The Wolf Of All Streets - Matrixport SHOCKED w/ Report Chaos | Crypto Town Hall

Episode Date: January 4, 2024

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Just getting everybody up on stage here. Obviously, we will get started. Great to be back. Yesterday was quite a day, obviously, in the market since we saw the drop from just over $45,000 all the way down to about $40,600. Obviously, the quote-unquote story behind that was the Matrix report, but anyone who took 30 seconds and four brain cells realized that's not actually the reason that the market dropped yesterday. As we sort of dug into it yesterday, we know that it was largely about a leverage flush. We saw open interest was at basically historically high levels.

Funding rates were absolutely absurd. It was extremely expensive, about 66% annualized at the top to be long. Longs were piled in and somebody made a hell of a lot of money by triggering it and likely just, you know, then the market looks for an excuse and finds that story. As you can see, sort of in the title here, Matrixport shocked with the report chaos. Jihan Wu couldn't really believe who is the, you know ceo of matrix founder of matrix port couldn't believe uh that it went down like that basically matrix port for anyone who needs context before we really get started matrix sports platform uh they're one of their analysts wrote a report saying that he believes that the bitcoin spot etf will be. It's one analyst's opinion. He is allowed to have it.

Nothing wrong with him believing, you know, contrarian belief that there will be that rejection. The block ran a story, also totally fine, which said, you know, Bitcoin spot ETF likely to be rejected, says matrix port analyst, and the world just lit on fire like as if that meant that the entire thing was going to be rejected price did what it did and uh absurdity ensued welcome to crypto right um alex you had to be watching this pretty closely uh what happened yesterday is that a valid summary do you think of how this went down um yeah hey hey everyone um well yeah i mean look the market was definitely stretched so it was primed for you know a correction that's fine i think it's it was a reasonable correction i i do think the note was impactful in the move i think if you look at the timing of the release of the note, I think if you also consider Matrixport's position in Asia, which led the move down, you know, I think it's reasonable

to think it had an impact. My problem with the note is that it's really poor. It's a poor quality note. And I'm so poorly written. It's absurd. I mean, it looks like a third grader wrote it, honestly. It also, you're absolutely right, Scott. You're absolutely within your right to believe anything about this market and voice your opinion in this case that the ETFs won't be approved. That's a reasonable opinion, right? We don't know that they will be. But you don't get to, if you want to be right, you got to deserve to be right you got to do the work right this note made a number of just truly ludicrous claims and and i'll just briefly say a couple of them one they claimed that the bull run in the fall was sparked by franklin templeton's etf filing which was in september and they wrote that um this was now the second

major financial traditional financial asset manager to file a Bitcoin spot ETF application. Well, that's just not true. First of all, the move started in mid-October on the Cointelegraph fake tweet and then the gamma squeeze. But also, Franklin-Temperton is not the first traditional financial, or the second. The first, I guess, being BlackRock in their thing. But Invesco, right? Invesco. You guys.

Yeah, WisdomTree, VanEck, ARK, all are bigger ETF issuers than Franklin-Timbleton, not to throw any shade at Franklin-Timbleton. And they all filed last time, right? So that's just wrong. And then also, you know, there's sort of just baseless speculation that the commission- About Democrats.

Yeah. Yeah, literally it was like a political statement. Yeah. And literally, it was like a political statement. Yeah. Well, Democrats don't like it, therefore, it won't get approved. That was literally their base case. And look, there's a possibility that the Democratic appointed commissioners, of which there are three may vote against it, no doubt, right. But again, like, that's not new information. I think this is why a lot of people, by the way, the other thing, the main sort of argument they had was that there was a critical missing piece in the filings. And they argued that this was the lack of a surveillance sharing agreement with the

regulated market of sufficient size. They said, so all the current applications have Coinbase spot market as the surveillance, the regulated market of sufficient size, which with whom they have surveillance agreements. And they said that, well, that market's only 11% uh the regulated market of sufficient size which with whom they have surveillance agreements and they said that well that that market's only 11 of the spot market but they seem to have missed the fact that this entire argument was effectively rejected by the sec six months ago yeah by the dc circuit court of appeals like it's actually totally irrelevant they could have all theoretically gone back to using the cme which is what they all used to say they were going to surveil in the 2021 application so my problem with the note is that it's just a bad piece of research there's plenty of you could make arguments that even even on the sec commissioners thing like they don't they don't spend any time analyzing the various commissioners past statements on on

these issues which there are some including including from the Democratic ones. So it's just bad research. And I feel comfortable saying that as a head of research. Yeah, we have a few, quite a few researchers up here, actually. I mean, I agree with you. Like I said, the first time I read it, it just didn't feel like a professional piece of research, even without digging in just the way that it was written and skinned. I guess the next question, since we know that at this point, this was just a single researcher's opinion, which was, you know, not so highly regarded.

