August 14, 2025 • 34 mins
Here’s a mind-blowing stat: the iShares Ethereum Trust (ETHA) is the fastest exchange-traded fund in history to hit the $10 billion mark outside of the Bitcoin ETFs. After a slow start, its price has doubled over the past three months, sparking massive inflows just as it hit its first birthday.
On this episode or Trillions, Joel Weber and Eric Balchunas look at why Ether is rallying, how big it could get and how investors should view it relative to Bitcoin in a portfolio. They are joined by Matt Hougan, CIO of Bitwise and Isabelle Lee of Bloomberg News.
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Episode Transcript
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Speaker 1 (00:06):
Welcome Atralian's. I'm Joel Webber and.
Speaker 2 (00:07):
I'm Eric Belchunas.
Speaker 3 (00:11):
Eric, we talked about crypto a lot, and a lot
of that is about Bitcoin, but one that we haven't
come back to basically since the ETFs launched is Ether
and Ether If you have been paying attention, or maybe
if you haven't, Ether is having a heck of a year.
Speaker 1 (00:30):
What's going on?
Speaker 2 (00:32):
Yeah, Well, when Ether launched one year ago, it launched
right into a downturn. And that's not it's hard to
get assets if you if your performance is awfulver off
the bat ask any issue or that. So not only
did it have to follow Bitcoin, which is.
Speaker 1 (00:46):
Tough, like most successful ETF launch ever.
Speaker 2 (00:50):
Yeah, it really, I mean the shoes that it was
trying to fill were just too big. It felt very disappointing,
and then it had a rally. There's a couple narrative
things that will go over the help get it going.
Sover in the past three months, it's doubled, it's up
one hundred percent the coin. So once that got started,
people started buying the ETF and amazingly, these e three
(01:10):
ETFs basically double their assets in July alone, just one
month double. They've got about twenty billion now. And a
great fun fact is that if you remove the bitcoin
ETFs and pretend they didn't exist, Black Rocks E three
ETF would be the fastest ETF to ten billion in
the history of ETFs. Wow, it's just I equated to
(01:32):
having to play with Michael Jordan in the eighties and nineties,
like Reggie Miller, great player, another era. He probably gets
a couple of rings, but he happened to play with Jordan.
And even with all that, there's still only thirteen percent
of the assets the bitcoin ETFs have, so at least
they're doing something though, you know, we think they should
probably get around twenty percent, so they're on their way
to earning that market share. That's sort of like silver
(01:55):
to gold. It's like they're the silver to bitcoins.
Speaker 1 (01:57):
Gold, the Regie Miller to the Michael Jordan.
Speaker 3 (02:00):
They are.
Speaker 1 (02:00):
And you're going to get so much comment on that.
On sociable, I can't wait.
Speaker 2 (02:05):
And you know, Ether is interesting to me because the
pitch for it is totally different than Bitcoin. It's more
like we had a note we referred to it as
feeling like a nineties tech stock, like the very early
days of this new possible thing that could really change
tech and the Internet basically, and we'll see how it
(02:28):
pans out. And there's a lot of things to talk
about here, but yeah, definitely interesting area of the market
having a moment. And the reason we covered so much
is those numbers are ridiculous. So I know people are like,
you know, if you're not into it, you're probably like,
why do you cover it so much? But I'm like,
these numbers are crazy? All right?
Speaker 3 (02:42):
To join us on this episode, we've got Matt Hogan,
who's the chief investment officer of bit Wise Asset Management.
Before he went full crypto, he was an ETF guy,
as well as Isabelle Lee Cross outset reporter with bloogrig News.
Speaker 1 (02:57):
This time on trillions Ether. Matt, Isabelle, welcome back to Trillions.
Speaker 4 (03:04):
We're very excited to be here.
Speaker 5 (03:06):
Yeah, one hundred percent excited to join.
Speaker 1 (03:07):
Matt.
Speaker 3 (03:07):
It's been a while since we had you on and
you're you know that full crypto transformation happened, and I'm
curious a lot has gone up in the crypto world.
Speaker 1 (03:19):
Why have you not retired already?
Speaker 5 (03:24):
Wow? Straight at it. You know, Look, I think it's
I think it's still inning too in crypto land. I
think we're just getting started. I think if you're listening
to the SEC, they're telegraphing that the crypto boom is
ahead of us, not behind us. So I'm going to
keep building. We'll retire eventually.
Speaker 3 (03:40):
Okay, So a lot has happened in the Trump administration
two point zero at the SEC. We've had bitcoin ETF's approved.
We've had these Ethereum ETFs approved, which we talked a
little bit about here. What what do you see on
the ground. How do you distinguish between what's happened with
(04:00):
Bitcoin and what's happened with Ether?
Speaker 5 (04:04):
And it's yeah, so Bitcoin, you know, remember the first
Bitcoin ETF was filed in twenty thirteen, so we had
ten plus years of pent up demand for an asset
that was easy to understand. It was digital gold. And
so it came to the market and it crushed all records.
As you guys talked about. It pulled in thirty six
trillion dollars in its first year. It was six times
(04:25):
as large as the second fastest growing ETF of all time.
It was massive. Ethereum launched, I would say too soon, right,
It launched five or six months after the Bitcoin ETF,
people were still digesting bitcoin. As as mentioned, it launched
into a difficult market for Ether. The underlying asset wasn't
performing well, the community was in somewhat disarray, it didn't
(04:47):
have an obvious growth youth case. But it's now has
all of those things and as a result, we saw
five point four billion dollars in flows in July. To
put that number in context, remember that Ether is one
fifth the size of bitcoin, so that's akin to saying
twenty seven billion dollars in flows in the Bitcoin ETF.
From a relative size perspective, it's absolutely massive, and I
(05:11):
actually think it's going to accelerate or continue throughout the
end of the year.
Speaker 1 (05:15):
Where are those flows coming from.
Speaker 5 (05:17):
I think they're coming from people who bought the Bitcoin ETF.
I think a lot of it's coming from financial advisors
and family offices who bought the Bitcoin ETF. And this
is not a new story. If you talk to any
crypto investor pre ETF, probably the first asset they bought
was bitcoin, and then twenty percent of them became Bitcoin
maxis and that's all they wanted to do, and the
(05:39):
other eighty percent eventually moved down to buy ethereum maybe
nine to twelve months later. It's actually a story as
old as Satoshi. It's been happening in crypto for years,
and I think that's what's happening here. So people who
bought the Bitcoin ETF now want to diversify. There are
only other choices in Ethereum ETF. It has a good
narrative with stable coins and regulation. Why not add that
(06:02):
to the portfolio. I think that's what we see a
bit wise, and I assume that's what other ETF issuers
are seeing as well.
Speaker 1 (06:09):
Isabelle. I know you've been covering this a lot for
Bloomberg News. What else has jumped out to you?
Speaker 4 (06:13):
I think what Matt said is really good food for thought,
because when Ether ETF's launch in July, we were almost like,
I don't want to say we were making fun of
how they're not getting inflows, but that's what we were thinking, like, man,
this is really so paltry compared to the just monster
flows we've seen in bitcoin ETFs. But then almost yeah, almost,
(06:34):
and then at one point I think we even saw
outlows when you look at them in aggregate because of
the black rock Ether fun and then now it's really
interesting how you saw really this influx of cash in
July and to everyone's earlier point, Like, for instance, as
soon as February to July second, we were seeing outflows
when it comes to black rocks Ether the biggest Ether
(06:55):
ETFs out of among the twenty related ETFs. But then
after that, for the whole month of July, we've just
been seeing inflows after inflows. So really, I think it's
this perfect storm of regulatory clarity momentum and just really
corporate companies piling into it. You see a lot of
eater treasury companies popping up.
Speaker 2 (07:13):
By the way, one more metaphor. When I would be
on these podcasts of these crypto people, I would be like,
they'd be like, oh, do you think Ether will be
a hit, And I'm like, it's tough. It's like, you know,
Bitcoin is the headliner. It's like having to follow the headliner.
It's like Sister Hazel having to follow Nirvana, which is
a if you know nineties rock you know that would
(07:33):
be no one would be left on in the crowd.
