Transcription
For the institutions that didn't allocate in 2024 or 2025, they're licking their chops. Crypto retail entered full bare market. They hit its lowest level ever. It's at five. If you want to think about an asymmetric opportunity, put five on a scale of 1 to 100. It's way over here. The average Bitwise client takes eight meetings before they allocate. We're about 2 years into the ETF boom. So, they're like just now getting ready to allocate. It just moves not at a Twitter pace. It moves at a institutional pace. Eventually, Bitcoin ETFs, I think, will at some point have a trillion dollars of assets in them. They're not going to go down from here. Institutions love tokenization and stable coins. We've talked about that before. They assume it's fatal conflict. Black Rockck's on unis swap. All their ETFs are tokenized. It's hard not to be bullish when you think about that world. These are attractive on a 10-year time horizon.
That's dope. Let's do you and I talk like once a week it feels like. So, you know, we got to find new topic. But the first thing I want to talk about is a tweet I saw from Hunter which said effectively to butcher his his words that you had a potential client I guess you've been talking to for two years. They decide to allocate I think it was $11 million and the the conclusion was that institutions are more excited than ever now and they see this dip as an opportunity not a problem.
That's absolutely true for the institutions that didn't allocate in 2024 or 2025. They're licking their chops. I know in in in Twitterland were worried about this volatility. They're not surprised that crypto is volatile. Like wow, crypto is volatile, right? They've been waiting for an entry point. They take their time. We had net inflows last week uh when the market was down sharply. I think institutions are the marginal buyer. I think they're going to continue to come into the market.
Do an institution like that, were they just waiting for the risk manager to finally give them the green light or were they literally watching a chart and said 60 seems like my moment?
No, they're they're they're better lucky than good. You and I have talked about this before. The average Bitwise client takes eight meetings before they allocate, which is brutal. Um but they meet quarterly. We're about two years into the ETF boom. So, they're like just now getting ready to allocate. It's actually just completely normal. It's the passage of time. Lucky them. They're buying at 60 and not 120. But I think it really is that amount. They're just they wanted to allocate to this space. They finished their due diligence. They're ready to go and they happen to have a great entry point.
But these people have social media just like we do, right? So they probably open X or do a search and they see the stories about the brutal bare market and massive outflows from institutions which we could talk about. You're seeing inflows and there's actually uh outflows I I guess writ large. How do they stay convicted when they haven't even touched the asset yet?
Well, I think they also look at that fouryear cycle. We're in the negative part of the four-year cycle, but guess what the next three years look like in that chart, right? They are looking ahead. These people are making allocations for the next five or 10 years. I think even if you talk to the most bearish, desparing person on crypto Twitter and you ask them where Bitcoin will be in 10 years, they're going to be pretty bullish. I think that's the timeline that these people are moving on. So yeah, again, they're not shocked that crypto is volatile. They know this is part of the thing and uh they're they're excited to take advantage.
So how do these people allocate? Say this one for example. I I know you can't speak specifically about them, but the $11 million they put in.
Is that the $11 million that they're putting in? Let's just generally or is this the uh first tenth of a position that they're building?
Yeah. So, so it's actually a great question. Usually, this is a financial adviser who might have a 100 clients and typically what they do is they take their first 10 clients who have been asking them relentlessly about crypto for the last 10 years and they allocate on their behalf. The big gain comes when they go from 10 to 100 and that's typically a second phase. I don't know in the case of this one group if it was they decide to do it across all their accounts but most of the adviserss who buy Bitcoin do so for a handful of clients that have been talking to them about Bitcoin and then over time they broaden out to the wider community. But it's interesting because there was a long time sort of at the beginning of this institutional adoption when they were allowed to take incoming but weren't allowed to pitch their clients. Right. That that's open now. Correct.
It's just open as of Q4 at least for the major wires. Yeah. Yeah. We call it whether it's solicited or unsolicited. Uh it was in the unsolicited camp meaning they couldn't proactively talk about it. Now three out of the four major warehouses can proactively talk about it with clients. the fourth one will come on board soon.
So they using those 10 customers as basically their uh test case their crash test dummies so to speak before they start to actually recommend it.
