Ep. 698 How Yield Generation will Lead Crypto's Mass Adoption with Galaxy

[SPEAKER_02]: Welcome to the Crypto101 podcast, presented by Gemini. [SPEAKER_02]: Your bridge to the future of money. [SPEAKER_02]: All right, everybody, welcome back to another episode of the Crypto 101 podcast. [SPEAKER_02]: All you good, wonderful, crusaders of crypto nation. [SPEAKER_02]: I hope you're just enjoying the holiday season. [SPEAKER_02]: I'm your co-host, Bryce, as always, joined by my equally excitable companion over here, Mr. Brendan Veeam, and how are you doing, Brendan?

[SPEAKER_01]: I am doing good, you know, we've spoken a little bit on a little bit under the weather. [SPEAKER_01]: So maybe I sound a bit more nasally. [SPEAKER_01]: I blamed it on the bears before I'm gonna do it again. [SPEAKER_01]: And I totally did a cold and south Florida. [SPEAKER_01]: But, I mean, this is just one of those pods price where, you know, we knew who was coming on. [SPEAKER_01]: I was like, I cannot miss this one. [SPEAKER_01]: I've been really looking forward to it.

[SPEAKER_01]: And so I know the audience is gonna enjoy it as well. [SPEAKER_02]: Yeah, no, it's been a little bit of a crypto winter this year Bitcoin is negative year to date and many altcoins are very, very, very negative year to date.

[SPEAKER_02]: And so we always thought, you know, the year after the Bitcoin having was going to be this, you know, classic four year cycle bull market. [SPEAKER_02]: Well, I don't know, maybe the four-year cycles dead, but we'll kind of get into a lot of what's going on with market dynamics. [SPEAKER_02]: But most importantly, we want to introduce everybody to our guest, Zach Prince M. D. Managing Director at Galaxy in the head of wealth for the new Galaxy One product.

[SPEAKER_02]: Zach, how are you doing?

[SPEAKER_02]: two and great guys it's a little it's a little cold where I'm based but other than that no complaints excited to be here good so your fight-knoth fight-knoth the cold Brendan is succumbing to the warmth and becoming a little sick but yeah no what we're excited to have you but let's just you know get you acquainted here with our audience at crypto 101 tell us a little bit about your background and how you you know became a managing director at one of the largest you know crypto

[SPEAKER_02]: Publicly traded companies, you know, they galaxy touches so many different areas of the industry. [SPEAKER_02]: So give us a little one-on-one on Zach Prince [SPEAKER_00]: Yeah, sure, happy to. [SPEAKER_00]: So I grew up in South Texas, went to college down there, and then based on being a semi-professional poker player in college, I got an internship at an advertising technology company in New York City. [SPEAKER_00]: And so I moved to New York City right after college.

[SPEAKER_00]: I worked at two different startups in the ad tech space, one that was acquired by Google. [SPEAKER_00]: And then two different startups in the financial technology space and while I was working at one of those startups I started a blog writing about what just all things happening in the FinTech ecosystem.

[SPEAKER_00]: So this is like 2014 time frame Robo advisors were just coming out crowd funding was just starting to happen There's a lot of stuff going on in FinTech and so I started writing this blog that [SPEAKER_00]: I don't think really many people read, but writing it led me to discover Bitcoin.

[SPEAKER_00]: And so I was screaming on this blog in 2014, early 2015, that if people wanted exposure to something that had kind of a venture capital type return profile, it could easily [SPEAKER_00]: uh... they should they should be looking at buying crypto and i was originally fascinated by crypto because a lot of what happens in fintech is just putting a mobile app or you know an online website on top of the traditional financial infrastructure from banks and in broker dealers and so

[SPEAKER_00]: Then in 2017, I started a company called BlockFi. [SPEAKER_00]: The original idea for BlockFi was to make loans with cryptocurrency as collateral. [SPEAKER_00]: We started with that product and that's actually where I got my introduction to Galaxy. [SPEAKER_00]: Galaxy was a seed round investor in BlockFi on the equity side and they also provided BlockFi with its first credit facility to fund the loans that we were making.

[SPEAKER_00]: Block-Fi had a four and a half year run of pretty remarkable growth. [SPEAKER_00]: We had that loan product, we had an interest account product, trading platform, we launched the world's first Bitcoin rewards credit card, then we also had an institutional side of our business, but ultimately Block-Fi ended in tragedy after selling the FTX and filing [SPEAKER_00]: then I thought I was going to retire all gloss over this part.

