ETF Edge - Deadline Looming: Gaming the Odds of a Bitcoin ETF 8/7/23

Episode Date: August 7, 2023

CNBC’s Bob Pisani spoke with Matt Hougan, CIO of Bitwise Investments, and William Bernstein, legendary author of The Four Pillars of Investing. With a key deadline looming ahead for the crypto community this week, our panel of experts discussed the odds of a spot bitcoin ETF being approved, and all the pitfalls and regulatory hurdles to come. Plus, Bill Bernstein broke down the second edition of his timeless investing classic.In the “Markets 102” portion, Bob continued the conversation with Matt Hougan from Bitwise Investments.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQQ, supporting the innovators changing the world. 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 interviews and market analysis and breaking down what it all means for investors. I'm your host, Bob Bizani. A key deadline looms ahead for the crypto community this week. The SEC needs to give a thumbs up or down to arts.

proposal for a Bitcoin ETF by later this week. Today on the show, we'll discuss the odds of a spot Bitcoin ETF being approved in all the pitfalls and regulatory hurdles ahead. Plus, we'll hear from legendary financial author William Bernstein, who's bringing us the second edition of a timeless classic when it comes to investing wisdom. That's the four pillars of investing. Here's my conversation with Matt Hogan, CIO of Bitwise Asset, Bitwise Investments, and Bill Bernstein, is the author of The Four Pillars of Investing. Matt, you have also filed for the Bitwise Bitcoin ETF Trust just behind our handicapped is for us. Does the SEC say yes, no, or punt it down the road?

Yeah, if you look at the history of ETF applications around Spot Bitcoin ETFs, Bob, they've historically punted it down the road. In every case since 2016, they've taken up to or entirety of the 240 days they have to review these applications. These are complex applications with a lot of data. I think they're likely to extend this until the final review, which comes in January. So if they want to push this off further, the drop dead date is January. Is that right? They can extend it again.

That's right. The law gives them up to 240 days. What this August 13th deadline is an interim deadline, sort of like a check-in. Can we decide now or do we need more time to review? My guess, I don't know, but my guess is that they'll need more time to review as they have in each instance in the past. Yeah, we got a long line here. I mean, besides ARC, we have BitU, Bitwise, BlackRock, Vanek, Wisdom Tree, Valky, First Trust, Fidelity, and Grayscale wants to convert into into an ETF as well. So talking to the community and just getting a sense, they seem very

excited, the crypto community, because the current crop of applicants has this surveillance sharing agreement in it with exchanges like NASDAQ and the CBO that would allow for the sharing of information about market trading activity and clearing activity and customer identification. And supposedly this will reduce the chance for market manipulation, which is the main complaint the SEC has. It also seeks to ensure that investor assets can't be diverted by the exchanges to an unauthorized party. That was the big issue I know at FTX.

So is this enough? Is this sufficient to address the SEC's concerns? about fraud and manipulation? It's a great question, Bob. You know, I think it's very helpful, but it's not a silver bullet. Look, what the SEC wants is for a spot Bitcoin ETF that the American public can trust that provides careful exposure to the price of Bitcoin that doesn't lose customer assets, etc.

So they're evaluating a totality of circumstances. The surveillance sharing agreements between traditional exchanges and crypto exchanges like Coinbase are helpful, but it's also helpful that we've had a Bitcoin future. ETF on the market for almost two years. It's also helpful that the regulated futures market is large and robust and growing. It's also helpful that we have a better understanding of crypto custody, of broker transfer, the totality of circumstances is what the SEC is looking at. I don't think there's any silver bullet.

But I do think if you step back and look at those totality of circumstances, we're in a very positive state. I think the market is ready for a spot Bitcoin ETF. I think investors deserve a spot Bitcoin ETF. and I'm hopeful we'll get one sometime in the coming months. Yeah, I'm in agreement with you. There is a lot of optimism out there in the crypto community. I've heard several reasons.

