Why WonderFi buys Bitcoin and Ether and is building a layer 2

Transcript

products like the ETFs can have a massive impact on price certainly longterm the shift for corporates and treasury management and adding Bitcoin as part of that treasury management could of course similarly have a very U meaningful impact on price for Bitcoin GM good morning welcome to the milk Road show The Daily crypto show that's dishing out crypto tidbits tastier than your grandma's forbidden cookie jar I'm your host Jay Hamilton and today we've got Dean skirka CEO of wonderf on the show wondery is one of the largest crypto exchanges in Canada over 1.5 billion assets under custody over 1.7 million accounts across their various Brands Dean welcome to the milk Road Show thanks for having me I'm

excited to be here really excited to have you man a fellow Canadian always very exciting on the show but also really excited to have you guys on the show because you are really leaders not just in Canada but globally when it comes to understanding regulation and compliance which is an area that obviously a lot of the industry is still catching up on so excited to get your perspectives on that today we're going to talk about your new Bitcoin and ethereum treasury program which you just launched recently so you are buying Bitcoin and eth and we're going to talk about why you're doing that which is super awesome we're going to talk about where you think adoption and Innovation are coming from for the rest of this cycle and into 20202 and then we're going to finish by talk touching on your

recent L launch of Wonder Labs which is is building an L2 and a non-custodial wallet so started with a centralized exchange now you're going decentralized love to see that let's start with the Bitcoin and ethereum treasury program so on July 10th you announced that you guys we're going to start to acquire Bitcoin in eth and that this would take place over the next three months until the end of September why did you decide to do this that's a great question look we've always held Bitcoin and ethereum and other digital assets on our balance sheet and you know we thought that this was a really strong time to continue to accumulate Bitcoin and ethereum on the corporate balance sheet and really send

a signal to the rest of the market that you know as industry experts and you know really on the front line of you know what's happening on the Dig within the digital asset industry that we are you know have a long-term conviction and we are accumulating digital assets at these prices you know you think about taking a step back and the last six to nine months there's been a lot of excitement a lot of positive developments in the industry you know really kicking off in Q4 of last year with you know the the announcement of the Bitcoin ETFs and then you fast forward to January of this year the ETFs launch and you know everyone gets Blown Away by the demand the inflows that are being seen in the market and of course Bitcoin by extension goes to 75,000 You

know despite an recent 25% pullback in Bitcoin Peak the trough you know there are still strong inflows into these ETF products you think about the imminent launch of the eth ETF and the signal that sends not only throughout the entire industry but the broader signal it sends that you know Black Rock Fidelity these institutions that launch these products you know are so happy with the results that they want to continue to invest in the industry and roll out additional products and services to support the industry and the growth within it you know you think about traditional financial markets continuing to set all-time highs in the US you think about the fact that you know markets are pring in approximate 70% chance for rate Cuts in the US starting in September and I think those

numbers are even higher now actually it's up to like 85% chance now yeah exactly and so you think about all of these variables and then you think about of course the context of this being a having year with the having passed back in April and you know we think this is a really good opportunity to accumulate we think that this is you know really midcycle and you know when you see these opportunities when markets correct and you think about some of the recent fud around you know Germany and their selling and some of the mount gaw distributions you know there's a bit of a disconnect between at least in our opinion you know price and you know the long-term outlook for the industry and so you know we're encouraged you know by the program that we've implemented and

you know we're excited to accumulate at these levels and we hope that sends a positive signal uh you know to other corporates that are considering adding Bitcoin and ethereum to their treasuries and of course to the our users across the bit buy and coin Square platforms that you know we have a long-term view on this industry we always have and you know we're excited by you know where prices are today and the way the market has been evolving you know over the last six nine months and we expect to continue to evolve over the next year year plus you nailed it when you said that there is so many great macro factors set up there's also an incredible setup within the crypto space on from a regulatory side within the US it is feels like the first in a long

