Bokn or chillions.
I'm Joel Webber and I'm Eric Belchunas.
Eric, we got a vip here today, we do.
I'm excited about this one.
Who is it?
We got Blackrocks head of Digital Assets, Robbie Mitchnick, and I have been told and we've seen him as like the guy internally who has really turned Blackrock into this sort of bitcoin force. And not only has he done that, but since the bitcoin ETFs have launched, especially ibit, I bit, Blackrocks offering, Yeah, that's their bitcoin ETF. And as an analyst, I've never seen anything like this. This has to be like a golf analyst tracking Tiger Woods in the late nineties.
What is this?
What is going on here? Let me give you some number stroll. So before I Bit, the fastest ETF to get to ten billion dollars in assets was jp e Q, which did it in six hundred and forty seven days. Okay, it's like three years. I Bit did it in forty nine days, and Fidelity no slouch, did it in seventy seven. So think about that. Just let that absorb. That is insane, right. Another one, if you look at Blackrocks ETFs globally they have over one thousand, like one thousand and forty four
something like that. IBID is taken in more money than any of them. IBID is taken in eighteen percent of all of black Rocks global flows this year, unreal for a new launch or unreal for any ETF. Even IVV doesn't pull off those numbers. And then when we look at the ETFs in the US, you're to date flows, IBID is number two overall. Only VU, the stud of all studs, VU is above IBIT this year, so it's
top one percent in volume. Again, this is after four months on the market, and we see thirteen f's come in, which is reported holders. There's already two hundred and sixty reported holders of this. Normally a new ETF and their first thirteen F season will see anywhere from zero till five if they're lucky. So again, this is like breaking records by quantum leap style.
And here we are with the guy who came to Blackrock and said, let's do something a little different. Okay, So joining us on this episode of Trillions Robbie Mitchnick, head of Digital Assets at Blackrock, and also James Safert, an ETF analyst with Bloomberg Intelligence, this time on Trillions. Blackrocks Bitcoin believer Robbie James, Welcome to Trillions.
Thanks for having me, Thanks so much for having me on, and I appreciate the intro. I actually feel like I'm the one with celebrities here because we've all been watching Eric and James.
Your guys, their head don't do it.
So James is a somewhat of a regular on the podcast. Robbie obviously so thrilled to have you here. Have you asked Larry Fink for a raise yet? No? No, okay, all right, so maybe it's like in the course somebody just gave Yeah.
By the way, I saw Larry Fink on Fox Business. I never see him mention tickers. I mean, because he's got a thousand of them, but it's like having a thousand kids you don't really bring up. He talks Macro a lot, but he was beaming. He's the biggest launch ever I been. But it's rare again seeing him talk about the ticker. I'm like, that must be a big deal internally if the big man's talking about it.
Yeah.
I think he's brought a lot of insight and thought leadership to this right, you think about we talk at Blackrock a lot about being a student of the markets, being a student of technology, and Larry's kind of the ultimate embodiment of that. So you see that in his journey on this, and obviously he brings a ton of geopolitical and historical context to it.
So Eric ran through some stats about the launch in the intro there. But let's rewind the clock a little bit. When did you first spot the opportunity and go, Okay, we got bitcoin and we got Blackrock. How do I bring those two things together?
Well, I joined actually in the summer of twenty eighteen, so coming up on six years now, and I had been at business. I totally fluked into this internship at a company I hadn't heard of and nobody had heard of at the time called Ripple, And that was twenty seventeen, and I interviewed for that internship in April of seventeen.
XRP was a two cents.
Their crypto tooken when I started eight weeks later in June, it was a twenty eight cents, and three months after I left in January to go back to finish my MBA, it was at three dollars, and so that explosive journey obviously incredible fortuitous fun timing, and I knew at that point I had to do something in this space. The opportunity was just too great and too exciting, and it was apparent to me that Blackrock had a lot of
potential to be a transformative force in the space. And so August twenty eighteen, I started as full time employee number one in the digital assets realm.
And it's been a fun couple of years.
Who hired you?
It was really Rob Goldstein in effect, that's who I first met with it at Blackrock, and we had a good conversation. I think some of my ideas were probably a little premature, let's say, at that time.
But what were they Well, you know, you might guess, but you know, if you think about twenty eighteen, or at that time was twenty seventeen, the idea that we would do a bitcoin ETF would have been totally premature, right, You did not have the institutional infrastructure, you did not have the regulatory clarity, You frankly didn't.
