Welko Onchrillions.
I'm Joel Webber and I'm Eric Belchunas.
Eric, you've been busy lately, Yeah, Joel a little bit. Yeah, what happened?
The word is obsessed.
What happened?
Yeah, So spot Bitcoin ETFs were approved after ten and a half long years, and it was really intense the past month, you know, and James and myself were all over, the rest of the team did other things, but James and I dove in, you know, headfirst, basically and deep, and if anything, we almost need some time to like like wash it off. But I'm still in it because they just launched and now it's like the first couple weeks of the race are pretty intense. At some point
we will move on to other things. But this is all we can talk about right now.
What's been the most exciting part since the SEC's x account got hacked, which happened like the day before, or they actually authorized everything to start treating.
From that fake tweet to the approval was twenty four hours. A lot of people came in with Gary's now going to disapprove or he actually planned it all just so we can say he can disapprove because bitcoin fell and it's like, oh see, it's it's so easy to manipulate I did it. Like there was all kinds of conspiracy theories, and James and I had a quick call where like, let's just hold the line. We're still ninety five percent
approval odds. And even at the last minute, there was some filing that said withdrawal and it turned out to be a complete technical issue, but people saw the word withdrawal, thought arc with withdrawing. So that whole twenty four hours was very wild and emotional because there was always that little chance that yeah, they could not approve them, and we put a lot of career risk on the line, James and myself, and we ended up vindicated. So but the last day was really intense. I mean little sleep
that week. Once they were approved, though, the only thing I could think of. I don't know if it's because I'm watching a World War two documentary, but I just I just thought, war is over. So I went and posted a picture of the Pittsburgh Gazette from like nineteen forty four or whatever, war is over. And then no matter what he says or Elizabeth Warren says, it's over, they're out.
It's done.
And that felt so good.
So here we are. They're out of the bag.
They're out.
We've we've we've many questions that people on X and elsewhere have been asking you and James Safer, the Bloomberg intelligence analyst who's going to be joining us on this episode. So we're going to do an episode that we haven't done for a very long time. Mail bag, lots of questions and we have maybe a few answers who asked the most questions.
We got a lot of questions about like three hundred respondents to my tweet. A lot of them are are overlaps, really about like how does it work?
You know?
And we'll get into that. There's also a guy two people want to give a shout out to Fred Krueger. I mean, I assume that's his real name, but it is the same name as the you know nine news it is, so you never know.
I don't know.
But anyway, he did a Q and A and it was beautiful and that was part of where we got the idea. But we've been my inbox has been flooded with questions, but we pulled some from his cues. We also nature Acy did a Q and A with Matt Hogan. There's some overlap with that, but generally speaking, a lot
of them came from people who hit our DA. My dms are open, so I get all kinds of questions and in the replies and so I've never had this many questions ever, so I thought we would address a lot of them right now and just be done with it.
Okay, here we go, this time on Trillions Bitcoin ETF mailbag. James, welcome back to trillions.
Yeah, thanks for having me. I'm happy to be back.
Okay, so have you gone full bitcoin yet or are you like cyborg half bitcoin half ETF.
Definitely the cyborg around. Eric can tell you I've built.
I've been building a tool that I'm very, very proud of and excited to show off the clients that is pretty much completely unrelated to anything happening with bitcoin ets but largely a huge chunk of my time over the last month or two has been spent and focused on nothing but talking about these ETFs and also tired of it a little bit.
Honestly, just props to James. If we're going on crypto knowledge or fluency, he's better than me for sure. I mean, he was interested in this a long time ago. I'm much more focused on the ETF and the positioning in the marketplace. But he really knows this industry, I think better than anyone on our team for sure.
Okay, James, I'm gonna start these questions off going to you. Some of them have I'm gonna call it like a like a little bit of a tinfoil vibe. So we're gonna maybe unpack that as we go there, as we go. Here are the ETFs backed by actual bitcoin or are they paper bitcoin? That was question number one?
Ja, Yeah, so I actually, I mean the answer is yes, they're backed by actual bitcoin. Theoretically, you could argue that it's not that dissimilar from people who are used in the crypto markets to trading bitcoin on in exchange like coinbas or Gemini, in the sense they're sitting.
