ETFs: Crypto's Path to ATHs in 2024 | Matt Hougan

The idea of Ethereum raising its banner on the New York Stock Exchange is both an incredible accomplishment. There's like an element of the Trojan horse being invited into Troy that I really love about it. Again, it's making me think just how far we've come, right, from just a few years ago where that was a crazy idea. It was a crazy idea. And yet there we were at the New York Stock Exchange with huge parts of the Ethereum ecosystem, right? People had been building in that space for 10 years. On the floor of the exchange ringing the bell for Ethereum. That's a pretty magical moment.

This episode is brought to you by Anoma, the universal intent machine introducing a new era of applications where you define the outcomes you want. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at anoma.net. Special thanks to Anoma for sponsoring today's episode. Real is a permissionless L2 designed for tokenized real-world assets. They've just launched their rewards program, so get started at re.al/rewards and be sure to use the code in the show notes below. Special thanks to Real for sponsoring today's episode. Hey everyone, excited to share with you that Cronos zkEVM has launched its Pioneer Program, offering early adopters a chance to earn not only loyalty points but also potentially win part of a $30,000 ZK CRO giveaway. If you're interested in being an early adopter, visit zkEVM.chronos.org/bridge. Big thanks to Chronos for sponsoring today's episode. This episode is brought to you by Avalanche. Avalanche is a leading network of blockchains giving some of the world's largest financial institutions new use cases and business models while leveraging completely customizable infrastructure. Check out. It's core.app/discover. You can explore Avalanche's subnet ecosystem at core.app/discover. I was playing around earlier today. Really cool. All right, everyone, welcome back to Empire. Back with Mr. Matt Hogan. Matt, welcome, uh, welcome back to the show.

Thanks for having me. I'm excited to be here.

Yeah, excited to have you. How's life? What's going on, man?

Life is good. I'm up in Maine, which is beautiful, and, uh, lots of fun stuff happening in crypto, so I can't complain.

Nice. Yeah, really casual weeks we've had here.

Yeah, yeah.

Let's, uh, so we're talking ETFs, and I want to get the big questions that everyone's wondering out of the way. Like, hey, we've got the Bitcoin and ETH ETFs, why aren't we at all-time highs? Uh, we got Bitcoin and ETH, what comes next? Is it Solana? Is it something else? Um, do the institutions really care? Who's actually buying this? Is it self-directed retailers, the institutions? But maybe we can just start with, with expectations, actually. Uh, I know you guys internally at Bitwise had pretty high expectations for the ETH ETF. Um, but from my vantage point, it seems like we exceeded even those higher expectations. But I'm just a measly retail guy on the side, so I'd be curious, uh, from your vantage point, like, how, how did the ETH ETF go?

Yeah, I think there are probably two important things about that. Uh, the first is that we did exceed expectations. The new ETFs have pulled in $1 billion in net flows in a single week. Right. That's among the fastest of all time in the history of ETFs. It's not on par with the Bitcoin ETFs, but it's not that far behind. And it's really strong. The average ETF pulls in, you know, $1 million or $2 million in its first week. So doing $1 billion is a big deal. At Bitwise, we did $250 million, which for us is a significant success. So I think, you know, the question was, would anyone care about ETH ETFs? The answer is yes. $1 billion cared. And then equally importantly, I think we removed the, the sort of risk of failure. If you remember way back, the Ethereum futures ETFs launched, and there's no way to look at those as anything but basically a dud, right? They didn't attract much interest. They didn't attract much trading volume. And so I think there, there was this question, do ETF investors care about ETH? But $1 billion answers that pretty definitively. They do. And that tells me that we're going to get many billions of dollars of flows over the next 6 months and then the next year and the next few years. So yeah, I think it's a success.

What is the— maybe we can start with the who instead of the what. So when I was at the Coinbase State of Crypto Summit, which, which you spoke at as well, Cathie Wood and what's her name, Samara from, from BlackRock, both said the same thing, which was interesting to me, which is roughly 80% of the buyers of these ETFs are not actually the institutions. And that the institutional floodgates really haven't even opened yet, um, and that the, the 80% of the buyers are actually these self-directed retail folks. I'd be curious if you guys are seeing that as well, and, and maybe why, if that's true, why is that the case?

Yeah, I mean, that's broadly true if you look at the data. You know, the SEC requires reporting, so that 80% number reflects what was reported as owning the Bitcoin ETFs at the end of Q1. So back in March, um, and it was the case that about 80% was self-directed. I would say two things about that though, Jason. First is, if you remove that 80% for the Bitcoin ETFs and you just look at the 20% that's institutional, it's the fastest growing ETF of all time. So it's absolutely the case that retail bought these in size, but it's also the case that institutions bought them faster than they ever bought any other ETF in history. And I think that gets lost because it's a smaller fraction. So these are a success on both sides of the spectrum. We see both people in our ETFs. Uh, you know, we're sort of the crypto-native ETF issuer, and there's a strong embrace from the crypto community of, uh, of Bitwise's ETFs, in part because we donate some of the profits back to open-source developers and we publish our addresses. But, you know, I had a conversation with a couple, actually 2 or 3 $10 billion-plus RIAs last week about these ETFs, and they're thinking about building portfolios that hold both Bitcoin and ETH. So I do think the institutions are coming. I think that story is intact, but there's also this strong embrace by retail.

