What Trump's regulators and the SEC task force mean for crypto ETFs

Transcript

DM good morning welcome to the milk Road show The Daily crypto show where we bring you crypto updates faster than Trump says it's huge I'm your host Jay Hamilton and today we are joined by Bloomberg analyst James saart we're going to discuss Brian Armstrong he said bitcoin price is going to reach multi-millions if the US starts a strategic Bitcoin Reserve he said that on cnvc yesterday AI coins are soaring after Trump announced a 500 billion investment in AI infrastructure along with open AI project called Stargate Bitcoin ETF 800 million on Tuesday eth ETF up 700 or sorry up 75 million on Tuesday Trump launches an well the SEC launches a crypto task force but

obviously Trump is behind that so much to break down and discuss and the ETF Master is in the house today myself and the rest of the milk Road team are constantly being ask for our opinion on tokens should I buy xrp is it too late to buy virtuals is there still opport Unity for AI BT well we wanted to make sure you had a quick and easy way to get all this information from us so the milro team has been cooking and they just launched the token Center the token Center is your One-Stop shop to get our rating on the top tokens each token is given a rating of bullish bearish or neutral it's even color-coded so it's super easy to digest and our ratings aren't just random guesses they're based on thorough examination of market

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coffee addiction join 3 million wallets already using odos to power over six billion in monthly trades start making smarter swaps today at milro docomo James welcome back to the milk Road show what's going on thanks for having me happy to be back stoked stoked to have you again let's let's start off with you know everybody's talking about Trump we haven't necessarily seen a ton from him on the crypto side but he I think good chance by the time this releases that there's been some executive orders from him related to cryptos we haven't really seen that yet but what what is your reaction what are your thoughts on what he's done so far in his first few days in office and more

so what the impact has been on crypto I mean it's been like a whirlwind I mean even before his first few days I mean launching the Trump mean coin which we can get into I have thoughts there but I mean this is what he does he dominates the news cycles and a lot of people hate it For Better or For Worse it's it's entertaining nonetheless he's I don't even know how many executive ERS he signed he's focused mostly on immigration and things like that but on the crypto side of things this overlaps more with the libertarian party than necessarily just crypto but he did free Ross via a pardon so that's promises made Promises Kept he's talked about doing some executive orders and he's going to be Pro crypto he's going to be the pro crypto president so what do I think going to do we can get into that

too but like he's going to do some sort of executive order some sort of things in the next few days in relation to crypto will they be as positive as some sort of uh Bitcoin Maxis and crypto Maxis I think they're going to be I don't know um I think honestly even if he even if they're like kind of lukewarm executive orders than crypto space I think it's a huge win for the space now are people going to dump on those that news maybe I I honestly I'm not I'm I'm not personally somebody that thinks the US government needs to be buying Bitcoin I'm not like I'm not a strategic Bitcoin Reserve person I mean if it happens it happens but I'm not somebody out here screaming from the rooftops think that thinks it needs to happen I don't think it needs to we need it to stabilize the

dollar I don't think really it's that critical and honestly I'd prefer if individuals were able to get exposure to to crypto and Bitcoin specifically uh before sovereigns like the US uh start getting involved but um like I said it'd be good for anyone's bags who owns Bitcoin if he does it but I'm not I think it's more likely that he's going to and this is not an out of consensus view that the executive order if he does do one about a strategic Bitcoin Reserve or stockpile as he calls it it's going to be more so like we're going to keep the Bitcoins we have necessarily than we're going to go out and buy Bitcoin um obviously there's ways he can do that without without Congress right now but one way is with Congress so I don't know I I'm not somebody who thinks we need

the Strategic Bitcoin Reserve let's talk about uh this SEC task force can you tell us what this is yeah I mean what it comes down to right now is the SEC it's supposed to be five Commissioners usually it's two of one it's it's two of each party plus a chairman from the party in charge of coming from the president so for the last however many years it's been gendler who was run by Biden and really Elizabeth Warren so it was three Dems that had control right now the SEC is just three Commissioners it's Mark UA who's the acting chairman Hester Pur who anyone listening to this probably knows who she is she's very Pro crypto or at least she's Pro like thoughtful Common Sense approaches to crypto rather than just bash it into the ground in the way

that the Dems have been and then Kenra who her techically her term is over but Commissioners can stay up to 18 months beyond the term her term ended this summer she's still there so we have three two Republicans kensaw though has been left of gendler in recent years so she's like even more anti- crypto than Gensler has been for anyone out there so but really it's it's two to one we're GNA get Atkins in probably within the next five months or so uh no guarantee on when that's going to happen uh could have Could Happen way quicker than five months but this crypto task force is just going to basically who knows exactly what's going to come out of it right but what it comes down to is Hester has been saying she wants Common Sense approaches to handling the regulation of cryptocurrencies and digital assets the cftc has seemingly

