BlackRock’s 2025 Crypto Strategy Revealed!

Transcript

one of the misperceptions on the crypto side is that ether ETFs weren't as successful as the Bitcoin ETFs where really by all accounts in the ETF World The Ether ETFs had really successful launches so how do we measure that first and foremost for us in the industry a successful ETF is one that delivers what it's supposed to deliver welcome to bankless where we explore the frontier of Internet money and internet Finance this is how to get started how to get better and how to front run the opportunity I'm David hoffen just me today and I'm here to help you become more bankless extremely powerful episode today it's not every day that you have a conversation with

someone who oversees $6.6 trillion yes that's trillion with a t Samara Cohen is on the show today and she is a badass Samara is the chief investment officer of etx and index Investments at Black Rock that's basically all of black Rock's ey shares ETF funds all their index products which is quite a large domain to say the least Samara has an affinity for the modernization of markets which is something that I think we share with her on Bank lists not only is she down in the Black Rock trenches not only is she down in the Black Rock trenches building ETFs talking to clients and producing market-based intelligence but she's also she can also see things from a zoomed

but she can also see things from a zoomed out View and can discuss the long Arc of the interaction of technology and Marcus which I think is truly helpful when we are currently in an age in which blockchain Tech is actually starting to disrupt tradition traditional markets this is one of my favorite conversations I've had on brist in a long time in addition to all the other things that I've already said about Samara she's also just so easy to talk to so I know you're going to enjoy this one bankless nation so let's go ahead and get right into the conversation with Samar Cen from Black Rock are you ready to swap smarter Unis swap apps are simple secure and seamless tool tools that crypto users trust the Unis swap protocol has processed more than $2.5 trillion in alltime swap volume proving its the go-to liquidity hub for swaps

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the digital assets team at Black Rock in September of 2024 it's now January of 20125 and you are also not Robbie mitnik you are Samar Cohen uh can you introduce yourself a little bit more for the audience and illuminate um a little bit of who you are and what you do at Black Rock just so we know who we're talking to sure I listened to the podcast with Robbie which was great and I am a listener of the podcast myself so very happy to be uh having the conversation with you directly uh so I am uh as you said the chief investment officer of ETFs and index at Black Rock uh I'm responsible for the portfolio management of our our index portfolios our ey shares ETFs and making sure they trade

in the market with the you know access high quality that uh investors expect from from my shares I've uh I think of myself though just by way of background is really a uh career markets modernizer I've been in in the ETF business for uh just 10 years now but when Black Rock first reached out to me at my uh the job I was at before then which was at a uh a large Investment Bank I didn't know what an ETF was I had to Google you know what is an ETF uh which was actually relatively typical of a person who was a uh uh growing up in the uh fixed income and derivatives uh division of a bank

then but my passion has always been making markets more resilient and more transparent and pretty much more useful for for more people so so that's what brought me from that job to to Black Rock and and into the ETF business I work really closely with Robbie mitnik who's our head of digital assets um and who has taught me a huge amount of what I know about uh crypto and and the digital assets world but really ETFs are also uh and have been in markets uh a disruptive technology that um uh incite many of the same goals what role does technology play in your job you called yourself a markets

modernizer maybe you could illuminate that modernizing word a little bit more what does it mean uh and what have you done to modernize markets uh is is this like an evolution of technology is this um new novel Financial products how do markets become modernized and how have you played a role in that sure so I I I'll try not to uh get too nerdy and weedy with this answer but I would argue that Technology Innovation is foundational to the modernization of markets and has been for literally Millennia I like talking about you know this um this past uh spring I took my teen daughter to Paris where she'd

always wanted to go and we went to the lou Museum and the one thing I really wanted to see cuz I knew was there was this Relic from uh ancient Mesopotamia that was a uh it it was it's considered a token actually a clay token but it was how you know trade was conducted initially uh thousands of years ago and it was a mechanism to exchange a what was then a real world asset and and kind of difficult to bring to the marketplace and that you know Clay token thousands of years ago was a technological breakthrough that contributed to to the next phase of markets so it was foundational then and it's foundational now now you know as we

said ETFs and index are both in my title index strategies which are the ability for an investor with not that much money to commit to actually diversify their portfolio by buying hundreds or thousands of line items that wasn't possible actually until really about 30 to 40 years ago and and indexing as a portfolio strategy actually came of age with the first commercial microchip because it actually took more computing power than had been available before to take what had been really a mathematical concept and turn it into a trading reality so that's like a few thousand years of history with technology as the

through Point very interesting yeah I really uh I think we at bankets really appreciate seeing the long Arc of Technology as it relates to markets so I think that's maybe something that we share so understanding the context of once we had clay tokens uh representing real world assets and you know going through the evolution markets to the world of of ETFs as you've just illuminated we are now kind of entering this world of uh modern markets uh integrating with blockchains or blockchains integrating with modern markets bidirectional uh so now we've entered in the world where there's now two very large ETFs uh and and I think this is just the beginning maybe you could place Us in history now in the modern era where blockchain technology blockchain assets are now manifesting in

the real world in in um TR traditional markets but then also it's like a foot in the door right so where does this go for here just Place Us in in history as you see it if you don't mind yeah I love that question because I think it is both a uh you know the uh the Bitcoin ETFs in the US as a category and I should actually say because our Regulators want us to say they are etps not ETFs Exchange traded products and definitions are important um have been around lit like for exactly a year almost to the day of this conversation and you're right this has been I think a watershed moment in markets and yet also the very beginning so what's so important about

