Bitcoin ETF outflows and altcoin ETF inflows with James Seyffart

Transcript

There's a decent chance that we actually crack two trillion in inflows this year to give you an idea of like how big this market is not just the sixteen trillion number and that's brand new flows not including asset appreciation or anything. So where is it coming from everywhere? >> Bitcoin ETPs have seen record-breaking outflows but new crypto ETPs are launching all the time. When will the capital come back and why are more and more investors choosing ETF products for their crypto investments? Hello and welcome to the Milk Road Show the podcast that knows that the tide comes in and the tide goes out but holding Bitcoin will make you see sick. I'm your host John Gillan today is Wednesday July 1st. We will be releasing this on July 2nd and today we are joined by James Seyfart. James is a senior research analyst at Bloomberg Intelligence

specializing in ETFs, mutual funds, hedge funds with a special focus on cryptocurrencies and digital asset products. James is everyone's favorite crypto ETF analyst and he's going to give us an update on that universe today. If that sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. Today's episode is brought to you by Bitget Stocks 2.0 with real liquidity and real dividends. Without further ado, welcome back to the Milk Road Show. James, how are you, sir? I'm good. Thanks for having me back. Happy to be here. >> Are you enjoying the soccer? Is that is that the World Cup?

>> I would say this is Yeah, I would say World Cup is probably my favorite sporting event period stop and uh >> Yeah, I'm very happy >> is March Madness is up there but that's every year so this is takes a little bit of precedence. Olympics too. >> Yeah, well, it's a special time for sports in New York for sure. James, I wanted to start this conversation with a look at the the Bitcoin ETPs, ETFs. People call them both things but they're technically exchange-traded products so I call them ETPs. Anyway, we've seen about nine billion dollars of a net outflows from the peak of these products and I'm curious your thoughts on this pullback here. Is this just is like short-term sellers taking taking some profits or getting out of the market? Is it consolidation? Is it longer-term hands, you know, like paper handing

their bags? What have you seen on these outflows here and what's your outlook on this for the markets here? >> Yeah, I mean it's actually worse than that. We're over 11 from the peak now. So, the peak back in October. Yeah, I mean there's no profits to be had to be honest unless you you bought these things like right when they launched for the most part. That's being a little aggressive more than it needs to be but like what what we saw here is obviously they peaked in 1010 along with everything else. Then we had you know the deleveraging event and ADLs and all that stuff. And it kind of bottomed in the end of February. Then we had a nice little uptrend for flows and performance even up until early May. So, they peaked at about 63 billion dollars in net inflow since launch which is

tremendous like the best launch of all time, right? And then we got down to like 53, 54. Went back up to 60. So, we almost like reclaimed the all-time high and now we're below that February level. We're at like just over 51 billion of net inflow. So, yeah, I mean some of it is like the the basis trade has completely unwound and it unwound like many months ago and it's just I think if you look at futures open interest it's that's going down as well. So, it could be some a little bit of the basis trade but it's mostly people are literally just selling and this is the worst that the ETFs have seen since they since they launched. Nothing else is close.

>> So, that that pattern of trading you just described follows pretty closely the path that Bitcoin has taken. So, it seems to me like a lot of the flows are tracking pretty closely with the spot price. Do you think that a lot of spot volume has shifted to these ETF products and do you like what are your what are your thoughts on that? Why is it tracking so closely as opposed to moving like more independently? >> So, I would say two things. One, no matter what you're doing in a long asset whether it's an index or a single asset like for the most part ETFs in general, they tend to see more flows when it's going up and have flows when it's going down. Like that there there is a somewhat of a positive relationship.

There that is different for ETFs when they're levered. So, levered or futures rolled so we actually see the exact inverse like people would consider them trading vehicles. So, if we were seeing the opposite I I know but like for the most part I mean the other thing we talk about outflows things haven't looked good since October, but from April of '25 through October of '25 these things took in 30 billion. So, we're not even close to unwinding all of those inflows from 2025 yet. So, yeah, I would say no matter how you slice it, it's kind of to be expected. These outflows are probably a little worse than I would expect considering how well they held up up until like we hit 60. Then you had a little bit of an uptrend and I guess people sold some profits there like I said when we got up to 60

billion in early May and now there's just continued selling. So, that doesn't surprise me I guess is the real answer to your question. >> Guys, listen, we are at a very crucial point in time right now. AI stocks have ripped, they're going to keep ripping. Our analysts on the AI side are up like literally 100% or more on quite a few calls and crypto is about to boom again or at least it feels that way. If you want all the inside on what we're buying, what our analysts are doing, what's on their watch list, all of that is in Milk Road Pro. So, join at the link below.

