Ethereum ETF approval and the path to altcoin ETFs

Transcript

I think this is the alt season. This has been the alt season. These DOS, I mean they've been they've been on absolute fire. GM, good morning. Welcome to the Milk Road Show, the daily crypto show where volatility keeps us humble and espresso keeps us going. I'm your host Jay Hamilton. It's Thursday, September the 4th. Who's buying ETH right now? A lot is being driven by the ETF and by digital asset treasury companies. Can this sustain? What's the outlook for flows and demand for ETH from here? Also, there's big-time tailwinds coming with the SEC and the CFTC working together and the SEC's new crypto framework which is going to bring more crypto to public markets. We'll dive into that, what ETFs are coming next when they are coming, and the big

question I know you all have is what will the demand be today to joining us to break it all down is our favorite Bloomberg senior analyst, James Stafart. Now, before we jump in here from James if you guys are making swaps right now which I know you are, as we gear up for the next leg of this bull run, I highly recommend you check out Milk Road Swap. You can do so at swap.mmillroad.com. Why should you check it out? Quite honestly, it's got some of the lowest fees in the space. We did not build this to make profit. We don't make very much money off it at all. We built this for you as a way for you to have an easy place to make your swaps. You can swap on Ethereum, Base, Arbitum, and Salana all in one place for some of the lowest

fees in the space. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. It's also brought to you by KGN, the verified distribution protocol, changing the growth game. With that, James, welcome back to the Milk Road Show. >> What's, going, on,, Jay?, Thanks, for, having me back. I'm happy to be here. >> Pleasure, to, have, you,, my, man., We, haven't had you. It's been too long. I never get enough of you in my life. Uh let's start with >> let's, start, with, your, thoughts, on, on, the market right now. Uh you know got through the summer August bit of a down month. September kind of a bearish vibe I would say going into September although bullish around rate cuts which

seem to be projected at about 98% likelihood in of happening in September. Give us your your current outlook and what you're look noticing in the markets. Yeah, I feel like everybody's always worried about what's going to happen in September and October. A lot of like huge calamitous like market downturns happened then. We had a pretty strong summer in the crypto market specifically. Equity markets have been rallying since those April lows off the tariff tantrum. But yeah, honestly, if we're looking at crypto markets, one of my big things that I look to is like Bloomberg has decided to do a little bit more in the crypto space two other times. Uh one was late 2017, early 2018 they were like we should really do more with pricing and looking at these assets. And that was when we first started looking at pricing of the assets. Um, and then in like late 2021

they decided to lean in. In summer 21 we hired people to cover this stuff. So if you if you know the markets, that was like right at the peak. >> Say,, you, say, that, Bloomberg, is, a, top signal. >> Maybe, right, now, there's, like, talk, of like the adding more assets and doing other things with cryptoreated stuff right now. So if there's anything that's history is any kind, that's what I'm worried about from my own personal experience of what I'm watching. But yeah, I mean there's a lot of tailwinds still happening. This Trump admin in here is like very different from obviously what we saw under Biden and Gendler in the prior administrations.

There's a lot of positive things happen. So you hinted at the opening with the CFTC and the SEC. The SEC is doing a ton of work, which we're going to get into here, to allow different assets to enter the ETF rapper. That's going to happen this year. ETH ETF flows are on fire. Bitcoin ETFs not maybe not on fire in the same way if you look on a relative basis, but the dollar amounts are still massive. Then we go into DAT codes which we can get into in a little bit. Like there's just a lot of money pouring in the space. So yeah, I mean there are areas where you can look and I feel like for the last like year I can point to like oh that feels very toppy and things keep going. I mean things can keep going like this for a very long time. Um so

who knows? I I'm I won't pretend to say that I know exactly what's going to happen. But I know, you know, if you're people with a four-year cycle, you're like, "Oh, you should really wait until October, November, then sell everything because that's the time if you follow the four-ear cycle theory, which I think has lost a lot of value." Um, at least this cycle. I'm one of those people not necessarily saying this time is different, but I don't think we're going to, you know, peak in later this year and then drop 80%. I just don't think that's going to happen anymore. >> Yeah., I, mean,, if, you, bought, into, the four-year cycle thesis, we would peak in October, November. and and as you said have have go into a massive drop in a bare market. It does not feel like that is the likely. If you talk to the crypto

people who basically believe in the having, right? They'll say, "Yeah, there you go. Look at the having. I can show you all these charts, three cycles three examples. We're going to peak again the same time. You know, this many days after the happening is always the peak." And it's been pretty close to that for two times. But it's different this time. I think it is. And you know what? It's funny. I wish Bloomberg hadn't tried this two times before because I could really say this was different. If Bloomberg was coming in this time because that now is the time when it actually makes sense to me because now there is a different investor here. There's institutions here which tune in to Bloomberg and consume all of Bloomberg's content and analysis.