Have a lot of interest from our clients in this at that time. So as you track through time our journey there was a confluence of factors over the years that evolved to get us to where we are today.
You were pitching an ETF, a bitcoin ETF even before you were hired.
I don't think I was as reckless as outright pitching it, because I know how that probably would have gone at that time. It really wasn't the time, right, But I would be lying if I didn't think that at some point this was the thing that could happen at What better place for her to do that than black Rock?
If you could have taken the internal temperature with one of those internal thermometers at Blackrock for what the temperature for crypto or digital assets in general was at that time you were starting, what do you think it was?
What was the I think it was pretty similar to just about every large traditional financial institution at that time, right, We had so predating me. The firm had begun exploring blockchain in twenty sixteen, and I think correctly at the time came to the view that this technology and certainly the asset class was nowhere near ready for prime time and for our clients. And that was accurate, right, And there's been a bunch externally.
Very importantly that's.
Evolved over the years that brought that temperature up to obviously a much warmer level.
So it was not ice cold, because it was just warm enough that they could hire you. So like cold.
Certainly not ice cold.
There was a recognition that this could be a thing, right, that it's time hadn't come.
So what's interesting to me is Larry Fink is a major name, just like Jamie Diamond, and a lot of his peers generally were not into bitcoin. And there is an interview with Anthony Scaramucci on I Think It Was The Wolf of All Streets podcast and he says that he had a private meeting with Larry in late twenty twenty one where Larry says bitcoin sucks and Scamochie says,
I think you're wrong. You should do some research, and then Scamucci says it was a young kid named Robbie who came into Blackrock with the idea of creating a bitcoin et have he orange pill Larry, And I'm going to give Larry a lot of credit because he actually did the homework. It takes a smart leader to pridefully say bitcoin sucks and then twenty four months later say you know what, I've got this wrong. Blackrock needs to be part of this? Is that mostly true?
Was the pill actually orange or was it a different code?
I think there's probably a little bit of hyperbole in that, But like I said, we talk all the time about being students of them mark markets and students of technology, and Larry's the ultimate embodiment of that and his journey in this space and the work he did in the study through various sources. It shows up in how insightful he is now when he speaks on the topic.
When you're talking about joining and you're interviewing, they're looking up blockchain. That's around the time that Larry Fink's famous quote about an index of money laundering came out. Could you just walk us through before we move on to talk about the actual ETF What was the actual process of going from that view in twenty eighteen to twenty twenty one, still saying it sucks to like all right, actually I'm changing my mind, Like what were the milestones
along the way? What did you see internally or even with Larry specifically that led us to getting Blackrock filing?
Yeah, and then also.
FTX was part of this. I had to think that almost would take you down a few pegs or set you back.
So first, I think the approach here has always been very client focused and very long term right. So, certainly FtF was a bad event for the industry, but our focus was much longer term in nature than anyone company
or market cycle. Where it started in twenty eighteen after I mentioned that initial work that happened in twenty sixteen, So twenty eighteen where we really spent our time and energy was applications of blockchain technology, and that was consistent with most of the banks and another large traditional finance firms.
So exploring a dozen or fifteen different use cases of how you can use blockchain and the data synchronicity benefits across our business and for our clients, and by and large, most of those use cases across the industry did not work. We actually hit on a couple that were pretty interesting and delivered some value, but you didn't see the sort of broad based adoption of blockchain of everything right that
some people thought would happen. That was an important period though, for learning, for building comfort, for understanding the technology, and as factors of evolved. Starting with I would say twenty twenty, you really started to see an uptick in client interest, you know, kind of in the post COVID aftermath, and there's widespread money printing. Obviously bitcoin went up thirteen x. You also had a huge amount of venture capital coming too the space, right if at almost one hundred billion
dollars in venture financing the last four years. And that's also brought with it a lot of credible human capital too from big tech, from financial services backgrounds. And so you saw this institutionalization of the infrastructure of the degree that would enable us to potentially build solutions for clients that we could be confident in and have conviction that we could build to a black Rock and I Shares quality standard. And the last piece is the regulatory environment
slowly but surely did moderate over time, right. And so when you put those together and then lay that against what we were doing at the time, first in crypto, so we think about this space across three buckets in digital assets, three pillars crypto.
Stable coins, and tokenization.
So in crypto foundationally, we built a partnership with coinbas Prime starting in twenty twenty one. That was a technology focused partnership building their trading and custody capabilities and workflows into our Aladdin Investment system, so that Black Croc or any of Aladdin's other clients who wanted to get exposure to crypto as part of the whole portfolio could do that.
