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    CRYPTO 101

    Ep. 555 Institutions Eyeing the Bitcoin ETF with Matt Hougan from Bitwise

    Tue Jul 25 2023
    CryptocurrencyBitcoin ETFsBlackRockMarket ImprovementsGlobal AdoptionIndex ProductsFuture OutlookRegulatory ChallengesInvestment Strategies

    Description

    The episode covers various aspects of the cryptocurrency market, including the potential impact of Bitcoin ETFs, BlackRock's involvement in the market, market improvements and global adoption, index products and future outlook, the future of crypto, investment strategies, and a conclusion highlighting Bitwise Investments' products and research.

    Insights

    Bitcoin ETFs could bring significant capital into the market

    The approval of a Bitcoin Spot ETF would make it easier for financial professionals to invest in Bitcoin, potentially bringing in tens of billions of dollars consistently year after year.

    BlackRock's endorsement signals Bitcoin's significance

    BlackRock's endorsement of Bitcoin is the largest and most important in its history, indicating that Bitcoin will be a significant asset for financial professionals.

    Market improvements increase the likelihood of a Bitcoin ETF

    Improvements in market cleanliness, custody providers, and trading have made a Bitcoin ETF more likely to be approved.

    Crypto is expected to enter traditional capital markets at an accelerating rate

    Over the next five years, crypto is expected to enter traditional capital markets at an accelerating rate, with index products and specific tokens emerging as key drivers.

    Regulatory challenges pose a headwind for the crypto industry

    Regulatory challenges continue to be a hurdle for the crypto industry, and legislative action may be needed for significant improvement.

    Retail investors have advantages in trading strategies

    Retail investors have advantages such as being smaller and having control over duration in trading strategies.

    Alt coins can be held like unexpiring call options

    Alt coins can be held like unexpiring call options, taking advantage of volatility in the market.

    The future of crypto is expected to disrupt the economy

    The future of crypto is expected to disrupt a significant portion of the economy and make it better.

    Chapters

    1. Introduction
    2. BlackRock's Influence
    3. Market Improvements and Global Adoption
    4. Index Products and Future Outlook
    5. The Future of Crypto
    6. Investment Strategies and the Future of Crypto
    7. Conclusion
    Summary
    Transcript

    Introduction

    00:10 - 07:17

    • Matt Hogan, Chief Investment Officer of Bitwise Asset Management, joins the podcast.
    • Bitwise is a specialist crypto asset manager and runs the world's largest crypto index fund.
    • An ETF (Exchange-Traded Fund) is an updated version of a mutual fund that trades intraday and is more efficient, cheaper, and tax-efficient.
    • A Bitcoin Spot ETF would make it as easy for financial professionals to buy Bitcoin as it is to buy the S&P 500.
    • This would bring in tens of billions of dollars consistently year after year into the market.
    • Currently, accessing Bitcoin or crypto is difficult for retail investors and financial advisors due to separate contracts, underwriting risks, custody concerns, and billing complexities.
    • The existence of an ETF signals market maturity and encourages wider adoption by financial advisors.
    • The approval of a gold bullion ETF resulted in $80 billion flowing into it.
    • Bitwise welcomes the entry of new players filing for ETFs as it indicates growing bullish sentiment in the market.

    BlackRock's Influence

    07:01 - 14:13

    • BlackRock's endorsement of Bitcoin is the largest and most important in its history, signaling that Bitcoin will be a significant asset for financial professionals.
    • Bitwise believes that specialists tend to win more than their fair share in niche asset classes, and they are confident in their ability to compete with BlackRock.
    • The entry of BlackRock into the market has opened up new opportunities and discussions that were previously difficult to have.
    • The ProShares Bitcoin futures ETF has traded well and helped grow the regulated futures market, which is important for getting the SEC comfortable with a spot Bitcoin ETF.
    • GBTC's lawsuit against the SEC adds pressure on them to reconsider their distinction between allowing futures products but not spot products.
    • The combination of market improvements, BlackRock's influence, and GBTC's pressure led Bitwise and other companies to file for spot Bitcoin ETFs.
    • BlackRock's involvement has even influenced individuals who were previously hesitant about investing in Bitcoin.
    • The entry of spot Bitcoin ETFs could bring tens of billions of dollars into the market.