And so now when Ether takes and flows, all these
ethereum people tag me and they're like, sister Hazel. Is
it still, sister, Hazel, It's a whole thing. They're very proud. Anyway,
that's side go ahead.
Speaker 4 (07:49):
That's true because when you explain it to people have
no idea what cryptocurrencies are. Like my parents, Bitcoin is easy,
it's digital gold. But what is the elevator pitch of ether?
Speaker 5 (08:00):
The elevator pitch now it's the rails for stable coins
and tokenization. But actually that is that's the big thing.
I mean, we do. I think it's fifteen thousand meetings
a year with financial advisors about crypto. After the Bitcoin
ETF launched, it was easy to come in and say
Bitcoin is like digital gold. The US has thirty six
trillion dollars in debt. Don't you want to buy this?
(08:21):
If you had to get into let me explain how
the bitcoin blockchain and the Ethereum blockchain are fundamentally different,
and how value accruis in the ethereum. You just forget it.
It's impossible. Part of it is it now has that
easy story. Ethereum is the rails for stable coin and tokenization.
If you're bullish on that, you're bullish on eth and
people buy it based on that premise.
Speaker 3 (08:42):
How do you feel about Eric's metaphors for sister Hazel
and Reggie. Are you going to use those with potential clients?
Speaker 4 (08:53):
This?
Speaker 2 (08:53):
Is it the second best or is there no second best?
Speaker 5 (08:58):
I love it. I think I think it's a different sport.
I think that would be the more accurate metaphor, would
be a a Michael Jordan Messi metaphor. I say, okay, Emailer,
but you know, I'm also courting the eth vote on
crypto Twitter, so I need I need.
Speaker 1 (09:15):
That you might be doing a more diplomatic version than Eric.
Speaker 5 (09:20):
Yeah. Yeah.
Speaker 2 (09:21):
And also I also once I referred to Ether as
small potatoes and that I get that a lot too.
They're there anyway. Listen, I was reading up on Ether.
You know what's interesting to me is Bitcoin came out,
and it makes sense. Bitcoin is really for security. It's
like built like a tank, right, it's like just for
(09:43):
uh indestructible money. And there's a scarce amount twenty one
million only. But the blockchain people thought we could do
something some other things on this maybe have speed and
in this case make it so anybody can like program
their own smart contracts so they to bitcoin for everything.
So when you think about it being the rails for
(10:04):
tokenization and stable coins. Can you explain how that works?
Try to use a visual if you can, because they
call it DeFi Web three. So it really is a
new version of the Internet. So is my nineties tech stock?
Is it kind of like that should be looked at
because then you have these other blockchains like Salana that
(10:24):
are competing with ether and so it feels very much
like the race for land in the nineties for the
Internet to me, except crypto versions. And is that a
good way to look at it?
Speaker 5 (10:36):
Yeah, I think that's a good way to look at it. Right.
Bitcoin is a tank, it's a way to store wealth.
Ethereum is a platform that lets you move wealth. An
analogy that I think helps people. You think of the
New York Stock Exchange. If you're a company, you list
shares on the New York Stock Exchange, and to a degree,
it benefits every time someone transacts in those shares. If
(10:58):
you want to issue a stable coin, you have to
issue it on a blockchain. Ethereum is the blockchain on
which the majority of or the largest share of stable
coins are issued, and then every time it moves on
that blockchain, Ethereum accrues a little bit of revenue. So
it's sort of like New York Stock Exchange for stable
(11:20):
coins and for tokenization. It's a new financial switching infrastructure.
Speaker 2 (11:24):
So real quick, how does it monetize this? Because one
of the things that I have sort of been seeing
is that they don't want to People don't want to
pay a lot, Like, how does is it going to
sell advertising? I mean, how does it actually make money?
So I get that it's a popular public ledger, but
how does it turn that into cash? And is that
(11:44):
something that the ether token will be riffing off of
or do you even need cash flow for this to work?
Speaker 5 (11:51):
Yeah? Absolutely, it's a cash flow drive an asset. So
right now, Eric, there's about one hundred and twenty million
ethereum in existence. That's it, and each year about one
percent new eth is issued, so let's call it one
point two million new eth. Every time you issue a
stable coin or conduct a transaction on ethereum, you have
(12:12):
to pay a fee that's denominated in eth, and that
fee is destroyed. It's removed forever, so that reduces supply.
You can think of it a little bit like a
share buyback. But the more activity there is, the more
that supply demand dynamic tilts in favor of less supply
and more demand. The idea is that if over time
(12:36):
the majority of the world's stocks and bonds and cash
move over ethereum, there'll be so many transactions, so much activity,
that there'll be a huge amount of value in this ecosystem.
There'll be consistent supply pressure and strong demand, and that
will push the price up.
Speaker 4 (12:54):
I feel like that's exactly what people should stop doing,
maybe or start doing. Not trying to think of ether
in terms of bitcoin, but something completely different. I'm looking
at it in terms of ether treasury because so many
people are asking us, Okay, why is it different? Why
make an ether treasury? But I think for ether treasury,
what makes it attractive is that it has yield and
(13:14):
it's more similar to a money market fund rather than
like you. And again the digital goal of the scarcity,
because Ether obviously is in scars, it's not finite, you
can keep the making. In fact, we know who the
founders are as opposed to do bitcoin, so I feel
like it's just completely different. At least that's how I
try to explain it very simplistically to sources.
Speaker 5 (13:32):
I think that's exactly right. It is completely different. You
could even argue that it belongs in different asset classes.
People debate whether crypto is an asset class. I could
argue that bitcoin should belong in the commodity space and
ether is actually a technology service. It's driven primarily by revenue.
That's not perfect, but it may be closer than assuming
that there's the same thing. Just because they're both crypto assets,
(13:55):
they're used for very different purposes.
Speaker 2 (13:57):
Today, let's go over stable coins, because when people out
there think about crypto sometimes, especially in like New York City,
they kind of a it's like, oh, it's a Trump thing,
I'm not into it. But stable coins to me, are
(14:20):
the most progressive technology I've seen in a long time.
If you're living in an emerging market under one of
these autocratic dictators, they just crap on the currency all
day long, and the currency has twenty five percent inflation
a year or worse. They used to go into dark
alleys to try to get dollars because they make they
(14:41):
go to work, make money, they don't want to keep
it in their own currency, so they want dollars or bitcoin.
Stable coins are just literally dollars on the blockchain that
all you need is an Internet connection, right, So I
had heard that it's possible stable coins supersede bitcoin completely
and the dollar keeps running around the world as the
(15:01):
reserve currency, versus bitcoin taking that path and challenging all
of the currencies for dominance. What's your take on that.
Speaker 5 (15:09):
I think both will happen. Actually, so, I do think
the existence of stable coins will extend the dollar's role
as a reserve currency in the world, because you're going
to crypto dollarize to borrow Nick Carter's term, huge parts
of the world, because if you're somebody in one of
those countries, you'd rather hold dollars than your local currency.
(15:30):
And if you can get it from your cell phone,
you absolutely will, particularly if it's in a way that
the government can't seize it. And it's more than that,
if you're conducting business between two countries with imperfect financial architecture,
you can use US quality financial rails with instantaneous settlement
at low fees, using stable coins instead of routing through
(15:52):
local banks. It is hugely progressive and hugely valuable for
the world. So yeah, I think that's the direction of travel. Ultimately,
I think bitcoin gets a seat at the world's reserve currency.
Table in the same way that gold has a small
seat at that table as well. I think bitcoin is
a better version of gold and it fills that role.
(16:13):
But I do think stable coins extend the dollars position
as the world's reserve currency. It's one of the ironies
of crypto that's going to end up helping the dollar
maintain its position for longer than it would have otherwise.
Speaker 4 (16:26):
I do think so, because I don't. I think it's
apples and orange like stable coins are meant to represent
a digital fee at currency, and your faith is on
the company backing it, like Visa, for instance, has been
slowly integrating stable coins into their systems, and I feel
like we'll be hearing more and more blue chip companies
say that whereas bitcoin is, it's on.
Speaker 1 (16:45):
The blockchain, a different asset.
Speaker 4 (16:47):
A different to Matt's point.
Speaker 3 (16:49):
Yeah, So, Matt, how do you think about what that
stable coin race is going to look like? Is it a.