Actually usually they start with themselves. So what we see as a pattern is the adviser themsel allocates they hold it for about a year and then they allocate on behalf of those 10 clients and then they expand it out and then they go from 1 to 2 and a half to 5%. Um, people are skeptical of this story, but I think if you ask yourself individually, like, Scott, what was the first time you bought Bitcoin? Have you bought Bitcoin since then? Of course, everyone has bought Bitcoin since then. And the same thing will be true for this community. really really interesting because what that says to me is if there's some that you're just getting traction from now could be a year for them to actually experience it themselves before that next 10 before the hundred which puts us on basically a just rising demand seemingly indefinitely.
It is a series of sequential waves and then there are other people who are moving slower right university endowments may meet with us once every six months or once every year. insurance companies may meet with us once every six months or once every year. So there are this it's not one institutional community, it's like 10 and they're all moving on the same path just at different rates. It is a rising series of purchases. Look, you know, eventually Bitcoin ETFs I think will at some point have a trillion dollars of assets in them. Um they're not going to go down from here. It just takes time.
So do they call you or do you call them?
Oh, we call them. Look, they reach out to us sometimes because they see us here. They read our memos, but we have a 25 person sales team. Uh they're out there visiting people in the territory. They show up in bull markets or bare markets. And honestly, that's how you build trust is you show up right now when the market is down. You explain why it's down and you give a a view on how it could recover. That's what they want to hear.
So from your perspective, what do you view as actually you you kind of said they're different, right? It's not all a monolith. uh institutions or how do you sort of bucket them?
Sure. Yeah. So, RAAS which are independent financial advisors, they're not tethered to a big corporation. Those are the first people to buy. They're already allocating in size. Something like 30 40% I think are thinking about or buying big.
Is that because they think for themselves?
They think for themsel. Yeah.
They don't have Schwab saying sell my product.
Usually they left. Exactly. Usually they left a large company where they got their business started to go independent because they wanted to make independent decisions. So those are the the pointy tip of the spear. The next is people who work at wirehouses at Morgan Stanley, Wells Fargo. They need the wirehouse to bless them and then they can start learning. That process just started last quarter, right? You also have family offices which are quasi independent and they're moving pretty quickly. And then above that you have true institutions. You have insurance companies, pensions, endowments, foundations, sovereign wealth funds, uh central banks. sort of in that order that I spoke, they'll move progressively slower, but we're going to get all the way down the stack. This is exactly what happened with ETFs. It's exactly what happened with every asset. It starts one place and it expands throughout the whole stack.
Are there still at at that level? Uh obviously, we've seen most of the big warehouses come online. Are there any holdouts that we're not talking about? Vanguard was obviously the big one and then there was announcement that Vanguard was going to allow it, but it seemed sort of vague.
Yeah.
It seems like call me maybe.
Yeah. Yeah, that's exactly right. That's exactly right.
I don't know where they where they stand on that.
Look, there probably a hundred of these firms that matter. Probably 50 of them are fully open. Uh 30 of them are conditionally open where you can do it on an unsolicited basis. 20 of them are still totally closed. So, yeah, there's still some some holdouts. They're not maybe as family names as Vanguard is. But again, all of this will change over time. And it's actually not normal. We in crypto are mad that it took the wirehouses two years.
They're fast. This is fast.
This is fast compared to how they move on everything else. It's just we're used to moving on a faster time. But make no mistake, it's just going to happen. These are just financial exposures. People want them. The the doors will open. They'll learn about them over time. It's just moves not at a Twitter pace. It moves at a institutional pace. So, when we were talking, it's got to be now a year ago or or more, we would constantly say, "What percentage of people who want access to Bitcoin still can't get it?"
Yeah.
Are are those people still out there?
No, no, no. I think those people are still out there. I think it may be 20% of uh wealth managers. It's still closed. Yeah. We're not 100% done. Um the door swings open slowly. It's swinging. The more conservative firms, we'll get there. You saw Vanguard break a little bit. They're firms that are more conservative than Vanguard and for sure the market volatility will slow that process down. So maybe it's 20 25% are still closed, but we'll we'll get it open.
Okay, there's a question I don't think I've ever asked you before. When you walk into a meeting, obviously they're probably meeting with Bitwise and maybe others.
Yeah, maybe.
Is that fair to say? I don't know. Maybe you're pitch.
No, I not in my mind.
Um what's the pitch for Bitwise specifically?
