're still the wirehouses. They're not allowing their brokers or their advisors to just put or recommend clients get exposure. So that's

why there's been this huge move into for RAA's independent advisors where they can kind of like they have a little bit more free say to what they to what they do and those were the advisors that bought these things super early. But most a lot of the assets are in these big institutions. So there's still there's still big process here and there there's nothing we can really do as an industry. It's just we have to slowly wait for this industry to just get more culturally mainstream, culturally accepted. There's we just have to wait. Yeah, kind of. I mean, let me tell you, this, like the, all these issues of the world, the ones we, like, Bitwise, Vanek, Fidelity, gray scale, like, they are pounding on the doors. Like, I've been in meetings with some of

these firms, like talking to these gatekeepers, like presenting to them why these, so I'm, like, I've kind of pseudo helped, like, pitch, like, not pitch these assets, but just talk about the asset class and why it, like, might matter in a portfolio. So, like, look, they're, they're doing the best they can. The other thing I would say is, like, these are story financial institutions that have been through a lot of like problems, right? And they, a lot of them have like three year minimums. So like some of them have skipped ahead of like what they require and you need an asset. You need a certain level of assets. You need a certain level of trading volume. You need a certain level of history. And like some of them are skipping the history because like it's just an

asset and we have the spot asset history going back, you know, 10 plus years. But for the most part, if you're like an active manager, like you could be shooting the lights out and these platforms won't allow you to list their ETF on their platform for three plus years. I mean, talk, Jim Bianco is running a bond fund at ETF and it's done exceptionally well in the bond fund category. And you can talk to him about this trying to get these wirehouses and these wealth platforms to allow people to just buy his ETF on those platforms. It's a process that's deliberately long and opaque and things like that. So they're working on it. If I was a customer of these platforms, I would be just so pissed. You're telling me on Vanguard, I just can't have these products. That would be enough for me to

move platforms. But of course, you know, I'm kind of into crypto. So I can tell you, like, I think I've said this publicly. Like I had to move my Vanguard IRA because I had GBT exposure from eight years ago. And like there was no way for me to, you know, move to their BTC product or another product. Right. Because if I sold by GVTC, there was no way to buy it. So like I literally had to liquidate my Vanguard account and move it to a different institution. Well, there you go, Vanguard.

Take note, Vanguard. Yeah. James left because of your decisions. He's not the only one. But also, I will say this, Vanguard's not struggling. Like, Vanguard is doing just fine, guys. They're taking a billion, a few billion a day right now. Are they like that meme or they're like, I don't even think about you guys.

Yeah, yeah, in the Madman elevator, he's like, I don't think about you. I don't think about you guys. Well, they will. They will in the future. Let's turn to the ETH-T-F. ETH staking has been a topic. It's been a focus. I think BlackRock filed an S-1 or something.

about their proposed ETH staking model. Do we have any indication or anything on the horizon about the conversion or addition of staking to the Ethereum ETFs? Yeah, we do. Let me look this up right now. So we've actually BlackRock was kind of late to file for staking, if I'm being fully honest.

So CBOE and Knight C had filed like a long time ago. So we actually have staking that was filed that is due for final decision on October 23rd. So that BlackRock filing, you're talk about, it's 240 days, that 19B4 process I was mentioning. That's not due until April. But we have other filings from CBOE and NICE and others at NASDAQ that, like, are going to come due long before. So, like, we'll have an answer from the SEC in October at the very latest is what I would say. So October.

And if they answer on those other ones, James, they're answering on BlackRock as well, basically at the same time. Yeah, there's staking is one where I don't think they're going to do like, we're going to make you sit in order. So basically one of the things that happen with the Bitcoin and ETTs, as most of your listeners know, is like they let everyone launch at the same time, no matter where they're there's a lot of debate in the community around whether or not they should be doing that. Because like you're, in one regard, you're picking winners if you let somebody go first. But if you let everyone go at the same time, you're kind of picking winners in the sense that you're just like allowing the biggest players to get on the same starting line as the more upstart faster moving companies. And they can't compete with the distribution network of somebody like an I share is black rock. You know, like there's the idea that maybe you handicap for the smaller guys. Or if you were first to, the way it had been done until Bitcoin ETFs and until Ethereum ETFs is like you were first to file,

you were first to launch. You got the launch earlier if you filed earlier. We saw that with the Bitcoin futures ETFs and things along those lines. So that's the huge thing. But with staking, there's no way they're going to do that. Like once you approve it for one exchange, it's going to get approved for all of them.

The problem with staking, I think the SEC would approve them right now and be ready to go. There's questions about the tax concerns and implications. So the IRS needs to weigh in on this because these spot trusts that we're talking about, they're what's called grantor trusts. And like there's issues with like taking income. And the IRS basically needs to comment and be like a no action letter or some sort of something that basically explains whether or not these grantor trust can actually stake and whether or not

the income, whether it's even though it's in kind or whatnot, it counts or it doesn't count as income. So there's problems there. So for my point of view, the question is like, can the SEC just approve this and like let the issuers deal with the IRS? Or are they waiting for the IRS to chime in. I don't think they need the IRS's comments. So the SEC can just basically like, we're allowing staking in these products. It's up to you to figure out if it's like legal from a, from a tax perspective or you have to change the structure of your funds or what have you. What's your sense of the probability of this happening in October of East Staking, ETF's being approved in October? Of being approved? I'm more very high. Like 90%, 80 plus

percent of approved. Whether or not it happens imminently or immediately, like the ETH were approved in May, they didn't launch until like the early July, right? So, or mid-July, late July. So, like, there can be a gap between these approval processes and the actual launch and implementation of these things. So approval, I think it's almost certainly going to happen in the next month or two. I'm not that bullish on, like, the staking being added to the ETHs on having a material impact on price.