Some say, well, look, the SEC is just to prove a two-time leverage Bitcoin ETF. Well, that's got to be a sign that they're sort of softing up a little bit. But the biggest thing that I've heard, which makes a lot of sense to me, is this lawsuit that Grayscale has brought against the SEC. So Grayscale wants to convert its Grayscale trust to. to a Bitcoin, spot Bitcoin ETIF. The SEC has denied

them. And in some of the hearings, the judge seems to have been very hostile as to why the SEC has approved a Bitcoin futures ETF and not a spot ETF. Very aggressive in his questioning. I just spoke with Michael Sonnichime from Grayscale. He tells me a ruling in the case is expected

any day now. Could that move the dial if it went in Grayscale's favor? I definitely think it could move the dial, Bob. You know, you and I love ETF history. We know that in Canada, which has spot Bitcoin ETFs. It was a lawsuit that provided the initial breakthrough that got us over the hump there to get those listed in trading. I think this would be an important catalyst. You know, Grayscale is arguing that you can't have a futures-based Bitcoin ETF and

say that there is something wrong with the price of Bitcoin that doesn't allow you to have a spot Bitcoin ETF. That has a certain amount of logic to it. And if the courts can enforce that, that narrows the window of the questions the SEC can act about this case. Again, it's not a silver bullet. There is no silver bullet, but it is another piece of helpful evidence that might help push us over the edge. Yeah, I was very impressed with how aggressively the judge questioned the SEC in the gray scale case. They seem to imply that the SEC hasn't really explained to gray scale exactly why they have been turning them down. So if a spot Bitcoin ETF is approved, should the SEC approve all of them at once? What happens? Let's assume something

happens. Should they approve them all at once? Do you think that should be the case? I think there should be a fair playing field that allows us to have multiple spot Bitcoin ETFs that compete in the market. That's actually the best outcome for investors. It will allow prices to be the lowest. It will allow competition to be the highest. It will allow service to be the highest. It's what investors should want. And it's probably the fairest to the industry. There maybe shouldn't be just a lottery-based system based on when you filed and when you get approved. Let's line up the best spot Bitcoin ETFs at the starting line, say go, and see who can win the market. We're confident at Bitwise that if we have the opportunity to compete in that

space, we'll be able to win our fair share. But most importantly, that would be what's best for investors. And that's really what we should be arguing for here. Well, certainly, we have seen the first mover advantage in anything that's out there in the business, particularly in ETF. So this would make a lot of sense to me. And what do you make of this idea? Oh, BlackRock got in because BlackRock must know something. Or, gee, BlackRock has a great record of applications. But I'm not so sure that they're not simply watching what everybody else is watching,

particularly this whole debate with Grayscale and the lawsuit going on. I mean, what do you make it when people say, oh, Black Rock must know something? Yeah. I don't think there's any conspiracy theory. There's no whispering of messages to BlackRock. What there is is the world's largest asset manager, a very sophisticated player in the ETF market, looking at the totality of conditions and saying they think the time is right for a spot Bitcoin ETF.

And on the other side of the aisle, equally important, BlackRock saying we think Bitcoin is an important asset for investors to get exposure to for the next year, the next three years, the next 10 years. Again, I don't think there's any special conspiracy, but they are a sophisticated player. So it's another sign that the best ETF experts in this market thinks conditions have matured enough to allow the SEC to say yes. And I hope that's what we see. And what about this endless debate about whether cryptocurrencies are commodities or not? We haven't even addressed that.

Can you explain simply, Matt? And you've done this before for us. Why is Bitcoin considered a commodity, but the SEC contends other coins, apparently? or not. What is it about Bitcoin that makes it somewhat special, it seems, to a certain extent? Yeah, it's a great question because the SEC has singled out Bitcoin and said it's clearly a commodity, and the CFTC has agreed. It's all about centralization, Bob. You know, securities laws are designed to protect investors from insiders knowing something about a company or an investment that the public doesn't. It's about, you know, let's not let those insiders pull the wool over the eyes

of the investing public. But with Bitcoin, It's so decentralized. We don't know who created it. There's no single person in charge of it. It's globally distributed around the world. There are no insiders. All the information is public. And that's what makes it clearly a commodity.

