Aug 21, 2023

Securities regulators are likely to approve ether (ETH) futures ETFs for trading in the U.S, according to Bloomberg.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, Bloomberg reports that securities regulators are poised to approve Ether futures ETF S for trading in the United States. Joining us now to discuss is bit wise asset management, Chief Investment Officer Matt Hogan. Welcome to the show. Matt. Thanks for having me. It's good to be here. Wonderful to see you. All right, let's let's talk about the these ether features. ETF S why is now the right time? We have that spot, Bitcoin ETF going through, we had the sec uh tell asset managers to withdraw their applications in May. It's now August. Why now? Yeah, why now in terms of potential approval? I think the answer to that question is the market continues to mature. We've seen Bitcoin futures ETF S trading on the market for close to two years now. They've been helping investors get safe exposure to crypto. I think regulators have been looking at this market holistically, seeing it move from a sort of a new state, a nascent state into a more mature state. We're seeing that the e futures market volumes are up open interest is up and so the level of comfort is up as well. It's a great thing for investors and, you know, we're optimistic that what you saw on that Bloomberg article is correct. We will see as we move toward the end of the year. But I think it's just, you know, overall crypto is maturing and that means the ETS we were denied so long, we are finally going to get and that's going to be a great thing for investors. Well, of course, your firm has um filed one of these applications along with several others. Have you heard anything from the SEC or what's the engagement process been like? Yeah, absolutely. Of course, I can't talk to any specific filing or bit wise's filing in general. Um You know, but we are optimistic that the SEC will review our application along with other applications in due course, looking at it from the from the outside perspective, if this is different than May in that in May, you saw ETF issuers withdraw their filing shortly after they were submitted. And so far that hasn't happened here. I think that's an optimistic note. Um but of course, nothing is guaranteed and we'll see how the review process unfolds. Is there anything uh I guess notable or novel or different about these applications than May? And I draw a parallel between the spot Bitcoin ETF applications. We had the SEC come back and say um to firms, you know, you need to make some revisions. The, the sticking point. There was that surveillance sharing agreement. Is there anything like that in these ETF S I really just uh no, is the short answer the filing are not all that substantially different from where they were in the past. There's no, uh there's no need for the same surveillance sharing agreement because these are regulated futures contracts and these are 40 act funds. So they follow a different pathway through the SEC. I really think the main difference is just this maturation of the market and it's true over in Bitcoin land as well. Of course, you know, the first spot Bitcoin ETF application was in 2013. The market has come a long way and you're seeing a new batch of filings that hope to capitalize on the maturation of that market. I know a few months doesn't seem like much from May to today, but it's a lifetime in crypto. The markets have continued to mature. And I think that's really the difference between where we are today and where we were even a few months ago. It's just, it's always been a matter of when and not if and hopefully we're getting closer to that when man, I was gonna say May to August doesn't feel that long, but in this industry, jeez, it's exhausting. All right. I know you can't speak about any particular application, but broadly speaking, uh what's the timeline we're looking at here do you think we'll see approval for one of these ETF S before spot Bitcoin ETF? I think that's the, that's it. There's of course, no way to know, but the general way timelines work is that these spot or these Ethereum futures ETF S would be reviewed around the early part of October. That's when we will hear yes or no spot Bitcoin ETF S could be reviewed at any point in time. But the next drop dead date, which is for the ARC application is in January of next year. Of course, the SEC could act before that, but likely they will take longer to review those applications. They're more complex, there's more data behind them. So I think we will see a decision on E futures before we will see a decision on spot Bitcoin. But if you step back and you think about what's going on in the crypto industry over the last couple of years, what you're seeing is that the EF log jam is breaking up for a while. There were no crypto efs. Then we got crypto equity efs including one from bit wise. Then we got uh Bitcoin futures EFS. Now we're thinking about e futures and maybe E Bitcoin blended futures eventually spot Bitcoin and then other spot efs I know people's perception is that the SEC has just been no on ETF S, it's actually just been slow on ETF S but that regulatory logjam is now breaking up and I think that's really exciting for investors. It brings a lot of new investors into the market. It's going to set the tone for this new cycle in crypto. And I think we should all be optimistic