Speaker 1 (16:55):
Different version of rails or is it something else entirely?
Speaker 3 (17:00):
And we're starting to live in, you know, a multi
dimensional world.
Speaker 5 (17:05):
Yeah, I mean there are probably two races worth talking about.
One is what is the infrastructure on which it moves?
Because you can issue stable coins on eth on, Solana,
on Tron, on XRP, on many different blockchains, So what
is the one that people gravitate to and does that
share change over time? I think what we see in
(17:25):
the world today is the two leaders are actually Ethereum
in Tron, and it's geographically determined, with Tron dominating in
Asia and Ethereum in Western markets. It wouldn't surprise me
if that's the case going forward, but they'll certainly be competition,
and I wouldn't count Solana out. The other one is
who will win is the issuer of these stable coins.
Remember this is an enormously profitable business because stable coins
(17:48):
don't pay interest. So a company like Tether, which is
behind the largest stable coin in the world, usd T
I think, made four point five billion dollars last quarter,
which was, you know, more than Goldman Sachs. I mean,
I may have that precise number wrong, but it's in
that order of magnitude. I think you're gonna see all
(18:09):
the major financial institutions issue stable coins and compete with
cryptonative companies like Circle and Coinbase and Tether, and it
will be interesting to see. I have my views on
who will win but we'll find out in the next
few years.
Speaker 4 (18:22):
Is that for the benefit of the world though that
there are so many stable coins issued by a lot
of different companies, and like the US dollar, there's just
one and that's at a full face of the US government.
Speaker 5 (18:32):
Yeah, these are all private lookthrough vehicles to that. As
long as there's an extremely liquid interchange market, I think
it's for the benefit of the world. If you just
had one issuer, they'd be likely to abuse their position
in a way that competition wouldn't allow. So I like
that there will be multiple I think it'll probably be
an oligopoly with a few big providers. But look, I'm
(18:56):
pro competition. I'm anti CBDC, which is the sort of
government issued version of a stable coin, and I think
I think the market will sort itself out well.
Speaker 2 (19:06):
And just to be clear, you buy the stable coin,
right the dollar you buy, just like an ETF, gets
put into a some kind of a collateral basket or
reserve that is one for one to the stable coin.
Because there was the big blow up right with terror Luna,
where they look these tokens that these intermediaries put out
(19:29):
screw that man. They use the token as collateral it's like, Oh,
I made this magic token, I'm gonna use a collateral.
Please tell me. They won't do that. Here, they're going
to actually use dollars or treasuries.
Speaker 5 (19:40):
They'll use treasuries. Yeah, thank you. The Genius Act stable
coin bill that just got signed into law requires it
to be short term treasuries. So back to one for one.
The lunar thing was a crazy experiment. You know, we
never owned it a bit wise, and obviously it was
going to fail. It was self referentially going to fail.
So the new stable coins under the Genius Act will
(20:03):
be one for one back by short term treasuries. I
would argue that they'll be safer than traditional bank accounts.
Speaker 2 (20:10):
Imagine that though, oh here you want a dollar. Here,
here's your digital dollar. I'll take my dollar, do something
with it. Maybe I'll buy a nice car, and then
I'll again make the error coin. That is that's that's
now what your dollars based on.
Speaker 1 (20:26):
You would call it the you'd call it the Reggie coin.
Speaker 2 (20:28):
By the way, this whole idea of these intermediaries, who
are usually under the age of thirty, I have this
overall theme that the adults have arrived, whether it's the ETFs,
people like you, the government SEC. It just feels like,
are we maybe beyond this sort of massive scam part
(20:51):
of the crypto era, because I just don't see any
of this happening anymore. But man, it happened pretty regularly before. Honestly,
the black rock eto all ETFs, it kind of we've seen.
There's like a turning point, I think, and then a
bunch of other things happened. Does that give you more
confidence that it's now a mainstream, mature and safer.
Speaker 5 (21:12):
Huge, huge amount of more confidence. Right when you refuse
to regulate something, which was essentially what we did in
the past, you create the space for these scams and frauds.
You get the space for something like Luna, or you
create the space for something like FTX. I do think
the market is more safe. I think there'll be fewer
blow ups. And actually you can see that in the numbers.
(21:34):
If you look at bitcoins volatility. Since the ETF launched,
it's actually been below about half of the mag seven stocks.
It's been the lowest it's ever been. Volatility has been squashed,
and I think that's because better regulation just removes some
of the risks. So it's not just a vibes thing
you're pointing out, Eric, It's actually reflected in the data.
(21:54):
It's a less risky investment. Still plenty risky, lots of volatility,
still very new, unproven, but fewer of those blow ups
that have sort of defined the first fifteen years of crypto.
Speaker 1 (22:07):
We've got a lot of places so far.
Speaker 3 (22:08):
I do want to bring us back to ethereum and
ETFs and Matt, it's been a while since we actually
talked to you about ETFs, but since you started there
and then went full crypto, when you look back on ETFs,
how do you feel about them?
Speaker 5 (22:23):
I mean, they're great. They've saved Americans billions of dollars.
They've made investing cheaper, more tax efficient. They let my
father buy the same investment as sovereign wealth funds that
invest in ETFs and hedge funds that invest in ETFs.
They've been an enormous democratizing tool. I think the analogy
I tied to crypto, which is what I've made before,
(22:45):
is people didn't trust ETFs either. Right. They were weapons
of mass destruction. They were going to destroy the bond market.
They were going to collapse American entrepreneurial spirit and now
they're the apple Pie investing. I think the same thing
is going to happen to crypto. Love ETFs. I think
they'll be here for a while. They're great financial technology
and I love seeing ETFs and crypto. Clyde.
Speaker 2 (23:08):
We had you on maybe four or five years ago,
and I said, you know, because I had that phrase,
half crypto, full crypto, and I said, how what percent
crypto are you? And I think you said fifty five percent?
What is that percentage? Now?
Speaker 5 (23:23):
Oh, I'm full crypto, full cryptoire.
Speaker 1 (23:25):
You're gone.
Speaker 2 (23:26):
And by the way, you can never come back, right,
it's like Hotel California, Like, but I've never seen anybody
go into the crypto world, whether it's investment or their
career and like come back.
Speaker 5 (23:36):
No, we're going to drag all of finance into crypto.
You know, it used to be you were an internet
company or a physical company. Now now it's just a company.
You're the same things. It's gonna be. There's not gonna
be crypto finance companies. We're pulling everybody, including JP Morgan,
kicking and screaming into the crypto market.
Speaker 1 (23:54):
I liked your hedge though, of like the ETFs will
be with us for a while.
Speaker 2 (23:59):
Well, let's go over this because I know, you know,
because like there's all these like tokenization people who are
predicting like everything's everything's token. Reminds me that everything's computer,
everything's token. Okay, Relax. ETFs still record launches, record flows,
and last year was really tough to top, and they're
gonna top them. And the market's not even up that much. Clearly,
(24:21):
it's still hot, red hot here. But this idea that
the Ethereum blockchain is going to allow people to just
buy these tokens that are based on stocks and ETFs
and indexes and it will render ETFs, it'll be a
competitor at ETFs, even the stock exchange. I don't know.
I get it for people in emerging markets who don't
have access. But do you really think the whole mainstream
(24:45):
en shalada of stocks and ETFs and the exchanges are
gonna be sucked over to web three and Ethereum and
all this like are are ETF's possibly gonna start to
plateau this year and then start to over the next fifteen.
Speaker 5 (25:01):
Well, I don't think over the next fifteen. I think
it's going to take a while the direction of travel
is ultimately in favor of tokenization, and I think ETFs
will sort of dematerialize in the ip of the index
being separated from the hands on asset management, which won't
need to be in an ETF rapper. But this is
(25:23):
going to take a long time. This is like you
and I calling the end of mutual funds. You know,
fifteen years ago mutual funds still have trillions of dollars
of assets. But I don't think it's right that we're
at the end of financial innovation. I don't think we
got to the ETF and then we're done. It's perfect.
I think there is another phase, which is sort of
(25:43):
direct asset ownership. I think tokens can unlock that, but
the timeline is going to take a while. But I
would say if you read Paul Atkins's recent speech on
Project Crypto, where he talked about the rise of super
apps that allow you to to cross all categories of assets,
I think that is pointing the way to an eventual
(26:06):
post ETF future. But it's not. We're not peaking this year.
