ETF Edge - Crypto comeback? 9/9/26

Episode Date: September 9, 2026

Short-covering, CLARITY Act, something else? Crypto is bouncing. But is it a one-time thing… or is there more at play? Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The EETF Edge podcast is sponsored by InvescoQQQ. Let's rethink possibility. Investco Distributors, Inc. Welcome to ETF Edge the podcast. If you're looking to learn the latest insights on all things, exchange-traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors. I'm your host, Dominic Chu.

So what's driving the recent crypto comeback? And is it sustainable? Here's my conversation with Zach Panky. the head of research over at gray scale investments, along with Michael Buchella, who's the managing partner at Neo Classic Capital. Gentlemen, thank you very much for taking the time to be with us here at ETF Edge. I'd like to start maybe with a bigger picture of you, and for that, I'll turn to you, Mike, on this.

The Bitcoin run up. It's been fast and furious, but again, you have to kind of see where we came from. We're still a long way away from the record highs that we've seen. is there anything to the price action lately that makes you feel as though this is somewhat sustainable? Yeah. So I guess the way that I think about Bitcoin's levels here is we had some pretty significant leverage, right? That was August 19 washout. So we had short get liquidated. We had pretty decent follow through on spot an ATF buying, which was good to see because that's very healthy in terms of building sort of building out of base. And then what we also saw was an increase in options open interest, particularly with calls queue. And while we also saw a decline in futures open interest.

So leverage was reduced while spot buying increased and then upside buying was increased. So that to me indicated that there was real demand to own Bitcoin incrementally from here. We're still down on the year. We're still well off all-time highs. The next levels to watch are roughly 83 to 86,000. We have a lot of long-term supply to chew through. And if we get past there, we're in pretty good territory. And if you look at Bitcoin relative to the rest of the market, it's in a lot healthier

position. I think I said earlier on the program, you know, Altcoin open interest and leverage is getting a little bit worrisome. So overall leverage open interest is about the same as it was before. before the October 2025 crash. And so I don't necessarily take that as caution or a flashing red light that we're about to head into a collapse in the market.

I'm just saying you wanna tread carefully and in this environment, maybe just incrementally accumulate your Bitcoin and then be a little bit more cautious as you go out the risk curve. Interesting, Zach, because this conversation as well has centered a lot on the price action in Bitcoin. We haven't spoken relatively as much much about some of the other larger coins out there, namely Etherium, namely Ether and Solana,

maybe XRP and others. We have talked a little bit about hyperliquids. So when it comes to what's been driving the price action, there have been some macro factors at play. So what in your mind has been the reason why we've seen other than the technical stuff that Mike referred to, are there fundamental reasons why from a macro perspective people have gotten back into cryptocurrencies? There are, and it's really the same two fundamental drivers that have been pushing the asset class forward for a long time. Number one is demand for scarcity. We have risks with fiat currencies created by unchecked government debt growth. That's driving investors into scarce assets, whether it's physical gold or digital Bitcoin. But that's only half of the story for digital assets. The other half is regulatory clarity for blockchain technology and integrating blockchains into mainstream finance.

And that's been moving ahead as well. Now, we'll talk about the Clarity Act in a moment. There is some uncertainty there. But even with that piece of legislation aside, the key regulators and the White House, the SEC, the CFDC, have been bringing regulatory clarity to the industry regardless. And this benefits the rest of the ecosystem, particularly the smart contract space like Ethereum and Solana, perpetual futures, platforms like Hyper Liquid. These benefit from regulatory clarity in addition to that scarcity. or debasement trade, if you will. So it's both of those things,

demand for scarcity and portfolio diversification, as well as regulatory clarity for the industry and asset class. So let's follow up, Zach, with that. Because you brought up clarity, because I mentioned it in the introduction here, how much is the momentum that we've seen in cryptocurrencies contingent upon clearer clarity in terms of the regulatory framework around cryptocurrencies?

Is the Clarity Act crucial to the longer-term success of cryptocurrencies, especially when it comes to the U.S. market and its investors. Regulatory clarity in general is absolutely crucial. This is financial technology. We need a clear rulebook to protect investors, protect consumers, to protect the financial system itself. We don't necessarily need the Clarity Act, that specific piece of legislation.