the Bitcoin etps uh in in my view is that they really created a bridge between these two worlds between the crypto world and the PFI world one of the things that uh I think surprised us to a degree this year was how useful that bridge was to people on both sides we knew there were trafi investors that um if they were going to allocate to bitcoin wanted to do it in a familiar rapper but there were a lot of digital kind of native investors who also found that the ETP rapper served their needs and we actually have some pretty good data showing that there are investors who

bought their very first ETP uh in one of the Bitcoin etps and uh are now buying other etps so hopefully it's helping both you know digital native as well as trefi investors build more Diversified portfolios that are more customized to to what they need so so that's why it was such an important moment and we really saw in all of the numbers and the flows this year how um embraced this bridge was uh but you know again to your point this is uh it's the story of one cryptocurrency um and it's the story frankly of trafi rails being very important uh to the uh bringing that

cryptocurrency more into the investor dialogue and so I think that's why it is still the very beginning both as we see crypto rails and the crypto Financial ecosystem develop more and also hopefully in my view and I'm interested in hearing your view on this as well develop in an integrated way with what already exists and works because I think there's always a lot of passion out there to completely disrupt and do things differently and sometimes that is the right direction um as a career uh markets modernizer um I think we you know find a lot of times that the best world is the

one that creates Bridges and looks to best practices from multiple places yeah I think people who are deeply crypto Natives and they believe in the cryptoz of everything might resonate with something that I want to get your take on I think this got uh incepted into my brain with um one of the short stories from Andreas Antonopoulos he kind he called it something like technology inversion and he used the metaphor of dialup internet where the internet and data was squeezed through telephone lines into people's homes and that's what dialup internet was and now uh later we actually just got Broadband we just got cable internet and was much faster and now when you make a phone call with someone the phone actually

goes through on the internet along with everything else that's on the internet you know the YouTube uh Twitter Facebook Instagram uh and then also you know phones and so things flipped things inverted and I think the uh correlation here the the way to apply this to crypto is that right now we have analog versions of these like crypto assets we have uh the Bitcoin ETF the E The Ether ETF but it's kind of the it's the analog it's trying to squeeze the internet through dialup where I think crypto natives are really looking for the inversion where all of a sudden more of what Black Rock does more of what the NASDAQ does is actually on a blockchain or maybe there is a Black Rock chain one day uh maybe that's a little bit uh futuristic but I'm I'm wondering your

take on that perspective so I agree with you that's the vision that crypto natives have I think for me the question is is that the VIS Vision that serves markets and investors best at this moment in time I'm not convinced that it is and a lot of times my lens and um you know it's interesting I think my my lens on crypto is kind of hard to extract from my lens on being a parent my daughter is uh 16 and she was born uh October 10th of 2008 and so she was born kind of you know 21 days before the uh white paper was was published and it was also during during the great financial crisis and while these things are obviously like not correlated um that

moment in time was a big one for me in my career and and determining kind of where I wanted to spend the rest of my career and really wanting to if I was going to continue a career in markets which is my passion and what I love doing I wanted to be a part of increasing resilience access and transparency in markets I think though that the vision of of uh crypto which has um huge benefits from a transparency auditability perspective I think where I call into question that Crypton native vision is around the degree of centralization that's ultimately most important because again as a parent the more uh like the more

decentralized a world the more you have to become the expert yourself um and I think that really the reason trade intermediaries have grown over you know decades centuries Millennia is because people want to focus on the things that they're experts in and they are sometimes very willing to trust an intermediary however uh crypto can make that process of uh trust work better I'd like to zoom into the here and now as you mentioned the Bitcoin ETFs are almost one year old The Ether ETF is about 6 months old how should we evaluate the development in progress and success of these ETFs how are they

tracking versus expectations so I think um one of the uh one of the I feel like I am uh becoming increasingly bilingual in um uh uh trafi markets uh as well as crypto I'm much more like no I'm more like a tourist crypto okay and uh you know I have more fluency in trafi markets but it's interesting to me increasingly to see the misperceptions on both sides of that divide and one of the misperceptions on the crypto side is that the uh ether ETFs weren't as successful as the Bitcoin ETFs where really by all accounts in the ETF World The Ether ETFs had really successful launches so how do we measure that first

and foremost for us in the industry a successful ETF is one that delivers what it's supposed to deliver so it tracks the underlying index with um absolute precision it's one of the reasons that Bitcoin ETFs became important because what we were hearing from investors was that they didn't have many ways um outside of actually holding Bitcoin you know in self- custody or on Exchange they didn't have many ways to hold it in a kind of you know trafi wrapper where they could view it alongside the rest of their portfolio in a way that tracked they were buying a Futures ETF which as you probably know for reasons around position limits mrack they were we're

buying proxy stocks and so the tracking of the ETF the Precision of that is uh number one how we measure success number two is Market quality and what we mean by that is it takes really an ecosystem of players to create uh trading volumes liquidity um access on exchange for us it was the authorized participants who were agreeing to do create and redeem in the ETF so making sure all of those things are in place we call that market quality both the Bitcoin ETF and The Ether ETF um have tracked they've had high Market quality High participation now the flows have been different um and

