Why This Bitwise Analyst Is Watching Coinbase and Bitcoin Miners

It's exciting to see another crypto asset uh be applied for on an ETF format. It shows that there is a desire for more crypto assets to become institutionalized via the ETF. Si think it's a little premature to say that even a Trump win would mean an approval for a sole ETF. Um Solana is very different than uh Bitcoin and Ethereum. Uh in many regards, it's Wednesday, July 3rd and this is Markets Daily, a show where we get into the minds of some of the most experienced and smartest investors, ceo S analysts, strategists researchers, anyone with a hot or smart take on the crypto markets before we get into today's discussion. Though, let's take a look at what's going on in the news this morning. Bitcoin and major cryptocurrencies experienced a sharp decline during Asian trading hours reversing gains made earlier this week. The price drop was attributed partly to concerns of large Bitcoin sales from the defunct Mount Gox Exchange, which is set to distribute assets later this month. Now us listed ETF S tracking Bitcoin also recorded outflows of $13 million breaking a five day streak of inflows this while our tech partners says that the industry is beginning a major growth phase. Some positive news this morning, the advisory firm said that the industry added more than $750 billion in value in the first half of the year. Now joining us now to unpack what's going on in the crypto markets and help us make sense of all of this is the bit Y senior investment strategist, Juan Leon Wan. Welcome to the show. Hey Jen, great to be with you. Great to be with you too. Now, the markets are looking a little more depressing than they were looking. Uh probably a week ago. Talk to me about what you're looking at this morning. And if you were to allocate a portfolio, where would you be starting if I was looking at a portfolio with these markets uh being down over the past day and month? I think it's a great time to allocate in crypto. I'm excited uh about what I'm seeing in traction uh in both Bitcoin and Ethereum uh and uh companies like Coinbase as well. So I would allocate to those three assets uh for sure. So Bitcoin Ethereum and Coinbase, yes. Talk to me a little bit about that about Coinbase. You know, we have a lot of uh stocks that are, I guess crypto related stocks, crypto adjacent stocks. Why? Coinbase? Well, Coinbase is primed for growth in many of its areas. Uh We're seeing we're in a bull market even with uh this volatility of prices. We're in a crypto bull market that is uh great uh for traditionally, for its trading volumes. So we think trading volumes uh will continue to go higher over the next year for Coinbase. Uh And that has been historically a big driver of its revenues, but it's also been diversifying its revenues over the past couple of years and now has a great growth coming from its subscription and services area areas. And that in that area, we are very excited by the prospects of base. For example, it's layer two solution that is now the fastest growing layer two on Ethereum. And we're seeing significant traction there and we are seeing things like partnerships. Recently, last week, they announced Coinbase announced a partnership with Stripe Stripe has 20% of the global payment processing market share and with the partnership, now us DC settled on base will be available to customers from Stripe. So you'll be able to spend U DC on your credit card on apple pay that is settled on base, which brings fees to Coinbase. And so that's bullish for Coinbase. Ultimately, it settles on Ethereum base is built on Ethereum as a layer two. So it's bullish for Ethereum as well. So I think things like that are great avenues for growth for Coinbase and we're seeing its international expansion as well and that is showing great traction. So we're very excited about what's going on with Coinbase now on the topic of stocks that allow investors to make a bet on crypto markets. I got to ask you about Bitcoin Miners. I know that bit wise recently said that crypto and A I could have a very bright future ahead. I think they said that it could be a 20 billion dollar industry in the future. We can get to that a little bit later. But given the fact that Bitcoin Miners are now diversifying their business models, looking at how to incorporate A I into their business. Are you watching any Bitcoin mining stocks? Absolutely. I'm watching all of them. And these developments are very exciting. I mean, a year or two years ago, no one would have thought that Bitcoin miners would now be sitting on the opportunity to be square and center in the infrastructure build up for the A I boom. But they are uh they found themselves in that position and we've seen this year recently the 3.5 billion deal between core scientific and core Weve. We've seen more recently the $150 million investment from Co Two management and had eight to continue to build out their expansion. Uh And uh just this week, we saw the announcement for from Northern data uh who, who said they're prepping an IP O for both their A I and Bitcoin mining data center units. So they're, they're right in the middle of the opportunity and that's uh creating excitement from investors and bringing in capital for further growth. Let's talk about that a little bit more. I do have the number in front of me now. So what was said by bit wise is that A I and crypto combined could add a total of $20 trillion to the global economy by 2030. What goes in to a prediction like this? Yeah. Well, there's