ETF facets are going to keep going up for you know,
another five to ten years.
Speaker 2 (26:13):
But Joel, you know, Nate Dracy, friend of the show.
He has a company called ETF Store. He changed the name.
Yeah luckily our our podcast trillions. Yeah, we could cover anything.
We're good to go.
Speaker 1 (26:28):
What's the name.
Speaker 2 (26:29):
Nova Das It was like at least he didn't call
it the token store. That would have hurt.
Speaker 5 (26:34):
He's going full crypto too, He's going, you're covered with
trillions where you know we are?
Speaker 4 (26:40):
We Go is a great name.
Speaker 2 (26:42):
Although my title senior ETF analyst, you.
Speaker 1 (26:44):
Have to change it to.
Speaker 2 (26:47):
Senior.
Speaker 4 (26:50):
That's fair to Eric's point, to push your tokenize everything,
I understand it. It's really for faster transaction, reduced costs.
But then in my inbox almost every day I get
a tokenization pitch, and you just it's been a struggle
to weed out which is noise and which are true efforts.
I mean, firms like black Rock and Franklin Templeton, they
have been pushing into this space to tokenize funds or
(27:11):
really create infrastructure around that. But for others, I'm just
not sure if they're just trying to get on with
what's hot or whether this are real, genuine.
Speaker 1 (27:21):
Yeah, what's real, Matt, what's real?
Speaker 5 (27:25):
I think real is pilot projects, and the idea that
tokenization will win eventually. A little bit of real is
tokenized treasury funds that trade on the weekends. That's finding
real use as marketable collateral. But we're very early on tokenization.
The whole tokenization markets like twenty billion dollars in assets
under management. I Unlike stable coins, which I think will
(27:46):
ramp really quickly, tokenization is still going to take a while.
There's still some regulatory hard yards to go there. But
the pilot project phase is an exciting phase. I would
say the hit rate on projects is going to be
low at this phase because we haven't defined exactly how
it will all work. But you see things like the
(28:06):
Canton network doing interesting work with THETCC. You see black
Rock building on tokenization, but you should think of it
as experimentation. We're not main main time. This is not
game time on tokenization. It's the experiment and learned phase.
Speaker 2 (28:28):
Ethereum is one blockchain, but then Solon is another. I
went to a Slona event this year.
Speaker 3 (28:33):
I was actually, I'm interested in Solana too, which I
was like, pending ETFs, right.
Speaker 2 (28:36):
Yeah, they got ets and there's a tron ETF coming
out Avalanche Cardano Solana, and the Solana event that I
was at was pretty you know, booming like and so
what's going to happen? Is there going to be this
race for the prize? Obviously a basket may make sense
for investors, but how many? How many can win?
Speaker 3 (28:56):
Yeah, especially since you know Ethereum it took a year
after launch to get to a point where it's seeing
this right, So what about how many times can we
replicate something like that?
Speaker 5 (29:09):
Look, I'm going to talk my book. You know, we
create the first crypto index fund. We're trying to turn
it into an ETF. I think that will be the
second biggest category after bitcoin.
Speaker 1 (29:17):
Shocker.
Speaker 5 (29:19):
Yeah, I know, I know, but I mean it because
who knows who's going to win. These are all software
programs that are optimized in interesting ways to be the
most efficient and most scalable. Ethereum has one vision on
how to build an efficient blockchain. Solana has a different vision.
Other assets have different visions. It's really hard to know
(29:39):
who will win. I imagine it'll be again an oligopoly.
I imagine this will look a lot like the traditional software market,
where there's Microsoft and Oracle and Salesforce and every once
in a while a new company like Slack or Snowflake
emerges that enters the big leagues, but mostly it's a
(30:00):
a handful of big providers that stick around for years.
There are network effects in crypto that are important, but
I don't think it'll be just one. I'd be surprised
if it.
Speaker 3 (30:07):
Was just one.
Speaker 2 (30:08):
The other thing is, if we're going to do all
this business of the blockchain and a smart contract is
like the computer telling you who's right and wrong and
whether it works. Who are you going to call when
something goes wrong? I mean sometimes on on Twitter that
there something will happen and a couple people will come
to the conclusion that centralization has its benefits. You can
(30:31):
call somebody like decentralization, I get it. Who you know?
These big internet companies have too much power, the government
has too much power. But you know, when you're on
the free decentralized platforms, is it? Is it a fragile
system because of the lack of people you can call
(30:52):
when something goes wrong.
Speaker 5 (30:54):
Well, let me, this is an ETF show, so let
me make an analogy to ETFs. One of the big
criticisms early in ETFs is what if you messed up trading.
When you buy a mutual fund, at the end of
the day, it's push button easy. You get nab based execution.
You can't muck it up. What if you put in
a market order for an ETF and you get blown
out on the spread. The reason we tolerated that risk
(31:17):
in ETFs is you got a huge number of advantages
in order for taking more personal responsibility. Crypto is the same.
Money moves instantly, it moves frictionalsly, It moves it maybe
one hundredth of the cost, but you have to take
on the personal responsibility for doing it right. The short
answer to your question is there is no one to call.
(31:37):
But the longer answer is maybe we should decouple sort
of fraud and accident from the core transaction. Right now,
if you go and buy a coffee at Starbucks, part
of the fee you're paying on your visa card is
what if you want to reverse that transaction. But no
one's reversing their transaction at Starbucks. It's just assigning more
personal responsibility. And I think if you think of that
(31:58):
ETF example versus mutual funds, that's the same thing as
the existing system versus crypto. You take on more personal
responsibility and you get huge benefits as a result. Is
it perfect? Of course not Well, some people want the
old version, of course, but people should have the choice
and it can be much more efficient and better.
Speaker 2 (32:18):
I mean, Joel has sent his frappuccino back when they
don't put half and half in it. So I've seen that.
Speaker 3 (32:26):
They're just saying there's always one ticket to Americano. Totally
black can't go round, Matt. We always ask a question,
which is a favorite ETF ticker other than your own?
I'm going to modify it slightly. My question for you
is favorite crypto related ETF other than anything?
Speaker 5 (32:47):
Yet you're in other thing other than anything bit wise issues. Yeah,
I have to talk about a friend's ETF. Yeah, let
me think about that. That's a hard one, do you
What am I going to say? You said it?
Speaker 2 (33:03):
Yeah, I'm gonna type it so Jule can see it,
and then.
Speaker 5 (33:06):
Okay, I don't know what I'm going to say. To
be honest, our products are better, but I'm glad that
black rock products exist.
Speaker 3 (33:14):
Oh, Eric was wrong?
Speaker 5 (33:17):
What did you say?
Speaker 3 (33:17):
Eric?
Speaker 2 (33:17):
I thought you were going to say total? Which was
the van Eck? I love? Yeah, I love it too, silly.
Speaker 5 (33:25):
It's just niche. When you're launching an ETF, you need
to appeal to a community. That's a smart way to
appeal to a community. Yeah, we compete in most markets
in the ETF space, so there are not many that
I'm envious of. But this is the early phase. I
want everyone to win. I'm happy with everyone.
Speaker 3 (33:41):
If there was an ETF crypto ETF, that's a top
your jealousy list, what would that be?
Speaker 5 (33:47):
Oh? The black Rock products for sure? Yeah, I mean, god,
we're twenty percent cheaper, they're twenty times bigger. That makes
no sense to me. But we'll get them a vent.
Speaker 2 (33:56):
That's good. He had that in his back pocket.
Speaker 1 (33:58):
You might have said that one before.
Speaker 2 (33:59):
I know that thing is a machine.
Speaker 4 (34:03):
Yeah, I bet I would say it's mine too. And
a fun fact is it's inching closer to GLD in
terms of total assets. So I think that's poetic.
Speaker 2 (34:12):
It's almost a foregone conclusion.
Speaker 3 (34:15):
All right, Matt Isabelle, thanks for joining us on trillions,
Thanks for having me, Thanks for listening to Trillions. Until
next time. You can find us on the Bloomberg terminal,
Bloomberg dot com, Apple Podcasts, Spotify, or wherever else.