time that all the ships are aligning to head in the right direction at the same time we completely agree I think we also think we're midcycle right now and we're about to go into the next phase of up only which is really exciting to see I want to touch on you have an interesting perspective we've talked to talked about other public companies putting Bitcoin and eth more so Bitcoin we see we haven't seen as many public companies put eth so it's really interesting that you decided to do both and talk I'd love to talk about why you decided to do both but I also want to get your perspective on do you think other public companies in Canada or globally are going to follow suit and any idea on like what kind of demand that could look like

could you quantify that in anyway because when we look at the demand that that could potentially create it could be very large much larger than the supply that we have oh absolutely and I think you're starting to see you know the impacts of what happens when these you know moments bubble up with respect to demand you look at the ETFs in January you know that really opened up a Floodgate for you know retail or institutional investors that historically had overlooked the industry or you know didn't want to let's say sign up for an account like bit buy or coin square and buy the physical asset but now they can get exposure through an ETF and that really opens up the doors to more demand which you know as you saw in q1 pushed the price to about 73,000 us and so you know you think about an

asset class that is still very early in its life cycle and the implications on the amount of Bitcoin that lives on exchanges and the amount of Bitcoin is you know that that is you know theoretically up for sale and when these you know spikes and demand come it puts real pressure to the upside on pricing because there's just not that much Bitcoin to be acquired right and so products like the ETFs can have a massive impact on price certainly longterm the shift for corporates and treasury management and adding Bitcoin as part of that treasury management could of course similarly have a very U meaningful impact on price for Bitcoin and I think that's you know what you're going to see play out you're going to start to see a lot more institutions get

exposure to bitcoin you know you've seen a lot of this ETF flow originate through the first half this year I think inflows are north of 16 billion so far year to date and you know there's a lot of discussion around you know large institutions Sovereign Pension funds ex as an example still not buying and if you think about about Sovereign or Pension funds putting 1% allocations you know that can really have an impact you think about a few large corporates you know there's been a lot of talk about Dell being one of them potentially Michael Dell the founder of Dell has been slowly becoming a little bit more public with his admiration for crypto you think about you know the kind of impact that alone could have let alone a

few of them you know you're really starting to see you know what happens when Bitcoin and digital assets start to get Mass Appeal and you know we certainly expect some of that to play out this cycle you know we've seen a lot of it play out over the course of you know the last few years and you know the six plus years that I've been involved within the industry and you know both bit buy and coin Square have obviously their retail platforms and they also have their institutional offerings as well that help educate corporates High net worths about the the asset class about how to buy it you know how to store the assets and so there's still this educational process that plays out but certainly when you think about the

sentiment shift and The credibility that this industry has received or you know benefited from over the last six plus months through the ETFs and some of these other developments you know that really goes a long way in terms of bringing more people to the party and you know ultimately through that process you know increased demand which we've seen in the past certainly can lead to you know price Discovery let's talk a bit about eth you mentioned you are buying eth in your treasury right now as well and before we hit record you told me that you plan to stake your eth do you think that other public companies are going to start to put eth on their balance sheet that we have not seen as much yet and do you think that they

might stake it how do you think they're going to go about it and why did you decide to do it yeah look I think you know similar to my points with respect to the Bitcoin ETFs I think the launch and you know the subsequent inflows that we would anticipate with the ethereum ETFs will certainly uh give it more credibility and make it larger part of the discussion when corporates are talking about treasury management and the inclusion of digital assets within within that you know certainly you know on the surface you think about the yield component to e being able to stake it and earn four plus percent on that excuse me through in ethereum you know certainly gives it you know a bit of a differentiator from Bitcoin on the surface you know we obviously you know

have a fairly positive view on decentralization and decentralized products and the role they'll continue to play in the industry more broadly and the evolution of the industry as well and you know we think there'll be a inflection point you know obviously the first step here is for ethereum ETFs to come to Market we think the evolution naturally will lead to yield bearing products where some of the ethereum Within These ETFs or all of it can be staked and that yield can be passed through to the unit holders and we think that's really where you know Main Street will start to really find a lot of value in ethereum the idea that you can get exposure to the digital asset industry and generate you know yield passively