>> Bitcoin is fighting to hold on to the $60,000 price level and I think maybe just losing it here today. But have you seen anything >> right? >> Right, yeah, we're >> [laughter] >> We'll leave them alone. They're making enough noise on their own. But my question here is have you seen anything in the flows on these products that have given you an indication that hey, maybe this selling pressure is starting to find find some exhaustion or do you think it's accelerating as we move through this price level? Are you seeing anything that indicates one way or another whether or not this is accelerating from here, slowing down, forming a bottom? What what's your what's your outlook on that?

>> Yeah, it's not slowing down. It's if anything it's accelerating. So, yeah, not what you want to hear. I mean, the biggest buyers of this over the last year and a change has been strategy, Saylor. And these ETFs they've basically been taking in money rain or shine and they honestly we didn't see much in the way of outflows even during the first pullback. Like if you told me an asset was going to go down 50% plus or more and it was only seeing, you know, $5 in outflows on $63 billion in flows, I say that's pretty damn good. There's a lot of people, you know, diamond handing this thing. Uh and that's not the case. Uh particularly since like I said, like early to mid-May, um things have if anything they've kind of accelerated.

One of the biggest outflow days we've seen across the ETFs was June 25th. We saw about $700 million come out in a single day. Then the next day we saw $445 million come out. $232 million the next day. And then yesterday we saw $223 million. So, I mean, it's not slowing down. If anything, it's kind of accelerating. Um I think there's a whole host of like the there it's not just one reason. One, it's what's going on with strategy. Uh people are obviously concerned about him potentially unwinding that. Part of it also has to do like there's way more interesting things happening in the market right now, right? You have AI, you have what's going on in space, you have uh a lot of things being built um that is drawing interest like from a both a capital perspective and just an eyeball perspective uh that's taking away from

this asset class. And so, I I can make a whole bunch of reasons why I think it might be happening. It's not one thing, but I think it's a whole host of things. >> You brought up strategy. Strategy got a lot of attention and capital, as you said, um with their STRc product offering, which was, you know, a yield-bearing preferred equity, um but was also giving people indirect exposure to to Bitcoin. Goldman Sachs and BlackRock have I think just today Goldman's uh ETF went live, but they're they're they're launching these covered calls covered call-based Bitcoin income ETPs. Have you seen any talk any any attention around these assets? Do you think that they're potentially like specifically designed to compete with STRc? What what's your take on these these new Bitcoin products that are

coming to market here? >> So So, I wouldn't say I don't think they're designed particularly to compete with with [snorts] strategy or what what strategy's doing with STRc. I mean, maybe there's a little bit of that. They see the interest there and they think they can like kind of pull some some interest away from there, but we've had covered call Bitcoin ETFs that have done decently well. They have a decent amount of assets. I don't really like love the the the process here of like of doing these things cuz like from my point of view like if you're going to invest in this asset, right? It uh you end up with you're giving up some of your upside for some income. Uh granted, you are protecting some of your downside. You will outperform in a down downward or or sideways market, but this asset is

theoretically has a lot of upside volatility, but there's a lot of advisors and people who love those trade-offs. And uh there are other ways to do this. People are also doing buffer ETFs on Bitcoin and crypto assets and all these different things. So, um there's a whole host of reasons why people would do this, but obviously if you when I talk to these issuers, whether it's somebody at Goldman or BlackRock, that clients are talking about it. Like this is something they want. They want like a toned-down less volatile way of exposure to Bitcoin, and some of them they did have no desire to touch whatever's going on with strategy.

So, yeah, I think that it's a combo of like maybe they see something they can compete there, but I think more of it is like they have actual client demand that they know is interested in a product like this. >> We're seeing like just like a general acceleration in ETF products, ETP products coming to market, you know, not just in crypto, but in general. But it hasn't slowed down in crypto, and you've talked about this before, but like throwing spaghetti at the wall, launching as many ETFs as you can think of to see what sticks. What's that divergence like in terms of the accelerating number of products at the same time we're seeing these outflows from the existing products?