So they would want the services that Bloomberg would provide. And they weren't here in the last two cycles. So it feels like strategically I actually want to give the Bloomberg exec a high five for doing it now. I wish they didn't try last time. >> We've, taken, a, step, up, every, time., So, we get we did more. We didn't have pricing on basically any of these assets aside from indices for Bitcoin and Ethereum back in 2017 2018. Now we have actual pricing. Like I can pull up a lot of these crypto assets. I think there's like 20ome on our platform right now. And I can look at the live quoting real-time pricing across like 15 different exchanges for some of these things ticking live like you would like a normal thing. So like we built a lot of that in like the 2018 2019 time range

and then there was a bunch of research and other things added in 2021 that was then like somewhat rewound. So like we have done it and we've leaned into it. We built out a lot of our news coverage in that 2021 right before the peak. That's when we hired a lot of people from competitive areas like CoinDesk and different people like that have come on to Bloomberg to cover crypto. Um, and it seems like there's now finally talk again of like, oh, maybe we should actually be taking this a little more seriously than we were. So >> that, goes, on, with, the, four-year, cycle. >> This, time, you're, right., This, time, you're right. Uh, okay. Let's let's go into let's start let's start with ETH. That's the first topic I really want to dive into. You mentioned the ETH ETF.

Absolutely on fire right now. Uh, who's buying ETH? Can ETH sustain this momentum that it's had over the past few months? >> Good, question, about, sustaining, momentum. I think a lot of it had to do with the DACO that came out. You know, Tom Le's Bit Miner and uh SBET and there's a whole bunch of talks of other ones coming out. Obviously, that is impacting the price in some way. But also, like you said, the ETH ETFs, they've taken in about 14 billion since they launched and like 10 billion of that has come just since like the start of the third the third quarter. So, just beginning of July. So like the they have they've taken in more assets since the beginning of July than they had at the beginning of July. So the money is pouring in like crazy. Unfortunately, we don't know

exactly who's buying, but I can go back. I wrote a note like looking at 13F filings, which here in the US, if you're an institution, you meet certain criteria. You have to say what you hold. Fortunately for us, ETFs fall under that equity reporting requirement. So we know who holds the Bitcoin ETFs and cry and and Ethereum ETFs specifically from institutions that qualify for that. So on the Ethereum side, it's the same as the Bitcoin side. It's dominated by investment advisor filings. Hedge funds are second, which largely use these products as trading vehicles or basis trades, things like that. Um, but we know about 25% of the holders for Bitcoin and Ethereum. I think it's 26 or 27 for Bitcoin. It's like 24 for Ethereum. Um, and that's as of June 30th. So like I mentioned, they took in more money since the end of June, since

the end of June than they had at the end of June pretty much. and we only know the holders as of June 30th. So, we don't exactly know. Uh, but we do know a lot of it is retail or international firms that aren't required to file those 13Fs. So, but really the number one answer is uh investment advisors and hedge funds. Those are the top two by far that are buying both the Ethereum and Bitcoin ETFs. But also, as I mentioned, it's largely retail um because we only know less than 30% of the holders of these ETFs as of each quarter end that we've had um so far this year. It's it's interesting to me that most of it is investment advisors and, retail, that, that, feels, it, we, we we keep hearing these two sides to the

story of this cycle. Side one is this has been the cycle driven by driven by institutions and retail isn't here and retail has still not shown up in this cycle in a real meaningful way. But then uh yesterday we had uh Ryan, head of research over at Bitwise on the show and we were talking exactly about this about how much retail has been driving the ETFs specifically and we're talking about the Bitcoin ETF in this case. Um and now you here you are saying that retail is driving the Ethereum ETF. Is that does that stand out to you? How how do you how do you digest that?

>> No,, because, it, was, it's, what, happened with the Bitcoin ETF as well. It's also we again not everyone qualifies to file these 13Fs. So we don't know exactly what the breakdown is. We can only know people who are required to file these 13Fs. Um so it's it's a it's a limited data set but it gives us good insight. But also like if you look at this ETFs as an industry the biggest users of those products are investment advisors. It's people who are managing money for their clients. ETFs are a great deal. They're cheap. They have like very they have zero transaction costs in most instances. Um they're very efficient. So like they're loved by investment advisors. So yes, it's it's obviously retail, but it it also could be, you

know, smaller advisors that like don't have to file 13Fs and things like that that might be putting this. But for the most part, the other side of this is I'm sure I didn't see the the hit with Ryan. Uh, Bitwise is great, but like I'm sure they talk about how hard it is to get on some of these platforms where these brokerages and and wealth platforms that like they need three years of history. They need all these things and like Bitwise is probably fighting tooth and nail every day to allow advisors on these platforms to put their clients into these products and we're still not there. Like most of these products there's like a three- tier system and it's like a lot of these products still no matter what you want to do, you can't buy it if you're using their platform.

