← CRYPTO 101
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- [00:00]
Adrian
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- [01:25]
Bryce
All right, everybody, welcome back to another episode of the Crypto 101 podcast. I'm your co host, Bryce, as always, joined by my good friend Brendan. How are you doing, Brendan?
- [01:35]
Brendan
Dude, I'm doing good. I'm excited. I mean, the crypto market is on fire. And one of the probably most interesting spots in the crypto space, Bryce, are all these ETFs. I mean, they're coming out of the woodworks, they're left, right? And you know, who better to talk about that than, than someone who's actually filing for them themself?
- [01:55]
Bryce
Absolutely. We have a great, great guest joining us today. The CEO of Canary Capital, Stephen McClurg. Stephen, thank you for joining us. And how are you doing?
- [02:06]
Stephen McClurg
I'm fantastic. It's a beautiful day in Santa Monica.
- [02:09]
Bryce
It is a beautiful day. I'm over here on the west coast as well and I'm, I'm super excited because we get bull market vibes everywhere. Things are, you know, in the altcoin world and the bitcoin world, Ethereum things are Moving up and to the right both in terms of ETF inflows. I know Ethereum, you know, broke some new all times, all time records of daily inflows and weekly inflows. So that was a big push. And all these, there's a flurry of altcoin ETFs that are coming out as well, that you're, you know, you're, you're backing some and we want to learn all about that. But before we dive into kind of what's going on right now in the immediate term, we want to know a little bit about who you are in the founding of Canary Capital and what the mission is and what you guys are up to as market participants.
- [02:57]
Stephen McClurg
Yeah, absolutely. So, you know, maybe go back in time a little bit on my background. I did come from traditional finance as a bond manager and a bond trader for years. Spent most of my career at Guggenheim. And then in about 2016, I just noticed that the bond market was at the top. You know, we, we had gone through a generational bull market in bonds. 2016, in my opinion, was the top. A lot of people say that 2020 was the top, but 2020 was a little bit more of a anomaly. And I decided that it was time to get into crypto slash blockchain full time. So I, I left my job and decided to kind of go, go all in. So I did, I mean.
- [03:47]
Bryce
Call just like, you know, short bonds, long crypto at the very peak. Bet your entire life on it. I mean, I just wanted to comment that that is a, a bold move. I love that.
- [03:58]
Stephen McClurg
It was a scary move actually. You know, I didn't know or not, but, but all, all, all signs pointed to that. So we so, so, so went all in and was able to do a lot of cool things and tokenization and ETFs, founded a company called Valkyrie that launched some of the first Bitcoin related ETFs. And by the way, I'm not even really an ETF person. I mean, I managed ETFs at Guggenheim and created a lot of them there. But really my background is active management. So throughout this whole process I've run crypto hedge funds. And that's really what I enjoy, what I spend a lot of time doing. But when I see opportunities coming from a structured credit background, I mean, that's really all ETF is, structured securities. So try to come up with different ideas and methodologies to put something in the market that people want and fast forward to a Canary. So after Valkyrie, at first I just thought I was Going to ride off into the sunset. And in about September of last year, I saw an opportunity. I started seeing the opportunity as early as August, but, you know, I was running my fund, which is really the only thing that was planning on doing, and saw this opportunity when, when Trump got shot, I said, he's going to win and everything's going to change in crypto. And I could be absolutely wrong, but the odds just moved to our favor. So I started. So in September, I decided to start filing ETFs that weren't Bitcoin ETH related, thinking that they might get approved this year. You know, 20, 25. They haven't been approved yet, but I still have high hopes that we're going to see a lot of approvals coming this year.
- [05:56]
Bryce
Wow, what has it been like?
- [05:59]
Brendan
I mean, you were helping launch one of the first US spot Bitcoin ETFs. Now you're. You're filing for all these different kinds of altcoin ETFs. What have you seen change? Like, what is. What has changed from the first of these filings to now seeing all different sorts of altcoin ETF applications kind of become the norm?
