The Wolf Of All Streets - Why Ophelia Snyder Of 21Shares Is Excited About Crypto & Expects Massive Price Action In 2024

Episode Date: January 24, 2023

Ophelia Snyder studied Earth Science in college. In 2014, her mom discovered Bitcoin, but could not find a safe way to buy one. Ophelia decided to build an easier way to buy Bitcoin for her mom. Today, 21shares has over $1 billion in AUM and Cathie Wood on its board. Listen to this incredible interview with one of the leaders in the institutional crypto space. Ophelia Snyder: https://twitter.com/OpheliaBSnyder ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #trading  Timestamps: 0:00 Intro 1:00 Bear market 4:00 No institutional pushback 9:55 Crypto in Europe 19:00 FTX 25:00 How to build trust 26:25 Getting into crypto 30:15 Crypto ETP 33:15 Tokenization 39:50 21shares & Cathie Wood 45:00 Building proofs of concepts 49:00 Exciting 2023 54:50 Wrap up  The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

While the United States is seemingly just starting to have the conversation around crypto regulation and legislation, there are countries in the world that have sorted this out years ago, where crypto is booming and people are allowed to create and invest in the products that we dream of having in the United States. Of course, Switzerland is one of them. Ophelia Snyder is one of the industry leaders in Switzerland and in New York, who created early ETP structures, which are just like the ETFs in the United States we're waiting for. She launched the company in the famous crypto valley in Switzerland and has incredible insight into the whole process behind regulation, legislation, and building products

that her mom and grandmother and everybody else in the mainstream will use. This is an incredible conversation. You don't want to miss it. We sat down at Consensus, and I must have done 30 podcasts in July. And it was right at the beginning of the bear market. And it was all the protocol leaders and stuff. And every one of them said the exact same thing. It was like I had 30 of the exact same conversation. So now at least we get a little diversity of opinion and things have separated because that was really when it was very fresh wounds, I think. Also, I think one of the key things here is realize as a lot of the people

who do things like lead protocols or run companies in this space have been around in the sector for a while. Yeah. Right. Like it's rare for you to be running a company in this sector or running a protocol in this sector. If you've never been through a bear market, whether, whether by the way, that's like, actually you were already working in crypto or you were just participating in it. People were very aware of what was happening in 2018, 2017, 2018, 2019, those types of conversations. Typically, the people who are now in positions to be having these types of discussions were at least quite aware of what was happening back then. And they're speaking from experience. And I respect that. Yeah, I think anyone who's been here before has the not my first rodeo attitude for sure.

Nothing about a bear market or down cycle surprises them in any way, shape or form. I've only been in the market since 2016. So I didn't experience gocks in the first cycle or two. But I think 2018 was bad enough to be somewhat bulletproof by 2023. Yeah. And if you were at the table then, when I first built my company, we approached this, we started talking to banks, right? Because we sell to institutions. We sell to retail, we sell to institutions, but some of our first like early client meetings were with, you know, traditional Swiss asset managers, traditional Swiss banks, traditional retail platforms, like even even getting on retail

platforms, and like providing that accessibility to a retail customer requires you to talk to someone, right? You have to go to, you know, the Swiss equivalent of Schwab and say, hey, these products exist and they should be on your platform. And so it was amazing because people thought we were more likely than not like, like, it's not possible. What you're describing you have done is clearly illegal. I'm like, no, no, it's not. Like this is a fully regulated setup.

It's set up in this way. It looks exactly the same as what we do in gold. This is something you've already run diligence on structurally before. It will clear every one of your risk hurdles. We know what we're doing. We've already done it. It exists.

Here's a ticker. You can see it on the market. And it still had a ton of resistance to it. And quite frankly like this fair market it's not like that at all so like even the progression over time like that would have been right when we started the company so our first listing um was late 2018. so 2018 yeah and that was the depths of the last bear market when we still had major skepticism, very little institutional involvement. I remember thinking the institutions were here in 2017, 2018, but they weren't.

So then you talk about clearly the difference between 2018 and now 2023, even with another bear market, prices being down, the mainstream media narrative that crypto is dead. You said you're not getting that same pushback. No, of course not. No. And it's interesting because I think there is this mainstream media narrative of crypto is dead.

Kind of. Not as bad as last time, like not even close. Last time it was going to zero in every article. Every article going to zero. Every article. That's not where we're at right now. I think two incredibly interesting things have happened. One is that if you actually talk to institutions, a lot of the big projects,

so we want to start including crypto in our fund mandates so that we have the ability to invest in them in discretionary fund structures, for example, which would be like a key element of getting institutions into the space. That work takes years in some cases, because of the way regulations work. Months, years, it takes time and none of that work is slowing down. So there's a lot of the work and everyone is saying this, right? And it was sort of the point you made when we first started chatting about what are the soundbites? And the interesting thing is, I think there have been historically different points in time in crypto where those were soundbites.

