On The Brink with Castle Island - Matt Hougan (Bitwise) on Crypto Market Narratives and the Launch of BITC (EP.410)

Episode Date: March 28, 2023

Matt Hougan, the Chief Investment Officer at Bitwise Asset Management joins the show. In this episode we discuss: The banking crisis and Operation Chokepoint 2.0 The decisions facing the Fed and the second order impacts of Fed policy How the cryptocurrency industry has evolved post FTX Prospects for stablecoin and market structure regulation in the digital asset industry The bitcoin futures market The launch of the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) To learn more about Bitwise visit www.bitwiseinvestments.com and follow Matt on Twitter.  

Today on the podcast, I sat down with Matt Hogan, the chief investment officer at Bitwise. Matt is a recurring guest on the podcast at this point, and I always love getting his pulse check on what's happening in the markets. In this episode, we talked about the banking crisis. We spoke at length about Operation Chokepoint 2.0 and the impact on the crypto landscape, as well as some other current events. We also discussed Bitwise's new product, BITC, a futures-based ETF that uses an optimum role strategy for their Bitcoin futures. I think you'll enjoy this one. So without further additional, do here's my conversation with Matt Hogan. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions

and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by Bad Mortgage Investments, Lehman, which has 25,000 employees will be liquidated.

American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin.

Bitcoin. Matt, welcome back to the podcast. What is this, your third or fourth appearance? on the brink? I think that's right. I feel right at home. Thanks for having me back. Yeah, well, I'm excited to chat. I had to cut off our little banter at the outset here because we were talking about the banking sector and it was just really something we should have had the podcast recording on. Why don't we just start and give us kind of the who you are and then we'll hop right into it? Sure, yeah, absolutely. Matt Hogan, I'm the chief investment officer here at Bitwise Asset Management.

Of course, Bitwise is a specialist crypto asset manager, have been in the market for five years, offer a variety of products, mostly for professional investors, financial advisors, family offices, and institutions. And I lead the investment team over here at BitWise. Awesome. So we're investors in BitWise, full disclosure. You guys have just launched a new product that I want to talk all about. But before I do, I mean, let's just talk about what's going on in the world right now. How does this banking crisis stack up to anything you've seen in the past? It is an incredible moment. You know, to one extent, it's like deja vu, right? It's right back to the Cypress Banking Crisis or the global financial crisis. It is the case that this has been a

rickety system beset with failures for a while. But the speed of what's happened over the last few weeks, the number of failures. And I think, you know, as we were discussing before we started recording, what it means for the banking industry long term is really amazing. Of course, it has ramifications for crypto. It has ramifications outside of crypto. But it's been an incredible couple weeks. and I don't think we're out of the woods. I think there is more to come. It just seems like we're at a super unstable equilibrium right now. I mean, holding money in small regional banks, when you could be holding it at a SIFI, you can see why the deposit outflows from some of these smaller banks are going to be through the roof. I mean, is there a path forward here absent having a two-year

guarantee of FDIC insurance? I don't even think that that is a long-term path forward. So on a short-term path, absolutely not. I think the regulators and the government are sort of hoping that everyone will forget about what's happened over the past few weeks. And I don't think people are going to forget. We also have seen historically that who they save and who they don't save is seemingly random or arbitrary from the outside. And because the switching costs of moving your money to a SIFI or to a money market fund is effectively zero, and the downside is more than zero, of course everyone is going to do it. So I think they're going to have to step in and guarantee effectively all deposits explicitly in the same way they've been guaranteeing them implicitly.

But I don't actually think that's going to solve the problem long term. I think long term there's going to be money draining from these banks, certainly corporate money draining from these banks, even if there is a deposit guarantee. These banks have been underpaying depositors from an interest rate perspective for years. And I think that jig is up. I think you're going to see money move into money market funds and other solutions. I think this is a more fundamental crisis for banking than perhaps many people are talking about. I mean, I think that's probably right.