[SPEAKER_00]: I thought I was going to retire for a minute and then I became the CEO of a real estate kind of tax optimization business for a year. [SPEAKER_00]: And just couldn't resist the urge to come back into crypto and financial services when Mike and Chris reached out to me about this acquisition that they were making, which ultimately became the kind of starting point for the Galaxy One platform that we launched in October.

[SPEAKER_00]: So, [SPEAKER_00]: That's my background. [SPEAKER_00]: I try to be really concise for you. [SPEAKER_02]: No, it's awesome. [SPEAKER_02]: So out of the ashes of FTX of Phoenix Rose, man, talk about, I remember, you know, obviously, you know, podcasting and trading through that period. [SPEAKER_02]: And I thought I was having a bad time, but I can't imagine kind of what was going through through your mind.

[SPEAKER_02]: What were some of the lessons that you learned from that whole experience? [SPEAKER_00]: You know, I learned a ton of lessons, [SPEAKER_00]: I would say that, you know, I learned a lot about regulatory, you know, how kind of ugly the regulatory game can be if you're on the wrong side of it. [SPEAKER_00]: I guess is one way I would say it.

[SPEAKER_00]: A lot about risk management, market structure, and the value of having [SPEAKER_00]: You know, a really strong balance sheet in times of volatility and financial markets. [SPEAKER_00]: That's kind of on the negative side. [SPEAKER_00]: On the positive side, I think there were a lot of things that we did really, really well at BlockFi that I've brought to Galaxy and the Galaxy One platform.

[SPEAKER_00]: We were, I think, really good at launching products that, um, [SPEAKER_00]: We're differentiated that we're in a lot of cases first of their kind and there's not a lot of opportunities to do that in financial services and when you can do it you generally get a first mover advantage that's you know helpful in igniting growth. [SPEAKER_00]: We prioritized client service at BlockFi.

[SPEAKER_00]: I think we were one of the first of not the first crypto companies crypto financial services companies to have a phone number that people could call. [SPEAKER_00]: And so I've carried that with me to Galaxy One as well, where we've got great folks based in the US who are super familiar with both crypto and traditional.

[SPEAKER_00]: financial markets and products who are available to talk to clients or folks that are interested in the platform, and then there's all kinds of smaller things, but those are the big ones that I would highlight.

[SPEAKER_01]: Yeah, I mean, you mentioned it didn't feel great to be on the receiving end of a lot of those targeted regulatory attacks. [SPEAKER_01]: And, you know, a lot of this happened under Gensler and it felt, again, just targeted and biased and intentional. [SPEAKER_01]: And recently, we've gotten a lot of news that like, it's flipped, right, with Palatkins and a huge regulatory shift. [SPEAKER_01]: And we always hear about all the changes that have made and how it's more crypto-friendly.

[SPEAKER_01]: I'm curious, you know, have you felt [SPEAKER_01]: the actual shift because you're the one who's dealing with this, you doubt under the, you know, the the previous situation, you're under the, now the news. [SPEAKER_01]: Administration, do you feel like there is a difference? [SPEAKER_01]: Because again, we hear about this all the time, but you actually like see a difference is what I'm asking. [SPEAKER_00]: I think there's absolutely a difference.

[SPEAKER_00]: I mean, we've already had one bill passed through the legislature with the Genius Act. [SPEAKER_00]: I think there's going to be a market structure bill getting passed soon, which will clarify, which of the financial regulators regulates certain things. [SPEAKER_00]: We've seen multiple companies recently get approved for the OCC banking charter, which is not something that was ever even thought to be on the table during the previous administration.

[SPEAKER_00]: You've seen, [SPEAKER_00]: uh... pretty much every enforcement uh... inquiry or action against crypto companies uh... get taken off the table uh... you know at the cc so you absolutely feel it and i think it creates a uh... a much better culture for capital formation a much better culture for uh... product innovation and and ultimately when my view is that

[SPEAKER_00]: When you enable these things, this is what America is supposed to be great at, and we are great at in a lot of cases. [SPEAKER_00]: When you enable the market to flourish, that translates into competition, competition translates into... [SPEAKER_00]: You know, price, price competition and people just, you know, trying to put their best foot forward to win business from whatever their client segment might be and ultimately that translates to great outcomes for consumers.

[SPEAKER_00]: So you can, you could feel it, you know, kind of across the board in terms of, you know, [SPEAKER_00]: You know, even if you're thinking about building something, you can actually have a kind of candid dialogue with the regulators now, whereas before it didn't feel like anything was candid. [SPEAKER_00]: It always felt very guarded and there was this message put out there of come in and talk to us.