As you go from Bitcoin to Ethereum to other assets, the degree of centralized control increases. And the question gets more complex. Eventually, I think we'll have legislation solve that. But what's important for investors to understand is that the regulatory status of Bitcoin specifically is very clear. It's a commodity. It could fit into an ETF trust.

And I think both of our major regulators in the U.S. agree on its commodity status. You mentioned legislation. What are the chances of getting congressional rules on crypto? Everybody seems to want that. It seems to be very far away, though. You know, I don't think it's as far as people think, Bob. I've been on Capitol Hill recently meeting both with Republicans and with Democrats.

And I'd say two things from those meetings. One, the level of understanding about crypto is extremely high. Congress didn't know much about crypto a few years ago. Now they're really experts. And two, the bipartisan sense that we need legislation to provide a firm regulatory framework for crypto in America so we can compete internationally is very clear. Look, you have the two largest regulators disagreeing on whether most crypto assets are securities or commodities. The right solution there is for legislators to come through and make that

clear so that U.S. innovators can win in the market. I'm actually optimistic. We'll see that sometime within the next two years, even with the challenging sort of network in Congress we have. There is real progress there being made. All right, two years. I'm going to call you to that. Now, stay there, Matt. I want to pivot for a moment. I want to bring in a special guest, a friend of mine, legendary financial author, William Bernstein, joining us now with a new, of his investment class. This is the four pillars of investing on how to use ETS. Partly I'm going to talk to him about, I'm building a long-term portfolio, but he's the author of many, many other books, including The Birth of Plenty, one of my famous book, A History of the World's Standard

of Living, essentially, and the delusion of crowds, why people go mad in groups. Bill, thank you very much for joining us. And before I get to your book, I think you were listening there to our discussion on Bitcoin. Do you have any thoughts on crypto? Is it money? Does it deserve to be considered an asset class? What are your thoughts? Well, I think that the key term is the word itself, crypto currency. It is a currency. And one generally doesn't think of currency as part of an investment portfolio. It's a unit of account, but it's not an investment product per se. So I would no sooner invest in cryptocurrency than I would in, you know, Swiss francs or English pounds and then stick them in the mattress. And there are some people would argue that it's not

money, of course, but I want to turn to your book because that's why I'm having you here today, the four pillars of investing. This book came out 20 years ago. I read it then. It's become a bit of an investment classic. Before I get to the four pillars, I want to let the viewers know. You were a very early proponent of indexing. You were one of the champions of that. You have generally argued against stock picking and market timing. Is there anything that's happened in the last 21 years that has altered your fundamental views on this? The only thing that's happened is I'm now 20 years older, and I would like to think I've acquired some useful experience. And one of the things that I acquired and learned both in 2008 and more recently during the March 2020 COVID swoon was that how you behave in the worst 2% of the markets probably describes 90% of your overall investment performance.

because compound interest is magic. And the prime directive of compound interest, as Charlie Munger famously said, is to never interrupt it. And so that you should design your portfolio with those 2% of the world's, 2% of the world in mind. Yeah, that's a very good point. Let's go over the four principles because it's important. You've got a book title, Four Principles. Let's say what the four principles are. So number one here is the four principles investing.