this kind of gets me to uh you know misperception number two and there's definitely misperceptions on both sides but that's that creating an ETF drives flows it doesn't investors and investor sentiment drives flows and in 2020 before for investors the thesis around Bitcoin was much more tangible than the investment thesis around um eth and that explains the you know disparity in in flow however um they've both been I think that you know the Bitcoin ETF as as you probably know really beat all ETF records in history but the E ETF was

still in the top 20% of ETF launches in the United States this year so we feel the both as successful it's interesting to hear that you're saying that it's really the marketing The Narrative uh the identity of the eth ETF that uh can be the reason why investors buy versus don't buy and I think this is definitely something we learned as an industry is like the Bitcoin story is just so easy to tell it's very simple 21 million limit it's digital gold that's it and then The Ether story just doesn't have that same Firepower that same punch we asked Robbie I remember a similar question to this but that was again back in September uh and also since then ether ETF flows has picked up

significantly in the last month or so I'm wondering if there's any new conversations uh that you're hearing from clients or any just what's the gossip Mill sound like in in the terms who people who are buying the Bitcoin ETF or the E ETF is there anything different than when we checked in four four or five months ago I don't think there's that much that that's different I will um give my take on a couple of things that you just said and actually David as a fun fact I should tell you how I um how I started listening to the podcast because I think I'd listen to it from from time to time and if you recall um the SEC really surprised the industry with its approval of eth ETFs that happened in May um we were uh the industry was ready for it to happen and

we were you know kind of had the Playbook from the Bitcoin etps but but that was a surprise and so and and if you remember and you guys covered this very closely that period of June through early July we really weren't sure when trading would start um and so we were you know looking at everything our portfolio Readiness trading operational as well as the um education strategy uh around how we would position the ETFs when they came out so I was uh one weekend a lot of my favorite content in crypto has actually been through um podcasts versus a lot of the the stuff that I normally read and so I was just searching through podcasts and I saw this podcast called the Great eth pitch off and I thought I thought

well this sounds like it could be useful and so I listened to that and um and I actually thought it was really uh I I I thought it I mean you guys were were uh funny but also very uh thoughtful and and educational and uh and so that was actually when I what we go for yeah well you get the combination of things you've covered a lot of things really well I think but um but uh that's when I started listening to the podcast so but I will say this I think your frustration then which is a little bit of what you just said was that it was just harder to explain it was a tougher narrative I actually think that's true but I don't think that's the Crux of the issue investors are smart and the uh what we call self-directed or individual

investors who are really driving the success right now of the Bitcoin ETP range from from you know really small investors to very sophisticated um uh investors it's a very broad space and I think generally speaking they understand the difference they don't buy the investment thesis at this moment in time to the same degree it's not as relevant as the Bitcoin thesis is in a moment of time where we have heightened geopolitical tension concern over kind of broad-based uh disruptions concern over the dollar deficits so all of these things play really well into the Bitcoin thesis on

top of which what's really in investor psyche right now I think is that 2022 was a brutally hard year for trafi investors because stocks and bonds went down together that was a historical you know event and it really made people think about how do I diversify my portfolio what are the you know is there are there um alts that can create some sort of ballast in a traditional kind of 60/40 equity Bond portfolio and there's a really interesting um analysis you can do around the potential that Bitcoin plays in that scenario where at the same time particularly for the US investor who is in um uh whether it is through an

active strategy or an index strategy you know likely pretty exposed to Mega cap Tech I think often they feel that the um eth story is uh less of a diversifier and more of an amplifier to some of the exposures they have so I think that the you know both you know the industry um as well as investors are are on that educational journey and it's not that they don't get it I think that Bitcoin has just been more more relevant at the portfolio conversation right now yeah yeah there's there's always just a maybe narrative Market fit asset Market fit for the times that we are inside of uh and I I think there is just a lot of

like geopolitical relevancy over the last few years and maybe Bitcoin is simply just a stronger player in that sort of environment I'm wondering does Black Rock provide any recommendations in terms of allocation for investors interested in holding exposure to bitcoin the Bitcoin ETP or The Ether ETP does that is that something that you guys do and if so what are those recommendations so we're not an investment adviser we don't provide investment advice but we do put out investment research and it's generally rooted in uh risk and how we look at portfolio risk and we do that across asset classes countries strategies um and we have started writing about Bitcoin we haven't yet uh written about eth in the portfolio context because

most of this year I mean again eth is you know uh um six months old versus Bitcoin a year old so so initially with Bitcoin it was really educating around Bitcoin the asset class and also importantly for the digital native investors who understand Bitcoin educating around etps and the ETP wer and we're still on that Journey with eth over the last few months though we did write um uh twice and we'll continue to do so on Bitcoin in the portfolio so we wrote about Bitcoin as a diversifier and the reasons we think it's interesting uh or or you know relevant for investors who are thinking about an allocation to bitcoin to think about um the potential diversification

aspects of of Bitcoin versus you know of uh uh equities and and bonds and and in the traditional 60/40 portfolio then we actually took it a step further and uh I think probably about a month ago we wrote a piece that I think is really interesting on portfolio interactions of Bitcoin and that's the first place we talked about potentially sizing and allocation and this of course is for an investor who has determined I am you know interested in participating in Bitcoin because there's lots of investors particularly on the institutional side who aren't there yet but who are for investors who who want to incorporate Bitcoin in their portfolios how do you think about it in

the context of a diversified portfolio and we thought an interesting framing given that so many investors are um already in some way exposed to the you know mag s um stocks we looked at uh portfolio IO risk contribution of different levels of Bitcoin allocation and how that would compare to a MAG s stock um and that's not to say that Bitcoin is at all like any of those stocks is different but taking a risk centered approach to how to think about a Bitcoin allocation and its contribution to overall portfolio risk we thought was something that investors would really understand and that came