On a wallet.
But all of these shares are going to be backed proportionately by some number of bitcoin. So yes, they are physically backed. And that's all you really need to know. If you're buying a share of this ETF, you should know that you're going to be backed by bitcoin.
And this came up with gold back in the day, Jrol, This is a repetitive question. They said paper gold, So they actually took people into the gold vault, took pictures in there in London and showed them the bars. These issuers do not want the risk of being short bitcoin. Okay, they want to do a one for one. The way they make their money is the small vig or the fee they get for this service. They're not into the
trading business. So I would say yes. The only reason the answer is not yes is if you're a hardcore crypto person and you believe bitcoin is literally a currency that is there for when the system collapses. No, this is not the same as direct ownership, and you should buy it direct, get your own wallet, God bless you. This is more indirect ownership, but it's still ownership. ETF shares are receipts. That's what the word spider stands for,
SMP depository receipts. So think of the shares as a receipt too, the bitcoin storre with the custodian.
Yeah, if we're putting tinfoil hats on, I'll say, like, there's a lot of takes out there about why ETFs aren't great or bad, and like the one take that I was out there that I was like, yeah, that's actually value like fair. It was like, this is centralizing. So if the government wants to confiscate your bitcoin, they can do it. And it's like, well, honestly, if we get to that point, you're you're probably correct. The government could confiscate your bitcoin if it's in this ETF.
Okay, question number two, Can I get the bitcoin back when I sell the ETF? James No.
So part of the reason, part of the reason, part of the way that the SEC approved these ETFs is they did not allow the standard in kind creation redemption. So in a normal ETF, the way you create shares you hand over the underlying asset or securities and in return you get the shares of the ETF. In this case, the SEC said they were uncomfortable within kind, so they
force them to only be cash create. So that means the only way that money can go in or out of these funds for now, until there's further regulatory approval or changes for now is cash in, cash out. So no, there is no real way right now to get the bitcoin that you have de facto ownership of the ETF itself. Will have to sell the bitcoin to generate cash if you are redeeming.
Now, fund investors like, there's how many thirty trillion dollars in funds and ETFs and equity stock everything? Right, Nobody wants the stuff back. That's the whole point of outsourcing. This is the whole thing to explain to crypto people. Fund investors want no part of this. They want USD back. That's a feature, not a bug. So part of that question is, as a true coiner person, most people happy to get USD. Let Blackrock deal with it. I'm just here to get a little piece of the action.
Okay. Is it possible Eric that if I, you know, buy this ETF, that the money that I'm giving to one of these issuers uses the money that I was going to give to them for something other than bitcoin.
No.
Here's one thing though. If you sell a bitcoin ETF on the market, or buy one, let's say you buy one, you may be buying it from somebody else on the stock is change. That's called a natural there's no reason to do flows. But if there's way more people buying than selling, it creates a premium in the price that triggers an ap to do a creation. That's where the flows come from. And again these issuers don't want to
in the market makers and aps. Nobody wants to be long or short the underlying thing, whether it's S and P stocks or bitcoin, they want to be flat. They're not in the trading business. And so no, the answer is or yes, the answer is your flows would go directly towards that. They wouldn't go SBF and buy like a bunch of apartments in Bahamas and give the money to all kinds of celebrities and politicians. They wouldn't do that.
Eric next question was this launch, let's call it. I guess it's a series of launches really successful.
So yes, by any measure we're talking, I'll give the numbers. If you talk about organic, there's a couple of tfs that were launched where someone just stuffed two billion in and no one traded it after that. I would call that like total like sea capital, and that's it and remove those Easily the most successful launch organically of all time, ten billion dollars of trading in the first couple of days. The flows are already up to about two billion. Now
you have to subtract GBTC. Okay, so that's what makes it weird.
James, I was saving this one for you because of GPTC, and you can unpack that one. There were outflows there, So does that make this these launches a failure? So talk to a saisho between GBTC and also these newer entrants.
Yeah, I'll add a little nuanced to what Eric was saying.