What I'm seeing is actually just large volumes of work getting done, ranging from super sexy new tech that's going to drive the next major wave of use cases all the way through to absolute drudgery of filling out required paperwork with your regulator. That's going to take 18 months to get it approved. And the difference in that you're getting both sides, right? The infrastructure is being set up. The really painful, not sexy, not interesting things people don't even realize exist. If you are a big asset manager and you decide tomorrow you want to start allocating the crypto, how much work and time it takes to go from that to your first dollar? It's years. So all of that work is still happening. And so

that is really interesting. Talking about the 2017, 2018 phase, I remember getting these hints that large-scale institutions, we're talking about endowments and pensions, the really big money, might think about it, but it would literally take half a decade to do due diligence and to get a structure in place, which still we potentially lack to some degree. The SEC obviously never approved a spot ETF, which would have made that extremely lack to some degree, right? I mean, the SEC obviously never approved a spot ETF, which would have made that extremely easy to some degree. So what I'm talking about is actually the European market. And I will tell you, we've had crypto exchange traded products for five years. I've been running them for five years. We were like some of the first people to come out with them. We issued our first crypto index product in 2018. like we were absolutely at

the cutting edge of what you could do was actually physically backed it looks exactly like what you would expect a commodity basket to look like in europe it's structured exactly the same way to a t it is the same concept works the same. There's no funny business around the structure. It is not a particularly interesting structure. It is as plain vanilla as it gets. That's what it wants. And it works. And it's been working for years. But by the way, it's still taken years to get people to a stage where like, okay, yes, we'll add it to our allowed list of tradable assets for a trader. Right. Just because it exists doesn't mean that they're going to actually allocate to it. But it really speaks to how far behind the United States

continues to be and probably falling even further behind. I mean, we have futures ETFs, which obviously are not ideal for a long-term investment, and GBTC that was trading up to a 50% discount to NAV. I mean, these are not good products for retail to put in their retirement portfolio or for institutions to buy to get exposure to this asset class. No. What they are is they are essentially like a second order derivative. There's a second thesis in what you're buying, which is completely fine as long as you realize that. Yeah, you're just not buying spot Bitcoin and that's not the same as gaining exposure to spot Bitcoin, which is what I think people most are looking for in the United States.

Right. And exactly. And like with something like futures, you're also taking some incremental risk around institutional demand for longs and shorts, which affects what the carrying costs and the roll costs of those futures are. In GBTC, historically, you were taking a bet on two things. One was like a demand asymmetry between retail and institutional investors, primarily in the United States, and on public market sentiment on the likelihood of a Bitcoin ETF approval. There's nothing wrong with that, but it is these two other thesis that actually drive a large part of that investment return.

And we don't really talk about it in that context. And that's part of the issue. If you're going to distribute product, if you're going to distribute a product, it needs to be sold in a way that is linear to what the actual return profile is. And we need to talk about those differences. I think the future products have done a really good job of talking about that. I don't think anyone who's bought that doesn't know exactly what they've gotten into. I think GBTC likely left something to be desired in the way in which that was sold. I concur. And you obviously are splitting time, I believe, between New York and

between Switzerland. So you might be the best person to speak to those vast differences in the way that regulators, legislators, or just the markets in general approach these products and this market. Why do you think that Europe is so far ahead and has been so open-minded, I guess? I mean, Switzerland is notoriously open-minded about products like this, but why do you think that they're so far ahead? So I think a couple of things happened. All made small incremental differences,

but ended up making just a world of difference when it came to timeline and how we moved things forward. I think Switzerland in particular has a very deep history of gold custody and physical metals custody. And that may seem like a completely irrelevant little anecdote, but it actually means that their product structures and the way their legal requirements for those product structures work were designed to accommodate something that actually works quite similarly to crypto, to Bitcoin, the way it behaves, right?

The concept of cold storage is much more similar to putting a gold bar in a safety deposit box than it is to holding a security on a like DTCC kind of thing. Just in the way that asset is going to behave inside of a product. And no one really thinks about this stuff, but it actually does matter because it means that the templates that they used existed. They also have a massive history of banking, right? So their relationship with banking and with bank infrastructure is quite complicated and goes back centuries. And so their views on these things are,

okay, if you have this new technology that revolutionizes the core industry here, how are we responding to that? What are we doing with it? They also have a huge tech footprint, which again, nobody really thinks about. Like Google, massive headquarters in Zurich. And so they have this really unique combination

of a clear understanding of these types of commodity markets, a clear understanding of financial structuring, a clear sort of alignment between the country and a lot of the values associated with crypto, and the right talent to be able to execute on that. And so they set up really crystal clear regulations way before everyone else. And the regulations have a tendency to be very practical. They take a different approach to regulation, right? Even like the way you file your taxes is like a simple, accessible example. In the US, the IRS knows how much money you owe them and you're supposed to try to back into that number and get the number right. And you get punished when you're wrong. Yeah. In Switzerland, there's a piece of paper. You fill in three numbers on it and they will

call you if they think there's a problem and talk to you about it. And say like, hey, by the way, like, have you, this one piece of paper is missing, would you mind? And you can call them and say like, hey, yes, I'm so sorry, I didn't realize that, let me, and there's a dialogue there. And that's true of your taxes, but it's also true of like major questions around regulation. Like this is what it says on this piece of paper, what am I actually supposed to do? Is guidance they're willing to give. And it means that regulations are more flexible because they're actually able to work with you on like, how do you, how does this apply to my business? How does this apply to me? How do I comply and have that dialogue? So it allowed

them to create more flexible regulation that's been able to keep up with crypto. And so that, those combination of features really started this nice little nugget within Switzerland. The ability to do all of these things, it's brought an enormous amount of business into the country. That alignment's only gotten stronger. They've been able to set a really clear example for the rest of the European Union. And I think the rest of the European Union has...