out of the lot a lot of the conversations that we have with our clients and where we came out in that piece was that a 1 to 2% allocation to bitcoin got you to the same level of risk contribution as a MAG 7 stock and going above 2% would um uh exponentially increase the risk uh contribution so if you were to go above 2% you were really making a very strong view on bitcoin specifically versus trying to keep it in in the bounds of this Diversified portfolio now who are the people that are consuming this information who is this is I'm sure very robust analysis

who's the intended audience for who is supposed to hear that information so we talk to uh uh investors uh across the Spectrum um largely the investors that we talk to directly are advisers um who have you know their own uh clients and we also talk to institutions and then we do make a lot of um information available uh on our website for individual investors we'd have to check though David before uh I'm not sure if this piece is I forget like on if it's on the website for anybody but uh we do put the diversifier piece is out on our website for everybody the portfolio allocation may be for advisers and institutions but we really write for

all of those audiences yeah I guess since you have $6.6 trillion dollars in ETFs and index product the maybe the answer to who is reading this is some chunk of whoever is operating that $6.6 trillion dollar of of ETFs and and index well but remember this the $6.6 trillion doll um doesn't have any crypto in it all that's all of our Equity ETFs our fixed income ETFs the only crypto that we hold because you would know this one of the things about the index and ETF portfolios is they are completely transparent we publish Holdings on a daily basis so the only crypto in those portfolios right now is actually in the

two crypto etps Bitcoin and eth right I would like to get your opinion on what we want to see out of the ETFs in in 2025 if there was like a a rubric of sorts with things that you wanted to see the Bitcoin ETP and the eth ETP check off as achievements in 2025 this year what might be on that list what's some things that you feel like are pretty safe that we're going to get what are some things that are maybe a little bit harder that you're optimistic for and then maybe what are some some potential stretch goals well so first of all I think that this um work being done around Bitcoin and the portfolio construct is really important and I hope we see more of that in 2025 I hope the conversation becomes

less about Bitcoin or not Bitcoin and more about how is Bitcoin um manifesting in the portfolio where is it useful where is it not useful and look the experience of the next you know few months and the next year is going to be very instructive um in terms of of where that goes it's important to remember that relative to you know lots of other asset classes Bitcoin still has a pretty limited history so there's lots of investors who say hey conceptually this makes sense but it's really hard for me to do the type of you know back testing and analytics that I'd want to do with kind of you know call it 10 meaningful years of of trading data so the more Market Cycles we weather the more data

that comes available the easier it is to kind of integrate Bitcoin into the broader conversation around um risk and and asset return so that's number one number two which is a little bit more specific is I think the um launch of options on the Bitcoin etps was a really important moment in November generally speaking options ecosystems are really good for markets they tend to create more balanced trading Dynamics you will have buyers on the way down sellers on the way up um and so seeing how that plays out um is going to be really important on the other hand and I was

having this conversation um with with someone yesterday actually with um uh Bob pizani on on CNBC Innovation and complexity go hand inand and there are lots of people who are really excited about launching and pitch ing um options-based strategies and some of those will be really useful for investors um and some of them may be really hard to uh understand and so I think the more options are incorporated into you know product strategies around Bitcoin the more important it is that we really put out good clear education on on what investors are buying but generally speaking options help investors uh go in multiple directions

it helps them kind of tailor their exposures participate with limited downside um you know uh uh achieve income and so um I think the uh the development and and the use of options ecosystems is going to be interesting you know we've even seen interesting Dynamics in in the last few weeks where as you expect um when options were launched there was so much more demand for calls versus puts so upside protection versus downside protection that started flipping a little bit and that's going to give us a lot of information and transparency around investor sentiment and that level of transparency actually is really acreative to healthy markets so when I think about the Hallmarks of a more

mature um resilient Market the development of this options ecosystem in etps um I think will be helpful both for the underlying crypto assets and also probably for their um digital native derivative markets which don't have as much transparency as they will need to really achieve more uptake among investors I'm going to quote friend of the podcast Alex Thorne here Black Rock ibit options are absolutely dominating uh the volume on ibit is dominating versus the vanilla ETFs also Etha the Black Rock uh ether ETP has also recently started to take the lead on volume on the ethereum side the question is um what has black rock done to Foster

that growth or was that all just emergent and just part of the product of maybe the elections or just the times that we are in is there anything from the top downside of things that black rock did to help um promote volumes on the the V the options in The Ether a um product well remember we're not options market makers we're not option Traders but we do uh invest a lot of time and attention in the options ecosystem because again going back to how do we measure a successful ETF high levels of Market quality and in our experience experience etps that have developed options ecosystems around them have higher Market quality than those that don't so we think investing in um

options ecosystems is an important use of you know time and resources um we uh spent a lot of time with NASDAQ on it of course and and ibit options actually ended up launching the uh the day before uh the rest of the the Suites I think because we are we are just you know very focused on um on options and and making them available when we think there's investor demand for them and there clearly was in this case but what's interesting is we also um what's differentiating about the ey shares platform is that I mean you gave some of the headline numbers but that's actually not the most exciting part of it I think what's exciting about the platform is