What is the pitch? Maybe you could walk through the pitch for Bitcoin and the pitch for, for ETH. And the context for this is Santi and I have been talking a lot about this in the roundups. It seems like, so Larry Fink went on CNBC, right? And he basically just said, uh, you know, 3-minute beautiful commercial for Bitcoin, but I think you could summarize it and say the best way, if you, if there's chaos in the world and you're scared about chaos, the best way to get exposure to that fear was either shorting markets or buying gold. And today the best way to get exposure is Bitcoin to that uncertainty or fear or whatever it may be in the markets. ETH, it feels like, is this global computing platform for the new, for the new digital asset era, right? It feels like a totally different pitch. But I'm curious how you, how you think about it and how you pitch these assets.

Yeah, no, I think that's right. I mean, Bitcoin's a monetary asset. It's a hedge against chaos. It's a hedge against inflation. It's digital gold. It's an exciting technology. So it's, it's got that element as well. But I really think that's how people think about it. That's something they put in their portfolio that's not correlated to anything else. and that hedges them against dollar debasement, runaway inflation, and sort of a loss of faith in institutions. So that's a, that's a relatively easy pitch. The way advisors think about ETH is as a technology. They think of it almost as a picks and shovels way to play things like tokenization or play the growth of stablecoins or play the growth of DeFi or play the growth of NFTs. All of those are built on ETH. So if you want to invest in tokenization, how are you going to do it? The best possible way is to invest in Ethereum. So I do think people think of it as a technology play. Now, I recognize to the ETH community, ETH has a lot of moneyness in it. Like a lot of the value of ETH is it's a, it's a, it's a monetary asset to the Ethereum community. But from Wall Street's perspective, they need an easy place to bucket it. And they bucket it as part of technology. And I think that gets them 70% of the way to the story on ETH.

Hmm. What's the, what's the last 30%?

Well, the last 30% is that sort of that, that monetary aspect of Ethereum. I don't think its only value is in utility, right? There's plenty of parts of the ecosystem that are legitimately denominated in ETH, right? NFTs are denominated. It is used as money. And so it has a monetary premium, but Wall Street likes to think in simple ways. A simple way is Bitcoin is digital gold. ETH is technology. A story I've been talking to a lot of investors about, um, is pretty simple, which is, you know, if you own the NASDAQ 100, the QQQ ETF, which many people own as a way to play technology, and you don't own Ethereum, you're missing part of technology. Right? You're only capturing a portion of it. It would be like not owning AI or not owning semiconductors or not owning biotech. ETH is just another sliver of that technology sphere. And if you want to own tech, you need to own some Qs and you need to own some ETH.

Sure. Yeah. So then what's the— you meet with these RIAs, the financial advisors, sure, some retail folks, big institutions. What is the main reason why people are not buying it? Is it a regulatory reason? Is it a They don't understand the thesis reason. Is it lack of fundamentals? What is, what is the reason why people don't buy?

Yeah, so most of it is just time. I mean, I do think that's what crypto misses is when new products launch, professional investors don't rush to put them in their portfolio. These are people who are building portfolios that last people for 30 years. If they get to it today or they get to it in 3 months or they get to in 6 months or a year, it's fine, right? I mean, for most new investments, they have to due diligence themselves. Then they have to arrange a call with their client, they have to review it, and then they have to execute it. That all takes time. These people have 100 different clients. They have to arrange 100 different meetings. I mean, this process just takes time, not for crypto, but for everything. So the number one reason is just time, and I think they will eventually come. The secondary reason— people still get hung up on how can Bitcoin have value if it doesn't have cash flow. I do think that that is still a stumbling block, and there's a great answer for that. But you need to be able to have that conversation with people, and that just takes time.

Hmm. What about the interest outside of just Bitcoin and ETH? Things like Solana or NFTs or other L1s or maybe even L2s or DeFi. What's the interest like in those assets?

Yeah, there's a lot of interest in Solana. The funny thing about these professional investor organizations is they usually have one person who absolutely loves crypto and they want to be just on the outside of what is mainstream. So in the early days, that was liking Bitcoin because Bitcoin inside these firms was a crazy idea. But now, by and large, these firms have come along and embraced Bitcoin, right? The CEO of Goldman Sachs just said Bitcoin's a store of value. So that's like a normal position. Then for a period it was Ethereum, but now we have Bitcoin and ETH ETFs. And what I hear when I talk to these advisors is that the crypto person always wants to ask a question about Solana. So they always want to be a little bit ahead of where the market is. Beyond Solana, there's really sporadic interest. There's some interest in DeFi. There's some interest in DePIN. Occasionally, there'll be interest in one specific coin, but really Bitcoin, ETH, and Solana are the shining stars that the professional investor community knows about.