[SPEAKER_00]: But if you were actually on the front lines and you tried to do that, you weren't met with a welcoming environment, you were met with kind of blank stairs and [SPEAKER_00]: You know, fear of getting an enforcement action a week or two after you left the office and told them what you were thinking about doing. [SPEAKER_01]: And I think that that's important for the listeners to understand, right? [SPEAKER_01]: There is.

[SPEAKER_01]: truly a great system and structure that's being laid in place and what I'm gathering from this in our conversation so far is that it truly does have an impact on what the future of crypto looks like and what you're allowed to do and who you're allowed to speak with and all of this stuff.

[SPEAKER_01]: It seems to be an environment, a much better environment that promotes growth. [SPEAKER_01]: And I think that that is arguably one of the most important things. [SPEAKER_01]: Because, listen, price is going to fluctuate day-to-day week to week, month-to-month. [SPEAKER_01]: And, you know, we're probably going to talk about that at some point during this podcast. [SPEAKER_01]: We feel price action, and sometimes we focus too much on it in the short term.

[SPEAKER_01]: But I think what's important here is what you're saying. [SPEAKER_01]: But the future of this industry could look like. [SPEAKER_02]: Yeah, and Galaxy certainly, you know, on the cutting edge of pretty much every different area of crypto. [SPEAKER_02]: And so we definitely want to dive in, you know, full disclosure. [SPEAKER_02]: I have some exposure to some galaxy shares, small shareholder personally, and through one of the funds I managed.

[SPEAKER_02]: But, [SPEAKER_02]: So I'm biased. [SPEAKER_02]: I think you guys are great and you guys are executing at a really high level and doing some incredible work. [SPEAKER_02]: But we want to hear it from the horse's mouth. [SPEAKER_02]: We want to know what you guys are up to. [SPEAKER_02]: Just give us the, you know, the 30,000 foot view of galaxy before we kind of dive into your role and what you're specifically building a galaxy one. [SPEAKER_00]: Yeah, sure thing.

[SPEAKER_00]: So Galaxy historically was providing institutional financial services for the crypto market. [SPEAKER_00]: So what that means is they built out large businesses in asset management, trading and [SPEAKER_00]: And then in 2022, the company via the acquisition of a Bitcoin mining firm expanded also into AI data centers. [SPEAKER_00]: And they took this, what was historically a Bitcoin mining site repositioned as an AI data center.

[SPEAKER_00]: And that's now a very large business for galaxy and just pausing there. [SPEAKER_00]: How many individual stocks in the market can you buy that would give you exposure to what I think [SPEAKER_00]: You know, growth categories of the economy, crypto, and, you know, AI in a single stock. [SPEAKER_00]: So, yeah, I mean, it's exhilarating to be a part of a company that has so much going on in both of these major business lines.

[SPEAKER_00]: You know, some quick stats, there's Galaxy has over 17 billion in assets on its platform. [SPEAKER_00]: We're coming off a record quarter that saw 500 million plus of net income. [SPEAKER_00]: Company has a very strong balance sheet, total equity of 3.2 billion, including nearly 2 billion in cash and stables.

[SPEAKER_00]: And on the lending side of their business, which I'm sure we'll touch on as we get into Galaxy 1 and some of the unique products that we have, they have a principal outstanding in their loan portfolio as of the last earnings report of north of 1.8 billion. [SPEAKER_00]: One thing I didn't touch on that I think is just important to note is galaxies also [SPEAKER_00]: innovating and a leading provider of infrastructure services to institutional partners.

[SPEAKER_00]: And they do that in a number of ways. [SPEAKER_00]: They're depending on the day, either the largest or one of the top three largest validators on the Solana blockchain. [SPEAKER_00]: So they're very active in staking, the very active in tokenization. [SPEAKER_00]: And you've seen them partner on things with traditional financial services firms ranging from ETFs to crypto custody and other things.

[SPEAKER_00]: So Mike Novigratz, the CEO of the firm, has been saying since 2017, when I first met him, that institutions are coming to the asset class. [SPEAKER_00]: They're increasingly here now and looking for ways to leverage the technology, build products, and services around that. [SPEAKER_00]: And galaxies, one of the key partners in the ecosystem to them in that pursuit.

[SPEAKER_02]: Yeah, no, it's an incredible feat of what you guys are tackling and, you know, arguably one of the most exciting aspects, although we don't want to diminish any of the other aspects, but I think one of the most exciting aspects, especially for our audience, who's mainly a retail trader focused audience is Galaxy 1. [SPEAKER_02]: And so let's kind of just unpack what's going on with with Galaxy 1 and how people could get involved as well. [SPEAKER_00]: Yes, sure.