And we've been very encouraged by the recent steps by the CFTC, for example, to approve perpetual futures here in the U.S. market, by the SEC for laying out. some ground rules around transfer agent changes, around issuance of crypto tokens, what's called reg crypto. So we're getting that regulatory clarity through agency guidance rather than through legislation. For stable coins, we went a legislative path, got the Genius Act last year. That was a great step forward for stable coins. We may be taking a different path forward for the rest of the industry, but I think we are still

getting that clarity and it absolutely is crucial. Encouraging we are seeing it every day with the announcements from these agencies. It's interesting, Mike, because the last time we spoke, we were on CNBC Air for Power Lunch, and it was just around the time when there were some kind of last-minute hiccups and on the path for the Clarity Act to get some real momentum. And we had talked a little bit about just how important the Clarity Act is. I wonder since then, have you maybe altered your view in some way or not at all about whether clarity and that Clarity Act is something that we really do need for this next leg of the markets to go higher? Yeah, I think it's kind of what, towards what Zach was saying is I think we're kind of in this unbundling phase of the areas of regulation that we're looking to push forward.

So, you know, I think back then I had said, you know, we'd love to see the Clarity Act, you know, move forward, but we've done just fine without government direction in the past, and we will continue to do it and move forward. And I think we had the right folks lobbying, obviously, you know, everyone has their own fiefdoms and people are going to lobby for the things that interact most kindly with their existing business lines. But I think generally speaking, we're in a very good environment where the private sector is doing a very good job. We've been forming the public sector on what we're trying to do. And I think we're getting progress. I still, you know, unfortunately don't see

a likelihood that we get the clarity I pass near term. And then obviously we had into midterm elections and that could obviously solve a number of things, including clarity. But, you know, I think generally we're doing just fine educating the government, the public sector and regulators. And I think we're going to continue to get support from those who are open to having productive dialogue with us. Now, Zach, speaking of that dialogue, the regulatory framework is important here as well because it does provide at least some guardrails, people feel a little bit more comfortable. One place that they've seen a lot more of that happen and really evolve quickly is in the world of exchange traded products that track many

of these crypto assets. It's broadened out the total addressable market to investors and traders who aren't necessarily crypto-native but want to have some kind of exposure and you've given them by the framework that we have more vehicles by which to do so through traditional markets, centralized markets. Grayscale is one of those people, as one of those, firms that has offered these types of products. So how much has this dynamic around regulatory scrutiny been helped by that cooperation with regulators on issuing these exchange traded products? And is that big for the driver of this next leg higher? Yeah, absolutely. Grayscale has been one of those players that's had a long engagement

with regulators on these topics. You think back to the first ETF filings for Bitcoin. We're in 2013. They didn't come to market until 2024, almost 11 years. later. So it was a lot of process to bring those first products to market. But we've had a streamlining now, I think, thanks to some of the current regulators. Last year, the SEC created something called generic listing standards, which gives an asset manager like ourselves a pretty clear roadmap on when and where and how we can issue new ETF of products. So we're broadening that exposure for our clients. One of the great things about these products is they're kind of the easy button for crypto investing. There's lots of different ways to buy

crypto, no wrong way necessary way to do it. But you have to solve some things for yourself. Where do you get the liquidity? How do you custody these assets? How do you do your taxes and your estate planning? The ETFs package all of those solutions into a single product, oftentimes at low cost of product. So they make it very easy for investors. They've had a great success, as you know, since the Bitcoin ETFs are launched. I think ETFs will continue to capture a rising share of the crypto asset class because they make investing in these assets straightforward for anybody. Now, Mike, another big point about this whole process is access to these markets and the way that ETFs and ETPs have kind of done so and propelled this kind of current leg, that we've also seen

a lot more of a variety of these ETF products come to market tracking, not just Bitcoin, but other parts of the market as well because the regulatory framework has been, loosened is not the right term, but it's allowed for more of these products to come to market in a quicker fashion. I wonder how much you think investors and traders who are not necessarily as deep into crypto as you and Zach are, Mike, to go and maybe get more into places that are not just Bitcoin, but to other places that people talk about maybe in the news, but maybe don't talk about as much as Bitcoin or Ether. Yeah. It's funny you mentioned the Bitcoin. I was actually in Switzerland in the mountains the day they first started trading in 2024. So it's a nice little come around story. And it's also nice that Zach and I both ex-ex, you know,

know Goldman colleagues saw our alma mater issue a new approval for, I think, a call overriding Bitcoin ETF today. So a lot going on in this space. I would say we probably need to get, we need to be quicker to allowing further ETF distribution or creation and distribution. It unfortunately, I think the lack of clarity, not the act, just clarity broadly, led to an over-issuance of public holding companies of the long tail of all of coins and led to, you know, what was it kind of a bubble in digital asset treasury issuance last year? And a lot of those structures are very toxic. And a lot of retail got burnt on those. And so I think, you know, from my perspective, you have really, you know, I would say good stewards of capital. So before the