Yeah. So, mostly uh it's you don't have to sell against other people. Mostly it's a rising tide. If they're there and they like you and they trust you, then they will go with you. Um really the pitch is we're built to serve the advisor community. So, there's no other crypto asset manager I know that has 25 full-time salespeople that will show up in their office that has a team of researchers that will answer any question that gets asked in 24 hours. We're sort of built to serve this advisor community. other people are built to serve different communities. Just how we're architected, that usually wins. I could say we're 25% cheaper than Black Rockck. I definitely say that. I could say that we donate to Bitcoin core developers. I definitely say that. But in the end, these advisers want someone they can call and that's sort of what Bitwise built its business to do.
right? because initially I I remember us talking about the fact that part of the pitch was being cryptonative and as you said, you know, uh giving money to Bitcoin, core and all those things, but I would imagine that as time passes and as the net is cast wider, the people you're talking to don't even know what that means.
They mostly don't even
No, that's exactly right. They just they just want someone to trust and you can imagine them making two different decisions. Look, I love Black Rockck. You can imagine them trusting Black Rockck, biggest name in in asset management, incredible company. You can imagine them wanting to get any question they ask answered in 24 hours from experts in crypto. That's Bitwise, right? Those are just both good choices. And you know, look, Black Rockck's done very well. Our assets are up 15x since they joined the market. It's a rising tide. I'm happy about it.
But Black Rockck doesn't have 25 people out there with uh charts and data pitching exclusively focused on crypto. I I don't think so. May maybe they do, but that's all we do 247 365. We do it in bull market markets or bare markets. We're not going them to pitch them on AI or pitch them on bonds. It's crypto only. We live and breathe it. We've done it for eight years. That has value for people. In any area of asset management, there's a specialist that wins a large share of the market. Right? If you want to do private equity, you're probably talking to Blackstone or KKR because specialists matter. And Bitwise is that specialist. That's sort of our calling card.
How much easier is the pitch when prices are going up than going down?
Ah. It's it's it's a little bit easier. It's a little bit easier. But again, if you're starting at zero, these prices are really attractive. I I think I've been surprised in previous bare markets in FTX, the bare market felt existential. People were worried that Bitcoin was go to zero, that we were dead or the industry would be gone in the United States.
In 2018, 2019, there was so much despair that there were those questions as well. And look, post FDX that was actually reasonable, right? the infrastructure was collapsing and the regulator hated you. It was a nonzero chance that it was just going to be a long long winter. This winter doesn't feel like that, right? Most people look at this as an attractive entry point. They don't see death and despair. They see the world getting more digital. They see rising concern about fiat currency. They see a four-year cycle that would naturally mean we have a pullback. And they think that's an attractive entry point. So, I I actually think it's a better bare market than 2022.
It just worries me. Do we need to all be uh giving up and in the depths of despair to put the bottom in?
Well, I will say, do I have to get depressed to not want to buy?
Or because I'm euphoric buying at these prices.
Well, there look at the fear and greed index. I do think crypto retail entered full bare market, right? It hit its lowest level ever. It's at five. Yeah. If you want to think about an asymmetric opportunity, like put five on a scale of one to 100. It's way over here. So, I I do think there is that level of despair. It's just only in crypto retail people who haven't bought yet. It's attractive. It's exciting.
Yeah. I was talking to Tilman Holloway earlier and he made a great point. He said it it's depression for anybody who doesn't have cash and it's euphoria for anybody who does. Which is a interesting way to frame it because if if you've wanted to buy I think it's fair to say that you'd rather buy $65,000 Bitcoin or 75 or 50 than 150.
That is that is absolutely right. And look, a real thing that's true about Bitcoin is that if you think it's worth a dollar, it's really easy to imagine it's worth a million dollars. It's hard to it's it's harder to argue the zero to one than it is one to a million. I think the world has accepted that it's it's worth something. So, I think the people are licking their chops at the ability to buy it uh at these levels. Doesn't mean we go straight back up. Bottoming is a process. Um but yeah, I like that framing. If you have cash, it's closer to euphoria. These are these are attractive on a 10-year time horizon.
Okay. So, we talked a lot about Bitcoin, but obviously there's a number of other products. How is the narrative or I would say the the bare market or winter affected the narrative for ETH Salana and the others that you're >> launching have launched or are or looking to launch?