Is anyone surprised here at the size of the move or that, you know, any sort of announcements around the ETF right now can give us effectively 10% move in this kind of volatility. I think now largely we've reset all of that open interest and leverage I was talking about. Funding rates are effectively flat. So maybe this was something that healthy that we needed before we actually see this approval. But curious to hear anyone's opinion here. I mean, Ryan, obviously you're a bit wise. You're doing research. I mean, were you surprised at all with the breadth of this move? Yeah. Yeah. Hey everyone. Good. I'm happy to talk about this. Um, I was, I was not surprised by the, the sharp sell-off that

happened following the news. I mean, I kind of agree with everything that Alex has said here, uh, when it comes to the report and how it was written and the facts that it cited. But, you know, anytime we're in kind of a bull market, we're not opposed to having sharp sell-offs, you know, fed by liquidations. It kind of creates this self-fulfilling prophecy when you have these big down moves that then lead to liquidations that lead to more down moves. And it's, you know, yeah, a bit of a self-fulfilling prophecy. So I wasn't super surprised to see markets continue to move lower once they started moving lower. I mean, people are so hypersensitive right now to any news around potential, you know, Bitcoin ETF

approval or rejection. And certainly I've been seeing a lot of headlines and takes every single time there's any kind of update being made or any kind of uh you know new documents being added to the register that leads to uh not everything leads such a sharp sell-off but i mean i think that even once we're on the other side of approvals or rejections of spot bitcoin etfs you know in a bull market people get out over their skis they uh you know take on leverage and when when price is correct a little bit, that just leads to cascading liquidations. And this is one of the biggest liquidation events we've seen. So when that happens, there's really nothing there to stop it. And so 7%, 10% sell-off in the face of those conditions wasn't that shocking.

And I think we'll continue to see, like I said, after, even after approval or rejections occur, I think we'll continue to see major kind of whipsaw events happening throughout this bull market. I mean, that's just kind of the nature of the beast. Yeah. I mean, we saw over 500 million liquidated. I mean, I saw it on the hourly liquidations, but if you really dug in, I think it was literally in 10 minutes or less, a really, really large liquidation event there. Yeah, I mean, that's insane, right? And we've seen a few liquidation events of a couple hundred million this or I guess last year now that happened, right? That caused similar price movements, 10%, 8%.

And so it's not like this is the only time something like this has happened, especially in the past 12 or 18 months. But I do think people are getting really excited around entering those windows that the Bloomberg ETF analysts have projected there to be approval or rejection. And so people are hypersensitive to news. And there's some headlines that get put out there anytime there's any updates. And sometimes those get misinterpreted. And I think this was a situation where maybe there was too much weight put on one analyst's expectations or view. And, yeah, it just kind of led to, yeah, a huge liquidation event.

So that's just the market dynamics. Yeah. And meanwhile, here we are back at 43,900 today, right? I mean, bottoming at 40,600 yesterday, we retraced 70% of the move, probably 65%. I haven't really done the math, depending on top and bottom of any given exchange. Seems like if you just wait 24 or 48 hours

after these things tend to reset and sort of bounce right back. Yeah, exactly. I mean, Bitcoin's still up, what, 160% from where it started in 2023. And so, again, a huge retracement like this or a retracement like this isn't resetting all the gains we've seen. And it's somewhat healthy flush of liquidation leverage, like you said, at of the of the spaces here that that we you know sometimes need in order to reset things so uh you don't want to get way too over leveraged across the entire market uh consistently over and over and over again so you need this kind of healthy market dynamic in there and and this is

what happened people take leverage is why leverage trade is dangerous and can be dangerous and it can be great to the upside and it can be very painful to the downside but yeah i think we've retraced most of those uh losses as the information spread throughout the market and people realize this is just you know one analyst call versus a sec decision i love how much like uh these simple either analysts or the media reports and how they how they run and the timing can just whip this market into an absolute frenzy i think my favorite headline yesterday it was like from bloomberg crypto i believe and it said you know bitcoin something to the effect of bitcoin had its worst day and gave up all of its gains for the year as if it wasn't january 3rd right it's like yeah yes yes guys and and funny and you know it it's sort of like the meme I tweeted every time.

Plenty of people do like breaking news, Bitcoin crashes to prices not seen since 48 hours ago. You know, it's like we may make this huge news event, but really nothing happened here. Mario, are you seriously raising your hand? Yeah, man. It's been so long. I feel a bit rude jumping in, but have we confirmed it? I've been keeping up since the whole explosions and Epstein and all that

for the last 48 hours? But is it 100% the reason, Ryan, that the liquidation happened? Is it purely for that analyst? Or is there other reasons as well? No, it's because Stephen Hawking was behind the Iranian bombings on Jeffrey Epstein Island. Where have you

been, man? Like, what's happening? Can you stop following my account? I'm sitting there covering the explosions in Lebanon, Iran, and then Bitcoin suddenly decides to dump like never before. And I couldn't even notice for that reason. But on a serious question, is that because people are asking me, and usually i haven't asked but this is something i genuinely know you weren't here yesterday but largely the

consensus is that we had an extremely high amount of leverage in the system and it was the classic trader traders triggering a cascade and then people pointed to the news as an excuse but it was just the market was like historically over leveraged. This was, as you just said, like one of the largest liquidation events we've had. And now that leverage is gone. Funding rates are flat and the market starts to float right back up. Right. And I think that that's really what happened. I think I guess what's worth digging into is how much if we do believe that that had a piece in it, which Alex pretty eloquently said it did, like how much that gives us a hint as to