been more common sense about this as well um so she's G to basically work with the industry to come up with common sense rules and guidelines for the most part the last five years you've had good actors like Kraken and coinbase and uh you know Gemini I you could you could argue some of the things that any of these people have done maybe people don't like but for the most part they've been trying to come in register they want to be us regulated and there's just been no way to do it and the SEC is like come in and register we'll figure it out and then it go they have meetings on top of meetings on top of meetings and then the SEC sues you or sends out a Wells notice saying they're going to sue you and all these things so I think what

this task force is going to do is like let's come up with clear Common Sense guidelines that people can follow right now or as quickly as possible and then ultimately those guidelines will either be followed by Congress or an act of Congress or they'll just become kind of the rules of the road in the way that we've been following the rules of Road and or gendler but these will be more common sense into like how these things should be handled I think I'm hoping that this uh task force that Hester's going to be running is going to coordinate with the cftc but really at the end of the day what you need to coordinate all of this even you really need an AC of Congress you need a fit 21 a crypto Market structure Bill to solve this and the one thing I would say also

is there's a meeting a closed door meeting on January 23rd I think a lot of things over the next you know few months are going to be determined and they're going to talk it out in this closed door meeting on January 23rd so I think and these things aren't that crazy they happen all the time uh in many cases they'll do they'll vote on different things that are coming up and decide what's going to happen we have a lot of ETS that have been filed things like that so I think they're going to coordinate and decide what they're going to do uh in this meeting so I think this is a this is a big week uh and that meeting could determine a lot not necessarily we'll see but I think it could be very determinant in what happens in the coming months do you

expect what do you expect their Pace or their speed to be that's a good question I think part of the problem is like I said already there's only three Commissioners there they're supposed to be five they can obviously operate with just three so I don't know I don't know how much longer kenell is going to be there if I'm Atkins I would want to like stall this stuff potentially I mean I don't know if he's going to be able to pull strings behind the curtains or he's probably in in talks with Hester because Hester used to actually report into Paul Atkins when he was an SEC secc commissioner over a decade ago so I have they have a friendly relationship he speaks highly of her I mean she speaks highly of him so does marua speaks highly of of him so I'm assuming they're talking but like if he's going to be the

one in charge he should be the one dictating but right now Maru is in charge Hester's gonna be running this task force I think they'll move pretty quickly it's just I have a feeling they would like to slow things down until they can get like a proper things properly handled but also if you listen look at any of the letters that Hester has written that Mark has written in Descent of what the SEC has been doing I think they are probably just so happy to finally go back to like handling this from a more libertarian point of view like kind of like let's make some rules of the road and I think they can act rather quickly and there's a lot of ETF filings out there that basically have things that need to be decided on before April like it's not the final deadline on these these things the way they've

been filed which we can get into the nuances there but like there's things that need to be decided by the beginning of April so uh and possibly even before that so I don't think that even if they wanted to slow things down I think that a lot of these issuers a lot of these companies are really going to start they're in the envelope here and they're they're putting their their the pedal to the metal they're pushing the pedal to the ground and trying to figure out what the this SEC is going to allow but I do think it's possible that the C the crypto world I've been saying this for a long time everyone's like give us rules give us guidelines give us laws so we can follow them and I think one I think that that's going to come but I have a feeling that some of these rules and

guidelines even at that Hester will come up with some people might not be huge fans of the the cipher punkus over the world the more libertarian minded um there's going to be rules that come down from Congress from the SEC from cftc that people aren't going to be happy with but at the end of the day my point of view is it'll be way better than anything we've had uh since I've in the space yeah let's you you bring up the ETFs and I want to get there in a minute but first let's just talk about case like what's the impact of all of this SEC having a task force you know yes regulation is coming we don't know when we don't know how quickly but already we are seeing the impact of this take place so Franklin Templeton CEO Jenny Johnson came out and she said yeah blockchain

will ultimately be used to build ETFs and mutual funds it's a better technology it's more efficient for managing money markets black Bank of America CEO said yeah we're ready we're in on crypto payments we we want this we just were waiting for the regulation is there a there seems to be a trafi defi convergence that might be happening and it might come quite quickly just because Trump is in office especially with him launching a meme coin he kind of signaled to everybody hey don't worry guys we're going to do all of this everybody's good yeah I mean honestly this is what I've expected and what I've been telling our clients like if you look at all these Banks they've been doing a lot of stuff on the back end to try and custody these assets there's

been tons of talk about things they could potentially do with stable coins and they've been completely hindered by the rules and regulations by Congress by the Elizabeth Warren and Gary gers of the world from doing this and so they've been building things quietly in the background even Jamie Diamond at JP Morgan who's one of the biggest critics of Bitcoin and a lot of cryptocurrencies I mean they have their own blockchain on the on the back end it's a private blockchain they've been doing a lot of stuff with blockchain networks I'm so it's not surprising to me I mean you look at Franklin templeton's I would argue is one of the leaders in the trafi asset management space for saying that everything's going to be tokenized eventually and they're doing a lot of work to try and like you know build those bridges both the ETFs are a