Look, it's really interesting right now actually. I haven't talked about this much, but uh institutions love tokenization and stable coins. You guys, we've talked about that before. They assume it's fatac fleet, right? So that market is going to be many trillions of dollars. The questions now are valuation focused. Is Salana at $50 billion overvalued or undervalued versus the opportunity. Is Ethereum at its current price over or undervalued? So it it's it's a really interesting dynamic. Institutions assume everything will be tokenized and effectively assume everything will move over stable coins. They're max bullish. It's just are the valuations right? And I think that's actually a great question for crypto to answer.
Okay. So, I've been actually thinking about that quite a lot. I think it's exceptionally positive that we get to a place where we fundamentally value things based on utility and usage like any other market. But if we're being honest, that also means that if they were previously valued or priced by speculation, could that actual floor price be much lower before they're able to capture upside?
Yeah.
Are they wildly overpriced because it was only speculators that bought them in the first place? I don't have a conclusion on that, by the way.
I think that's the biggest question in crypto. When you boil down all the bare market question, I think that's the question that mattered. Look, Bitcoin, it's easy to argue, right? store value $30 trillion market it's going to a million very easy on these other assets I think this valuation question is the number one question to ask when we do the math we end up bullish but not 100x bullish I think that is the reality look some of these are real businesses like chain link is a real business salana has real GDP and real revenue but the targets you end up with again are are are attractive But it's not like it's not a 100x.
Not what it's not what people uh showed up for in 2017 and 2018.
No, it's a more mature market, but that's that's the market we're in. Look, I still think it's probably more attractive than parts of the AI space, which where valuations have really soared. Uh but we're going to get into like this odd part of being a valueoriented crypto investor. I think that's going to be one of the themes coming out of the market.
Jordy Vistor said the exact same thing yesterday.
There you go. I think it's real.
Uh it is real. So having the conversations then we know that you have people finally allocating to Bitcoin although I'm not sure Hunter's tweet specifically said it was a Bitcoin. I think I just in this market I just assume it.
Are you still having as many conversations about Ethereum and Salana the early Bitcoin ETF buyers are they now still you know saying maybe it's time for me to take the next step or is it kind of how retail is is that there's the shine off of all coins and still more of a focus.
So yeah, it's an interesting question. So conversations are 5050 Bitcoin and stable coins and tokenization. So it's it's not Bitcoin and Ethereum and Salana. It's Bitcoin and stable coins and tokenization. And then there's the secondary question of how you play stable coins and tokenization. What we see there is people just don't know which I think is fair
Us. That's right.
Us being me. I can't
Oh, me too. I don't know where the value going to acrewue. And so what I think we're going to see is them just buy companies that are building on that space and a suite of crypto assets that are building on this space. I don't think people will try to pinpoint one or the other. I think they're going to sort of take a diversified approach to that.
Sounds ripe for an index fund.
It does sound right for an index fund. I agree with that. But look, I think that's the right approach, right? I I don't know where value is going to acrue. Is it going to acrue to USDC or Coinbase or Robin Hood or uh or Ethereum or Tron or Salana on stable coin growth? You tell me. I think the jury is still out, right?
But are stable coins going to be bigger in 10 years than they are today? I think Yeah.
Yeah. This has been where I get stuck uh thinking about it every single time because like I know stable coins are going to be huge, but I don't know if Circle is priced correctly.
I think it's hard to sell. It's
because if interest rates come down massively, the revenue for stable coins drops dramatically. It happen to be publicly traded. So, you know, I Tether obviously will just do whatever Tether does. They only have 100 people. It doesn't matter. But if you're publicly traded stable coin, it's a great business, but is it a great business for a shareholder? Maybe, maybe not. I don't
I think it's the greatest question. Look, stable coins are going to create an enormous amount of value in the world, right? They're an enormous valuable technological innovation. They move faster. They move 24/7. They're available globally. They can lower the cost of payments. A huge amount of value is going to be created. The question of where that value occurs, I think, is a great question. And my view as an investor is just buy everything that's associated with it because you'll benefit no matter what happens. But this was true in the early days of the internet, right? Was it infrastructure plays? Was it apps? Was it the large caps? Was it the small caps? The right answer there was to sort of buy everything and be kind of right. I think that's probably the right answer here.
