BlackRock's Crypto Strategy In 2025 With Samara Cohen

Transcript

I think that we are really early in our uh in our digital assets journey and as I said I think we are really bullish on the potential for tokenization to improve access to capital markets um and make them work better. we will continue to invest in our capabilities to to build those bridges and how you get from point A to point B is uh something we need to spend time on. What is the turning point where more people's investments go onchain than offchain?

Hey everyone, Jason here. I'm excited to announce that today's sponsor, Petra, a top non-custodial wallet developed by Aptos Labs, just launched Earn, a new feature to access DeFi with just one click. Earn lets non US users deposit USDT directly into Aries Markets lending pools and manage it all directly from the Petra wallet. This is not financial advice. Participating in DeFi does carry risks. To learn more, visit petra.app/earn. I wanted to take a moment to tell you about Focal by Falcon X, the AI powered insights engine built for institutional crypto. By leveraging AI, Focal empowers institutional investors to streamline research,

anticipate market shifts, and make sharper investment decisions. You'll hear more about Focal later in the show. Hey guys, Jason here. Just to let you know, we have Permissionless 4 coming up in June from the 24th to the 26th at Industry City in Brooklyn. This is a conference for the developers and builders where we'll be focusing on the DeFi Renaissance, applications, token design, and much more. Click the link in the show notes to grab your ticket today and use code Empire 10 for 10% off. All right, everyone. Welcome back to Empire. Very excited about this.

Very, very excited about this conversation. I think it's two varies. Um, I usually don't read people's bios at the beginning of episodes, but Oh my gosh. Please don't read my bio. I uh and I don't I I I think I'll get this one right. I created it myself. Um but I it's possibly the most impressive bio we've had on Empire, so I actually do feel compelled to read it. Uh so we've got Samar Cohen. Samar is the chief investment officer of ETF and index investments at BlackRock. The CIO of BlackRock, uh Black Rockck's ETF business. Uh what does that mean? Manages the market quality and investment integrity of roughly 7.8 trillion of Black Rockck's index funds and Eyesshar's ETFs. Before Black Rockck, Samar was the managing director in the securities division of Goldman Sachs. Also, I'm just going to keep

going with this. Samara Samara was named one of American banker's most powerful women in finance. She's been honored as one of Baron's most influential women in US finance for the past four consecutive years. She's on the board of SIFMA. She's also on the board of Black Rocks Foundation and also my favorite is you studied theater in college. So, well, thank you for including that, Jason. It's important as a as a history major and my co-founder Mike was a classics major. So, I love that. You got to get the theater major in there. Absolutely. Is that the right bio? Yeah, that was pretty good. I'm uh I'm psyched to be here. So, I would like to know what your role actually is um and what you actually do um and how you think about your role at Black Rockck, including maybe some numbers would be helpful,

like how big is your team? Um how many assets was the 7.8 trillion number correct? I'd love I'd like to hear how you think about your role. So I actually think the most important number if you're going to take away uh one number in terms of my role are the number of investors around the world who are accessing the markets through iShares ETFs and Black Rockck index portfolios and that's over a 100 million investors and our aspiration uh is to reach the next 100 million investors uh in the hopes and we write about this all the time we've written about it recently uh around the the importance of capital markets to fueling people's uh

retirements and financial well-being. The more people who can participate in markets, the more people who um can participate in economic growth around the world and ETFs and indexing have been really a disruptive uh technology over the past 50 years that allow more people to participate in markets. So what I do at Black Rockck is I oversee um how we do that, how we take indexes and turn them into investable portfolios and then a step beyond that of our assets about half are in other types of fund rappers that are uh index portfolios and half are ETFs. So ETFs, many ETFs take index portfolios and put

them in the ETF wrapper, although increasingly ETFs are used for things besides index investments too. Hm. How do you think about the the role that Black Rockck plays in the world and what you guys are are are really doing here? So, I actually uh have almost an OG seat to that. It really depends on who you ask how long I've been at Black Rockck, but uh Black Rockck was actually and and I don't think in despite the fact that you insisted on reading my bio, I don't think you got this one piece of trivia, which is that Black Rockck was my very first job out of college, 1993, right?

Yes. Thank you. That was not necessary to put in your podcast, but thank you, Jason, for for dating me because I actually left the date off my uh bio. All right. Well, I do think it is important if we're talking about ETFs as this uh as as a technology because people don't really think of ETFs. People don't realize ETFs at one point in time are this controversial technology and now they've penetrated all of capital markets. By the way, index investing was too. Index investing actually and actually something that I think you might enjoy and your uh listeners might enjoy too that dropped uh a few weeks ago on YouTube is a pretty cool movie called Tune Out the Noise about the history of index investing. And interestingly, index

investing didn't really come of age until there were uh commercial microchips available because it took so much compute power to simultaneously buy thousands of securities into a portfolio. But actually when I say I was OG almost OG Black Rockck, uh BlackRock didn't have an ETF in index business then. I was graduating as a dual degree, a finance major and a theater major. But all of my summer experience from college was working for regional theater companies. But I wanted to see what I could do with my finance major and I was captivated by this firm uh which at the time I was recruiting was called the Blackstone Financial Management that said they were on a mission to bring

better risk management technology to investors in the mortgage back securities market which was really Black Rockck's expertise then. Now, I didn't really know what a lot of that meant, but I loved the mission of helping elevate the ability of more everyday investors to manage risk. And so, I ended up going to work for this company, Black Rockck. I was employee number 134. We now have over 20,000 employees. I think 23,000 employees, but I was employee number 134. And despite the fact that we are more than 20,000 employees, you know, later now we manage in markets around the world and across asset classes. I still think that basic

um premise of that story around bringing better technology to allow investors to manage their risk and access markets is as true today for what we try to do as a firm as it was then. H can you tell me the difference between ETFs and ETPs and how you how Black Rockck's business has basically evolved? Because when I I think when the general public thinks about Black Rockck, they think of Black Rockck as the largest uh maybe distributor of ETPs or ETFs. I'm not even sure the right which acronym to use there. Um but it's I I actually didn't realize you guys didn't start with that.