I think it will have a long, slow, subtle boost that is going to be indiscernible. But I'm not really bullish on staking being the real. reason why, like, okay, now I'm going to buy the ETH ETF. For that extra, you know, 2% yield I'm getting. Yeah, what do you think about that, James? I agree. I mean, the question remains to be seen, like, how, what percent of the ETH can actually be staked or Seoul can actually be staked?

And, like, are you going to do liquid staking tokens? But they did come out and say that liquid staking tokens are not considered security. So that's a good thing. So we'll see how those are used. So it could be some combo of actually using a staking provider and putting these assets to work. Right. I do think it will move the needle for some people, because

if you were thinking about buying the ETF and you could get exposure and like stake yourself with whatever platform you're used to using, like why would you move to the ETF, right? So I do think it will move the needle, but I'm with you. It's not going to be a massive, massive thing. I think it's a bigger deal for Salana because their yield is so much higher on staking. So you're just getting debased at whatever it is, like 7% right now if you can't get exposure to Seoul with the staking option. So I think there's a few things that will have to be ironed out. I mean, they exist in Europe. They exist in Canada already. it's not like you're going to see tens of billions of dollars flow in because they have staking. But I do think it will be one less hindrance to people not getting exposure in the ETF wrapper.

That one Solana ETF that kind of just like came out of nowhere really quietly, the Rex Osprey. What's up with that story? How did Solana just get its, it seemed to have just like emerged out of the shadows and all of a sudden Solana had an ETF? How did that come to beat? Yeah. So very good question. If you were reading, if you had access to one of those Bloomberg termination, you're talking about. You would have been reading my research and know that it was something I

kept talking about and putting bits in. Basically, I mean, this thing is 300 million in assets now. So it's done pretty well. What happened is all those processes we were talking about that, 240 day to 260 day where you get delays and approvals or denials. That goes through what's called the 19B4 process. Those are for 1933 Act ETFs. I'll just stop there. Like there's a special process that goes on with those. There's a new, there was a rule almost like, generic listing standards, what we're talking about for the crypto assets that will be part of that generic listing standards, they won't have to go through the same 19B4 process. It will be more similar to what happens with 1940 Act ETFs. If you think about the futures ETS when they launched

when we talked about them, it was like 75 days from filing and we thought they were just going to get to go live. A lot of people didn't think that was going to happen. There's a rule that basically says, here's all the rules for what you can do to list a 1940 Act ETF because we have all these restrictions in place. There's all these rules you have to follow. And if you follow these rules, you can just launch in 75 days. What Rex and Osprey did is they basically came up with a bunch of these clever regulatory legal workarounds to try and launch this thing.

So they launched it as a C-Corp initially. It's now a regular fund. There's like a Cayman subsidiary. Basically all these things that are like, you know, going through the back alley to try and get this thing launched earlier than everyone else. And there are a lot of very smart lawyers that I talked to that thought that the SEC wouldn't allow this.

But the SEC, after a bunch of back and forth, much longer than 75 days was basically like we can't stop this. So because they meet all the requirements and there's nothing we can do. But it's not perfect. Like it's not just holding spot Salana and staking it. It is holding spot Salana in some regard.

It's also holding other staking salami ETFs internationally. It has to hold a certain number of securities to be a certain percentage of securities and cash to be considered a fortiac fund. So it has to jump through all these hoops to be a 40 act fund. And therefore it has a little bit of a higher fee. at 75 basis points,

but you're getting staked salon exposure and ETF wrapper. They're going to launch a Doge ETF this week and XRP etif and East staking ETF probably in the next week or two. I don't know exactly it's up to them in the SEC, but they're going to come out first. So basically, I mean, we talked about it before,

being first to market really matters, and that's what Rex Osprey was doing. That said, we're going to get these other pure, I've been putting them in quotes, the more pure spot products, the ones we're used to from the Ethereum and Bitcoin spot ETFs. Those pure products are going to come to

market in the coming months as these 19B4s come up for decision. I mean, great. Light coin is due in the first week of October. Solana is due a couple weeks after a week or two after that. So like, we're going to see a bunch of these things either get approved via those generic listing standards that come through or the SEC is just going to approve them via 19B4, in my opinion. In the wild west of defy, stability and innovation are everything, which is why you should