I mean, we saw what happened to Ethereum when I mean, Circle effectively went public and then Tom Lee, Tom Le, right? But he went on TV and he said stable coins are the next big thing. Ethereum is what you need to buy if you want exposure to stable coins.
Yeah.
Right. And I think anyone in the industry was like, I think stable coins are kind of going to be everywhere and commoditized and maybe it's not just Ethereum, but the narrative or the thought of that for investors set Ethereum on fire.
I agree with that for a while.
Well, yeah. Well, narrative matters. Narrative matters. And these are again, you have to think of this as like a series A startup. What are you looking for in a series A startup? You're actually not looking for high revenue. You're looking for growth of use and growth of revenue. That matters more. I'd rather have a fast growing thing than something that has a lot of revenue but is growing slowly. I think that's the right mental framework. But narrative will drive a lot of it. If people assume Ethereum is the play, Ethereum will do well for a while. Ultimately, it will peel back to this value though. When you think about uh everything being tokenized, do you think that it will largely happen on existing blockchains or you think we're just going to be hearing about JP Morgan coin and Black Rockckcoin?
It's a big battle. It's a big battle. You can see right now the sort of mechanics of Wall Street trying to capture that within its own blockchains and its own isolated areas. My bet is on open source. My bet is on global and diversified. But again, I think that's an uncertain bet. If you look at the history of technology, usually open and global wins, but not always. Sometimes the captive network dominates, sometimes there's regulatory capture. I think uh I think I think we'll find out, but I I actually couldn't tell you which side of the ledger. My bet again, Ethereum Solana will be the backbone. That's actually my bet, but we I think you can't be certain about it. Interestingly as well, I think we had this period where there was a fear in the early days that there wouldn't be enough block space for the billions of online and then we got so much block space and so many blockchains and now we're trying to scramble to to fill it. But
with that everything tokenized future, it feels like the pie might be big enough that everybody wins in some way, shape, or form. It might not be as black and white as I presented it.
I totally agree. I look, it's a classic infrastructure buildout. What always happens? There's always a shortage and then there is always a glut and then it always fills up in the end. That's what happened with internet bandwidth. That's what's happening with AI chips. There'll be a glut of AI capacity at some point for sure and then AI will eventually suck it up. The interesting thing about crypto, we don't talk about that much, but you're right. If we were bandwidth constrained, now we have way too much bandwidth and eventually we'll fill it up with the $300 trillion of tokenized assets that are moving on chain. I think the big winners are likely to be the leaders right now. I think it's likely to be Ethereum. It's likely to be Salana, but you can't discount some of the more interesting new ideas, right? You would can't discount what Canton is building.
Well, that's that one's the one that blew my mind.
Absolutely. And they're doing real revenue and they have real partnerships. They're very wellrun. You need exposure to that. You can't discount layer zero launching, right? You It's It's early, right? It's early. In any technological boom when it's early, you can't be certain the leaders will ultimately win.
Yeah. When the DTCC made that announcement and Kent Network's coin didn't move, it's like, you know, we're in a bare market, but then it moved. It did.
It did. So, it took a couple weeks for I think that to like register. I don't know if that's what did it, but it did finally move, which gave me some hope.
Yeah. Well, that that is the bare market where good news is stored as potential energy, but not recognized immediately. And you're seeing that as well. I mean, every day. every day. I think unis swap didn't move enough on the black rockck news. Um I think the I think that is you know that is the pure sign that we're in a bare market but there are these fundamental good things that are happening and yeah Canton is a good example.
Do you think that the chains will effect effectively become like specialized you know like the chain for this chain for that or that certain kinds of uh institutions will adopt different ones?
I actually just don't know. I don't know. I think there's a good case for that to be made. Um but I think it's just an uncertain future. I keep coming. I know I keep shilling my index based background.
No, no, but I think I I agree. That's the approach. It's why I made the joke.
That exactly right. The thing you're confident in or I'm confident in is tokenization, right? Will be hundreds of trillions of dollars. Will it be specialized chains? Will it be a few chains? Will it be geographically located? Will privacy play a role here? How easy will be to move across chains? I think all of that is uncertain at this point.