So I'd love to hear just the development since you know in the the years that you've been there and how we should even talk about Black Rockck as a business. So let's work in reverse order. First let's start with definitions. ETP is the Uber category exchangeraded product. ETF is a subcategory of that. It's an exchangeraded fund. The industry conflates them all the time. I really appreciate that you asked me the question particularly because I didn't set that question up with you but we think increasingly since there is so much more being put into the ETP wrapper it's actually quite helpful to separate the two technically IBIT would be an ETP or even an ETC not as broadly an

industry accepted term in the US exchange traded commodity but it's not a fund um and it's not a you know diversified index fund or an active ly managed, you know, portfolio and so it's helpful, but really they are used interchangeably. ETF is is used the most in the industry, but technically ETP is more of the Uber category. Black Rockck was founded in 1988. Actually, Black Rockck bought Barkclay's uh Global Investors BGI in 2009, and that was the uh that was when Eyesshares became part of BlackRock and Black Rockck really leaned into the ETF and index business, which at the time was like actually kind

of controversial and and surprising for the industry who didn't really have their heads around the fact that um active and index could live together in one place. Yeah. Oh, that's interesting. So, if you you're on the um uh I'm blanking on the name, the the global executive committee, I think, for Black Rockck. How do you all think about the business and like almost the P&L? Like, tell me about the different business lines of Black Rockck and how you think about the business as a whole and and really it's under the context of me trying to think about, you know, we'll start to get into crypto and Bitcoin.

Yeah. And so I'm trying to almost envision where uh crypto and bitcoin fits into the whole P&L of Black Rockck. Sure. And this has been a journey for me I would say in terms of uh being I mean I look I've been on Black Rockck's um global executive committee just just for three years but I came back to BlackRock uh 10 years ago almost 10 years ago exactly um after being at Goldman Sachs for 16 years. So I can tell you something that was extremely different um in coming uh be being at an asset manager and being at Black Rockck specifically after being you know part of the the trading business at Goldman is that um we are uh uh very missiondriven. Our mission is to help,

you know, people invest better, to help more and more people experience financial well-being, but we also really every five years take a long-term view around what our north star is as a firm. We write about it. Um, we spend a lot of time internally with employees so everybody really understands where we're going. So, as you've seen some of that play out over the last few years, where do we think we need to be in the future to help more and more people experience financial well-being? We know we have to be bigger in private markets, which explains three of the, you know, transformational um uh uh deals that we announced over the last year, Prequin, GIP, and and the

one that is yet to close, that's HPS. our work in digital assets tokenization um and with IBIT um and more broadly how we're thinking about uh retirement and and retirement portfolios in the new uh you know macroeconomic regime that we are today. Yeah. Um what do you think of the macroeconomic regime? I don't know if you're uh I don't know how much markets talk you can you can do or that uh yeah that you're like I guess allowed to do but uh what do you think of the market regime today? I mean it's completely flipped on its head. I mean, yes, you and I, you and I have uh have gotten to know each other over the past years and uh uh or past year in particular, and um it has been uh an extraordinary market, although I will

say as a 30-year markets professional, um I can point to multiple moments over the course of my career where I have said, "This is an extraordinary market environment." I've had more of those moments um over the past five years I think than I had had in the you know maybe 15 years. So it does feel like the market is getting crazier. That's not just you know someone who has less market experience than I think the past few years have you know starting with co introduced more um unpredictability and I have been thinking a lot about what that means for a market in terms of resilience, adaptability

um and repositioning um as information changes quickly and um you know and and is digested and actually some of the ETF story that we have seen um I I think that the growth in ETFs and demand for ETFs has in part been fueled by that because ETFs are really easy and convenient ways to access a market. So for example, you and I are having this conversation, you know, a couple of weeks after the uh initial announcement of tariffs and we have seen record days of ETF trading volumes in both equity ETFs and fixed income ETFs. So just you

know for example the percentage of the US equity tape um that is ETF trading is usually pretty positively correlated with the VIX and probably before April 2nd was around 27 or 28% and in the past 2 weeks has spiked on certain days to 40%. because if you want to very quickly reposition your risk, ETFs are a transparent and easy way to do that. Um, and so I think the ETF story is very entwined with the how do you create more access and agility in a market um, as things are quickly moving.

Hey everyone, earlier in today's episode, I mentioned Petra, a top non-custodial wallet developed by Aptos Labs. They just launched earn, a new feature to access DeFi with just one click. Earn lets non- US users deposit USDT directly into Aries Markets lending pools to gain interest and rewards and manage it all directly from the Petra wallet. Petraearn was designed to make DeFi more accessible for everyone. You can manage your balance, claim rewards, and deposit directly from the app. This is of course not financial advice.

Participating in DeFi carries risks. To learn more, visit petra.appear or by hitting the link in the description of today's episode. I wanted to take a moment to tell you about today's sponsor, Zenrock, the permissionless decentralized custody network backed by one roundt partners 10T, Maven 11, and Spartan. Now available on Jupiter. Rock is the native token for transactions within the Zenrock ecosystem and secures Zenrock's decentralized custody network. The first application launching on Zenrock is ZenBTC Yieldbearing Bitcoin on Salana.

ZenBTC will be live in April 2025. To find out more, you can follow Zenrock on X or click the link in the show notes. Okay, so let's say that we're going into this kind of like I guess broadly could be described as like high volatility era of the markets potentially. I don't know if you'd agree with that. ETFs now make up I don't know if I'll get these stats right either but ETFs I think now make up over 50% of the like fund complex I think you could call it and somewhere between 13 to 20% of uh equity markets those are the numbers that I roughly found um the I think traditional wisdom might say uh in a in a high volatility era you want maybe more active strategies active managers and in a le less volatile you know eco

uh regime you might want more passive or index. Um, how do you how do you think about like the role that ETFs play in a higher volatility? And I know I I'd be curious to get your husband's I know your husband works on the active side as well, so I don't know if you guys have these debates over the dinner table, but totally. So there's a lot to unpack uh in those questions and and I do say this is such a nerdy thing for an index uh um investor to say, but I do like to talk about um Adam and I as like an alpha beta couple where I'm the index portfolio manager and he is the uh alpha seeking active manager. But really at the end of the day, Jason, there is a nothing passive about managing uh an ETF or index portfolio and b probably even

more important than a uh nothing passive about an investor's decision to use an ETF or an allocation to an index strategy as part of their investment process. And I think that's really important. And going back to this trajectory that Black Rockck has been on um since its 2009 acquisition of of BGI, it was really that uh active and index is a spectrum for an investment, you know, for for an investor to construct a portfolio and determine when do they want kind of core beta building blocks, when do they have single security um high conviction and bringing those two things together in