I'm with Eric one hundred percent, like this was a successful launch for these ETF fissuers, for ETFs in general. I think some people are saying it's a failure because it didn't send them bitcoin price skyrocketing.
That said, I do think some of the volume numbers were seeing.
There was almost about ten billion that traded in these things and the first three days of trading, which is insane. But I think part of that is you got to look at GBDC is over fifty percent of that volume. I think a lot of this is pair trading from these market makers. And you also got to look at what was happening with the premiums and discounts. So a lot of these new ets were trading at premiums while GBDC was trading at a discounts. So there's a lot
of r being happening between these things. So it's like basically facilitating more trading. That said, trading is a very good thing for a new product. Whether it's whether it's partially because of the underlying structure of the market or not, it doesn't matter. But yeah, GBDC, we expect it outflows.
I've written notes where I was saying I'm expecting billions of dollars to flow out of GBTC, and I think a lot of that money, who knows how much, at least the third maybe half, is going to flow into probably other.
Spot, bitcoin ETFs.
But people are also fixated so much on like the near term, day to day, what's going on with these flows. Just take a step back, give us a little bit so we can see what's going on with these flows over a week.
Yeah, and let me add this. I get a lot of people replying because the price of bitcoin has been like flat, went down a couple of days. These guys are like when moon, which is like when am I going to the moon? I'm like, dude, you just went there. It went up eighty percent in anticipation of this event. Of course, there's going to be some profit taking and some selling of the news. That's just the way it works.
With anything. How about the FED.
The FED gets front run right, FED announcements. This is normal stuff. Some of these people expect like one hundred percent return every day when they wake up in the morning, and if they don't get it, they're like cry babies. I'm a sixty forty person, I expect six seven percent a year. Joal, that's how low my expectations are. So everybody's people are going to get more miserable the higher their expectations are, and so there's misery out there somehow,
even though this was successful. Other thing, the ETFs traded. There was seven hundred thousand individual trades in the first day, so the number of trades is gigantic. That is a lot. That's more than the q's trades every day. And the other thing is if you take the volume, the average volume of the newborn nine, let's take GBTC outboard nine.
Yes, is everything except GBTC, which is, by the way, Greyscale Bitcoin Trust. If you're not familiar with what we're talking about with GBTC, go back to previous episodes of Trillions and you'll learn all about it.
Right, So GBTC separated because it came over with volume and assets like a fully grown adult. The newborn nine is newborn, and that's why I use it, use it. Launching a fresh ETF is hard, So those are on a different standard. Those nine, right, if you take their average volume just totally obliterates a normal situation. So consider this last year, there was five hundreds launched on Tuesday,
they traded four hundred and fifty million total. The spot bitcoin ETFs traded two to threefold that on day three, right, and that's five hundred combined. I bit alone traded more than the five hundred. Yeah, so yes, there will be some tapering off of the volume. But the other thing is, remember who's in this. This isn't like some random I don't know, like global x fund that had had a good day and is being used as an our blackrock fidelity.
Right.
These are investco These are gigantic companies with huge marketing divisions and sales sales forces. So I think the short termism is annoying, and I think I just tell people out there, if this is bringing you down, they get despite all these numbers, just because it didn't go up another fifty percent on top of eighty. You have to get outside. You have to read a book, you have to find a girlfriend, you have to do something, because your expectations will never be met.
Not it's not twenty twenty James. Question number five, If I buy a bitcoin ETF, does it cause an immediate buy of bitcoin? And how does the settlement cycle work?
Yeah, so it's it's sent from your perspective, the answer is yes. Right at the end of the day, that share is going to have exposure to bitcoin. But there's a creation process that has to happen. There's a there's what we call a creation cutoff times. So different ETFs have different cutoff times. So to create new shares, there needs to be essentially in order from the aps to to these fun saying we're going to create this many shares.
And wire the money over.
But you've got to realize once that money is wired over and those shares are created, which what only only happens with net new demand and the ETF once that money is wired over, all these issuers, as Eric was hinting at before, they are not They're they're trading trying to get good execution, but they make their money by making.
Sure they're exposed one to one with bitcoin. The last thing they want.