And then the vast majority are in that middle ground where like you can only buy it if the client asks or if the client meets these certain criteria. Very few are like you can just buy this for your client if they if you want to put it in their portfolio you can recommend it. So like we're still relatively early days but things are changing and moving fast and they're moving fast at the SEC and CFTC and just with the government in general as well. >> Yeah., It, it's, it's, a, story, that, you, you and I have had this exact conversation a few times before, which is when will these pipelines open up that all of these investors can actually buy the ETFs or or can buy crypto? I mean, I think actually them buying crypto on chain is further down the road, but even

the ETF so many of them can't buy. And that's not a let's jump in let's use that to jump into the SEC. But I just want to ask one quick question which is that's not like a one day one moment thing where all of a sudden it's going to happen. That's just a slow gradual trickle. >> Yeah., Yeah., It's, as, as, m, it's, just, like government like people like uh the SEC comes in right everyone's like oh you know he's supposed to be pro crypto and all these Paul Atkins he likes crypto and doing all these positive things. Why are these ETFs still getting delayed? It's like dude it's still a bureaucracy. It's still government. they still like they're moving ridiculously fast for how that agency normally moves. It's just not fast enough for people in crypto.

And the same thing goes for advisors like one even once those pipes are fully opened up and it's like you can recommend like as much as you want clients to invest in a crypto asset ETF or crypto assets directly still only a subset of them are going to recommend it and only a subset of them are going to put it in like a meaningful part of their portfolio. So like we're not even opened up yet and it's just like slowly going to happen. And like that's just the way things happen. That's going to be a gradual development and and buying. And I think people are used to like, you know, the dopamine of like massive 20% runups in prices and 100% runups immediately in some stuff. That's just not the way the trady investment advisor institutional world tends to work.

They're going to, you know, they're going to leg into these products. They're going to buy in in downturns. They might sell as things rip up and seem unsustainable. Like that's just the way this things work. So, I think it's going to limit volatility as these people come in. Uh maybe a as they come in, they won't be sellers necessarily but I think they're going to dampen volatility to the upside and downside um over the near and longer term. That's my personal view. But yeah, it's it's just it's just going to take time. Like you everybody wants things to happen immediately and it's just not how it's going to work unfortunately. >> Why, do, people, invest, in, real, estate? Because it spits off cash flow. But I'm not here to manage rental properties.

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>> Yeah., So,, I, I've, been, writing, about, for a long time that I thought they were going to come up with some sort of framework for the ETFs. Like, if you look at what was going under under the Biden admin with Gendler, even parts of the SEC, there was just no like anyone who's paid attention to this space there was no clarity. It was like what is required? Like if you wanted a Bitcoin ETF or Ethereum ETF, I came on here, I explained all the processes for like what needs to go through these checklists, what needs to happen in order, these dates where they can delay or deny or approve. And that's so crazy. Like are they going to do that for every single ETF, for every single crypto every single individual ETF for that crypto? And it's just like not really sustainable like that. They changed a

whole bunch of things for how ETFs are approved years ago. And it was like the SEC needs to come out with some like rules of the road of like these are the assets that are like make sense to go into an ETF rapper. Give us give these issuers some guidance like what can I put in an ETF like what's allowed? And our view was they were going to do it. And our view months ago was that one of the number one things was going to be that have a futures product a futures contract listed with a CFTC regulated exchange. Um and that's what came out. So the SEC is working now with those issuers, with the exchanges to say like if you meet all these criteria, we'll allow you to list an ETF that holds this underlying asset. We don't need to get into too much specifics, but it comes

into like surveillance sharing agreements and these different or ISG organization that basically allows all these exchanges to share data with each other. But really at the end of the day the number one requirement is basically that you have a futures contract on an asset, for, at least, six, months, with, one of those futures exchanges that meets the requirements uh of the CFTC SEC. Um and if you do that for 6 months, they're basically going to allow you to have an ETF, which immediately opens the gate for a whole bunch of different assets.

So Coinbase derivatives, that platform is part of the ISG framework. So anything listed on Coinbase or it is with a futures contract for six months theoretically once this framework is approved or if it's approved as it's currently there's there's going back and forth like as you saw with the Bitcoin ETFs and theory ETFs it's the issuers exchanges going back and forth with the SEC and that's what they're doing with this framework. Theoretically the earliest it could be approved is sometime I think it's like September 19th. I wouldn't hold my breath for that but that's where things are headed. Um but we have a whole bunch of ETFs due under the old process starting in like early October. Um, so essentially they're going to theoretically open the floodgates once these platforms open

these uh assets for futures contracts. 6 months later, theoretically, you're going to be able to have a spot ETF that holds that underlying asset. And a lot of that goes back to the Grayscale lawsuit. Basically, like you can't have a futures ETF and not allow a spot ETF. And I think that's kind of where they're backing into this. And it makes sense from my point of view at least. So what's the let's let's leave the um the the when this is approved aside for a second uh whether it's September or whenever it happens this is coming what's going to be the impact of this what, tokens, are, we, going, to, all, of a sudden see how many like are we going to see is this like hundreds of tokens are going to have ETFs five 10 and and like