What's the pitch for Solana? Is it, hey, all these DeFi and all these things could be built on ETH. Don't try to get exposure to one thing, just buy the underlying. It's like buying a cloud platform. Like all these websites are getting created, go buy AWS or Amazon. Hey, maybe Solana comes along, it's a competitor, go buy Google Cloud and, and AWS as well because you don't know what it's going to be. Is that the main kind of story that's being told right now?

That is the main story. It's Betamax and VHS, it's BlackBerry and iPhone, it's Google and Yahoo. Yahoo, it's the fact that, you know, people have seen that technology is hard to predict. So do you want a layer 1 blockchain that's scaling through L2s, or, or one that's scaling through parallelization? And they just, you know, they're not in a position to know the answer to that. I would argue that even people inside of crypto, though they have opinions, are not in a— not in a place to know exactly what will transpire. And so I think most of them just want to own both. And that's a pretty standard response. I think it's smart, actually. Yeah.

Is— do you think— so Mike and I have this conversation a lot, which is like, all right, if we sold our crypto, what would you buy? Because Mike and I both have— I mean, basically 99% of our liquid exposure is crypto at this point.

Yeah.

And it's like, I'm just— I mean, like, I, I guess you could go buy Facebook or something or Netflix or something like that. But how much of the demand for crypto right now do you think is coming from It's like, yeah, what are you going to go do, buy Nvidia? Like, I mean, this— that chart looks crazier than Bitcoin did in 2017. Like, so how much of the demand is coming from interest in crypto versus like uncertainty around what else you should buy?

Yeah, I mean, look, there are certain areas of the market that I think people find very exciting. People are excited by AI. They're excited by the story you're seeing in India. They're excited by gene editing and the advances in biotech. So there There are other areas that are exciting, but look, crypto has the best, you know, best returns of any asset in the world over the last 1, 3, 5, and 10 years. It's easy to see how it could still 10x from here. And so I do think people are attracted to that and they're looking for a way to get, you know, outsized returns. And there aren't that many options. Like, I just rattled off 4, but I think that's the complete set. Yeah, right. And crypto is probably the most attractive of that bunch. So I do think that matters.

Is there interest in, um, I imagine people bring up Coinbase stock. One, one thing that I'm kind of waiting for is more publicly traded crypto companies. So whether that's Circle or Kraken or Bitwise one day, um, have you, have you guys thought about the strategy of putting together just a— I'd call it like, I'm putting quotes around this word for people not watching on YouTube— like a normal tradfi ETF, like a crypto ETF that's just maybe Coinbase, Circle, Kraken, and maybe you do throw in some Bitcoin and ETH in there as well. But have you guys thought about that?

Yeah, you know, I wrote a piece about this for my CIO memo about how to build the diversified crypto portfolio. And what I said was, using publicly available tools, it would be 60% Bitcoin, 30% ETH, and 10% crypto companies, because I do think there are opportunities in crypto that it's hard to capture in the token or crypto asset space. You can capture some of what's happening in stablecoins through Ethereum and Solana and Tron if you want to go there, but you can't capture all of it. Like, a lot of the value in stablecoins is going to accrue to companies like Circle, and you can capture some of what's happening in the Layer 2 space in Arbitrum, etc. But the fastest growing piece is Base, which is part of Coinbase. So I do think the sort of default starting position in crypto should be at least Bitcoin and ETH, maybe Bitcoin, ETH, Solana, and then crypto companies. We have a crypto equity ETF, BITQ, which I think is the best on the market. But there are a lot of crypto companies— you mentioned Circle, Kraken, uh, and others which aren't public yet. And so I do think there's some interesting ways to gain access to that. And I think that's pretty smart. I will add just one thing. The story that resonates better with institutional investors than almost anything is stablecoins. People love stablecoins. It's a US dollar bank account in every cell phone in the world. There are 8.2 billion people. That's a huge addressable market that could want dollars. I think people would love a way to invest in stablecoins. And there really aren't good public vehicles to do that right now.

Maybe you could walk us through— you mentioned the CIO memo. So 2 weeks ago you wrote this good piece about ETH ETPs and the path to a new all-time high. And I don't have it in front of me, but you said something along the lines of everyone wants to know what's going to happen to the price of ETH after these ETFs launch. I think your summary was we'll probably chop around for a little bit. There'll be demand into the ETFs. but also selling out of the Grayscale, uh, ETH products. Um, but by the end of the year, we'll be at— we'll, we'll hit above $5,000 and we'll hit, we'll hit a new all-time high. I don't want to put words in your mouth, but can you just walk us through your thesis for the price action for the rest of the year for— I think both Bitcoin and ETH would be interesting.