the postcoid period period. Actually, some of the biggest institutional uptake we saw of ETFs were um institutional asset managers like BlackRock using ETFs um for allocations in their portfolio strategies particularly in fixed income um ETFs. So one thing to say with respect to your stats which I think are broadly correct for the amount of the equity market that is in the um ETP or ETF wrapper right now much lower in bonds. So bonds is about um 1 to 2% of the you know fixed income market is in the ETP wrapper. Um and of course for those of us who watch

it closely Bitcoin is more like 5%. Kind of in between equities and and bonds. Okay. Okay. So maybe moving into Bitcoin. So I'm assuming the conversation had been had here way before 2024 about should we launch a a Bitcoin product. Was it more of a regulatory driven decision where you said okay now that from a regulatory perspective this is finally here or was it a investor demand driven decision or was it a uh a market structure decision where you said okay the exchanges are buttoned up enough the transparency's in the market there's no wash trading. Uh what what drove the decision? It was all three of those things. Um, but it really did start with the investment thesis and client demand. So, it went investment

thesis, client demand to market structure and readiness to obviously um the regulatory backdrop and and what we could do. And it was and and pretty much always is in that order. And hopefully um that's the trajectory for regulation too. um that the market structure needs to be there for for you know regulation to to be there and those things inform each other. One note is that our first Bitcoin product actually wasn't the ETP. So we did launch a private trust in 2022 which was really important as much as I would say we had been uh we you know launched a digital assets team in you know 2016ish

um and had done a lot of work particularly around applications of blockchain technology to different parts of the investment process. We had done a lot of work and we had been students of crypto for years. We didn't get hands on to actual Bitcoin until we launched that institutional product in 2022 and and that's uh that was a very important institutional moment for us to just get comfortable with the workflows and the risk management and the systems and that positioned us in terms of our technology inside our four walls to then support the um the ETP which as you said we we launched and filed in in 24. But we really so by 22 we had heard from enough

clients um that a they did want access to Bitcoin and b they were kind of dissatisfied with the current suite of of alternatives they had uh to access Bitcoin. Um and they were building out their investment thesis around it and that was pretty profoundly different by then than it had been even five years earlier. Yeah. Um, and then you know to your point with respect to ETPs, you could have the best technology and trading capabilities in the world, but it takes a market's ecosystem to make an ETP work. And in the case of a Bitcoin ETP, it was really like a fascinating exercise in not just assessing crypto market structure, but

assessing the key points of interoperability because the Bitcoin ETP was kind of the ultimate bridge to take this thing on crypto rails and put it on ETP rails. And and then I guess the last thing I'll say, which is a little bit because I know it's been a bit of a long-winded answer, but it was a long journey. Um, initially when we were approached around the Bitcoin ETP and and this is definitely true for me personally and I would consider myself, you know, a student of crypto and digital assets. It was surprising to me that people in crypto thought it was so important. It almost seemed like the ETP is a um, like we talked about, it's a disruptive technology. So is crypto.

It's an organizing construct to help people access markets more easily. It struck me that Bitcoin on its own, the first time I bought some Bitcoin just personally to understand how the ecosystem worked, it took me inside of 2 minutes to do it on my phone. So, it was I had to get my head around what that value prop like. It almost seemed like the ETP rapper would deprecate the promise of Bitcoin market structure. But then you learn the reality of crypto market structure is that there's actually a lot in TRDFI that is additive and that's where we saw the demand for ETPs. Yeah. When did you buy your first Bitcoin?

Not soon enough, Jason. Um what is what how does a decision like that get made at a firm that's as large as Black Rockck? And maybe there's because I've seen maybe three ways that decisions like this get made at big at big organizations. There's top down the CEO, right? Someone like Larry is like we're doing this. Uh there's very bottoms up. So there's maybe the salespeople are hearing from clients and that trickles all the way to the top. And then maybe there's the third way which is someone on the executive team has extreme buyin and says we have to do something with crypto. Let me just run with it. What did it look like actually at Black Rock? Look, I think at our best all three of those things are true and our crypto journey has played out pretty publicly. Yeah. Uh in terms of the and

and I think that's um that's kind of the nature of the firm. We are students of the market and we may evolve in our thinking on something and and what we heard from clients in that you know again 202021 was really changing from what it had been a few years before in thinking that this actually has a potential role uh in a diversified portfolio and why and recall also uh I mean for me it's always easy to remember how old Bitcoin is because my daughter Eileen was born on October 10th uh 2008 so you uh three weeks three weeks before the the white paper and and a couple of years before the first transaction. But this is a pretty young asset class in

terms of actually even assessing what its role should be in a um in an asset allocation strategy. So I think for us we need um uh um you know we had top- down um uh fascination with the market and with all things that can improve how we serve our clients. we started to get uh more and more bottoms up interest from our clients. And then it is really important that you have uh internal champions who educate and engage and are patient and I would put our head of digital assets uh Robbie Mitchnik solidly in that category. He's done an incredible job. He really has. Yeah.

Um tell me why you think so so undoubtedly I mean it's one of the most successful ETP launches in the history of ETPs. uh the most actually the most the most why was it the most successful launch in the history of ETPs. So one of the things I learned and I learned so much about uh um so much more about the utility of the ETP wrapper and the utility about the utility of of bridge building between uh crypto and tradi. But one of the key learnings in 24 was how much demand there was for the ETP raptor rapper from the crypton native community. So broadly speaking about

half of IBIT's holders right now are what we call self-directed investors. The other half is split between also retail but advised retail. So it acts a little bit more a financial adviser or an RAIA. That's right. Okay. Um so 50% are uh I've got a TD Marit trade account or a Charles Schwab account and I'm just clicking buy on my account. 50%. Yep. And then uh call it, you know, the other 50% is is half advised and half institutional. Huh? So, of the self-directed investor, that first 50%, our data really suggests that 34 of that investor base had never held an

eyesshares. We can tell that they had never held an iShares ETP before. So even though we have I mean it's pos I I can't see uh other ETPs so it's possible they held a different ETP but since Eyesshares is the leader in the category I think it's pretty fair to say that for 3/4 of that population they set up a brokerage account in some cases and bought their first ETP because they wanted their Bitcoin in the ETP wrapper. Um probably because they yeah they wanted the kind of institutional grade custody. they wanted the transparency of trading and you know maybe they aren't living their life on crypto rails and thought it was annoying to you know move in and out of their you know yeah there