perfect example of like taking a def crypto digital asset from that in in uh system and putting it on the trafi rails right taking that but we're also seeing tons of examples of uh Franklin Templeton doing the opposite black rock is doing the opposite with their bidle fund they're taking money markets funds and they're they're taking these trafi assets and putting them on the defi crypto rails and so I think there's going to be a lot of these trafi institutions that are going to hire a bunch of people or they already have people willing to do this and they're going to continue to build those bridges the one thing that I was so Franklin uh Franklin Templeton Jenny saying those things was not surprising she's been saying she's been very Pro crypto um I mean you look at Fidelity they've been early in the Bitcoin and crypto space uh

you have Vanek that is very trafi and pushing hard for this space bitwise started up there are a lot of trafi guys that now believe strongly so I mean no matter how you slice it there's tons of people in this space that are trying to you know do this or there or it's trafi firms partnering like Invesco partner with Galaxy and things like that so I could the list goes on and on and on and the list is going to extend in the coming years everyone's going to jump on board here I think first it's going to be you know stable coins and payment rails and things like that are going to come via blockchains but at the end of the day that's what's coming and I'm I'm you should you should be expecting this because a lot of companies put a lot of money into trying to do some of this

stuff years ago and they were essentially stopped and Trump is gonna open the floodgates essentially for these trafi companies to at least start trying things out so I think it's a good thing for the space I mean there's some people that really won't like this they'll think it as the institutions the elite coming in and destroy destroying the cipher Punk ideals but honestly if you're a full believer in this and you really believed in you know full Bitcoin hyperbitcoinization or hyper tokenization or things like that this was always going to happen at the end of the day these people have a lot of money they have a lot of assets and they're smart and if there's a trend that's going they're going to jump on that Trend and try to take advantage of it and I mean it's it's it's a free market so we'll see what

happens yeah I think it's it's very clear that the the wave is now on we've been talking about the institutional wave for probably too long uh sometimes you know us Talking Heads like to say things repeated over and over but the institutional wave really has not been here yet right like they sure they're buying Bitcoin ETF and the eth ETF but I don't even really know if they're doing that even that much right so you know I think that wave is finally coming and I think it's gonna come faster than than most really anticipate the other thing I would say real quick is also I I don't know if I said this clearly the moan comments very very much surprised me because I've never really heard him talking too much that might have just

been me not knowing but that that was surprising I said I said Franklin Templeton comments weren't that surprising but Bank of America talking about this I mean that's one of the largest banks in the world uh us let alone world so like I don't know that that was a little surprising but I think we're gonna see more of that sorry he let let's chat about um ETFs what's what's the state of the ETF crypto ETF market right now uh there is so many filings it's it's almost become too much to now to like it used to be simple it was like okay Bitcoin eth and then soul and then you know there's some a few more but now there's like a do gtf application and I can't even keep track of it all can you kind of give us an overview yeah I mean I I actually have

my screen shared of my current list so if you want to throw that up for anyone who actually watches this and doesn't just listen like I do on your on your iPhone while you're driving and things but I mean even if you can't read that that's just a massive list of tickers uh that are filings that have been filed um for the most part there's the most recent ones have to do with a lot of Futures Rex Osprey is going through a unique process or unique approach I I'll point that out real quick it'll get two in the weeds but there's 30-some filings here um a lot of the ones earlier on uh they don't have basically to get approved you have to go through two processes you have to go through an S1 and a 19 B4 19 B4 is the one where you

have those deadlines delays approvals those are for products that are filed under the 33 act and not under the 40 Act those are the ones that are going to be like your your Bitcoin ETFs your ethereum ETFs that hold nothing but Bitcoin or ethereum they're set up as trusts and and things like that in the under end but they need to go through a special process 1940 act products which the Futures you know Bitcoin Futures ethereum Futures ETFs and a lot of these filings now don't have to go through that same process it's just like a 75 day period And if the SEC doesn't basically tell you you can't launch then you can just launch after 75 days theoretically that's not usually how it works the SEC usually gets involved uh I think that could happen with some of these like the SEC might allow some of

these through and then say others you can't do this but what's interesting to me is like they talk about using cftc Futures in a lot of these filings cftc regulated Futures typically that means CME or CBOE but there are no futures for xrp or salana which a lot of these filings are yet from CME they are on coinbase and there might be some other uh crypto platforms that have cftc approved trading for futures markets but those markets aren't really that big so it'll be interesting to see what the SEC does and says like may they might for all we know say these markets aren't big enough or these issuers like if you look at volatility shares they file they filed for a salana Futures ETF back in on December 27th so their deadline is coming up not too far away from now right beginning of March middle of March