What's the signal there? What should What should investors take away from that? >> So, it's funny. I I it it I I call it the spaghetti cannon. So, issuers, it's not just crypto-related products, it's everything like single stock leveraged ETFs. We are seeing tons of them thrown at the wall. One issuer launched 50 ETFs last week, new issuer called Corgi. A lot of them single stock leveraged ETFs and and things along those lines. Uh those are those more trading vehicles I would talk about. Um and so they close. Like they're will basically it's it's a very capitalistic system, right? Like the the ETF industry is a terrordome. Um so, they're going to throw spaghetti at the wall and see what sticks, and some of these charge relatively high fees, so you just need a couple of them to work out. It's almost kind of like a VC portfolio. Not

exactly. The hit rate hopefully is a little bit higher than a VC portfolio cuz the payoff won't be necessarily be as high. But yeah, that's that's the way people kind of look at this space. I would say like for the most part there are some bright spots in like the crypto ETF ecosystem. There are things that aren't seeing outflows. There are things that are actually seeing inflows. It's just that you know, it's it's Bitcoin and ETH and some of these other ones are are actually seeing some outflows. The things have been around for a long time. And so that they have a much broader holder base I guess you would say. Whereas like the bright spots I'm thinking of Solana and XRP which launched in the bear market in October, November of 2025. Like things are already down pretty bad. Hype just Hype ETFs just launched which is actually

been a bright spot in crypto overall. And they've also done very well. So there are areas where like things are looking pretty good. They're just you know, fewer and farther between and they're much smaller. >> You're getting ahead of me here. I want to come back to those. But before we move on to that, I want to ask about the Ethereum ETFs. The the staking products have gone live. And just you know, like Bitcoin has these these Bitcoin income covered call strategies. Ethereum now has staking. Do you think that that as a as a innovation on this product of being able to earn yield or returns within an ETF wrapper? Is that a big unlock? Is that something you think is going to get a lot of attention in the market? What are your thoughts on that?

>> So I think it it's not as big of a deal with ETH as it is with something like Solana cuz of the yield percentages we're talking about here. I think if you had to launch a spot Solana ETF and not be able you were not able to partake in you know, whatever the the 7% or 6 plus percent yield that is in Solana. But obviously it matters a little bit. But still there's a bunch of ETH ETFs including one iShares product that doesn't have exposure and it's still the largest most traded product for ETH. So I think part of that might have to do with the idea that like it's a 1 to 2% yield. So it's not crazy and there are some clients of these ETFs that don't want to have to deal with sort any sort of staking queue or they're worried

about liquidity. So basically there's options out there for whoever and whatever you want. So but it does it's not it's not stemming the outflow demand. I mean, I talked about Bitcoin before, right? We we it went off into 10 10 and it came down into end of February. Actually had a pretty good run back into early April, I mean into early May. Ethereum kind of had the same, but it was nowhere near the same level of comeback. And that's like the the numbers are smaller, but the percentage of outflows is much greater. So, the Ethereum ETFs peaked at about 15 billion and they went all the way down to 11 and 1/2 and they barely they didn't even get back up to 12 and now they're down at 10 and 1/2 billion. Um so, they've seen basically a third of the flows leave since since

inception and that's all happened since 10 10 8 10 10. So, yeah, Ethereum is struggling a lot harder, which also is happening in the regular underlying market. As you mentioned as we mentioned before, there's kind of a correlation between what's going on with the underlying asset and what's going on with the flows of these ETFs because obviously there's a lot of complaints about the narrative, there's a lot of concerns about the competition coming out of ETH that isn't necessarily coming for Bitcoin in the same way. There's a whole whole host of reasons, but yeah, they're um the ETH ETFs are struggling even though they have staking. >> Okay, James, you talked about some green shoots in the crypto ETF space. You mentioned Solana, XRP, Hyperliquid. I want to get your outlook on those. We don't have to do them all together, but if you want to, you can. It seems like

these differently than the Bitcoin and the Ethereum products have held up well. Any particular reason you're seeing for that or what are you seeing for for these alt ETF products? >> Yeah, so if you look at SOL and XRP, they've seen like a little bit of outflows, a little bit of inflows, but for the most part they've seen inflows. Even even as those other two assets we're talking about Bitcoin and ETH have seen like pretty serious outflows. So, these things since their launch in October, November, I don't know exact date, I mean, technically there were some ETFs that launched under a different wrapper that gave provided exposure to these things starting back in like July and August, but the real pure spot products, the the real big launch that everyone was waiting for happened, you know, during a bear market. And they both XRP and SOL both

have over 1.6 billion in assets and they really haven't seen any meaningful outflows. They've actually seen inflows. I I part of that has to do with like the people going into this know exactly what they're looking for. Like I could see people like not initially knowing this and just trying to buy Bitcoin and get an exposure to the ETF where it's like if you're going like further into the bag and you know, the toolbox and trying to figure things out and you're buying soul and XRP, you you probably have an idea of what you're getting yourself into and they already knew it was in a bear market. Um so I think for all those reasons for the most part the people that are are in there now know what's happening. But if we end do end up out of this, you know, this winter and it

starts taking off and then we go into another downtrend, I would expect to see outflows. I think it's just that this holder base that has come in very early into these ETFs in the first 6 months of the launch or 8 months of the launch, um they know what they were getting themselves into and they're just trying to you know, buy the bottom, I guess. And then HYPE as well, they they just launched a few weeks ago, a couple months ago uh and they've taken in 200 million during this absolutely brutal sell-off across everything else. So uh they've also done exceptionally well. >> Everyone's tokenizing stocks these days, but almost nobody's doing it right. Thin liquidity, prices that differ from the real thing, dividends that just vanish.