might be this idea of like too big to fail like you know a lot of my friends who were you know maybe got into the industry fairly early self self-custody your bitcoin it was always self custody bit your bitcoin you have to self custody your bitcoin then coinbase gets bigger coinbase starts custodying some institutions it's like okay you know what maybe it's fine uh because if Coinbase goes down we've got bigger problems are in hand. So then it's moving to Coinbase and now maybe something like um IBIT is the next iteration of that where it's like look if like if Black Rockck fails it's too big it's almost too big to fail. Um so I don't I don't know. I'm trying to get inside the mind of someone because I I didn't I didn't do that. Um so I'm trying to get inside of the mindset of

someone who would do that. You didn't move all your Bitcoin into IBIT. I didn't move my Bitcoin into IBIT. Yeah. But maybe by the end of this Yeah. Maybe by the end of this podcast. Why why would someone move their Bitcoin into IBIT? because it's safer. Um I think because uh probably one of the number one reasons we heard is that it's just easier. Investors like to especially investors who are looking at um their whole portfolios and managing their kind of risk in um uh in a holistic way. It's like complicated to try to do it across two different ecosystems. It's just easier to do it um all in one place. And I will make the point if you're a holder

of Eyesshares, you're um it's not like Black Rockck is your counterparty to be clear like you are a shareholder in the fund and there's a governance structure around that fund and and yes, our custody is provided by Coinbase and we kind of disclose all of the the parts of the ecosystem, but um we do curate um who we engage with in the ecosystem to deliver Bitcoin. coin to to IBITS investors. Hey everyone, earlier in today's episode, I mentioned Petra, a top non-custodial wallet developed by Aptos Labs. They just launched Earn, a new feature to access DeFi with just one

click. Earn lets non- US users deposit USDT directly into Aries Markets lending pools to gain interest and rewards and manage it all directly from the Petra wallet. Petraearn was designed to make DeFi more accessible for everyone. You can manage your balance, claim rewards, and deposit directly from the app. This is of course not financial advice. Participating in DeFi carries risks. To learn more, visit petra.app/earn or by hitting the link in the description of today's episode. I wanted to take a moment to tell you about today's sponsor, Zenrock, the permissionless decentralized custody network backed by one roundtable partners 10T, Maven 11, and Spartan. Now available on Jupiter, Rock is the native

token for transactions within the Zenrock ecosystem and secures Zenrock's decentralized custody network. The first application launching on Zenrock is ZenBTC yieldbearing Bitcoin on Salana. ZenBTC will be live in April 2025. To find out more, you can follow Zenrock on X or click the link in the show notes. I remember uh I was reading this piece and uh you all recommended and I think I saw maybe Robbie might have presented on this. Um Black Rockck recommended a 1 to 2% allocation for investors interested in investing in Bitcoin. Where did this allocation decision come from? Because that's a big that's a big head. You must have known that was going to be a big headline.

Black Rockck recommends allocating 1% or 2% to Bitcoin. What went into this decision? Well, first of all, you said it um correctly. We recommended for investors who wanted to make an allocation to Bitcoin that 1 to 2% was um a reasonable way to look at it in the context of a whole portfolio. Now, just to go back a little bit on the journey of 2024 and what we tried to do um because we knew we were doing two things. Number one, we were educating existing eyeshares investors on Bitcoin. And number two, as we realized, we were um educating existing Bitcoin investors on ETPs and and on the ETP wrapper. Um so, so we wanted to do those two things

at the same time. So, we started really mostly by educating on just Bitcoin, what is Bitcoin, how do ETPs work, how does access work. Then we wrote um more broadly about the potential um diversification uh about Bitcoin as a unique diversifier in today's macro environment. And we looked at a bunch of past stressed market um episodes whether it was COVID whether it was the kind of regional banking crisis um to look at how Bitcoin was performing versus other risk assets. when we talked about the potential for diversification and that is a story that will continue to play out as we get more data including from the most you know recent episode of of

geopolitical market volatility that we're in um and then after having done that work bitcoin overall bitcoin um potentially is a diversifier we wanted to tackle this question around portfolio allocations and it is um uh difficult to do this in Bitcoin also difficult to do this in in gold ultimately when the value of the asset is a function of its adoption. So what we thought might resonate with investors externally that resonated with investors um inside the firm was to think about um tolerance to contribution to overall portfolio risk and to make the case that um investors

at the time uh given concentration in you know broad US equity portfolios to the MAG 7 had taken on some concent had taken on that concentration risk and were living with it and so therefore maybe you know rooting the allocation saying okay if I'm comfortable taking up to the same incremental risk contribution in my bitcoin as I am in a mag seven stock that's something that I can get my head around and that got us to this 1 to 2% allocation if you go beyond 2% the incremental contribution to overall portfolio volatility gets exponentially higher so that was the the construct that um we thought was helpful interesting how do I so it's been really

interesting seeing how Bitcoin trades. So we're recording this in midappril um and the just the last couple weeks with you know liberation day and I mean the market it's been very volatile in the markets obviously the it is it is becoming clear that the market doesn't know how to trade Bitcoin. I think uh you know it's it was there's one day where the NASDAQ was really down, gold was really up and bitcoin was flat, which we talked about this on the roundup a week or two ago, but uh I think Santi and my take was that it's clear that investors don't know if Bitcoin should trade like NASDAQ or if it should trade like gold. Um and I think I saw Matt Hogan, the CIO of Bitwise, saying on on Twitter, he's like, "It doesn't trade like either.

Bitcoin trades like Bitcoin." Um it's a new it's a new asset class. I'm curious to get your take on that. Yeah. Um, so I think that's fair. Uh, you Bitcoin definitely uh is a new asset class. I think the hope um or at least the the potential for Bitcoin to be this, you know, borderless store of value is that it does ultimately look more like gold. But how to think about that that during the adoption trajectory um is the tricky part. And I've heard you or or somebody on the roundup kind of say it's like 50% NASDAQ, 50% gold.