Number one is theory here. Risk and return are joined at the hip. The higher risk, you get higher return. If you desire safety, you have to accept lower returns. So that's the theory behind this. And of course, a lot of people understand this intellectually. They don't necessarily do it, though. That's right. I couldn't have said it better myself. So, you know, risk and return are joined at the hip. And if you want perfectly, perfectly safe, portfolio, you're not going to have high returns. And if you want the high returns that come with equities, then you're going to have to sustain bone-crushing losses. Hopefully, there will be temporary from time to time. And basically, you don't get those stock returns for free. You have to pay for it with stomach acid. All right. Number two of the four principle of investing is the history part of this. And that is the market's overshoot on the upside and the downside. But there's only so many plot trajectories. Now, what do you mean by

that bill and said there's only so many plot trajectory what's the takeaway for an investor to say markets overshoot on the upside and downside well markets don't get either very expensive or very cheap without a good reason so at market bottoms uh everybody likes to say that you know we're gonna i'm going to buy at the market bottom but you don't know where that is except in retrospect and the narratives at market bottoms are really scary it looked like in the end of 2008 that our entire financial system was collapsing. It looked like in early 2020, like there were going to be tens of millions of worldwide debts in the markets and the economies of the world were going to completely shut down. And remember that in March of 2020, there was no vaccine in sight. So the world

looked very scary then. So you have to just be able to keep your discipline and understand that the expected market return has to do with the perceived risk of the market. and the perceived risk of the environment this you're in. So when the risks seem very high and things seem very scary, then you have to be paid with a high expected return to compensate for that risk. Yeah. Let's move on. This is investing pillar number three here, and that's the psychology part of all of this.

You are your own worst enemy, one of my favorite lines from you, which is true. This goes to behavioral psychology, and people don't buy low and sell high. they do the opposite. And investors tend to be overconfident about their ability to pick stocks and about their own risk tolerance. There's a lot in here. But I want to start with that point about they're overconfident about their ability to pick stocks. If there's anything that you stood for and a number of other people out there, it's that market timing generally does not work, and picking stocks doesn't work over investing in indexes. The academic literature is pretty overwhelming on this bill and and how do we keep emphasizing this to the new generation i guess

well you tell people a couple of things in the first place whenever you buy or sell a stock the guy on the other side of the trade isn't some dentist from peoria who doesn't know what he's doing all right it's generally that person on the other side of the trade generally has a name like warren boffett or goldman sax and that's not even the worst case scenario the worst case scenario is that you're trading with the CFO of the corporation who knows more about it than anybody else on the planet. And the analogy I like to use, or the metaphor I like to use, is you're playing tennis against an invisible opponent. And what you don't understand is the person on the other side of the net is Serena Williams. All right. So that's the main thing.

Now, the other thing has to do with timing the market. And all you have to do is just look at the history of newsletters and market timers to see that no one, and I mean no one, can, you know, consistently calls the market with even 60 or 70% accuracy. More closely, more likely, it's more like 30 to 50%, which is worse than a coin flip. And by the way, you have to hit 70% to win because not only you have to decide when they get out, but you have to decide when to get in. When to get in. And the math of that's, yeah, and the math says you have to be right about 70% of the time

you do both of those things successfully. And no one does that. It comes even close. Right. You also said investors are overconfident on their risk tolerance. That's very interesting. And this ties in what you said earlier, how you behave in the worst 2% determines what you're going to do. So it turns out people are risk-tolerant until the market's down 30%.

And then all of a sudden, they're less risk-tolerant. How do you convey that? How do you make that into something real for somebody? Well, I quote that famous financial economist, Mike Pyson, who said that everybody's got a plan until they get punched in the mouth. Yeah, that's true. So the bottom line is, I think the simple way to do this is prepare yourself for, like last year, the market was down 20%. Most people were very, very worried, and I got lots of emails. So we pull money out, and I say, you know, if you were a long-term investor, this year is not going to matter in the next 20 years.

I think that's the key point here. Let me just move on here and go to four pillars of investing number four. And that's understanding the investment business and who you're dealing with. The primary business of most fund companies is collecting assets. It's not managing the money. That's very profound. Assets under management is what matters, not necessarily managing the money, and pay close attention to fund fees. And of course, this was Bogle, Jack Bogle's central insight, that even when you get a fund manager who might have some alpha that's often destroyed by the fact that their fees are too high here.