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begrudgingly said yes, I have no idea how that happened. Anyway, that happened by July 23rd of that same year, 2024. The ETH ETF had a slower start than Bitcoin. It was okay at first. Maybe you have some of the flows in front of us, but it's had a slower start. Wow, this is it in green. And for people who can't see this, it did decently at first, I suppose. It got to, let me see if I can see the precise number here. So basically what it did initially was actually there was net outflows for the first. It was like 550 billion outflows, which was all Gray Scales, ETHE product. Basically right until like early November, right before Trump got elected, and then things took off, right? And it got, they took in like $3 billion. Oh, I see. Yeah, it starts. The red is

where it starts. Okay. And then so it had a bump up into, from November to January, I guess 20, 25, early 2025. And then it had a dip. So I had a pretty bad first quarter, no net inflows, I suppose. But then this summer, something changed. Maybe that's the debts. Maybe that's the timely effect, right? Where suddenly we just climb from about, you know, less than $3 billion all the way, right now, we're above $13 billion. Yeah, we're right near $14 billion. This data is like a couple, a week or two old, so there's a little bit more money in there. But yeah, we're right around $14. weird chart. Like, how did this happen? And how does this compare to, like, Bitcoin's story? Yeah, so if you look over the last, so I basically demarcated it as of the end of the second quarter, so June 30th, so the start of July, these things have taken in $9 billion.

They spot ETH ETFs here in the U.S. Again, they don't have to be. Like outperforms, right, from an absolute value terms? Since the end of the second quarter, it's not even close. That said, year to date, Bitcoin is still taking in, Bitcoin ETFs have still taken in more money. But if you just look over since the end of June, it's not even close. So, yeah, Ethereum has been on fire. Again, I said at the beginning, I think part of it has to do with Tom Lee coming with the narrative.

You know, it's going to be the tokenization chain. It's going to be the chain that people use stable coins on. Like, all the things that he's saying, I think, to help people start getting involved. I think people also got more and more bullish that we were going to get staking in these things. And they're just like overall bullish on Ethereum in the defy community with this new SEC talking about all the things they want to do with allowing tokenization. And, you know, that whole speech that Atkins gave around like, we went through in the 60s and 70s and like, digitize things and now we're going to go through and like tokenize them. And I think that got people on board more so with like the Ethereum narrative. I mean, you hinted at it like Ethereum launch.

One, it was kind of surprised. Two, it was right after the Bitcoin ETF. I mean, you told about Matt Hogan before. One of the things he was saying when these things were launching was like, I wish they weren't launching right now. Like I wish we had six more months to like talk to advisors and explain what this is because like people just don't understand what ETH is. So I mean, I think that narrative is starting to clear up a little bit. So I think all of those things are contributing to this thing just being on absolute fire since the end of June, really. So now the scoreboard, obviously Bitcoin is ahead, but Bitcoin is a larger asset to begin with. Would you say relative to market cap, ETH is kind of performed now closer to neck and neck

with Bitcoin on an absolute basis? How big are the potatoes? Yeah. Yeah. Yeah. So one of the things that I got flack for from like the dot Eath crowd was Like we were relatively bearish, ETH compared to Bitcoin on a market cap basis. So we thought 15 to 20% is what it was going to do. Not you. That was all Balchunis. That was all about Ariric Balchunis.

That's not what I remember from James. That's not what I remember from James. Even the clerk was even lower than that. And honestly, for the first year, that was the correct move. Like it was way less than 10%. He was right. He's been right. Again, that changed since June.

So they're still underperforming their market cap ratio as far as assets and flows go. but I mean if anything continues in the way it's gone over the last three-ish months, I mean, it will come on and be more comparative in the very near future. Because Bitcoin ETSs sit-quant are at like 55 plus billion in flows. And again, the ETH ETFs are at like 14-ish billion in net flows. Okay, okay. So is it like where does that equate to like the 15% versus the, you know, 20%, you know, I don't know the exact numbers.

I looked at this for AUM as well. So the Bitcoin ETFs are like 140-150 billion, 140, 150 billion in AUM, and the Ethereum ETFs I have right here, I can scroll down. Give me one second. Here we go. So if we look at this chart,

they're around 30-ish billion in AUM. So you're looking at 30 to 35 billion versus 140 to 150 billion is the comparison right now in assets. But again, part of the problem is Ethereum launched later, right? So you have to discount that a little bit because when you look at AUM, it's a common, this is what always breaks people's minds

when you talk about this, like it's you're talking about assets. Like, I feel like I always have to explain this over and over and over again. Flows are just pure money coming in. It's dollars coming in and that's it. And like people think that's the only thing that can change AUM,

but the performance of the underlying asset also changes the AUM. And like, so you talk about flows being X, Y, and Z and the AUM going up by X amount, and people like always can't wrap their heads around that. It's why, like, in the, in my world, in Tradify world, sorry for your defy people, but like mutual funds for actively managed equity mutual funds have been seeing like a trillion dollars in outflows every year and

their assets are continuing to go up because like they're just seeing money come out or like distributions go out and they're not reinvesting. And it doesn't matter because the bull market subsidy, as we call it from the equity market just keeps going up. So it's like it's the only industry where like you can be losing customers every single day. Money is coming out of your products and you're earning more money year after year after year. You're bleeding up. Yeah, it's the best business in the world. Okay.

It's just so fascinating to me that that $9 billion in inflows for Ethereum was basically you're saying is kind of the narrative shift that happened over the summer. It's like, look at it. Like narrative makes a massive difference with respect to these assets, like prices and how they do in the ETF world. I will also add down the trendfi also has narratives. Yeah. That you need narratives.