Bitget Stocks 2.0 is different. Real NASDAQ and New York Stock Exchange depth through licensed brokers. Prices mapped one-to-one, dividends paid to your account in real time. Plus you get the lowest fees in the market at just 0.04% and you can trade them like any other crypto as margin, in earn, in grid trading. Tokenized stocks finally done right. Head to milkroad.com/bitget to get started. >> Yeah, I guess you know, if you're buying just like you said, if you're buying >> altcoin ETFs in the midst of a bear market, you kind of know what you're doing. You know, you're going to be sitting in it for a while. So that makes sense. And yeah, HyperLiquid has been on a huge tear in the spot markets as well.

Um have you seen any signs of that slowing down? I think HYPE has had some, let's call it digestion in its price action. Have you is it like no outflows, but just maybe stagnating inflows for HYPE or is it just still incoming only? >> Yeah, so it yeah, it was really hot from like mid May So they launched the first one launched on May 12th, I think, somewhere around there. And then by by the end of May, they had already taken in over 100 million assets. So, it was it was off to a hot start. And they kind of hit 180 in the middle of June, and they kind of stagnated, but they haven't really seen outflows. So, they're now at 192 million of inflows by my count across three different ETFs. So, we had two ETFs launch since then. So, I mean, as far as anything is concerned, it's

it's gone pretty damn well for these things. >> Yeah. Okay. Well, it's good to see some green shoots, like you're saying. And we'll we'll keep checking in with you on this as this plays out. James, I wanted to get your thoughts on something. This is just something I saw yesterday. So, I want to get your take on this. The SEC is seeking public comment, and they're talking about reevaluating their approach to ETF regulation after they've gotten a slew of prediction market ETF applications. I've asked you about this before when you've been on the show. Um but they they also said that there's a rapidly evolving $16 trillion ETF industry here, and they're concerned about how to regulate that. Um first, just where's that $16 trillion coming from? Is that trading volume? Is that assets? And with these prediction market ETFs, why is the SEC so concerned about

these? Just explain the situation to our audience. What's going on here? >> Yeah, I mean, it's it is assets. Um so, things are pretty off to a pretty hot start. I mean, if you look at the So, last year, I'll I'll just talk about flows real quick for the ETF industry as a whole, and I'll go back to your question. Like, we had a record inflow year for US ETFs. It was 1.5 trillion almost exactly. Uh we're at 1 trillion through June 30th. We're on track for a $2 trillion a year, and honestly, usually the second half of the year is bigger cuz December tends to be the largest monthly inflow that we see. So, there's a decent chance that we actually crack 2 trillion in inflows this year.

To give you an idea of like how big this market is, not just the $16 trillion number. And that's brand new flows, not including asset appreciation or anything. So, where's it coming from? Everywhere. The ETFs are competing with a whole host of markets. They're competing with single stocks. I mentioned single stock leverage. Yes, which probably is part of the reason why they're considering like trying to figure out how they they manage this market. Obviously, prediction markets ETFs are a huge part of what they're looking at. They almost they basically explicitly talk about that. I do think they're going to We can get into those in a little bit, but but also it's just like they're competing with mutual funds, they're competing with like other Wall Street derivatives and options. So, ETFs are like a we we like to refer to it as a their Swiss