hyperliquid ETF was issued, you know, we had Hyperion DFI was the first to come along and buy hyperliquid in a public company and really engage with the ecosystem, make strong investments, and I say act very responsibly as a fiduciary for the shareholders. And then you had, you know, per hyperliquid strategies. And then you had the hyperliquid ETF issued. And, you know, you have this much more neutral, safe exposure that was, you know, stewarded again by, you know, more responsible digital asset treasury holding companies. The long tail where people really wanted this obscure exposure was what led to a lot of retail pain because a lot of these digital asset treasury companies that happened last year came to market, they were again, just really, really

toxic structures when you picked when you lifted the hood. And that was unfortunate and it wasn't necessary. So I do think the more ETF issuers become comfortable surrounding the assets that they'll issue ETFs in, the better environment and more transparency that we'll have from the investor-based. So that's something that I think is interesting. Obviously, as options market develop, option markets develop, futures markets develop, there's a lot more opportunity to have yield-enhanced strategies, which is an interesting area of the market. And I think could work for, you know, a lot of folks. Again, Goldman, Goldman, I don't think it was approved, but they filed the ETF today. Yeah, I mean, speaking of, I mean, these yield-enhanced funds, Goldman is very active in these days with the acquisition

of innovator capital and neos and everything else so that's a big point the last point i'm going to ask to you sack here the et f product market and exchange traded products market has led to maybe the ability for retail investors and traders as well as financial advisors to quote unquote allocate right on a systemic or more systematic basis do you find at a company like gray scale that you are seeing more activity from people who are not not just taking shots about buying and selling, but are programmatically every week or two weeks or month, putting money to work in a certain crypto or basket of cryptos.

That's absolutely the change that's taking place. It's not only the products that are changing. It's the investment strategy. It's the investor types that have changed over time. And this allocation trade, I think, is what is beginning now that is catalyzed by some of the other things that we've been talking about, the Treasury buybacks, fiat currency risk. investors are looking at how do I build a diversified portfolio.

I have a lot of equity concentration, a lot of AI concentration. Where can I start to spread things around that give me a different type of exposure? Crypto gives you a unique exposure to an asset class that is built on a new technology that's integrating with the financial system to digital scarcity. And so that type of allocation trade, if you will, is exactly what's happening in the ETF structure. A great way to do that for so many types of investors. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETS with our Markets 102 portion of the podcast.

Zach Pandal, head of research over at Grayscale Investments, continues with us now. Zach, thanks for sticking around. Let's pick up this conversation for the podcast along the lines of where the online show for ETF Edge ended. We had talked a little bit about the regulatory aspect and how much that would be a factor in the future growth trajectory and speed. for cryptocurrencies overall. The CFTC is much more involved these days. The Securities and Exchange Commission, SEC,

is a lot more involved these days, but they've been more involved in a way that has maybe made innovation and product rollout a little bit less stressful. I guess that's maybe the way that you put it. How much do you feel as though that's an accurate statement and how much do you feel as though that kind of regulatory softer touch is necessary for the crypto markets to keep progressing the way that they are.

Look, I think that's absolutely accurate. And Grayscale has been one of these players that has been engaged with regulators for such a long time on these issues. And we're thrilled to see that streamlining of the process. And if you look back two years ago, President Trump came into office, Iran, with a mandate from voters to bring clarity to digital assets here in the United States. I think the administration has been absolutely delivering on that. There's been a lot of pieces along the way. Some of it is rescinding old rules that didn't make a lot of sense. Some of it was bipartisan legislation in Congress,

things like the Genius Act for Stable Coins. Now we're going through a different phase where regulators are tackling lots of rules modernizing our financial system and finding a way for blockchain technology to fit in. A great example, slightly boring topic. I think for most people is transfer agents. And it was the last time we thought about that. But this is what modernizing our capital markets is all about. We do need to find a way to change the rules to bring in things like 24-7 trading, instant settlement.

These are the benefits that blockchain technology brings. And so the regulators are going one through one tackling each of these issues. It's made absolutely an easier job for players like Grayscale to operate in the space. And hopefully it brings value to users. That's the point at the end of the day. A more efficient, more resilient financial system supported by this new technology. custodians, transfer agents, all of these types of things are constructs of what people would call centralized finance, right? And it kind of maybe works a little bit against the, maybe some of the notions around the use cases and the benefits of cryptocurrencies and blockchain on a decentralized format.