uh there's been studies made, uh PWC made some studies about the potential for crypto NA I to contribute to the global economy. Looking out to 2030 they estimated the two industries combined could add an additional of $17 billion to the global economy. We looked at that and given the synergies that we see emerging between crypto and A I, we mentioned the Bitcoin miners, but there's more opportunities as well. We think it could have a compounding effect and so that 17 trillion could be higher much closer to a 20 trillion or even or even above that. So we are very excited about the opportunity, the long term opportunity for these two high growth technologies to work together, to enhance the economic growth prospects of the world economy, productivity for individuals and businesses. Um and uh and new new, new applications for for consumers. And when we talk about crypto and A I uh are, are we talking about the two industries kind of growing together or are we talking about the two industries coming together and there being some sort of convergence that gets us to this number, both each industry has its uh in its uh idiosyncratic growth factors. Uh And so there's wide adoption for these technologies individually, but we see many opportunities for them to uh intersect and collaborate together and for synergies to happen between the two. And so we think it's a mix of both that is uh that is going to be driving them. Now, I gotta ask you your opinion on the A I Tokens. I believe that on the show yesterday we spoke about in Q two, there was a little bit of a surge in A I tokens along with some other uh tokens that kind of went against what the rest of the crypto market was doing. Are you watching any of the A A I Tokens as a bet on A I? Yeah, I'm excited by the decentralized A I uh tokens and the prospect there, there's the centralized companies like open A I Meta Google that are building out their A I capabilities and they have lots of resources, but there's fears there with and concerns with the centralization of who's building out A I who controls that and the biases that go into, into that. And so there's a big push for decentralized A I and, and that's where the opportunity comes for some of these projects. Uh you know, projects I'm excited about, we're seeing the merger happen between singularity net and fetch A I and Ocean Protocol that is going to allow them to pool the resources of the three the three nets and, and be able to enhance what they're doing. And so I think projects like that and combinations like that are very, very important for the space to be able to evolve from a decentralized point of view and bring that transparency that Blockchain technology does and the pooling of resources to the A I movement. Tell me a little bit more about that. I know the convergence of those three projects was big news this week or big news in the last few days. Why is that so important? It is really important because it allows the expertise of those projects to come together. Each of those projects is tackling slightly different areas of A I VA I is tackling more of a marketplace for consumer services. Um Singularity net is tackling more of the backbone building of MS in a decentralized manner and creating a marketplace for compute. And so these projects coming together really solidifies the offering and allows them to vertical their A I capabilities to to integrate and be more more effective in the marketplace together. Juan, let's talk about Bitcoin. Now I mentioned at the top of the show, Bitcoin sunk more than 4% in the last 24 hours. What are you watching when it comes to the largest crypto by market cap? Yes. Well, we, we saw Bitcoin as you mentioned, down 3% over the past day, it's 12% down 12% over the past month. Uh But it's important to keep in mind that it's up 36% year to date and up 93% over the past year. So I think it's important to zoom out a bit and contextualize the market moves out of happen. Uh Looking at this year, we saw the run up to the all time highs near 74,000 in mid March on the back of the debut of the Bitcoin ETF S. Now the ETF S have been the best performing category of all ETF S of all time and have seen 14.5 billion in influence since the launch that surpassed everyone's expectations. But of those 14.5 billion, 12 billion of that came in through the it was gathered through March. So what we've seen is that since the all time high, uh the last three months, the ETF S have gathered an additional 2.5 billion, which is great, but the flows have slowed down, which is natural to expect that as the first wave of investors deploying capital into the ETF S runs its course. And so then we've had additional selling pressure from Bitcoin miners post h to cover higher cost more recently from government entities uh uh selling out some of their seized Bitcoin. And so that's putting pressure on the market. Um and what we've seen now is since mid March, Bitcoin has been wedged in a con consolidation channel between 60 70,000. Uh and investors seem to be in a holding pattern until the next catalyst emerges. What is the next catalyst? I think that could be a couple of things. Um It could be the second wave of influence to into Bitcoin ETF S which we had bit wise expect to come from platform approvals uh of wire houses, the likes of Morgan Stanley in the second half of the year. Uh We think that will be a big wave of capital that reignite the momentum in Bitcoin ETF inflows. Uh We're also in an election year as we all know, and we've seen a pro