I mean, we used to call, there's like, Even just having an ETF where you can go in, we call it conversational alpha. If you're an advisor and you're talking to your client, like even if you're just putting, you know, 1% of your client portfolio into Ethereum, if you go to a client, you have a two-hour meeting and you're explaining them what you're doing, and you spend 30 minutes talking about Ethereum and crypto, even if it's only 1% of your portfolio, that's conversational alpha because you can have the conversation with them about why you're doing it. There's a lot of ETS that people do that. We're like, it's not really doing anything that different, but you can be like, I'm investing in value or I'm investing in growth and you can talk about it. But really, you're just like got broad exposure. The other thing I would say with the eth ETH ETHs, part of the flows, Ethereum basis yield, that basis yield we were talking about is much stronger than Bitcoin's.

So a lot, some of the flows and some of the demand from the Ethereum ETSs, a lot more of the flows is coming from the basis yield because the yield on the Bitcoin basis trade is much lower, much less attractive, whereas it's been roughly double digits if you do this on like a 30-day weighted exposure. So that's definitely a chunk of what the hedge funds are doing and what people are doing to get their exposure. I mean, if you remember one of the pension funds in the Midwest, Wisconsin or somebody bought exposure to the Bitcoin ETFs, and then they sold it as of the end of Q2, there's like a 95% chance that that exposure was a basis yield exposure because Bitcoin

basis yield was through the roof at the end of 2024 and then all of a sudden was down into single digits. So you went from 20% yield almost risk-free, I don't say that lightly, but almost risk-free to now getting single digits and money's going to come out. So that's part of why we think Ethereum ETFs and Bitcoin ETFs saw significant outflows in one Q into early 2Q because the yield was gone. Like you can see in this chart I'm showing, it's just a line showing the change in basis yield. It goes down near 0% and goes negative at some points. And if you look at the Bitcoin price, it's even, it's just as bad, if not worse, for basis yield. So this is also playing into demand for these ETFs.

Interesting. There is a basis yield ETF coming online in the future for both Bitcoin and Ether. Does that matter? Just that comes online, say that attracts some amount of eAUM. Does that make Bitcoin and ether more liquid? Like, what is the significance of this? Or is it just like a kind of a side quest? Yeah, I mean, one of the things that ETFs are doing now more than so than ever is just

like packaging trades for you. Like you have 2X single stocks. You have like covered call strategies. Things that most people could do on their own if they really wanted to, but they just do it for you. It's just like providing a solution for something you're looking for. that's what I think these basis yield ETS are going to be. Like you said, there's one for Bitcoin

and one for Ethereum that has been filed by defiance. And, like, I don't necessarily think they're going to, like, drastically change anything. Like, these exposures are supposed to be, you know, delta neutral. But the one thing you said that I 100% agree with, it's just more money into the space. It's more liquidity.

Like, more liquidity begets more liquidity begets institutions. Like, you don't want to have, like, this small pond because you're never going to get the massive fix. to come in and bite and play. But the more you can build of that pond, the more you're going to get the bigger fish and not just the minnows playing with whatever your, whatever rod you're throwing into the water, right?

So it's all net positive for the entire ecosystem as far as I'm concerned. Does the fact that ETH has a larger basis rate, a more rewarding basis trade than Bitcoin, is that because the volatility is higher? Honestly, I'm not going to pretend to know the exact reason. I think it probably has something to do with that. It might have something to do with like the fact that

Ether doesn't offer, I actually, I really just don't know exactly what's causing it, but I can just tell you that one, it could be volatility. There's a whole bunch of things that go into like what the futures price is doing. But for whatever reason, part of it could be that there's just more demand for these types of assets. Like part of the reason the basis trade exists is because like it's even steeper in the tradfire world, right? Like you're looking at funding rates and different things like that. There's more demand for capital to get into the space specifically for whatever. And so all of a sudden, And this is kind of like tradfai taking advantage. And like there's usually, and I haven't looked at this in a while,

there's usually even more yield if you do it from like the tradfai world into the defy world. You can go short in the defy world and long in the tradfye world. And like that steepness of the curve is usually a little steeper than doing this with the spot ETF in the CME futures. Whereas if you did it with futures on like finance or like some perp elsewhere, like it usually was a little more profitable. So basically what I think this all has to do is like money is like moving all around. all these different places and there's different funding rates, what have you.

But once this is more ubiquitous and it's easier to move across chains and across tradfai and defy, I think these yields will come down a bit. But I mean, no matter what you do, when things get crazy, volatility goes up or demand spikes to the roof like we saw at the end of November into December. Like, I'm telling you, like it's not even like it was just like one day where yields. Like yields were over 20% multiple days in a row for just eth basis trading. Like, if you're a hedge fund, like, are you kidding me? I will take an annualized yields above 20%.

I just need to borrow some money and put up capital and I just eat my funding costs. And yeah, you're going to do it every single time. Zooming out, James, I think a question that many crypto natives have is like what's driving market prices this cycle? So the thing that's new for us in this 20204, 2025 cycle, bowl cycle is these ETF products and these institutional flows. previous cycles, crypto natives, retail, has always been in the driver's seat.

So, like, one metric you could look to is like, what are the Coinbase downloads? You know, oh, they're top of the charts. Okay, retail's here and they're buying. It's like a signifier of a bull market. Maybe that matters less this cycle around. Maybe the real driver of prices is much more these ETFs and these institutional flows. What's your take on this? What is really driving price at this point?