Yeah, let's start with ETH. You know, I think when these ETFs launch, it's great to talk about fundamentals, but what really matters is supply and demand. So in the short term, supply and demand determines the price. And so what I said about ETH was I didn't know what would happen in the first few weeks because I was concerned that a huge amount of money would flow out of the Grayscale Trust. A lot of those people in ETH-E are not long-term ETH investors. They're people who were simply arbitraging the discount, right? They're not systematically long. And so that money is going to come out. Also, people might sell it because it's gone up a lot and then have to pay taxes. So not all the money will come back in. And that's what we've seen. We saw $1.7 billion come out of that product in the first week, which is more than went into the new, uh, the new ETFs that were launched. That was about $1.1 billion, right? So in the short term, and I think that could continue for another week or two, you could even have outflows from the ecosystem, and that could be challenging to price, which I think is what happens. But in the long term, there's just so much demand for these ETFs. Right. I, I think I put out a note. I expect $15 billion of inflows in the first 18 months. I think that could be too cautious. I think we might be above that based on the fact that we pulled in a billion into the new ETFs in the first week. Um, and that's going to, all else equal, drive up the price. So the reason I thought we would chop around, or at least chop around up to the all-time highs, is you always have a series of investors who want to sell around the all-time highs. We saw that in Bitcoin. The price bumped its head against $72,000 a couple times. And so you have to exhaust those sellers and then you move higher. Um, but if we get, you know, $5 billion of ETF flows this year, we're going to push it up to all-time highs and exhaust the sellers there and then be above that. And I think the same thing is true in Bitcoin. I actually think we're probably pretty close to exhausting the sellers at Bitcoin's all-time high. And I think as we get closer to the election, we're going to push through that level. And then I think it's fairly clear sailing up to about $100K, where the next level of sort of opportunistic sellers probably wait.

Yeah, this might be a really dumb question. Is that a quantitative or qualitative thing that you look at? Like, is there a thing that you can look at on TradingView or whatever charts you look at where it says, ah, we're being oversold here, overbought? Or is this a qualitative feeling that you have that like people sell around all-time highs, you got to push past, clear sailing to $100K because it's this nice like numerical number.

Yeah, I think it's, I think it's just behavioral. Yeah, it's, um, it's qualitative, right? And you can look at his history, right? You— I'm not a chartist, but you can often see in assets bump against their all-time highs, and I think that aligns with behavioral tendencies, and it's indeed what we saw with Bitcoin, and I think we'll see it with ETH as well. Yeah, yeah.

Even it's funny, my— I feel like I've been bringing up my wife too much on Empire. So she's just funny because I think she is a good indicator of like retail, someone who doesn't pay attention to crypto and how they think about buying and selling crypto from a retail perspective. And when Bitcoin hit an all-time high, she's like, all right, Bitcoin's at an all-time high, let's sell. I was like, what? She's like, yeah, it's at an all-time high, let's sell. I was like, oh man, we were looking at this differently.

So yeah, yeah, yeah. But I think that's completely normal. I think that's normal. I mean, if I— if you woke up and Bitcoin was at $82,000, would you think it's going to $100K? Like, you probably would, right? But right now it's this— it's this overhang, you know. People are part of the market, so you— you can't overlook it.

Yeah, I also think we'll get a lot of selling. I agree. I think the other reason is at $100K, I think there's this idea when you talk to people who have been in crypto for a while, what's Bitcoin going to this cycle? They usually say $120K, $125K, $150K, somewhere between $120K and $150K. So the, quote, smart money who's been in crypto for a while, they say, I'm not going to wait until $120K because I didn't sell the top in 2017. I didn't sell the top in 2021. Let me take some chips off the table, like 80% of the all-time high of what I think it's going to go to. And if you do the math, that's around $100K as well.

So yeah, yeah, yeah. I wish, I wish there were more sort of quantitative hard facts here. But, but again, the market is made up by people and this is, this is what I've seen.

So what's it going to take for the institutions? You know, you've got the Larry Finks on CNBC and I did see the Goldman Who is it? David, David Solomon, I think, I think it was at the Olympics on CNBC said Bitcoin is, could be a good store of reserve or good reserve currency here. Or excuse me, a good store of value. What's it going to take to get these institutional allocators to just start buying Bitcoin and ETH?

Yeah, it's going to happen. And I think it's going to happen in the second half of this year. So there are two levels at which we should we should talk about it. Um, the first is the wirehouses. So, you know, if you think about the, the US wealth market, it's 20% self-directed retail investors, people managing their own portfolios. They can already buy these ETFs, and they're the big driver of, of, of assets. It's 40% wealth managers, so people managing money on behalf of individuals, and then 40% institutions like pensions, endowments, etc. In that wealth manager space most of the money is controlled by people who work for firms like Morgan Stanley, Wells Fargo, UBS, Merrill Lynch, etc. Big firms. And they can't yet buy these ETFs because they haven't gone through the due diligence process. That's happening right now, and I expect that that will unlock late Q3, early Q4. And when it does, all of a sudden you can have trillions of dollars of wealth managers moving into the space. Um, and so I suspect that will happen The, the pension side, the true endowment side, that's slower, but we're starting to see it, right? It used to be one name, now it's 3 or 4 or 5. I think there'll probably be something like 10 when we see the Q2, uh, holdings of Bitcoin. But that's more a 3 or 4 or 5 year story. Look, ETFs are multi-year stories. Uh, if you look at the gold ETFs, inflows rose 7 years in a row. The first year was big, the Second year was bigger. The third year was bigger. The fourth year was bigger. We're going to see the same thing in Bitcoin. So, you know, patience. I think they are coming, um, and when they do come, it, it'll be, you know, trillions of dollars.