Mika is not perfect by any stretch, but it is a massive step forward in terms of harmonization, which is actually what you need to be able to operate a piece of globalized financial infrastructure. And ultimately, that's what crypto is. So the fact that the EU also has that history of understanding harmonization has put them ahead from that perspective also. Yeah. Kind of a convoluted answer. There's been, not at all, there's been much ado about nothing sort of to Mika's proposals that could have been very damaging to crypto, but to be intellectually honest, they've not generally passed the worst parts that were proposed or discussed.

It just seems like even them who maybe are a bit controversial or have a negative take towards crypto have generally done the right thing, or at least had a thought process that you could follow for the way that they are approaching this thing. I love your analogy of self-custody being more like gold in a vault than it is like a security, because one of the biggest confusions in the United States has been whether these things are commodities or securities and where that line is. In Europe, are they making that differentiation? Is it really Bitcoin is a commodity and we have to figure out the rest of it? Or do you think that that framework is already there, even for the ones that probably are securities? The infrastructure is already there. Because for example, in Switzerland, they did asset categorization as one of the first things and it's broad,

like it was broad. And so sometimes you go and ask like, Hey, this one thing it has to be. And so one of the things that happens in, because Switzerland is so practical, you can go and say, Hey, by the way, like this new thing, where does this fit? Like, we think it fits here. Could you validate? And they'll actually work with you on that. And so I think, again, it's just a different approach to regulation. And that has a lot to do with like how their legal system works and why it was built that way. And a lot of these

things have very little to do with, like, they don't have a 33 Act. They're not running on something from 1933. Structurally. They just don't have that. There's no Howey test because conceptually, that's not how they write their laws. They have a much more direct democracy structure. There's a bunch of very specific things to Switzerland, which, like I said, philosophically makes them very well aligned with crypto. But it's also just very different than the United States. And I think Europe had, you know, Switzerland's obviously not part of the EU, but they had a template that they could see that was working.

And there's a lot of harmonization, especially on the security side between Switzerland and Europe in terms of like, they talk to each other, these markets are linked. There's a lot more cohesion there and i think also they've had more time in some respects right it took a while once you know we were operating products in switzerland to get all the european regulators comfortable and that's taking years but there was a way to have that conversation i think um that's changing in the us i actually think a lot of what's happened in the last six months in this space just in the con everything from like enforcement to you know they're gonna have to say something about block fight eventually they're gonna have to say

something about gemini eventually and i think that's going to change a little bit this um stalemate that we've been in and and some of it, I think crypto is going to like, some of it we're going to hate. And I think either way, we're going to have more clarity, which is probably a net benefit to us. It is a net benefit, but it seems all we get is enforcement after customers are already losing their funds and hurt and not protecting them when it could actually be practical and helpful. But that's not something that we need to certainly talk about right now.

I want to talk more about life in crypto in Switzerland, because it feels like they're so far ahead of the curve. Of course, crypto valley, I believe that's where you guys actually launched. So you're fundamentally involved in that area and what's happening there. I've never been there. I think most people have sort of heard of this at this lost city of Atlantis where, you know, all Bitcoin rules all. What is it like in Crypto Valley in Switzerland? It's interesting. It's a real community, right? Like not just our company, not just people, but there's excitement around the space. There's an

understanding of what it is you're doing. There's friends and people who are much more connected to this space in a way. And actually, honestly, the best part of it is that none of the people... There's a certain amount of anxiety that comes with, I think, crypto businesses that have to operate in this shifting sand environment. And that takes a like takes a toll on everything, right? You never, you do your best and you hope for the best, but the sand is shifting under your feet all the time from a regulatory perspective. And you're talking about, unfortunately, you're talking about these things like can be kind of tough.

Like the thing with Switzerland is you don't have any of that, which means that ultimately a lot of the conversations have a tendency to then be like more about, Hey, this really cool technology or hey, this really cool expansion and less, well, what are we going to do about regulations? And I think even just that conversation being different makes it really pleasant. Yeah. So you can focus on the building side and not on the, can we actually do this? Are we allowed?

Exactly. Are we allowed? Did you run the analysis? Because it's a pretty straightforward answer. And if you're not sure, you should ask somebody. But like, you're going to get an answer to that before you're getting into anything that's going to be, before you get to that place of anxiety. It's just sort of the same as building in a way. Yeah, the ask for forgiveness instead of permission approach has not worked very well in 2022 or 2023 in crypto. It worked for a while.