Is it retail as in previous cycles, or is it now these Atef's? institutional ETF type flows. I mean, I think retail is obviously huge, but I think this kind of goes back to something we were talking about before. Like, we haven't seen alt-coin summer, if you will. We haven't seen alt season because I think a lot of the money that has come in,

the whole space is just way bigger now. I mean, we're looking at trillions and trillions of dollars. Like, if you go back to 2017 or 2020, like retail really could move the needle. Like if you had enough people coming in, I mean, you still see it in smaller coins and pockets of the market, But you could retail money coming in.

Now we're as big as the space is. You need more money to move the same percentage points, right? So like retail, one, I guess they could still move things, but they're like becoming a smaller piece of the pie. This is something I'll often argue with people because they're like, oh, Larry Fink is using like paper Bitcoin and paper ether because like look at all the flows coming in and the price isn't moving. And I'm like, there is so much more going on.

One, some of this money could be basis trade as we talked about. Two, they are just a piece of the pie. Like, yes, they're becoming a, a big piece of the pie. But like, what I saw moving the narrative now was, was the flows coming to ETH the last few months. And then also the DAT conversations, right? All the DACCOs, like, we're buying up tons of, tons of ETH and honestly, Solana

and Bitcoin. So, like, now it's institutions that are moving the mark. And I think as you look, if you look at this, if you look at volatility on these assets, it like over a short time period, it goes up, it goes down. But if you look over a long enough high frame, you smooth it out, volatility is down into the right. And I think it's because of the institutions, I think it takes. takes a lot more capital to come to the space to move the market, particularly to the upside.

But obviously, at the end of the day, it's still always, the price is set at the margin. Like, it's whatever people are willing to sell it at. When you look at something like Bitcoin, you know, you can't create more of it. So like, if the demand goes up a ton or goes down and done, the only way demand is really going to change at this point with the way that Bitcoin's block is set up is by people selling the Bitcoin they already have. And ETH has been less inflationary than Bitcoin over the last few years since they moved to proof of stake, and kind of the same thing is happening. I mean, you just look at, I mean,

what do we bottom out at, like five months, four months ago, $1,500 a coin, and now we're near $5,000. I mean, things are still moving. The answer is like, I don't know what's moving these prices. I wish I did. I probably wouldn't be sitting in Bloomberg writing about Trafai world and the overlap with defy. But I mean, it's, the answer is it's all of these things, and it also just takes more capital to see those massive moves that people in crypto are used to seeing from a dopamine perspective back in 2017 and 2020, it's just, you're probably not going to see the same types of things that you're used to seeing back then. James, David and I were batting around this question, didn't really have an answer. I was wondering if you might. So S&P 500,

the index itself, right? Of course, many ETFs track that. There's apparently a group that gets to decide, a committee of some sort, that gets to decide which 500 companies are in the S&P 500. And from time to time, of course, that changes. We have two. crypto-native S companies in the S&P 500. One is Coinbase. And then last week, Robin Hood was invited into the S&P 500, which is a great place to be because you get all the passive ETF flows. Very nice. Appreciate that. It seemed like Robin Hood took micro-strategy's place because micro-strategy also was a contender for this slot. I'm not sure how this works, but what's your take on this decision, why it was made this way, who made it? Are people biased

against micro strategies, the SMP committee, is the fix-in? Or is this like a pretty rational decision for this indecy? All right. So I wrote a note basically predicting what was going to go in. And I was, I had App Lovin and Robin Hood at the top of my list. Right. App Lovin? App Lovin. They've been out there, they're what got in. They're the, they're bigger than Robin Hood. They're a larger company. I've never heard of this. App Loven? What is this? It's like Nickloven? What is this? App loving? Yeah, so I like, yeah, most people have never heard of it. Okay, this is some sort of a mobile phone company?

Yeah, they do apps. They make apps for mobile phones and mobile mobile platforms. Cool, good for that, good for them. All right, all right. Yeah, so what it came down to is I was pretty confident that those two were going to get in. And then I said it should be micro strategy. Micro Strategy should be the other name that gets into the S&P 500 index. And what basis did you say it should be micro strategy?

Because it meets all the criteria. So I'll list off the criteria and don't try. not to fall asleep for anyone listening. But there's like seven main things, right? So you have to be domicidal in the U.S. You have to be listed on a major U.S. Exchange. Shares must be either a REIT, which is a real estate investment trust or a common stock. The market capitalization has to be above $22.7 billion. That's the number right now. There's a liquidity ratio, which basically looks at like the amount of trading volume, dollar volume you've had as a relationship to your market cap, but that needs to be high enough. Micro strategy is off the charts on that metric.

like nobody else that's even remotely possible to get in is remotely close to that level, that metric. Then the key thing here, which you've heard many people, if you're listening to this, you're paying attention to the space, the sum of the prior four quarters earnings must be positive.

So all four earnings together over the last four quarters has to be positive. And the most recent quarter must be positive. You have to make money. You have to be revenue positive. Exactly. Well, not revenue. Gap earnings.