that we cover virtually all asset classes all countries and so we have very deep ties into the trading ecosystem and are able to work very closely across the trading ecosystem to understand what do market makers um need in order to commit their own capital and Technology to making markets and and participating and there's a lot of things around Bitcoin that are um very uh um attractive to to market makers it's a high volatility asset the volatility of volatility is high and it also has this like what we think of as positive ske the you know

volatility historically generally has has gone up when prices go up right which also makes it attractive so we spent a lot of time on those Dynamics and we engage a lot in the options ecosystem with over $1.5 billion in tvl the meth protocol is home to me the fourth largest eth liquid staking token offering one of the highest aprs among the top 10 lsts and now CME eth takes things even further this restak version captures multiple yields across carak enan layer symbiotic and many more making CME the most vient and most composable LRT Solution on the market metamorphosis season 1 dropped $7.7 million in cook rewards to me e holders season 2 is currently ongoing allowing users to earn staking reaking and AVS yields plus rewards in cook me e

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November stable coin volumes hit $6.8 billion made for seamless onchain FX trading plus users can pay gas with erc20 tokens like usdt and usdc and send crypto to phone numbers in seconds but why should you care about cell's transition to a layer 2 layer 2's unify ethereum l1's fragmented by becoming a layer 2 cell leads the way for other evm compatible layer ones to follow follow cell on X and witness the great cell havening where cell Cuts its infl in half as it enters its layer 2 era and continuing its environmental leadership yeah you talked about how options and volume just really make for a very high quality product a high quality Market I would imagine that the existence of options also is just legitimizing for Bitcoin it's something that fits into

the traditional Finance mental model for what Finance looks like what is that unlocking is that unlocking further institutions to deploy more capital is it what does the legitimacy and the market quality unlock for the Bitcoin ET and The Ether ETFs as they achieve them I think I'd replace the word legitimacy with transparency and access so options provide a new level of transparency and access and I would say it's been interesting to me on my own crypto Journey because theoretically there is so much transparency in crypto but actually if you are a Trader or an investor um there are so many different sources of price information transparency is harder to procure um in

crypto markets uh uh in some ways than than you would expect it to and so bringing um volatility instruments onto exchanges and listed exchanges so investors can kind of standardize and Source how and commit Capital to prices which allows us to really see where volatility is and where it's trading that level of transparency and access is a game Cher for markets and wasn't there to the extent I I might have thought it would be um you know a few years ago in crypto so I think that's kind of um Point number one um and point number two is absolutely we often see that

investors who um want exposure to an asset class but for whatever set of reasons aren't um ready to commit in you know fully to the underlying they will come come to the asset class via the options Market um we've actually seen that historically I told you there's a lot of parallels between exchang traded funds and and options exchang traded funds have grown explosively over the past 20 years and a lot of institutional investors came to exchange traded funds initially through options on exchange traded funds they thought um it would be like they appreciated the idea of the

exposure but they wanted to um have more of a limited Capital uh outlay and limited downside to start and they came to the you know underlying wrapper via the options market so that's an important to mention too there's a famous quip in Bitcoin land that the price of Bitcoin is its marketing department price is the best marketing for Bitcoin and I'm wondering if you just have any anecdotes uh you can share about what it was like since the Bitcoin ETFs were launched when Bitcoin crossed $100,000 a his Milestone uh what was that like on the inside of Black Rock uh was there any Communications with clients or fund advisers or anything like that any anecdote you can you can share that's related to the idea that price is the

best marketing for Bitcoin I think education is the best marketing for Bitcoin I think education um and work around uh uh risk and how to harness risk in a diversifying way and and look at portfolio interactions from my perspective and how we talk to investors that it's actually the best marketing for Bitcoin um actually I think it's important that investors are reminded despite the you know highs that Bitcoin was reaching into the end of the year that this you know although price volatility in Bitcoin has dropped meaningfully in the last few years it still is by any measure a risky volatile asset versus pretty much anything else

that investors have in their portfolios um and that's actually part of what creates uh relevance for it right now if it didn't have that you know those volatility characteristics it might not have the same investment thesis as a diversifier that it has but actually um keeping in front of investors uh um you know in particularly long-term investors which is you know largely who we are talking to um those facts has actually been a lot more significant than the price action of of Bitcoin and actually this gets me back to this point around misperceptions I do think in the crypto World there was this view that success in the ETF was that the price of the

underlying went higher and that is absolutely not how how we would ever measure success of an ETP it's does it effectively provide access have Market quality um and and play a role in a in an Investor's portfolio I was wondering um there's a potentially in the ethereum land there's future upgrades to uh the ethereum blockchain that may or may not impact uh the fundamentals of ether or just you know the the blockchain at large but then that's also true for for Bitcoin as well does Black Rock have any view about future upgrades to the protocols of which it has ETFs for would black rock ever take a stance on upgrade proposals out of these blockchain systems so first