We also concurrently developed this private Bitcoin trust, which was really a starting point for us being an asset manager in the space, and that was focused on large US institutional clients, but it was a key solution that we felt was solving part of the problem that our clients were experiencing.
Think about stable coins.
We started managing the USDC Reserve or a part of it in twenty twenty one. That relationship grew significantly in twenty twenty two where we became the primary non bank manager of that three billion ish reserve today and invested in Circle and started to become a technology collaborator with them as well because of the potential we see for stable coins.
And then finally tokenization.
We did some private tokenization work with JP Morgan on their Onyx platform in twenty twenty one that laid the foundation for us to ultimately do our first public blockchain tokenization earlier this year. So those are all the key pieces that ultimately paved the way.
For Understood But and this reminds you of what's going on in JP Morgan, but again, all that's happening. While the CEO does say some things that seem to be contradictory, but clearly he's also has to service clients, and he's well, this is fine, we're serving clients. But personally I don't
get it because we do see JP Morgan. Jamie Diamond is basically slams it like every other week, and yet JP Morgan is one of the big aps for ibit and some people are like that hypocritical, but yeah, it's pretty much par for the course for a lot of firm this is the whatever business they're in, Like, they can't ignore clients, right, So you could actually be in the business without your CEO being all in.
Yes, although thankfully Larry's been super supportive of this, right. I think he recognizes the level of interest from clients, and I think importantly the level of frustration that we felt from a lot of our clients, which was if you want to access crypto or bitcoin directly, that's been very hard for most of our clients. With the institutional or wealth advisory, right, it's different for retail. Retail has their own challenges too, but for financial advisors and for institutions,
almost impossible practically to hold bitcoin directly. So what they do They went to alternative exposure vehicles, and a lot of those didn't go well right. They were often high fee, high risk, underperform the price of bitcoin in some cases all three right, and so there was this frustration. There are other clients who missed the opportunity entirely. Bitcoin turned out to be the best performing asset in the world the last ten years, so that was also a bad outcome.
So I think that recognition that we were in a position to solve a real frustration for our clients definitely motivated the firm.
I'm going to go to twenty twenty three now is that okay, Okay, I'm on vacation in Kpe. May I'm doing my thing. I try to stay off the internet, and I try to stay off work email, and I see my Twitter's blowing up because coin Desk puts out a story saying black Rock's about to follow for a bitcoin etf. I remember quot shooting. I said, this can't be real, ken it. I didn't want to totally shut
it down because coin desk is pretty good. They've had some scoops about four hours later at four in the afternoon. Bang there it is. So my vacation, thank you, was messed up for the next couple of days. But it was exciting. I was like, what why would they file? Like I always thought Blackrock would come out after there's a couple filings and they get launched, and you come out a year later because you don't need to be
early you're Blackrock. But you were like leading the way and there was no real I mean, as far as I was concerned, our odds were one percent that SEC would approve one and that day, on that day, on that day, and they immediately went to fifty because blackrocks Blackrock. And so the whole thing was what does Blackrock know? And then there was these conspiracy theories that like Larry was talking to like Gary and the head of the SEC.
Or a lot of conspiracy things.
Yeah, there was a lot. It was like, well, remember, Blackrock is a big time company. You helped bail out the whole economy basically with buying bonds with the FED in twenty twenty. So Blackrock is like just a monster company, different than any other company. In my opinion, this wouldn't have been as big as Fidelity or even Vanguard filed it. So anyway, everybody went crazy. The internet blew up. I mean, you broke the internet that day. I wasn't sure. I
didn't know. I was like, maybe they saw Greyscale lawsuit and you saw that, Hey, maybe the SEC's going to lose. We should file now. So my question to you is what drove the filing that day at that time versus say, just waiting a while until the SEC comes around and then you can come in a little later and do your thing.
Yeah.
Well, I think that we were ready and our clients were ready, right, that was the big thing. We had laid out all those foundational pieces from the technology side with Coinbase in Aladdin, from the Bitcoin private trust side, and had conviction that we could deliver an ey shares quality product in this space, and it was increasingly clear that our clients hungered for that. Right that, at the end of the day is what it was.
You knew that you could decrease friction and cost, which is sort of what Larry did say on Fox Business when he went on and I agree, I mean, ETFs are so good at that. I get it again. It was just a little bit of a shock. We figured usually the first one to throw in their hat is like a van Eck or a grayscale. It was like Blackrock playoffs.