It seemed like in 2017, 2018, you could kind of do whatever you wanted and maybe they wouldn't catch up with you. But now it seems like they're taking it very seriously. And I think, like I said, I think that's going to be a good thing. I think one of the areas I'm actually most happy about this is sort of a weird adjective here but like bear with me um it's been made very clear by mainstream media that fpx is fraud has nothing to do with crypto not at first but i think they've clarified yeah not at first absolutely not at first but like where we've ended up is a bunch of irresponsible people did some very illegal things and stole people's money and that's actually sort of where you want to be like this is theranos this isn't you know

that difference is huge and i think like what we're seeing this year, and I think that's an indication of like real nuance when it comes to this stuff in the mainstream media, real nuance around like how the space is moving and evolving and how the rest of the world thinks about us in a really critical way. I think it's actually been, it's highlighted some real evolution that we should not take for granted. I like the glass half full view because it's easy to take the glass half empty view of everything that's happened in this space. I mean, we've had a legitimate contagion, six months of trusted platforms failing, hurting both retail, then hurting institutions with FTX and hurting all the crypto native traders who are holding their assets there. But it really does leave you sort of at a, at least in my opinion, the only way to go is up sort of situation. I mean, even if we have a Genesis failure or another shoe drops, which I think everybody's sort of anticipating and expecting, it does feel like we now know

who was swimming naked and who is for real. And I think it will cause us to be more disciplined. There was a moment in the last bull market. And I think this is, and this one's kind of on us, so to speak, like this idea that like risk-free yield. Wait a second. Do you really think a 20% APR is risk-free yield? Or nine. And in some cases, or nine, like where the actual risk-free rate is like 2% or 1%. Like, what does that look like? And granted, now we're in a very different interest rate environment, so these numbers look different.

But I think one of the things that's come around this time, and I'm hoping we're having more of a conversation around, is like, hey, yield on stables is super high because the counterparties you are lending to have pretty high risk profiles. And that's completely fine, but that's what we're doing. We are lending to counterparties with high risk profiles. Now, some of those counterparties have perceived high risk profiles. So if you look at the way Coinbase's bonds trade, that's not totally fair. People are indexing that to the performance of crypto. And there are other issues

that come with that. And access to credit and crypto has always been significantly more restrictive, which does cause there to be a premium. But we are still talking about lending into structures. And so that comes with risk. There aren't real risk-free rates anywhere. And I think this time around, the theme of this bear market has actually been like, do we really understand the risks we are taking and how are we talking about those? Especially in the context of things that have been repackaged for retail, for people who might not be doing a ton of diligence about it, right? If you are yield farming and you're doing a super sophisticated strategy, you're

probably not the person who doesn't understand what that risk profile is. The problem is like, hey, if we've repackaged that into such a way that like you're no longer seeing what is actually happening under the hood, either via a trusted centralized party, or any other structure you can think of, we have to be careful around how we're talking about those things. And I think if we take that from this bear market as our big lesson learned, as much as all the building and all the tech infra and all of the institutional adoption is going to be part of the next bull market, I think that awareness of risk

will actually serve us so well as we develop as an institution. And maybe that's me being like crazy class half full here, but if it's going to hurt, we might as well learn. I think a lot of the collapses, I think we had the outright fraud at one end of the spectrum. And then we had a lot of just poor mismanagement and bad decisions by humans. So in that case, the only thing missing to your point was transparency. I mean, I'm a Voyager creditor. I've talked about it quite a few times. If Steve Ehrlich had come out and said, we gave an unsecured $700 million loan

to Three Arrows Capital so that we could earn your yield, I would have taken that opportunity to remove my funds. I would have known that I would have been able to make a decision. So it really is, as you said, people can make their own decisions how much risk they're willing to take on. The problem is that you don't know what's happening under the hood. Yes. And I think one of the missing pieces here is, for example, we as a company are required to produce audited financials. We have a regulated product. There's a cadence to financial reporting. We are required to comply with it. And it shows both our assets and our liabilities. We are just required to do that. That is part of what we have to do to operate. That's not special. That's not interesting in

any way. You can pull this stuff off of our website and you can any day of the week you like and has been there for years. And we have maintained the entire history. That's completely fine. And I think like there's an element of what is the right level of transparency? What is the right level of reporting? And how do you give people the tools to do that? And how do you build trust inside of a trustless system? And I think there's a sense of, well, crypto is all about, you know, you don't need trust. You can have code execute trust for you. And that's true when you're doing certain things. That's not true universally across the board. And I think, for example, we will still need unsecured credit. There's not really a good

way to replace unsecured credit. If you actually want to make changes to global financial infrastructure and, you know, exit just existing in crypto. We're going to need unsecured credit as a structure. How are we dealing with that? Because by the way, I'm guessing most of your listeners use unsecured credit in some way if they have credit cards. It's a key piece of how the American financial system works. We're going to need to solve that problem in some way. If you actually believe this is a better rails, but you can't do that by just deleting the transparency and the risk pieces. You have to do that by actually building a holistic system to manage that and make sure

people understand what they're exposed to. There's a reason your credit card's interest rate is like 25%. Yeah, absolutely. And that makes sense when you put it in that context. So you have a really interesting background. You did not start in finance, right? You literally started in earth sciences. Is that correct?

Yeah, I did. I started in earth sciences in a very funky degree program that is all about how do you connect disparate systems? So it's very systems design heavy. And I loved it. I thought I was going to be an oceanographer. That did not end up being how that worked out. I found my way to crypto in a very roundabout way. My first real deep conversation about crypto was with my mom. And I was not the person who brought

it up. My mom came up to me one day and she's like, I just read about this thing called Bitcoin. There should be a global currency. That makes so much sense. All these multinational corporations spend so much money currency hedging. And we have no really good way to send money from New York to Tokyo accounting for FX. This makes no sense. We should actually just have a better system for this. Also, why does that take three days? I'm looking at my mom like, I'm sorry, what are you talking about? She's like, Bitcoin.