Speaker 1 (34:32):
You'd like to listen, we'd love to hear from you.
Speaker 3 (34:34):
Hit us up on social I'm at Joel Weber Show,
He's at Eric Faulcini's. Trillions is produced by Magnus Hendrickson.
Brendan Newman is our executive producer. Sage Bauman is the
head of Bloomberg Podcast
Welcome Atralian's. I'm Joel Webber and.
Speaker 2 (00:07):
I'm Eric Belchunas.
Speaker 3 (00:11):
Eric, we talked about crypto a lot, and a lot
of that is about Bitcoin, but one that we haven't
come back to basically since the ETFs launched is Ether
and Ether If you have been paying attention, or maybe
if you haven't, Ether is having a heck of a year.
Speaker 1 (00:30):
What's going on?
Speaker 2 (00:32):
Yeah, Well, when Ether launched one year ago, it launched
right into a downturn. And that's not it's hard to
get assets if you if your performance is awfulver off
the bat ask any issue or that. So not only
did it have to follow Bitcoin, which is.
Speaker 1 (00:46):
Tough, like most successful ETF launch ever.
Speaker 2 (00:50):
Yeah, it really, I mean the shoes that it was
trying to fill were just too big. It felt very disappointing,
and then it had a rally. There's a couple narrative
things that will go over the help get it going.
Sover in the past three months, it's doubled, it's up
one hundred percent the coin. So once that got started,
people started buying the ETF and amazingly, these e three
(01:10):
ETFs basically double their assets in July alone, just one
month double. They've got about twenty billion now. And a
great fun fact is that if you remove the bitcoin
ETFs and pretend they didn't exist, Black Rocks E three
ETF would be the fastest ETF to ten billion in
the history of ETFs. Wow, it's just I equated to
(01:32):
having to play with Michael Jordan in the eighties and nineties,
like Reggie Miller, great player, another era. He probably gets
a couple of rings, but he happened to play with Jordan.
And even with all that, there's still only thirteen percent
of the assets the bitcoin ETFs have, so at least
they're doing something though, you know, we think they should
probably get around twenty percent, so they're on their way
to earning that market share. That's sort of like silver
(01:55):
to gold. It's like they're the silver to bitcoins.
Speaker 1 (01:57):
Gold, the Regie Miller to the Michael Jordan.
Speaker 3 (02:00):
They are.
Speaker 1 (02:00):
And you're going to get so much comment on that.
On sociable, I can't wait.
Speaker 2 (02:05):
And you know, Ether is interesting to me because the
pitch for it is totally different than Bitcoin. It's more
like we had a note we referred to it as
feeling like a nineties tech stock, like the very early
days of this new possible thing that could really change
tech and the Internet basically, and we'll see how it
(02:28):
pans out. And there's a lot of things to talk
about here, but yeah, definitely interesting area of the market
having a moment. And the reason we covered so much
is those numbers are ridiculous. So I know people are like,
you know, if you're not into it, you're probably like,
why do you cover it so much? But I'm like,
these numbers are crazy? All right?
Speaker 3 (02:42):
To join us on this episode, we've got Matt Hogan,
who's the chief investment officer of bit Wise Asset Management.
Before he went full crypto, he was an ETF guy,
as well as Isabelle Lee Cross outset reporter with bloogrig News.
Speaker 1 (02:57):
This time on trillions Ether. Matt, Isabelle, welcome back to Trillions.
Speaker 4 (03:04):
We're very excited to be here.
Speaker 5 (03:06):
Yeah, one hundred percent excited to join.
Speaker 1 (03:07):
Matt.
Speaker 3 (03:07):
It's been a while since we had you on and
you're you know that full crypto transformation happened, and I'm
curious a lot has gone up in the crypto world.
Speaker 1 (03:19):
Why have you not retired already?
Speaker 5 (03:24):
Wow? Straight at it. You know, Look, I think it's
I think it's still inning too in crypto land. I
think we're just getting started. I think if you're listening
to the SEC, they're telegraphing that the crypto boom is
ahead of us, not behind us. So I'm going to
keep building. We'll retire eventually.
Speaker 3 (03:40):
Okay, So a lot has happened in the Trump administration
two point zero at the SEC. We've had bitcoin ETF's approved.
We've had these Ethereum ETFs approved, which we talked a
little bit about here. What what do you see on
the ground. How do you distinguish between what's happened with
(04:00):
Bitcoin and what's happened with Ether?
Speaker 5 (04:04):
And it's yeah, so Bitcoin, you know, remember the first
Bitcoin ETF was filed in twenty thirteen, so we had
ten plus years of pent up demand for an asset
that was easy to understand. It was digital gold. And
so it came to the market and it crushed all records.
As you guys talked about. It pulled in thirty six
trillion dollars in its first year. It was six times
(04:25):
as large as the second fastest growing ETF of all time.
It was massive. Ethereum launched, I would say too soon, right,
It launched five or six months after the Bitcoin ETF,
people were still digesting bitcoin. As as mentioned, it launched
into a difficult market for Ether. The underlying asset wasn't
performing well, the community was in somewhat disarray, it didn't
(04:47):
have an obvious growth youth case. But it's now has
all of those things and as a result, we saw
five point four billion dollars in flows in July. To
put that number in context, remember that Ether is one
fifth the size of bitcoin, so that's akin to saying
twenty seven billion dollars in flows in the Bitcoin ETF.
From a relative size perspective, it's absolutely massive, and I
(05:11):
actually think it's going to accelerate or continue throughout the
end of the year.
Speaker 1 (05:15):
Where are those flows coming from.
Speaker 5 (05:17):
I think they're coming from people who bought the Bitcoin ETF.
I think a lot of it's coming from financial advisors
and family offices who bought the Bitcoin ETF. And this
is not a new story. If you talk to any
crypto investor pre ETF, probably the first asset they bought
was bitcoin, and then twenty percent of them became Bitcoin
maxis and that's all they wanted to do, and the
(05:39):
other eighty percent eventually moved down to buy ethereum maybe
nine to twelve months later. It's actually a story as
old as Satoshi. It's been happening in crypto for years,
and I think that's what's happening here. So people who
bought the Bitcoin ETF now want to diversify. There are
only other choices in Ethereum ETF. It has a good
narrative with stable coins and regulation. Why not add that
(06:02):
to the portfolio. I think that's what we see a
bit wise, and I assume that's what other ETF issuers
are seeing as well.
Speaker 1 (06:09):
Isabelle. I know you've been covering this a lot for
Bloomberg News. What else has jumped out to you?
Speaker 4 (06:13):
I think what Matt said is really good food for thought,
because when Ether ETF's launch in July, we were almost like,
I don't want to say we were making fun of
how they're not getting inflows, but that's what we were thinking, like, man,
this is really so paltry compared to the just monster
flows we've seen in bitcoin ETFs. But then almost yeah, almost,
(06:34):
and then at one point I think we even saw
outlows when you look at them in aggregate because of
the black rock Ether fun and then now it's really
interesting how you saw really this influx of cash in
July and to everyone's earlier point, Like, for instance, as
soon as February to July second, we were seeing outflows
when it comes to black rocks Ether the biggest Ether
(06:55):
ETFs out of among the twenty related ETFs. But then
after that, for the whole month of July, we've just
been seeing inflows after inflows. So really, I think it's
this perfect storm of regulatory clarity momentum and just really
corporate companies piling into it. You see a lot of
eater treasury companies popping up.
Speaker 2 (07:13):
By the way, one more metaphor. When I would be
on these podcasts of these crypto people, I would be like,
they'd be like, oh, do you think Ether will be
a hit, And I'm like, it's tough. It's like, you know,
Bitcoin is the headliner. It's like having to follow the headliner.
It's like Sister Hazel having to follow Nirvana, which is
a if you know nineties rock you know that would
(07:33):
be no one would be left on in the crowd.
And so now when Ether takes and flows, all these
ethereum people tag me and they're like, sister Hazel. Is
it still, sister, Hazel, It's a whole thing. They're very proud. Anyway,
that's side go ahead.
Speaker 4 (07:49):
That's true because when you explain it to people have
no idea what cryptocurrencies are. Like my parents, Bitcoin is easy,
it's digital gold. But what is the elevator pitch of ether?