So I will say, you know, I maybe downplayed what Scaramouchi said your question earlier, but to his credit he did in the summer of twenty two when we launched the private Bitcoin Trust, he connected the dots and said, I think this is a precursor to them doing an ETF, which was a pretty good call.
Yeah.
I mean, like you said, our expectation was like people like Vanguard and Blackrock are nextually, Like Vanguard's never going to happen, but Blackrock we think that will probably happen. But we didn't think he'd be first or in with the first guys. So you talk about clients wanting this, I guess what are the client questions you're fielding or what were the questions like six months ago versus what
are the questions now? What type of conversations are you happening with those clients that wanted you to do this?
A lot pretty steadily through you know, we're four months in now, We've had hundreds of conversations across our client base, right, You could think of kind of our main distribution channels and investor direct which right out of the gate they were buying. There no hurdles to them getting access. That's been I think the largest source of flows for sure, second being wealth advisory channel and third being institutional, and
those latter two really operate on a longer timescale. Right, There's a much longer, as you guys know, education, research, diligence journey that underpins their process. So it's a lot of conversations with our wealth advisory partners with home offices who are considering the approval process for this because many of those platforms it's available unsolicited today. Right, you guys have covered this in the past, but not on a solicited basis. So that's the process that they're going through.
And then institutional, when this happened, it restarted in many cases those conversations of crypto or bitcoin, should we be invested in this?
Right that in some cases.
That firm has been having those conversations in twenty one and twenty say, for some of they hadn't had it yet, but this was a moment where they said, okay, we better figure out what this thing is and how it fits the portfolio. And that's kind of the education that we've been doing.
Let's go to advisors for a second. When we saw the first inflows and the trade sizes for IBIT, it looks small. It looked like a bunch of minos biting right occasionally a big bite, right, big trade. The thirteen f's showing that there are advisors buying a couple hedge funds. No major institutions yet. But when you look at all ETFs, I think advisors are like seventy percent of the assets.
Like they're the biggest users of ETFs generally. And there's been this sort of debate on Twitter lately about whether the boomer advisors are really coming. And let's bring up this part about solicited versus unsoliciteds So what you're saying now is that only if a client goes to the advisor says I need this, can they buy it. But over time the advisor will be able to solicit it to their clients. And where are we what inning are we on the solicit sure?
Sure?
So the standard process for new ETFs right is typically a multi year journey from launch to actually being approved for solicitation, right, And so I think what's happened here. Given some of the historic demand that we've seen around this that you talked about, Eric, there's been an acceleration of that process for a lot of these home office platforms at the Wealth Advisor. So that's a long journey. There's a very intensive diligence process that goes into that.
There's also an education process, and so we're going through that with them. Some will be faster than others, that's just the nature of it, but certainly over the coming months we would expect to see some of those approvals come online. The institutional piece is interesting. You mentioned that, remember on the thirteen apps that says of March thirty first, So over the last couple of weeks you've started to see some of those institutional conversations come to fruition. And
I think people forget with an investor direct. People say, Okay, well, that's like small dollar retail. Not necessarily we have within that bucket a number of very large positions, right, So we're talking about many of our holders are in the ultra high net worth category holding in some cases nine figure positions, right. And what we've found, we've been surprised by some of the ways that this that ibit has
resonated with investors, even large existing bitcoin holders. One of them that we found is very large holders like the fact that one it's extremely liquid, right, ibit trades ibit USD larger than many of the crypto exchanges in the world that's been around for a long time, and you don't have to show your hand in moving bitcoin to an exchange, right. So Wales hate the fact that people monitor the blockchain for when bitcoin is being moved from
large wallets to exchanges. They don't have to tip, and so we've seen actually a lot of very large bitcoin holders coming to the product for that reason.
It is really interesting. In my first book, which I'll Plug your Institutional ETF Toolbox, which Joel's read eighteen times, I remember institutions love the anonymity. They love that. They also love liquidity, anonymity and freedom, and it sounds like that's what you're talking about. The liquidity had to come and you're trading a billion a day, which is that that's what they need. So that's interesting that I do
agree institutions will bite probably more on on that. That's why I think you're like the GLD, there can only be one super mega liquid one, it looks like you're going to be a Fidelities is pretty liquid, and the others are pretty liquid, but none are in like the top twenty most traded every day consistently like ibit, So you get liquidity, jol. That's when that's like the best big fish. Yeah, it's like chumming the water.
