Ether ETFs Are Looking for a Bitcoin Style Love

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Welcome to Trains.

I'm Joel Webber and I'm Eric Belchiernis.

There's been this wildly successful launch of Bitcoin ETFs this year. Eric and the industry just couldn't get enough. They're back for more, never enough with this. What's going on? What's going on?

So they filed for Ethereum ETFs after filing for Bitcoin ETFs. Fast forward, after the Bitcoin ETFs launched, there was sort of a surprise approval from the SEC that the E three ETFs will be approved and they just launched about a week ago, and it's sort of, in my opinion, like the opening band following the headliner. So it was definitely interesting, but not quite the impact and import I think of Bitcoin, which is just way bigger across the board.

You know what I can't wait to talk about is you didn't think this was going to happen.

I didn't. There's an ongoing debate on why it happened. Some people thought Gary Ginsler all along thought he would approve this, but didn't want to give any signals to the issuers because he didn't want to have a circus like the bitcoin, you know, approval process. On the flip side, some people thought that the politics had shifted, and Biden told Gensler, hey, let's lighten up on crypto a little. Let these out so we don't appeal appear to be

I'm also really excited to bring on Stacy Marie Ishmael, who's at an executive editor at Bloomberg News overseeing crypto, digital payments and cross assets. That also means she oldersees ETF coverage Peptinberg News. She's a longtime collaborator of mine in the newsroom. Looking forward to having her on her first episode of Trillions, this time on Trillions Ether ETFs Stace Marie Wecome on Trillians.

Great to be here.

Okay, so what is Ether?

Just starting with the softball questions.

Yeah, exactly what is Ether? How is it different than Bitcoin?

I would say the distinguishing factor of Ether, which Ether fans may not like, is that it's significantly smaller than Bitcoin.

I heard Eric called it small potatoes.

I am not going to say that Ether are small potatoes. I am going to say that on the merits it is the second largest cryptocurrency after Bitcoin, and the gap between the largest and the second largest is very large. Right where the way that folks think about Ether is not necessarily that it's a Bitcoin replacement, but that it does very different things.

And that's like, actually, how it's built and how it operates, everything about it is actually pretty distinct and different, pretty distinct then bitcoin? Can you can you explain some of that?

I'd say, if you care about these distinctions, one of the very first ones that you'll point to is the way that bitcoin is created is something called proof of work. So a bunch of you know, energy intensive data centers switched on all day solving mathematical problems. You've heard the Shpiel Ether is maintained and kept in existence by a totally different methodology called proof of steak, which is still maths, still complex, but not something we necessarily need to go into.

If you want to go down a rabbit hole, you can go read a lot more about all of this.

And let me jump in here too, because I'm a tourist of the planet crypto. I'm an ETF guy who basically, yeah, yeah, I've got an English to Crypto conversion dictionary that I've used a lot. It's worn out, basically, but I've read a couple of books, and one thing that struck me and I started to understand this whole thing a little more. Is bitcoins sort of a reaction to the dollar devaluing.

Right.

It's like, hey, if you want to store value in something because the dollar loses valuation, and hey, government's print money. It's just it's very politically expedient to print money if you have a problem, and so hey, there's this thing that can help protect you from that. Ether is not about security or currency. It's like, let's do another Internet that is completely decentralized and like a couple tech companies

So why does the world need an ether ETF let alone mini ether ETF.

Look, if you want to invest in all this action and creativity that's happening in this decentralized platform, ether is sort of the gasoline that runs it. So some people call digital oil. So again, if you want access that is frictiony to go do that yourself. ETFs kill all the friction. So that's why the world needs ETFs in general, is they're friction killers. That said, do you need ether? And that's the question people have to ask themselves personally.

I think that's.

Probably what's going to happen, and then there will be some people who are sold in the ether story, but I think that's going to be a minority of the sort of bigger crypto PI station. Y.

What's the vibe inin like this year? Because it feels like this thing that was really the wild West has started to get tamed.

I can tell you that no regulator would say that they think that crypto has been tamed and that everyone is now following all the rules that they would like them to follow. But certainly as it relates to the

When we think about investing through an ETF in this and you're now the Ether people, they're all in. That's why when I did refer to a small potatoes, I got attacked for like three weeks straight on Twitter. I still still remind me that was a little dismissive. I do think opening act a headliner is a little fair.