what would happen. I mean, let's say we actually got a rejection. Holy crap, what would happen to this market, right? If just a person's opinion saying that they heard that maybe the thing could get rejected, what would happen if we actually saw a real rejection here? And I'll open the floor to anybody. Yeah, I know. Go ahead, Peter. I saw you lifted your mic. Yeah, I'll take it slightly the other way. What happens if you get this approval and within a couple of weeks, there are really no big inflows into Bitcoin? How much of this has been front run by people already holding Bitcoin on expectations? I'd be a little bit more worried on some of this price action that there's already so much hype into this. It's really going to be difficult to live up to the

expectations, especially when I still don't get a broad sense of people who aren't already in Bitcoin wanting this. And the conversation that's also coming up, I think somewhat realistic, is Bitcoin has been around 10 some plus years, right? And people still, quote unquote, need an ETF to be able to invest in it. Isn't it supposed to be a cash equivalent now supposed to be able to buy pizza and stuff? I think this is going to turn out to be a massive sell the news event, probably not directly, but within a month of these ETFs getting approved. That's my bigger concern. in your Morgan Stanley wealth management account or your GS account or any of your bank, broker, dealer, platform, financial advisor accounts, Merrill? No, but what percentage of people

don't have all their money in something like that and not the ability to buy this elsewhere? Well, that's $48 trillion in USAUM in those wealth management platforms. Okay. Maybe the big bet's still there that this is going to attract a huge amount. Obviously, everyone, all the large firms are taking a bet, but they always take a bet, right? Here's an asset class with a lot of volatility, a lot of noise around it. It's relatively cheap if it works. Again, all you have to do is look at GBTC, right? How much potential money there is

from owning this space. So everyone's going to chase it. But are the investors still there? I'm very dubious at this point that we are going to see these massive inflows once you get some GBTC conversion, et cetera. I just don't get the sense that there is widespread demand for this like there might have been three or four years ago. I think that's a reasonable

position. Definitely. I'm just saying that, for example, on those platforms as well, which again, is a massive pile of AUM, they also don't have access to GBDC. And on none of the bank broker dealer platforms that I'm aware of, do they have access to the cash settled futures ETF. So this does unlock a massive market. Go ahead, Wendy. Hi, I have to leave if my daughter wakes up. I know, Scott, you understand that struggle. But Peter, I really enjoyed your stance on this. I think that, I mean, I'm not a big proponent of the Bitcoin spot ETFs in any way, shape or form. I think they're predatory. I think it's completely

against the true intended purpose of Bitcoin. When we talk about mass adoption for Bitcoin, we talk about people actually custodying it and owning it and, and whatnot. But that's neither here nor there. I'm happy to hop on the grift train with everybody else and make as much money as ethically possible, because really, that's why we're all into crypto. But it's honestly the truth. But I do agree with your stance that there's, you know, we have all these traditional financial institutions that have all this AUM that people are excited, they're waiting for it to come in. But if you kind of look at the state of the economy, and you look at the inflation levels, you look at the high costs to purchase to live to do anything, where is this additional money going to come in from the masses? That's always my question when it comes into it.

I personally know people that, you know, they work traditional nine to five jobs, and they're actually cutting down the amount of money that they're contributing to their 401ks because they need to offset that because of the increased cost to, you know, of cost of living. And we also do have some, some of the smaller firms that do, that do offer like Bitcoin 401ks or IRAs or SEPs and those types of things. I work alongside one and I send my audience members to them because they're legitimate financial advisors. So I understand that there's people on the side of the spectrum that are super excited about the Bitcoin spot ETF, all the traditional financial firms. But at the end of the day, when you really take

a step back and you look at it, Micro know micro strategy has you know owns quite a bit of bitcoin um blackrock is a shareholder of micro strategy so when you actually take a step back and you kind of look at whose money is going where it's kind of this big circle of people that essentially do have exposure to bitcoin in traditional finance but not necessarily custodying it themselves yeah i think those are good takes. I don't disagree with that. I just think it's always important that the nuance of how BlackRock is invested in all of these miners and microstrategy that we talk about is largely because BlackRock is indexing, right? And they own a lot of everything and everyone. So I haven't really dug deeply into whether those are largely, especially with

microstrategy passive or active investments. But my gut tells me that like with the miners that people get whooped into a frenzy about, it's mostly passive for indexing. But I think it's a fair point. And I think at the end of the day, the one thing we can all be sure about with the ETF is that it gives us the plumbing to allow for that demand to enter the space that did not exist before. And then the wildcard becomes that demand. I mean, Alex, Ryan, Alex, you guys, Alex, obviously you're with Galaxy. You guys are filed with Invesco. Ryan, Bitwise, obviously. You guys are running commercials for this now. You have to have some sort of sense

of whether there's demand here. We're getting this massive marketing push. We're expecting that we're going to see these approved. BITO did a billion dollars in 48 hours. It was the most successful ETF launch in history. I just, maybe I'm just, I would be very surprised to see these fall flat, which a lot of people are expecting. I mean, either of you can feel free.