roughly what do you think the timing is for when this will happen? Yeah, I mean I'll name the ones that look like they're pretty much ready to go or will be ready to go within the next couple of months for an ETF rapper assuming this platform or this they're called generic listing standards. This is a thing I I'll refer to them as GLS and it basically says if you meet these requirements and you file and we have no problems with the the paperwork you're filing, it's ready to go. So it's like uh Doge, Link, uh so Chain Link, XLM Stellar, uh Bitcoin Cash, uh Avac Litecoin, SHIB, Polka Dot, Salana, HAR are pretty much they have futures contracts already on Coinbase derivatives or elsewhere. Uh well

obviously Bitcoin, Ethereum would fall under, but we don't need to go there. They're ready to go pretty much now. If this framework were approved within the next few months, you will also have ADA or Kadano and XRP Ripple uh that theoretically would meet this framework as well. Those are the ones that are immediately going to come due and then you're likely going to see other platforms launching futures products and different things. I actually don't like the current framework. I think there's not enough restrictions on like the liquidity or the you know you like high high FTV low float type stuff like those. I think there should be more on that, but it basically from my point of view, it looks like the SEC is outsourcing that to the CFTC and the CFTC is going to have to dictate whether or not these futures contracts are going

to be allowed. Um, but I I think there should be more protection around what can get in here because you could get some really wonky crap in a spot ETF wrapper, but you know, this is what looks like things are going. So, yeah we're I just listed off 10 assets, I think, at least. And and I be with with within those ones that you listed off there's a wide range of what I would consider a good asset. I'm not gonna I'm not going to name them here, but there is some within there that fit exactly what you're saying of low float, high FTV, you know, not not maybe a lot of fundamentals behind them.

Here here's my main question though is what is the what is the outcome of this? What's the demand going to be? Because I sit here and I look at two perspectives. One, I look at the Ethereum ETF when it launched last summer and we all had such high expectations after the Bitcoin ETF and then it did nothing. Now, you could argue that that was partly market conditions, but I don't think that's the full argument. And then the other thing I look at is the crypto companies that are IPOing right now. And the demand that they're getting makes me think okay, so there is big demand for crypto from Wall Street through the public companies and the DATs, but is there going to be demand for the ETFs? Like I can't I can't wrap my head around the

way this will shake out. What do you think? >> Yeah,, I, I, would, go, back, and, say, two things. one, we were pretty bearish on the Ethereum ETF AUM and flows um compared to many people, but we we weren't even bearish enough. Um so like I got a lot of flack from the ETH community for saying that we thought they were going to underperform their market cap ratio to Bitcoin and assets. Um but we also thought it was just too quick. Like Bitcoin ETFs came out in January and these things were approved in May and launched in July. Like there wasn't enough time for Wall Street advisers to even wrap their heads around what this was. Staking isn't allowed still really in the in the traditional spot ETF rapper. There is a staking Salana ETF out there that goes through a bunch of hoops and like legal loopholes

and things like that to get it out there, which is a great product to get out early. Um, but for the most part staking is allowed. That's going to I we have very high expectations that's going to be allowed within the next month or two. Um, so like that would be another thing there. And then obviously you hinted at it launched in July into a doldrum on Ethereum price and you know it just never garnered a ton of assets. That all changed when Trump kind of got elected and then it really took off over the last like three or four months >> partially, Tom, Lee, you, know, he's, he's he's the advocate for Ethereum. So what does demand look like for these other things? Um I would have thought Salana would do pretty well but we have Salana futures products that could be a decent

indicator and we have the Salana product now that has staking. Um, and ironically, >> how, are, they, doing? >> Pretty, good,, actually., Um,, but ironically enough, there's also leverage futures XRP and XRP products. They actually launched after the Salana products and had even more interest. So there's a lot of interest there. Is it going to be the level of interest that a Bitcoin the Bitcoin ETF launch had? I absolutely not. Like anyone who thinks like, oh, Bitcoin ETFs took in 40 billion, my, you know, XRP ETF is going to take in the same amount or whatever. That's, just, not, how, this, is, going to work. These are longer tail assets. I think there will be demand. There will be plenty. There will probably be multiple products for each of these assets to do well. Maybe not all 10 of the ones I listed, but a decent amount

of them. Is there going to be enough to have like 11 different products that are going to be successful and garner a ton of assets? Probably not. It's not the same as a Bitcoin ETF, not even Ethereum necessarily. The one area that I do think will be extremely beneficial is basket products. So, we have two products that are kind of being held up by the SEC at this point. There's a lot of wonkiness around why they're they were technically approved, but they're not allowed to list from Grayscale and Bitwise, which holds Bitwise holds 10 assets. Grayscale holds five, I think the Grayscale digital large cap fund. Those products, I think, will garner a lot of assets. So, will these individual ETFs holding, you know, Har gain a ton of money or holding Polka Dot? Probably not. But they'll be trading vehicles. I

think they'll be there's enough for at least one of them to survive and have a decent amount of assets and garner interest. And who knows what's going to happen with the underlying assets. But I'm very bullish on the demand for those basket products. We talked about advisors. They like diversification. So even if it's market cap weighted and it's 70 plus% Bitcoin and then 15 20% Ethereum and then 10% other stuff, I think advisers are going to like love to go in that route even if no matter what it is. Um because they get it's this is a 3% slug in their portfolio or 5% in their client portfolio. They'll just buy a basket product potentially. Or maybe they're like, "Oh, I want Bitcoin." And then I want to have a basket product of everything else. And we've seen a bunch of filings for products like that. So