[SPEAKER_00]: So the original idea for Galaxy One was to bring the institutional quality that Galaxy's known for to the individual investor. [SPEAKER_00]: And so we launched the Galaxy One app in October. [SPEAKER_00]: It currently has four products, a checking account that offers a three and a half percent yield. [SPEAKER_00]: our premium yield product where you can earn 8% on cash by participating as a lender into the institutional lending market that the galaxy is very active in.

[SPEAKER_00]: We have a brokerage account where you can buy and sell stocks, commission free, and then of course a crypto account where you can buy sell and transfer Bitcoin ethereum in Solana currently.

[SPEAKER_00]: And so the idea that we were really going after here is can we deliver a more [SPEAKER_00]: institutional quality experience across, not just crypto, but also traditional financial services, banking and brokerage to, you know, US-based tech forward crypto interested, kind of mass affluent investors that are looking for both in all-in-one platform to manage their [SPEAKER_00]: Innovative ways to grow their wealth that they can't do on other platforms.

[SPEAKER_00]: So, you know, one example of that is the premium yield products where you can get 8% on cash. [SPEAKER_00]: You know, one note on that is that you do have to be an accredited investor to participate in it. [SPEAKER_00]: But for both that premium yield product and the checking account, you can auto reinvest the interest that you're earning into Bitcoin or another crypto of your choice, and soon you'll be able to auto invest in equities.

[SPEAKER_00]: more products and services from us over time, but that's what we have today. [SPEAKER_00]: That's what we're starting with. [SPEAKER_02]: That's incredible. [SPEAKER_02]: And I think either you or somebody at the company said, you know, yield is one of the big unlocks in crypto. [SPEAKER_02]: And I'm curious about, you know, the yield, where is it coming from? [SPEAKER_02]: How is it generated?

[SPEAKER_02]: There's a lot of different ways, you know, whether it's lending or doing, you know, treasury bills or cash and carry, you know, [SPEAKER_02]: the mechanisms underpinning some of the yield products. [SPEAKER_00]: Yes, sure. [SPEAKER_00]: So our checking account is the yield is just powered completely by a bank.

[SPEAKER_00]: When you have been a checking account at Galaxy One, you're getting a direct account with Cross River Bank, who's our banking partner, but we're facilitating your access to that bank account. [SPEAKER_00]: See you have FDIC insurance, just like you would with. [SPEAKER_00]: other checking accounts. [SPEAKER_00]: The premium yield product where accredited investors can earn 8% on their cash. [SPEAKER_00]: The yield for that is generated from Galaxy's institutional lending business.

[SPEAKER_00]: So we're aggregating individual investors and giving them the ability to participate as a lender into Galaxy's institutional lending activities. [SPEAKER_00]: Now, [SPEAKER_00]: It's important to note that the structure of that product has a guarantee on it from galaxy.

[SPEAKER_00]: So while the activity that's happening is lending activity and the fact that crypto debt markets don't have the same access to financing that traditional markets do is the reason why we're able to offer 8%.

[SPEAKER_00]: from a risk perspective, it's really galaxy corporate credit risk. [SPEAKER_00]: And so irrespective of what happens to the lending book, galaxy has a guarantee on this product. [SPEAKER_00]: And so functionally, it's kind of like corporate debt from a risk perspective. [SPEAKER_00]: And important to note there too, just in terms of how the product functions.

[SPEAKER_00]: It has a 60-day duration, so from when you contribute to the vehicle or from when you say you want to get your funds out of the vehicle, it's 60 days until they're made available to you, and also it has a $250 million cap on the total size of the vehicle, which is really important from a risk management perspective, and so at a certain point I don't

[SPEAKER_00]: Potentially in the not too distant future, we haven't disclosed how much is coming to the product yet, but at a certain point the cap will probably be reached and availability will be to this product will probably become somewhat restricted. [SPEAKER_01]: You know, one of the things I remember in previous years really just the last cycle was in 2021 there was this rush to see who could offer the highest yields and it kept growing and growing.

[SPEAKER_01]: We started at pretty normal rates a couple percent than four than five. [SPEAKER_01]: then 10, then 20, and then you saw places offering like 30, 50 percent. [SPEAKER_01]: And I kept growing until it reached a point where it became unsustainable. [SPEAKER_01]: And I think that was a big factor in that previous crash that we had. [SPEAKER_01]: My question here is, how is this time different? [SPEAKER_01]: Or how is this different?

[SPEAKER_01]: And how do we protect from it happening again? [SPEAKER_01]: Because we've had a lot of people come across us in our community. [SPEAKER_01]: And they got burned by that. [SPEAKER_01]: And I think that they're a little bit scared. [SPEAKER_01]: And it's important to help them understand what the difference is so that they can know that this can't hopefully won't happen again. [SPEAKER_00]: Yeah, absolutely.

