The Pomp Podcast - #1291 Anthony Pompliano on 12 Bitcoin ETF Predictions

Episode Date: January 8, 2024

Anthony Pompliano breaks down his 12 bitcoin ETF predictions that he thinks will happen once we get the bitcoin ETF approval. Predictions include how the launches of the funds will go, asset inflow perspective, marketing, fees, and more.  ======================= This episode is brought to you by Frec — Just as easy as investing in an ETF, Frec Direct Indexing can help you earn more by unlocking tax savings, no matter the market. Done for you, automatically. Check them out at ⁠Frec.com ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠base.org⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Hey everyone, today's episode is 12 Bitcoin ETF predictions that I think are going to happen once we get the Bitcoin ETF approval. It's a very short episode, but I wanted to let you know what I'm thinking about going into this

big week, how I think the actual launches of these funds are going to go, and then what I expect from an asset inflow perspective. I try to put it together and keep it as succinct as possible, about 10 minutes or so all about Bitcoin ETF and what my predictions are. I hope you enjoyed today's episode. And once you get done listening, jump on Twitter, let me know what you agreed with, what you disagreed with, and what maybe your predictions are as well. Let's get into today's episode. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular

investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. This episode is brought to you by Freck. Historically, the wealthy had a hidden secret in investing. They would spend a lot of money and use very big teams to conduct tax loss harvesting. Tax loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling the profitable assets later. But now FREC is bringing this incredible advantage to any investor. They'll literally lower your tax bill, regardless of how much money you have. They use state of the art technology through a product called direct indexing to allow investors to invest in the S&P

500 while getting all the benefits of tax loss harvesting without the big bill. If you want to learn more, go check them out at FREC.com. That's F-R-E-C.com. I'm a big fan of the product and I even became an investor in the business. Freck.com. Go check them out today. Today's episode is brought to you by Base. Base is making it their mission to bring a billion people on chain. What exactly is Base? It's a layer two offering a seamless experience for both builders and users. With near zero gas fees and rapid transaction speeds, Base is shaping the future of the on-chain world. Base is a canvas for everyone with hundreds of apps in the ecosystem, whether you're an emerging creator a seasoned developer or someone exploring the on-chain space

for the first time base is designed to bring your ideas to life so if you're looking for a platform where the future of on-chain is being built daily base is your destination join in and make on-chain the next online learn more at base.org or follow along on twitter at build on base again that's at build on base to see cool things to do on chain every single day. Hey, everyone. Bang, bang. All right, here we go. The Bitcoin Spot ETF. This is the big week. So I've got 12 predictions for you on what is going to happen with Bitcoin Spot ETF. First, I believe that we are going to see the approval on Wednesday, and then the funds will start trading on Thursday. This is important because historically, people were worried. Maybe the approval is going to

happen and then it'll be one or two weeks in between when it starts trading. No, I think it's going to be a very, very narrow and tight timeframe between when the approval happens and then when it starts to trade. Now, the second one is that the ETFs will likely receive $2 billion in AUM in the first 48 hours. $2 billion in the first two days. To put this in context, there was about a billion dollars that came into the BITO, which was the futures-based Bitcoin ETF. And that came in about the first 48 hours. I think that this one is going to be at at least two X that. So $2 billion in the first two days is what the inflows are going to look like. That number is surprising a lot of people in traditional finance. This would smash the record

for all ETF filings, and it would put a brand new all-time record out there that is unlikely to see another asset that could come along and beat it. But who knows? But $2 billion in the first 48 hours is kind of my base case. So what's going to happen in the first 30 days? In my opinion, that's going to be $5 billion in AUM. $5 billion in AUM, gold is about $100 billion. So it'd be like 5% of the gold market coming into this ETF in the first 30 days. That would be a very, very hot start. So $2 billion in the first two days, $5 billion coming in the first 30 days. Now, outside of Grayscale, my next prediction, Grayscale has the most assets today. They are only lowering their fee from 2% to 1.5%, which we'll talk about in a second. But who is going

to be the big winner here. I think that BlackRock will emerge with the most assets outside of Grayscale. Everyone's going to do well. Everyone's going to get assets. There's going to be a ton of capital inflow, but it will be a BlackRock winner coming out of this. And I think that Grayscale will be number one just because the assets they already have. Enough assets won't leave for BlackRock to be able to eclipse them, but it'll be Grayscale one. And then BlackRock will be the big new winner or the big new entrant into the market. Next up, marketing spend. I think that there will be at least $100 million spent on marketing in the first year across all of these different spot ETF issuers. I recently learned from the guys over at Bloomberg Intelligence

that you can't actually advertise the ETF in the commercial. So you can advertise Bitcoin, you can advertise the name of the issuer, but you can't advertise the ETF itself. And so that $100 million, I think, is going to come into the market. You're going to see it everywhere. You see it on podcasts, you can see it in newsletters, billboards, you see it at the airport. You're going to see it on bus terminals. You're going to see all sorts of different things on TV, et cetera. That leads to the next prediction, which is number six. There's at least one Bitcoin spot ETF ad that we played during the Superbowl. So we're going to get a Superbowl ad for the Bitcoin spot ETFs, which really just means that we're going to have a