Army knife. Like if you're a trader and you want to get short-term exposure, you want to trade, you can. And if you want to put this in your retirement portfolio and buy exposure to an ETF for two bips and get exposure to the S&P 500 and hold it for 30 years, you can do that, too. And there's a whole gamut of people in between that are going to be using this for different ways. So, advisors are the biggest users of these things. Um so, yeah, there it's just a it's a great mousetrap and it's a great vehicle and it's one of the reasons why I cover the space. I've been bullish on ETF and the ETF industry for basically as long as I've been working in finance. >> I I went back and forth with you a little bit on Twitter about this, but you mentioned leverage products and I

would love for you to just like talk a little bit about the leverage that we're seeing come into the markets through leveraged ETF products and the expansion of that. I saw somebody on Twitter saying that um margin debt um as a percentage of GDP and as a percentage of or like relative to a GDP and relative to M2 are at all-time highs or near all-time highs. Uh how how are the ETF How is the ETF universe introducing more leverage and more access to leverage um into the market? >> So, if you would ask me this question like a week from now, I'd have a lot more like hardcore answers cuz I've actually starting to dive into this and I'm going to write on write a note on it, but the answer is like you have these single-stock levered ETFs and we have we've had levered ETFs on indices

for a very long time now. They do reset daily, so it's a little bit different than margin debt because margin debt like you don't have to reset daily. These ETFs are can get can be be pretty complicated to understand cuz there's um path dependency cuz like I said, it resets every single day, whereas margin debt you're just kind of exposed uh whether it's going up or down over whatever time frame you you have that margin debt outstanding. But that said, I mean it there's been a extreme explosion in both the trading volume, the assets, the flows into these things. So, one, it's heavily on the long side. Like, we're at a record levels of ratio of long leveraged ETFs to an AUM to the short uh side of things. So, we're at about 16 times levered long ETF assets versus the short ETF assets. So, things are kind of at an

extreme level. Does tend to rise and fall with the market. So, obviously, we've been in a pretty strong bull market. It's an extreme bull market in AI and space type stocks in particular. So, that's kind of driving some of this. So, as things come out, it will naturally deflate. But, we are definitely at um relatively extreme levels. And that's why people are getting kind of concerned. But, the other thing I would say is I talked about this before, right? We were I was talking about how like there is a kind of a correlation between the flows and the performance of the underlying asset. But, with leveraged ETFs, it's the opposite. So, when the underlying asset in a leveraged ETF does really well and you're long, you tend to see outflows. People basically are taking profits. And And you see a lot of trading. So, for

the most part, people are using these the way they should be. They're heavily traded. And you can see that as the trading volume as a percentage of the underlying assets, like people are trading them a ton. And as they go down, that's when the money comes in. So, you have a lot of people trying to bottom call and try to, you know, get these massive pops. And you also have people selling profits. So, there is like some level of healthiness underneath it. But, like I said, we are getting to extreme levels. And it's concerning some people. >> Gosh. Yeah. So, I think um that that that observation there makes a lot of sense to me. I'm really looking forward to your note on this because I've been wanting to get some more transparency into this. So, I'm looking forward to see what you write on there. Um you

talked about I think you said space and AI-related things. Uh when SpaceX launched, I saw you'd written a piece saying that there were at least 25 ETFs filed by 14 different issuers, um many of which were trying to go live for trading on the same day of of of SpaceX's launch or shortly thereafter. Um in the past, I've heard you talk about this spaghetti cannon. >> [laughter] >> Is this part of why the SEC is asking for comment and considering overhauling all this? Are they trying to like like take the punch bowl away from the party on some of this craziness? Or like what what are you seeing here?

>> They might be. I mean we had issue where they were trying to backdoor their way into launching these leveraged ETFs on single stock SpaceX on the day of the IPO and they and people like the SEC came in and halted those things that were trading. They basically called all these issuers and said you can't launch on the same day and they still tried to do this. So it might be playing a factor in what's going on here. It's definitely intriguing. I mean but they I like I said we were just on the SpaceX ones. I mean there's I don't know how many there's like six [snorts] or seven leveraged long and like four or five leveraged short ETFs that all launched on the same day or maybe this maybe within a day or two. I mean those things already they took in a billion in

flows. So I mean within two weeks of launch. So that's the type of money and these things charge. So normally ETF I mentioned like the S&P 500 is if you can get one of those for two three basis points and get exposure to it. So you get tons of money in there it starts adding up but like these ETFs that I'm talking about some of them are charging 1.5% on annualized basis. But like I said they're heavily traded so people don't generally care about the fees as much. But for these issuers that's a lot of money. So it's it's a cutthroat like real push push and pull industry to try and you know get a foothold. But I think the SEC thing is more to do with the prediction market ETFs. I thought they were going to launch. It seemed like the SEC was getting ready to launch. There

was a lot of back and forth. We can see this via filings and you can see like the issuers are changing this document and this language around here and it means the SEC is going back and forth with them almost certainly and telling them we don't like the way this is worded or you need to add risk disclosures on X Y and Z and it looked like things were getting pretty close. And then some weird things happened in the prediction markets like particularly during the Maduro raid and I think the somebody in the administration was like I don't know if we want these ETFs out there. So I think the I do think ultimately we will get them particularly if they're on economic forecasts or finance forecasts or earnings reports and things along those lines. I think what the SEC is trying to do is they need to

