21Shares Exec on Future of Crypto ETFs

It's Monday, July 1st and this is Markets Daily Show where we get into the minds of some of the most experienced and smartest CEO S analysts, researchers, academics and anyone with a hot take on the crypto markets. Now, before we get into our discussion today, let's take a look at what's happening in the news this morning. As Bitcoin looks to recover from the July loss on chain data suggests that new challenges could be ahead suggesting a potential resistance level at $65,000 as a recording time, the largest Cryptocurrency by market cap was sitting at around $62,800. That's up over 2% on the day. And Japanese investment advisor meta plan that spent $1.2 million to buy more than 20.2 Bitcoin as part of its strategy to build up holdings. The investment is part of its strategy announced a week ago of buying another $6 million worth of the Cryptocurrency and 21 shares has filed an application for a Spot Sole ETF in the United States. This comes after Venne filed for the same product joining us now to provide more insight into what's going on in the crypto markets is 21 shares, Head of Us Business Federico Proc Federico. Welcome to the show. Thank you so much for having me, Jen's pleasure to be here. Of course. Now, as you know, on this show, we talk about crypto markets all day, every day. What are you watching this morning? What's standing up to you? Yeah. Well, there's a lot of activity in the space and, you know, I personally joined 21 shows about two weeks ago to come to the US business for the firm. Um for your viewers that perhaps need a little context. 21 shares is the world's first and largest issuer of crypto etps with a mission to make crypto investing accessible to everyone. Uh So I'm really excited to have joined the team and I'm really excited to, to learn from the people here uh and to continue integrating into the industry. Um You know, for me, it's been a fun two weeks and I've been really impressed with the culture they've built and the long term vision they have for the firm. So excited to help grow the US business. Well, Federico, congratulations on the new position. First of all, you're welcome. Now you come from another asset management firm. One that many of the, of the people in this industry have heard of this year. Black Rock talk to me about making the decision to move from Blackrock to 21 shares especially this year when we had the approval of the spot Bitcoin ETF. Um A lot of market watchers think that Black Rock was really the driver behind the approval there. Talk to me about making the switch. Yeah, so that's a great question. Uh You know, I've been a longtime admirer of 21 shares. They were one of the first to launch for the Spot Bitcoin products in the USA few years back. Um And I would say that I've always had my eye on them because there's several things that differentiate them from other issuers in the digital asset space. Um One thing that's been apparent since I joined the firm is uh there's a very clear mission here to make crypto investing more accessible to everyone. Uh and to really be that bridge between traditional finance and decentralized finance. And so everything the firm does is in pursuit of that mission and joining a place like that has such a clear purpose is, is really refreshing. Um The second thing I'd say here is, you know, 21 shares is a fantastic track record. Uh That really speaks for themselves. Uh They launched the world's first physically backed crypto etp over six years ago and they manage over 50 products a day with diverse strategies all around the world. And so it's great to learn from, from an industry expert and an industry leader. Um And the last thing I'd say is, you know, 21 shares is a strong focus on research technology. And so being able to join a firm that has produced some of the most comprehensive digital asset research is really fantastic and it's a great resource for us. Uh And the firm also provides a fantastic tech offering for companies that are looking to access and manage their own digital assets. And so I think the combination of these things has really positioned 21 shifts to be one of the strongest players. When it comes to merging traditional finance with crypto, you talk about that bridge between traditional finance and crypto, just given your background. I'm curious to hear your thoughts on this. What are some of the challenges that still exist um when building that bridge because that bridge hasn't been built yet? Yeah, that's a great question. You know, uh I think the ETS have made a big step forward in bridging the gap between traditional finance and crypto. Uh I think over the next year, what we're going to continue to see is a further adoption of the vehicle by different types of investors. And so, uh so far, we've seen a lot of appetite on our side when client conversations from both institutional investors all the way through retail investors. And so uh what we're hoping happens is continued adoption of the ETF continues to bring the two universes a bit closer together. Well, we, of course, we have the Bitcoin ETF, we're hoping to see some Spot E ETF S trading this summer. And like I said, at the beginning of the show, 21 shares recently filed for a Spot Soul ETF application in the United States. Now, I know that as um an applicant, you can't talk about the application directly. But what does this tell you as someone who