I'm bullish on the demand for those basket products. And these ETFs listing will allow basically those other products to come to market as well. >> I, I, I'm, bullish, on, the, basket, products just because I think they're the best thing for investors. Like I would just I would love to see basket products for you my my friends and my family who aren't in crypto because that's what they should be doing, right? Everybody's finally we're, you know, we're we're at that part in the cycle where, you know we all get texts and we get those questions from friends and family. Is it too late? Should I buy? And I don't I'm very I'm always very hesitant to tell them what to buy other than than Bitcoin, quite honestly. And it's not that I don't believe in the rest of crypto, but I'm here full-time, right?

So, I'm following it. So, I'm not going to, I'm, not, going to, get, wrecked, and, I'm not going to get stressed out by the volatility, but I want to tell other people to get in and a basket product would make it so much easier. What is the what's the timeline on these basket products and is it tied to these ETF filings and and them being approved? >> All, right,, so, we're, going, to, go, down like we'll put on the tin foil hat here a little bit because there's no no one really knows exactly what happens, but it seems like the most likely scenario is these things were approved. So they they, both, both both, the, Bitwise, product and the Grayscale product were approved this summer to list and then afterwards they got a stay order from the SEC and basically what happens is like the SEC

is a five member commission typically and typically it's you know two Dems two Republicans and then one commissioner who is of the party of the president theoretically and three to two would win out but there's also this thing called delegated authority which is like there's all these people you can call them bureaucrats but they're usually people that've been the a long time sometime lifers and they can handle the vast majority of the stuff the SEC needs to do. They don't need a commission vote on every single thing that needs to happen. The comm the staff can just have delegated authority to do things on behalf of the commission. But if there are things done by delegated authority which these products were approved by, a commissioner can say, "Hey, hold up. I want to look at this closely or I want to have a vote or do something like

that." And that's what happened. So there was two theories when it first happened at Grayscale a couple months ago was a is the SEC just say, "Hold on let's get these generic listing standards I've been talking about. Let's get this done and then we'll allow these basket products to come to market because then we don't have to worry about these special one-off things or whatever benefiting other people or did the SEC, someone at the SEC on the commission go in and just give one last like middle finger basically to to these companies and in the industry to stop it from going because you only need one commissioner to do this." And honestly I'd probably lean more towards the latter. It looks like Caroline Krenshaw might have done that um for Grayscale and Bitwise. So theoretically, we could have had these products listing and trading ETFs already, but it was stopped

by the SEC and these stay orders. They'll eventually list and convert. Um there's no way to know for certain what it was, but Caroline Krenshaw wrote a descent after the Bitcoin ETFs were approved despite the fact that a federal court basically said the SEC couldn't do what they were doing. She wanted them to essentially deny a court order in my view. Um so I don't know. There's no way to know exactly what happened, but yeah I think that's probably what happened but again, no way to know for sure. Uh she's going to be out of the commission in the very near future. Um, so it might have just been, you know, a last, you know, harrah on her way out the door.

But yeah, uh, and you mentioned like getting texts from your friends. I'm not really getting that many texts about the assets directly. I'm getting I'm like what do you think about these this these DAC code? Should I be buying Micro Strategy? Should I be buying Bitmin? That's more of the questions I'm getting which I'm like h again this is feeling a little toppy. Yeah, and perfect lead in that was exactly where I want to go next is is these DAC codes these DATs are digital asset treasuries for anyone who doesn't know that acronym. uh DATs have been so hot particularly I mean we all know that Micro Strategy and you can go down the list of Bitcoin DATs those are nothing new they've been quite successful for years particularly Micro Strategy uh Ethereum DATs took over in

the in the summer as you mentioned really drove a lot of Ethereum uh flows will will Bitcoin and Ethereum debts continue to dominate my big question is we're going to have we already have DATs for other tokens. You know, you go down the list of the top 20, top even 100 and we're seeing DATs. You know, Litecoin has a DAT. Uh BitSensor has a DAT. Like I can just the list goes goes very long. Uh will will there be an alt season of DATs? Like when we have alt season, are we going to have a DAT alt season at the same time? Will Salana DATs have a moment? like I'm trying to break down or