So you talked about these whales and people buying ibit, I mean, what percentage allocations of a portfolio you're seeing? Are you seeing people like you you always hear everyone saying one to five percent or something? Are you seeing people doing way more than that is? Are you actually seeing the one to three percent when you're talking to these clients, Like, how are clients looking at ibit and just bitcoin in general?
Yeah, I think that's probably the most intensive part of our conversations and the education journey right now, frankly. And it varies by investor type and risk references, et cetera.
Right, So there's no.
Kind of one size fits all, but we're doing a lot of education with our clients around that, and I would say one to three percent is probably the most typical range for those who who are allocating.
And we talk about allocations, how is it being positioned, because I see people who will there's all a big spectrum. There's the hardcore people who are all in this is like their religion. They think sixty forty is a scam. Will move them aside for a second they're a special Then they're sort of the more normal sixty forty ors who are like, yeah, I don't want to kick myself if this goes to a million, so they buy one
two percent. I would consider that hot sauce. Now, some of the bitcoin issuers will try to sell this as something that lowers your overall portfolio volatility. It's like digital gold. But if you compare bitcoin to gold, bitcoin makes gold look like a money market fund. To me, bitcoin would be like double black diamond ski slope, whereas gold is like the bunny slope in terms of volatility. Have you
are people understanding that it's hot sauce. The one thing I fear is that they look at it as gold, but it's not going to move like gold, and that they need to make sure that they are ready for this roller coaster ride. Is that how do you brace them for this?
Certainly that's part of the education journey. But I think Eric, you've hit on what is probably the most important debate in the space right now when we think about investment thesis risk portfolio construction. Is the nature of bitcoin's risk and the reason I think it has so many people confused is bitcoin has this duality to it.
Right.
On the one hand, it's a novel technology disruption, right. It is potentially a global payment instrument, right, It's very early in that journey. It is something that on that basis as a sort of technology play and a beta of some sorts to blockchain adoption, you would expect it to be highly volatile, correlated and would look more like tech or VC in a portfolio.
Right.
And on the other hand, it is a global, non sovereign, scarce decentralized, global monetary alternative of sorts, right. And so that's where the digital goal thesis comes from. And there you would also expect it to be volatile because it's early and it's adoption on that journey, But you expect it to be uncorrelated and a potential hedge to some
of these rich factors inflation, monetary debasement, geopolitical et cetera. Right, And that's where the tension comes in because how you think about it in a portfolio depends very much on which of those narratives prevails. I think the direction of travel is increasingly towards the latter, because fundamentally, over a longer term, I think that's the bigger component of what
drives bitcoin. But it's gonna have short term episodes where there's a lot of noise around that, so people certainly have to be ready for that ride.
I thought of the best catchphrase for it. It's like gold, but as a teenager, you know it's out the party, bring all the rules, expect your car to get stolen in the middle of the night, like all that kind of stuff. It's not going to be dull, right, Gold is eight thousand years old. This is like gold is like a seventeen year.
Old role to be fair, the common phrase that people meant and including me, for many years, have been using is a call option of store value asset, which is like a monocle Pooh or super smart one, but like a call option in store of value asset is what a lot of people have been referring to it.
As the other description I heard that I thought resonated was some guy, this retail person on Twitter, just the regular guys like, it's like the Second Amendment for money, which I thought about it. I thought about it. I'm like, I get that it's like protect from your own government from devaluing the currency, which honestly sends wealth right up to the top. And so this idea of like devaluation
and you have something to protect yourself from it. How much does that resonate with advisors versus just simple Hey man, this thing is cool. I don't want to miss out if.
It goes to a million. It's some of each.
But I think that in the US and Europe in particular, that first piece is a little bit harder to grasp.
Right. The US has enjoyed this.
Incredible run of the post World War two era, basically eight decades of pretty remarkable stability and prosperity, right, And that is an outlier in human history, in financial history, and so it's harder to grasp why you would have to worry about the debasement of money or political dysfunction, destabilization, et cetera for an American, specifically those of an older generation.
The reality is around the world, there's about four billion people who live in some sort of non democratic regime, right, You've got about two billion people who live in hyperinflationary or severe inflationary monetary regime. So for those people, this is very real and they've lived it. For Americans, it can be a little bit more amorphous that this concept.