[SPEAKER_00]: Well, one thing I would highlight is it's not just crypto where this stuff happens. [SPEAKER_00]: I don't know if y'all all of like some of these yield max ETFs that come out recently. [SPEAKER_00]: You know, it's it's very important to understand what you're investing in, especially when you're talking about.

[SPEAKER_00]: fixed income or credit or yield, so I can't speak to everything that's happening in the industry with regards to yield, but in terms of how the 8% premium yield product at Galaxy 1 is different, I would highlight a few key things, so 1 is that we're only paying the yield on cash.

[SPEAKER_00]: And at least, you know, in my experience at BlockFi, one of the challenges we had was [SPEAKER_00]: There's kind of a fundamental imbalance in that market where there's a lot of supply of Bitcoin that wants to earn a yield, but not a lot of safe places to generate a yield on Bitcoin.

[SPEAKER_00]: And so you're constantly kind of pushed out a whack there in terms of [SPEAKER_00]: how much you need to get a yield on and how many options there are in terms of places to get that yield. [SPEAKER_00]: Cash doesn't have that problem at all, right? [SPEAKER_00]: Like, obviously, there's very, very large lending markets for cash, including stuff that is risk-free like treasury bills. [SPEAKER_00]: The second is that Galaxy has put a cap on the product of 250 million.

[SPEAKER_00]: We did that basically, you know, at the time that we created the product as a function of the lending book size, and so you're seeing, at least in the case of our platform, responsible sizing constraints being put on the product.

[SPEAKER_00]: you're seeing a duration constraint being put on the product as well, which wasn't true, at least at BlockFi and at another of the, you know, few of the larger lending platforms where, you know, those were overnight deposits, which really exposes you to run on the bank type risk scenario, where all the capital wants to leave it once.

[SPEAKER_00]: which creates its own kind of challenges and then the last thing I would say is that the issuer of this product, Galaxy Digital, publicly traded company, audited financials in the United States and the United States put a guarantee on it, you know, you can go and look at the balance sheet of galaxy, you know, I highlighted earlier,

[SPEAKER_02]: It's just kind of night and day I think from what we're happening back then and it's I think it's really clear and how we structured the product that we're keeping those learnings and risk factors in in mind yeah totally no it's it's not you know some offshore you know private obscure you know subsidiary you know it's just you know it's it's pretty vanilla now but back in you know 2021 and 2022 I mean

[SPEAKER_02]: There was really like hardly any publicly traded U.S. crypto related companies. [SPEAKER_02]: I think Coinbase went public April of 2021 and so it's like now we've just got the mature infrastructure and so it's great to see y'all really capitalizing on that and offering great products and services and you know truly innovating another thing I would know this is officially a security's offering. [SPEAKER_00]: the premium yield product.

[SPEAKER_00]: It's a red D506C securities offering. [SPEAKER_00]: That's why participation is limited to accredited investors. [SPEAKER_00]: There's an entire PPM and risk disclosures document that everyone should read before making an allocation to the product. [SPEAKER_00]: So the regulatory structure is different as well. [SPEAKER_00]: I left that off the list.

[SPEAKER_02]: No, that's super important for people understand, but look, you know, we're starting, you know, I would say we're in a post-rate hike United States. [SPEAKER_02]: I know the Bank of Japan is planning on hiking rates now or something, but you know, in the United States, we're pretty firmly in rate cutting territory.

[SPEAKER_02]: And I was just wondering, like how much do you all think about like the traditional, you know, government yields coming to bear on your business? [SPEAKER_00]: I mean, we think about it, I would say quite a bit, you know, notably since launching the premium yield product, there's been two rate cuts and we haven't adjusted the rate on the premium yield product yet, it's stated a percent, but we're certainly keeping the broader rate market in mind.

[SPEAKER_00]: That being said, what we're trying to make sure that our checking account yield is competitive with other options out there, I think it's one of the highest you can get if not the highest when compared against other fintech platforms. [SPEAKER_00]: I think it's certainly the highest that lets you auto reinvest in Bitcoin. [SPEAKER_00]: And then the premium yield product, we're really measuring that against.

[SPEAKER_00]: crypto debt capital markets and where we see the cost of borrowing cash in those markets plus a little bit of you know for lack of a better term call it like new customer experience you know we we want this to be a valuable product offering for people and so those are the things we're keeping in mind in terms of the the premium yield rate which I should note is subject to change with 30 day notice but we haven't changed since we launched

[SPEAKER_02]: Yeah, makes a ton of sense, you know, I see, I don't know if you would call them competitors directly or if they're going to start morphing into competitors, but you know, big banks like, you know, JP Morgan Chase, Bank of America, and all of these folks are starting to get a little bit more comfortable with crypto. [SPEAKER_02]: I don't know if they're going to get anywhere near as, as, you know, evolved as what Galaxy one is with their, you know, offerings and stuff.