Speaker 5 (08:00):
The elevator pitch now it's the rails for stable coins
and tokenization. But actually that is that's the big thing.
I mean, we do. I think it's fifteen thousand meetings
a year with financial advisors about crypto. After the Bitcoin
ETF launched, it was easy to come in and say
Bitcoin is like digital gold. The US has thirty six
trillion dollars in debt. Don't you want to buy this?
(08:21):
If you had to get into let me explain how
the bitcoin blockchain and the Ethereum blockchain are fundamentally different,
and how value accruis in the ethereum. You just forget it.
It's impossible. Part of it is it now has that
easy story. Ethereum is the rails for stable coin and tokenization.
If you're bullish on that, you're bullish on eth and
people buy it based on that premise.
Speaker 3 (08:42):
How do you feel about Eric's metaphors for sister Hazel
and Reggie. Are you going to use those with potential clients?
Speaker 4 (08:53):
This?
Speaker 2 (08:53):
Is it the second best or is there no second best?
Speaker 5 (08:58):
I love it. I think I think it's a different sport.
I think that would be the more accurate metaphor, would
be a a Michael Jordan Messi metaphor. I say, okay, Emailer,
but you know, I'm also courting the eth vote on
crypto Twitter, so I need I need.
Speaker 1 (09:15):
That you might be doing a more diplomatic version than Eric.
Speaker 5 (09:20):
Yeah. Yeah.
Speaker 2 (09:21):
And also I also once I referred to Ether as
small potatoes and that I get that a lot too.
They're there anyway. Listen, I was reading up on Ether.
You know what's interesting to me is Bitcoin came out,
and it makes sense. Bitcoin is really for security. It's
like built like a tank, right, it's like just for
(09:43):
uh indestructible money. And there's a scarce amount twenty one
million only. But the blockchain people thought we could do
something some other things on this maybe have speed and
in this case make it so anybody can like program
their own smart contracts so they to bitcoin for everything.
So when you think about it being the rails for
(10:04):
tokenization and stable coins. Can you explain how that works?
Try to use a visual if you can, because they
call it DeFi Web three. So it really is a
new version of the Internet. So is my nineties tech stock?
Is it kind of like that should be looked at
because then you have these other blockchains like Salana that
(10:24):
are competing with ether and so it feels very much
like the race for land in the nineties for the
Internet to me, except crypto versions. And is that a
good way to look at it?
Speaker 5 (10:36):
Yeah, I think that's a good way to look at it. Right.
Bitcoin is a tank, it's a way to store wealth.
Ethereum is a platform that lets you move wealth. An
analogy that I think helps people. You think of the
New York Stock Exchange. If you're a company, you list
shares on the New York Stock Exchange, and to a degree,
it benefits every time someone transacts in those shares. If
(10:58):
you want to issue a stable coin, you have to
issue it on a blockchain. Ethereum is the blockchain on
which the majority of or the largest share of stable
coins are issued, and then every time it moves on
that blockchain, Ethereum accrues a little bit of revenue. So
it's sort of like New York Stock Exchange for stable
(11:20):
coins and for tokenization. It's a new financial switching infrastructure.
Speaker 2 (11:24):
So real quick, how does it monetize this? Because one
of the things that I have sort of been seeing
is that they don't want to People don't want to
pay a lot, Like, how does is it going to
sell advertising? I mean, how does it actually make money?
So I get that it's a popular public ledger, but
how does it turn that into cash? And is that
(11:44):
something that the ether token will be riffing off of
or do you even need cash flow for this to work?
Speaker 5 (11:51):
Yeah? Absolutely, it's a cash flow drive an asset. So
right now, Eric, there's about one hundred and twenty million
ethereum in existence. That's it, and each year about one
percent new eth is issued, so let's call it one
point two million new eth. Every time you issue a
stable coin or conduct a transaction on ethereum, you have
(12:12):
to pay a fee that's denominated in eth, and that
fee is destroyed. It's removed forever, so that reduces supply.
You can think of it a little bit like a
share buyback. But the more activity there is, the more
that supply demand dynamic tilts in favor of less supply
and more demand. The idea is that if over time
(12:36):
the majority of the world's stocks and bonds and cash
move over ethereum, there'll be so many transactions, so much activity,
that there'll be a huge amount of value in this ecosystem.
There'll be consistent supply pressure and strong demand, and that
will push the price up.
Speaker 4 (12:54):
I feel like that's exactly what people should stop doing,
maybe or start doing. Not trying to think of ether
in terms of bitcoin, but something completely different. I'm looking
at it in terms of ether treasury because so many
people are asking us, Okay, why is it different? Why
make an ether treasury? But I think for ether treasury,
what makes it attractive is that it has yield and
(13:14):
it's more similar to a money market fund rather than
like you. And again the digital goal of the scarcity,
because Ether obviously is in scars, it's not finite, you
can keep the making. In fact, we know who the
founders are as opposed to do bitcoin, so I feel
like it's just completely different. At least that's how I
try to explain it very simplistically to sources.
Speaker 5 (13:32):
I think that's exactly right. It is completely different. You
could even argue that it belongs in different asset classes.
People debate whether crypto is an asset class. I could
argue that bitcoin should belong in the commodity space and
ether is actually a technology service. It's driven primarily by revenue.
That's not perfect, but it may be closer than assuming
that there's the same thing. Just because they're both crypto assets,
(13:55):
they're used for very different purposes.
Speaker 2 (13:57):
Today, let's go over stable coins, because when people out
there think about crypto sometimes, especially in like New York City,
they kind of a it's like, oh, it's a Trump thing,
I'm not into it. But stable coins to me, are
(14:20):
the most progressive technology I've seen in a long time.
If you're living in an emerging market under one of
these autocratic dictators, they just crap on the currency all
day long, and the currency has twenty five percent inflation
a year or worse. They used to go into dark
alleys to try to get dollars because they make they
(14:41):
go to work, make money, they don't want to keep
it in their own currency, so they want dollars or bitcoin.
Stable coins are just literally dollars on the blockchain that
all you need is an Internet connection, right, So I
had heard that it's possible stable coins supersede bitcoin completely
and the dollar keeps running around the world as the
(15:01):
reserve currency, versus bitcoin taking that path and challenging all
of the currencies for dominance. What's your take on that.
Speaker 5 (15:09):
I think both will happen. Actually, so, I do think
the existence of stable coins will extend the dollar's role
as a reserve currency in the world, because you're going
to crypto dollarize to borrow Nick Carter's term, huge parts
of the world, because if you're somebody in one of
those countries, you'd rather hold dollars than your local currency.
(15:30):
And if you can get it from your cell phone,
you absolutely will, particularly if it's in a way that
the government can't seize it. And it's more than that,
if you're conducting business between two countries with imperfect financial architecture,
you can use US quality financial rails with instantaneous settlement
at low fees, using stable coins instead of routing through
(15:52):
local banks. It is hugely progressive and hugely valuable for
the world. So yeah, I think that's the direction of travel. Ultimately,
I think bitcoin gets a seat at the world's reserve currency.
Table in the same way that gold has a small
seat at that table as well. I think bitcoin is
a better version of gold and it fills that role.
(16:13):
But I do think stable coins extend the dollars position
as the world's reserve currency. It's one of the ironies
of crypto that's going to end up helping the dollar
maintain its position for longer than it would have otherwise.
Speaker 4 (16:26):
I do think so, because I don't. I think it's
apples and orange like stable coins are meant to represent
a digital fee at currency, and your faith is on
the company backing it, like Visa, for instance, has been
slowly integrating stable coins into their systems, and I feel
like we'll be hearing more and more blue chip companies
say that whereas bitcoin is, it's on.
Speaker 1 (16:45):
The blockchain, a different asset.
Speaker 4 (16:47):
A different to Matt's point.
Speaker 3 (16:49):
Yeah, So, Matt, how do you think about what that
stable coin race is going to look like? Is it a.
Speaker 1 (16:55):
Different version of rails or is it something else entirely?
Speaker 3 (17:00):
And we're starting to live in, you know, a multi
dimensional world.
Speaker 5 (17:05):
Yeah, I mean there are probably two races worth talking about.
One is what is the infrastructure on which it moves?