crypto bipartisan coalition begin to form in Congress that has been encouraging, but of course, investors are waiting for the outcome of the election, given the current sec and the current administration's unfavorable stance towards crypto so they can better gauge the potential for political and regulatory progress over the next four years. Well, I got to ask you about the elections, right. Trump has come out as this. I think he's called himself the pro crypto candidate. There have been industry leaders who have come out in support of Trump by donating to the campaign or just voicing their political opinions online. And now some are saying that if Biden is not the Democratic nominee after poor performance at the last debate, the crypto markets might react negatively. Do you have a thought or opinion there? Yeah, let's see to, let's wait to see what happens. Um, Trump has certainly, uh categorized himself as very pro uh crypto leaning. Um, in, in contrast to the Biden administration, I think that's helped him garner support and votes uh from the, the crypto voting block. So that, that's uh voting well, for, for Trump, he's played that very aptly. Um We'll see what happens with, with Biden. Um If he, if he remains a candidate, uh well, he's already feeling pressure from democratic senators and congressmen who are realizing from their constituents that crypto is an important technology. Um And they've started to switch their views. We saw that in the bipartisan coalition that helped pass F 21 that repealed the S A 121 measure in Congress. And so there's, there's an emerging voting block of both sides of the aisle in congress that is putting pressure on the current administration to change their stance. Um And it's, it's favored, well, for Trump to, to take the lead in really advocating for the industry. Now there's a change uh in, in the candidate from Biden, we'll have to see who comes in and what their stance on, on crypto is. So that is uh at an unknown at this point. Uh I have to ask you on the topic of the upcoming elections, Van Eck and 21 shares recently filed for a spot. Seoul ETF and some analysts are saying this is maybe a bet on uh Trump or Republican win at the election since these would come up for approval in the new Year. What do you think? What do you think is driving these soul ETF applications? I think it's exciting to see another crypto asset uh be applied for on an ETF format. It shows that there is a desire for more crypto assets to become institutionalized via the ETF si think it's a little premature to say that even a Trump win would mean an approval for a sole ETF. Um Solana is very different than uh Bitcoin and Ethereum. Uh in many regards, uh and some of the measures that the SEC has used to um approve the Bitcoin and E the ETF S, it's unclear that Solana would pass those, those uh those measures. For example, uh Solana is more much more centralized than Bitcoin or Ethereum are uh also to approve the, the ETF S, the SEC has relied on regulated CME futures in order to be able to um uh keep track of the underlying price movements in order to monitor the market. Um And Solana doesn't have uh regulated CME futures, at least not yet. So those are things that stand in the way of potentially an approval, but I think it's exciting nonetheless. Uh and uh we do hope that uh an ETF for Solana happens uh in the future. And Juan, we can't talk about ETF S without talking about the E ETF which could be trading any day. Now, we are, it's July 3rd today. So it really could be any day. What do you think is gonna happen to the price of Ether once these products start trading? It's a great question. And we've seen e uh also down 12% over the past month, but it's actually up 40% year to date. So it's slightly ahead of Bitcoin on a year to date basis, which many people uh don't, don't realize. So it's up more than Bitcoin year to date and the ETF hasn't even launched. So we at bit wise think, uh we put out a piece uh recently uh where we think that there could be 15 billion in inflows into the E ETF S when, when they launch over the coming 18 months, uh or the coming 18 months after launch uh based on allocations between Bitcoin and E in markets like Europe and Canada that already have spot products uh for both. Uh And also based on our expectations for flows into Bitcoin and E TT FS in the US uh going forward, given the relative market caps and to prepare investors for the E TT F opportunity. We're educating them on how to differentiate between Bitcoin and Ethereum. Many investors new to the asset class, lump them together, which is understandable since they're the two largest crypto assets. But of course, they're very different. Uh So we're helping investors understand that Bitcoin is structured as a new monetary asset that aims to compete with gold as a store of value. Uh While Ethereum is structured as a technology platform, as a fully programmable Blockchain that serves as the backbone for new crypto based applications like tokenization, stablecoins and decentralized finance. And so investors love tech. We know that and that framing is getting investors uh really excited about it given the innovation happening on its platform. Um Just to touch on that, we saw the DAN upgrade on Ethereum earlier this year that has brought down transaction fees on L twos by an order of magnitude. And that's helping the applications built on uh L twos gain traction such as base which I mentioned earlier. Juan, thanks so much for joining the show. Thank you very much, Jen.