I noticed you didn't mention one group, which are the— which are corporate treasuries. Um, this is honestly one narrative that I've always found to be a bit silly, is that companies are going to, you know, buy a bunch of Bitcoin, put it on their balance sheet, I just— maybe I'm mid-curving it too much. I just have never really got on board with that thesis. But what are— what are you seeing here? And am I wrong? Are these Fortune 500s going to come out and we're going to see it in the reports that they're— that they're buying Bitcoin?

I mean, I think it's a very similar— almost a similar question to central banks buying Bitcoin. It's not the core of what companies do, right? What companies do is they make products and sell them and create profits and then distribute dividends. Their treasury management is just a way to have cash to, you know, make payroll and to fund investments. So I agree with you, I don't think it's going to be mainstream. You'll see more companies doing it, but you don't see these companies, you know, holding stocks or having venture portfolios. Like, that's a very— it's somewhat atypical. You see some companies doing it, but it's atypical. I think it will be atypical with Bitcoin. At least until, you know, it's extremely mainstream. They don't hold gold, they don't hold silver. I'm not sure that they're all going to hold Bitcoin, but clearly some of them do, and they're being rewarded by the market for doing so.

Yeah. Big question on everyone's mind: what comes next? So we got Bitcoin, we got ETH. What are the next maybe 3 products that you think come into the market, and what do you think the timeline looks like?

Yeah, I mean, first I just want to emphasize it's continued unlocks of Bitcoin and ETH is the biggest story, right? Those are maybe 30% open to the market, and going from 30% to 100% is a much bigger deal than Solana or Litecoin or Dogecoin, etc.

Can you explain that? Actually, I actually— I didn't realize we're only 30% unlocked. So what?

Yeah, well, it gets to what I was speaking about, which is these major platforms that haven't yet approved these ETFs for sale, right? Um, they represent most of the wealth in this market. And institutions, while they don't have a formal, like, key switch— there'll be a day when Morgan Stanley approves Bitcoin ETFs, there won't be a day when all institutions do— but they're all running their due diligence process, and that process takes time. Takes 6 months, 12 months, 18 months, 24 months for any asset. And so yeah, I think most of the market is not yet turned on even to Bitcoin, much less to the Ethereum ETF. And that's going to happen over the next 6 to 12 months. And again, this isn't unique to crypto. This is, this is par for the course for ETFs. So I think that's by far the biggest story. Probably the next biggest story are variants of Bitcoin and ETH. I think you're going to see a lot of like momentum strategies and covered call strategies and other strategies wrapped around Bitcoin and ETH.

Hmm.

In terms of other assets, people have filed for Solana ETFs. I think if we get a regulatory reset in November, you'll start to see things like Solana ETFs become possible. Under the current regime, they're just not possible. But we could see a major change in the fall or in the spring of next year that makes those suddenly possible. And then we'll have a wide array of ETFs.

Do you— so obviously I think what you're referring to is if Trump gets elected and we get this, uh, more hands-off SEC or agency, um, you know, a lot of things can unlock. What about if Kamala gets elected?

Yeah, I mean, I think the, the right response is we don't know. She's talked about a reset towards crypto. I think, you know, maybe there are two paths that she could go down. She could go down the Elizabeth Warren path, which is sort of the, the SEC path we've been on, in which case anything beyond Bitcoin and ETH is very, very difficult, right? There are no regulated futures markets on Solana or any other assets. It's just very hard to imagine the ETF landscape expanding beyond Bitcoin and ETH. They'll still be there, um, and they'll even have a degree of regulatory capture in terms of investor mindshare because they'll be the only sort of approved assets. But it'd be very hard to go beyond that. But I think if she goes the other direction and creates a more sort of normalized policy towards crypto, then I think we will see those other assets unlock over time, right? That pathway is probably slower than the Republican pathway, which could just have a very, uh, different SEC mindset to what's allowed. The Democratic pathway probably requires legislation and slower change over time, but it will open up as well to Solana and to multiple other assets.

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Yeah, it's something that just, just rattling around in my mind for the last few days. I think my long-term takeaway is we need to sort of widen the Overton window of what's possible in crypto. One of the funny things about being sort of trying to be a rationalist in crypto is that it's the land of hype and hyperbole. For years, Bitcoin was either going to $0 or it was going to $1 million, depending on who you talk to. And I think some of us have sort of carved out a path. This is a disruptive asset with risks and opportunities. Uh, it's interesting and exciting, but those are extreme outcomes. Coming out of the Nashville conference and watching what's going on, even with the Harris campaign or with various senators or various representatives, I think you have to start widening the possibility that, you know, you really could be talking about Bitcoin being hundreds of thousands of dollars if we get a regulatory reset, let alone central banks buying Bitcoin. It's just such a— it's such a game changer. It's so far out of where we were even 2 years ago, right? 2 years ago, FTX was collapsing. Today, David Solomon from Goldman Sachs called Bitcoin a store of value. A few years ago, they were seizing Signature Bank, even though it wasn't insolvent. And today we're building a Bitcoin Fort Knox. I mean, it's just, it's hard to wrap your head around how much the conversation has shifted. And I think for investors, you have to widen out the right tail of what this asset could be. It's still not likely that it immediately goes significantly higher, but I think you have to accept that six-figure Bitcoin has a reasonable probability of being here sooner rather than later, given what's going on in DC.