that we're going to continue to see progress as we've seen over the last few months uh in this space. Tell me about the demand um that you're seeing from customers for, for these ether futures ETF S is the demand there. Are they like banging down the door? Can't wait to get their hands on this. Yeah. You know, the people that bit wise, speaks to our financial advisors and family offices and they by far prefer ETF S to every other vehicle. We do a survey each year and we ask them, what's your favorite vehicle for getting a exposure to crypto last year? 68% said they would prefer to get exposure inside ETF S and financial advisors control trillion dollars of assets. So this is a very important market. I would also add that Ethereum appeals to a certain set of financial professionals in a way that Bitcoin does not, it has more utility in their eyes, it has more cash flow in their eyes. It is easier to understand valuation drivers in their eyes. So I've long thought that Ethereum will find its place amongst professional investors in a really exciting way. It doesn't have the same sort of binary. I like it or I hate it that Bitcoin does. Everyone can get around a new computing platform that generates revenues and has tens and hundreds of thousands of daily active users. That's what Ethereum is and advisers are going to hear a lot about that over the next year. And I think that will be helpful to prices, it will be helpful to sort of perception and it will start to shift this idea about crypto utility in the world in the eyes of, of the people who control the vast majority of money. So yes, we're seeing demand. Yes, we think that demand will accelerate once products are in the field. And I'm really excited about what that means for the e ecosystem over the next 12, 24 and 36 months. You know, a lot of analysts who have come on this show have said that the approval of the spot Bitcoin ETF could be the next catalyst for potentially the next bull run. Do you think in either futures? ETF would have the same impact on the markets? Yeah, I already think we're in a bull market. So I would disagree there. I already think the bull market has begun. I think it began at the beginning of this year and will run for a number of years until we get to all time highs. The definition of this crypto cycle is it's when crypto is going mainstream. So each of these points contributes to it. The spot Bitcoin ETF is a catalyst. But the E futures ETF is a catalyst as well. This is not a uh sort of one step function change. This is a change in the attitudes of crypto going from outside the mainstream to inside the mainstream. Every one of these points matters and E futures is a big one. This is a huge part of the crypto ecosystem that's being legitimized. If we get these products, it's the giant win and then the Bitcoin approval, if we get that will be another giant win and then spot eth if we get that down the road will be another giant win. I see a series of those. And again, I think it's all part of this mainstream era of crypto which started earlier. This year has driven crypto prices up. And I think that will continue with some bumps and volatility for at least another couple of years. It's interesting that you say that you think that we're already in the next full cycle. Like I said, a lot of analysts have come on the show and said we're not quite yet there. Maybe there's a recession coming, maybe rates are going to rise. We saw mass liquidation at the end of last week. Regulators are coming head to head with a lot of these mainstream um advancements. Of course, the stable coin bill, there's a lot of back and forth there. Um Any of that give you pause when you say we're in, we're already in the next full cycle. Uh Yeah, absolutely. It makes me a little bit nervous. We've talked about this being a U shaped recovery. I think we're seeing the dip in that U but if you step back, crypto is the best performing asset class in the world this year, it's up huge amounts. Even with this major retracement, it's always the hardest to buy at the early stages of these bull markets. The last cycle began in 2019. It felt terrible in crypto. There were all these reasons to avoid the space. The sec was cracking down on IC os, everyone hated crypto. There was no utility, there were no users, there were no mainstream maps and then boom, we got, we got NFTS, we got stable coins. The market went up for three years. It was a massive bull market. If you're trying to be on the cutting edge of investing in crypto, you have to be willing to buy when there's still headwinds when there's still challenges present. That's when sort of the hero making trades uh happen. That's what this, this year is. Of course, there's risk, of course, it may not work out. Of course, it could crash back down. But from my view, the positives outweigh the negatives in the market right now. I think that's why we've had such a strong start of the year and I do think we're just getting going could be some short term volatility. In fact, I expect that, but I think we'll end the year higher than we are today and I think 2024 and 2025 are going to be great. All right, Matt, thanks so much for joining the show this morning and I hope you have a great rest of your Monday. Thanks for having me. That was a bit wise, asset management, Chief Investment Officer, Matt Hogan.

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