Go ahead, Ryan. Yeah, yeah. Look, we obviously believe that there is going to be a lot of demand for spot Bitcoin ETFs. I agree. It's been around for 10 plus years. And many people do already have exposure to Bitcoin through brokerage accounts that support it or through Coinbase or through decentralized exchanges, they can acquire Bitcoin. And so there's a lot of people that have exposure to it. But ETFs just unlock so much potential sidelined capital. There are tons of firms out there. You named a few or a few were named earlier around how many trillions of dollars in assets are sitting at

traditional wirehouses, traditional financial institutions, where they just simply haven't allowed their investment advisors, the professional investor community to access Bitcoin through those same means that retail driven accounts can access it. And so I don't personally think that people are investing in BlackRock to get exposure to Bitcoin, or honestly don't believe that majority of financial advisors even understand MicroStrategy's business model. And that's not to say that they aren't intelligent investors. It's just to say that a lot of financial advisors, at least the ones that we talk to, don't think

about crypto on a regular basis. They aren't spending all day every day like we all are thinking about crypto, talking about crypto, diving into what publicly traded companies on the stock exchange own crypto on their balance sheet and therefore might give them some leveraged exposure to Bitcoin. That's just not in the purview of what they're spending time on. And so I think for them, there's a really big advantage to having a spot Bitcoin ETF. And yes, there are elements of it that don't fit within the core values of Bitcoin, such as self-custody. I completely understand and sympathize with that. But to

not have any access to Bitcoin because you simply can't because of compliance reasons is also difficult when it's potentially a once-in-a-generation wealth building opportunity and an asset that has extreme growth and has been one of the best performing assets over the past 10 years. And so we're excited about the fact that people, clients of advisors who haven't been able to invest in Bitcoin now can work with their advisors to get exposure and that a lot of institutions that have held back their employees or the investment professionals at those institutions can now get access to Bitcoin. And that's just a ton of sideline capital, trillions of dollars that now could access Bitcoin. And I mean, that's right. And to your point, yeah, to your point, that doesn't have

to be new money, right? It can just be somebody reallocating 1% of their existing portfolio into it, which is, I think, what we're more likely to see. And my more cynical view to sort of follow up on what you just said, RIAAs do things for fees and for money. So even if they deeply believed in Bitcoin, they're not going to, first of all, as a fiduciary, they're not going to send someone to Coinbase and say, buy this and put it on a hardware wallet, right? But now they can literally just make their fee selling this spot ETF to people. They're going to be much more compelled to encourage them even just to put that 1% in, right?

And I don't think that's like a first day flood. I think the Bitcoin spot ETF approval is much like the halving if you want to compare it to an event, something we all get very excited about, but it takes four, six, eight, nine months to really see the inflows and the effect on the market. And Peter, that's, you know, just sort of addressing what you were saying. I don't think there are people that are waiting and willing to do the 1%, and that could be a massive amount

if there are enough of those minnows sort of biting. How do you see the RIA advisors getting paid for moving their clients into the ETF, right? The ETFs don't actually pay the advisors like they do, right? It's not like a closed-end fund, anything like that. We're on the initial IPO, right? There's going to be a create-redeem process. Those people will make some money doing the create-redeem. But as far as I know, there will not be direct fees paid to the RIAs. And even I'm just saying that the RIAs have an actual incentive now within their job of managing people's money and advising where Bitcoin becomes an active part of it.

Yeah, the advisory world is, you know, a fee based business. They live on billable assets. And so if you have a client who has an investment in Bitcoin through Coinbase or wants to make an investment through Bitcoin and hasn't made that investment, if you can bring those assets in-house and under your kind of billable umbrella, that's right. But that's a wash then, right? You haven't actually created new demand for Bitcoin. You've just replaced some that was on some other system. It's actually good. It's actually really good marketing because, for example, let's say you have somebody who's interested that you manage a bunch of traditional financial assets for them, and then you're finally able to offer like a Bitcoin spot ETF or whatever that may be.

Yeah, you're not going to make money on that, you know, converting them over to the Bitcoin spot ETF, but you will make, you know, you might be able to sell them something down the line later because really when you think about it you're talking about sales But you're you're you're you're selling financial advice and you're making a percentage off It's the same thing as selling a house or being a broker or anything like that. It's basic marketing and sales So I think overall for that particular industry, it's gonna be good and it's gonna make sense even though they might not make something on it They're just gonna have more product to offer their customers in a compliant manner. Yeah, I totally 100% agree with that. It's a, you know, it's a bill, it's a business built on billing on assets, you know, you charge a 1% fee on assets under management. So if you

can drive more, if you can build your client base by now having this new ability to access new types of investments, that's a great marketing opportunity and a great way to build your business to maybe establish a new client base that has interest in crypto. There's a lot of people that invest in all kinds of assets that do it through a financial advisor because they're just not savvy enough or want to spend the time or comfortable enough managing their own money. And so the fact that now we're going to have tons of those investment professionals who can offer that service, I think that they will also be bringing in new dollars and reallocating portfolios.