Um, and I think that's that's a bit what we're seeing, but this is an important moment uh to play out in terms of how Bitcoin's price performance does show up. I mean this environment of market volatility that is really induced by crossborder tension and you know um supply chain um you know complexity like this should be Bitcoin's environment and so the price performance has actually been pretty disappointing um and it definitely has not delivered that unique diversification that you know we saw from in some of those other um stressed

market episodes, if anything, in this particular one, Bitcoin's correlation with equities has increased from where it was before. There's a couple additional observations and look, you and I have talked about this. I'd love your your thoughts here as well. Um but uh uh number one is that uh uh Bitcoin it's it's pretty interesting actually if we look at uh what's been happening in Bitcoin and also what's been happening in IBIT where we see a little bit of a a divergence in that um IBIT actually hasn't had the level of outflows you would you know almost associate with the price performance that we saw in

Bitcoin. coin which might suggest and and we can prove out that a lot of the market um the price action in the past couple of weeks was uh retail and uh specula speculatively led with a lot of institutional positions being you know kind of flattened at the in the second half of March and of course you can't lever IBIT um in the same way you can lever BTC so you could actually see these different investor bases playing out right now um and and you kind of see the uh you know more of the long-term investor base in in IBIT. The other thing is that certainly Bitcoin's V of V um has been interesting to um to observe like Bitcoin hasn't had the volatility

in the downtrade. It continues to have this kind of positive skewiness to its volatility. Interesting. What does VA vol? I mean that um Bitcoin's uh um Bitcoin tends to uh melt up more than it melts down. Ah yes, we like that about Bitcoin. Yes, that is generally a a good thing. And and by the way, it is why this um uh options on IBIT uh were so important to the ecosystem because that is generally a a great thing for uh an options market making business that kind of characteristic of of volatility. We talked about the different buyers, right? 50% of the buyers were self-directed. The other 50% is kind of advised in the institutional crowd.

There's a group of buyers that u so Dave Kulk um uh also next Goldman person was on former swap trader from Goldman Sachs. There you go. Yeah. Yeah. Um was on the podcast a couple weeks ago talking about there's actually a new group of buyers and they are the non-emotional buyers. They're the market makers. They're the hedge funds who are maybe not the market makers but the hedge funds who are just trying to clip very small bips and do that in size. How do you think about this new group of folks who are in the market? So I haven't heard him uh talk about that. Uh I do think that uh there is this the institutional um so that last piece not self-directed not um advised wealth but rather institutional

while there have been some notable we can see from the filings like sovereign wealth pension and endowment buying most of that category is still hedge funds and in that case a lot of it is I I wonder whether what David is talking about as the non-emotional buyer I kind of think of as widget buyer like they look across asset classes for relative value. A big part of the um their Bitcoin buying was in futures uh basis trades. Yes. Yes. Um and so I think that that is a uh uh an important dimension of um of like every market. Yeah. Uh okay. So so I bet the most successful ETF in the history of uh or excuse me most successful ETP in the history of

ETPs. uh Ethereum less successful. Yeah. Why was that? It always I'm very used to uh um the crypto community uh disappointment in in ETH. But I do have to say like I bit is the wrong benchmark. Yeah. Yeah. We're benchmarking against the most successful in history obviously. Yeah. I think for investors the framing around Bitcoin and their interest in Bitcoin is quite specific to its potential diversification properties, you know, store of value. Understanding how to create a valuation framework for Ethereum or, you know, any other token gets more complicated. And I think one

of the things we've seen in the investor community is you might be really bullish on the you know utility of the public Ethereum blockchain but not know how that translates into value acral to the native token. M so I think that's one dimension and another is that I think largely uh investors have felt relatively exposed to um meggaap tech and and felt a you know correlation uh uh to that with any potential incremental allocation to ETH.

Do you think that the there's a story problem for Ethereum right now? If Bitcoin is uh you know digital gold, what's what's the story of Ethereum? And is it too is there is it too complex of a story right now? I don't think that the Ethereum story is any more complex than frankly any of the altcoins. I think that crypto does broad broadly have a data and standards problem um in terms of like how do you start to look at these different um tokens and applications and understand where value acral is and is going and where do you get the information to to do that

analysis. So I think that is really complex. I don't think that it's a marketing problem. Yeah, I'm going to clip that and use that as like a That's our ad for Block Works research and data platform right there. Yeah, that's our that's our ad. Um uh what do you think of other So, I want to get back to the that in a second, the standards and and data because it's really interesting. Um and the valuations as well. What do you think about other crypto products? Um not not not that you guys I I know you can't share anything that you that you all will launch, but just what other new crypto products does the mark do you think the market wants? So if we go back to the conversation we had on you know Bitcoin ETPs and and the journey um it you know starts with the investment

thesis and I think it is really unclear what the investment thesis is um with respect to like a very broad array of of altcoins right now because I think one of the issues in crypto um is generally like what are the like where are the winner apps going to be? What problems are actually going to get solved and how? So right now a space that we pay really close attention to because we can see um the problem it's solving is um uh tokenized money funds and tokenized treasury funds because the movement of cash and collateral in the capital

markets ecosystem is very suboptimal and can clearly be improved by blockchain technology. So, as that starts to play out and as we start to kind of see um what protocols, what applications, what companies uh succeed and are solving real problems, I think we can work backwards into the investment thesis for them. But I still think we're kind of early innings in figuring out like who are the winners and losers in terms of the adoption trajectory for the technology overall. and you kind of need a view on that to invest in it. Now, that gets me back to and don't worry,

I'm going to bring us back to data and standards um your question around an index because there should be an answer in there somewhere. If you are bullish on the application of the technology um but not sure how to pick the the winners and losers like that's actually why index investing was born. And it was born to give people access to an entire market or a sector of a market as defined by the algorithm that we call index methodology. Right. So I guess my question for you is how do you do that in and I know that they're experts in um indexing and in crypto and and I look

forward to to getting to know them, but still like h how do you do that? If I if I think about indexing fundamentally as an organizing technology for a market, how do you perform that task in crypto right now? Does because foundational to it is data and standards. Yeah, I think the data and st it come I think uh so the industry is kind of looking at the wrong metrics right now in in in our at block works like in in our view the industry is looking at the wrong metrics. So I I think it does come down to the data and standards. It also comes down to if I look at the top uh 100 companies or 50 companies or 500 companies in the equities market, I look at them and I might not know fully what they're doing, but they're real companies, right? They're they've got