figure a way to draw the line between some of those other more esoteric things that they don't necessarily want in ETF wrapper particularly sports betting those types of things because believe me if an ETF issuer can like wedge themselves through a crack and get out with some something that they think they can launch these products, they will do it. That's how kind of how we ended up with these single stock levered ETFs. There was like a rule that was made on levered ETFs, and the lawyers are very smart, and they figured out a way that they would that fit with the rules to get these things out. Even though, yeah, I think that's mostly what the SEC comments are about, but it might also have to do with some of this other stuff that they're just trying to like figure it out because we're I don't know

if I think we've seen over a thousand ETF launches this year. Don't quote me on that, but like we're at a record level of ETF launches, record levels of flows, record levels of trading. Like things are just really taking off. We We've made some predictions that we thought things might start to slow down the growth a little bit, and we were completely wrong a couple years ago because things have only accelerated in the ETF industry. And part of it is the tent is growing, right? Like you're not just buy and hold long term. It's all these other trading vehicles we were just talking about. >> This whole thing has the energy of somebody in a van behind a 7-Eleven being like, "Hey man, you want to buy some SpaceX ETFs?" Like >> [laughter] >> I'm a little concerned about all of this. But James, I I I want to get your

thoughts on this. I won't ask you to guess what the SEC is going to do, but something else that's happening that's sort of like a big trend in investing and in financial markets is real world assets tokenization, moving these things on chain. Theoretically, these things accelerate the speed of capital formation, and they take away a lot of the friction around some of these markets. For something like the ETF landscape that's growing so rapidly and, you know, is experiencing this spaghetti cannon moment, do you think the tokenization is something that unlocks even more capital and liquidity and and speed of trading?

Do you think it is kind of like a an indifferent thing to the market, but just kind of helps support the infrastructure behind the trading? How do you see that intersecting with the ETF space here as tokenization starts to take off? >> Yeah, so near term, I think it's just another distribution avenue, right? Like it's another distribution avenue to different levels of capital. And that's like on the DeFi rails right now. And I think right now there's a lot of testing going on about figuring out ways to do this and distribute their ETFs on chain. But long term, I think it could be a true competitor, you know, if you get a lot of these assets that are tokenized, you can basically create a pseudo ETF that is like a smart contract on some smart chain. So, that's kind of how I view it. So, right now I think

it's a net tailwind because it's just creating another way to distribute these things. Um but there there's no way to know for sure, but I can tell you right now there so many issuers are toying with this and trying to figure out ways to tokenize these things, put them on blockchains. And if it's not like they're not I don't think a lot of these issuers are expecting this to be like we're going to earn so much money and it's going to help us make pull in so much more assets because we do this. A lot of it is just like they're testing the waters and trying to understand to see so they're ready if this is the way things go long-term. And I I do think some of this stuff is going to go that way long-term. >> What is in your mind the right balance

here that the SEC or just in general the industry should shoot for in terms of balancing between enabling and encouraging some of this innovation that we're seeing and sort of like investor protection, limiting some of the risks. Like I I I mean I guess it's like kind of a big general question, but how do you think about that and and where where are we on that scale? Are we are we limiting innovation? Are we bringing too many risks? Or how do you how do you see that in your own mind? >> Yeah, so I actually like the way that this SEC is currently handling it. I was very critical of the prior SEC admin and the way that they handled the launch of, you know, some crypto ETFs and some other leverage ETFs.

Um but I this this SEC has found a way to put their foot down including Hester. Um a lot of these issuers I mentioned they tried to launch in different times and earlier than the SEC was comfortable. They keep also trying to file for 3x and 4x leverage ETFs which is like explicitly forbidden. They're trying to find these loopholes to get it through and the SEC has kind of put the put their foot down repeatedly like saying no. And I I do think like like I said I'm I'm kind of very libertarian minded in the way these things. Like if you can get them launched it makes sense, but there needs to be a line drawn somewhere otherwise people just going to push it to the absolute limit. And I think that's also what's happening with the prediction market ETFs. Like the ones that have been filed have to do

with like economic recession indicators and and thing and job losses and and things along those lines uh which makes sense in a ETF wrapper, I would think, personally. >> Um, but like do we need an ETF to bet on, I don't know, the Jets winning the Super Bowl in 2027? Probably not. Um, and I think the SEC is just trying to figure out ways within the rules that they've set out that they can try to draw a line so they don't have issuers like pushing beyond what they think is acceptable. So, right now I've I'm a fan of how they've handled things. Um, I don't know what else they could do for the most part without like going against the rules and regulations of what is already stipulated uh at the SEC and in other laws within Congress. So, yeah, I think they're trying to find that line