so but again we don't have CME Salon of Futures the only fut Salon of Futures we have are coinbase so I don't know how the SEC is going to handle this you asked like how liberal basically is this SEC going to be what's this crypto task force going to do under Hester I don't know it's possible these things get approved and then and maybe these guys know that CME launs wants to launch salana of Futures and wants to launch xrp Futures which I think is true I think they all do want to launch those futures um so those things could be the first things to Market other than that right now Litecoin is something that could come to Market that's the first thing up under that 19 Litecoin likecoin the problem with salana and xrp even if Hester decides that she does not think those things are security you have the

whole invest this uh division of the secure uh of the SEC the division of enforcement that has active lawsuits saying these things are securities or like in they they're they're um appealing different things they're calling xrp is security they're calling salana security they're calling all these other things Securities right so even if you're Hester and you think that those things aren't Securities can you allow them to listed a commodi ETF in a trust rapper as a commodity when you have another division can you even have your other divisions division of corporate finance division Investment Management division of trading markets looking at these documents while you have the division of enforcement in an act of litigation calling them Securities I think I think that all needs to be cleared up Litecoin doesn't

have that problem for example uh H bar potentially doesn't have that problem but but Canary who's run by Steve McClurg used to be at Valkyrie hasn't done the full filings for the the H bar thing so it could be that Litecoin is the next fully you know spot ETF filing that comes through but again you hilarious that would be just ridiculous it would be fun but the problem is like how much demand is there for Litecoin I I don't know um I mean I would have said none but M litecoin's marketing over the past two months has been genius and they've basically turned themselves into a memec coin and now it actually they've they've caught a narrative as a result of that so fundamentally I don't know but yeah they're also hosting a conference which I just found out right

after the Bitcoin conference in Las Vegas so like the Bitcoin conference ends and Litecoin is hosting a conference as well which I I don't know we'll see how that goes um I might I might be there basically to talk about the ETFs but you go back the other problem is so like the way Bitcoin and ethereum got approved is the CME Futures Contract right they said the the SEC basically they need to approve something they want to be able to know that they can look and find and single out fraud and manipulation the underlying markets and what they ultimately decided on was the CME Futures Market regulated by the cftc was enough for them to look for fraud and manipulation in the underlying market so that they felt comfortable launching the ETFs but what really got most people aggressive for Bitcoin ETFs getting approved was back when Black

Rock filed in June of 23 and what they filed was with the surveillance sharing agreement with coinbase and the SEC ultimately decided they didn't need that surveillance sharing agreement that's not the first time it happened Gemini had one when they first filed like over a decade ago with their Gemini platform I'm sure we could get a whole bunch of these platforms online with an SSA so I think that would satisfy the Litecoin concerns if you just get an SSA with coinbase Kraken binance Gemini you name it right so I think one that's how that be settled so but all of these need to settle both of those things you're going to need some sort of way to surveil the underlying market and you're going to need to settle is this a security or a commodity so I mean an act of Congress could clean this up but who who actually

knows so yeah that's like the current La Land and then we can get into the Rex Osprey filings which I think like ETF nerd toy is like fascinated by this go yeah tell us yeah so they are pigeon ho holding spot exposure into a 40 act rapper which is like they're doing it it's a complex they're using a Cayman subsidiary that will hold the underlying asset of these products and they filed for a trump ETF an ethereum ETF a Bitcoin ETF salani ETF xrp ETF Bon ETF and Doge ETF so um the way they're doing this incred this is like a strategy that we've seen issuers use typically in the Commodities world so in the past there's a lot of Commodities ETFs that trade

commodity Futures give you exposure and usually they're they're typically used a hedge hedge against inflation they use for diversification portfolios but the way they're set up they have to issue what's called a K1 because it's the the underlying structure is basically a partnership so what like some really smart lawyers and ETF friends figured out is they can do a Cayman subsidiary that holds those and wrap that in a 40 act wrapper and basically you can get the same exposure without having to do a K1 and that seems to be from my non you know legal I'm not a lawyer experien of what they're trying to do basically they're complying with the 40 act rules and regulations to try launch spot exposure to these things they'll also likely have some derivative exposure as well so it'll be interesting to see what

the SEC does again that's because they're not going through the 33 act or they will because they're going under the 40 act it goes to that 75 day clock that I talked about with the volatility shares Futures the pro shares Futures contracts that are filed things like that so it'll be very interesting to see what the SEC does are they going to say all right this is good enough you can launch these under the 40 act and then all of a sudden they'll be the first ones out with some sort of spot exposure under this the one thing I would say is is H I know Hester's pretty liberal but is she GNA really let them launch a trump bnk and Doge ETF this way I don't know so I mean Kathy Wood was just on her show like 30 minutes ago we have a ETF show on

Bloomberg News uh and my colleague ER barunis asked her the question like what's the SEC gonna do and she said I think what the SEC will do under these new Under This Atkins SEC as as long as they qualify with the 40 act regulations they're going to let them through I don't know maybe I mean I would say it sounds like from everything I'm seeing it looks p uh viable that these things could actually get approved the one thing I go back to is again you have Salon xrp in there again you have divisions of the SEC the division enforcement calling them a security I think you kind of need to get that cleared up before you allow these things in the ETF but I don't know these are not filed as Commodities trusts in this case right so this might be another way to satisfy that who who knows I don't