So I think a lot of people have absorbed this idea, Bill. I mean, this is one of the reasons ETFs have proven so popular. How do you feel about the ETF business and its role in reducing fees, for example? Generally pretty positive. One can purchase a lot of investment products now for next to nothing in terms of expenses, a couple of basis points. And, you know, this was, you know, Jack Vogel wasn't wrong about very many things, But he was wrong about his opposition to ETS. And thank goodness that Gus Sauter was able to convince him in the Vanguard group to go ahead with their ETF offerings.

Yeah, the very few things Jack was wrong when he was wrong about that. And Jack thought there was going to be too much trading around ETFs. And there is, but the benefits far outweigh anything else. Matt, you've been sitting there quietly. Any thoughts on this? The academic literature certainly supports the idea that market timing and going in and out of stocks is a bad idea. But there's a whole new young generation of traders, particularly since COVID, who seem to love doing this. They love doing options, too. Matt, how do you convey Bill's

wisdom in history without those younger people saying, you know, yeah, guys are a bunch of old fogies. Doesn't matter that much anymore. Any advice, Matt? You've been around a while. Great question, and it is true wisdom. It's extremely true. You know, indexing always appeals to the head, but there's always a part of people's heart that thinks they can time the market. My hope for people is they put the vast majority of their portfolio in low-cost index funds and buy and hold. And if they have to have a small portion that they try to time the market and learn those lessons individually, that's fine. But protect the bulk of your assets in low-cost index funds for the long haul. It's extremely good wisdom.

And Bill, what do you say to people when GameStop happened, people message me immediately said, You see, this proves fundamentals don't matter. The company's not making any money. It doesn't look like it's going to make any money. Look at the price of this crazy thing. It makes no sense at all on a fundamental basis. And ultimately, of course, those of us who are fundamental investors believe that long-term, that this will play out. But you have to admit, short-term, they can certainly make things a little crazy.

What's the correct response to people who say, well, look at GameStop. Fundamentals don't matter that much anymore. Yeah, almost 100 years ago, my father kept trying to convince my grandfather to invest in stocks during the 1920s. And he just kept saying, no, son, I'm not going to do it. And then finally, my father, an exasperation looked at him and said, my dad, shouldn't I invest in stocks? And then he just said, you'll see. And of course, 1929 happened. And that was the answer.

That's my response to people who are enthusiastic about meme stocks is just wait a few years, you'll see. Well, so you broke up a little bit there, Bill, but your point was this craziness happened in the 1920s, too, and eventually fundamentals caught up with everybody. That was the point. Exactly. Yeah, that was the point. It was just a story between my father and my grandfather. My grandfather finally in exasperation looked at my father and said, just wait a few years in the 1920s, and you'll see what happens to all these high-flying stocks. Yeah, well, my response has always been, the reason people buy stocks is to participate in a future stream of dividends or potential earnings that would turn into dividends. And I'm not aware of any reason why that has changed over the years. But you can get groups of people to suddenly believe in other things.

I don't know if you remember, Bill, but in the 1980s and 1990s, we used to have on a fellow Arch Crawford who used to recommend buying stocks based on astrology. So the moon was in Venus by Microsoft, literally like that. And we all sort of said, you've got to be kidding me here at CNBC 30 years ago. But he had a very large following of people. And obviously this had nothing to do at all with the fundamentals. But I guess my point here is if you could convince this sufficiently large number of traders to suddenly believe in sunspot activity and that was going to affect something, I guess you can move stocks for a while.

But ultimately, you've got to go back to fundamentals somewhere. Yeah, I mean, that's called data mining. You can always find spurious correlations. The most famous example of that was about 20 or 30 years ago, somebody figured out that when he plumbed the United Nations economic database, that butter production in Bangladesh precisely predicted the movement of the S&P 500. Well, if you're looking at 100,000 different parameters, you're liable to find one that's very accurate. But, of course, there's no guarantee that's going to do terribly well going forward. Yeah, or that there's even any correlation there, that it's any statistical anomaly there.