and these comments that they're asking for an industry are part of that, right? They're they're not going out there because they they want to let everything through. They're they're trying to figure out ways to do this without, you know, stepping over the boundaries of what they're allowed to control, I guess. >> James, I'm shocked to hear that you're not a fan of Gary Gensler. That's that's breaking news there. So, I'm I'm I'm just floored to hear that. Uh I do want to drill down on this though. You know, you said like you you see the case for prediction market ETFs that have thing to do with like, you know, economic indicators or outcomes related to to the jobs market or etc. Kind of give me a little more detail on on what value you see there and why you think that's different than just sports

betting as an ETF prediction market product. And then, you know, what what value that brings to the market if the SEC does allow those to move forward. Like talk to me about that opportunity there. >> Yeah, so I mean, the the main ones that are coming out first are they were going to come out first have to do with uh political outcomes, right? So, the first ones that were coming out were if there's two for each one and it was who's Democrats or Republicans going to win the Senate, Democrats or Republicans going to win the House, and who and Democrats or Republicans going to win the presidency in 2028. I think that is like you you're betting on an outcome rather than like the second-order effect of that outcome, which people get wrong all the time. Um, so there's like investing has a lot more

to do with that. And if you want to hedge some sort of outcome because it affects what something you're worried about, but not necessarily like you're picking a stock because, you know, if you'd listened to everyone that that said when Trump was going to win the first time the stock market was going to crash and it did initially, but then obviously the exact opposite happened and if you you positioned yourself that way, you things went down and so there's a whole host of reasons where like you would want this first order effect ability to bet on things like an economic recession or something along those lines. Um so I think there's a pretty good use case for an ETF that does that. Even though for the most part I the one criticism I do hear from most people is like if people want to get

exposure to this, they can open, you know, uh a Polymarket or Kalshi or whatever and they can do it and which is the same thing I heard from people telling me that there wasn't going to be demand for Bitcoin or crypto ETFs because they can open a Coinbase account or Kraken or you name it, Gemini. And that's kind of the way I view these prediction markets ETFs. So if these things do get out, I I envision them being an absolutely smash hit. >> Yeah, I think it it's I was kind of in that camp too of being like, I don't necessarily see the value of putting a product that already exists in another wrapper, like what's the difference? But it's become very very clear that there is a big difference and there's a much bigger market there for those products.

>> Yeah, people are willing to pay up for convenience. That's why and they they're willing to outsource some of those concerns and particularly outsource like self-custody and things like those. So they they trust the names and the brand names of, you know, BlackRock, VanEck, Bitwise, you name it. Um they're happy to outsource that because they're willing to pay up for convenience. I mean you see that over and over and over again in ETF wrapper. There's plenty of strategies out there where like anybody can out there and be run their own covered call S&P 500 strategy, but they'd rather pay up a little bit and have somebody else handle it for them. >> Got you. Okay, this is a crypto show. That means I'm allowed to talk about crypto as much as I want. I want to go back to Saylor and MSTR. Um strategy released a framework for, you know, how

they're going to manage their capital stack, give themselves some options to continue to support MSTR, sell some Bitcoin if they have to. Has that moved the needle in your world at all? Have you heard any people like saying like this is a good move, this is bringing some confidence back to the digital asset markets? Are they kind of shrugging this off and be like let's wait and see? Like what's been the reaction for that or what's your own personal take on that? >> Yeah, I would say like the the people that are my clients for the most part uh in on average aren't huge fans of what he's doing. I think a lot of people are just okay with him doing what he's doing with the you know selling shares in the M and A and I think a lot of people have concerns about like entering into um

with these preferred shares where you have set distributions that you need to make on a regular basis and there's no cash flows in the underlying assets. So, those are the main concerns I hear from people. I mean, he has a lot of runway in time and length and his balance sheet absent you know dropping another >> [snorts] >> 80% from here. Um so, I think for the most part people are paying attention to it, but they're it's not something that I'm getting a ton of questions on maybe cuz people know I'm not like the expert on this, but my view is I have no problem for the most part with what he's doing. The one thing I'll I'll say is like him and some other people at other companies like Strive and other things they they kind of refer to this some of these assets as like money market like