Yeah, okay. Yeah, yeah, yeah. So they meet that criteria because of all the changes that we saw with FASB and what they're doing with the accounting rules, which basically, I mean, the rules were dumb with the way they were handling the accounting for Bitcoin. Basically, you can mark it down, but you couldn't mark it up. So they marked up a massive income in the most recent quarter, and which way more than offset

the losses they had in the prior quarters from the way that they were handling things, right? So they were eligible. And then the final thing is 50% of the shares of the float have to be public. So it met all that criteria. The problem is like, one, this is the first time they're eligible. There's plenty of examples where companies have been eligible for over a year. in itself was eligible to be put in last December, and they hadn't gone in, and they've been eligible every single quarter since. So I was like, how much longer than you keep putting this off?

And two, like, I could see that Eric likes to describe, he like, we've met people that are on this committee and have been on the committee. It's not that crazy, but like in your head you think, like it's just a bunch of guys in like a smoky room, smoking cigar, like no one knows what's going on. But they're controlling tens of trillions of dollars of exposure in the world. Like, it's serious capital. But part of the problem with micro strategy is one, like, okay, their earnings, yes, they're following the rules. But like, I could see them being like, this is not something we necessarily want exposure to. And honestly, they can wait. Like if it takes another quarter or two and it's micro strategy or strategy still continues to be profitable,

they can get in at the next rebalance in December or the rebalance again in March. Like, it's not like they're never getting in and they've been snuffed continuously. Like, if they are eligible and they meet all the criteria I just mentioned over the next year and we're come back in next September and they're still not in, then people start complaining, I think, more. But for now, it's up to the committee. Tesla was notoriously left off forever because they were never profitable over a four-quarter period to be let in.

So the other problem is the S&P 500, the committee is concerned with, like, diversification. Like right now, it is heavy tech. It has a lot of tech names and the weight to tech is very exposure. And as you know, which most people would argue, strategies gick sector is tech.

because of their underlying business, I'd argue it should probably be financial now. Ironically enough, it got into the NASDAQ 100 because its GIC sector is information technology. But like, if it ever were to change the financial, that honestly might help it potentially to get into the S&P 500 if they meet all those other criteria. But then they would have to get booted out of the NASDAQ 100

because a NASDAQ 100 doesn't hold financial stock. So there's all this wonky stuff, but like people like to attribute like malice where they're just like they're just not ready yet. people were flipping out about them not adding Tesla for years. It's only a matter of time, right? It's only a matter of time until they're kind of forced to add them. I mean, exactly.

They're going to add. And the other thing I would say, there's like 60 names-ish in the S&B 500 that you've probably never heard of that wouldn't meet the qualifications today. So the other thing they're worried about is like they don't want to be changing the names every quarter and moving everybody up and down.

So they're very deliberate about what they take in and take out. So the names they removed were one of them was a tech name so they could let an app love it. You know, one of them was financials and they led in Robin Hood. So, like, it's not like they're trying to keep track of like this. They want to balance. They don't want a lot of tone over. But the other thing is like, I don't know.

I don't think it's that big of a deal. If it continues to get in, if you believe Bitcoin is continue to rise, your bullish Bitcoin, like at some point, they're probably going to get in the SB 500. If you're worried about Bitcoin, you don't think it could be due for a correction or you don't think it's going to have any value beyond where it is now, then all of a sudden they won't get in because then the micro strategy won't be profitable. It's fascinating.

I had never, I had never, I had not realized how gate capped S&P 500 was. I thought it was pretty simple, which is just basically you take the five, top 500 by market cap companies and you just stuff them in there. It's a passive index for that, but it's much more gatecapped, it sounds like. Yeah, shout out to, shout out to the Bloomberg 500, which is basically that. That's also kind of like, yeah, that we have a Bloomberg 500 that basically does that and strategy is in there, for example. So there are indices that do that.

that, but the S&P 500 doesn't do that. And there's a reason, like, they have the S&P 400 and 600, which are mid caps and small caps, and they also don't do that, right? So they're strict. You need to meet profitability requirements. And if you compare that, like, we're getting really in the weeds, but like the Russell indices, like the Russell 2000 is small cap. If you compare like the S&P 600 to the Russell 2000, which are two small cap indices, the S&P 600 blows it away every single year because like they don't let in like crappy stocks or really high flying sketchy biotech stocks that are dependent on FDA trials. So they're more restrictive on what they would let in.

And it's part of the reason why it has been so ubiquitous. But I mean, right now on my list of like potential names that could get in that qualify, we're looking at like 40 that are like big enough and meet most of the criteria, but maybe not one or the other. But there's plenty, there's at least like 20 something that meet, met every single criteria but just weren't let in. James, this is one last subject I want to ask you about because I was just really confused when I saw it on my timeline.

There's announcement from, it wasn't from BlackRock, but it was concerning BlackRock. BlackRock can tokenize ETFs, that BlackRock wants to tokenize ETFs, which is just so weird. It's like a nesting doll. My understanding of this is that, okay, they have ETFs. They have the Bitcoin and Ether ETFs, and now they're going to tokenize them, presumably on Ethereum. And so if maybe I'm just misunderstanding this, but if you take the ether,

You put it in the BlackRock ETF, and BlackRock tokenizes it and makes a token on Ethereum. Why are we doing this? We're back to where we started. Now it's a wrapper with a bunch of intermediaries and fees. Like, what's going on here? Yeah, so I actually was at Future Proof, which is a massive Tradfai wealth conference.