And so then if you're one of these smaller banks, I guess you need to innovate on the product side or go by the wayside. It just seems like it's very unstable at the moment. I think that's absolutely right. Or just work with small individuals, right? The days of small regional banks banking corporations, I think may be over. You need to move to SIFEs or you need to move into money market accounts. counts, maybe some innovation will save some of the more thoughtful regional banks. But I don't think the banking ecosystem will look like it looks today in five years.

I think this is a more fundamental shift than that. And I mean, what does this do? No one's talking about what this does to money funds longer term. I mean, you could make an argument, I guess, in some will that this makes the money fund systemically important in a pretty major way if you just start to grow that asset base. But you're going to have another whole set of issues there if that part of the market just expands exponentially. Isn't that the story that we're living in?

You squeeze one little corner and of course it explodes on the other side. Every one of these steps creates issues down the road. We've been kicking the decan down the road for more than a decade. We're trying to progressively kick it and it's getting heavier and heavier. So you're absolutely right. It's going to create issues in that market. It's going to create overfunding in that market, which will create its own systemic issues. There is no great solution here.

there's no easy way to put the genie back in the bottle. I think the sort of ultimate lesson is there's going to be hard consequences at the end of this. We've been postponing those hard consequences for years, now for more than a decade. Each time we postpone it, it gets progressively harder and the knock-on consequences are larger. There's just no easy, soft landing I see to all of this. There are going to be more and more consequences on the downside. It certainly seems that way. really interesting to see the price of Bitcoin this year reacting to some of this. I mean,

if you view Bitcoin as a liquidity gauge, it would tell you that the Fed is going to have to cut rates here. It seems like that's what it's telling me. I'm curious how you think about that, just the context of how Bitcoin is performing against this backdrop. Yeah. Well, let's say that Bitcoin has been a perfect predictor of what the Fed is going to do for more than a year now, right? Bitcoin peaked in November of 2021. When the Fed first signaled, it was a perfect predictor. It was a was thinking about moving to quantitative tightening and to raising rates five months before they actually did so. Bitcoin was telling you what was going to happen. And it bottomed late this year when most real-time statistic looks at inflation also bottomed. It took a new view. I think what

it's saying is exactly what you said, which is the only way out of this in the short term is quantitative easing in whatever four-letter acronym you want to package that inside. And a pullback on the rate-raising regime, which we're already seeing in the Fed Fund Futures price. You know, I think Bitcoin was primed to do well this year, even if we had a normalized macro environment, I think we would be up. I think we're in a new full cycle for crypto. I think it will last for multiple years. But I think what you're seeing in Bitcoin specifically in it outperforming the alt-coins, in it responding directly to news events, is it showing us where we're going, which is the Fed is going to have to reverse course to some degree from tightening to easing.

That's going to help assets like Bitcoin. And it's also pricing in some of this sort of existential risk around the banking sector with people looking at alternatives. I think that's exactly right. I mean, it's really, you've been around this industry long enough to remember what this all looked like before Signature and Silvergate. And so, you know, it's interesting to think about, hey, there's this bull case story about Bitcoin going on, but at the same time, it's just getting harder and harder to keep a bank account if you're a crypto infrastructure business. And getting harder to get money into the system, frankly, as an

individual based on some of these crackdowns. So, you know, how do you think about what's going on here? I mean, I have my own views that this was basically a drive-by shooting of signature because they were in crypto. But I'm curious what your view is on just some of the hostility we're seeing towards the sector from the FDIC and other agencies. It's really astonishing. I'm a very optimistic person. I generally think people operate with best principles. I generally think conspiracy theories are wrong, and the world operates a call it normal rails. But it's really impossible to look at what's going on and not see a coordinated effort. We had Barney Frank, who wrote the rules on banking sitting on signatures board and saying they could have opened for business on Monday.