And you used to have to use a digital wallet and now you just use your insert whatever platform you want.

But this is interesting because the hardcore people are like, you know, not your keys, not your coins, and they're like, do we really want Larry Fink to have all the bitcoin? And he doesn't really own it? But I see what they're saying because like, let's say the government wanted to confiscate all the bitcoin, Obviously Blackbrock's probably going to comply with that, and that does kind of kill the whole ethos.

Yeah, And I think to that point about fomo, you know, when you're now having a conversation with your financial advisor, who maybe a year or two years ago might have just stared at you blankly if you said, how do I get exposure to crypto? There's more people who have a way in. Whether those folks ever end up owning a Coinbase wallet is a totally different question.

And a lot of the crypto people they want the ETF to be like a gateway drug. And then they go set up a coinbase account. Then they go and get a hard wallet, cold cold wallet, and then they won restore in the backyard and like bury it. And these are the steps to becoming like the full the full crypto, ye person.

But full crypto when you got it in the backyard.

But one thing on advisors and people having conversation with advisors, I do think seeing Larry Fink right, he's the head of the largest asset manager, a lot of these advisors use other I shares products, Fidelity, They've been around since the eighties. I mean, these are massive trusted brands. I think that gives advisors some cover. Now it's almost like, well, it's now, it's mainstream, the SEC approved it, Larry Fink

Stays Marie. What was this horse race to get ETF approval like for Ether? I mean, we spent a lot of time talking about the Bitcoin one. There's all kinds of back and forth with the SEC. What was it like this time and who were the players that you all were watching?

Well, I think to Eric's point, the main thing that we were keeping an eye on is if the roughly same universe of people who got into issuing these you know, Bitcoin ETFs would do so for Ether, and you know the filings landed and we're like, yep, pretty much the same people, right, because they already had the infrastructure, they had already gone through all of the hoops with the

Yeah, we wrote about the Solana ETF. We feel like it's just basically like a call option in case Trump wins White House, because let's say he pointed like a libertarian commissioner like hester Purse.

Anything could happen if Harris wins or at that point we wrote it was bid him.

But if the current administration kind of continues, and even if it's not Gensler and it's somebody Gensler two point zero, it's not going to happen.

And a big thing that they've kind.

Of like used legally is that there's no futures contracts currently and the only two coins they've approved have futures trading. It's a long story, but that was really behind the Greyscale lawsuit which sparked all this to begin with. So no future is no coin, but that's just the SEC's interpretation. Now you get a new SEC in there, anything's possible. I'm not saying it'll prove it, but certainly now it's more of a I would say, the odds go up.

Why did you originally think that this ether ETF moment wasn't going to happen?

Because Genzler had come out and indirectly just thought it was a security And this is trying to get through a nineteen thirty three Act, which was for commodities. So if you approve this, you're sort of ipso facto saying it's a commodity. And I don't think I still don't think he thinks that he wasn't really clear that's one thing. The other was there was no grey scale lawsuit here.

Don't look for any other ones. He was pretty upset.

You could tell he was feisty, and he felt he had to do it almost by like gunpoint, and I was like, all right, I just don't think it's gonna happen. So there was a variety of reasons that we were like pretty bearish on him.

And what was the moment that you realized it was game on?

Well, there was chatter ped the issuers and their lawyers starts saying, hey, we just got notified from the SEC. And this is like a week before in the bitcoin process, people were hearing back from the SEC on like hey, tweak this or answer this question.

This is called comments. Ninety five days before approval.

We were in day ten to like we were ten days left and I hadn't heard anything, So we're like, there's just no way anyway. With a week left, it was like what oh, So it was a shocker. And that's where the political side comes in because if you trace it, but a week before that, that's when Trump said I'm the crypto guy. If you want crypto, vote for me. And then there was a couple other little

This stays me.

Where about a weekend at trading? What have we learned so far?

People don't like fees is the main takeaway. If you look at what happened with the bitcoin ETFs, there was a higher priced premium offering in the markets, and then everybody else was like, what about zero percent? Do you like zero percent? And that very much has been the case with the ether ets and.

The bitcoin ones. It's just like even before launched, they were in a price war. Yeah, all right, so what's that look like on the ether side?