I'm I'm just guessing here it's it's I'm spitballing I need to like form a more concrete opinion on this and then again I don't know what Trump the Trump coin launched like less than a week ago and we might have an ETF in April I don't know that's that's I mean I'm all for the SEC liberalizing some of this but that also might be a bit of a step too far for me even even as somebody who's who's very libertarian minded on on this front so it'll it'll be very interesting look these ETF issuers they're lawyers they're very smart at trying to Pigeon hold the SEC and if you give them an inch you give them a little opening they're going to BL pass through it that's how we have leverage single stock ETFs by using similar strategies to this because technically they comply with all

the rules even though you could maybe argue that they don't apply with like they apply with the letter of the law but not the intent necessarily but here we are we have a bunch of you know 2x inverse and bull levered uh micr strategy ETFs coin coinbase ETFs you name it so we could see a whole host of these crypto ETFs coming through as well so if we just take 30,000 foot view here what we're seeing is we got we got new SEC we've got a lot of companies that are very excited to launch crypto-based ETFs the filings are increasing you know there we got some really smart lawyers that are going to try to uh create some loopholes and do things in different ways to get to Market faster so the

likely outcome of this is yes we're going to have more ETFs other than eth and other than Bitcoin like that that feels clear would you agree yes that's going to happen whe whether or not it happens in 2025 I guess is still up there or my my bet would be it does happen in 2025 uh for some of these coins but it will undoubtedly happen within the next 18 months would be my my assessment and so so I think the the main what this does the impact of all this is that it brings flows right and as you said who knows what the demand for a Litecoin ETF is does that bring many much flow I don't know right but that's really you know if you're an investor you're sitting here you're thinking okay great if I hold salana there's a salana ETF there's likely to

be more flows into salana right more buying pressure increase price my my bags go up great let's just chat about the flows of Bitcoin and eth since those ETFs already exist I know you can't necessarily predict the flows of these future ETFs but when we look at Bitcoin and eth what are you seeing from those those flows because one thing that stands out to me is uh obviously Bitcoin ETF like just an insane year like you can give us the stats but I mean just like no ETF has ever done that before in history and everybody's kind of downplaying the ethereum ETF because it didn't do what Bitcoin did but it's still also from an ETF perspective had a tremendous year and I'm sure all the the the creators of the ETF black Rock's ethereum ETF is doing great right

so I think maybe that a lot of people are missing that the ethereum ETF is actually doing better than most people think would love to get your take on that yeah so everything you said is correct I mean the Bitcoin ETS blew the doors off of everything and honestly so I there there's some people out there that say the the s are doing well they up until November they really weren't I mean as far as I mean you look at Black Rock it's had a very successful asset Gathering process um some of the other issuers as well in the ethereum space but for the most part it was vastly offset they had 600 million in net negative in net outflows up until Trump got elected essentially because of money pouring out of grayscale's eth so yeah grayscale a lot of money went to eth like their mini trust uh eth a from

Black Rock did very well uh Fidelity's eth product did well I mean a lot of eth products actually did gather assets but most of it was like basically catching uh catching the ethereum outflows from eth that is until the election and then money poured in right like a lot of money came in they went from $600 million in outflows and all the way to I mean like three billion in net inflows right so that's like a almost four billion dollar swing essentially in a couple month period and they're doing pretty well this this month as well who knows how long that will last so yes that has been a succcess I don't know how much of a success it will be we're we're still early days but again it's a huge success compared to where we were for the first you know they

launched in July through early November they were not doing all that great so but the the going back to the other coins right so one Bitcoin they they've taken in 40 40ish billion dollars since they launched uh essentially 30 upper 30s on net inflow bases even accounting for the outflows of gbtc which again dwarfs ethereum and I think that's going to be the trend even if we see a whole bunch of these other ETFs a lot of people are clutching their pearls like particularly in the trafi world like I can't believe the SEC might actually allow all these to come to Market particularly the meme coins a lot of people are not happy with that I kind of get it the gist of it like why you don't like it but at the end of the day if it's going to be a free market the

market will decide if there's any value in these ETFs right and I think what we'll see is kind of similar to what we've seen in the the trafi space right uh even if you look at commodity ETFs for the most part they're dominated by gold ETFs uh silver ETFs are also doing decently well but for the most part most of the money is in Gold ETFs but there's also ETFs Palladium Platinum nickel you know beefs po pigs uh corn wheat like there's a lot of ways to get exposure to different Commodities in there are they're successful in their own categories but they're dwarfed by the 130 plus billion dollars in US Gold ETFs um so at the end of the day I'm not so sure that these ETFs are going to like a lot of people who are like super bullish