Now it's time to round out the conversation with some analysis and perspective to help you better understand ETFs. This is the Markets 102 portion of the podcast. We'll be continuing the conversation with Matt Hogan from Bitwise investments. Matt, thanks for sticking around. I want to just bring up a point that's bothered me for a long time, and that is whenever we talk about crypto, we tend to talk about Bitcoin. And I wonder when the community or when we're going to start talking a little bit more broadly about the wonders of blockchain and decentralized finance in general. People ask me about Bitcoin all the time. I have no opinion on the price of Bitcoin.

I'm not sure it satisfies a really strong use case. I'm not even sure it's money. But I am very enthusiastic about blockchain, very enthusiastic about decentralized finance and all the great, I think it's a real technological breakthrough. I think it can make the financial transactions of all stripes much more friction of more friction free. I'm wondering, when do we start hearing more about real estate transactions or transferring money or even settlement with stocks or all this wonderful things that are potentially out there with blockchain? It's such a great question, Bob. You know, Bitcoin is the big dog that gets all the coverage, but in many ways, the least interesting crypto asset out there, right? It's like the pet rock of crypto.

It's just a way to store wealth. Maybe a digital version of gold. That's what it's aspiring to do. But as you mentioned, blockchain and public blockchains have the opportunity to rewire how finance works, how transactions works, how part of our culture work. I think the key to when we'll make that flip is when we see more breakthrough retail adoption that my uncle, my cousin, my mother, my friends are using in their day-to-day lives. You know, we're starting to see that on the cultural side, Bob. We're seeing things like Nike,

which did $200 million in NFT revenue over the last year. We're seeing integrations between digital fashion and video games like EA Sparts. We're seeing more traditional asset managers launching on-chain versions of mutual funds fully in a blockchain setting on platforms like Ethereum and Layer 2 solutions. We haven't seen sort of the iPhone moment, but I suspect it's coming sometime in the next year or two. The conditions are right. And I think that's when people will start talking more about Ethereum, about Polygon, about other crypto blockchains, and about blockchain more generally. Yeah. I mean, the problem I have with it, I think this could happen very quietly and people don't even notice. So for example, my whole family is in the real estate

business. Title insurance is one of the great businesses of all time. It's essentially a gatekeeper. You can do whatever you want with your property, but you've got to prove that you actually own it. And by the way, I'm the one that proves it to you. That's why you have title insurance. But you can do this through the blockchain very easily. And yet I don't hear about it happening. And I'm afraid the minute it happens, nobody's going to notice. It's just going to disappear.

And the wonder of this, how important this is to facilitate, you know, transactions. People don't understand the mountains of paperwork it takes to buy a house these days. It's ridiculous. My old family's in the real estate business. I know this very well. So I keep trying to push this, you know, this understanding that this is a potentially revolutionary technology. Think of reducing financial friction, any transaction where there's something even in between, even if J.P. Morgan standing in between you and sending $1,000 to your friend in London,

or there's a title insurance company between you and a real estate transaction, or there's a settlement company between you and buying and selling your 100 shares of IBM. You go on and on and on. And it's tremendous the potential there. And yet all we ever do is talk about Bitcoin. So it annoys me a little bit, I guess. It's totally right. And there's a key that you know that this is true, Bob, which is when you look at the

leadership, the largest financial institutions in the world, whether that's BlackRock and Larry Fink, whether it's PayPal, whether it's even J.P. Morgan, which is publicly skeptical about certain crypto assets, but behind the scenes has a large blockchain team. or if it's Visa, they're all engaged in this. They're all developing teams. They are hiring in crypto and blockchain. And why? It's because they know the dirty underbelly of how slow and sclerotic our financial system is,

how terrible title insurance is, how awful that paperwork is. Stocks still take two days moving to one day to settle. What takes a full day in today's world to get done? Blockchain can make all that instant. It makes it atomic. It makes it efficient. And that's why at the leadership levels of the largest financial institutions, you see, without fail, everyone is developing and thinking about this new technology.

