Nov 9, 2023

The SEC has started talks with Grayscale on the details of the company's application to convert its trust product GBTC to a spot bitcoin ETF, according to a CoinDesk source.

Video transcript

A little bit of a green day today. And you know that part of that is the SEC uh reports that the SEC has started talks with gray scale on details about the company's application to convert its trust product G BT C to a spot. Bitcoin ETF according to a coin desk source, got to note this grey scale and Coindesk both owned by DC G. So joining us now to discuss the uh this whole of uh uh potential uh discussion is CEO of institutional DFI asset management uh at D I Asset Management company. Hash Note Leo Mizuhara. Welcome back, Leo. Hi, good to be back again. How are you guys? Great, great to see you again. So, uh what does this mean overall for the crypto industry? Is it, is this really momentous sources? It's a typical discussions between an institution and a regulator. I think this G BT Z thing is pretty big. Um My guess is it's their attempt to equalize the playing field in that they want to approve all the ETF S at once, right? We've heard that story before in terms of uh with the number of ETF S that are currently getting approved, uh they want to try to not be the kingmaker, so approve as many of them at once as they can. And given that GP TC is also uh trying to convert their futures ETF into a spot. ETF I think this is just another hint toward timing on when we're going to get this uh approval of the ETF S if all of these ETF S are approved at the same time and there's no first move or advantage, could that potentially be not so great for gray scale? Given that Blackrock is also in the running largest asset manager in the world. Um What do you think it's probably no worse than if they don't get it right? Like they, they're better off having the ability to convert to an ETF than not. So I don't think um be converting with them along at the same time is any worse for them. Um If anything uh they, they want that flexibility and they want to be able to give their investors that choice of not having a negative carry in futures. So, Leo uh we see from Bloomberg, they expect a 90% chance of a launch in January by January uh for an ETF, a spot, Bitcoin ETF one or many. Uh what do you think of that timeline? And, and, and also what would deem it a success and a failure? What kind of criteria if we were to look at assets under management a month out a year out. Uh from when it's launched, we had these ETF S that launch that were futures based ETF S for Ethereum lackluster. Now we're, we're looking at a spot, Bitcoin ETF, what is the timeline and what would would mean? It's a success and what would mean it's a failure. Well, I, I think that seeing an increase in demand at all is really a success here. Um One thing I kind of fear is that with so many ETF S launching at once, the liquidity in any given ETF could be lower than we would like. Um that all said, I think there's a lot of evidence that there's a lot of pent up demand for this stuff. And uh I think I saw one article that was saying that there's a potential for another 6 billion in demand for Bitcoin assets once the ETF is launched, uh that would be approximately double the current market cap, which you know, is obviously huge. Uh We also have the happening coming up which is also gonna um increase the demand in the space or reduce supply. Um So I think these are all pretty positive things. I, I don't expect the V the the total A um of Bitcoin ETF S to like skyrocket as soon as they happen. Um I think it'll take maybe a year or two for all the big asset managers to really start moving their clients into this product. Um but I think it's inevitable that asset managers are going to move some percentage of their assets into Bitcoin in the same way that a lot of um a lot of asset managers hold a percentage of their wealth in things like gold and other diversifying assets. But nonetheless, uh what, where is this demand coming from? And, and, and you, you said that it would double the demand here is 6 billion. You said 600 billion, 600 billion would double the OK. So sorry, I thought you said 6 billion. I said, well what? OK, 600 billion. Um so double the market cap and so you come from, yeah, I think um if you think about the, the model portfolio, if you will, right? If you're a JP Morgan or Goldman Sachs, you're, you're looking at the model portfolio for what is your average investor gonna be holding? And your average investor right now is probably still holding less than 1% Bitcoin. And so I would not be, and I think the usual uh usual metric has something like close to 2 to 5% in something like gold. Um I wouldn't be surprised if Bitcoin started to take a similar uh type of position in the model portfolio uh as goal. So uh if you imagine something like 2 to 5% of people's holdings in Bitcoin, that's, that's quite a large piece and you're gonna see that across the board, right? All high net worth individuals. Uh, even now, now there's gonna be a retail ETF. Right. That's, that's even gonna be true for all retail as well. Like buy and holders will be something like call it 60% equities, 20% fixed income. And you've got another 20% to work with whether you're going into all pe uh VC or something like this. A Bitcoin ETF and maybe a little bit of gold. All right, Leo Bitcoin crossed over $37,000 just as we were starting the show. We spoke about a report recently on the show that is calling for Bitcoin to be over $50,000 by the end of the year and a little bit of a Santa rally. Where do you see Bitcoin headed next? Do you think it could break the $50,000 mark by the end of the year? I mean, it certainly can, right. This is a very volatile asset and uh we've, we've seen Bitcoin do incredible rallies before. Um I'm not that much of a price forecaster. Uh I think it will be difficult for us to dip below 34,000 ever again between now and now and the end of December. So, uh the risk is definitely to the upside in this product. And um you know, if we see a ETF approval, I think we'll easily see over 40 45,000, 50,000 is probably not crazy at all. I would give that maybe a 2525 to 30% chance. All right. And, uh, we saw a bit of an alt coin rally just some days ago XRP was involved in that soul link. Any alt coins you're watching, I'm certainly watching all of those. Like the Solana story is very compelling. It's quite an interesting rally. Um, a lot of people thought of Solana as kind of a dead chain after the whole FTX debacle. Uh But yeah, I know a bunch of those guys. Uh There are friends of mine who say they eat glass like they will, they will power through any problems that they have and any problems that the industry has to champion that, that tech technology. So, um you know, my, my mantra for them has been to never write them off like those, those guys are, are survivors. And, you know, I think the same of the Ethereum community and the Bitcoin community, these guys are not going away. We've seen uh bear markets before and they're all going to build right into this bull market and we'll see some really interesting things coming from them over the next few years. Yeah, we, we do see this uh you know, we have seen these Bear markets before Bitcoin and eat survived. Um But what is the narrative for the alt coins? I mean, you said they'll eat glass and they'll be, you'll be excited to see, you'll see some exciting things that are coming up. But uh other than they, they're, they're incredibly poor choices in eating. Um What else do we see here? Like, what is the narrative that that should make somebody think about investing in it if at all? Yeah. Um So personally, for myself, um I'm kind of a traditional finance investor at heart, so I'm very much looking for cash flows. I'm looking for what is the fee driver in each of these tokens? And I think that the next uh the next bill cycle in alt coins is really going to be driven by fundamentals is uh so that is, can I uh can I earn fees from this, from this chain? Uh Is the chain economically sustainable? Is the chain really bringing a technology that's going to be used by the world? Um So you have, uh you've got a, a number of metrics where you really wanna look at profitability. This is something that we already do in equities and I think it's inevitable in the coin space. Um It's interesting that we talk about Solana because Solana in particular has a little bit of conflict in that space, right? The uh the fee structure there is so low that the profitability of um of Solana as a token or as a token holder uh is quite questionable. So, um there are reasons perhaps to doubt the Solana rally, but at the same time, if you need Solana as um as gas on that on that chain and there's a certain amount of demand for it and there's a certain monetary premium. Uh you could see quite a bit of value in Solana even at these levels. All right, Leo, we are going to leave it there this morning. Thanks so much for joining the show. Always a pleasure chatting. Yeah, great to speak with you. Have a good day. That was has not Ceo Leo Mizuhara.

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