I'm like, I have no idea what you're talking about. And interestingly, my mom ended up making like, never bought any Bitcoin at the time, because she couldn't figure out how to do it. Well, that's super sad. Can you imagine? Can you imagine? You get it. You get the whole vision, the whole point, the thing that's actually hard to get what

the use cases, why it should exist, that it should exist, the anonymity piece like this was that you're talking like 2014. This was a time when like when crypto was sketchy. It was unclear what use cases were. Institutional adoption wasn't even a part of the vocabulary. There was nothing, right? She's like, no, no, no, this should exist. We should be using this for ATMs and ATM networks and global payments and global disbursements. And I'm like, okay. And so a couple of years went by after that. And I started following the space kind of casually. I went on and got jobs doing other things. I got

my master's. I went to go work for a big bank, actually two big banks. And my co-founder and I, who we'd been friends since college, got together for coffee one day and started talking because his mom and my mom had actually fallen into the same issue. There was no way for them to buy crypto at the time. And my mom didn't want to open a new bank account. And I get that. She's like, I'm not going to open a bank account for one investment. I also don't know how to do that. Also, what is Coinbase exactly?

Because I've never heard of these people before. By the way, the woman understands Bitcoin and is like, who's Coinbase? There's a level of skepticism with infrastructure when you have to actually give people money. And obviously, Coinbase is a great company, but she wasn't comfortable with that. And certainly not that early, five, six years ago. And so we started looking for ways to put our parents into crypto. What are the options? There were a few private funds, there was GBTC, and we couldn't get comfortable with any of it. And so the two of us were like, okay, cool, we should build a thing to help our moms get into the sector. They believe in this. They see the use case. They totally get it. Why is this the hard part? And so that's how we got the company started.

And we looked at 37 different jurisdictions. We looked all over the world trying to figure out where we might be able to build this thing. And for all the reasons we discussed earlier, Switzerland just made the most sense. And so what did you build so that your mom can actually buy crypto? We built crypto ETFs, the European equivalent of an ETF, which is called a crypto ETP, slightly different name, but has more to do with European regulations than anything else. And it does exactly what a crypto ETF is supposed to do. It tracks the performance of the underlying asset in a really not interesting way to provide exactly the return it's supposed to on the label. And you can subscribe to it. You can come into it. You can come out of it. There's liquidity. It's not a big deal. It's tradable. You can hold it at your existing bank. So my mom using her existing securities account with her existing structure can buy this

product. She's like, okay, cool. I'm good. I can now buy what I want to buy. And that was it. We could use more boring. We could use more boring. Everything doesn't have to be interesting in this space. It's been a little too interesting in my humble opinion. We need the legacy products that are familiar for boomers and millennials alike. And we just haven't had it here. We need it to look like the legacy products. And that's the difference.

It doesn't mean they have to work like the legacy products. And so our products behave like the legacy products and are built on some pretty advanced tech to allow a legacy product to play nice with crypto. That's actually not that easy. They are not built to play nice with each other. No.

Definitionally. There's very limited ways to connect these things. So our whole job is to bridge this. How do we build a bridge between something, a legacy product, my mom feels comfortable buying and holding, and I feel comfortable with her doing that and literally the most cutting-edge technology possible right we're talking like we were launching proof of stake products with staking returns actually compounding into our funds years ago. It's crazy. Yeah. We launched a Tezos staking product in, I want to say 2019. 19, maybe. Yeah. Yeah.

I remember this because it was right when Coinbase was launching their first staking infrastructure. We were one of the first clients for Coinbase staking infrastructure and we were using it inside of a public market product. How do you make that happen? It's actually really hard, but the key is to do both, right? And not just for boomers,

but for everyone else. If you run a fund, going back to some of the stuff we were talking about at the beginning, it's really a lot easier to buy security than it is to buy an amorphous thing that is undefined with all novel infrastructure

that you now need to set up. How much work are you putting into setting up infrastructure to make one investment if you run a multi-billion dollar fund with thousands of positions? What is that worth to you? And that's a real thing, right? We don't ask brain traders to have brain silos. We just let them buy derivatives. Same concept. Now there's this dream. You kind of described the one-way street of bringing crypto into the legacy bucket and doing it in a way that's familiar. There's a lot of people who are working on bringing the legacy system into the crypto bucket by tokenizing everything,

tokenize every stock, tokenize every real world asset, trade them like crypto in a decentralized manner. So it's not just a one-way street. Do you think that those are realistic goals? I mean, you've been through it all, right? I mean, you're working with regulators, you're building this product. It would take a lot to eliminate a lot of very powerful parties to get to a tokenized future that's decentralized.

And I don't know, central banks and banks and payment companies all go extinct or adopt the technology. Do you think it's realistic to think that we could tokenize everything and live in that sort of future? Yes, actually, which is interesting. I think one of the issues with this is that people love to talk about tokenized equities. And tokenized equities are the hardest possible thing in a very weird way. They're the simplest possible thing, which is why we like it from a technology perspective. But from an adoption perspective, they're really hard. And the reason they're really hard is that dark pools exist and provide liquidity outside of the trading hours. So you actually do have liquidity beyond market hours, depending on who you are and what kind of access you have.