    Market Improvements and Global Adoption

    13:55 - 20:50

    • ETFs in the past were declined due to market manipulation and lack of banking-grade custody providers.
    • Improvements have been made in market cleanliness and ease of handling.
    • Custody has improved with the availability of qualified custodians like Coinbase, Fidelity, and Anchor.
    • Trading has also improved significantly, with a decrease in false reported Bitcoin volume.
    • The market is moving towards higher quality, making a Bitcoin ETF more likely to be approved.
    • Approval of other cryptocurrencies like Ethereum could follow after Bitcoin's approval.
    • Other countries already have ETFs for Bitcoin and Ethereum.
    • An Ethereum futures ETF may be the next step in the US market.
    • Crypto will enter traditional capital markets at an accelerating rate over the next five years.

    Index Products and Future Outlook

    20:21 - 27:43

    • Index products and specific tokens are expected to emerge in the next five years, accelerating the entry of crypto into traditional capital markets.
    • The XRP ruling and clarity around altcoins may impact the available assets for index funds, but it's a complex analysis with multiple factors to consider.
    • Bitwise Crypto Industry Innovators Fund is a pure play crypto equity ETF that has crossed $100 million in assets under management.
    • BitQ is the first crypto ETF that can use 'crypto' in its name by proving at least 80% exposure to crypto-related assets.
    • Average investors can buy BitQ through traditional brokerage accounts like Schwab or Robinhood.
    • BitQ and Bitwise 10 large cap crypto index are the most popular products offered by Bitwise, providing diversified exposure to the crypto ecosystem.
    • Bitwise offers over 20 products including ETFs, private funds, OTCQX trusts, SMAs, and an active fund of funds.
    • Bitcoin and Ethereum are expected to generate excitement in 2023, with potential killer apps emerging in the Ethereum ecosystem.

    The Future of Crypto

    27:25 - 34:51

    • The Ethereum ecosystem is still waiting for the killer app to emerge, despite significant infrastructure improvements and experiments with DeFi, stablecoins, NFTs, gaming, decentralized compute, and decentralized graphical rendering.
    • There may be new capital formation mechanisms that arise from the recent XRP ruling and legal guidelines in the crypto space.
    • New distribution mechanisms for tokens issuers could potentially drive another big run-up in the market.
    • There is a pipeline of significant crypto companies waiting to go public in the next three years.
    • Some Bank of America customers are having their accounts closed down due to interactions with Coinbase, indicating that traditional banks have not fully embraced crypto yet.
    • Regulatory challenges continue to pose a headwind for the crypto industry, and legislative action may be needed for significant improvement.
    • The fund of funds concept aims to provide exposure to interesting developments in the crypto hedge fund space while offering high-risk controls and due diligence for institutional investors.
    • Crypto is an entire asset class with different approaches such as individual asset purchases, index funds, actively managed funds, hedge funds, and venture capital. The hedge fund space has potential for growth and alpha opportunities.

    Investment Strategies and the Future of Crypto

    34:22 - 41:35

    • Retail investors have advantages of being smaller and having control over duration in trading strategies.
    • Alt coins can be held like unexpiring call options, taking advantage of volatility.
    • To diligence cryptocurrencies, look for assets that major custodians custody and avoid assets only trading on unregulated exchanges.
    • The future of crypto is expected to disrupt a significant portion of the economy and make it better.

    Conclusion

    41:06 - 41:40

    • Matt from Bitwise Investments discusses their products and research on the Crypto101 podcast.
    • Listeners can visit bitwiseinvestments.com to sign up for newsletters and learn more about the products.
    • The host expresses interest in having Matt back on the show for future announcements.
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