Last weekend I did a panel on tokenization. I'm doing a panel on tokenization at one of the exchanges next week as well. They're going crazy for tokenization now, aren't they? It's something that I've been pretty bullish on. too. And like there's levels of it, right? Like there's aspects of just using blockchain tech to like smooth out the back end. Like there's parts of it where like it kind of echoes the 2017 blockchain, not Bitcoin yelling match that people are doing.

But really like the DTCC is leaning into some of these. They're using Ethereum ERC 34 blanking on whatever the actual thing is. They're going to be using Ethereum and EVMs and stuff to do like streamline kind of back office operations, if you will. So there's levels to this. The other thing I would say is like, it's not just the Ethereum ETFs, right? Like they're looking to do this with stocks. If you look at what NASDAQ just filed with the SEC, they're looking to do with ETFs as well. So it's more like taking these issues, we're early, right? Like they're going to do a lot of these different things for the initial parts is going to be weird. It's going to be like you have this thing in TradFi and then

you put a wrapper so you can put it in tokenize it and put it on chain. But like, can you actually move it on chain because you need KYC? So like there's a lot of regulations and rules that need to be set up both by Congress or just by the SEC and CFTC. But, like, we're starting down this path. Like, this is where things are going. Okay, so these are beta. This is a beta product in a sense. I would think about it like that.

And the other thing I would say is like, it's not just, like you said, the Ethereum ETF, like I don't know, the Ethereum ETF doesn't make sense to tokenize. Like you could buy Ether. Right. Or like, you can tokenize like their SMP 500 ETF or like their. That makes way more sense. Yeah, yeah, exactly. And you can use that in DFI platforms, lend against it.

You know, what have you. So that's more along the lines of what they're going to do. But also, I mean, initially it's probably just going to be that NASDAQ will allow you to like trade tokenized stock on their platform or tokenized ETFs or what have you. So we're very early days. This is all being sorted out. There's a lot of efficiencies that can be had from using these. Whether like, like for the most part, when you're trading a stock, I mean, most of the people listening have no idea what a transfer agent is. They don't have any idea how the custodian works in.

They don't have any idea about how like the settlement works at the TCCC with like. netting and offsetting. So all the stuff that happens on the back end that is like literally free nowadays because they don't charge fees for trading that can be streamlined potentially by this technology. Is it going to happen next year or this year? I think they're going to toy around with it.

I mean, we see Franklin Templeton playing with it, Van Eck, gray scale, bitwise, black rock, obviously, wisdom tree. They're all doing things with tokenization. And we're like, we're so early right now. We're like we're not even in the first inning, I would say. I don't know what it's going to look like, but they're trying it and there's a lot of money being thrown at this. This isn't like, oh, we're just going to dip our toe and try this stuff out.

Like there's a lot of people putting a lot of money and capital and brainpower behind better ways to do these things. Okay, so there's two things that I got out of that. There is the actual, the thing that's exciting to like me, Ryan, the crypto industry, which is BlackRock has ETFs. They're going to turn them into tokens on Ethereum and those are tokenized ETFs. And there's also separately the part that doesn't really interest me, which is NASDAQ,

using a private blockchain to tokenize ETFs to have better back-end settlement for their own purposes, and nothing is happening on a public blockchain, but like they get a streamlined process. Well, the question is, it could theoretically happen on a public blockchain. I mean, this goes back to the debate you guys I listened to, which was fantastic between Austin and Omead.

Yeah. Very good. And like how much of it is going to be permission, like are we going to bend to the legal regulatory world, the real world versus are we just going to have to have things that like kind of meet with like way the defy and decentralized protocols work? I don't know. I mean, I can tell you right now, I tend to lean more on Austin side of things because these institutions and regulators are not going to be, you know, gleefully going towards something where they could, you know, lose some sort

of control over. So I don't know. There's going to be some mix. I think some things will end up more on this public decentralized open blockchain network. And some things are going to have to be a little bit more, you know, controlled and gate kept and you blacklisting different things and stuff like that. So, yeah, I don't know what the world looks like, but I mean, these companies, they're not stupid. They see the tech. They see a lot of use case for it. I mean, Jenny, I'm blanking in her name. The CEO Franklin Templeton was talking about how they have money market funds. They were operating in the old school system with the transfer agent and all these things. And they were also operating on a blockchain to keep track of ownership.

And it was just so much more efficient and cheaper to use public blockchains to do this that they're just doing that. You have BlackRock doing Biddle fund. I mean, I can go on and on and on. Wisdomtree has a whole bunch of funds that are just tokenized. They're tokens, exposures to different things, whether it's gold or money markets, you name it. I don't need to keep going. So, like, all these companies are looking at it,

and there's this thing is the area where I'm very interested in is like this merging between TradFi and Defi. And I don't know what it's going to look like, but it's extremely interesting. And you may not be interested, but if you're BlackRock and your margins are super low on these ETS and you're only earning five bips on something and it's costing you one BIP to do all this stuff

and you can cut that down to one-tenth. Like you are very excited to like eke out that little bit of extra margin. And look out this crypto world, the defy world, look at Coinbase, you look at any other trading platforms. I mean, the fees, the margins are really juicy. So if you're a trad-fi company like in Schwab or Fidelity or some of these ETF issuers that are earning like the mini-tiniest, tiniest margins in many cases like have lost leader products,

you are just foaming at the mouth to compete in this industry where people are charging 1% to trade something. James, final question for you. So over the next three to six months, let's say, what are the key things that people in crypto might be interested in in terms of dates, things getting improved, the timeline. I think you mentioned one of them,

which is look, in October for an approval, possibly, of the ether staking ETF. So maybe that's October. We can flag that. What else you got going on in the next three to six months that people should be taking a look at? Yeah. So, I mean, there's a lot is going to happen literally

in the next month and a couple weeks, six weeks, I would say. I don't know exactly when this is dropping, but like it could happen really quickly. The main thing that matters is the generic listing standards, I would say. And right now, the number one thing that you need to get approved. So like the generic listing centers, again, it's like a crypto framework that says if you meet this criteria, you can launch an ETF on this asset.