It's the first time we've ever stepped in to take over what was a solvent bank. And it's hard to look at that amidst the multiple warnings being issued by the FDIC. the OCC and Treasury about banking crypto companies and not see a consolidated effort to cut off crypto from the banking system, which of course will just introduce significant risks for people trying to invest in crypto because they think it is an interesting, disruptive, and good for society technology. It's going to make that effort harder and riskier. As you mentioned, we've been here before in crypto. Many of the earliest scandals in crypto were the result of the difficult of getting banking relationships.

Like if you remember Tether and the reason they had to do the Leo offering was because they lost a billion dollars dealing with some shadowy payment processor, I think in Panama because they couldn't find a bank to do simple payment processing. Even when Bitwise started backed by some of the leading venture capital firms in the world, it was hard to find a bank just to make payroll. And we're back there and it's getting worse. It really is a coordinated effort. And it's bad for crypto.

Let's be clear. There are lots of reasons to be very bullish about crypto right now. There's huge animal spirits in the developer community. What's going on in the banking sector? Injections of liquidity, we're seeing that in the market price. But this isn't good. This is a net negative that we have to wrestle with and fight against as an industry. Fortunately, we're of the size where we can fight against it.

But it's something to really keep your eye on. It is a real risk. It makes no sense from a geopolitical strategy perspective to have this innovation. happen elsewhere. I mean, one of the most important things that's happening right now in the crypto space is just the proliferation of stable coins and the idea that people in other countries want to hold the dollar as a savings technology. As crazy as that sounds to us, it's, you know, it's a better alternative to a lot of local fiat currencies. Why would you not want to have that? I mean, why would you not want to make the dollar a stronger fiat currency? We should be

enacting laws to make it very clear how to launch stable coins and, you know, we're going after it. It's just, it's hard to see why we would be taking these moves as a country. I love that example. I couldn't believe it when we effectively banned Facebook from moving into creating its own stable coin, which was a great chance to export the dollar literally everywhere in the world, secure our place as the world's reserve currency for the next 100 years. Now we still have that chance in the stable coin market, but it's not going to be there forever, right?

All of the forces that are arrayed against the U.S. dollar hegemony that we've, enjoyed and experienced and indulged in as a country for the last 50 years, those won't persist forever. And you're absolutely right that we're missing this massive opportunity to extend that leadership. We have it here. It's a vanishing opportunity. It is astonishing to me that people don't see this. And I think we're going to pay the price if we don't get our act together in the next couple of years. This opportunity won't exist forever. I agree. I mean, the other thing that just seems so obvious yet Congress is not acting is just have some sort of a market structure that codifies who oversees the spot market for crypto assets and crypto commodities

and put probably some sort of a safe harbor in place around things that have already launched and how they can come into compliance, whether that's with the SEC, the CFTC, or just some new regulator. It just seems in the absence of a bill like that, you're just going to have the SEC try to win a couple of hundred different cases and use tech. taxpayer money to fight against startups. That's exactly right. And you're imposing a huge burden on crypto companies. I think I read a statistic somewhere. The average crypto company hires a full-time internal counsel as like employee 15 or something, which is way too early in a company's life cycle to have to do that.

But that is what you need to do to deal with this engagement. What's so annoying is it's this sort of fight for regulatory turf that's slowing this down. And you're right that the only solution is a legislative solution, and it's obvious sort of the broad contours of what that should look like. I'm also of the view that just clarity on this would be better than whatever the substance of the regulation is, even if it ends up in the SEC's domain, and even if it ends up with a short grace period to come into compliance, that would be long-term better for this space than this lack of clarity than this infinite enforcement actions, infinite subpoenas, which is the status quo that we're living under. The good news is Congress is actually relatively progressive on