I mean, a lot of RIAs work off of model portfolios. And in a lot of the conversations that we have, there's this new movement that's been happening, especially over the past year or two, where they've been discussing. And now we're kind of hitting a point where they're able to do it, you know, adding a 1% sleeve or a 2% sleeve or even a 5% sleeve across all of their model portfolios to crypto, right? And so that could be assets rebalancing out of cash. It could be assets rebalancing out of gold. It could be assets rebalancing out of tech. It's really a number of areas where inflows could come from. Some of those inflows could come from existing holdings. But we think there's a large majority of those inflows that would happen after an ETF approval that would come from other assets that investors are invested in through rebalancing those volatile portfolios to add a crypto sleeve alongside other alternative investments like real estate and gold and other commodities and tech.

Peter, what would you, in your mind, view as sort of that unsuccessful launch, a failure as far as AUM? I mean, we are talking about 14 products here, theoretically, marketing. I mean, do you have a sort of number in mind that there's an expectation that it would reach and therefore be a disappointment? Yeah. So one, I think lumping in GBTC, assuming that that either gets converted or all that money finds a way out, right? You already kind of have $25 billion that should immediately kind of get transferred, assuming GPD converts, right? I could see this maybe getting to 50 billion. I think the people out there who have been bidding Bitcoin up are expecting 100 billion, 150 billion relatively quickly. On what timeline? Sorry. I think over the course of a couple of months. I don't think you're going to see this immediate

rush. I think people are looking for this pop. I think on day, the first week or two, I would expect to be around 50 billion total, including GBTC or whatever that transfers to. So you'll get some decent demand of people who are putting it in, waiting on the sideline, decided not to open an account at Coinbase or somewhere last year so they can put this. So I think you go to about 50 billion ETFs relatively quickly, including the 25 billion that has to do something in GPDC. But from there, I think it stalls out. And I think that's where the disappointment amounts. So I would not want to short man, I think. Yeah, sorry. I think 50 from the people I've spoken to is way beyond the expectation. I was just talking to James Seifert from Bloomberg, actually, on YouTube YouTube right before this and their view is that we get a couple

hundred million in the first week or two. BITO did a billion obviously in 48 hours but 50 billion I think would be viewed as a massively successful launch even over a year or two. Am I wrong? Yeah, Peter is talking about, I think what I'm hearing is net 25 if we just leave, you know. Right. Even 24, right. I think even net 25 is over most people's expectations for a year. I think that's quite bullish in my view, but in positive, I think we put out a report, granted, which we intentionally made extremely conservative, where we said that 14 or 15 billion in the first year would be positive. So I don't know, I guess expectations are frankly all over

the map. It's reasonable. Yeah, I mean, Peter, with those expectations, it's interesting, because if those expectations are what would be a disappointment, I would think we that it ends up being massively bullish. But you know, from your perspective, those could be a failure. I just like if we're not, I would be, I was more thinking you were going to say like somewhere between one and three billion. Oh, no. And again, I think there is some pent up demand, people who have been waiting. But again, we're also at 40 some odd thousand, right?

Does it sustain it if we don't get a pop on that sort of inflow? If we start going down from 45,000. I think that's very fair. I think that's very fair. I think that's very fair. I think there's been a lot of front-running and pre-positioning that's gotten way ahead of itself. Yeah. I'm thinking on the leverage side,

most of that was flushed yesterday, but I definitely tend to agree. I just want to pivot slightly since we have Dan Spooler here, head of industry affairs at Blockchain Association. Dan, is there anything like now that obviously everyone's coming back in session, we're sort of getting at the head of this election years. Do you expect any beyond maybe a spot ETF approval, which, you know, for institutions, but do you see anything on the legislative side changing before this election?

Do you think we get any movement on any of these bills that we've seen talked about? You know, Ron, I was on earlier this week from government affairs, chimed in on quite a bit of that. Typically in the election year, there's not going to be, I think, any major action. Certainly the second half of this year after the presidential primaries are concluded. We're focused, again, as always, on education and particularly after this rather harsh letter that we got from Elizabeth Warren right before Christmas. It's rather funny. I think it was the first time I was accused of treason. That one nutcase, I forgot the guy's name, retweeted me and essentially said the entire crypto industry is committing treason just by virtue of our interest in crypto.

So that's kind of what we're up against. This is the mentality. And I responded, I'm not really surprised. I think she's very bitter over a lot of the things that's been going on. You know, we sent up we actually did really a really good flying earlier in late in the year, rather, with quite a few former U.S. military intelligence officers, national security professionals. And I think that's what really irked her, because we brought in folks that essentially debunked every facet of her talking points. And she didn't like that. And so that's really where we're at. We're going to have a really strong response next week. You know, they cited three players. So Warren's letter cited three groups.

It was us, the Blockchain Association, it was Coin Center, and it was Coinbase. And they asked us, you know, what we're doing, quote, to undermine efforts to rein in crypto's use in terrorist financing, which is completely ridiculous. So I'd be on the lookout for that. We're going to be responding to that in the next week or so. And then on the legislative side, you know, of course, stable coins, you know, we filed that amicus brief again, the tornado cash situation last month. We're going to be doing a strong CFPB response comment letter that they put forward. Yeah, so we got our hands full. But again, in terms of landmark legislation happening this year, it's going to be tough. But I'm really optimistic with the election coming up. To be honest, I'm not sure if we should view that as a positive or a negative.