I do think it's behind the scenes. I've said crypto will be mainstream when we stop talking about crypto, when it's behind the scenes and it's just frictionness and the world moves faster. I think we'll get there, but we're not there quite yet. Yeah, we keep talking about improving productivity. We need to improve productivity. Here's one of the great productivity improvers staring us. in the face. And I just hope that it's what I want. I want it framed that way. That's the way

you need to frame this game and not get rich quick around Bitcoin. Enough already. And let's start talking about improving productivity. All right, enough of me on my soapbox. You know how I feel. PayPal launched a stable coin today. Is that right? Tell us about that and what that means. Absolutely right. You know, the largest U.S. FinTech putting its flag in the ground and saying stable coins are an important improvement over how money moves in the market today. Who moves money faster than PayPal, right? PayPal has built its business on the rapid movement of U.S. dollars. And it's saying that there's new technology out there, stablecoins built on public blockchains

that are even faster than the fastest way to move legacy money in today's market. This is potentially a game changer. And I would note it comes just a few months after the world's largest asset manager, BlackRock put its flag in the ground and said that crypto matters. So to my point about the largest financial institutions adopting this technology, you have the largest asset manager, you have the largest fintech. They're all saying this is a big part of the future. I think investors may want to think about what that means. And maybe some of the skepticism around cryptocurrency may not reflect the reality of what's going on underneath the surface. And distinguish for the viewers,

and we should not necessarily assume the viewers know everything, a stable coin, which would be tied presumably to a U.S. dollar and Bitcoin. They're their potential means of payment, but they're two very different animals, right? Totally different. Bitcoin's price can fluctuate and is very volatile. A well-designed stable coin is designed to reflect the price of a dollar in the way maybe a money market fund does. They're not under the same regulatory guidelines, but they operate in the same general framework. So it's just a digital representation of the dollar. The difference is it moves at the speed of the light instead of the speed. of you know whatever our dollars move today which is something like horse and buggy so that's the

transition it is very different from bitcoin it's using blockchain technology underneath to accelerate money into the modern age right and of course in theory you could send money almost frictionlessly and theoretically potentially for very little if anything um using a stable coin between two recipients that's right you could pay for coffee maybe with a stable coin and the merchant could get it today. You know, if you're running a small business, you have to pay a fee to visa for every transaction. It can take us to settle that up. We could see stable coins become a real payment technology that we use in our day-to-day lives to make transactions instantaneous, better for buyer and sell. How do you think VEVNMX feel about that? Well, they're looking at this. They know

that it's coming, Bob. That's the thing. They have huge teams that are developing this. They have a choice to ignore the innovation that's coming and then get crushed or to adopt it. And I think you're going to see them move towards adopting it. They're actually on the inside, very pro-crypto. They just want to make sure that it takes enough time that they can adapt their business. But it's going to change their business. There's no question in my mind about that. Well, and they want to make sure they can get in on it somehow.

It's sort of like the mutual funds in the ETF business. The mutual funds look discance at ETFs for decades. and now we see them slowly joining, if reluctantly, at a lower cost to them, but they're finally realizing where the public is going. I mean, don't just think there's a similar to glide path here? It's exactly right. Financial innovation can be delayed for the mainstream, but it can't be denied. Ultimately, the world wants faster, cheaper, more efficient financial transactions, whether that's

ETFs delivering it from an investment perspective or blockchain delivering it from a money perspective. It's the way the world's going. I think it's inevitable. It's just a question of how fast we get there. Yeah. This is one of the great financial innovations of the last 50 years. Let's hope it gets here sooner rather than later. Matt, thank you very much for joining us. Matt Hogan, the CIO, a bitwise investment. And thank you, everyone, for listening to the ETF Edge podcast. InvescoQQQQ believes new innovations create new opportunities become an agent of innovation Invesco QQQQ Invesco Distributors Inc.