Because you can issue stable coins on eth on, Solana,
on Tron, on XRP, on many different blockchains, So what
is the one that people gravitate to and does that
share change over time? I think what we see in
(17:25):
the world today is the two leaders are actually Ethereum
in Tron, and it's geographically determined, with Tron dominating in
Asia and Ethereum in Western markets. It wouldn't surprise me
if that's the case going forward, but they'll certainly be competition,
and I wouldn't count Solana out. The other one is
who will win is the issuer of these stable coins.
Remember this is an enormously profitable business because stable coins
(17:48):
don't pay interest. So a company like Tether, which is
behind the largest stable coin in the world, usd T
I think, made four point five billion dollars last quarter,
which was, you know, more than Goldman Sachs. I mean,
I may have that precise number wrong, but it's in
that order of magnitude. I think you're gonna see all
(18:09):
the major financial institutions issue stable coins and compete with
cryptonative companies like Circle and Coinbase and Tether, and it
will be interesting to see. I have my views on
who will win but we'll find out in the next
few years.
Speaker 4 (18:22):
Is that for the benefit of the world though that
there are so many stable coins issued by a lot
of different companies, and like the US dollar, there's just
one and that's at a full face of the US government.
Speaker 5 (18:32):
Yeah, these are all private lookthrough vehicles to that. As
long as there's an extremely liquid interchange market, I think
it's for the benefit of the world. If you just
had one issuer, they'd be likely to abuse their position
in a way that competition wouldn't allow. So I like
that there will be multiple I think it'll probably be
an oligopoly with a few big providers. But look, I'm
(18:56):
pro competition. I'm anti CBDC, which is the sort of
government issued version of a stable coin, and I think
I think the market will sort itself out well.
Speaker 2 (19:06):
And just to be clear, you buy the stable coin,
right the dollar you buy, just like an ETF, gets
put into a some kind of a collateral basket or
reserve that is one for one to the stable coin.
Because there was the big blow up right with terror Luna,
where they look these tokens that these intermediaries put out
(19:29):
screw that man. They use the token as collateral it's like, Oh,
I made this magic token, I'm gonna use a collateral.
Please tell me. They won't do that. Here, they're going
to actually use dollars or treasuries.
Speaker 5 (19:40):
They'll use treasuries. Yeah, thank you. The Genius Act stable
coin bill that just got signed into law requires it
to be short term treasuries. So back to one for one.
The lunar thing was a crazy experiment. You know, we
never owned it a bit wise, and obviously it was
going to fail. It was self referentially going to fail.
So the new stable coins under the Genius Act will
(20:03):
be one for one back by short term treasuries. I
would argue that they'll be safer than traditional bank accounts.
Speaker 2 (20:10):
Imagine that though, oh here you want a dollar. Here,
here's your digital dollar. I'll take my dollar, do something
with it. Maybe I'll buy a nice car, and then
I'll again make the error coin. That is that's that's
now what your dollars based on.
Speaker 1 (20:26):
You would call it the you'd call it the Reggie coin.
Speaker 2 (20:28):
By the way, this whole idea of these intermediaries, who
are usually under the age of thirty, I have this
overall theme that the adults have arrived, whether it's the ETFs,
people like you, the government SEC. It just feels like,
are we maybe beyond this sort of massive scam part
(20:51):
of the crypto era, because I just don't see any
of this happening anymore. But man, it happened pretty regularly before. Honestly,
the black rock eto all ETFs, it kind of we've seen.
There's like a turning point, I think, and then a
bunch of other things happened. Does that give you more
confidence that it's now a mainstream, mature and safer.
Speaker 5 (21:12):
Huge, huge amount of more confidence. Right when you refuse
to regulate something, which was essentially what we did in
the past, you create the space for these scams and frauds.
You get the space for something like Luna, or you
create the space for something like FTX. I do think
the market is more safe. I think there'll be fewer
blow ups. And actually you can see that in the numbers.
(21:34):
If you look at bitcoins volatility. Since the ETF launched,
it's actually been below about half of the mag seven stocks.
It's been the lowest it's ever been. Volatility has been squashed,
and I think that's because better regulation just removes some
of the risks. So it's not just a vibes thing
you're pointing out, Eric, It's actually reflected in the data.
(21:54):
It's a less risky investment. Still plenty risky, lots of volatility,
still very new, unproven, but fewer of those blow ups
that have sort of defined the first fifteen years of crypto.
Speaker 1 (22:07):
We've got a lot of places so far.
Speaker 3 (22:08):
I do want to bring us back to ethereum and
ETFs and Matt, it's been a while since we actually
talked to you about ETFs, but since you started there
and then went full crypto, when you look back on ETFs,
how do you feel about them?
Speaker 5 (22:23):
I mean, they're great. They've saved Americans billions of dollars.
They've made investing cheaper, more tax efficient. They let my
father buy the same investment as sovereign wealth funds that
invest in ETFs and hedge funds that invest in ETFs.
They've been an enormous democratizing tool. I think the analogy
I tied to crypto, which is what I've made before,
(22:45):
is people didn't trust ETFs either. Right. They were weapons
of mass destruction. They were going to destroy the bond market.
They were going to collapse American entrepreneurial spirit and now
they're the apple Pie investing. I think the same thing
is going to happen to crypto. Love ETFs. I think
they'll be here for a while. They're great financial technology
and I love seeing ETFs and crypto. Clyde.
Speaker 2 (23:08):
We had you on maybe four or five years ago,
and I said, you know, because I had that phrase,
half crypto, full crypto, and I said, how what percent
crypto are you? And I think you said fifty five percent?
What is that percentage? Now?
Speaker 5 (23:23):
Oh, I'm full crypto, full cryptoire.
Speaker 1 (23:25):
You're gone.
Speaker 2 (23:26):
And by the way, you can never come back, right,
it's like Hotel California, Like, but I've never seen anybody
go into the crypto world, whether it's investment or their
career and like come back.
Speaker 5 (23:36):
No, we're going to drag all of finance into crypto.
You know, it used to be you were an internet
company or a physical company. Now now it's just a company.
You're the same things. It's gonna be. There's not gonna
be crypto finance companies. We're pulling everybody, including JP Morgan,
kicking and screaming into the crypto market.
Speaker 1 (23:54):
I liked your hedge though, of like the ETFs will
be with us for a while.
Speaker 2 (23:59):
Well, let's go over this because I know, you know,
because like there's all these like tokenization people who are
predicting like everything's everything's token. Reminds me that everything's computer,
everything's token. Okay, Relax. ETFs still record launches, record flows,
and last year was really tough to top, and they're
gonna top them. And the market's not even up that much. Clearly,
(24:21):
it's still hot, red hot here. But this idea that
the Ethereum blockchain is going to allow people to just
buy these tokens that are based on stocks and ETFs
and indexes and it will render ETFs, it'll be a
competitor at ETFs, even the stock exchange. I don't know.
I get it for people in emerging markets who don't
have access. But do you really think the whole mainstream
(24:45):
en shalada of stocks and ETFs and the exchanges are
gonna be sucked over to web three and Ethereum and
all this like are are ETF's possibly gonna start to
plateau this year and then start to over the next fifteen.
Speaker 5 (25:01):
Well, I don't think over the next fifteen. I think
it's going to take a while the direction of travel
is ultimately in favor of tokenization, and I think ETFs
will sort of dematerialize in the ip of the index
being separated from the hands on asset management, which won't
need to be in an ETF rapper. But this is
(25:23):
going to take a long time. This is like you
and I calling the end of mutual funds. You know,
fifteen years ago mutual funds still have trillions of dollars
of assets. But I don't think it's right that we're
at the end of financial innovation. I don't think we
got to the ETF and then we're done. It's perfect.
I think there is another phase, which is sort of
(25:43):
direct asset ownership. I think tokens can unlock that, but
the timeline is going to take a while. But I
would say if you read Paul Atkins's recent speech on
Project Crypto, where he talked about the rise of super
apps that allow you to to cross all categories of assets,
I think that is pointing the way to an eventual
(26:06):
post ETF future. But it's not. We're not peaking this year.
ETF facets are going to keep going up for you know,
another five to ten years.
Speaker 2 (26:13):
But Joel, you know, Nate Dracy, friend of the show.
He has a company called ETF Store. He changed the name.