crypto, is my view from the outside. There's a lot more balance in Congress than there is in the regulatory community. So Congress isn't good at passing bills writ large right now, but if they could get their act together on a few, it would be helpful for us and it would help make sure that this innovation takes place in America, which is, you know, what I want as a U.S. citizen. Totally. I mean, you're right. There are some kind of green shoes. For a long time, I've been worried that it would just be Republicans that were pro-crypto, but we're starting to see Democrats in Congress, Richie Torres in New York, Jake Gatchen-Claas up here in Boston, utter skirts of Boston, become, I would say not necessarily like full-fledged advocates, but certainly receptive to the innovation story,

receptive to things like stable coins, receptive to regulatory clarity and new companies being formed, which kind of seems so obvious there's something you should be getting behind. But I do hope that we can have some sort of a bipartisan pro-crypto. lobby emerge here? I'm hopeful for that as well. I also think you see more decentralized applications come on board outside of the monetary use of Bitcoin. I think that can appeal more to the Democratic side as an alternative to existing

large tech monopolies. I think that's a narrative that may emerge over the next few years that could help even that out. So I'm relatively hopeful, but Congress is just so slow. And it's going to take longer than any of us want. And crypto may not have long enough. We'll see. I haven't had you on since FTX, but in the backdrop of FTX, that's obviously a factor,

how much money that guy had sprung onto Washington certainly has put a sour taste in a lot of people's mind. You know, you wonder if we'd be dealing with some of these issues if he hadn't turned out to be sort of a super villain of all super villains. It's incredible. It's set back the industry for years. I think he robbed months from my lives, and I will never forgive him for it. And neither should you.

I do think it's set the market back. It also creates a strong anchoring bias. in the minds of people who only think about crypto two minutes a week. The first thing they think about crypto is they think of his disheveled hair and of a birdie made off level fraud from day one. And so they assume that all crypto is like that. And I think that's a big hurdle to overcome. Anyone who's had discussions with regulators, it's a little bit like back to the future.

You end up talking about scandals that crypto has moved on from like five years ago. But they're still present in the minds of these people because they, left an indelible mark. And I think FTX left an indelible mark. And it will take quite some time for us to move past it. I'd be interested to get your views on how that impacts the allocator community. I was in town talking to one of our LPs this morning. And they were saying, look, we were kind of ramping up to get a little bit more aggressive here, had been having some conversations around getting into spot. We've just been doing the venture capital thing for a while. But the headline risk is off the charts. And so politically speaking, if you're on one of these big allocators,

do you really want to be pounding the table to, hey, let's go buy some Bitcoin, let's go get deployed against Ethereum. I'd imagine it's slowing down some of those conversations, depending on how political your organization is. Yeah, it's a great question. I think it's nuanced is the answer. I think at the largest single institutions, you run into those sort of political challenges, at the bigger Wall Street organizations that we deal with, you know, broker dealers, independent broker dealers, regional broker dealers, there was so much momentum around crypto from 2021, and those are more like oil tankers than they are like power boats, that that momentum is still continuing and you're still seeing approvals on those platforms and you're still seeing

a lot of progress. So I do think there's a top tier of institutions and pension communities where FTX is just one red flag too many to surmount. But underneath the surface at the wealth advisor level, we're actually seeing phenomenal progress from national account approvals, from onboarding new sets of advisors, that market actually hasn't slowed down at all, just because there is so much momentum there. Yeah. And certainly it doesn't seem like it's slowed down some of these large custodians getting involved, right, with the Fidelity's and the Bank of New York Melons of the world. Maybe in a lot of ways it will benefit some of those folks. I think it does benefit some of those folks. If you want to migrate to those people, creates acquisition opportunities. I also think

one thing that's deeply true about crypto is you can be too close to it if you're inside it to see the long-term themes. So from your and my perspective, last year was Celsius and then it was three arrows and it was FTX and there are a million terrible things and oh, what did Elizabeth Warren say about a signature bank two days ago and all these negative headlines? I think it's important to remember that if you step back and look at crypto from a three-year, five-year, 10-year perspective, the trends are all enormously positive, right? Even something like Coinbase, The number of users at Coinbase have 5X since 2018, the last bare market. The number of high-quality custodians have gone from zero to Bank of New York.