[SPEAKER_02]: But do you view this as co-optician or, or competition with these big banks? [SPEAKER_00]: I would say both, I mean, when you're in financial services for consumers in the US, you have a lot of competitors in general, you've got, you know, banks,

[SPEAKER_00]: You know, DeFi, there's a lot of competition out there and sometimes you're partnered with somebody for a certain initiative and you're competing with them on another initiative. [SPEAKER_00]: And I think we could see banks fall into that category specifically with Galaxy Affair Bet. [SPEAKER_02]: No, I think you're spot on, I think it's probably good, right?

[SPEAKER_02]: Like in a sense, because they're going to be broadening the market, they're going to be getting folks like our parents, you know, more comfortable once they see, oh, you know, JPMorgan Chase, you know, they just launched an on-chain fund, you know, and black rock and fidelity, you know, all these guys are starting to launch funds. [SPEAKER_02]: And, you know, that kind of leads into my next question about the ETFs.

[SPEAKER_02]: I think the ETFs have done a lot to legitimize crypto. [SPEAKER_02]: I know Galaxy is also involved with some ETFs. [SPEAKER_02]: Maybe you could give us a little color on Galaxy's sort of relationship with the ETFs. [SPEAKER_02]: But how do you kind of think that some of these flows into the ETFs or just the ETFs in general might influence Galaxy 1? [SPEAKER_00]: Well, it's interesting to see.

[SPEAKER_00]: I mean, so we enable folks to buy and sell all listed ETFs on our platform in the brokerage account, commission-free. [SPEAKER_00]: Galaxy also has a suite of ETFs that it is brought to market with stage treat. [SPEAKER_00]: So Galaxy has spot-big-win ETFs and other ETF products that are out there.

[SPEAKER_00]: I think that, [SPEAKER_00]: You know, it's so weird that it didn't necessarily happen this year, if you're just looking at the annual performance, but I think it's been clear that the ETFs launching is an incredible new distribution channel for people being able to own crypto. [SPEAKER_00]: I think on a long enough time horizon, we'll say this was definitively a good thing. [SPEAKER_00]: Maybe the counterpoint is that there's more paper Bitcoin.

[SPEAKER_00]: I'm using air quotes intentionally here and there's more abilities to, you know, hedge or kind of, you know, bracket your exposure to the asset, which may be acts of utility dampener over time. [SPEAKER_00]: But, um, mid-delong term, I think that, um, [SPEAKER_00]: more folks will own crypto in ETFs.

[SPEAKER_00]: It will increasingly become, you know, crypto ETFs will increasingly become parts of other actively managed or passive, passive managed portfolios in ETF or other constructs. [SPEAKER_00]: And ultimately, more capital would be allocated to the space as a result of that ETF product construct being out there, and that will be a good thing for the price over a long enough time horizon. [SPEAKER_00]: So I think it's great, I think it's a big net positive for the asset class.

[SPEAKER_01]: Yeah, and one of the other, I think one of the biggest shifts that we've seen in the last year is how much Ethereum has begun to be used on the institutional side in terms of infrastructure and we're seeing it in Solana as well, but I would argue that we're seeing considerably more on Ethereum from the institutional side.

[SPEAKER_01]: You look at banks and asset managers [SPEAKER_01]: more like traditional financial entities and there are dead set on building and we just saw the news about JP Morgan this week and then right afterwards Bank of America came out and we're like we're in agreement we think that things are going to kind of head in that direction where we're stuff's building on chain and then you have

[SPEAKER_01]: city and black rock and all these other and you know everyone else talking about this already I mean what do you think or what do you see in terms of infrastructure because you know Galaxy you guys either you know work with some of these players or you talk to them in your communication and you kind of get a backend view and what's going on

[SPEAKER_01]: I mean, what, what is the deal with all this because from from our perspective, again, I think we get a little bit more of an inch to err of a retail side between us and it looks convincing and, you know, what we see here, regardless of price action, which has been heading down as of recently, it almost feels

[SPEAKER_01]: Dare I say, dare I say, okay, so I'm gonna preface this. [SPEAKER_01]: Dare it seems impossible for Ethereum to not be a part of the future when you have all the biggest banks and asset managers who want to build and want to bet on it. [SPEAKER_01]: So, yeah, I mean, I guess what are you seeing in regards to Ethereum and it being uses infrastructure behind the scenes? [SPEAKER_00]: I mean, I tend to agree with your general categorization, Brendan, that a lot is happening.