And the only thing that matters is, is there a CFTC regulated futures contract and has it existed with like enough volume and an open interest for six months? And Coinbase has listed futures contract regulated by the CFTC for almost all of the assets that we would be potentially. So once you have that, basically, the pipeline is open for really fast approval of a whole bunch of crypto assets becoming ETFs. Correct. Yeah. So like we're looking at literally over 100 ETFs in the crypto world coming to market in the next six to three. 12 to 18 months. Wow. Hundreds of them. Now, how many of them are going to stick around and be profitable and people are actually going to be interested in? I said before, I'm very bullish the basket products, whether that's like top 20x Bitcoin or just the Bitwise 10, like, because advisors,

that's what they're used to investing in. I'm very bullish on that side of things. But yeah, there's a ton of these products. And even if the generic listing standards isn't ready to go in the next couple of months, you still have due dates coming up in October and November for a whole host of assets, including like coin, Solana, XRP. let me go down the list even. Pocod, Hedera, Doge, like there's a Doge ETF coming in that 40-Eck rapper

probably this week. You name it. I would like to say that I'm excited about the Doge ETF and I'm not as excited as some of the other ones that you just named. Avalanche, Sween, a Cardano.

Yep. So, yeah, there's a lot coming. Again, I'm not going to say that these are all going to get tons of assets. I think anyone thinking that these other all-coin ETFs are going to be as successful

as Bitcoin or even as successful as Ethereum, I wouldn't go that far. I think we've seen demand for some other products, specifically for XRP and Seoul that have shown really strong demand from the ETF world and the TradFie world. So I think those could do very well, but I'm, again, most bullish on the basket product.

I guess it's funny how much that generic token, that generic standard that you mentioned, that's almost like, the ETFs are almost like an ERC20 for TradFi, just on the opposite side, where it's like, we're just taking all of the crypto assets, our biggest crypto assets, and we're putting them in a ERC20 wrapper for TradFi.

That's an ETF. A commonly understood form factor. Yeah. And whether there's buyers buying them or what the demand is, whatever, the market will figure that out. But at least we've kind of bridged these assets into the Tradfy world. Yeah. And there's some pushback right now on the current framework.

Like I've read a bunch, you know, like there was a bunch of common letters in some of these ETF filings. You read a bunch of people saying, we should never allow these and all this stuff. And other people saying these are God's gift to earth. There's people doing stuff for the general. listing standards, and even pro-crypto people are all like, just because it has a futures contract that has existed for six months, we probably should have other requirements. Like, because what if we get something that like high FDV, low float, like weird stuff could happen.

So there's a lot of people out there saying we need a little bit more like to restrict on what can go into the ETF wrapper. Like we don't need to be going through nitty gritty and picking these things out. And I tend to be. We're going to be wrapping up some shit coins, man, if this is just a generic wrapper. I mean, there's, I mean, and not only that, we're going to see like, like there was a filing yesterday for something called income blast balk ETF where like they write covered calls like deep in the money covered calls to like earn a bunch of income and self like you're going to see levered versions of all these things like it's not just like there's going to be spot products like you're going to see these things launch we have covered bitcoin cover ethereum you're going to see

all these things come to market and they're going to not just be spot exposure they're going to be wonky exposures there's honestly what you might be more interested is there's there's like there's going to be active crypto ETFs right so they're going to they're going to choose their weights and they're going to actively make decisions, whether it's short term or longer term, and you can choose those ETS. And honestly, like, I'm somebody that thinks passive management makes a lot of sense in, like, U.S. large caps. I think active management could make sense on fixed income and small caps international. Another area where I think active management could make a lot of sense, crypto. Like, there is so much stuff out there. And people that, like, love,

like, ancient coins that have, like, nothing going on and that whatsoever. And they're, like, think they're going to come back to the ratio that they were historically at with Bitcoin, and none of the things. So I think just smart, active management and some of these things will make sense initially. And we're going to see all those things happen in the next 12 months. It's going to be, it's a bazooka.

We call it a spaghetti cannon. There's going to be just shit thrown at the wall or at the fan, if you will. And like whatever sticks, whatever investors buy, whatever retail and institutions are throwing money into, if it gets enough assets and it's profitable,

these issuers are going to keep them up. Well, that is tradified becoming a lot more like crypto. James, thank you so much for joining us today to talk about all these things. Yeah, thanks for having, guys. This is a lot of fun. Huge fan. Bankless Nation, got to tell you, none of this, of course, has been financial advice. Crypto is risky. We have no idea what's coming out of the spaghetti cat. You could lose what you put in. But we're headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.