If I had to ask you to put a time frame on that, sooner rather than later, what's, uh, what are you gonna say?

Look, I think Bitcoin could, could be north of $100,000 this year. Um, I think that's a very real problem.

I agree with that. That's, that's my mental model too right now, is yeah, we could be at six figures by the end of the year.

Be at 6 figures by the end of the year. And then depending on how things sort out, we could be significantly higher in 2025. Right. I do think you need to start modeling in a major regulatory and political reset towards crypto. The industry has been working for the last 4 years with both hands tied behind its back and like, you know, a parachute pulling backwards. And not only could those be released, but you could get a tailwind. And I don't think the market has realized just how significant that shift would be if it in fact occurs. And even if it doesn't occur, if we get just a normalization of crypto, I think, you know, I think we'll be, you know, heading towards 6-figure Bitcoin, uh, in relatively short order, um, based on what I'm seeing in the market right now.

Hmm. Okay. So the— let's, let's, let's play this out a little bit and think about it from a portfolio perspective. So the I think in your CIO memo you said the best portfolio for a maybe a more cautious institution who wants to get exposure to crypto is like 60% Bitcoin, 30% ETH, and 10%— what was it— publicly traded crypto companies, I think it was. So the Coinbases and miners of the world.

Yep.

What if you are not the cautious institution and you're inside of crypto and you're saying, Matt, you've got all these insights, and you're telling me that Bitcoin's going to go above $100K and you think it's going to hit an all-time high. Well, over the last couple of cycles, since crypto has existed, the long tail tends to have basically have higher beta than Bitcoin and ETH. And on the downside, that sucks. But on the upside, that's really, really cool and that's really, really fun. So how do you think about the portfolio, not for an institution, but for maybe a crypto-native person listening to this episode?

Yeah, well, look, I think you have to be anchored in Bitcoin and ETH, uh, because those are the, the two leading assets in the two leading use cases that exist in the market today. Um, and again, I think there's this possibility of a regulatory direction in DC that leaves with those assets in a really unique position that benefits them at the expense of other assets. So I, I think you want to be anchored in Bitcoin and ETH. But look, we're at the part of the cycle where altcoins tend to outperform. I think a high-quality, you know, 20%, 10%, 20% allocation to smaller assets I think could make sense. As you know, I'm a big index investor. Most of my money is in our index fund, which is the 10 largest assets. That's a pretty boring answer, but also I think a pretty good answer. But I would, I would at least want exposure to Solana, and I would pick and choose some smaller interesting products, projects to have a more complete portfolio. Right. You're otherwise you're missing, you're missing the growth of Layer 2s, you're missing the growth of DeFi. I think there's some exciting things out there.

Would you basically— do you think the best strategy for that is pick 5 areas that you like? Maybe it's AI crypto, L2s, DePIN, just buy the top 2 or 3 in all of those areas because you can't really pick a winner. Try to pick the top 2 to 4 and just get exposure to all of those.

Yeah, I love that strategy. We have a strategy called the Crypto Category Leaders, which defines the market into 7 different categories and holds the leading asset in each one. So the leading monetary asset, the leading layer 2, the leading smart contract platform, uh, and so on. I think that's a good strategy. I think you could expand it a little bit to hold maybe the top 2 assets and you would be in a great position because all of those will have their moment, right? DeFi will have another moment, and you're going to want to have some exposure. So just, just own all the categories, I think, is a good starting point.

Own it all. Just own it all. Uh, what was it like to ring the bell?

Uh, it's always great to ring the bell. I mean, the thing about, the thing about the bell ringing, which I really loved Uh, and I actually wasn't there. I was in Nashville for this one, although I've done it, done it in the past. Um, there's something, if you've seen it on Twitter, about the banner going up on the outside of the New York Stock Exchange. Yeah, you know, it was, it was for our ETF, but really it was for Ethereum. The idea of Ethereum raising its banner on the New York Stock Exchange, um, is both an incredible accomplishment. There's like an element of the Trojan horse being invited in Detroit that I really love about it. And, um, again, it's making me think just how far we've come, right, from just a few years ago where that was a crazy idea. It was a crazy idea. And yet there we were at the New York Stock Exchange with huge parts of the Ethereum ecosystem, right? People had been building in that space for 10 years on the floor of the exchange ringing the bell for Ethereum. That's a pretty magical moment.