[SPEAKER_00]: I think at a high level, there's kind of three areas, and we're seeing a lot of activity across all of them. [SPEAKER_00]: So one is banks and traditional financial firms needing to connect to crypto infrastructure in order to facilitate offering crypto to clients on their platform. [SPEAKER_00]: In some cases, they're doing that. [SPEAKER_00]: You know, through partners in other cases, they're building directly. [SPEAKER_00]: So facilitating crypto is one.

[SPEAKER_00]: Real-world asset tokenization is another. [SPEAKER_00]: So, you know, there was a press release just in the last week or so that, you know, JP Morgan was the bookrunner on a tokenized debt offering from, you know, your truly galaxy digital. [SPEAKER_00]: Yeah. [SPEAKER_00]: That was kind of a proof of concept that you can do these things this way. [SPEAKER_00]: So, there's real world asset tokenization.

[SPEAKER_00]: Obviously, stable coins is a huge runaway winner in that category already, but I think we'll see other things coming to that space, whether it's equities or other types of assets. [SPEAKER_00]: Get tokenized and trade on crypto rails, and then the last kind of category is replacing traditional infrastructure. [SPEAKER_00]: whether it's for money movement or securities settlement or other things with blockchain technology.

[SPEAKER_00]: And I think if you measure each one of those things today, facilitating crypto, real-world asset tokenization and replacing old infrastructure. [SPEAKER_00]: And you said, which blockchain is being most used across these different categories? [SPEAKER_00]: It would be Ethereum.

[SPEAKER_00]: Yeah. [SPEAKER_00]: Now, you know, Solana folks, I think would obviously make the case that they might have some advantages in particular with, uh, with, uh, speed and trading, uh, type use cases, but, um, you can't argue with, uh, with the stats that today, the, uh, adoption has, uh, really been led by Ethereum.

[SPEAKER_02]: Yeah. [SPEAKER_02]: And it seems like, you know, Ethereum has really, I mean, they had what some downtime back in, you know, when there was the Ethereum fork, you know, when it turned into Ethereum classic. [SPEAKER_02]: But by and large, you know, kind of what Tom Lee says, you know, the folks that are pioneering, you know, from the big bank side, the big asset manager side. [SPEAKER_02]: They're not really looking for like transaction speed yet.

[SPEAKER_02]: They're just looking for security and, you know, figuring that we could build out speed over the long term with, [SPEAKER_02]: some architectural enhancements and so on.

[SPEAKER_02]: So yeah, I'm obviously a big, big, personal fan and have long exposure to Ethereum, but also Solana, you know, I want to see everybody when maybe that's naive and optimistic, but I think there's a world in which we can have maybe some interoperability and just, you know, broad success for both chains, but

[SPEAKER_02]: You know, a lot of folks come to the crypto 101 podcast obviously to listen to experts like yourself about what they're building and kind of getting on the the fan guard of like what's next. [SPEAKER_02]: But I want to kind of maybe we could have a little bit of a retrospective since we are here at the end of the year on. [SPEAKER_02]: I don't know if I could call it what went wrong this year, but why was this year kind of, you know, of the 15 or 16 year history of Bitcoin?

[SPEAKER_02]: Why did the four year cycle sort of break down? [SPEAKER_02]: Right, every year after the having, we typically get this really nice run, was it because now that was consensus and everybody was like, oh, well, of course it's going to keep running. [SPEAKER_02]: I'll sell later and, you know, somebody shorted the market.

[SPEAKER_02]: Well, from your vantage point, like, [SPEAKER_02]: Why is the four-year cycle dead or what happened to this year to cause Bitcoin to have negative returns? [SPEAKER_00]: Yeah, I mean, look, Mike Novogratz is a much better market prognosticator than I am. [SPEAKER_00]: I'm generally, I consider myself a Bitcoin most emalist and someone who kind of like sets a, you know,

[SPEAKER_00]: diversified portfolio and let's let's time do its thing. [SPEAKER_00]: So one thing I would tell you is that my confidence in Bitcoin, Ethereum, Solano over the long term, hasn't been shaken at all by the the disappointing performance relative to other assets for this year.

[SPEAKER_00]: One thing that I would tell you is someone who you know, operate has operated in the crypto industry for a while is that very frequently [SPEAKER_00]: Bitcoin does the opposite thing of what you think it's going to do, price-wise, yeah. [SPEAKER_00]: Then it really rides these, it really rides these kind of, you know, emotional or sentiment-based indicators harder than other assets do for better or worse.