We used to talk about Kingdom Trust. Now we're talking about Bank of New York. And so I do think for those outside the industry, there is this longer narrative that's extremely positive. And when you're inside the industry, you can overlook that. And I think that's why those larger institutions are going into the market there. They're saying, look, yes, a bunch of headaches. But it's the best performing asset class in the world over the last three, five, and ten years.

It's gone from this really niche crazy idea to something the Bank of New York is investigating and State Street is building its own custody platform. I think they're looking at those longer trends. So sometimes we can be too close to see inside the industry. It's fun. But the longer trends are really, really positive. And I think that's why you're seeing that institutional adoption continue. Yeah.

You have to remind yourself that not everyone lives on Twitter every single day. Crypto Twitter is its own little echo chamber. I mean, we've got people talking about Bitcoin going to a million dollars in the next 90 days. It can get a little weird on crypto Twitter. Yes, it can. So, Matt, this is all happening, obviously, against the backdrop of Bitwise and things are going well at Bitwise. Tell me a little bit about this new product. I want to get into the mechanics here.

Sure, absolutely. We all know that people want a spot Bitcoin ETF, and we all know that you can't have a spot Bitcoin ETF in the U.S. You can have it in Canada, Germany, Sweden, Brazil. But so far not in the U.S. But futures ETFs have been effective tools for people to gain exposure. They've attracted about $2 billion in assets since they launched. What our new product, BITC, the Bitwise Bitcoin Strategy ETF does, is it borrows a page

from traditional commodity indexing. In traditional commodity indexes, you always have one product or one ETF that just buys the front month contract. So we're in March now. It would buy the March contract. right, that expires at the end of this month. But you also have this other strategy called Optimal Rule, which looks at all the available contracts, March, April, May, June, etc, and says which contract has the best pricing to deliver the best long-term returns? That's what's

called a second-generation commodity index. So almost everywhere in ETF land, you have this first-generation product and a second-generation product, first-generation great for traders, second-generation great for long-term investors. So what BITC is, is the first Bitcoin futures ETF, then instead of just reaching for the front month contract, looks at all the contracts and says, what has the best expected long-term return given the pricing that we're seeing, and it buys that. And so I think the existing futures ETFs will be great for the trading community, and hopefully long-term investors will find our product useful as a way to allocate while reducing contango, improving rural yield, and having a better long-term return. At least that's the goal. Was this something that you guys had been wanting to do for a while?

What was the catalyst for even seeing this as an opportunity? Yeah, you know, part of my background, as you know, I spent 10 years in the ETF industry, including as the CEO of ETF.com. I also ran a website called Hard Assets Investor, which covered commodity futures investing. So I've been a geek on commodity role yield strategies for more than a decade. So when these first Bitcoin futures products came to market, we kept our eye on the space. We had the idea about this long-term strategy, but we needed a little bit more volume to develop in the out-month futures contracts, a little more liquidity to develop before we could bring it to market.

And we reached the point, you know, we're out there every day talking to advisors. They want exposure to Bitcoin and the ETF wrapper. And we thought we can build a better mousetrap. So this has been on our radar since those first ETFs launched. But now is the right time to bring it to market because the market has matured. It's ready for it. And we're really excited that we got it on to the market yesterday. Yeah, it's an exciting product. I'm going to be interested to see kind of what happens here. It just feels like the regulated derivatives venues are going to start to be a lot more important here. We've had a big unregulated one in FTX fall off the map, but products like yours become a lot more attractive in a context where there's just more exchanges and more regulated players participating.

Yeah, that's what we hear. And people want, you know, there's a class of individuals who want to own their own keys. And there's a class of individuals who want a regulated venue to trade exposure. to the price of Bitcoin. And I agree that those are ascended. You know, we've seen growth in open interest on the CME. We've seen them develop an options market. We've seen the same thing in Ethereum. They're expanding that. I think that's just going to continue to grow. Our product is one example of that. We're really excited about it. But you see a lot of innovation in this space. I think a big part of our future is regulated as an industry. And these regulated futures are going to play a significant role. I do want my spot ETF, though, to be clear. I want my spot ETF, though, to be clear. I want bitwise spot ETF.