I would say um black rock is about 20,000 people so um so Black Rock you know is never going to have a uh a kind of you know monolithic view um the best person to talk to about that of course would be um Robbie mitnik and and you know Robbie will certain have views certainly have views and I think with respect to um how we uh engage in the industry there are many times that we do um go out and and you know speak to our views although generally speaking if I look at other you know trading environments trading ecosystems um our views will be kind of rooted in the principles of what makes an ecosystem

the most useful for us and our clients versus um because we generally favor um just open architecture and interoperability which at its core operating at our scale is something we need um everywhere we transact generally speaking having to operate in a closed ecosystem can be very limiting for us it's one of the reasons from a tokenization perspective one of the pivots we did make pretty publicly over the last couple of years was leaning much more towards public versus permissioned blockchains so I think in terms of stances you'll hear from us it would be more along those lines versus one kind of you know crypto platform

versus versus another but scalability and the aspects of of scalability and particularly the prerequisites for our our counterparties to participate is something I would um expect us to to be vocal about one thing that I think the entire crypto industry is hopeful for is that we are not at all close to being done with the increased ETF isation uh the index isation of some of our crypto assets you know we have our number one and number two Bitcoin and ether uh but I think we're hopeful by the end of hopefully 2025 we at least have signs of number three number four and maybe number five uh and then hopefully in you

know 5 to 10 years there's more than we can really count does Black Rock have any other plans for other digital asset ETFs or what would it look like to start to see some plans starting to come together so I guess I I actually have a question for you if you want to share your thoughts on this but it's why um do you think that is uh so important and and of such Focus if if you know because I I I sometimes again worry that going back to misperception number one that you launch an ETF and the price of something goes up that's a misperception and I wonder whether some of that misperception is driving the excitement over kind of multiple coin uh ETFs we

root our decisions based in like investment thesis in the portfolio but but what do you think is is driving that oh I think it is absolutely exactly what you identified I think if you are a large uh Community member of a respective blockchain ecosystem and it does not yet have an ETF you see the ETF as a cataly for Price appreciation of your respective crypto asset and to be fair that is what happened with Bitcoin maybe it's not exactly what happened with ether maybe ether didn't really exactly have a very strong price appreciation post the launch of the ETS but Bitcoin certainly did and that is what the narrative has become in the world of crypto uh and the narrative I think is because uh the ETFs unlock

access to investors in a particular uh asset that did not exist prior uh there's also some amount of legitimization so if something is got an an ETF it's legitimized by trafi it's opened up to uh potentially pools of capital that it didn't have prior um and also there is a a regulatory drisking as well uh where um maybe this is less relevant for the incoming Administration but for the previous administ ation uh an ETF is kind of considered as a shield of armor against Gary gendler and the SEC uh and so I think some combinations of those reasons everyone in the crypto industry wants an ETF for the respective asset that that they

hold yeah interesting I think that um uh there's a lot to unpack there uh categorically launching an ETF does not magically create um price appreciation and by the way this is a conversation I have had for the past 10 years wherever I go in the world I might be in a a country that has you know a relatively less developed stock market and and you know the CEO of the exchange there will come and say to me hey can you guys come and launch ETFs here because the idea that they have is you launch ETFs and magically it creates liquidity and demand for the underlying and it really works in the reverse way so I think what's important is really to parse out

what will the investment thesis be for each of these native tokens of these different blockchains how do you measure it how do you describe cash flows to it and how do you look at risk what's unique about Bitcoin is not that it is the oldest uh oldest is funny it's a year old but oldest you know us listed ETP it's that it actually has a very unique um investment thesis where the kind of future price is entirely a function of the level of adoption given the you know scarcity finite Supply um and Bitcoin you know and this is the part yes it's easier to understand

because Bitcoin is generally only trying to be one thing this you know borderless store of value um however despite the more complex investment thesis of these other tokens um you still need a way to ascribe cash flows um and to look at them you know one to the other and that's the story that has to be told and you know from from my perspective I think most um successful ETP launches will follow that but to your point there's you know lots of excitement and I think the the regulatory path may become much clearer to launch an ETP on any token that you want um but you know without speaking for other issuers the

way you know we approach it is really like rooting the work and what we hear from our clients has a role in their portfolio right now me and and Ryan we do the weekly rollup every uh Friday and we look at the inflows into the Bitcoin ETFs and The Ether inflows Into The Ether ETF I know you do yeah yeah right yeah I mean black Rock's usually like the number one there uh inflow on on a weekly basis and just looking at it right now Bitcoin has uh 35 almost 36 billion dollars of net inflows into the Bitcoin ETFs and I think when people in the crypto industry hear that they are thinking well that is $36 billion of buying pressure now granted there could have been maybe a majority percentage of

that inflows that was sold by actual physical Bitcoins sold by crypto investors and then rebot in the ETF package just for whatever reason tax advantages uh convenience advantages and so maybe maybe only a a minority of that inflow pressure is actually true net buying but nonetheless people think that some percentage of this buy of this inflows into the Bitcoin ETFs is true buying pressure that did impact uh the price of Bitcoin in a positive direction is that is that wrong is that naive how should we think about this I don't think it's wrong I just think that there's Bitcoin buying in all wrappers um and you see that in the you see that in the ATP flows now one of the

things that we really like to look at we call it the uh secondary primary um ratio is that imbalance of demand and those net inflows like when people actually because of course a market maker doesn't have to um create new shares of the ETF and it's when they create new shares of the ETF they deliver coin to the ETF and you actually see the inflows there is nine times as much trading that is actually happening between buyers and sellers of the ETP such that no coin gets exchanged at all that's a really interesting statistic I think in terms of looking at at Market sentiment is how much like incremental

um exchange is happening uh outside of actual inflows but yes categorically inflows show an imbalance of you know buying versus selling and some of that is net new buying but there's net buying um happening across other rappers as well I don't think it's a function of the existence of the of the ETP yet I think that um there are institutions that um May do their first uh sizable Bitcoin allocations via the ETP rapper where they haven't had any allocations so far that has not largely been the story though of 2024 and that

gets back to this was a big year but it really is the beginning that conversation around institutional adoption and also a wealth advisor adoption that's going to be the important story of 25 and beyond beautiful I do actually want to get back to the original question of uh does Black Rock have any plans for other digital asset etps and what what can you share with us on that front um I mean we're pretty public about it and I uh I I do get a lot of um commentary on on crypto Twitter which we should talk about for a second because I think crypto Twitter can be unproductively mean um but our yeah our plans right now are around uh