- [06:20]
Stephen McClurg
Yeah. So there are really two things. You know, first of all, for the longest time, I thought that bitcoin was really going to be the only thing that institutional investors would want and investors in the ETF markets want. And as a matter of fact, when everybody started filing for ETH ETFs, I passed because I just didn't see a strong demand for ETH. Now there has been, but when you have BlackRock and Fidelity in the mix, it's really hard to compete with those two shops. And sure enough, in the beginning, ETH did take a little bit before it caught on. But as it started catching on, I skipped over eth and I was like, it's time to move on to the next iteration of level ones. So really started focusing on the protocols that I thought would really be the future of protocols. So looking at things like Solana, xrp, Sui, say, Injective, just, just to name a few, hbar. And I really saw those as having a lot of demand in markets like Japan and Korea, which, by the way, Japan and Korea, you cannot have crypto ETFs right now. And if you look at a lot of the flows coming into the existing crypto ETFs in the US a lot comes from Japan, Korea, and even UAE. And you might ask, well, why don't you try to launch an ETF in uae? Well, it's Such a small market, everybody in the UAE just buys the US and there's really no tax advantage to buying, buying things in their own exchange. So everything, all the flows going to the us. So what I've really been focusing on is, okay, what's popular globally and not just popular in the US because sometimes we put blinders on. You know, we're in the U.S. we're like, well, why do you need bitcoin? We've got an amazing banking system here. Well, the rest of the world doesn't, right? Or why do you need privacy tokens like Monero? Because they're illegal here. There's a lot of places around the world that have dictators that are trying to take your money. So privacy tokens are pretty amazing in a lot of jurisdictions. So I'm really focused on what is great on a global perspective. And that's one of the things that I'm focusing on. And one of the things that have changed is that view. And the second thing that has changed is the current administration and the current sec. Now we haven't seen movement yet. I feel like they're kind of dragging it out a little bit. I mean, we should have seen some ETFs by now. But I do believe that we will get there soon.
- [09:04]
Adrian
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- [10:48]
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- [11:17]
Bryce
Wow, there is so much to unpack there from the generational kind of move, short bonds, long crypto, which is again, has proved to be quite prescient to really, you know, studying the landscape and saying, you know, what, Bitcoin, ETFs, Ethereum ETFs, those are well groked. They're the best products out there right now in, in the ETF world for crypto. But there's, you know, competitive landscape where, where's the blank space where's kind of the blue ocean and you, you know, decided altcoin ETFs and so tell us a little bit about what goes into that, that process of, you know, deciding, you know, what ETF you're going to file for because for, for which underlying asset, I guess is what I mean because I think the first one was hbar and then there's, there's several others I believe. So tell us a little bit about that discovery process and the underwriting process, I guess if you can call it that.
- [12:12]
Stephen McClurg
Yeah. And just to tell you a little bit about the way that I think about product, Right. You know, I think about product management and how to launch, you know, a slate of products and not just one or two. And I do think about them like this. So in a, in a slate you're going to probably pick two or three that are, that you think are going to be guaranteed winners. They're not always. And then you choose some that you think are going to be steady earners and then you choose some that are a little bit more risky, you know, but if, if they work out, they can be grand slams. So that's the way that I think about product. And of course we've launched about, or I say we've filed about a dozen ETFs. So some of the things that I look for are the ones like, okay, which ones are going to be very quick for financial advisors and financial institutions to complete due diligence. They've been around for a long time, they're going to get there quick. Right. So that's going to be your XRP or hbar and your Solana, even Litecoin, you know, they all have futures markets. They all have, you know, long histories of their blockchains. Well, Solana, not so much, but they're large. So those are the ones that in my opinion are the four kind of slam dunks. You know, I mean, you know, a lot of people question my litecoin and I said look, and this was in the prior administration, I said, look, like Gary Gensler said that Litecoin is not.
- [13:38]
Bryce
A security bitcoin fruit.
- [13:42]
Stephen McClurg
So let's go. And of course Litecoin is just a very well known chain. Charlie Lee, the creator, is one of the most well known people in crypto of all time. So I do think that there's like a good brand there and a, and a good product there. Same thing with H Bar. Everyone's like, well, what's, some people don't even know what H Bar was. But what's, what's interesting about hbar is that even though Gary Gensler didn't specifically say it's not a security, they did everything as if it was a commodity. Right. So, so think about this. There's a lot of foundations that have launched blockchains and they set up the Swiss foundation and they act as if it's a security and they think they're being cautious. But when you act as if it's a security, then the SEC could interpret that to be a security.