Superbowl based Bitcoin ad. I don't know who's going to do it. I don't know what the ad is going to say, but you got to think in this entire marketing war that all these ETF issuers are going to go through. Somebody's going to pull the trigger. Somebody's going to spend the money and somebody's going to do that super bowl ad. So what next? My next prediction, number seven, financial advisors around the country, they're going to put one to 3% of their client's assets in. My friend Mark Yusko recently brought up this great idea where if it comes from on high, some of these platforms, some of these financial advisor networks, if they say to their financial advisors, okay, our base case, our model now includes 1% Bitcoin, all of the financial advisors

within that network, they got to go put 1%. And so it is not going to happen overnight. But yes, financial advisors, now that they have access to an ETF, 1% to 3% is going to be the allocation that will likely lead to tens of billions and eventually over $100 billion coming in from financial advisors and their clients' assets. Number eight, at least one sovereign wealth fund within the first 12 months announces that they have bought the Bitcoin ETF. I don't think it's because they're saying, hey, we're going to hold the Bitcoin. They're obviously just buying an ETF. It's not the same thing as owning a Bitcoin itself. But I think what they are going to do is they're going to say, okay, just like we manage our equity portfolio, if you've got

tens of billions or hundreds of billions of dollars of assets, getting some exposure probably makes sense. And so at least one sovereign wealth fund within the first 12 months will go ahead and they'll buy the Bitcoin spot ETF. Number nine, speculation around the Ethereum spot ETF will intensify before the end of Q1. Once the Bitcoin is out there, all of a sudden people are going to turn and say, hey, we want the Ethereum one as well. And so again, I don't know if it gets approved by the end of Q1, but I do think that the speculation begins to really, really intensify similar to what's happened here with the Bitcoin one. And we eventually do get that Ethereum spot ETF as well. Number 10, non-Bitcoin ETF issuers begin allocating some of their AUM into the

Bitcoin spot ETF. So you have all these ETF, all these fund managers, mutual funds, et cetera, that are out there, they can either directly invest into underlying securities or assets from their funds, or sometimes they will actually just buy other funds to get exposure to an asset. And so if somebody is out there wants to get exposure to Bitcoin, but they can't actually hold the Bitcoin or don't want to hold the Bitcoin, buying ETF may actually be a pretty good way to do it. And so what does that mean? That means that there's going to be some level of net new capital inflow that is coming from funds that are already allocated to mutual funds, ETFs, etc. We've seen a couple of people go ahead and update their prospectus up to 15% of AUM to

put into the fund. I don't think that that's necessarily that groundbreaking, but I do think we will see some of them start to do it. My next one, number 11, I think we're on is Bitcoin's volatility drastically reduces in the next three years. This one is not going to make a lot of people in the Bitcoin community happy, but I just think it's the truth. As you get a larger holder base. As you get a holder base that is not used to actually holding all the time, what you are likely to see is that you're going to see that dampened volatility. That dampened volatility will likely lead to less asymmetry. Less asymmetry means that some of the people who have been really interested in Bitcoin, they become a little bored, right? If Bitcoin isn't just going to go parabolic,

then all of a sudden the ETFs, there's lots of positives, but maybe one of the downsides is just that there is that dampened volatility. And so asymmetry has disappeared. Number 12 is that Bitcoin's compound annual growth rate falls to 20% within five years. So Bitcoin's compound annual growth rate is fluctuated between 50% to 150%, depending on where we are in the different market cycles. At the top of 2021, it was over 100%. Today, it's over 50%, but under 100%. I think that we will start to see it perform much more like a traditional asset within the next five years because of that dampened volatility. Again, we're going to see that dampened volatility in the next three years. Within five years,

I think the average compound annual growth rate of Bitcoin will be about 20%. So it'll be two times the stock market is a way to think about it. And again, great return if you can compound every year, year over year at 20%. That's amazing. But I don't think that that's necessarily what a lot of people seeking asymmetry are really looking for from Bitcoin. Now, I have a bonus prediction. I said 12, but I lied. I got 12 or I got more than 12. I got a bonus one around the fees. So when we look at the fees, Grayscale used to charge 2% management fee. They now are dropping to 1.5%. We recently got a bunch of updates in terms of what people are going to charge.

So we've got ARK 21 shares. They're going to be charging 25 basis points in the steady state. iShares, BlackRock, they're going to be charging 30 basis points. We have Bitwise coming in at the lowest so far at 24 basis points. VanEck and WisdomTree. VanEck is at 25 basis points. WisdomTree is at 50 basis points. We then have Invesco 0.59 and Fidelity is at 0.39 as well.

So what does all of this mean? There's a fee war going on. And if that fee war is happening, then you're going to see them all keep cutting fees to try to compete with each other. It's a mimetic thing. There's competition. But my bonus prediction is that we will see

all of the crypto exchanges and custodians drop their fees by 50% or more within the next three years. and a lot of it is going to be due to the fact that you are going to get such big pressure from these ETF holders. Gabor Gabox posted earlier this morning. He's like, wait a second, it's cheaper to go buy the ETF

and hold it for an entire year than it is to do one transaction on some cryptocurrency exchanges. And so if it's cheaper to just hold the ETF for a year, then why would I go onto this exchange and buy because it's gonna cost me more money in the long run. So I do think that we're gonna see a massive cut. 50% is my prediction within the next three years where we are going to see custodians

and exchanges have to cut their fees down in order to compete with the ETF. We know the fee wars are happening in the ETF world, but now we're going to see it happen to these other players as well. There's a whole lot of stuff going on. This is going to get absolutely crazy. So buckle up. I think that we're going to get it Wednesday is approval day. Thursday, we start trading.

I think it's going to hit, you know, bang, bang, as some people may say, and it'll be quite exciting. So I appreciate you all listening. watching, and I hope that you guys have a great week.