Bitcoin and um and e that's where we hear from our clients there is the you know um portfolio level interest uh you know with respect to to where our focus is right now and we have focuses obviously in digital assets beyond the ETP we're very focused on um uh tokenization and tokenization of of Treasury funds we're you know very interested in kind of the future path around uh stable coins and and our when we think about our digital assets strategy it's kind of those pillars of uh crypto uh stable coins and and tokenization um so for us there is a world Beyond new coins in an ETP but with respect to our um near-term

strategy uh our focus is really Bitcoin and eath understood understood I want to get into a little subject about regulation but maybe first before we get there uh we are about to have a new Administration uh one that has positioned itself to be more free markets more Pro markets uh Gary gendler uh will be resigning in six days uh maybe that's more relevant to us crypto natives than it is is to Black Rock but we are very excited about it on the crypto side of things has this incoming new Administration changed any strategy uh or impacted anything at all as it relates to Black Rock's involvement in the crypto industry yeah look I think first of all nobody's in place yet to your point uh we are we are a few days

away from inauguration and to be super clear the SEC uh impacts absolutely everybody uh in financial markets uh certainly in the US and I would argue as well around the world so so we care deeply and we engage very closely with the SEC I think taking a pretty big step back um from kind of the current administration US markets um have generally done a better job at supporting Innovation and supporting investors at the same time than anywhere else in the world and that's why us markets kind of have the prominence that they do today it is that combination of support for Innovation and um

appropriate investor protections that I think are really the the Hallmark of of what we do really well so I'm pretty excited and optimistic that that is the direction we will return too um there's been you know uh uh less transparency and that's played out pretty publicly certainly around the crypto um etps but but in other ways as well now recall a lot of what impacted this SEC um has nothing to do with crypto it really goes back to some of the um stock market disloca when I say sorry this SEC some of the the stock market um volatility and dislocations that characterized 2020

2021 like one of the big themes in in global markets right now is this heightened participation by individual investors so like you or me trading through an online brokerage account and there was a huge spike in that in the US at the beginning of 2020 because a lot of trading platforms started offering commission free trading people were at home over covid and getting more comfortable with technology and then a lot of people got stimulus checks and so those three things combined created a lot of like individual traders in the markets and importantly a lot of um those Traders actually kind of stayed in the markets and became index and ETP investors but markets have changed and

are changing in the US and around the world because of the participation of retail and and that has um just created a wave of of regulatory Focus um that has really dominated the the last few years but I think to your point yes I think that it is um exciting to be looking ahead to um a more uh Innovation supportive environment but I will say I really hope and I think that um you and Ryan have done a really nice job of of covering in in a balanced way the the impact just positive and negative of of Regulation a lack of Regulation a lack of guard rail can really undermine

investor confidence and maintaining and growing investor confidence is one of the single most important things for this Market to to meet its potential so my hope and you know and my engagement and I hope you know yours as well is going to really be around how do you how do you strike the balance between those two things is there anything that um black rock is anticipating for for regulation in 2025 there's there's a potential set of bills out there stable coin Bill uh anything that black rock is hopeful for or anticipating in 2025 yeah so um we're hopeful that a lot of the basics get established so things like definitions um things like

jurisdiction like who's the regulator who's responsible um there's a lot of work that has to be done to Simply figure out like who's going to engage who can you ask questions to who do you work with because to get this right is really going to require collab oration by um the public and private sector which is why I think it's generally a positive sign that there's a number of private sector experts that are signaling the fact that they are going to be uh engaged in in positions of of influence that's going to be really important that's always important in terms of areas of of new technologies so number one the basics like jurisdiction who's responsible definitions you know what's a security and in terms of the

existing bills whether it's fit 21 which I think is you know an important step forward that probably could be a little better integrated with some of you know what exists in trafi I think what happened in the last couple of years is is what you see in some of the bills is a footprint of a lot of um uh crypto engagement and and in some cases the development of a a separate crypto ecosystem which I'm not sure in the long term that's that's the best outcome because you want existing players to um be able to invest and not face a whole duplicative set of regulations so ideally you have uh uh you know

something that works for people that are new and something that works for people that like aren't new but want to participate in this space but I think um bit 21 goes in that direction as does the stable coin Bill and and I think outside of those bills My Hope um and I think my expectation as well is that there will be more work around interoperability um so that more um trafi Market experts can can play a bigger role uh in the future now specifically about the way that black rock is built there are two teams at Black Rock that I know of that touch digital assets the digital assets team uh and then also the etf's team which you run uh how do these two teams engage with each other what does what

does it look like when these two teams are talking with each other I actually think it's cooler than that um um so we have a digital assets team and I think one of the most important things we did as a firm in terms of uh progressing our digital assets strategy was putting in place the team uh you know uh with Robbie's leadership um but what Robbie did is he really made digital assets uh the work of everybody at the firm so years ago I mean we were spending hours together Robbie you know to his credit is an incredibly um uh uh patient resilient and thoughtful person but he spent a lot of time uh educating the businesses and giving all businesses so