Is to have cash drag in their portfolio where their portfolio is significantly exposed to cash and then bitcoin goes on a run and all of a sudden they're underperforming. That is borderline worst case scenarios of the ETF fissure. So at the end of the day, the plumbing can get confusing because there's a lot of offsetting trades in the back end. People are trying to look at what's going on with the on chain metrics. Well, do you look at coinbase and GBTC or grey scales on coinbas
sortm in these other ETFs. There's money coming into the other ets and money coming out of GBTC, and it's hard to know exactly what's going on in the back end because there's offsetting positions that don't necessarily show up on chain that we are seeing.
In flow data.
So I'm just going to go back to the beginning and say, yes, eventually you will have exposure to bitcoin.
If there is a share outstanding, you have exposure to bitcoin.
But yeah, okay, you mentioned coinbase. What role do they play in this and how safe is the bitcoin that they're holding, and what happens if they lose it? You know, if you followed crypto at all, you know that, you know the cryptos bass in general is sort of then rife with thefts at times.
Yeah, So there's two.
The primary way that most people think of Coinbase playing here is they're the custodian. They're the ones that are storing these assets in cold storage. Right, they're on these hardware wallets or multi sig wallets, whatever they're using. They don't exactly tell you exactly how they're doing it. The other part of what coinbase is doing is they're also execution agents for a lot of these As I said, cash comes in and then the issuers need to execute
and get exposure to the big bitcoin. So they're working with the coinbase over the counter desks and the execution desk to make sure they're getting exposure to bitcoin. As far as your question about what if they lose it or it gets hacked, the coinbase does have like an insurance policy for one.
Hundred and something million.
I should have looked it up before again this podcast, but coinbase has an insurance policy in the event that they do get hacked. Obviously that would be a bad situation. But one thing I will plug here is I think we'll see some of these ETF fissuers likely sign up to have multiple custodians, which is in something and we have in the US. So I think we'll see Gemini and Bicco as custodians of some of these ones that have only goin base listed now.
But time will tell if I'm right on that front.
Okay, Eric, I'm gonna kick this one to you. When will the SEC approve an ether ETF now that Bitcoin's been approved?
Yeah, this is a tricky one. James and I haven't fully dove into this and given odds like we thought, but we're kind of in agreement that maybe a two thirds chance sixty five percent is by may and our rationale the pros are that they've already approved ether futures and if they approve bitcoin futures, didn't approve spot, got sued how to do spot, and they approved ether futures, remember the SAT questions, Well, then they got to approve
ether spot where they gonna get sued. That's the general like sort of you know Bell curve meme, like even the like the not so smart person and the super smart person come to the same conclusion there. But Gary did kind of say some things that were like he was really lashing out in his you know, after the approval, he was saying like he didn't like it. All the risks and he didn't he said, don't expect anything soon.
But I would blow that off. I just think that you've got Blackrock with a filing too, and remember Blackrocks Blackrock Gray Scale who sued them. So you have those two main companies with filings for spot. I think they probably do it. But you know, we were ninety percent on this, we're only sixty five percent. So take with that which you will. I'm not sure if James has anything to add.
Yeah, I'll just I agree with one hundred percent of what Eric said. I will just add the other side what the other thirty five percent is. And that's basically that Gendler might know everything that Eric just said. All the facts are pointing to that they should be approving these things. But he could say I don't care, I'm denying them because of XYZ reason and then waits till
a court forces him to approve them again. That's my most of my other thirty five percent that basically he says, fine, we'll go back to court over this one and maybe he learned a thing or two from what they did wrong on bitcoin futures, if he indeed did not want bitcoin futures and spoty bitcoin ets, and he'll use that
in the theorem. The other thing is the other part of that is etheroem is different from bitcoin, right, it's proof of steak, not proof of work, which means there's yields and other things, and there's some very mind, there's a lot of minutia and the differences here that the sec is gonna have to get comfortable.
I'm gonna go out on a limb here and say that he's gonna he's gonna uh punt on that he'll find a way not to do it. Okay, Uh, James doesn't spot bitcoin ETFs defeat the purpose of bitcoin as a currency quote outside the system end quote by Tinfoil Cap.
Yeah.