Who you are and what access you have. Even retail platforms have that. But even retail platforms have that. After hours trading exists for a lot of retail platforms. So that's a little shaky. And the other problem, the honestly bigger problem, is that most equities trade for very narrow. Think like penny spreads. So what is the increment? And they're extremely efficient on the settlement side,

because it's very high thorough put systems. So in a world where you need to get all these institutions to buy in, because at the end of the day, people still want to buy someone to buy, right? Like Goldman Sachs is real added value to the world is advising people on M&A and on what to purchase, not on how they actually go about purchasing it. So you still need... That is actually what you pay them for. No one cares who's processing your wire transfer. So most people really don't care about the rails as long as their order fills. No. Exactly. And so the question becomes, you need to provide real infrastructural benefits to get Goldman to say, actually, I would rather trade on this system because it's going to save their bottom line. It's going to affect their cost structure because they're the ones who

are actually paying for this. That's a different game. And equities, because they trade so efficiently, is a really tough uphill battle. Do you know what does not trade efficiently? Fixed income and derivatives. The hairy, really complicated stuff does not trade efficiently. And the spreads are wide and the markets are not super liquid. And the ops overhead is real. That's interesting. ETFs, for example, are a nightmare to trade for the most part because they are Frankenstein instruments made up of between seven and 12 siloed counterparties largely held together with phone calls, emails, and duct tape and people emailing spreadsheets to each other. That is how these products work. And that's not how crypto ETFs work. That's how S&P 500 massive funds work. Like there's no super solid, super automated infrastructure.

And the costs are very high for operating these products. They're measured in basis points, not in pennies. And so what does that look like? Who's paying for that? Well, actually, you know, a lot of the trading shops, a lot of banks, a lot of the asset managers are the ones who pay those costs. These hairier, meatier products are a lot harder to bring on chain, way harder technologically to bring on chain. But from an adoption perspective,

you're actually delivering real customer value immediately. And then you can kind of drag along the equities later. Because once all the hairy stuff is there, well, we might as well do the easy stuff too. But that's a tougher sell technologically and easier sell from a customer value perspective. I literally never heard it described like that, but it makes so much sense. The thing that would be the easiest to tokenize is probably the least needed. And the one that would be the most difficult

is the one that we need imminently. Yes. And if you look at a lot of the big proof concepts that we've seen, it's a lot of funds and it's a lot of fixed income. Yeah. Right? Like think about the big ones, the ones that we're attention grabbing. It's bond issuances, it's tokenization of funds, and it's derivatives.

And there's a reason. The reason is that that is actually where there's value to bringing real world assets on chain. Then we do equities later because that's fine. Right. But I mean, there's so much room for crypto to grow and for the usage of the technology, even us capturing a small percentage of that market be a massive coup, I think, for the crypto space.

So it's enough. It doesn't have to be the whole world of equities and stocks for it to prove the use case. No. And in fact, the use case is a lot easier to prove. Right? The customer benefit is so much easier to prove in fixed income, for example, than it is in equities.

Because my ability to send something from point A to point B, eh, okay, cool. Like, that's great. That's nice. Okay, cool. Like, that's great. That's nice. Like faster bank transfers. That's nice. Payments are else. That's really useful.

But like the equities trading side, less so. Whereas something like, hey, we want to have all these mortgage payments flow into this structure that's then going to have a waterfall. And there's this complex payout algorithm that's not easy for a bank to run when they structured this product. And someone needs to operate that. But hey, we could create a piece of code where code is law and it does it by itself. There's like four people working on that today. That's interesting, right? That is a real

improvement for people and real improvement for the people who pay the bills, which is the other issue. Like who pays for this stuff? Well, actually, wait a second. It's Goldman, right? They're paying the headcount. They're paying the infrastructure providers. They're paying the transaction costs. They're the people spending the money. It's BlackRock and Goldman. So what do you need to solve their problem? And that is a way to really push forward adoption in a real way, especially when you start to think about the institutions are coming. We need to answer those questions.

The institutions are coming. I mean, BlackRock has made headlines five or six times in the last year, quietly, surprisingly, I think. But they're really working heavily in this space and starting to make legitimate moves towards adoption. And now just going back a bit, you kind of talked about the origin of 21Shares, which I loved. You created these products, you launched them, your mom was able to use them.

Somehow that attracted the attention of Cathie Wood, who you're working with. Could you talk about the origin of that story and what you're doing? Yeah. So I met Kathy at a conference randomly like years ago. And we ended up sitting next to each other at lunch and got to talking. Possibly one of the most useful conferences I've ever been to. We just got to talking about innovation. A lot of the conversation we had back then is not dissimilar from the conversation you and I are having right now about what does settlements infrastructure look like? What do payments rails look like?