throughout that process it it's really attractive and so we would expect that to over time resonate with a broader audience certainly a more institutional audience and I think that will reflect on corporate treasuries as well you know certainly for us being as close to it as we are you know we really look at Bitcoin and ethereum as you know the two leaders by a meaningful you know distance and you know we are certainly as comfortable holding ethereum as part of our treasury program as we are Bitcoin and you know over time we would expect you know certainly others to take similar positions we think the fact that you can stake in an earn yield certainly will resonate longterm as well and you know we are you know happy to to to

endorse that you know at an early stage yeah well it's interesting you bring up staking being a part of the EF currently it's not a part of the EF at least in the US when it launches next week on July 23rd but SEC commissioner Pierce came out yesterday and said that she thinks that staking could be part of it in the future so it is very likely to come where do you think we're at when we step back and we look at trafi adoption adoption of tokenization within the the traditional financial markets where do you think we're at right now and where do you see six months a few years down the road within that context I think

we're still very much you know early stages I think the Bitcoin ETF was really the Catalyst and the starting point to really you know Force this asset class you know onto the Main Street and you know really you know as part of the institutional discussion with respect to asset allocation you know now through an ETF product it's way way more accessible than it ever has been for institutions you know you think about the fact that markets like Canada had ETFs before but you think about the liquidity and The credibility of an ETF Say by Black Rock alone and then the fact that there's about 10 of them in the US you know that makes it just far more accessible than it was you know even while there were ETFs in smaller

markets like Canada you know we think the fact that you know these products have seen really good traction you know these are some of the best performing TF launches of all time you know that's going to resonate internally with the likes of Black Rock Fidelity Franklin templon and others and they're going to start you know selling these with a bit more confidence you know a bit more outbound you know sales you know I guess in general and so you think about what that can do longer term you know we think the eth ETFs are a good example of you know what happens when these products are successfully rolled out and uh you know guys like Black Rock really are encouraged by the results so you know ethereum ETF coming as quickly as it is I think is a really strong

indication of the relative interest That Wall Street and institutions have for the asset class you know what we'll likely see after that you know and we both sort of touched on it is the idea of some e ETF with a yield component you know longer term you know I I do believe you'll start to see products like salana ETFs and then you'll start to see Structured Products and whether it's you know a basket of the top 10 top 20 whether it's a basket of layer ones or a basket of layer twos you're you know my my my feeling is you're going to start to see you know a a a you know a strong increase in the number of Structured Products that exist that will try and give people exposure to you know the

various elements of the industry you know I've been in this industry long enough to know Bitcoin and ethereum are you know the two leaders but certainly there's a large world and a ever growing World outside of them that offer you know relative exposure to either interesting technology or you know as a beta to some of the Bitcoin and ethereum exposure that people will hold and I think you know Bitcoin and ethereum are really the starting point and as people learn more and gain Comfort holding Bitcoin in ethereum they continue to educate themselves on you know layer one Alternatives what are layer twos what is decentralized finance and you know what are some of the protocols that are getting it right within that you know sort of vertical real world assets is

something that is really you know found its footing this year with products like Ono Finance you know really finding those real world examples that have um that can really grow TBL in a meaningful way today um and so you know I think through these processes you know there is a lot to learn and like about what's happening when you sort of look Beyond Bitcoin and ethereum and I think ultimately that will resonate you know with Wall Street and it'll probably find itself through Structured Products and you know various baskets or indices of exposure to you know the various subcategories within the industry what we're doing right now and you point this

out so well is we're really just enabling more access to institutions which it's it's always nice to hear I think a lot of people think that the institutions are here because the Bitcoin ETF went out six months ago and everyone's like oh the inflows have been massive it must be Institution buying it but when we look into the underlying numbers it's actually not a lot of Institutions it's a lot of retail so the institutions actually might not be here yet but we are giving them access and they are coming and that's just I mean I can't think of a more bullish sentiment than that you also though are very excited about building on chain which I think is very interesting about wondery and your various Brands is you just launched wondery Labs which is focused