I mean it is arguably against the ethos of bitcoin, but it is in the ethos of bitcoin that bitcoin is all for free markets and libertarian ideals for the most part. And basically, these ETFs are not changing anything about bitcoin itself, aside from maybe storing some of the bitcoin in cold stores where no one's gonna fucking play method to get.
Exposure to that.
That said, obviously, as we talked about, this is not gonna help you if if society collapses, you're don't you don't actually own your bitcoin, not your keys, not your coins. But if you want exposure to the asset, in my opinion, this is the best way to get exposure to it in the traditional financial rails.
James, one more for you, kind of related does the does the bitcoin held by these ETFs count as on exchange or off exchange?
Yeah, I mean I guess, I guess it depends how you're going to define that, right, So for the most part, I would say it's it's not on exchange in the sense that the any bitcoin that's held by these ETFs.
Needs to be in cold storage.
That said, in the same way that bitcoin is on exchange. Bitcoin it can be moved at any point just because of flows in or out of ANYTF. Right, So it's not it's more cold storage than anything.
Eric, you mentioned the gold etf uh, and there were conspiracy theories when those products launched that the gold wasn't actually in the vaults. So this next one's for you, which is, are any of these issuers going to show us the wallet addresses for the bitcoin.
I think so I do. I just don't think of.
The similar thing because the gold bars they eventually showed the serial numbers or whatever. Yeah, some of them.
James is going to go a little deeper on this than I am, because I also I think this should be pivoted to how does a bitcoin actually get stored at coinbase? Like, how does that work? Where do they source it? That's what I want to hear him answer. But I will say one thing, Nobody who would buy an ETF care stroll. The only people who cared about the gold were a couple like quacky Gold people who were like really really paranoid. Even goldbugs don't care they
traded it. They were like, it's fine. Remember these are also big companies. Do you think blackrock after like forty years on the market once it's reputation damage because it blew the money on something else or didn't. It's just this is serious business. These people are not are going to mess around for a one billion, two billion dollar kind on behalf.
Of the tinfoil crowd? James, are they going to show us the wallet addresses?
So I think some of them will. I think some of them are going to share their addresses. But the problem is, if you're using coinbase and some of these other ones, they might not want to show you exactly what the addresses are for operational security purposes. That said, I think some of these smaller shops might say, all right, these huge funds might not want to release their addresses and show where the money is.
But if you're a.
Smaller shop, you might feel a lot more comfortable and use it as a marketing ploy to be like, if you're questioning it, you can use our ets. But like Eric said, for the most part, the people that will be using this and really care about that are going to be more cryptonative type people, and they might be just using this in like an IRA or something like that they have a money in some sort of account that they can't actually buy physical or spot bitcoin itself with it.
Yeah.
Remember there's there is a gold ETF that stores the gold in Switzerland, and there's another one that promises to give you send you goal coins your front door, even as a retail redemption. And those two have maybe one percent of all the assets in gold ETF. So I think we'll see something similar. Someone will come out with a we're literally going to make sure it stored a company that's in Europe, and we'll show you the address and we'll figure out a way to sort of get
you bitcoin. I could see that kind of thing coming out, but don't look for that to be a big hit or anything. This is a very fringe sort of concern.
Okay, I think this is question eleven, James. I love this one. Actually, how come the ETFs have different prices and different discounts. That makes no sense to me. It's all they're all holding the same underlying.
Yeah, that's actually a good question.
So some of them went with the idea of, like we're going to do one one thousands of a bitcoin, so if bitcoin's trading at forty thousand or fifty thousand, will trade at forty dollars.
Or fifty dollars.
But for the most part, most CTFs just launch around twenty five dollars, which it looks like what a bunch of these guys did as far as the premium and discount go. That's just a part of like fine tuning this process. I've put out charts in a note that shows like all those nine ETFs, the newborn nine, which I've never heard Eric.
Say before this, and I love that phrase. It's so good.
I say it on Twitter all the time. You do you not follow me?
I guess I don't follow you well enough. I never, I never. The alliteration didn't click until I heard it aloud. I guess they were trading at big premiums.
But what you've got to realize is, I think that's also part of the reason why the volume is up, because people are basically trying to r of those premiums in the Newborn nine and the discount and GBTC.
