BlackRock's Spot Bitcoin ETF Is the 'Only One That Matters': Arca CIO

Bitcoin has little changed this morning trading around $26,000 as digital assets appear to be settling into another trading lull. Joining us now to discuss the crypto markets is a Chief investment Officer, Jeff Dorman. Welcome to the show, Jeff. Thank you. All right. What's going on with Bitcoin? It's not going up, it's not going down. We're sticking around the $26,000 mark. What, what's happening here? When are we going to see a break out? Uh Well, we might have already seen one of the breakouts that just went the wrong way. Um You know, Bitcoin has always been a tough asset to really predict prices. I know everyone always wants to hear people's price predictions. If you say Bitcoin is going to 100,000 or a million, you get a lot of air time. Um But you know, as I said on your show before many times, Bitcoin is really just a call option on future problems with confidence in your local governments and confidence in your banks. So during periods like March of 2020 when that, you know, happened in a big way here in the US, when you lost all confidence in regional banks. That was a real boon to Bitcoin's price right. Last year. Uh when you saw in Canada uh sanctions being put on truckers, you know, loss of confidence in government. That was a big boon for Bitcoin's price. When you don't have that though, it's very hard to figure out. Well, what should Bitcoin trade at? Should it be 20,000 should be 30,000? Should it be 50,000 or 10,000? Um, you know, and that's why for the most part of the last 18 months, Bitcoin more so than any other digital asset has really just tracked real rates. Uh um, you know, when real rates are going down, Bitcoin generally does, well, it just like, you know, most tech assets just like, you know, pretty much any other risky asset that has no cash flows and as real rates start to go higher, which is what we've seen over the last two months. Uh Bitcoin starts to struggle. So, you know, if you're looking for a short term move in Bitcoin, it's probably gonna be, you know, if we start to see, you know, rates start to go back down and, or, you know, uh inflation going back up and therefore real rates going down. Um or you're gonna need some other big movement, uh a a at a more government or bank level that reduces the market's confidence. And what's your prediction around that? Which sorry Jen. Uh I, I just wanted to quickly understand what is your prediction for? Which market changing event are you looking at? Like, that would actually impact Bitcoin? Yeah, I mean, it's always hard to predict when you're gonna have uproar with regard to your confidence in banks or government. Right. I mean, over the course of the last 15 years, there's been a lot of research and data that shows that in aggregate uh almost every nation around the world is having less and less confidence with their banks and with their local governments, uh not just in emerging markets and, you know, areas with high inflation uh pretty much everywhere you're seeing that, right? I mean, there's been polls of, you know, throughout the United States and Europe that show the exact same thing. So that, that's been a constant predicting when you're gonna have another event is always, you know, pretty difficult, but the other side predicting real right rates, that's a little more interesting, a little more easy to predict, right? I mean, we don't know the exact timing of when the fed is going to ultimately cut rates again, whether it's going to be at the end of this year or in the middle of 2024 or beyond. Uh but ultimately rising real rates is not sustainable. Um I mean, we haven't had a period of rising real rates in any sustainable uh way for 40 plus years. So, you know, at some point you're going to see either inflation, um, you know, start to settle and therefore we start to cut rates again. Um, or at least they start to stabilize like we saw in a period from, you know, call it 2012 to 2020. So, you know, I, I, I'm not old enough but there's very few people who invest anymore who are old enough to really remember uh the 19 seventies. But that's really the last period we've ever had with sustainable rising real rates. And I just don't think from a political standpoint or from a cash flow standpoint that that is feasible. Uh You know, in the current environment, what I mean by that is, you know, government spending, government debt is uh so high across the globe right now that to have a sustained period of rising real rates is almost impossible. You know, everyone's hanging on to the spot. Bitcoin ETF story waiting for a decision to be made. There, some are saying that that could be the next catalyst. I've asked many of the analysts on this show. Do you think that that's actually going to move markets if and when there is actually an approval? Yeah, I mean, when you get positive ETF news, whether it's, you know, gray scale winning their lawsuit with the SEC or an actual approval of one of the many outstanding Bitcoin ETF S, at least from a short term standpoint, you will definitely get a move I in price, right? That's a big enough catalyst. A big enough piece of news that short term traders bots algorithms will, will certainly on the price of Bitcoin. But in terms of a sustainable higher price, something that leads to price action that doesn't just immediately retrace really what you're asking for is will this increase flows? And if you look at the applications of of a Bitcoin ETF in my opinion, the only one that matters is Blackrock and not because, you know, the other companies aren't real who are doing this, but Blackrock has real distribution right back. There's a reason uh you know, Blackrock is, is well known as it is, it has what 10 trillion in assets. So if you put Blackrock sales and marketing department behind Bitcoin and start to put out research