That is magical. Yeah. So how does that come, come to be? They— is that a sales pitch to Bitwise? Are they saying, look, when you guys decide to go public one day, you should go public, you should go public on, on our stock exchange, not the other guy's stock exchange, and we'll do these cool things for you?

Yeah, that's part of, that's part of the competition between the exchanges, right? Which is not to say that NASDAQ is a lesser exchange or CBOE. But there is something iconic, I think, about listing crypto asset ETFs on the New York Stock Exchange. Yeah, on Wall Street, like the home of the Buttonwood Tree. It's, it's just, it's just so incredible. And if you haven't ever been there before, being on the floor of the exchange is sort of a magical experience. You do feel this history of American capitalism. And then if you're there for crypto, you feel where that capitalism is taking this, this industry, and it's, it's really pretty special.

Yeah, I had the feeling when I was there, I was like, we've, we've infiltrated. Like, yes, I can't, I can't believe they're letting us in here.

That's what I mean. That's, that's the Trojan horse thing. Yeah, like, like, uh, you're letting us ring the bell for Ethereum. Don't you, don't you understand what's going to happen?

Can't you see? Yeah.

So that's pretty great. I think that's great. I love it. Look, exchanges evolve, right? Started under— underneath the tree, um, a few, you know, not that long ago they were trading pieces of paper, then it moved upstairs to digital, and now they've invited Ethereum in. So maybe they know where it's going.

Yeah. Do you have any thoughts on if, um, these exchanges will trade 24/7?

I think eventually. I mean, it's such an anachronism. Right? Yeah, it's completely absurd. They, they just moved to settle trades in a day instead of 2 days. I know, it's so funny. There's a Bloomberg headline that said stock exchanges settle trades the fastest they have in 100 years, because 100 years ago they settled them in 1 day, and then we went backwards for 100 years. Um, just imagine, it's like, it's like cars, cars finally catch up with horses. Um, it's, it's a pretty, it's a pretty incredible moment. Yeah, but yeah, they'll trade 24/7, 365. That's the way the world works. We're totally digital and we're totally global. Um, and I think both of those things will switch. Yeah.

Can you take us into, um, like Bitwise's strategy conversations when you guys are talking about how you compete with the likes of Fidelity and BlackRock and these, you know, Invesco and these huge financial players that I don't think people can wrap their heads around how big their distribution really is, how many financial advisors they have pushing products. Um, but, but here we are and you guys, I mean, I don't, I haven't looked at the, I should have looked at the numbers going into this episode, but I mean, you guys came out at least for the ETH ETF ahead of folks like Fidelity. So how is that, how is that possible?

It's a great question. Thank you.

I mean, I think you have to think about, like, I do 7 of these podcasts. Us every day, right? Exactly, years in a row.

There's an element of that. No, I mean, look, uh, you have to understand how you, how you can't compete, right? We're not going to out-market BlackRock. We're not going to have a bigger sales team than BlackRock. We don't have as well-known brand as BlackRock. So you have to find where you can compete, and where we can compete is we can be the most crypto-native ETF issuer. We express that by doing things like donating 10% of the profits from each ETF to open-source developers in that ecosystem, by doing things like publishing our Ethereum custody addresses and tying them to ENS domain names. And, uh, we do it by writing and understanding this space better than other people. And it turns out that there are many investors who want to work with a specialist It sounds maybe surprising in crypto, but if you put it in other terms, of course it's true. Would you hire a stock manager to manage your bond portfolio or a commodity manager to manage your stock portfolio? Right. Of course not. Would you hire a venture capital firm to invest in private equity? No, you would want a specialist. You want a venture capital specialist, a private equity specialist. It turns out people want a crypto specialist. And there actually are like fundamental advantages to how we trade Bitcoin versus how some of these other people trade Bitcoin. There are fundamental safety procedures we put in place that are different from how other people, you know, work with trading and custody. And it turns out that people want this specialist asset manager. I think there's a place in the world for a large crypto asset manager that cares about the crypto ecosystem. And the hope is that Bitwise can fill that role.

Do you guys think that, um, you'll get into the financial advisory business one day?

I don't think so. I think we serve financial advisors. I think our lane, our lane is going to be, um, helping investors gain access to the opportunities in crypto at the lowest possible cost and the highest possible quality, right?

Yeah. Can you give us a sneak peek and, uh, what you guys are cooking up for the rest of the year?

Oh, we have some big announcements coming this year. I'm really excited about it. Let's see, what can I talk— what can I talk about? Look, look, I think you're going to see us innovate on within the Bitcoin and Ethereum space. I think you'll see that coming out from us. And more than anything, you'll see us continue to put our shoulder behind these ETFs. Again, they have multiple years to run. I say this fact all the time. We do 20,000 meetings a year with financial professionals to talk about crypto, and that means we got another 8,000 or so to go this year. So that's going to be a primary thing that you guys have done.

12,000 meetings with financial advisors this year, financial advisors and family offices and institutions.

Yeah.

Where do you keep track of that number? Do you have a big, like, board that just is ticking up?