revenue, they've got cash flow, they've got a P&L that I can build and I can understand it. They've got governance. We could write index methodology, by the way, with those five things that you just named. Yeah. Right. If you say governance, a team, you know, cash flow, like like then all of a sudden like I don't know how many coins meet that then we potentially that's I think what need that we are like that's uh if you you know go inside like the leadership meetings at block works like that that is what we're thinking non-stop about because one of the core problems with the industry I think is if you look at the top 50 on something like coin gecko or coin market cap I don't I don't believe in 40 of the 50 of those right I think there are games being played with

market makers I think there are uh very uh yeah just lack of transparency into those coins and um it's very different than you know the top 50 on coin market cap would be very different than the top 50 in the equities market where I may not know what they're actually building but I I can see a P&L and I can see the governance and I know who the leadership team is you don't have the same in crypto so that's right and so that is foundational to index investing because of course there's there's kind of two steps with index investing number one there's the how do you build the algorithms and create the index methodology to describe the market, organize the market or different sectors of the market. Then part two, which is non-trivial, is how you take that algorithm and turn it into a realworld

investable portfolio and minimize all the real world friction that goes along with, you know, investing and rebalancing, um, etc. Yeah, that's an index I would buy, by the way. That's a pro an ETP. code by something with the top 50 probably like uh protocols that generate like real REV or something like that but we can talk about that after the yeah I wanted to take a moment to tell you about Focal by Falcon X the AI powered insights engine built for institutional crypto with Focal you can create charts and generate answers to questions in seconds used by over 80 funds with more than $10 billion in assets under management you'll feel like you have a team of anal analysts at your

fingertips. Ask vocal questions like, "What's causing the uptick in liquidations? How much Bitcoin did Michael Sailor buy last year? And what is crypto's correlation to traditional markets?" Focal pulls data from trusted sources like Coin Gecko, Token Terminal, and the tie with enterprisegrade privacy and security. Learn more at askvocal.com or check the link in the show notes. Thanks to Focal for making today's episode possible. This episode is brought to you by token.com, the social first platform transforming how people discover and trade through crypto content. With a mobile first interface, token.com transforms crypto investing into an intuitive scroll-based video

experience. Trade the latest and trending tokens at your fingertips, all while discovering captivating web3 stories from the top industry leaders and influencers. With token.com, you can earn points for tasks on the app, including on every trade you make. Just scroll to watch and tap to invest. Thanks to token.com for making today's episode possible. Let's talk about Let's talk about data and standards. What um a little bit more what do you think that so you uh you all have spent I think it was somewhere between 15 and 30 billion acquiring different companies. Maybe we can actually talk about the uh private markets. Um so when we all when we went

on our walk we you know we talked about crypto obviously is one big asset class and industry that you all are focused on. Private markets are another one. Uh can you tell me just how you all think about like the growth of the private markets why that's so interesting and then data and standards kind of slots into there because totally there's the uh uh the prequin acquisition obviously fits into that. Look data and standards slots into doing anything at scale. And right now we're on a mission to uh expand capital markets so that they can support more people who want to you know save and invest and also more companies uh and not just public companies who want to consume capital

for all of the kind of incredibly interesting and exciting investment projects that are there in the world right now whether they're AI related or infrastructure related like we're kind of at a moment where expansion of capital markets will deliver more economic growth. How do you expand capital markets pretty much starts with you know data and standards? Uh and and I think indexing is pretty foundational. It will be foundational uh to crypto. It will be foundational to private markets if only to describe even before even upstream of index investing like what does performance look like? What's your

benchmark? How do you know if you're outperforming or underperforming the market? Like you need to define the market. Um so with that as the the stated mission like we need bigger markets to support more investors. We're looking for the next 100 million um investors. We have our digital asset strategy which we've talked about and we've also um really uh increased our bet on on private markets with our acquisition of global infrastructure partners. Um HPS which you know hasn't closed yet. Um HPS is the private credit manager. That's right. Okay. That's right. And then lastly, um, what has closed and it's really important to tying all of this together is Pquin because Pquin is a, you know, data and

analytics firm. And so I think our our transparency and our conviction around data and standards is is pretty clear just from that um the the trajectory of of acquisitions like that is how you will bring um transparency scale and ultimately more more access to to a broader set of of markets than you know we have uh if you total up those three acquisitions it was so I saw a CNBC headline that says how the world's largest asset manager is using nearly 28 billion of acquisition itions to reinvent itself. Um I don't know if that number is fully accurate. 28 let's call it 28 billion of acquisitions and that's for the private assets. That's to help black push into the private assets in and prequin. Um will you do the same in

crypto with M&A? I mean I have no idea. Um I think that we are really early in our uh in our digital assets journey and as I said I think we are really bullish on the potential for tokenization to improve access to capital markets um and make them work better. So we are like very much uh focused on the path to more tokenization in markets more tokenization. We are very focused

on the utility of bridges to investors. So whether that is an ETP that kind of brings more access to crypto to you know onto TRDFI rails or whether it is like like we talked about tokenized money fund some of the biggest consumers and investors in tokenized money funds are cryptonnative institutions that want more sophisticated you know treasury management capabilities. So we will continue to invest in our capabilities to to build those bridges. Um I think this question around um crypto as a uh or crypto is is it's such a you know broadly defined term like if like if I

say you know digitalized capital markets um like people need to be invested in capital markets but I and I look I'm curious your thoughts on that like what is the turning point where more people's investments go onchain than offchain? Yeah, I mean we I think at Blockworks we basically just see this as we're creating a new financial market here and you've got all these assets in traditional kind of old databases and we're just moving assets into a new maybe more efficient database. Yeah. And I love that analogy. I think in attention must be paid to the transition because look, I could stipulate if you and I were sitting together and coming

up with a vision for global capital markets from a whiteboard, it would be you know much more tokenized than you know markets are today. But we have huge functioning legacy markets and how you get from point A to point B um is uh something we need to spend time on and and that's I spend a lot of my time thinking about that and how these markets can be as interoperable as possible for a long period of time as well. I mean, I think one of the most interesting developments in the last couple months is so what you all did with IBIT is take a crypto thing right with Bitcoin, uh, something that

was historically on crypto rails and then move it into traditional rails. Uh, there's there's also the we haven't even talked about Biddle at all, but that's something that's going from traditional rails onto crypto rails. I think uh, Athena is one of the largest holders of Biddle. Um, I just saw Sky. Yeah, the bridge goes both ways. Yeah, it goes both ways. very interesting. Yeah, that's very And then um I mean the big I think so one of the big trends that'll happen this year that hasn't I think is starting to happen behind the scenes and will become more public is uh you know we so stable coin started with note just basically putting dollars on chain then we started putting treasuries on chain and these money market funds the next thing is onchain credit I think and starting to move credit onchain um so anyways we'll see what happens there

before we go too deep into tokenization I have a question for you on um going back to new products. Uh how many assets in how many crypto assets do you actually think are investable right now from an in institutional lens? Bitcoin and Ethereum. I'm not a deep enough student of kind of the institutional ecosystems in the other coins right now, but in terms of the conversations that um we've had with institutional investors, they are um really largely focused on Bitcoin right now, particularly in this environment.