But it's it's just a it's gonna take time.
Like these authorized participants, these market makers, they're going to get more and more efficient as time goes on and making these things, and we're not going to see these same differences in premiums and discounts and prices. But while we will see the difference in prices but not in premiums and discounts over time.
James, I'm gonna ask this one of you because I think it's a little technical. How do these ETFs match up with the biggest holders of bitcoin to the best of our knowledge?
Yeah, So the problem with this question is, like it's what a lot of regulators get don't understand about bitcoin, Like if you use an exchange wallet, that wallet is not a wallet for one person, that's for an exchange that's representative a whole bunch of people, which goes back to like tradfy looking at ETFs and who owns the who actually owns the ETFs. It's not black rockets the end investors in those funds. And that's the same way to look at some of these bitcoin addresses. And the
other part of it is is the exact opposite. I could have ten different bitcoin addresses and you would never know that. Said GBTC is like the largest known holder of bitcoin in the world as far as i'mwhere, aside from something like Satoshi and some of these other people. But we don't exactly know how many of those wallets or actually Satoshi and things like that. So the real answer, the easy answer, is Satoshi Nakamoto, the inventor of bitcoin.
But those coins haven't moved since basically the invention of bitcoin. But yeah, GBTE is the largest holder. When it came over, it had over six hundred thousand bitcoin. A lot of that's leaving and coming to other ETFs likely, but it's it's basically the largest holder right now.
And how much this Michael Sailor or micro Strategy hold again, James.
In dollars?
Eight billion?
Yeah, it's eight billion dollars.
It's one hundred and thirty nine thousand bitcoin.
What to watch in the next twelve months? I BIT passing micro Strategy at eight billion. I'm not sure i BIT will go that fast. We'll call it one to two years, but I'm calling it now. I guarantee that will happen.
Trol.
I don't the timeframe will see. It depends on the price and stuff. But that's something that you could probably take to the bank. Not all of them will pass him. That said, owning that much as a stock is one person interested a lot, But I could see that happening.
Okay, okay, James, I'm curious about this one. What percent of bitcoin is already owned by the ETFs and how high could it get. I'm picturing a conversation in a couple of years. Maybe it could be more than a couple of years where suddenly it's like you look at who owns what and it's like black Rock and Vanguard own ten percent of all public trade in companies or something. Right, we're gonna get to a world where ETF's own vast quantities of the bitcoin available.
Yeah, they already if you include all international ETFs and gBGC, I mean it's somewhere around flourish percent. I think it's under five percent, but it's a pretty healthy chunk of the out standing bitcoin. And that's out of like the outstanding bitcoin. It doesn't take into account the fact that a lot of this bitcoin is just hasn't moved in as untouched.
It might be in a hard drives that were lost.
So the number as far as like actual float, if you want to think about it that way, might even be higher. I'd have to go back and crunch the exact numbers. But things are changing very quickly, pretty much every single day.
How does that compare with like equities and fixed income or this.
Is another thing I hear people kind of I wouldn't say moaning about, but like fear mongering over which is, hey, there's only a limited supply, how how could this work? Scarcity? And I'm like, well, there's only a limited supply of float for a stock shares too, that this is normal. It just means the price would go up if there's if there's a limited supply and more demand, the price would go up. So I'm not too worried about it.
I do think, you know, maybe we'll settle in it like fifteen percent, that's where I could see this going from four. But remember ETFs are headed for fifteen percent of the stock market too, so I think ETFs overall will end up, you know, under twenty percent of just about everything. Every now and then they own a lot of us like a mid cap, but that's like a quirky situation. They usually rebounce out of it, so I would see that. I wouldn't see them owning like, you know,
eighty percent or anything. But it's certainly the more they own, or the less limited supply there is, the more volatility there should be, which, by the way, is in my in my theory, the volatility this is a feature, not a bug. I think there's gonna be leverage. ETFs is gonna be fun for traders and what I call hot sauce. So I see it's sort of fitting in as a hot sauce. So that volatility, I think would be desired, and the scarcity, if you own some, you're gonna feel good about.