When you guys are talking about this, what do you view the what do you think it's correlated to or inversely correlated to? Are you looking at the dollar real rates? Like what inflation? How do you guys talk about this with clients? From a correlation's point of view, you've danced around with a lot of this talk.
Let's dive right.
The correlation is super super important, right, because volatility is volatility, right, And because it's so volatile, we're not recommend it in large concentrations in a portfolio because then the volatility really starts to add to risk. But at smaller concentrations, the correlation becomes the key factor. And fundamentally, from a macro perspective, you can sum up most of Bitcoin's correlation where it exists to so called risk assets.
Based on real interest rates.
Right, Bitcoin is massively short real interest rates, it is short nominal rates, and it is long inflation expectations. You look at the charting of this, it's quite striking, and of course the alternative way of thinking about it is versus the dollar, and bitcoin is also very inversely exposed to the dollar, and of course the dollar and real
interest rates have their own pretty tight correlation. So that explains most of the correlation that exists, because fundamentally, on other metrics, you'd expect that correlation to be low or even in some ways the negative.
So the pitch should be basically inversely correlated to real rates expectations that but.
Also the volatility.
You talk about volatility as a bug, but I almost
I think of it more as a feature. If you look at any of this research, if you do any sort of semblance of regular rebalancing, whether it's quarterly, semi annually, or annually, if you can manage to sell when it's a little bit, when it's going way high through the roof and these massive bull markets, and buy after it's collapsed eighty percent, which happens pretty much every single cycle, that's where a lot of this sharp ratio seems to come from any back test analysis that I've done, so
is that the pitch you're giving to these advisors do this put in an allocation and just rebalance it and make sure you do it properly.
Well, I think that market timing is easier said than done right because sometimes it may look like the top and it's not yet, and sometimes it may look like the bottom and there's a.
Ways to go yet.
So historically, for bitcoin, the best way to trade it was to buy and hold it for a long period. The people who had the discipline to do that over the last ten years fifteen years did extraordinarily well. So we're certainly not trying to advocate market timing.
For Sorry, I just meant regular rebalancing, which I know like bitcoin believers here out there listening to that, and that's like blasphemous.
Well, let's talk about behavior, because I frequently debate this. When the bitcoin ets were taking your money, all of the degens were thrilled. They're basically celebrating, and then they top off a little. There's other sellers. The ETF flows seem to be somewhat driving the price, but there's definitely the ETF flows have the price going up, and then you can tell there's actually like whales selling or somebody else,
like clearly it's not the ETFs. Then the price kind of flat lines and the ETF flows follow, which is normal, but in the past sell off there's been like a month of like shaky flows. I think it's added up to about three percent of total assets, so not a lot, but everybody's all, look, the boomers have lettuce hands. Yeah, and I'm like, first of all, it's three percent of the assets. Second of all, ETFs or hotels, people come
in and out. It's the way it is. And then I do think that ETF investors are usually heads up. If you're smart enough to know what an ETF is and use it, you've probably used one before, and you probably have this as a small occasi. This isn't like the whole enchilada, so you can stomach more volatility. So my view is there will be some outflows, but over time I think these are more diamond hand investors than some think. Is that true?
Well, certainly our client base I think is taking more of a long term buy and hold view than a lot of the sometimes frivolous trading activity that happens more
broadly in crypto markets. Ultimately, the ETFs are an access vehicle, right, They're an efficient, comedian access vehicle that has taken away frictions from some portions of the market that historically may have liked or wanted to participate in bitcoin who couldn't, and now they are and I think ultimately that's making the market more efficient and more liquid.
So talking about an access vehicle. We've talked about institutions a lot, but like thirteen fs, we'veeen granted, there's still some time left before they all file, but like, when are the institutions coming? I mean, forever you've been hearing people on crypto Twitter and elsewhere saying the institutions are coming. I heard is coming, But when are the institutions coming?
I think crypto twitter also thinks advisors or institutions. Crypto Twitter thinks anybody without like a coinbase account is like an institution.
Right, I think some parts of crypto Twitter.
Yeah, they just think someone wearing like pleated khaki pants to golfs that's like the institution for them. Well, I'm talking about pensions. Someone said someone said bitcoin ETFs are for your parents. That was like, I forget what article did, but that I thought that was a pretty accurate. This is the boomer The boomers are coming.
We talked about those three buckets, right, and investor, direct, advisory and institutional It's just just the longest timescale for sure. There's a very significant research, education, diligence process that is going into it, and I think that we're still very early on that journey. Obviously, there are a handful of institutions who over the years, very small number who allocated to bitcoin directly, who overcame the pretty significant frictions to do that.