It seems like maybe we should just cheer for the government to get nothing done. Yeah, you know, you might not be wrong. I mean, that's the problem. We don't want anything crazy to get done either. Because depending on how the Senate and the House play out later in the year, you know, there's a real chance that the Senate is going to go Republican, but the House very, very much flip back to Democratic. And then the presidential race, of course, is a coin toss at this point. So we may not want something massive to get done. Yeah. And in your view, then, does that, if we don't get any more clarity, I would say during the next year, does that mean that we continue to see the SEC take their regulation by enforcement to act pretty much unhindered by the

law or anyone else? Yeah, I think SEC has definitely got more things up their sleeve for the remainder of the year. I wouldn't be surprised if there'll be more enforcement actions coming out, rather large ones. I mean, they finished the year out strong with some of the big, big ones. But, yeah, it remains to be seen. But I think either way there'll be changes at the SEC a year from now too because a year from now we're going to be coming up on the inauguration for another few weeks or so, about 12 months.

So that's really not a long time. And I think even if Biden's hypothetically reelected, I still think there's going to be significant changes even in a second term. Obviously, if Trump's elected or a Republican, then there'll be significant changes. That all makes sense. From a legal perspective, lawyer, do you have any thoughts on what he just said? I mean, obviously, legislatively, we're not going to see much, but the SEC has been taking their lumps, you know, so do you think

that we could see a downtick in their enforcement action because of that? Or do you think that they're just empowered to do whatever the hell they want? Anybody want to weigh in on that one? I was gonna ask the lawyer. I don't know if he heard me address him specifically, but maybe he's not there. Yeah, no, I mean, I think you're right. I wouldn't expect too much enforcement action. You know, I think we saw the big ones. I don't know if we'll see a lot more, but I do think we'll see pushback on all this.

And I think that we're going into election season. I mean, look, we're going to have a lot of feelings that maybe there might be some connection between the political apparatus and the SEC and the way that this is going. So I do think that they're going to fight against crypto in the coming election season, but I don't think they're going to win. And I think the names and size of the institutions that are involved.

Obviously, I'm not talking about necessarily even the filers. I would love people's take. How about this? On Jamie Dimon, obviously, going on the Senate floor with Elizabeth Warren famously a few weeks ago and saying if he was the government, he would shut it down. And then only weeks later being named as the ap on blackrock ctf we're seeing goldman sachs trying to come in now uh as an ap on blackrock ctf as well as grayscales i believe these are the biggest institutions on the planet who all seemingly want a piece of this pie go ahead kristen i'm just going to echo what you said scott either

earlier it was maybe on your show this morning or yesterday, but look at what they do, not what they say, right? Because, I mean, Jamie Dimon's speaking out of both sides of his mouth, in my opinion. Yeah, I agree. I think his message was very consistent. Here's what he would do, but since that's not the playing field, who am I not to try and take as much advantage of this as possible in case it works? Again, this is just a free option for most of these companies, right? It's a relatively trivial amount to set up. If it works, great. If it doesn't, not great, right? Three years ago, everyone was talking about ESG equity funds,

right? ESG funds this, ESG funds that, green bond this, green bond that. It was all the big players. It hasn't really worked. Enthusiasm's died down. So I think it's interesting, but they're doing what's right for them, right? They are large businesses that make money trading transactions and making money from custodial business, from trading. They are going to do this, whether they believe in it or not, because it doesn't cost much, even if it turns out not to be worthwhile. So I would not be running around that this means that they are investing huge sums of money. I think they're looking at this just like any other commodity or any other thing they can transact and say, well, can we do

this? Sure. What's the cost? Not too much. Let's do it. Rather than that, this is a huge endorsement and they are looking at new businesses all the time. This is a potentially new business. It's interesting to them. It's not the same as being wedded to it and it being their bread and butter. So I think his messaging is actually somewhat consistent. And I downplay a lot of what's going on because banks and hedge funds and all these places will always follow whatever's the trend. I was a CDS index trader. We've seen this play before. Some products take on a life of their own and do very well for a long time. Others fade in the background. JP Morgan also created Onyx, though, and is actively expending money and resources on blockchain technology. That doesn't

mean that they don't believe that crypto is exactly what Jamie Dimon says. But I mean, when you see JP Morgan Ony JP Morgan on it, settling, digitized digital money market fund between BlackRock and Barclays, I don't know, that's a little more than just chasing the fees. I do agree that, you know, in the background, Jamie Dimon's probably like Tyrone Biggums in the Chappelle show. He's like, speed, somebody said fees, like you're on a free crack giveaway. I do think stablecoins are a slightly different story, too, for a lot of institutions. And again, I think we do need technology that lets us move to faster and easier and seamless transactions.