on building your first two products are going to be an L2 to an evm L2 and a non-custodial wallet where do you think adoption is coming from or should ask more so what will be your focus with this L2 are you going after rwa I hate the term rwa but you going after real world assets and more the trafi space what's your what's going to be your focus and where do you think the opportunity is there yeah I mean look wondery and the brands that we operate you know have a history of you know being first in Market in this IND indry and building really good products and brands that resonate with quite you know significant audience certainly in the Canadian Market thus far you you think about bit buy coin Square smart pay you know tetr trust which you know

was originally built inside coin Square you know we have a long track record of innovation and building products and services within the within the industry you know we can't help but notice the continued trend on chain and we think that there's a really strong opportunity to build you know products and services on chain that resonate with a Global audience you know we think that user experience is really important and making it you know frictionless and really easy for people to bridge on chain and get their assets on chain and so we're really focused on bringing you know certainly the Canadian audience we have but a global audience you know giving them you know seamless access to onchain you know products and services we think that the world is going to

continue to move onchain the trend is clearly in in our favor with respect to onchain activity you know I think think historically you know user experience has been clunky you know the friction around getting assets on chain and and keeping people on chain and and and making it you know super intuitive for people to you know sort of you know access all of the different elements of of that exist on chain do this it's so hard to do right now you see bridging like most you tell somebody to go Bridge an asset they're like Bridge what like what it's on different blockchains what like you know and everyone list to this gets that but we always have to remember that

95% of the world does not get that I mean what's what's the stat that there's about 500 million people roughly globally that own crypto but about 90% of those people just have it on centralized exchanges like it's not even really on chain yet no exactly and so you know we think you know that that is going to evolve and part of that Evolution process is going to be userfriendly products and making it as seamless as possible to the point where you know perhaps in many instances you know the end user is unaware that they're even utilizing onchain protocols or or or or products right and I think that's sort of the inflection point that we're ining toward as an industry you

know we're really excited to play a role in that and bring you know more people on chain and you know whether it's retail or institutional you know we think we have you know the network and the you know the the the the really the talent from a product design engineering perspective to really you know help lead these these efforts you know we think that there is so much to like about you know decentralized finance and onchain capabilities and as that Technologies just continues to improve you know really it comes down to like I've said like the user experience and making sure that it's as easy as possible for the masses to come on chain you know you can't help but think about what you mentioned 90% or whatever it might be of

of people that hold crypto it's just sitting on centralized exchanges you know bit buy and coin Square are fully regulated in Canada and have had a really strong track record of keeping client assets protected you know I think there was an example in India with wer X today about $200 million plus you know security breach and you know there's countless reminders whether it's FTX Voyager Celsius from the past quadriga in Canada you know many years prior to that the risk clients actually put on themselves when they keep assets on centralized exchanges that aren't properly regulated and so there's an element of you know consumer protection there's an element of you know all of the increased capabilities that exist on chain you know we talked about rwa as

much as we don't like that moniker do you like that term no I don't no I don't but okay okay what do you what do you when you're talking to trafi what do you say I sort of refer as like tokenizing their products and services right you know if you have a money market fund and you want to tokenize that offering you know sure we could call it our wa but you're really just taking your existing product and tokenizing it and giving it an opportunity to be marketed to a global audience that exists on chain and you know whether or not the moniker or the you know however you want to refer to them you know I can't help but think about the Simplicity of you know an AO Finance where it's just treasury bills and that's you know probably been the best example of an rwa thus far I

remember early on people would have crazy ideas of tokenizing 10% of a Condo building or a sports car and that sounds great but you know in practice that's probably not something that has demand or you know liquidity or volatility to support a 247 Market you know you think about tokenizing things that people are actually looking to access on chain and give them an opportunity to stay on chain rather than you know take their usdc into US dollars and then to invest in these products and you're going to create a really exciting onchain community and we think that you know there'll be more examples like that and we're excited to you know help you know bring these products you know to the

mass right on man I'm excited too Dean and shout out to you and the whole team at Wonder five bit bit by coin Square all your products super awesome to see a Canadian company leading the way not just in Canada but also globally thanks so much for joining the show today thank you had a great time happy to come back anytime we'll definitely get you back my man have a good one thanks for listening in everybody have a wicked awesome day thank you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you well making you laugh and if you're willing

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