A little bit larger number.
Who allocated to the sector, to the technology or asset class more broadly, typically through funds. Venture funds were a popular way to do it, But it's still early. What I can say is there's plenty who are on that research journey, and that's part of the education that we're doing every day.
What do you think is next for the crypto industry as a whole? I mean, not that we have ETFs trading, what does it mean for the rest of the industry.
You know, obviously there's a much longer tail of crypto assets than bitcoin or bitcoin and ether. For us, for our clients, their interest overwhelmingly has been in bitcoin, a little bit in ethereum, and not a whole lot in that longer tail of ten thousand plus assets, So I think it's important to make that distinction between the two.
Certainly there's some great projects out there in that larger group of assets, but there's also been a lot of pretty frivolous projects, right, A lot of tokens that have been flashing the pan and they've come and gone, and there's been you know, hype associated with them that hasn't
been backed up by real economic substance. So it's going to be a long journey for some of the rest of crypto to really start establishing product market fit and economic use cases before they start to cross that chasm into what we've seen obviously Bitcoin become.
So bitcoin maximalists.
Bull maximus would be a little stronger, but certainly it's unique and it's where it is today.
We've seen when they launched bitcoin and ether together, whether it's futures or like in Hong Kong, they launched both at the same time. I think e've got fifteen percent of the assets twenty over twenty twenty. Yeah, I think it was a little less. He's more bullish than I it was. I tot you funny is to me, Bitcoin is the headliner and eth coming out next if it ever gets approved would be like the opening Act coming out after So I just mostly focused mentally on the
bitcoin ETFs. I think eth also speaks to what I was going to ask you next, which is tokenization, And I wanted to ask you about that because when Larry's on Fox, he does talk about the bitcoin ETF, then he pivots to tokenization. Now, are you talking about tokenizing everything so that Microsoft shares and even your own ETFs are tokenized? Or we just talking about tokenizing things that are hard to get like artwork or farmland in Iowa
where you can just now places ETFs can't go. What are we looking at in ten years?
So I think if we go back to that three pillar frame where crypto stable coins, tokenization is by far the least developed of those three right now from an industry perspective. Right that said, there's a lot of excitement around it because the potential future state and I don't.
Know whether this will be realized.
I don't think anyone really knows, but certainly possible of a world where a blockchain digital asset token becomes the primary format for the majority of investment assets and securities.
Right that's a possibility, and that is a really interesting world in a lot of ways, or something that becomes global, universal, digitally native, transparent, instantaneously transferable, programmable, all these attributes of tokenization that are behind why there's so much optimism for it and for us, it's a story of how does
this increase access and lower costs for our investors. The substance today, though, is that tokenization has not yet taken off at scale in any meaningful way, right, and so there's a lot of work happening. I think what you need to see is a coalescence around what are the right asset classes to start with? Forget about where we're going to finish and what's going to be included in that.
Where do we start so that we can say there's a geography, there's an asset class that we used to trade and an issue this way, and now we primarily do it using a digital asset token and then having the custody and the trading and the regulatory support infrastructure to actually make that happen.
We're just early in that journey.
Let me ask similar question in a different way, which is there anything that the ETF can't do?
ETS is a pretty good wrapper. It's popular for a reason. I haven't thought about that question though.
I think some of the crypto crowd underrates the disruptive ability of the ETFs. I think they think crypto is the big disruptor of everything. But ETFs, I think are gonna push down costs from the exchanges. If you're doing direct indexing for advisors, you're probably charging one percent. You're going to get pushed down. There's nothing like a highly liquid, cheap ETF, and the US is full of them, and these are already at twenty to thirty basis points with
a billion dollars in liquidity. I can't overstate how powerfully attract act of that is to every investor. We're probably going to see people come over from other countries who are big investors just to get that. It's just hard to compete with that.
Yeah, So what's interesting, you know, comparing the ETF and a digital asset token as a rapper. If you look at the two things. Two major announcements we had this year obviously i BIT in digital asset space and our tokenized yield fund on a public blockchain, and they do the.
Opposite of each other. Yeah, which is i BIT takes a crypto.
Asset underlying investment and puts it in a trad FI rapper an ETF wrapper, right, And a tokenized fund takes a trad FI underlying investment and puts it in a crypto wrapper. And you might say, well, that's contradictory, but it's really not, because what it's a reflection of is across our client base there are various stages of their evolution and have very different preferences around infrastructure and access method,
et cetera. And so for a lot of our clients, certainly the majority of our client the ETF is a much more efficient convenient way to access something like bitcoin.