But in many ways, it also allows more people who are not as in tune with the industry or the market. to become participants. So how exactly do you think the industry is balancing the centralized aspect of markets for crypto versus the decentralized ethos that many want cryptocurrencies to have? Where are we in that kind of evolutionary cycle? It is a spectrum. I think we balance it with a lot of lawyers is the answer. Look, the technology is amazing, but it has to be compatible with the rules,

the laws of the United States and any other jurisdiction that we operate. And there are lots of specific rules once you start digging deeper into the structure of the financial system, whether it's around custodians or transfer agents or exchanges and best execution price, all these types of things. So whether we're going to tokenize a stock, tokenize the ETF, we can use that new technology, but it does need to fit into the framework of the rules. And that's really where the industry is today, is figuring out how to get to an optimal place, an optimal place that gives us the best value of these tools while remaining compatible with the rules and protect. investors and other institutions along the way. It's an exciting process and expensive process with the lawyers, but I think we're going to get to a very good outcome and a new and improved financial system with public blockchain technology really at the foundation in the future.

So speaking of lawyers, rules and regulations, we had talked a little bit about the regulatory aspect of this, about whether or not you needed a little bit more regulatory ease in order to stay at the forefront for cryptocurrencies. From a big picture standpoint, America is an an interesting position right now where it is very much a leader in many of these kind of frontier or emerging technologies. I can think of things like artificial intelligence and data centers. I would put crypto in that kind of general realm as well. Do you feel as though, and I say A, because it's debatable whether the U.S. is the outright leader in some of these or whether or not other people, institutions, countries, sovereigns are better equipped. Does America not,

need to be a little bit different in the way that it views these types of products and these technologies in order to be the leader instead of a leader in many of these kinds of industries? You know, there are really two sides to this coin, if you will. On the one hand, the U.S. is an incredibly dynamic, resilient, large scale economy. So many innovative entrepreneurs writing clear rules now to bring this technology into our financial system, modernize the financial system, other countries will follow those rules. So the U.S. will be a leader in digital assets in the same way it's a leader in these other industries. The other side of the coin, though, is that the U.S. dominant position and the dollars dominant position in the global financial system

is ours to lose, and it is actually part of the Bitcoin and crypto story. We have a changing world driven by debt and deficits, by foreign policy. choices by the needs of other countries and their own development path. That's putting pressure on the current system. And so one of the reasons that our investors look to digital assets is that they see that a changing world and they're looking for a way to express this view in a portfolio. How do I take a position in an asset class that isn't tied to just one country, one system, one set of rules? How do I try to express something that's more global in nature? And crypto is intriguing to many investors like that. So the U.S. story has two sides to the coin. It will be a leader,

no doubt about it. It'll be an innovator. So many great technologists will come from this country. At the same time, in my personal view, the dollar probably will lose some ground in the global financial system as a store of value, as a medium of exchange. And one of the things that will pick up market share is the digital assets ecosystem. All right, because you open the door or window to it. You mentioned a small slate of different potential catalysts in the marketplace. You talk about geopolitics, the debasement trade, so to speak, deficits and debt. Interest rates are a big deal right now. We have the Fed kind of at a crossroads trying to figure out whether it should raise or lower rates based upon economic conditions.

We have the Treasury Secretary being active in the longer-term debt markets for U.S. sovereign debt. these are a lot of different variables, a lot of moving parts. What do you think the balance of all of that means for cryptocurrencies going into the last part of this year, vis-a-vis, by the way, another big factor, which is a midterm election cycle that could also potentially add a little bit more volatility to all markets? You're right. There are so many moving parts at the moment. Let me touch on a few things.

First off, the Treasury buybacks. I think I would encourage people to think of this as policymakers treating the symptoms because they can't cure the disease. The symptoms is high interest rates. The underlying problem is structural deficits. And regardless of the midterm outcomes, we're not likely to deal with those challenges. We're still going to have unchecked deficit growth almost regardless of the outcome. That drives investors to scarce assets, physical gold, digital Bitcoin. When you think about the interest rates and their impact on digital assets, I would say it's diverse. So this is not just one asset, not just Bitcoin anymore, but lots of different types of assets.