Any updates there? Is it still not open for business at the SEC? From your lips to God's ears on that. I wake up every day wanting my spot Bitcoin ETF. And we're 100% committed to it. We haven't filed one because we don't think the door is open. But we're watching the Grayscale lawsuit closely. I don't think that will end in a spot Bitcoin ETF,

but I do think it will move us down that pathway. And I think we will get one eventually. So as the Rolling Stone song goes, You can't always get what you want, Matt, but sometimes you can get what you need. And that's what we're going for with Bitsy, the futures ETF. So we'll get there, but we're not there yet. I did notice that there was an ETF denial, I think, two weeks ago, and it wasn't just Hester Purse that dissented.

So maybe there's some folks that are actually coming around to this a little bit. That is some deep geek ETF knowledge. I love it. Yes, it was the first one where we've had two commissioners dissent. And that's actually interesting to me, because it only takes three. It actually doesn't require the chair. It only takes three. It is a majority vote.

And the fact that we had two publicly dissent, I think, is meaningful. We should look at that as progress. We should look at GBTC as progress. We should look at the success of ETFs abroad as progress. All of these roads end up with a spot Bitcoin ETF. I think it is inevitable. It's just a question of when. You'll know that we're really bullish about it when we file.

But we do think about it and talk about it, almost every day at BitWise, because it would be great for investors and it would be great for crypto. We talk about it a lot of Castle Island, as you might expect, given our investment in BitWise and also our past at Fidelity, who's also trying to get one done. But, you know, it's interesting. I wonder if, you know, a crunch, some of these folks that are around the fringes, maybe of interest in the sector, but seem to be getting more excited, you know, the argument that you guys have put forward, the argument that Fidelity has put forward, to me it's quite compelling. So fingers crossed, I guess.

Yeah, absolutely. One beautiful thing about that, I'll just note for the deep ETF nerds out there, you can look at our application and you can look at the research that Fidelity did, completely independent. Obviously, we're competitive in a sense, but the same findings using the same multiple statistical techniques. I do think truth is on our side. And so I think we'll win out. I'm obviously hopeful we beat Fidelity to market by one day, but we'll see how it goes there. The flows will be incredible on day one of a product like that. I guess it'll probably be similar to like GLD, right? It'll something like that, I'd expect. Yeah, I think that's right. So, Matt, you know, you're traveling around the country as usual talking to folks outside of this

kind of banking crisis, how is Bitcoin going to do against rates? What are people talking about with respect to how they're viewing crypto? What are the people that are not in this every single day talking about? Yeah, I think they're really excited to see real world applications of crypto outside of crypto inside crypto application. So they are more open to crypto than you would think. I think they recognize this is a cyclical industry. I think they recognize it runs in four-year cycles and we're in a new cycle. So they are interested in allocating. I think there are a lot of people interested in Coinbase stock right now as a potential financial leader. If you think about, you mentioned the word unstable equilibrium, I think the price of Bitcoin, the price of Coinbase,

the price of most crypto assets is at an unstable equilibrium. Either you think it will succeed, in which case it should be many multiples higher, or you think it will fail, in which case it should be multiples lower. But where it is right now doesn't make sense. So they're thinking about that. But I think a lot of people are excited about Ethereum and the growing application ecosystem there and some of the technological improvements we're seeing there. We hear that in the market as well.

But you shouldn't, from an outside view, it may seem like professional capital is not interested in crypto after the pullback of 2022. And that is not our experience at BitWise. We go to these top financial advisor conferences, and we do core education, and the room is packed, and people are asking much more sophisticated questions than they were two years ago. The sort of education level in crypto has not had a bare market.