So that to me is slightly different than Bitcoin as well. Yeah, I agree. I'm saying that's more of a it's become a meme in the crypto community, you know, that blockchain, not Bitcoin or Bitcoin, not blockchain or whatever. But that is more of a technological advancement for them than a belief in the asset class itself or in the actual tokens. Alex, you were about to say. Yeah, I think I agree with Peter on this, but I would point out also that JPM and the big banks have other business before the Senate Banking Committee specifically related to Basel and other requirements for which they're asking for reduced regulation, right? So these actually go hand in hand. You know, Jamie knows that decentralized finance and, you know,

non-state access, self-sovereign access to bank-like services, you know, which Bitcoin and others can provide is a direct threat to their business. And by the way, also a threat to their business is these new onerous banking regulations, which he's lobbying against. So it doesn't surprise me to see him currying favor with leaders on the banking committee in general. Both of those actions are self-serving to his business. That makes perfect sense. Dan? Oh, yeah. One of the questions I had for the ETF experts on the call was, I read that Fortune the other day, there's a race to the most competitive fees for these.

I know some Fidelity setting their ETF fee down to 0.39% ahead of these SEC approvals. And then I saw Invesco Galaxy announced they were going to waive fees for the first six months of operation. BlackRock's looking to come in at 0.47. Is this sustainable? Is this just a way, is this typical for these ETFs to compete with one another for the first big wave to get customers? I mean, Alex, obviously, you're Galaxy and the ones offering the six months off, perhaps you could answer that first. Yeah, so I can't speak to any differentiation between these currently unapproved securities.

But I will say that, yes, I mean, you know, in asset management in general, fees are a highly competitive part of the product. And I mean, look, expense ratios are, I would say there's only a couple things that, you know, investors and financial advisors look at when they look at investing in a vehicle. One of them, you know, there's AUM liquidity, obviously, performance is probably the number one, but but way high up on that list is expense ratio, right? So I mean, this is an area where and and it's an area where the different issuers have different advantages or challenges, right? So I think you've already seen a couple come out sort of across a relatively big spectrum from the ones I've seen announced so far. I mean, in general, this has always been true.

Think of like the brokerage space, right? I mean, it was just a few years ago that, you know, you were still getting charged to trade stocks in your Fidelity account. Now, basically, everyone's on zero there, right? So it's a common competitive dynamic. Yeah, and also, you know, from speaking with Eric and James, obviously, at Bloomberg, this is a bit of a unicorn event. And there, at least to the first, what Eric said was that, you know, you don't really see a new

asset class getting an ETF more than once every 10 years in the first place. I think they've dubbed this the Cointucky Derby, because and even in those situations, you never see 14 of them lined up to compete for that AUM at the exact same time. So I don't know that we have much precedent for this specific event and how that will play out. And I do think it just becomes a marketing war. Go ahead, Peter. One, I think you're right that A, fees tend to go down. But if you just take a step back, look at GBTC, right? At 2% on $25 billion or whatever they're making, I believe that they would have been probably the third or fourth largest ETF business out there, right? If you look at even Vanguard's ETF business, BlackRock's, which is, you know, they make a lot of fees on a lot of managed products, right?

That pool of money that was being paid out to GBTC is massive compared to a lot of the scale of many other ETF businesses combined, right? Because nothing else charges 2%. You look at things like LQD, TLT, right? What are those 10, 11 basis points? This potentially even get 40, 50 bps is massive on that 25 billion. So I think there's a real fight to get as much of that out of it as possible. And the size of GBTC and the profitability is what opened everyone's eyes to this. And that's why you have 14 people chasing it, because if every one of them could just get two and a half billion out of GBTC, it would probably be one of their more profitable hedge fund or sorry, ETFs, even at 50 or 70 bps.

Peter, that's a question, though, I agree with that 100 percent. But for GBTC itself, having these insane fees that they're currently riding on, they would have to massively increase their AUM for this not to, you would think, meaningfully destroy their business in this race to the bottom for fees. How does Grayscale survive if GBTC converts and all of a sudden they have to cut their fees by 66% to compete. I don't know enough about their business model, but I would expect they have to be prepared for cutting fees. And the other thing that I do not know right now, what will be interesting to see is how many people own, say, GBTC back when it was at a steeper discount versus shorting spot or something to try and watch that gap close waiting for this announcement?

And will that $25 billion even stay in if it becomes available to get out at spot? Or is a lot of this arbitrage type trading where people own GPTC at a discount or short something else waiting for that gap to close, and we might not even see that $25 billion convert? I think these are all real questions, and it'll be really interesting to me to see what happens to GBTC in particular, because that will drive, I think, so many of the other flows and businesses, both internally and for other firms. Yeah, that makes a ton of sense. Alex, Ryan, do you guys have a concept of what would be viewed as sort of successful or sustainable long term as far as AUM for any of these issuers? Maybe not. Maybe Ashley, whatever. Yeah, go ahead. Either of you. Go ahead, Alex. Then Ryan.