like they're uh you know their individual coins and we if we see like 50 different coins get ETFs over this Trump Administration over the next four years the ETF money pouring in it's it's not going to be the same as it was for Bitcoin like the money for the most part it tends to be like a funnel in the S the biggest things the most common things are at the top and then all these other coins are going to be down near the bottom and I don't think they're going to get near the level of Interest they might see a ton of trading but yeah overall it's been a smashing success for everything particularly since Trump's election and I think the ethereum stuff makes sense because if he's really going to do things to allow decentral Finance decentralized Finance to flourish I think ethereum could theoretically

benefit more than Bitcoin obviously Bitcoin you're benefiting from a whole host of things potentially a strategic Bitcoin Reserve you name it but I mean just softening leg regulations coming up with laws around how to handle decentralized finance and these tokens what's security what's the commodity things like ethereum and their layer twos and salana and even xrp and other things like they're going to benefit possibly more from this sof and Regulatory environment than Bitcoin because honestly I think Bitcoin would have been fine even if Biden was reelected right I think it would have been these other coins that would have had a hard time under another or Cala I should say under a Harris Administration she was definitely not going to be anywhere near as Pro crypto might as well have been continued a lot of the headwinds and I think even Bitcoin

honestly if you were looking for Bitcoin to outperform the other assets you might have benefited more from uh from B from from Harris winning if you were just going off of that spread because I think a lot of the rules and regulations would have been far more hindrance to to everything else but Bitcoin right uh just well you talk about there's a few things I want to unpack there but one of the things you mentioned and I tend to agree with this thesis is so let's say we get 50 more coin ETFs in the next in in the next four years you pick the time frame whatever let's say it happens seems likely that it'll happen like within the next four years doesn't necessarily mean that that's where the flows are going to go more likely where I see the flows going is to some basket

or some index ETF tell us because there is some index in basket ETFs that are up for approval right now what do you think the likelihood of those is what are your thoughts on those yeah so I those are on that list as well and I kind of skipped over them we talk about the ETS before but there's there's a whole bunch out there so hash deck and Franklin actually got approved for their technically they're Bitcoin and ethereum ETFs right now but they're going to be basket ETFs they have language in there that as Pro as as are approved for the ETF rapper by the SEC they will add them to the ETF basically as a basket you have two application you also have bitwise that filed for this I don't think they've been approved yet but it's essentially the same thing they're going to do

Bitcoin and ethereum and potentially add other assets or it might just be Bitcoin ethereum I'm I I should look into that a little bit more but then the main ones that I'm watching are bit wise's bitw which is their crypto 10 index and then also grayscales digital large cap ETF so those are due for final decision in July second and the end of July and I think those have a decent chance largely because they're like 80 85% and 90% in in varying level so the bitwise one is like 85 87% Bitcoin in ethereum and the rest is a whole bunch of other like eight other altcoins and then the the the gdlc one from grayscale they're filing again to move that trust convert it into an ETF that one is 90% Bitcoin

and ethereum so even if there's still these issues that I was just talking about with whether or not these things Securities are they Commodities are they you know what whatever there's a lot of clarity that needs to come to that space I could make the argument that there it's such a small position in the portfolio that it satisfies the SEC rules if you look at a lot of the investment strategy of these ETFs they're all going to say this product will invest at least 80% of its Assets in X Y or Z and that's basically that gives them a lot of leg room to like go into cash or other products that don't necessarily fit exactly what the principal investment strategy said it was going to do and there's 's also this rule about like you can put up to 15% of your investments in the 40 act and like

more liquid products so maybe you could argue that these kind of fit in there so there's like a lot of gray area in that sense that possibly those things could actually just up list to an ETF I don't think it's guaranteed but I think there's a lot to be said about like just allowing these things to uplist to an ETF something that gendler wasn't in agreement with on us on is I thought gbtc E A lot of these trusts just let them up list to an ETF they were trading at discounts and premiums they were in efficient for all investors it basically was allowing uh AI or and credit investor and qualified purchaser people high net worth individuals to take advantage of retail because they're creating shares and then selling them at a premium to retail investors who can't get exposure to this in the trafi rails

and like in my mind it's just like honestly at the end of the day just let these things list as an ETF like I know you don't really like them necessarily but like it's an it's an efficient rapper trust the ETF issuers trust the ETF market makers to find an efficient market for these things because right now the way people are getting exposure just really isn't the most efficient way um so I I I think those things will be successful products uh I think there's going to be a lot of people that'll be like I'd rather just dump it into this ETF I'll put 4% and 5% of my portfolio into a basket of crypto assets and be done with it uh but for the most part advisers they don't do that right like we see this and what they'll do is they're like I want to control how much