Bitcoin, think of it kind of alternative currency like gold and how you might think about the effect of interest rates. But stable coins, stable coin issuers like Circle, they actually benefit in the way a bank does with net interest margin when interest rates move higher. So think about the specifics of the asset in the digital assets. ecosystem and how it might behave. And then on midterms, you know, it'll raise a lot of different issues that touch on our ecosystem. A big one will be privacy. You know, AI technology is amazing, but it is raising a lot of privacy questions for people. Those questions are definitely being asked in the crypto ecosystem, bringing forward things like Zcash and other privacy preserving crypto currencies are very much in focus. So quite a lot of moving parts. This is what we help

our clients navigate, leading with education, trying to walk them through each of the steps of they're confident allocating capital to digital assets. How far are we away, Zach, because Grayscale does a number of these types of products right now, not necessarily for mass market distribution, but for certain types of investors and participants. There's been, I guess, an evolution of some of these ETF markets or ETP products, right? Exchange traded products to kind of portfolio-wise, if you will, baskets of cryptocurrencies and then allow you to buy kind of units or shares in a basket or a portfolio of different currencies. So it could be cap-weighted in which Bitcoin becomes a massive part of

these portfolios. It could be a little bit more actively managed and more custom-indexed. What exactly do you think that next evolution is for the crypto exchange traded products market, given all of the factors that we've talked about, given all of the regulatory constructs that are currently in place or could be in place to the best of your visibility, when do we start seeing more product come to market that is not just say a Bitcoin ETF or a Ethereum ETF or a Solana ETF and become more kind of like baskets, if you will? I think evolution is exactly the right word to be using here. You know, when people approach digital assets for the first time, they tend to think of specific use cases. Well, Bitcoin is digital

gold or I've heard of stable coins or I'm excited about perpetual futures. We encourage people to think about it as an industry and an asset class. It's a roughly $3 trillion asset class of today, a mid-size alternatives category, lots of different interesting assets. We think people should take a diversified approach, capture Bitcoin, capture Ethereum, capture hyperliquid, in the same diversified portfolio. I think that's the direction of travel. Education still needs to continue. I think people are still coming up the curve on exactly how all these pieces fit together. And in fairness, products still need to come up the curve. One important question is around staking, for example. So some blockchains allow staking, which produces a yield or

a reward rate for investors. We can't do that in every single product today that holds back some of these capital allocations. But Grayscale continues to be a leader in this, pushing to innovate wherever we can, in line with the guidelines that we get from a regulatory, and cooperatively with regulators. But as you get more product efficiency, as you get more education, we think that ultimately that's the direction of travel, a diversified portfolio approach

alongside other alternatives like venture or private equity should be your crypto sleeve, you know, not just a Bitcoin, not just an ether, but a diversified portfolio. And one final question before we let you go here. We had talked during the online show for ETF Edge, Michael Buccella had brought up the idea of yield-enhanced products. it has been one of the biggest drivers of new ETF issuance in traditional markets.

In other words, buy a NASDAQ 100 ETF that has an options overlay, that sells covered calls and generates a certain kind of yield for it. Do you think that that kind of yield enhanced strategy view can translate effectively into cryptocurrencies as well? I understand that it necessitates a more active and mature options. market in order to make those things happen. But do you think that the crypto industry is moving towards a yield focused type environment as well? We are already seeing that. And I think one of the attractive things about crypto for these alternative income strategies is relatively high volatility.

So, of course, volatility means risk in an investment portfolio. But when we're talking about option income strategies, it means also the income, the premium income that you're receiving. So with all the usual are disclaimers about understanding option products and working with your financial advisor. We do think that this will be a popular category. Grayscale is offering a Bitcoin option income products today. We think that that will expand to other alt coins, some of which have meaningfully higher volatility and therefore higher potential premium income. So absolutely a popular category in traditional finance. We're seeing that bleed over into digital assets today. All right. Zach Pendle at Grayscale, thank you so much for taking the time for this ETF

102, Markets 102 portion of this podcast. We appreciate it. My great pleasure. Thank you. All right. Thanks for listening and join us again next week or just head over to etfedge.cmbc.com. Over the last few decades, technology has transformed our world in amazing ways. Through it all, Invesco QQQEF has connected investors to the forefront of innovation. Access the future today with InvescoQQQ. Let's rethink possibility. There are risks when investing in ETFs, including possible, of money. ETF risks are similar to those of stocks. Investments in the tech sector are subject to greater risk and more volatility than more diversified investments. The NASDAQ 100 index includes the 100 largest

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