about, you know, efficient frontiers and why you need to have Bitcoin in the portfolio. And here's why you should have uh uh you know, Bitcoin in, in, in different fund managers, funds, then all of a sudden you increase that distribution, right? I know most people who come into digital assets don't care about business development, they just care about technology. Uh But you know, you look at polygon, for example, or polygon has the best business development, you know, independent of whether not Polygon's tech is better than other, you know, layer ones or layer twos. They've done the best, they've done the best job of finding partnerships look at coin base now with base, right? Coin base immediately. But you know, the has had more transactions and more interest in their layer two than any other uh project that's come about. Not because of the technology because they're coin based, right? They have 60 million users, they have partnerships with corporate America, they have real investment bankers. Uh that's what matters. And, you know, with Black Rock, I think if they get an, an ETF independent of how many other ETF there are out there, that distribution engine will be powerful. It's not actually based on Bitcoin being accessible. Bitcoin is accessible right now. There, there's probably nobody in the world right now that doesn't have some easily accessible way to buy Bitcoin, whether it's doing it yourself. Uh you know, an OTC desk using a coin base or a Binance or, you know, many of the etps uh around the world or even the futures ETF S or the CME, I mean, you name it, there's, there's plenty of access to Bitcoin. What you don't have is that sales and, and marketing engine from Blackrock telling people why you need to own bit. So, Jeff, I just want to quickly understand from you about what we're hearing through an article that was published in Bloomberg which cited Bloomberg Intelligence and its analyst that it, it had actually spoken to independent analysts. On the one hand, they were talking about the, the timeline and I don't want to get into like which event will happen for the base scale case, you know, let's say Ether ef or Bitcoin Spot spot Bitcoin. I'm just talking about timeline when it comes to what you're talking about, this is the only real liquidity, you know, catalyst out there black rock and, and, and the deadline for that, what we are understanding is, is going to be potentially either the second of September which is the first deadline in the process, then there's a second, there's a third and, and the last deadline is for Black Rock is actually in, in March, March 15th of 2024 right? And, and traditionally, historically, what we have seen is that, you know, the AC C kind of takes it all the way till that time. Uh And, and, and that's when we, we kind of have an answer, but there is obviously this other conversation out there that it might happen earlier because that's a wise is on first of September, the first deadline and arts deadline is in January and if they do a, they do Blackrock all of that. Uh I, I, I guess my point is that the excitement is premature, like we know traditionally the SEC takes its time and even if we go by ARCS deadlines, which are, which is the first spot Bitcoin application, we're not expecting any real action happening before January. OK. Uh I, I mean, I think, I mean, I just wanna know why people are, why people are talking about it as if it's about to happen right now. I mean, I just want to know what you think about that. I mean, the real answer is, is because there's literally nothing else going on in the market right now worthy of talking about. Um I agree with you. Um It's very hard to predict exactly when uh exactly the dates are that the SEC is gonna uh put an approval through even once an approval happens. Like I said, you'll get a short term bump just because traders like to trade. But the real uh uh follow-through only happens once blackrock and others start to really market Bitcoin in their documents. So for sure it's premature. Uh but you know, the market likes to grab onto things that are known and this is known, right? We don't know the timing but we know it's happening. Uh There's not a lot else that we know right now, right? I mean, you look at other periods like 2018, 2019 when it was slow. Um You know, there wasn't a lot to sink your teeth into and then, you know, seemingly out of nowhere, obviously, it wasn't out of nowhere, there was plenty of developers and, and companies working on it, but seemingly out of nowhere, you started getting the rise in stable points, the rise in D I, the rise in NFTS now that will happen again, there will be other sectors and other sub sectors on the market that seemingly come out of nowhere, even though behind the scenes is being done for 18 to 24 months. But that's more of an unknown, right? What we know about Bitcoin and the ETF is that, that's a known, we just don't know the timing. So, you know, you guys know that you've been doing this long enough, there's always, you know, there are periods of time where you've got 500 guests clamoring to be on your show with 6000 topics to talk about right now. You know, unfortunately, the 2023 story has only had real three things happen so far that we've had the March banking crisis. We've had Blackrock applies for an ETF and we've had ripple, you know, seemingly win a court case. Um, you know, outside of that, there really hasn't, you know, maybe you could put coin base base on there as well. I mean, but that, that's it, there hasn't been a lot uh uh to sink your teeth into as a digital asset uh investor this year. And when that changes, that people will be less, you know, uh focused on a Bitcoin ETF. All right, Jeff, we're gonna have to leave it there. Thanks so much for joining us this morning. Thanks for having me. That was a chief investment officer, Jeff Dorman.