ETFs index trading Cash Securities lending derivatives um giving all the businesses the opportunity to consider what are your use cases um you know helping us uh um bringing in you know kind of being a digital asset consultant so that every business could consider what the the applications were to them and what we found in our business you know when I started working with him years ago was we had this initial excitement and this was very typical in Trad file likeo Bitcoin let's put that to the side it's like this blockchain technology that's really going to be the game changer we came up with all of these use cases we piloted some things nine times out of 10 we realized okay we need a better technology solution but

blockchain isn't necessarily the answer but that was actually the you know impetus for some of our bigger um technology upgrades was doing that work where we knew there was a friction and we had to fix it um but then eventually uh you know both of those things really the uh um became clear where there were more industrialized use cases but I guess that's a long-winded answer to your question these aren't teams that sit in distinct verticals we have a digital assets team that kind of cuts across as a horizontal that lets us really consider in a much broader way what our potential um use cases and opportunities are so I guess it's really

just a matter of Robbie innovating with all the other parts of Black Rock and really convincing them that crypto for that particular part of the organization is the right tool for the job if and when the moment comes that crypto is truly the right tool for the job is that a way to interpret things I think that's right and it also means you know you have to have somebody who has skin in the game and game and is accountable for their actual business result to to commit and then to partner uh with the digital assets team and that's um that's worked pretty well well Robbie we're we're rooting for you uh Samar I think I can also speak for Ryan uh who's not here at the moment obviously uh that we're both very uh honored that you listen to the podcast on on such a

frequent basis uh who would you like to hear as a guest on the podcast uh who would uh who would really nerd snipe you as a very fascinating guest that you'd like to hear from um well I'm incredibly uh interested in in some of the new uh policy voices uh that come out particularly over the next couple of months I think I told you um one of my favorite episodes was um when you had uh Austin Campbell on I actually reached out to him after the podcast and just met up with him and and talked to him he like me has a derivatives trafi background so I knew we had a lot in common um and and he wants to like create a better Financial system and so I think um people people like that who

oh I have another misperception for you David sometimes when you do these episodes like the eth pitch off or Austin Campbell you guys preface it with okay um bankless citizen this episode is not for you it is for your like grandparents uh who were trying to educate around this and I would say like tra we're not all that old um there have been a few times I'm like really really like I'm not your like parent maybe but like grandparent that's a little bit of a stretch um I actually think that there are a lot of people in in positions like mine who care deeply about the like the Legacy

they're leaving in markets and and again I'm a parent of two teen kids there's nothing that's more important to me than what their financial Futures are going to be and how they engage with with the financial system and how we create resilience and access and and transparency for them so I do think that um my uh hope for you I know you guys get super excited when you talk about like blocks and blobs and you know this this like you do like the blobs I know you like the blobs and I know it's a thing that scales eth but like that's kind of the uh the extent for me but um I think thinking about uh how you can talk to that that broader audience with people like the um Austin Campbell uh of the world is uh um would be really

impactful yeah yeah Austin Campbell was a great guest as you have also been a great guest and sometimes it's actually really the guest that really helps us get the message out uh and I think that's something that we've done here today on the podcast uh one last question for you Samar Before I Let You Go just open-ended what are you excited about what are you excited about for for 2025 what are you looking forward to either professionally or or personally in the world of markets I know you really like markets uh so what kind of like uh keeps you and what gets you excited for 2025 this is going to sound corny but but I'm going to go with it um what gets me excited is Hope and optimism um and I have a lot of that right now I think that uh 24 23 was was

a tough year I think you and I saw each other at the um yeah at permissionless where you actually like had a fight with someone right a guy yeah yeah okay so so like you guys are like there is some branding there but I I get it but but I guess I will say to be clear it was a karate combat orchestrated fight between two consenting adults who agreed to do this inside of a uh professional environment not just a random fight but like I get that but a lot of the promotional material was like I felt like around this fight and I just bring that up because there was a lot of um anger uh at the system like more than I had

expected and that was very there were a couple of things that were eye openening for me at that conference that was one of them crypto system what do you mean by that I I think um anger at the state of the uh uh regulatory environment um like anger at the idea that it was just like it was a moving Target to know what you could do and couldn't do and how do you invest your capital and and I think that's you know that's a bad um environment for um innovation and for growth um but the degree of uh just kind of the atmospherics around it was a bit diverting from from the mission and the goals so my hope is now

we can really focus on the mission and the goals which is I believe to create a more um transparent and accessible Financial system for and obviously crypto is is Way Beyond Finance I just live in the the financial realm of it um so so that's that's really my My Hope for for 2025 and I think that we are on our way towards doing that well I hope that there are some things that are lining up in the crypto industry and outside of the crypto industry that really can foster that some people are calling for a golden Ag and crypto Innovation uh we finally have very abundant very cheap block space developing has never been easier and now

regulator wise uh we have pretty clear skies uh and so hopefully we can put that optimism and to some use uh and kind of get back to exactly what we were saying which is Mission driven to espouse what is so good about blockchain and crypto uh and bring this bring this industry into its golden era so Samara thank you so much for joining me on the bank list podcast today we really am very honored to to have had you thanks a lot for having me this was fun Bank list Nation you guys know the deal crypto is risky you can lose what you put in but we are headed west this is the front it's not for everyone but we're glad you are with us on the bankless journey thanks a lot