and T-bill like and like talking about like rate curves and I'm like don't do that. Like don't do that. Like these are very much not those things and they like to talk about the duration and then the and the ball and the risk the sharp ratios and things of these things and like that always just didn't sit right for me just because I anybody who looks at this and understands markets knows that like there is some there's a lot of embedded risk in these things and acting like there isn't is not a great thing no matter what your intentions are to like keep it at some par level. Um so, that's the one thing I kind of had a problem with, but other than that I mean, he's they're trying all these new things. I'm not personally somebody that's going to hold those and this is like a little bit

out of my wheelhouse for my coverage. Um so, I would say I don't get a ton of questions on it, but yeah, that's my two cents, I guess. >> Got you. Okay. Well, let's go back to your wheelhouse then. We're going into summer. Uh is there anything like I think a lot of people are looking forward to the SpaceX IPO is sort of like this big market event that was going to come. We've gotten through that. It seems like Anthropic and OpenAI maybe waiting on their IPOs for a variety of reasons, but what's on your horizon that you're watching for this summer in terms of a big market event, market catalyst? It doesn't have to be crypto specific, but just like in your world, what's on the horizon that's a big blip on the radar that you're watching for as it comes closer here?

>> I mean, honestly, like I said, I am paying attention to the leverage, but we already talked about that. And then the other the ones I'm I am also paying attention I wrote a lot about what's going on with SpaceX IPO and the ETF trying to track it. I think that is the norm with those ET Remember we we just talked about the ETFs tracking SpaceX and the levered versions launching one day after IPO. We saw the same thing happen with Cerebrus. I think the same thing is going to happen. Probably as big, maybe not as big as SpaceX, but same thing depends on when and what what's going on with the market for Open AI and Anthropic. So yeah, that those are the things I'm mostly paying attention to and getting ready for because, you know, SpaceX is getting that added to the Nasdaq index lot next

week. It was just added to the Russell 1000 this week. So there's a lot of things to, you know, kind of pay attention to on that front. And then obviously, when you you come back to crypto, you have to pay attention to what's going on with Clarity. It looks like they're going to get a vote in the house no matter what they do this summer. It seems like that's going to house or whatever, they're going to try to get the votes done before election time. And I think both. Yeah, yeah. I I don't know. We we are we're like the my my colleague who's down in DC and covers this stuff is mildly optimistic that it could get done, but I think it the general consensus is more so that they're going to make people go on record as voting against it. And then you understand, you

know, the stand with crypto is the other packs are going to be able to fair shake, are going to know where people stand and they're going to throw money against people who who vote against it. So I think that's we're going to get votes on that. I mean, that would be enough the catalyst like that could be the only thing that I could think of that could get us out of this because as we talk about like with bear markets and and whatnot, um they're measured in performance return downturn and length of time. Uh in the last two lasted 350, 300, 400 days. We're at like 270, something like that. So we still got a long ways to go on time, but like if you get a catalyst like Clarity Act approval, maybe bumps things out of it initially, but who knows. I would say

like for the most part um these things tend to lot take a while if history is any guide, but obviously past performance not always indicative indicative of what's going to happen going forward, but those are the things I'm paying attention to. Um we could have a a little while to go through to to to wash out everything. >> James Seyffart, senior research analyst at Bloomberg Intelligence. Thank you so much for being on the Milk Road Show. I always enjoy our conversations. I feel like I learn a lot and you're just very authentic and and free-flowing with your expertise on these things. So, I know our audience loves this a lot. Where can we send people to find more of you and your work online?

>> Yeah, I mean the easiest thing is if you have a Bloomberg terminal, all of the research that I was just talking about is I write about it on the Bloomberg terminal. Um so, that's where you can see the most in-depth portion of my stuff. I post occasionally on LinkedIn, but most of my stuff I'll I'll share some charts and data and debate with people on some of the stuff on Twitter. So, Twitter is probably the easiest place to get me if you're not going to if you don't have a Bloomberg terminal. Um so, yeah, my Twitter is J S Y F F and I share we we can't share everything, but we share a couple charts from from our notes every once in a while. So, um always open for debate and people feel free to come rip me apart, audience, if you want.

>> All right, James. Well, enjoy your holiday weekend and the World Cup and we'll talk to you again soon. Thanks for being here, James. >> Same to you, John. Thanks for having me. >> And thank you all for joining us. I hope you all learned something today, too. So, until next time, stay safe, stay educated, stay bullish, and we will see you on the next episode of the Milk Road Show. Thanks for being here, everyone. Bye. Want insights on what's moving crypto markets and how we're [music] trading each event? Subscribe to our channel and join the Milk Road Daily and Pro newsletters and start investing like the top 1%. [music] This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.