Um Ethereum is still a a distant second. So distant second. So we're not even talking about revenue generating protocols or anything like that. Yeah. And remember, we're talking about uh you know the the you know institutional investors who are you know broadly in uh 6040 equity bond portfolios and and looking to figure out what that what the new sources of return and diversification will be for them. They want both of those and that's what's bringing them to private markets. Um it's bringing them to Bitcoin specifically right now. Yeah. Um and then a whole host of other kind of um uh uh more systematic uh um alpha

generating strategies. Yeah. Do you from a valuation perspective do you think that we'll try? So there are these uh typical ways to value a company in today's market and it's nice because we all look at the same metrics. It's like earnings per share and PE ratio and you know you can create a P&L and like we all look at the same metrics right IBIDA things like that. Are we going to use those metrics and apply them to crypto assets or do you think that we'll create new metrics that matter for crypto assets? I don't know if you have a take on on this. What's your take? I think we'll I think we'll some It depends what you're looking at. So, I I think uh it's really easy to just like slap a P&L on a blockchain. I don't think something like Ethereum you can put a P&L on it. I

think it probably looks a little more like a commodity um a little less like a company. something like an application maybe unis swap that there I think something like unis swap is a lot easier to put something like a P&L on it because it's an application that has revenue and expenses and things like that. I think that makes sense. I mean look another conversation you and I have had a lot is the um path forward of kind of policy and regulation with respect to digital assets. And I think one of the things that is um so complicated but also exciting right now is that a lot of existing regulation just doesn't contemplate what blockchain technology makes possible, right? It doesn't really

contemplate like 24/7 trading or um atomic settlement um you know uh uh you know real time transferability like all of those things. And so I do think that there is a a kind of new set of of you know standards um as well as metrics that are going to be a part of real um durable uh adoption of crypto. How would you describe the value prop of tokenization? Why what in okay the context is so for folks who are around in maybe 2018 2019 uh there was a lot of talk about we're going to tokenize the world. we're going to tokenize

everything. And you had these firms that maybe started to move uh the original pitch was we're going to take illlquid assets and make them more liquid by tokenizing them. So we put all this real estate on the blockchain and guess what happened? Nothing happened. No no no buyers came because ill illlquid assets were now liquid. Um now the new version phase two uh we're trying again at this is we're actually taking pretty liquid assets and just moving them onchain and there's actually a lot of demand for that. Yeah. Um so I'm curious how you see tokenization. Okay. So I think you gave a great answer to that question. It is first and foremost um can make uh plumbing for securities transactions, derivative transactions, collateralization

um much more uh efficient, much more resilient, much more transparent. Um and so I think looking for realworld problems to solve with the application of the technology to existing infrastructure is a much better place to start than the um let me turn an illquid thing liquid. Now, one of the things I love about that, um, and I think you're exactly right, uh, everybody, uh, kind of thought, oh, we can create, you know, markets for for so many more more things. And, um, same exact thing happens all the time with ETFs. I cannot

tell you the number of times I might get approached by a um you know a stock exchange in an emerging market country who has a lot of work to do to make their local markets more investable to create you know transparency and data and and trading in their local markets. But somehow they have this mythology that all they need to do is list ETFs and that will like relieve them of the obligation to actually try to modernize their markets. And it doesn't work like that. You need certain standards in a market to create investor confidence to bring buyers and sellers together to meet. And I think it's exactly the same thing with respect to um to tokenized assets. But there is no question if we

look at how uh various different parts of the capital markets ecosystem work, they will be improved and value will be unlocked for end investors um with tokenization. How do you think about Black Rockck's 10-year vision when it comes to to digital assets? Um, our 10-year vision, which we've, you know, written about a fair amount recently, uh, we wrote both a paper called, uh, power of capital markets and then every year we put out a chairman's letter. So, um, you know, we're we're pretty public on that. it is we believe that capital markets which by the way we should define capital markets because

one of the things I realized as we wrote this paper um we were all working with different definitions of capital markets and so in our paper and in our thinking we take the broadest definition possible which is capital markets are the ways in which consumers and suppliers of capital meet. So of course a supplier of capital is a saver is somebody who has money and they don't need it today and they're willing to put it to productive use for some kind of return whether that return is a share in the future profits of a company or an IOU in the form of you know interest in a bond like those are the suppliers of capital and of course the consumers of capital are companies who want and countries and governments

who want to um uh spend today and invest um and in doing so create growth. So that's how we define capital markets and in the kind of um call it era that we're in today, right? So the post crisis era where banks can't do as much lending as they did in the past, governments have deficits and can't spend as much as they've spent in the past. What that means in order to fuel economic growth, we need bigger capital markets. So the meeting place to bring together you know consumers and suppliers of capital. It needs to expand tokenization will definitely play a role in the expansion

of capital markets. Um probably by addressing the places where there's the most need and one of those places right now I do think is in the liquidity and collateral ecosystem which kind of makes all of it run. Yeah, I agree. Um, when do you think that we will see tokenized stocks? I have no idea. When do you think we'll see tokenized stocks? Like I think with some of, you know, some of the big um IPOs of of, you know, crypto firms. That would be an interesting Yeah, I think I think that'll be interesting. I mean I think the first thing that will really happen is you've got the crypto platforms over here like Coinbase and Kraken and then you've got the uh traditional brokerages like the TDM trades and Schwabs of the world and then