Very similar. We have, you know, folks saying it'll be zero percent for six months or until we get this amount of inflows. We have people saying, well, we're not necessarily going to cut our fees to zero, but we will launch a smaller version, a mini that has a more attractive fee structure. You know, you get kind of like this bargain basement feel to it, where people are like, well, how is this thing different from that thing? Mostly I trust these three big names. Mostly they're kind of around

This fee war is really intense. If you look around the world, an ether or bitcoinspot etf is one to two percent. So for these guys to come out and be like the base fee, forget the waiver, We'll go over that mint. The base fee is between fifteen and twenty five basis points, so we're talking five six times cheaper than the rest of the world or a hedge fund. This is why the US market sucks all the money and jol it's very powerful. Plus you add liquidity and

Does it come like, do you get an ether steak knife and a bitcoin steak knife?

Combine them? Yeah? Buy both?

Yeah, yeah, and you get maybe or I don't know, a monthly subscription to a magazine.

But walk through the way that these waivers work. We don't usually see this, but we did see them.

With the bitcoin, you'd be like a waiver for six months or if the ETF hits two billion, whatever of those two things happen first. So they're just trying to get fish tho. Yeah, they're trying to get people.

And here's why.

When you're in a race against ten or nine other issuers, the first couple of weeks are crucial. We report on who's winning and losing. Everybody is and if you don't have any assets or volume to begin with, you start to have a stank on you, and advisors tend to gravitate towards around the ones that are liquid. It's like a party you want to go where people are not to the one no one's at right, so they know how important the first couple of weeks are to getting

Coin based custodian fee.

They all use coinbased except for like one or two is I heard between like nine and twelve basis points something like that, So they're only making like six to seven that is razor thin, and that's before any fee. This is starting gate stuff, so it is intense. I was a little shocked. I thought we'd be forty to sixty to start and then we'd you know, have fee wars over the next couple of years.

But where I thought we'd be at after like two or three years and we're in one week?

Yeah, yeah, Well I guess that speaks to the power of what the ETF can do though, right, Like if you put this thing in a wrapper, it's going to drive down the price and everything's going to be you know, basically transparent.

Well, the whole thing's very ironic because, in my opinion, especially black Rock and fidelity. They're both looking for Vanguard free zones in which to operate so they can make more money because they both have to continue to make money, especially Blackrock that it's a publicly traded stock, so they're like almost like an oil driller looking for new forms of oil. And they were like, Wow, this is something.

We can do.

But to go to those fees, it's almost as if Vanguard Vanguard's spirit was there even though they weren't. And so ironically there's not a ton of revenue here. But I think what they're thinking of is long term, let's get customers in. We'll bring them in here and then maybe something down the road we can charge more on. Let's just get the people, and this is something we can do that Vanguard clearly.

Wants no part of a gale in other words, scale.

Yeah, let's walk through who the players are and maybe even what distinguishes their offerings. If it's clear yet Blackrock ran away with the bitcoin game, how are they looking so far?

So they're leading.

If we're doing a horse ray so flows after about a week Blackrock four hundred and forty million. It's about double number two, which is about a tie between bitwise and Fidelity bit wise punching above their weight. They're indie, but they're real into crypto. They're like hardcore crypto people. So for them to compete with Fidelity up right off the bat's pretty good. Gray scales minim as a one sixty four flows. That's a good sign for them. If they didn't get any money in that being the cheapest,

Five ten percent. Yeah, put it on the board.

Yeah, and that's like one of the last ones on the list here. So these are really strong numbers. They just pale compared to Bitcoin. But if you remove Bitcoin volume wise, these were some of the best launches in the past year. In fact, the black Rock traded like two hundred and sixty million, that's double any of the launch of the past five fifteen.

You got to move bitcoin.

Though, put bitcoin back in. These all move down the list, right, But what distinguishes in them? Black Rock would say, you know brand, you trust us whatever?

I think.

Bitwise would be like, we're actually crypto people, We're not like opportunists like those Wall Street guys.

Gray Scale would say that.

Gray Scale would say that that's I think that's the two.

Can It sounds so similar to the exact same thing we heard when the bitcoin launch has happened, right, It's like us are them? Right? What else jumps out to you? Taysom Marie about who's in this mix so far and how they're attempting to distinguish themselves.