comes from, from the trad I side of things, the fact that we have a Spot Soul ETF application from not only one shares but Van Neck. What does that tell you about where crypto ETF S are going for the rest of 2024 and beyond? Well, the first thing it tells me is that digital as ETF S are here to stay and that the digital asset ecosystem is going to be uh or will have a place in portfolios moving forward. Um Like you mentioned, I can't say too much about the filings, but we're really excited to be able to bring some of these strategies that we've managed in European markets already. Uh We have a sole ETF in Europe. We've had an E ETF for some time as well in Europe. And so for us, it's being able to bring this expertise to the US market is really exciting and the momentum that we're seeing in adoption demand for some of these strategies is also quite encouraging. Well, this application is kind of unprecedented. I'm gonna reference James Seifert. He's an ETF analyst at Bloomberg. He said that based on years of prior approvals and denial orders for crypto ETF, Aslani ETF should be denied because there is no federally regulated futures market. But a new admin in the White House and New sec admin could change that. Um Broadly speaking again, I know you can't speak about yours. But like, do you think these applications and applications like this is maybe a bet on uh a Trump or Republican win in November? So before I answer that, you know, I will start by saying 21 is a Swiss based organization. We're founded in Zurich and we typically are not in the business of picking political candidates or, or placing hopes there. I think this political conversation around the digital asset space is a fantastic tailwind for the industry. All the attention that we can get from regulators and our client base is fantastic. And I think we will only continue to propose forward that said, you know, these filings will all have their own process and they will all have their own review cycle and, and we will have to put forward a notification for a while. They should be in an ETF and, and that will happen at some point in time. Um I think what I take away is all the excitement that's coming around. Uh some of these approvals and some of these uh new launches that could come to market at some point. Uh And whether that's with the left wing uh administration or with a right wing one. I think that this trend will far exceed anything that we see in November. Now we talked about 21 shares building the bridge between Trad PFI and D Phi. Talk to me about what that future looks like for you. I know we've spoken about three different types of crypto ETF s but what does that look like? Tell me a little bit more about that. Yeah, look, I think it means that a lot more people will be holding uh digital tfs in their portfolios uh and to varying degrees and I think everyone needs to grapple with what the right amount of that is going to be. Um But it's going to be an evolution and it's going to be a sliding scale. And ultimately what we want is for people to be able to benefit from all the innovation coming from the digital asset space. And so we hope that the ETF is the right vehicle to do that. Uh And we have strong confidence there, you know, education has been one of the big challenges we've seen many of the asset managers approach that challenge in different ways. How are you thinking about educating folks? So that future that you just told me about um is one that comes to fruition and, and people understand what they're getting involved in. Yeah, I mean, it really all comes back to our foundation of research, right? We're, we're a very research driven organization. And so what we aspire to do is be able to share that with our clients and with the, with the public and with the broader industry. Uh and hopefully use that as a way to continue growing adoption, growing interest in the space uh and making sure that people understand what it is exactly that buying and what purpose it has in their portfolios. Now, let's take, let's talk a little bit more about the markets. At the beginning of the show, I mentioned that the markets have experienced a little bit of a lackluster Q two. We also mentioned some analysts, so we think that there could be some more pain coming in Q three as the rest of the year unfolds. What are you watching for? Look, I tend to focus on long term adoption trends, right? Uh I'm not super fixated on day to day price movements by any one of our, of our products. Um What I focus on is are more people interested in the products that we're distributing and how does that overall interact with the, the general price of the underlying asset? Uh And so we view the ETF business as a long term business. Uh The majority of our clients are buy and hold investors. And so what we're trying to do is create products that they can use and they trust to be in their portfolios. Um and then ultimately will produce the performance that they want over the long term as continued adoption uh grows, you mentioned 21 shares of a Swiss based company. You are, of course focusing on the US business. I've asked you a little bit about challenges. Um And I think if we look at the industry more broadly outside of the United States, some folks in different jurisdictions, different regions are a little bit more comfortable with, with crypto for a variety of different reasons. What needs to happen here in the, in