How do you make capital markets better? How do you think about the next wave of what financial infrastructure looks like? Because it's not sexy, but it is what actually makes most of the world function. And we started talking about the businesses we were building. And at the time, she was not as much of a household name as she is today, that's for sure. And we got talking about how do you build a good business in a space that's all about disruption and innovation and forward looking. And we were very philosophically aligned on a lot of the things we were doing. And so she became essentially like an informal mentor to the company for a long time before she actually joined

the board and been working together ever since. We have a pending application for a crypto ETF in the US together. And she's been invaluable in terms of how we've actually gone about building our business. She's incredible. She's one of my favorite people in the space. So I can't imagine having her as a mentor and having her here when you need to bounce something off of someone. Seems like basically the best possible person on the planet to have access to to do that right and it's interesting you say that you were philosophically aligned because obviously she's invested in a lot of tech that moves fast and breaks things you know certainly and is disruptive but i think we've come to a place in crypto where we maybe need to like

move slow and fix things as opposed to move fast and break everything because it's people's money. And so it's interesting that you can have that disruptive mentality, but actually want to move slow and do it right. It seems like that's the approach that you're taking. Yeah. I think one of the things from our perspective is you have to prove that it can be done. And the move fast and break things is all about, can it happen? It's binary, right? Can you realistically tokenize a fixed income product? Yeah. There's going to be some issues to it, obviously. Like obviously there are going to be issues to it, but you can. And I think a lot of what we're seeing, what we saw in this bull market was binary. Can you actually do this?

Is this possible? Is there a way to do this? The next question is, okay, that's great. How do you do it safely? How do you go from... How do you do it at scale? Because the issue is not people who understand a lot about crypto. And this is actually where Kathy and Kathy and I are super, we're super aligned even back then. It's not about the 1% of the planet

whose idea of fun is spending their time actively managing their own life, their own financial life, you know, controlling their own keys, processing their own wire transfers. That's great. That is never going to be everybody. Definitionally. That is never going to be everybody. Definitionally, it's never going to be everybody. There's no way. It's not their day jobs. And we don't want it to be their day jobs. We want them to be teachers and lawyers and doctors and healthcare researchers and discovering new ways to send us to the moon. But we still want those people to participate in financial infrastructure. That is, it's an invisible layer, ultimately, to how all of these things get done.

And so a big part of that is education. And a big part of that is like doing that in a smart way. So where we are is like, hey, for the 1% to 5% of the planet who want this to be their whole life. And by the way, I wake up every single day and think about crypto the majority of my waking hours. And I love that about my life. That's not ever going to be everybody. So I think right now we've built solutions that are awesome for people like us. And we built them super quick and we know they can work and we know we can be sophisticated

enough to handle them. The question becomes, okay, cool. How do we get beyond that group? How do we suddenly make my elementary school teacher feel comfortable using this? And also, by the way, like, how do we make this as intuitive as her going to the ATM or charging her credit card? Because that's actually what it's going to take. Because I promise you, my elementary school teacher is not thinking about how the ATM she used in paris managed to debit her bank account in new york or if she needed private key access to her private keys and to sign into a metamask wallet to do it right i mean it's just the ux ui crypto is still just and it's not that's not a fault it just shows how early we are where we are in the cycle it's not it's not a fault. It just shows how early we are, where we are in the cycle. It's not an indictment of the people who have built these things. It just means that we're still in the process of building them.

And that's why when people say it's not about move fast and break things anymore, it's about this other thing. I struggle with that narrative because I don't think this was ever move fast and break things. I think this was built proof of concepts for a specific audience we did a really good job of that we did an awesome job of that now we need to like take that and turn it into actual scalable financial infrastructure and in the same way like startups when they're first starting and you're doing zero to one and you're finding product market fit it looks different than when you're scaling and like that is different like the level of infrastructure you need, the way you think about uptime of an application, I mean, everything about that is different. And I think we can be a little hard on ourselves

around some of this stuff. Like we built awesome proof of concepts for a small group of highly dedicated users who are super sophisticated in this technology. That is amazing. Cool, now what comes next? And if you look at major fintech innovation, think about early days of Square, early days of Stripe. That's how it starts. And that's okay. And we just sort of need to be more okay with that ourselves because that is

what we felt. And that's super valuable. There's nothing wrong with that. There's nothing wrong with the attitude that got us there. It's just... We've had our zero to one moment, right? And that's the jump. So now everybody, all these brilliant entrepreneurs and thinkers and coders, super shadowy super coders, whatever we call them, they're all going to step in and take us from one to 10. It's just the nature of any technological evolution. And I think that people should, to your point, be happy that we made it from zero to one. It's a massive accomplishment,

especially in a game that is very much stacked against this. Right? Challenging Swift is not an easy thing to do for a bunch of reasons. It's not. But by the way, like, hey, we've actually proven, yeah, you can. That's fascinating. But by the way, like, hey, we've actually proven, yeah, you can. That's fascinating. That is not to be taken lightly. And it doesn't mean we didn't do it

carefully enough. We just did it quickly. So now we have to go back and like, you know, make sure DevOps actually works the way it's supposed to. Using Swift is also really difficult, by the way. Yes. Challenging, it's difficult, but there's a reason we need to challenge it because it's uh you know technology from 30 40 50 years ago and at this point that barely works for your average person but we talk about this zero to one moment and the inevitability somewhat of making it from one to ten what's your timeline for that right looking forward it's 2023 we have a very impatient Community of course do you see 2023 being a big year are we talking about a five-year plan are we talking about a 20-year plan what are we talking about here depends on what you mean to do what for crypto to be the globally ubiquitous

payment standard maybe never I actually disagree. I would actually put that as a pretty high probability event given where geopolitics are at personally. I believe in that outcome. I believe in that outcome. Maybe killing all of the major banks and all the central monetary authorities? Possibly never. That's the one I was going with. Maybe. And then it's different. I'm very happy for all crypto rails for sending money from New York to Tokyo. Do I think that is going to be denominated in dollars or not? I don't know. I think some of the other stuff around... I think the contagion risk is dissipating. I think we all understand what it is. so i think that is good we at least