To Eric's point, it's really the do you want crypto native or do you want like trad fi full service? And that is very much, you know, to your point about how is the market changing? That's kind of where we're going much more broadly, right. It's the folks who are like, the path forward is how close to trad fight can we get? And then there are folks who are like how far away from them those people can

Well, I was speaking to somebody at that event in France, all crypto people. I was again like, I feel like it turists, and one person was saying, and this is I won't say who it is, but they're actually really hardcore. But they're like in my four to one K and these other there's certain accounts I cannot hold a cold wallet.

So even some of the hardcore.

People, I have some ETF exposure because it fits in the plumbing exactly of everything, whereas a cold wallet is really totally outside the system.

I think. One thing also is messaging.

You know you talk about where the crypto people bit wise has this commercial ad series. It's like remember the Mac guyack in the day, Justin Long was paired against that dork and it was like Mac versus PC, which is really.

John Hodgman was the dork. I think, yeah, yeah, it.

Was really Steve Jobs versus Bill Gates. Let's be like but anyway, they did that for the Ether rollout. So there's the Ether guy who's like this sort of regular cool looking dude or whatever. And then there's like mister wall Street and like he only trades like not, you know, nine point thirty to four every day, whereas Ether it's they have a couple of sketches, pretty good. Matt Hogan of Bitwise says this, if you own the cues and you don't own eth, you're missing part of the technology sector.

Are you outsting yourself as a boomer?

They call me a boomer's next technically, but compare to crypto people, I'm definitely a boomer.

Okay, So looking ahead, how many more crypto ETFs are we going to see?

I think on top of the existing products, you know people have already come out with ooh, let's add leverage. There's there's a bunch of prospectuses without let's go short, so let's go double long, let's combine some things. Just as a reminder, there's a lot of other different kinds of crypto ETFs. Theyre ETFs comprised of like publicly traded mining stocks, et cetera. But the biggest thing that will determine what's next is who's in the White House in November,

Eric, assuming the White House that is the same, not much, I think to Stacy's point, it's gonna be a lot of spaghetti being thrown the wall around ether and bitcoin like you know, long ether short bitcoin, ether plus bitcoin, ether plus bitcoin equal.

Weighted market cap weighted covered call.

I mean, it's basically gonna be like all kinds of stuff, and I'm telling you one or two of these will be a huge hitule I've seen it. So they're gonna try everything and anything. Because the assets in the collective unit is already something like seventy two billion.

That's a good chunk of change. Remember ESG they threw.

All kinds of products out that was only one hundred billion, so we're already close to where that was, so I kind of get the product rush.

This is what the ETF industry does. A lot of this stuff will just.

Be roadkill eventually, but a couple of these will make it and serve a purpose, and you know, we'll see, but I don't think again the White House would have to change.

Then we can talk about other.

Co Who do you think wins the ether race? When will we note what the finish line looks like?

We predicted black Rock and Fidelity is favorite simply because the bitcoin race. Ibit is the GLD of bitcoin. I mean, it's it's a done deal. It's not just the assets, it's it's the volume.

And it took like what six weeks for that didn't take long.

The volume is also underrated. Whoever gets the volume gets the institutions. Largely speaking, institutions love liquidity. It's the one thing that they get everything in the world for free because they have a lot of money. But what the one thing they can't get from an asset manager is is liquidity. And certain ETFs have that liquidity. That's why they like SPY and GLD, even if they're a little

And what are those tickers like?

For example, c eth is twenty one shares q eth is in Vesco. On the bitcoin front, I think BTCW is the wisdom tree, So I think that one's the last one of the bitcoin and I think it's over one hundred million already, which again, if if any new ETF came out at one hundred million in seven months, you'd be like, that's a hit. So they're all gonna make it. I think now once we get to these crazy spaghetti at the Wall ones, some of those will not. But I think the core ones here are are all

Okay, Stace Marie, one final question, since it's your first time on the botto, what is your favorite ETF ticker.

Spy?

Why?

Because when I was a kid, I was super into like Matilda and you know, anything just like espionage a jacent. I'm definitely not a spy now, but I know that's something a spy I would say.

Yeah, Okay, I love that. I think that's the first time anybody's actually just said, like, elephant in the room, the biggest one is the one I'm gonna talk about.

It's a clever ticker.

I think the only the spy kids. I think one of them might have used it, but that was it. Yeah, spies usually maybe most people pick like some of the more crazy ones.

But that's a good that's a good.

One say to me. Thanks so much for joining us on trance. Thank you