You know, that's exactly right. Yeah. Salesforce, man. Look, we have an incredible team here, and that's what they do each and every day. They wake up. Up early in the morning and they start doing meetings. They're on the road. Uh, I think we did 52 events in the first half of the year, right? This is what it takes to, to, to introduce people to crypto, because it's not just one meeting and somebody buys. You need to meet with them multiple times over multiple months, uh, to help answer their questions, and then they eventually come into the market.

Do you think that you're competing more for dollars with crypto funds? So let's say the Electrics and Paradigms of the world, or, um, or like BlackRock and Invesco and Fidelity. Who's a bigger competitor for your capital?

Yeah, BlackRock, Invesco, and Fidelity. I think the money that is coming into Bitwise today is allocated to the S&P 500 or the NASDAQ 100, which is primarily tech stocks. And, uh, it's money coming out of that into us. People are still going to invest with Electric, right? People still want high-quality venture. We don't do venture, we do liquid tokens and, and publicly traded companies. Um, and so I think your people are going to do both. So we really consider our competitors to be BlackRock and Fidelity. That's who I think about.

Got it. Um, Anything I'm missing here, Matt? This is an interesting chat. Anything? I know you're coming to permissionless later this year. That'll be exciting.

Permissionless.

I just want to plug it. I don't have anything to ask you about it, but I just want to plug it. No, anything that we didn't, that we didn't cover that you wanted to, you want to talk about?

No, I think, I think the, I mean, the primary question on people's minds is one that you touched on earlier, which is why aren't prices already at all-time highs? There are all these systematic tailwinds. The Fed is moving to lower rates. Washington is embracing crypto. Billions of dollars are flowing into ETFs. Legislation is being passed on a bipartisan basis to support this industry. Why aren't we at all-time highs? I think those are good questions to ask. I think a lot of it has to do with uncertainty. Uh, there is still uncertainty around the election. Even if we think, you know, right now maybe it's a toss-up and maybe the Harris campaign is looking to reset their position on crypto, so maybe we win in whatever happens, there's still uncertainty and markets hate uncertainty. But I think as that uncertainty resolves, the setup for the second half of this year is better than any setup I've seen in crypto in the past, and I'm pretty excited about it.

Yeah, I, I've been full-time in crypto for 7 years and been, you know, around it for longer than that. I think this is the, the best and easiest setup that has— I've ever seen. Now, yes, watch Bitcoin fall 50% and I'll eat those words, but I am knocking on a bunch of wood for listeners here. But yeah, I don't know, it's, it's pretty interesting. It's exciting and it's interesting. One last question that was going on in our Slack channel the other day was if there's so much buying, like, what are the actual mechanics when I think you said a billion of flows into, into ETH or whatever the actual number is.

Yeah.

Does that mean there's— if ETH is not moving that much, does that mean there's a billion dollars of ETH that people are selling right now? And that's why the market— that's why the market's not moving.

Yeah, that is right. That is right. And so for the last week, a lot of that has been coming out of ETH. The Grayscale product. So that's people selling Bitcoin or ETH from there and Bitwise buying it on the other side of that spectrum. But again, ETH will run out and demand for these ETFs I don't think will. So there's an element of just, you know, patience. We will get there.

Can you explain to me why Grayscale is running the strategy that they're running?

I mean, you'll have to ask them. I will say that there's a, there's an old playbook from the ETF industry. You know, as you know, I was in ETFs for 15 years before I was in crypto. And the position that Grayscale finds itself in of having a high-fee product and then a low-fee market opening up is not new to crypto. That's existed in ETFs before. And Grayscale is running the classic playbook, which is you maintain the high fee on one product and you launch a lower fee product. Uh, there just isn't a great answer for someone facing this dilemma, and this is sort of the classical approach. So I know it seems odd to people who are watching it, but you have to put yourself in their shoes, um, and ask yourself, what would you do? And it's a, it's a challenging question.

Um, and so, well, why wouldn't they just bring fees down to compete with you guys?

Well, their idea is they're competing with us with their mini ETH Trust, which is priced competitively, and, um, you know, why wouldn't you slash your sponsorship fees by 90%, right? So it's sort of the same, it's the same idea, it's just a challenging thing to do. Um, and, uh, and, and, you know, I commend them for doing a good job of bringing us into this ETF era.

Yeah, yeah. Um, Matt, great chat, man. I appreciate it. Uh, I think, uh, the thing I love about Bitwise is the industry basically has a team of— how many salespeople do you guys have?

We have 20-plus people in the field.

We got 20 plus the exec team. We've got 20, 30 people out there every day just pitching 20,000 investors on behalf of the industry. So I commend you guys and I just— I appreciate every day what you guys do.

Yeah, well, thank you. Same to you.

Appreciate it. Be well, man. Thanks for watching today's episode. Just wanted to quickly mention that the wait for crypto's killer app wave is nearly over. Thanks to today's sponsor, Anoma, the universal intent machine. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at anoma.net. Thanks again to Anoma for sponsoring today's episode.