Well, in the last cycle and even before, people would ask me what's the best way to invest in crypto, right? they see you on and and they want to know and my answer was always effectively the index approach but it was just buy the layer ones right
I said so I'm not going to catch the 100x metaverse coin or the 50x DeFi coin but if it's on Salana and I own Salana I might get a you know 25% bump or something
that's just the that's the native crypto mentality that leads to indexing
because now you can include publicly traded equities or
that's exactly right I think I think own the field look every investor probably 8020s Right. You need 20% that you're a DGEN and speculate on cuz we're humans and we all have views. I think you just need to bucket that as your 20% so it doesn't affect the 80% where we're just betting on crypto, Bitcoin, tokenization, stable coins for the long haul.
Yeah, Vitalik recently made some comments that sort of set the Ethereum world on fire again as he tends to where to summarize, we don't need layer twos anymore. It's all going to be on on the layer one. We're cheap, we're fast, and that's where we're going to focus.
Pretty uh big statement. What do you think?
Well, I I think it's like the Steve Jobs moment uh returning to Ethereum for Vitalik. I think it's going to make Ethereum one of the leaders out of the bare market. I think it gives it narrative juice. I think it's the right thing for the chain to do. Look, again, it's the same story. It really was constrained, right? Remember when transactions were spiking to $100 each?
You try to mint a $10 NFT, it cost $500.
It was stupid, right? It was stupid. And so they needed an emergency solution. The emergency solution was layer twos. They now don't need that.
What does that mean for layer 2 now though?
It means they're going to be ultra specialized and they're going to be more sovereign and yeah and and they'll try to maybe their market is smaller, but it is specialized. Um but that's just the nature of this market. And again, it really points to the unknowability at this early stage. But I do think it's going to make Ethereum one of the leaders. It needed a narrative push. Narratives contribute to leading you out of bare markets. it now has that like that Steve Jobs returning to Apple style uh idea and I think it's gonna I think it's going to be one of the leaders.
I didn't have the black rock on unis swap on my uh card. I mean, I mentioned it before but they're
the crazy thing. The even crazier thing to me was Martin Small, their CFO saying we're going to tokenize all of our ETFs in the next 3 to 12 months. And I know that sounds like a long time in crypto Twitter, but if you're at a big bank, 3 to 12 months means it's basically done, right? There is no chance it's not happening. Um, that's the world we're going to be in in 27. Black Rockck's on unis swap. All their ETFs are tokenized. Uh, I it's hard not to be bullish when you think about that world, but the market isn't paying attention to it.
I don't know why I'm not buying unis swap instead of talking to you.
Exactly.
Black Rockck literally had to buy unis swap for this to happen. Correct. Yes. Yeah. They they took a strategic stake in unis swap. This is probably just the first thing they're doing. They are not going to miss this train, right? BlackRock, remember, missed the last big financial innovation, which was ETFs. They had to buy their way in. They bought Eyesshares. They weren't a native ETF issuer. They're not missing this tokenization. DeFi. I think DeFi assets in general are probably undervalued. I think a is probably like I know the tokconomics is not perfect. I think those can be fixed.
I agree. But the usage uh and the growth I think it's you know it's like 10x 100x growth.
Yeah. Because the institutions are going to plug into them inevitably for yield.
Of course,
they're not going to build their own DeFi protocols when these work.
They don't need to.
And these worked through every collapse. It's like the the un untold stories of FTX and Celsius and Voyager and BlockFi was that
it was orderly in DeFi. Smart contracts worked, collateral was liquidated, people got their margin calls, the kept going.
Same thing. Yeah, I mean these systems are incredibly robust, right? Incredible uptime through massive volatility and yeah, institutions of institutional DeFi is going to be another one of the narratives that leads us out of this bare market. And I think people really underestimate the scale of it.
I needed my uh shot of Hogan bullishness today to get me going.
There you go.
I see it in the comments every time I have you on. They're like, "That makes me so bullish." And then they're like, "Mcloone."
That's how I feel, too. Every day that email comes in, I'm like, "Oh,
yeah. Yeah." But credit to him.
Oh, his Yeah, his email. Like, man, how do you come up with these headlines? They make me depressed every morning. It's good. I need that shot as well, though. I think
for sure. We all do.
Well, Matt, thank you, man. It's a pleasure.
Super fun. That's dope.