know what most of the cards on the table are which is a major improvement versus six months ago i think 2023 is likely going to be tough it's going to be a lot of building and a lot of like quite frankly like shaking the crap out of the like pipes of like good companies will continue to do well companies that don't have good product market fit will not will be much stronger in a year i don't think it's going to be like a banner year for crypto outside of like building and shipping cool stuff um i think when we see i'm quite excited about the next 12 months but i'm excited about the next 12 months from a you know it sounds trite but this is a better environment to build in. It's really hard to determine product market fit when you pay people to use your products. We don't talk about

that. Like if I mint a bunch of tokens and send them to you for pressing a red button, you're going to press that red button all day long. Why? It's not because you enjoy pressing that red button or that red button provides you any value aside from I just sent you $10. And I think that's what will come from this in the next year. And I'm very excited about that. I think we'll be a very different looking space in 12 months. But I think it's probably the year after for some of the price action that people are so excited about. Price should be so irrelevant to people. Price is such a superficial measure of this space that it's almost damaging that we even talk about it. Everyone wants to know when price is going to go up, when another bull market is going

to come, but all the cool stuff is built in the bear market. If you look at on-chain indicators, what we would call non-speculative on-chain indicators, so not like I sent money from A to B, but actually like smart contracts calls, they're up across the board and have continued to grow through this market. It's really interesting. And so you're seeing real activity. You're seeing real use. You're seeing really cool stuff get built and shipped.

We need those things to get built and shipped and hit the actual public world. And quite frankly, we need the right environment to stabilize. So a big part of the price action conversation, where every six weeks, we're not having a conversation again about what's going to happen next. We need interest rates to stabilize into a known quantity. We need monetary policy globally to stabilize into a known quantity. We need inflation to stabilize. There's a bunch of macro stuff that needs to happen. And I think that until that occurs, the whole world is going to be quite choppy and hard to stabilize. There's a bunch of macro stuff that needs to happen. And I think that until that occurs, the whole world is going to be quite choppy and hard to predict. So I think you sort of need that before you can start talking about realistically,

when does price go up? Well, hang on a second. Right now, we don't actually know what people's mortgage payments are going to be next month. The price of nothing is going up anytime soon. It sort of feels like. So it's disingenuous to call it a crypto winter when you're in the midst of arguably everything winter. It is though a bit like, I used to pound the drum heavily that Bitcoin was this beautifully uncorrelated asset and it was for so long. It was a little, I guess, frustrating to see it really just become the whole asset class sort of become a risk on asset in this environment, but it is what it is. I think it's a byproduct of that institutional

adoption. Yeah, we got what we wished for and we're probably regretting it to some degree. Yes, but also I think right now everything is correlated in a very weird way, like way more than you would normally expect, right? Sector diversification is across the board. There's a lot of consistency and partially because of the evaporation of cheap money. Yeah. Right. And at the end of the day, there's no liquidity for most things.

And so I don't know if that's actually an artifact of Bitcoin becoming more correlated in like a specific way or even crypto becoming more correlated in a specific way

versus like free money does stuff. Yeah. Inversely correlated to, yeah. Yeah, it does. That's the crisisely correlated to… And I think that's… Robert Leonardus Yeah. Yeah, it does. I just… And I think that's…

It remains to be seen in my mind if once the monetary contraction that we're going through stops, or stabilizes at least, whether or not that correlation sticks around. Because I can completely buy into purchasing Bitcoin is somehow tied to the availability of people's disposable income to make investments. That I completely buy. That makes sense. Whether it's actually sentiment and usability and actual performance, whether it actually stays correlated as a risk asset post the contraction in people's disposable income, I'm quite curious to see. I think we're going to be just fine. Once things normalize, I think that Bitcoin will have that casual 50% rise in the stock market

while Bitcoin does another 15x and we don't have to have this conversation anymore. You don't have to look so far back. I mean, March 2020, Bitcoin went up 17 times from the bottom when the stock market doubled and people seem to just forget that that happened. I think most of us would like to delete March 2020 from our collective memories. Unless you bought everything. Unless you bought everything. Or, you know, although let's be realistic, if I never spend that much time in my apartment ever again, it will probably be too soon. Oh, that part of it, we could definitely. I was speaking in financial markets, not in lifestyle.

Yes, I had two very young children at the time and can certainly sympathize with that. Yeah, so you know, maybe we give people a pass. Yeah, so where can everybody follow you and keep up with what you're doing after this conversation? Yeah, you guys can keep up with me on Twitter, obviously, because I work in crypto. So you guys can keep up with me on Twitter. We obviously have newsletters and research and cool stuff from the company that we put out. And you can get all of that off of our website. I can't wait to see what you guys continue to build.

And I will very much have my fingers crossed that you can bring some of that sweet Switzerland sentiment over here for the United States to follow in their footsteps because the Lord knows we absolutely need it. Thank you so much for taking the time to have this conversation. It was truly, truly a pleasure. And we'll have to do it again sometime in the future. I hope you're willing. Absolutely.

Thanks so much for having me. Thank you.