That, okay, James if I sell GBTC that's gray scale at a loss. Can I buy another bitcoin ETF or do I have to wait thirty one days to avoid the wash sale rule.
Yeah.
So first before I answer this question, I'll say, seek tax advice from a tax professional.
As far as I'm aware, maybe we just leave it there.
I can answer from what I understand because I went in the weeds on this a little bit last night and this morning.
Right now.
Technically so for gold ETFs, for precious metals ETFs, there is no washeale trading rule, which is what you were asking about. You can basically sell and buy immediately because they're not securities. A lot of the bills that have come in front of Congress, specifically one from Lumus Gillibrand trying to do a market structure bill around crypto and digital assets, if those ever get passed, it will make why sale. It will bring the wash sale rule into
effect for cryptos. That said, as far as I'm aware right now, it is not in effect, so it's not going to be impacting flows. That said, even flows wouldn't matter because for the most part, anyone who's in these things right now is probably up unless they bought like at the very worst time a couple of years ago. There's there's likely not really a situation where people are going to be tax loss harvesting right now in these things.
So yes, I don't think they're subject to the washsale rule, but no, I don't think it's impacting anything right now.
Okay, James, We're we're getting to the final questions here. How does an advisor in good faith recommend a bitcoin ETF when the SEC chairman who taught blockchain at MIT has said it's pretty much a scam in his approval statement.
Yeah, I mean a lot of what Gary said there is political in nature, is the first.
Thing I would say.
And second of all, you can just look at the hard data around what a small allocation in bitcoin does to a portfolio. It wouldn't be hard to make the argument of why it would make sense in a giving client's portfolio, obviously assuming they have the risk appetite and the ability to take the risk to add a volatile asset to a portfolio. But for the most part, I think it'd be a pretty easy argument, especially if you have your end client coming to you asking you to buy this thing.
Eric, if you're having that conversation with the financial advisor. The next obvious question is, if you're the advisor, this is what you're gonna hear from someone. When do I get to put this stuff in a retirement account?
That's a good one at some point. A lot of them have a broker I mean a lot of them do a brokerage window. You can get through there, assuming they provide it. I know Schwab has access to it. But here's the bigger question. A lot of it may be difficult for now. Again, over time, black Rock, Fidelity, these are actually sponsors of some retirement accounts, so it depends for now. I think over time it'll be normal
through a brokerage window. That said, the platforms out there like these, these brokerage platforms and advisory platforms, Wells Fargo, Merrill, JP, Morgan, A lot of them don't have them yet, so these flows and assets are even without that kind of distribution. Those will probably also happen over time. That could take like a eight months to two years. Though Vanguard doesn't have them. That's more for philosophy. They just don't believe
in this philosophically as an investment. They might come around eventually, but for now, it's actually not available a lot of places. I think over time, given the size of the asset managers that are into them, they will pop up on these places again typically, you know, Joel, you know I love MTV.
I read the book MTV.
Cable companies did not want to carry it. Remember the campaign I Want my MTV. That's how they got That's how MTV became MTV. They were told people call your cable person that you're you know, in Illinois or whatever, and tell them I want my MTV. That's how MTV got on widely distributed on cable. The same thing here. If there's enough grassroots demand, it'll be everywhere us me. If not, it might not be everywhere all right.
Final question. Unsurprisingly outflows dominating the conversation so far. So what's next. What are some other key ETF data points or features worth keeping an eye on to gauge success in competition in the coming weeks or months.
James, Yeah, So I'm watching those discounts and premiums I was talking about. I'm watching spreads, GBDC. Is they tight? It is trading of all these products, which makes sense. As Eric talked about, it came over as a full grown adult with immense liquidity, but their spreads are extremely low. But ibitspreads are already compressing pretty heavily just on the third day of trading, and so are many others. They're all trading pretty tightly, so be watching that and we'll continue watching flows.
Obviously volume will be important.
We'll see I would expect volume to fall off a little bit after the hype train has subsided, But as Eric hinted with his last answer, I'm more interested to see what happens with these assets and flows over the next eight to eighteen months, more so than I'm really focused on what's going on. Yes, now matters getting more assets, getting more volume immediately out the gate can help you longer term, but it doesn't guarantee anything.