Yeah luckily our our podcast trillions. Yeah, we could cover anything.
We're good to go.
Speaker 1 (26:28):
What's the name.
Speaker 2 (26:29):
Nova Das It was like at least he didn't call
it the token store. That would have hurt.
Speaker 5 (26:34):
He's going full crypto too, He's going, you're covered with
trillions where you know we are?
Speaker 4 (26:40):
We Go is a great name.
Speaker 2 (26:42):
Although my title senior ETF analyst, you.
Speaker 1 (26:44):
Have to change it to.
Speaker 2 (26:47):
Senior.
Speaker 4 (26:50):
That's fair to Eric's point, to push your tokenize everything,
I understand it. It's really for faster transaction, reduced costs.
But then in my inbox almost every day I get
a tokenization pitch, and you just it's been a struggle
to weed out which is noise and which are true efforts.
I mean, firms like black Rock and Franklin Templeton, they
have been pushing into this space to tokenize funds or
(27:11):
really create infrastructure around that. But for others, I'm just
not sure if they're just trying to get on with
what's hot or whether this are real, genuine.
Speaker 1 (27:21):
Yeah, what's real, Matt, what's real?
Speaker 5 (27:25):
I think real is pilot projects, and the idea that
tokenization will win eventually. A little bit of real is
tokenized treasury funds that trade on the weekends. That's finding
real use as marketable collateral. But we're very early on tokenization.
The whole tokenization markets like twenty billion dollars in assets
under management. I Unlike stable coins, which I think will
(27:46):
ramp really quickly, tokenization is still going to take a while.
There's still some regulatory hard yards to go there. But
the pilot project phase is an exciting phase. I would
say the hit rate on projects is going to be
low at this phase because we haven't defined exactly how
it will all work. But you see things like the
(28:06):
Canton network doing interesting work with THETCC. You see black
Rock building on tokenization, but you should think of it
as experimentation. We're not main main time. This is not
game time on tokenization. It's the experiment and learned phase.
Speaker 2 (28:28):
Ethereum is one blockchain, but then Solon is another. I
went to a Slona event this year.
Speaker 3 (28:33):
I was actually, I'm interested in Solana too, which I
was like, pending ETFs, right.
Speaker 2 (28:36):
Yeah, they got ets and there's a tron ETF coming
out Avalanche Cardano Solana, and the Solana event that I
was at was pretty you know, booming like and so
what's going to happen? Is there going to be this
race for the prize? Obviously a basket may make sense
for investors, but how many? How many can win?
Speaker 3 (28:56):
Yeah, especially since you know Ethereum it took a year
after launch to get to a point where it's seeing
this right, So what about how many times can we
replicate something like that?
Speaker 5 (29:09):
Look, I'm going to talk my book. You know, we
create the first crypto index fund. We're trying to turn
it into an ETF. I think that will be the
second biggest category after bitcoin.
Speaker 1 (29:17):
Shocker.
Speaker 5 (29:19):
Yeah, I know, I know, but I mean it because
who knows who's going to win. These are all software
programs that are optimized in interesting ways to be the
most efficient and most scalable. Ethereum has one vision on
how to build an efficient blockchain. Solana has a different vision.
Other assets have different visions. It's really hard to know
(29:39):
who will win. I imagine it'll be again an oligopoly.
I imagine this will look a lot like the traditional software market,
where there's Microsoft and Oracle and Salesforce and every once
in a while a new company like Slack or Snowflake
emerges that enters the big leagues, but mostly it's a
(30:00):
a handful of big providers that stick around for years.
There are network effects in crypto that are important, but
I don't think it'll be just one. I'd be surprised
if it.
Speaker 3 (30:07):
Was just one.
Speaker 2 (30:08):
The other thing is, if we're going to do all
this business of the blockchain and a smart contract is
like the computer telling you who's right and wrong and
whether it works. Who are you going to call when
something goes wrong? I mean sometimes on on Twitter that
there something will happen and a couple people will come
to the conclusion that centralization has its benefits. You can
(30:31):
call somebody like decentralization, I get it. Who you know?
These big internet companies have too much power, the government
has too much power. But you know, when you're on
the free decentralized platforms, is it? Is it a fragile
system because of the lack of people you can call
(30:52):
when something goes wrong.
Speaker 5 (30:54):
Well, let me, this is an ETF show, so let
me make an analogy to ETFs. One of the big
criticisms early in ETFs is what if you messed up trading.
When you buy a mutual fund, at the end of
the day, it's push button easy. You get nab based execution.
You can't muck it up. What if you put in
a market order for an ETF and you get blown
out on the spread. The reason we tolerated that risk
(31:17):
in ETFs is you got a huge number of advantages
in order for taking more personal responsibility. Crypto is the same.
Money moves instantly, it moves frictionalsly, It moves it maybe
one hundredth of the cost, but you have to take
on the personal responsibility for doing it right. The short
answer to your question is there is no one to call.
(31:37):
But the longer answer is maybe we should decouple sort
of fraud and accident from the core transaction. Right now,
if you go and buy a coffee at Starbucks, part
of the fee you're paying on your visa card is
what if you want to reverse that transaction. But no
one's reversing their transaction at Starbucks. It's just assigning more
personal responsibility. And I think if you think of that
(31:58):
ETF example versus mutual funds, that's the same thing as
the existing system versus crypto. You take on more personal
responsibility and you get huge benefits as a result. Is
it perfect? Of course not Well, some people want the
old version, of course, but people should have the choice
and it can be much more efficient and better.
Speaker 2 (32:18):
I mean, Joel has sent his frappuccino back when they
don't put half and half in it. So I've seen that.
Speaker 3 (32:26):
They're just saying there's always one ticket to Americano. Totally
black can't go round, Matt. We always ask a question,
which is a favorite ETF ticker other than your own?
I'm going to modify it slightly. My question for you
is favorite crypto related ETF other than anything?
Speaker 5 (32:47):
Yet you're in other thing other than anything bit wise issues. Yeah,
I have to talk about a friend's ETF. Yeah, let
me think about that. That's a hard one, do you
What am I going to say? You said it?
Speaker 2 (33:03):
Yeah, I'm gonna type it so Jule can see it,
and then.
Speaker 5 (33:06):
Okay, I don't know what I'm going to say. To
be honest, our products are better, but I'm glad that
black rock products exist.
Speaker 3 (33:14):
Oh, Eric was wrong?
Speaker 5 (33:17):
What did you say?
Speaker 3 (33:17):
Eric?
Speaker 2 (33:17):
I thought you were going to say total? Which was
the van Eck? I love? Yeah, I love it too, silly.
Speaker 5 (33:25):
It's just niche. When you're launching an ETF, you need
to appeal to a community. That's a smart way to
appeal to a community. Yeah, we compete in most markets
in the ETF space, so there are not many that
I'm envious of. But this is the early phase. I
want everyone to win. I'm happy with everyone.
Speaker 3 (33:41):
If there was an ETF crypto ETF, that's a top
your jealousy list, what would that be?
Speaker 5 (33:47):
Oh? The black Rock products for sure? Yeah, I mean, god,
we're twenty percent cheaper, they're twenty times bigger. That makes
no sense to me. But we'll get them a vent.
Speaker 2 (33:56):
That's good. He had that in his back pocket.
Speaker 1 (33:58):
You might have said that one before.
Speaker 2 (33:59):
I know that thing is a machine.
Speaker 4 (34:03):
Yeah, I bet I would say it's mine too. And
a fun fact is it's inching closer to GLD in
terms of total assets. So I think that's poetic.
Speaker 2 (34:12):
It's almost a foregone conclusion.
Speaker 3 (34:15):
All right, Matt Isabelle, thanks for joining us on trillions,
Thanks for having me, Thanks for listening to Trillions. Until
next time. You can find us on the Bloomberg terminal,
Bloomberg dot com, Apple Podcasts, Spotify, or wherever else.
Speaker 1 (34:32):
You'd like to listen, we'd love to hear from you.
Speaker 3 (34:34):
Hit us up on social I'm at Joel Weber Show,
He's at Eric Faulcini's. Trillions is produced by Magnus Hendrickson.
Brendan Newman is our executive producer. Sage Bauman is the
head of Bloomberg Podcast
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