[SPEAKER_00]: And so if I had to pinpoint a [SPEAKER_00]: created an opportunity, maybe for some long-term, very large size holders to access a kind of different quantum of liquidity than they were able to before, and then to the fact that everyone expected us to have a four-year cycle, and the game is a little bit different now because of the ETFs, and I don't know that you really need more reasons than that, but what I do think will happen.

[SPEAKER_00]: is when you least expect it, it's going to melt our faces to the upside again. [SPEAKER_02]: I'm like 100% I've been reading some market commentary from a few different operators and they've kind of coalesced around this idea as well of large Bitcoin whales.

[SPEAKER_02]: not only, you know, some of them liquidating and just selling spot, but selling call options against their Bitcoin, which could, you know, dampen some of the volatility and then you've got folks like micro strategy, which are kind of dampening the volatility of crypto and and all that kind of stuff as well. [SPEAKER_02]: So it feels like there's just, [SPEAKER_02]: almost a coming of age for crypto.

[SPEAKER_02]: It's like, hey, if you want to be in the big leagues, you're going to have to absorb a lot of, you know, derivatives, you're going to have to absorb a lot of, you know, different market participants, and that, you know, sometimes it goes up, sometimes it goes down, but over the long term, you know, that trend, [SPEAKER_02]: I think like you said, you know, it's going to come when people least expect it like a thief in the night and it's going to melt faces off.

[SPEAKER_02]: You just got to stay in like there was this one study I read. [SPEAKER_02]: It was from like, you know, I think it was from a fun strat, but like. [SPEAKER_02]: ten like most of the returns in Bitcoin happen in like ten trading days. [SPEAKER_02]: And if you're not in within those ten trading days, you know, so you're trying to buy and sell and go in and out, then you miss like all the returns and like you have negative returns like year over year.

[SPEAKER_02]: And so it's like you got to stay in because that volatility is really hard to to time. [SPEAKER_00]: So at the end of the day, [SPEAKER_00]: thesis for Bitcoin hasn't changed from when I first invested in it, which is, it's a fraction of the market cap of gold and young people, it has demographics in its favor.

[SPEAKER_00]: meaning, you know, the age of Bitcoin ownership skews younger, there's going to increasingly be, you're going to hear more and more over the next five, 10 years about this great wealth transfer that's happening. [SPEAKER_00]: And as that wealth transfer happens, I think allocations to Bitcoin and crypto writ large increase. [SPEAKER_00]: And yeah, I, you know, I'm not changing anything. [SPEAKER_00]: love it.

[SPEAKER_02]: Well, I'm not sure how much you'll be able to share with us just by the nature of, you know, you've been part of a public company and, you know, providing just an outlook basically for the product and, you know, what's on the road map, what can we expect both in terms of maybe products and offerings and also yield, like, you know, what is 2026 got in store for any [SPEAKER_02]: to give us a link so we could put it in the show notes. [SPEAKER_00]: Yeah, sure things.

[SPEAKER_00]: So we've already talked a bit about how early next year we're going to be adding support for entities to onboard to Galaxy One. [SPEAKER_00]: So beautiful. [SPEAKER_00]: Whether that's like an entity that you use for personal wealth management purposes, like an LLC or a trust, something like that, or

[SPEAKER_00]: You know, if you have a small business or a crypto business and you want to a place to and a unified way of manage the treasury for your business, so we'll be out of support for that, we'll be out of support for staking, we'll be launching what I think will be the best kind of see-fi crypto back lending product in the market, and then a couple things which I'm not able to say quite as much about yet in the

[SPEAKER_00]: asset management and lending category more broadly that I think will be first move or so. [SPEAKER_00]: We're in the early days of galaxy one, I think we already have a compelling value proposition and I encourage folks to check us out, get in touch with our support team, send me a DM on Twitter, my DMs are open on Twitter and I'm happy to hear from folks. [SPEAKER_00]: But also, you know, if now's not the time [SPEAKER_00]: amazing.

[SPEAKER_02]: Well, look Zach, we greatly appreciate your time joining us today on the crypto 101 podcast. [SPEAKER_02]: We really do hope that you join us sometime, you know, next year maybe Q1 or Q2 and you could give us some updates as these new products start rolling out. [SPEAKER_02]: But until then, we wish you a very happy holiday. [SPEAKER_02]: However, you're celebrating. [SPEAKER_02]: We hope you come back with a lot of fervor and excitement for tackling the new year.

[SPEAKER_02]: So thanks for joining us and everybody. [SPEAKER_02]: I'll watch you. [SPEAKER_02]: Thanks for joining.