is this just going to continue to be like a Bitcoin and Ethereum DAT dominated world and I know that we're going to have all these products like that I can that I'm pretty sure about and I I you can feel free to agree or disagree with me. What I don't know is what the demand is going to be for them. >> Yeah., So,, first, of, all,, I, will, say before I even get into any of this, I'm going to, say, shout, out, to, Blockworks. their treasury company dashboard on that on their website is unbelievable for tracking MNAVs and what's going on and assets and flows and all these new companies coming out for like a long tale of it's like yeah I mean there's a DAT code now that's being partnered with World Liberty Financial and the Trumps like there's a lot of like >> things, going, on, in, this, world, um, and

these things that are seem ponzies I guess I would say yeah so I I flip back and forth right so one I think these DACO these IPOs of crypto companies. I think this is taking a lot of steam from any potential uh or interest from any potential alt season, if you will. Like I I think this is the alt season. This has been the alt season. These DACOs, I mean, they've been they've been on absolute fire. Um their EBNAS are coming down a decent amount. And I I go back and forth between two things, right? I think there's there's three things that people need to think about. One, there are different types of DATO. One is just like people just completely taking advantage and doing things that are very sketchy in one regard and I'm just going to push those off to the side and not

even talk about any of them. Then the other one is like there's a lot of these companies that end up these DATC code tre companies uh dashboards that are like they're buying underlying assets whether it's Bitcoin or ETH or Soul or whatever as like a part of their treasury strategy. It's not like I am a company that's doing nothing but like what Micro Strategy is doing or Bit Miner or ESBET where I'm like completely betting in and leaning into things right? And what they're doing in in many cases like if you look at what Sailor's doing is a lot of financial engineering. I'd argue he's pretty much a genius. I mean, if you could sell a stock for $2 and buy something for $1 with it, like it's it's crazy. It's you would do it too. Like you absolutely would do it.

And what he's doing is he's like using these financial markets and giving people exposure to crypto assets in many different ways. Um so I think the people leaning the companies leaning heavily in it's very interesting to see what happens and you have things like on the Ethereum side and proposals on the Salana side where they're going to do a lot more like you can do a lot more with Salana and Ethereum because you know there's there's DeFi yields there's a lot of things staking where you can actually generate cash flow easily with the underlying asset. But I come back to like one these things are trading at decent premiums in many regards and it's like should it be trading at a premium like if you look at if you think about these just as a closedend fund like it's an actively managed strategy holding these assets. A lot of closed end funds

tend to trade at a discount unless they're outperforming the underlying asset. So because that money is stuck in there's no way to take those assets out. They actually trade at a discount because of the liquidity issues, right? But then at the same time, it's like if you're actually able to increase your Bitcoin per share or ETH per share over time, there probably should be a premium. This is the same way that stocks are valued, right? If you can ear increase your earnings per share, that share should increase in value as you're able to increase those earnings. So like I toggle back and forth between should these things be trading at a at a slight premium for being able to earn you know, excess returns in the underlying asset versus maybe they're just like a closed end vehicle holding these assets. I don't really know. Uh

it's it's it'll be interesting to watch. But I think like the way I tend to think about it is like one the longer tale of these things there's going to be blowups. Like they're going to cough up these coins whether no matter what the underlying asset is, there's no way all of these things are just going to do everything above board and structure their debt or whatever they're doing smartly so they don't end up coughing coins up. So and the next downturn that'll be scary. But the other part of it is like if you think about banks like they're valued on book value often at a premium because they generate yield underlying assets. So something like a micro strategy ends up becoming more like a Bitcoin bank or a Bitcoin you know company doing things with the underlying asset and earning underlying yield in some regard rather than just

you know selling calls or what have you. Like that's that's not that great either. But like there is value in in these things and if you can generate value in underlying asset it makes sense. So I'm not like these things are the greatest things since sliced bread. But I'm also not like these things are going to completely collapse and destroy everything. And I but I do think there are a bunch of these products that are going to completely collapse. Sorry, I rambled, a, lot, there., I, have a, lot, of thoughts and I don't want to do too >> No,, I, I, I, I, I, I, really, I, really, resonate with a lot of your thoughts there. I think the the the the one I want to focus on is you make a really good point when you say that these stats yes long term okay we have risk but in the short

term is this alt season like that's the one thing that I really want to I really want to try to understand that because there's a lot of people that listen to this show that are stand that are waiting for crypto alt season to And if that is happening already in public markets through DATs and IPOs and then are we going to miss alt season and I don't know the answer and I know you don't know the answer either but that is a that is a very good question which we should all be asking ourselves because if you sit around and you wait for alt season I still think we're going to get a crypto alt season because I still think the bull bull market has a long way to go really driven by a lot of macro factors. rate cuts are coming. All