the United States, do you think? Yeah, I think what we've seen in some other markets, especially in Europe is some uh action taken by regulators to uh make it a little bit clearer for issuers and for different market participants. I think that's a process there in a journey that we're on in the US. Ultimately, uh we will see how things shake out and how similar it is to European regulation. But uh to your point, yes, there are some markets that are more comfortable and are perhaps a little bit more advanced from the regulatory side that said we're seeing tons of client demand across the world. Uh And we're really excited about the interest that there is in the US market in particular, uh as evidenced by the fantastic launch that were the Bitcoin ETF Suite earlier this year. What kind of questions are clients asking? Yeah, a lot of clients are asking. Look, Ethereum is what is a product that is less understood by, by the masses. And so understanding what Ethereum can do, what benefits it can have to. Our portfolio are a little bit. Uh I would say behind where we were with the Bitcoin adoption cycle. Uh Obviously Bitcoin being the flagship products for the digital asset ecosystem. And so, uh what I would say is there's a lot of education going on around how it fits in a portfolio, how it complements a Bitcoin allocation uh and what percentages should be, should be considered for investing in these products. Now, I I don't know if you're gonna have an answer off the top of your head. But for our audience listening, if they wanted to understand how a product, like let's say the E ETF would fit into a portfolio, how would you, what would you say to that? Look all the analysis we've seen demonstrates that it's able to any allocation to the theory and pushes out the efficient frontier. Uh And so the answer is much more of a personal answer that I think investors need to need to explore. It's more what percentage makes sense for them and and it might not be a one size fits all. But what is proven is that it has an uncorrelated return uh profile. And so including it in a portfolio to varying degrees is going to be helpful for a lot of people. I want to come back to the education piece. So I keep sticking on this. We have Bitcoin uh ETF E ETF we potentially have a sole ETF next year if that gets approved, what is the education cycle look like? These products aren't? I mean, ETF S are, I guess a little easier to understand than the actual underlying assets, but they're also different, they all have such different uh benefits and, and use cases if an investor came to you and said, you know, how, how do I keep up to date? How do I educate myself so that I'm making the right choices for my portfolio? What kind of advice would you give them? Well, first, I, I would sympathize because this is the journey that I think we're all on to some degree. Um There's a lot of change within these networks on their in and of themselves. And so it's, it's a constant education process. It's not so much of a one size fits all or a one time and done. Um So what I would I would say is like, look, there's a lot of resources available and I think 21 shares produce is some of the best in the industry. Uh We have a monthly uh markets view release that we do every month and this month happened to be around Ethereum. Uh And so what I would encourage people to do is leverage the resources that we provide for free on our website. Uh leverage some of the thought leadership that we come to market with and these resources are made to make sure that our clients feel up to date on what's going on, make sure that they understand the products. Uh And that, that content education process uh continues to work. Federico. What makes you so excited about crypto coming from trad, what was the turning point for you? What made you get interested in it? Um And in turn pivot your career, look, I think there's a lot of excitement in the space and a lot of the transformative power of the Blockchain technology is really exciting for me. Um I think being at a firm like 21 shares that understands the underlying technology and the impact it can have on different businesses is really uh what attracted me to the space. And so I'm excited to help use an A TF vehicle to evangelize some access to, to crypto investing and to help spread some of that uh uh benefit across different uh clients that we can have. Uh But ultimately, I do believe in the ETF as the best vehicle for most people to invest in. And so uh this merging of an innovative space like is a Blockchain and Cryptocurrency world with ET I think is a fantastic medium to be in was the ETF the first thing that like got you interested into crypto. Uh No, you know, like everyone else I think that you probably have on your show. Uh I personally was very interested in the space for a long time. Um Obviously through my past professional experience, uh that was, uh, that was something that kick started it and definitely made me more interested in potentially pursuing a full time career in it. Um But no, there's been a long time interest here from my side. You're not telling me what it was. Was it Bitcoin? Was it NFTS? What was it? That was, that was a Bitcoin on coin, coin base in college person. Uh, so that was, uh, that was what originally hooked me. Federico. Thank you so much for joining the show. It was a pleasure having you on. Thank you so much. It's a pleasure.