you've got the fintexs fintech brokerages like the Robin Hoods and public.coms of the world. Those will all I think I think the legacy brokerages might eventually go away if they don't innovate but Coinbase will definitely offer equities at some point in time and then the fintexs like the Robin Hoods will definitely all offer a robust cryp crypto offering. So I think those will start that'll be the first convergence and I think look I think also you need to see real demand from onchain investors for a broader set of investment opportunities that is what will drive tokenization of uh stocks bonds and everything else. Yeah. All right. I have some cryptonnative questions for you that I don't know if you've thought about too much, but um so a few years ago, if you asked folks who

worked in Tradfi about using blockchain, uh the the classic response was very like permissioned blockchains. We're going to build maybe a we're going to fork Ethereum. This is what maybe JP Morgan did. They forked Ethereum, built I think it's called Quorum, kind of a private permission blockchain. Now a lot of folks including I think Black Rockck is leading the way are building on public blockchains. Um I'm curious how you all have you or your team or the Black Rockck as a whole has thought about this idea of public versus private blockchains. So I definitely would put myself in the category of you know when we first started looking at this thinking that the path forward would largely be in um permissioned blockchains just given you know first of all the need to satisfy regulatory

requirements and also just kind of desire for um uh um you know control over information and I think where we got to was in part really informed by the you know postcrisis experience of uh trading venue proliferation. And as much as it was a great idea to create these more um uh um alltoall multilateral trading platforms, the proliferation of them did ultimately create complexity and fragmentation um which was not systemically optimal.

So the idea around actually having the avoiding that pitfall with more the transparency um of of public blockchains I think was a pretty important pivot. Um that's definitely true for for me and how I think about it. Um as well as for us strategically. There's still a lot of things I think that have to be solved in terms of how you build effectively on uh public blockchains for like institutional grade financial applications. But I'm optimistic. any advice for folks who are building L1's and L2s and trying to go walk into Black Rockck and pitch you all on deploying on them?

No, I don't think that um I mean I think we do a pretty good job of um of of staying close and and educating ourselves. So I think better than thinking about how to pitch to Black Rockck would be to think about what are the big problems in the market right now that need to be solved. For me, one of those big problems is uh 247 trading and where that's going. This is fascinating and I've watched this unfold over my whole career. 247 trading is going to happen, I think, in public markets. We see it happening or 245 or whatever gets close to it in in public equities. Part of why I think it's happening is actually crypto FOMO. You have all of these investors who are getting used to knowing that like they can access crypto markets uh any time of day. And so, and

there's other reasons for it as well. And I think there's a lot of different views on the benefits of 247 markets. I can say in my view, it's really hard to restart markets that have stopped trading. And there is something to be said for market resilience when you have continuous liquidity formation. That said, there are times of day that are much higher risk. And so the big problem I think to solve is how do you create 247 markets with um transparency, resilience, guard rails um to to do both things like create that access but still some level of of investor protection.

That's a real problem for blockchain technology to solve. Do you have a thought on the memecoin trend of last year and whether or not it hurts Salana's brand with the institutional crowd? I don't have a specific thought on um on uh um on on that. I do think that um this question around uh gamification in markets is just an interesting one to look at. I don't know like anything that brings in gets investors interested in participating in a market that might be an okay thing long term but figuring out again what are the right guardrails what's the right education and and where

do we think about um investable long-term portfolios like for me I'm fascinated I used to think the whole story was taking more savers and turning them into investors I'm starting to think that maybe there's a midpoint stop where somebody becomes a trader first. It gets them comfortable with markets and engaging with We saw that with game GameStop, right? A lot of those people stayed in the market. That's a really interesting story. So, you know, maybe there's a role that memecoins can play in doing that for long-term investors in crypto. Um, but I think transparency and education around what they are doing and what the risks are and really the crypto industry coming together and owning that is really important for it to be a a

journey and not an endgame. Yeah, that's uh I hadn't thought about it's um it's it's almost like these more speculative things become the onboarding tool that then converts people into becoming investors. Yeah, look, I'm I'm the mother of teen kids and I can tell you my son, you know, doesn't think ETFs are fun enough to to look at from an investing perspective. And so I think as a parent, I initially was like, "Okay, well then, you know, wait till you're you're old enough." And uh but now I think like I I want him to experience the markets, but I want him to do it with some sort of guard rails around it. Yeah. um just in the last few minutes that we have, maybe we can talk about your kids. Um and not them specifically, but there is a massive wealth transfer that's about to happen. Uh there's a

this huge generation of wealth. I think it's somewhere in the range of 50 to 70 trillion dollars that will pass from the hands of the kind of older generation to the young. uh 90 if you look at different surveys roughly 90% of I don't know how old exactly your kids are but roughly 90% of folks 16 and 18 they've got some time kids don't get excited 90% of folks of kids who are you know between the age of 15 and 20 are disillusioned with the traditional financial system what do you I I don't even know the specific question to ask here but what do you make of this massive transfer of wealth into a generation where 90% of them are disillusioned with the financial system.

By the way, Jason, I I think another stat is that twothirds of that that 90% are actually probably female, which is also a huge change in the demographics of investors and participants in markets. Um, and we know that that generation of investing um is digital native um consumes investment advice often from their peers and their social media networks. Um, and so how do you pos, you know, how do you position for that? And how do you um uh um set them up for success? I think that's actually a pretty great example of why at this moment it's so important that you

actually have um partnerships between crypton, you know, digital native firms um and and trades in terms of thinking of like what is the right portfolio? How do you engage the investor? How do you create the, you know, um the solutions and and how do you how do you sell it? Like what are our brands? Um because ultimately I think brand uh becomes increasingly important. Agreed. Agreed. Um maybe there's a closing question here. I should have prepped you with this question so you maybe had some time to think about it, but I'll I'll throw it to you on the fly. Uh if you think about your personal legacy at BlackRock and just in your career, um I'm curious how you think about what you want that to be.

Well, I can relate this back to um you know, talking about my kids who are teens now and who were pretty much babies when when I came to BlackRock in the first couple of years after the financial crisis. I want my legacy to be someone who helped make markets more transparent and more resilient and more accessible to to more people. Like I mean I can kind of end where we started. I was a theater major who showed up at a firm feeling like I didn't belong. Um, and I was super intimidated. But on the other hand, I was fascinated by markets and I loved the story of bringing riskmanagement technology to more people. So if my legacy can be helping more people believe that the markets

belong to them and have the confidence then to go and um participate. Uh that uh that would make me incredibly proud. Yeah, that's a good legacy, Samara. Thank you. Thanks for having me, Jason. [Music]