of the tailwinds coming around regulation. 401k money is going to start to, come, into, crypto., I, don't know, sometime in 2026 likely is my guess. So it feels like we're still going to get an alt season just because we're going to get an asset season across all markets like bull bull bulls are going to run, I think. But I do think you you bring up a really good point of like should should crypto investors be focused on understanding DATs right now and investing in DATs versus trying to buy tokens. >> Yeah,, I, don't know., I, mean,, if, if, you're a long if you're a short-term trader maybe uh or if you like really believe in these strategies. I mean, anyone talking about these things as completely Ponzi schemes and nothing else is like

that's why I use the word Ponzi because it's not exactly the same. But like I don't know, you don't need to focus on DAT codes if you don't want to. Like you'll be fine. The thing is like I just think right now this market is becoming a little more institutionalized. It's becoming a little there's a lot of smart players coming into the space to understand this market and like obviously there's the DGEN side of things of all these meme coins being launched every single day and pump and sniping different things and these long tail of like layer ones that people are trying to do there. There's no way all of them are going to be successful. Do I think it's only going to be a win or take, all, in, most, of these, instances?

Definitely not either. So, I mean, it's it's going to be I I just don't think altcoin is going to run in the same way it has in years past. Largely because the money that's mostly driving the performance of things like Bitcoin and ETH right now is institutional money. And I just don't see a ton of institutional money coming into, you know, the 31st, you know. >> Yeah., You, don't, you, don't, they're, rotate out of out of ETH into every every beta. they're not gonna start going way down into the DJ stack. >> Well,, if, you, get, the, basket, products,, if you get, you know, a couple billion dollars flowing in and and this product this asset is, you know, a 5% allocation, that could actually move the price. I just don't know that we're going to, see,, you, know,, DACO, is, able, to

raise tens, hundreds of billions to move the market in the underlying >> the, the, thing, that, the, the, basket products are going to do is they're going to save. I think there's going to be there could be a lot of top 10, top 20 tokens that quite honestly I think you and I would agree are ghost chains and should not have that valuation, but these basket products could save those. >> Oh, yeah,, for, sure., I, I, would, say, two things. One, I think there are ghost chains there that are going to be ultimately completely worthless. I also think there are current ghost chains right now. I will name names that are like could potent they're going to come back from the grave. just watch like as institutions come in.

>> Yeah., There, will, be, some, things, out there that like they have technology and things that they can do and they have enough far reach that like there there will be bene benefits there and they'll outperform you know some of the other assets over time. Um so like I that's another reason why I think the basket product is going to be good. there's some of these assets that like have the technology and ability to like do certain things that some of these other assets don't in a different manner that you know institutions might like a little bit more because like there's this whole thing of like in this world and I I actually was listening to on here I need to finish it like the bankless guys did a podcast where they were debating like this completely decentralized world versus like the real world and like I lean more towards the

Austin Campbell side of things. I don't know if how well your audience knows him, but he's like, "Look," he he does this analogy of like, "Look, if North Korea hacks like whatever and we keep our housing titles on the blockchain and they own Grandma's house, like it's not like, well, North Korea now owns it." Like, that's just not going to happen. There needs to be a way to reverse that and do things like that. And I think like some of the bigger chains right now are completely decentralized, which are great for certain assets, but this real world asset like overlap, like there can't just be like irreversible things that happen. like there needs to be some way to get it back just because somebody gets hacked. Obviously in Bitcoin Ethereum specifically, like they're not going to roll back the chain because somebody got hacked for their Bitcoin

Ethereum. But if somebody like gets the title of somebody's car or you know their house, it's not like oh well it's gone. Like that just can't happen. So if we're, going, to tokenize, real, world assets, some of these other chains that need to be a little more centralized again like I think decentralization is on this spectrum and as long as everything's interoperable, I think it'll I think we're looking at a really bright future. But it could be, you know, a decade plus away before a lot of this stuff that these futurists are talking about happening with blockchain. But I think the future is bright overall and I'm pretty optimistic for the space in, general., It, it it, is, a, very interesting question which is like a a debate that I think will rage on for a while which is there are these chains uh I mean Hyera for example is one that

comes to mind that really built for institutions built by institutions with a lot of institutional funding and a lot of large tech companies and banks participating in it and they built it for maybe not what we needed four years ago which is why a lot of sit here and say, "Oh, that's a ghost chain." But they did build for a future that you are saying will likely exist because there's a trady world that doesn't want to give full decentralization. They do want some control. So, I can I can buy into that thesis for sure. It's just difficult to know which which chain is going to be the chain.