Bitcoin how much ethereum how much of these other assets I hold particularly for my clients because imagine so this we see this in trafi world too if you go to invite and he just put you in a total stock market fund rather than putting you in like segregating out the domestic us or maybe domestic large cap and then domestic small and mid and then International like you get like six different ETFs on that list by doing it that way or they just give you the total stock market index which you could probably like argue is just as good and arguably cheaper and more efficient because it's simple but like what advisor is going to want to do that and go would you use the advisor then right you have me in a bond ETF and an equity ETF and then basket of crypto ETFs for 2% like I can do this myself

I'm out so what advisers and people creating portfolios one they do like to be able to customize it a little more but also they want to basically be able to say like we're controlling this we have we we have we're inputting our views into this decision so for that reason I think basket ETS will be successful but not as successful as the Standalone you know individual asset exposure hey so you bring up advisors which brings up the question that I I think I asked you this last time we had on the show a few months ago back at permission list uh which is like who is actually buying these ETFs right now you know when we look at the large institutions that control most of the money in the world right are are they buying these ETFs yet are they still to

come are advisers actually selling these products because I don't think most of them are really yet like what's the current state versus everybody what everybody really wants to know is you know everybody saw black Rock say 2% Bitcoin right and everybody in crypto was like okay great is the whole world going to do 2% Bitcoin and if they are going to do 2% Bitcoin certainly aren't [ __ ] there yet not even close right so if if everybody did do 2% Bitcoin well it would make sense to front run that right like what what are your thoughts on on where these flows are coming from and are the institutions buying these ETFs or buying at all any onchain products yet so it's funny we actually kind of know the answer to this I said this last time but like if we

look at we have the ability on the Bloomer terminal to see like what the holders are the official holders of record not everyone has the report but if you're an institution of certain size or you're another fund or you're an advisor Network you kind of have to report how much of the assets and the these ETFs you hold and only like 16% of ibit for example do we know who holds it and a lot of it is market makers hedge funds things like that I talked about this last time what a lot of hedge funds are doing there's a term premium in the Bitcoin Futures Contract so basically the the bit if you're investing in Bitcoin Futures and that's the way you're getting your exposure you have to roll every month so you're going to buy it now and then you have to sell that

contract or take delivery and then buy the next month's contract and what people are doing is they basically are selling those contracts on the open market and then buying the ETF and then all of a sudden they have a neutral position so they they're only earning the difference between the Futures Contract price and the underlying bitcoin price and there's a premium there so people are earning like double digit yields essentially by doing this Arbitrage so it's it's it's a cash and carry trade uh a basis trade is really what what people would call it so we're seeing a lot of hedge funds and market makers do that type of trade there are advisors coming online we're seeing more and more of that um but the problem is most of the advisor networks the ones that have bought this they're like smaller individual raas registered investment advisors where they're not in

this massive shop they're not at a wirehouse like you know Morgan Stanley or UBS where they control trillions of dollars there's a lot of rules and regulations to get approved to go on there so smaller shops yes they're buying this it's a lot of retail that have been buying these ETFs for their IRAs and what have you um it's a lot of hedge funds doing that basis trade but the next wave of growth is probably going to be the institutions and the wealth advisor Network and you talk to any of these issuers You Name It Black Rock included they're working towards getting these wirehouses these broker dealers these advisor networks to approve these things to be sold on a solicited basis or at least to certain people so right we know Morgan Stanley the most vocal one that I saw they don't

have to announce when these things are approved like they're private Network so it's not always as easy to figure out who has these things approved but in many cases it's like one the way you get approved I think I said this last ataz on like you can either a no one can buy this no matter what B you could only buy this under a whole set of certain circumstances in many cases it's like you can buy it on an unsolicited basis which means like I'm a client you're in my adviser and I go to you and I say I want Bitcoin in my portfolio you could buy it for me then but I you can't come to me and be like I think Bitcoin including Black Rock agrees with me should be one to 2% of your portfolio most of those networks are not allowing

that yet right no most of the wirehouses some of them are allowing it but they're saying you need uh multi-million dollars invested with us you also need to be a highrisk seeking individual and the ability to take high risk so you have to meet all these other criteria before you can sell it to me as that individual so there's a whole bunch of processes going down they're chipping away at getting these approved on those platforms there's a lot of advice that want to buy these things I will tell you there's a lot of advisers that I talk to that think this whole Space is a bunch of BS have no desire they're never going to buy it but there are people out there that want to buy this and put in their client portfolios there's a lot of young people who have advisers uh Millennials

particularly that want to see this as part of their Investment Portfolio and they want exposure to it so I mean I rambled a lot there because there's a lot of nuance but that that's the next wave of growth are we really going to see a lot of these wirehouses ADV visor networks turn these things on and then how much money is going to come from that how many how how many people advisers are actually going to put their clients in those things so going from unsolicited to solicited and all these different things could be could be a Tailwind for assets and and that's all stuff that's like that's likely to happen soon like that I know that a lot of that's those processes take years but I would assume that that has already started when the Bitcoin ETF got approved so I don't know for certain but