No, I don't. I mean, I don't have a great idea of what that is. I mean, you could do math on the expense ratios. What I'll say is I'll be very surprised if more than just a couple of these ever last in two or three years. I'll be surprised if there's 14. I agree with that here. And similarly, can't speak to any particular filing one way or another. But yeah, I think that, look, we expect that once eventually these vehicles do get approved, if and when that happens, that this grows into a multi-billion dollar vehicle for Bitcoin. And so, again, you can do the math and the expense ratios there, whatever they end up being. But if it's 1% on a $50 billion AUM ETF, that's sustainable for many companies. It just depends on really the split between how many providers there are and what this expense ratio is. There's a lot of variables there. But I think if the asset class continues to grow, which over the past 10 plus years, we've seen evidence that it does and that we expect it will, I think these will be really interesting to follow. And it's really exciting, honestly. I mean, it's really exciting for a number of reasons. The potential AUM these vehicles could

generate or pull into them is one reason why it's really exciting. But there's a lot of other reasons that I'm particularly excited about the market evolving in the way it is, right? And kind of the regulatory stamp of approval that an ETF could put on Bitcoin. There's a lot of people out there who don't pay attention to crypto markets that point to the fact that the SEC has never approved an ETF or that the government is anti-Bitcoin as a reason not to invest. And so once that barrier, if and when that barrier is reduced, I think, you know,

there's a chance here that we are underestimating how large these vehicles could grow. But really just have to wait and see how it plays out and see what the decision ends up being, what the fee structures end up being and a number of other factors. Does anyone have a strong view on what happens to BITO or any of the other Bitcoin futures products that obviously are inferior to a spot ETF, especially because they don't really track the underlying asset particularly well? What happens to BITO in the short and or long term, assuming we get all these approved? Peter, have you ever seen anything like that where a futures ETF sort of dwindles

because the spot ETFs are approved? I haven't seen many examples, but that would be my expectation, right? It's just not a very efficient vehicle at all. So I think those are kind of dying up as this takes over. And it's really going to be a competition for GPTC money locked away elsewhere and new investors to see where this grows. Yeah, I think that makes a lot of sense.

Well, guys, I think we pretty much covered it for today. We will be back obviously tomorrow. Okay. Well, we got two people with their hands up, so I will not wrap. Go ahead, Kristen and Simon. So we probably don't have time to go into this in detail but um in terms of like gbtc converting i do think that it maybe flew under the radar i think a lot of people think that when it converts that um the tax implications uh could be pretty detrimental um for existing holders and i think so grayscalecale put out to their investors, like a piece a few

weeks ago in response to James Stafford's piece saying, this is not going to be as much of an issue as you're thinking. So it's very technical, but just wanted to raise the point that for tax purposes, the conversion of GPTC should not be as detrimental as people originally thought. Yeah, I wish we'd had you here yesterday. We were talking, Clinton, another tech, about the fear of this $10,000 rule. But I think we got that pretty much clarified. Hopefully, that we're not all going to commit felonies if we receive $10,000 in crypto as individuals.

Business is not good. Which was a... Or individual. Yeah, good. Yeah, perfect. Simon, what did you have to say? Yeah, I was just going to say the GBTC conversion can be treated in isolation, but then there's another interesting trend to watch, which is the impact on digital currency groups.

So obviously digital currency group has got subsidi bank um you know subsidiary bankruptcies with gemini genesis fraud cases all of that stuff so um i as far as i know it's a private i mean it's a private company but the the margins were really high that were going up because of those fees up to digital currency group um but yeah if you get a significant reduction i don't think it has any impact on the margin and profitability of the company but at one stage it was looking to go public um and this would be a significant reduction and if it wasn't for all the leverage obviously their biggest issue is that they've still got the hangover from the massive intercompany loans that were being accused of fraudulent, SEC, and at the same time all the leverage there.

So that's one to watch. Yeah, I mean, Grace JLGBTC obviously was the cash cow. I would even go as far as saying maybe piggy bank for DCG, right? Yeah, yeah. I mean, you know, so I don't think it's a survival thing, but they've just got all that leverage. So it might be very beneficial for them to go into bankruptcy, wipe out all the leverage,

which would have an impact on the Genesis Gemini creditors. And so I think there's still a little bit of unfinished business there that we're going to bring into 2024. And then obviously we've got whatever comes from the stablecoin stuff. We're seeing a bit of a China crackdown on Tether as well. Not sure if you covered that story, not for now. But yeah, that's another slight one to look at with the ETFf transition just to just watch yeah i mean there's last week i think that barry stepped down from the board of grayscale which uh you know i think uh

piqued a lot of people's interest with some of the things you might be discussing here but i don't want to go too too deep down that bad rabbit hole christine go ahead no you just stole my thunder i was gonna ask if if it kind of came, I think, like the day after Christmas. And I was like, what? Barry is gone? But yeah, I don't know if we want to go off on that tangent or not. Yeah, I think we'll save that one for another day when we have anything more substantiated. But I think, yeah, once again, that we did cover this.

Thank you, guys, and all the guests. We'll be back tomorrow. Hopefully, Mario won't be covering any more tragic war coverage and will be able to join us to talk about Bitcoin. Thank you, everybody. See you guys tomorrow. Thanks to all the guests. Everybody, give them a follow.

Have a good one. Peace.