>> It, I, mean, it, could, be, a, chain, that doesn't exist right now that ends up being the market dominant player a decade from now. um on on the DeFi side of things. Obviously, like the way I think about it is Bitcoin is digital gold, digital store value. It's very different. And then there's a lot of other stuff out there that I the Bitcoiners act like it's completely worthless, but I really don't think so. I I work in Tradfi. I see all the inefficiencies if you try to deal with a transfer agent or the DTCC or any of these other things. It's really painful and like to there's a lot of middlemen going on. So, like if you can do things and use blockchain technology to automate this, uh I think it can be powerful in the back end. How much of that accrs to the actual tokens, I don't

really know. Uh I hate to be the person to say blockchain, not Bitcoin because I was I push back against that hard in 2017 2018. But there really is stuff that's happening in blockchain that okay, maybe it'll be a little centralized. People say it's just an inefficient database. But like if right now the way all banks and the financial infrastructure works is like everyone has their own ledger and they're trusting that whatever ledger they're maintaining is accurately kept. And like you just have to go back and forth and they interact on those separate ledgers. And like if you can get to a point where everyone is using the same public ledger, there's no questions about what it is. It's almost like a utility. Um I think like a lot of people in Tradfi are trying starting to get around to the idea that oh wow, this might actually

have some real value. And the more and more people I talk to, the more they're coming around to that. Um but still the vast majority of people I talk to in my world still think the entire space everything we talked about is worthless. It is beanie babies. there is no reason to be doing any of this stuff. And I'm just like, guys, at some point you have to like take a step back. Like even if like in 2015 there was like a you you viewed it as a 0% chance, the actual chance was like these people were right was higher than that. Whether it's 5% or 10%. And no matter how you slice it even if all this thing blows up in 10 years, the odds of that future happening have continued to tick up. And that's what's showing in the price, right? The odds of this future onchain world being

success have has gone up. And the people back in 2015 and 2017 saying it was worthless are still saying no, the odds are zero. And I'm like, the market is saying otherwise. And they've been saying it's been saying otherwise for a decade now. >> I, I, love, that, there's, still, people saying that the odds are zero. That's great. That just shows we are still so early. We are still so so early. Let me ask you one quick question before we wrap. That's just more kind of a more fun one that uh there's been with with with with Tom Lee and uh you know Joseph Luben and uh and Joseph Shalom and all these large uh ETH DAT companies going on the news. They've really been pushing the Ethereum narrative. And one part of

this narrative is who is more valuable long term. Is it Bitcoin as a store of value or is it whatever the leading L1 is? Let's not necessarily say it's Ethereum. Let's just say whatever the leading L1 is as the backbone of the financial system. I don't know. It's it is a it is a pretty interesting question to ask is like does the leading L1 have more value in the long term than Bitcoin does if Bitcoin remains just a store of value? >> Yeah., Yeah., So,, the, thing, I, if, you, talk to a Bitcoin maxi, they would say Bitcoin is competing with anything that's money or an asset, right? So they'll say like they're going to be competing with people who are investing in real estate and like $60 trillion of global M2 and like all these things that

so they're like it doesn't matter what Ethereum does if it doesn't become money,, it's, not, going, to, be able, to compete with Bitcoin. I don't know if I fully believe that. Um I think I don't know that governments are ever going to fully give up their ability to use fiat. I think Bitcoin could be a check and balance on some of the things that are happening right now. Is it going to completely replace like government fiat? I I just don't see that future. I know a lot of people do, but that my personal opinion is no. So maybe it just is a store of value or a check on these government spending. Um and then like you said like Ethereum I think the problem is Bitcoin basically for now owns that space, right? There is a case that people are trying to make and have

been trying to make for years that Ethereum could be a proofofstake version of that, you know, digital money uh a digital store value. Uh that is definitely not the case yet at least. Um but the problem with Ethereum is like they have so many competitors. I mean namely Salana, but you have everyone in their mother trying to do something to compete take pieces of off off of what Ethereum is doing. So even if the piece of the pie that I we were just talking about is bigger, I just think that Bitcoin like owns almost the entire pie and Ethereum is going to have a whole bunch of competitors, but right now Ethereum is a clear winner for institutions. Black Rockck right now has no plans to launch on anything but a Bitcoin and Ethereum ETF. Um I suspect that will change in the future, but not

yet. Um, so institutions are leaning into the, you know, stability, 100% uptime, more decentralization aspects of Ethereum, but there's obviously going to be trade-offs. So there's going to be plenty, of, chains, that, are, going to, be, a little more centralized, things like that that they'll lean into. So I think maybe the pie could be bigger for this piece we were just talking about, but that doesn't mean that Ethereum will be bigger than Bitcoin, uh, because there's so many other players over there. So that's my current framework and I mean it's changed over the years. It probably will change again, but that's the way I think about what you just asked.

>> Well,, and, that's, why, we, got, to, keep getting you on the show, my man. Thanks so much for joining us today, James. Really appreciate your time. >> Thank, you, for, having, me,, Jay., This, was, a lot of fun. >> As, always,, I, got, to, remind, you, guys, that none of today's episodes financial advice. I'm not your financial adviser. James is not your financial adviser. If you need help with your investments, you should speak to a professional. Thanks for tuning in. Y'all have a wicked awesome day. We'll see you again tomorrow. If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap. This is a DEX that we built in partnership with Cow Protocol. Why do we build it? Not to make money. Just honestly, so we could have a place to do our swaps for the lowest fees that we could find. This is

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