And for some of our clients who are now.
Crypto fluent or they're active in digital asset world and they're used to blockchain wallets and settling on chain, they love the idea of having a black rock fund that is digitally native, instantly transferable, et cetera. So both are happening in parallel, and perhaps one day we see a convergence that's the best of both, but I think that's a long way off.
We're coming up on a deadline for some spot theorerem ETFs. You guys have an active filing, but what are the prospects internally. Do you think we're going to get an ethereum spot ETF.
Given it's an active perspectus, I can't comment.
If they don't get approved, there'll be five hundred and seventy five and two approvals. That's it, look it, hey, man, here's.
Sure it's never come up.
Yeah.
People were like, BlackRock's not going to file if they think they could get denied. In my mind, I was like, Blackrock doesn't care well if they get denied in their record is they're trying to get it approved. Do you guys talk about the idea like, we can't tarnish our record.
We're a lot more focused on the client out.
The number out there, which Fox never gave me credit. But that's okay. Yeah, But it wasn't to say they're focused on it was just to say this is how powerful and not messing around this company is, right. That is some record right speaking of that, like the in kind versus cash creations, just to get wonky in kind would be ideal for the industry, but SEC would only allow cash creations for these spot ETFs. Looks like they're
doing fine. It wasn't a big deal, but I know in kind is what you wanted and others you didn't get it, which proves that Blackrock isn't dictating things. Do we think do you think we'll get in kind in the next year or two?
I hope at some point our views on it were all public in the SEC discussions that we had with them on it. And ultimately what we're focused on is it's even more from a market structure perspective, better for investors that way. And there are a lot of clients, frankly who have large Bitcoin positions and they would like to hold some or all of that in an ETF, but without in kind, they would have to incur a tax realization, and so there's some eagerness from those folks to have that.
Crenshaw, who's one of the commissioners, was the I've heard is the driving force behind us having castreats and not having in kind.
Who's a Democratic commissioner.
So depending on what happens in November with the election, like all these questions could be completely different.
Yeah, could be moot because I think.
A Republican administration will be much more amenable to in kind transactions.
What did you learn about yourself through this?
I was expecting that one. Now, I think that so patience was not something that I would say I necessarily have a lot of, but I have maybe a little bit more than I thought I didn't. I think that for big things to happen in an industry, you have to be very patient.
Right, These things take time.
Obviously, you know, the digital asset space has had a pretty seismic shift over the last decade. But in any given year, people might have said, oh, this is all not happening fast enough. And if we look back on where we've come as an industry and as a firm.
You know what we've been able to do. I think it's actually pretty cool.
Capital one question, what's in your crypto wallet?
Oh? Boy, there's obviously some bitcoin there.
Is it? Or bitcoin?
It's both?
Okay, it's both.
Yeah, there's some eat there. And what's in beyond that? I'm not going to say, probably for the best not to answer.
The rest of any XRP people are the craziest.
Can we agree on that?
Yes, no comment.
When they put that foge XRP thing out and I said, I called you guys, and they said this is not true. I said, it's not true. The price went down to normal again, and for a week they just dragged me. They were like this suiting. It was longer than a yeah, they refused to.
I mean that there are some pretty intense elements to a lot of these token fan bases.
That's not just XRP.
All right, And then we got to talk about the ticker for a second. We always asked at the end of the show, is what's your favorite ETF ticker other than your own? I bet also pretty good. I want to ask if there was any other tickers that were in consideration that Black Rock.
Well, you hated the ticker, Eric, the first you dragged us.
I bit was fine. The first one was not going to save as a BONDIETF in Europe. It was like IBTC.
Yeah, it's too many consonants.
You gotta have a vowel in there, man, it's like a fortune. Give me a vowel and you can make it a verb and it's even better.
But yeah, I would say, I don't know. I so I grew up in Toronto and I gotta go with cow and MoU. Yeah, it just good ones cows one of ours. Moo is a van Eklin. But you know, my cousin's growing up north of the city. They had had this great farm and they raised cows. You know, had fun hanging out up there and have a lot of fun memories, all right.
Robbie Minchick of Blackrock, thanks so much for joining us.
Thank you, this is 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 Eric Altuna's. This episode of Trillions was produced by Magnus Hendrickson. Bye