It's continued to go up, and people are continued to be engaged and interested, and they're continuing to allocate. not at the size we saw in 2020, but not at a negligible size either. So I'm pretty optimistic. I had a guy at a pension fund the other day asked me about ordnals, and I was shocked. I could not believe that that was even on the radar. But if people are still doing their homework, and in this backdrop, there are just some

unbelievably exciting technology developments. I mean, the fact that people are now starting to try to do NFTs on Bitcoin, we're starting to see roll-ups that are trying to build on Bitcoin, that think that they've kind of found ways to do things without having hard forks on Bitcoin. Obviously, everything that's happening in the Ethereum L2, I guess the saying is always that the people that are tourists go away, and it does feel like we've just sort of aligned on sets of entrepreneurs that are actually in this for the long haul. I think that's absolutely right. And that pace of technological innovation is just so much faster than it's ever been, in my experience, thinking just about the

Bitcoin ecosystem, we got so excited about the Lightning Network, which was how many years ago? And then what's the last thing you've been excited about from a technological development perspective in the Bitcoin blockchain? And now we have ordinals and the pace of development is just accelerating so rapidly. And the same thing is true in Ethereum. How long do we talk about the merge? And now we're already on to Shanghai and EIP 4844. And like just the pace is accelerating exponentially. I think few people understand how fast that's happening and what that will mean for the development of mainstream applications that really grab the public consciousness. I think it's pretty exciting. The other thing that we've started to pay a lot more attention to,

I was fading it for a long time, was just projects that want to be securities. So security tokens and private chains haven't really been a feature of this market, but I'm starting to kind of flip on this, and we've made a couple investments in infrastructure and, you know, one in the real estate space. But I think this will be a really compelling use case for public blockchain is to have an asset that is a security, but has some of the functionality of an asset that can travel on a public blockchain that you can take possession of that potentially you could use in the context of defy. Is this a space that you imagine you guys will eventually become active in once there are more projects and more assets listed?

Yeah, it's a space that we think about a lot. I also was fading it for a while and have come around to it. Maybe I was just fading when it would be here. It always felt like pilot projects and pilot projects and small pilot project, but you can start to see more meaningful projects gaining meaningful traction. So we absolutely think of that side of the ledger as some place that we should spend some time and maybe innovate in. There's still a lot to do on the traditional financial product side and the traditional T plus two settlement world. But I do think that's a very exciting arena. It's attracting a lot of venture capital investment, the technology is getting better. And usually when you combine money and better technology

and smart people, you end up with interesting things. I think that's starting to bubble up in that space. So we're not doing anything actively now, but we are thinking about it. You had brought up Coinbase earlier. I saw this announcement of base, this L2 on Ethereum. I mean, this could be a really interesting platform for launching some of these real-world assets. If you were able to have some notion of a KYC, defy experience, I could just see a lot more people wanting that versus trying to figure it out all on their own. How do you get an asset onto a public blockchain? With better UX, with an established brand wrapped around it.

And the KYC piece is really interesting within the crypto ecosystem. I don't want to go too deep into it. But the process of KYC is a real headache for a fund provider. when you're dealing with private funds or non-traditional securities. And that can be effectively automated in a blockchain system in certain ways that are really, really interesting and exciting. So I do think that's a good example of how things take steps towards going mainstream. And I think you're going to see a lot of innovation on that space.

You know, you're already seeing it right now. For sure. Well, Matt, this has been great. Always good to have you on to have a little pulse check on what's going on in the market. Glad that you guys continue to innovate on the product side. Where can we send people to read your research? search and to find out more about the products. Yeah, sure. Come over to Bitwiseinvestments.com.

We'd love to see you a lot of research there as well as information about these products, including BITC, our new Bitcoin futures ETF designed for long-term investors. So we're ready. Awesome. Love it. Great to catch up. All right. Thanks, Matt. Thanks for listening to another episode of On the Brink with Castle Island.

To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.