Longer term.
Stuff will be very interesting to see as these ETFs potentially get added to those big wirehouses and advisor platforms.
So flows is still going to be the number one thing I'm watching as far as I'm concerned over the long term.
And then some of those other facts, like is somebody going to release their wallet addresses? Will people figure out ways to deliver smaller values of bitcoin directly to end clients? And will we get to in kind creation redemption with the SEC is not comfortable with He.
Went over almost everything I had. I would add in their options. Options should be listed on these in about two months ish. They have to get some more approval from the SEC. But assuming they do, options will help because anything volatile and you have options on it, you're going to attract the trading crowd. They love that you get leverage. ETFs have been filed already two x bitcoin. That will also drive in, so there'll be a lot of these amplifiers or these things that sort of bring
more ecosystem into it. We're going to watch that, and then the fees. The fees are already low between twenty and thirty, we're probably going to see somebody break through and set a low, so the fee war will probably carry on as well. I'm watching that, and then I would just but just to go back to James, as I think, you know flows are truth. You just you know, assets can move with the price of bitcoin, like you can have assets go up just because the bitcoin went
up in your fund. But flows are really truth, and so flows are probably the most important number. But I will say this to anybody listening who's from the crypto world. You need two things for an eat, for a new category to have a good shot at growth volume and low fees, and these have that in spades. And what I also like, what I'm seeing so far is that if you look at the nine, the newborn nine, their flows and their volumes are proportional to their size, and
everybody's getting some love. That tells me it's not one giant investor or something. It's everybody putting their whole might behind it and it ends up proportional to their weight, and that's good. That means a middle class is growing already, and that should help long term as well.
We've been waiting for this race to begin for ages. Now it actually began. When are we gonna know who wins the race to be the top spot bitcoin ETF.
I'll jump in real quick. I would argue that it's almost kind of over right now because of gbtc's immense lead and assets and liquidity.
That said, I would never count Blackrock out.
Wait, who whoa whoa whoa whoa that I thought you were going to say Blackrock, There's no way you can count GBTC that. This is where it's complicated rol GBTC. It's like it's like, Okay, there's a race and the the it's adults and like nine newborn babies, and the race goes on for fifty years. Obviously, that's I'm getting into a weird place.
I was gonna say, listen, listen, listen. Let me just say this did take some longevity meds there.
Here's what's gonna happen over time. GBTC is going to bleed. It's going to like a melting ice cube. It will stabilize. But honestly, from what I'm seeing early James, I wouldn't be surprised if bit of an ibit is already trading more day to day than GBTC within the month, And once that happens, it's only a matter of time before the assets gets past sort of like img EM. So I would look at a couple of years down the
road the assets get passed. But the real important one is volume, and I think I BIT could have more volume by the end of the month. You disagree.
End of the month seems new to me.
But again, I think a lot of the reason that GBTC has has made up fifty two percent of this entire volume. Pie is because it was being used as the other side of the trade on these market makers. So when they're when they're offering shares to new people that are buying them on these new Boar nine, they're probably going out because then they're net short those ETFs. They have to go long Bitcoin in some way on the other side, and I think a lot of people
were using GBTC. That's why we saw minimal outflows in the first day despite the massive trading volume. So I mean, maybe you're right, maybe that once these flows start to settle in and the discounts and premiums come down a little bit, maybe GBDC starts to lose some of its shine. But right now, from what I'm seeing on a trading perspective, GBDC spreads are are immensely tight and tighter than everyone else. But IBE it's gaining on them really quickly. So maybe
you're right. I'll take the l of the wrong I won't. I won't bet a Susie Lunch on this one.
But again is whoever has the average thirty day volume that's higher that will take a couple months to play out, that to me would be the winner. But again, GBTC makes this such an intriguing race. It's it is interesting, but it's a again. It's that's why I say the newborn nine.
Do you think we'll talk about any of this again? Probably? James. Thanks for joining us on Trillions.
Thanks for having me guys, this was fun.
Thanks for listening to Trillions until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show. He's at air Caultunas. This episode of Trillions was produced by Magnus Hendrickson. Bye