what I will tell you is like usually it takes like you need three years of History you need a certain level assets certain level liquidity a lot of these ETF have met that there's like this whole due diligence process that these these these platforms and they make sense you want to make sure you're not putting money in an ETF that's going to liquidate in a year from now that's going to do something weird that's going to go wonky with this trading strategy they're understanding the risks of like the custody of Bitcoin and ethereum and what what have you so there's a lot of due diligence needs to happen from what I understand a lot of places have expedited that like they're pushing through as quickly as possible but like I said in some cases like three years like it could take that long so we're

we're a year in right so even if the platforms that have approved these that's moving pretty quick for for some the way that some of these wirehouses work so we could be waiting another couple years I think this year is going to be an unlock for some of these but we're not gonna everything's not going to be on board yet uh even probably by the end of 2025 so I mean it's it's it's another Tailwind it's another something that's growing and we could see interest from that area but I don't think it's necessarily going to be like by Q2 of 2025 75% of wirehouses and visor networks are going to allow these things to be sold on a solicit basis like that's not going to happen I think it's going to be gradual it's going to be depending on your risk depending on your assets all these different things will

allow you to sell it to them and what have you yeah super helpful thanks for breaking that down for us James final question before we let you go I got to ask about eth staking is the eth ETF going to get staking what what are you hearing there I'm starting to hear talk about it some people saying it's coming soon some people saying it's never going to come I'll take the other side of it's never goingon to come it I mean it's definitely it's going to come whether it happens in 2025 is a different question basically in the 19 before approvals those things I talked about before those filings for the ETFs you're not allowed to stake it uh they said that in approval so I think you would need to file another 19 before and go through that process which could take 240 to 260

days from filing so that's how long it typically takes now nobody's filed that nobody's filed that no not yet um you might wait till Atkins comes in before you file that um I don't know yes the issuers are pushing the limit like I pointed out what Rex and Osprey were doing they're really they're they're pushing the SEC here so you got to be careful but like I think we're going to see this in 2026 the latest would be my guess the other thing I would say is a lot of these ETFs I talked about like that that timeline we haven't seen 19s for a lot of those other products for spot products on with uh xrp or salana like the salana ones that were filed months ago were actually outright rejected by the SEC they basically refused to acknowledge them and but if we do see those filings come through the

way that this process typically Works under the SEC even before gendler was if it's a new novel asset or new novel approach that needs to go through that 19 before process for the most part they take the full time to approve they take to the final deadline we saw it with the Bitcoin ETFs we saw with ethereum ETFs you see it with a bunch of other stuff they take the full time to do this and that's not just because like gendler wanted to do that that said that's just kind of precedent how the SEC usually handles these things if as Atkins comes in and wants to move quick he could do the the first deadline typically is 45 days after it hits What's called the Federal Register so like if he really wanted he could approve those things as quickly as possible there's nothing stopping him I just think they'll have

so much other stuff on their plate uh that they'll probably just take the whole time to study this and do Nuance analysis about what staking would look like how much of the ETF Could you actually stake due to liquidity concerns there's a bunch of providers out there that are trying to come up with ways to like have staking pool so that you can have same day liquidity for something like the ETFs um so there's all these nuances that are to come out I think staking is going to be a huge part of these ETFs in the future I think it's going to happen under this SEC Administration I just don't know how quickly it's going to happen I think the thing that's going to happen is in kind create redeem but there's a lot of nuance there uh right now basically you can only create or destroy shares of ETF

by doing cash so most ETFs like you hand over the shares of the equity and you get back the shares of the ETF but the Bitcoin and crypto ETFs like you have to do cash and it just adds a whole bunch of other layers the problem is right now the SEC basically said those broker dealers can't touch Bitcoin so that's why they have to do cash so they're just using other ways to create the markets and they're giving the cash to the the um the ETFs themselves the ETF issuers and they is ERS are either themselves going out and buying or using third parties like coinbase Prime and things like that to get exposure so there's a lot of nuance and things that I think are going to be cleared up and smooth in this transition uh under Atkins but I am I think it's going to happen rather

quickly I just don't know how quickly it can happen some of it might require like serious rule changes from the SEC particularly something like that crypto task force would handle or um a lot of stuff will be sped along in my opinion if we actually get a market structure Bill who the hell is in control of crypto digital assets should it be the SEC should it be the cftc should tell us already like who knows like there are definitely digital assets that are tokens that I think look very much like Securities and they're just Define what they are and decide who's in control of them maybe it's the cftc duel controlling this maybe cftc has more control so I think all of that will help like push this along and get better answers just be careful what you wish for like I said some of you guys out

there in this space you might not like some of the rules they come up with but it is what it is things are going to move fast this year that's for 2025 going to be a big year James thanks you so much for joining us today appreciate your time as always yeah thanks for having this was great thanks for listening and everybody have a wicked awesome day we'll see you again tomorrow as always if you liked today's episode please hit subscribe and make sure you follow us so you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our

portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day