- [14:30]
Bryce
Interesting.
- [14:31]
Stephen McClurg
Hbar acted as if it was a commodity. It even filed with the CFTC every time it released tokens. I mean, everything they did was right. And you know, there's, there's no question that this is a commodity. So I believe it would be one of the first ones. And they have a futures market which not many, not many do in the.
- [14:46]
Bryce
US and they've been around For a long time. I remember being at consensus, I think it was 2018 and I was in a little, you know, hotel room and they were, you know, talking about hashgraph and Hedera and all this kind of stuff. And there was, you know, some, some new apps that were being built on it. And this was, you know, you know, way, way, way, way back in the day. And then, you know, the bear market came and wiped out a lot of competition, but they continued to grind. And we had, you know, Mance and Lehman on the podcast several times as well, talking about all the amazing things they're doing. And so hbar is one that, you know, I'm really excited about. But you know, there's something that, you know, hbar and SUI and all these different cryptos have that I think is really interesting. And it's a staking yield. It's an in kind sort of yield that allows you to basically not just hold on to an asset like a pet rock and hope it goes up, but actually have some kind of income that it's generating based on, you know, the value that you're, you're providing to the network to secure it and to, to operate it and so on. And so like you mentioned, there's been a little bit of a holdup here at the sec and I wanted to get your thoughts, your comments, as much as you are legally allowed to speak to it. Because the staking ETF or, sorry, the, the Ethereum ETF with staking seemed like it was approved but then initially immediately stayed, so they paused the approval. What's going on with staking in ETFs? Is it going to happen? Is it not going to happen? Why is there such a debacle?
- [16:21]
Stephen McClurg
Yeah, look, anything could happen, right? But I do believe it's going to happen and it's one of the reasons why we focused on our next iteration of filings on tokens that do have proof of stake and have a significant staking yield. One of the things that makes people, I guess, not understand Bitcoin so much is because they don't understand the transaction that happens in the background because it all happens with Bitcoin mining companies and even the word mining is confusing. And then really who's processing the transactions are the mining pools and people really don't understand it. I mean those, those that are, that are deep in the technology understand it. But when you talk about a network like, you know, let's just use SUI as a, as an example. You know, you talk about a network like SUI and you have nodes that process transactions and you get money for processing those transactions. Okay, that makes sense. Traditional financial services. And when you can actually participate in staking your sweat against someone's validator, then, and you get rewarded for that, it just makes more sense. So it's, it gets you one step closer to like, I can touch and feel it, even though you really can't, but you can actually see the staking rewards coming into your account. So the, you know, the validators are super important to not just the network, but also to understanding the network and then for, you know, just regular pedestrians to understanding that, oh, I can make extra money, it's extra yield because I am a participant in the network. So that's, that's, that's really important. But look, when it comes to the sec, what I think they're trying to do, you've probably seen a lot of comments come through from some of the issuers of eth and then of course some of the other tokens as well when it comes to staking. And I think what they're really trying to do is, is take the risk out of the markets for that and understand it more and make sure that all the issuers understand their own risk and what's going to happen when they start offering that yield. Because there is risk. Right. I mean, you could, you could stake to a validator and get slashed. Yeah. Okay. And then what happens to all the tokens sitting in the etf? Right. So there's got to be a policy and those policies have to be reviewed and it's taking a little longer than I think what a lot of people have hoped. But it's, but it's super important to make sure that, you know, it doesn't affect capital markets in a negative way.
- [19:02]
Bryce
I think it's really one of the reasons why we're seeing so many inflows right now. It's like I'm kind of a proponent of like, the markets are kind of the first to know about the news before the news even knows the news. And like Ethereum is pumping through the roof right now. Like a lot of capital flows are showing, like, you know, bitcoin dominance falling, Ethereum dominance rising. Like some of these records, like, I think the market's sniffing out that like these, these things are going to get approved, the staking yield is going to come and it's going to be really, really interesting. But like, it just seems to like, kind of validate one of the reasons why the market is pumping right now. But no, no, no question really on that. But I Don't know, Brendan, if you have a question on, on anything that we were talking about with the staking stuff, but it's just interesting because, like, I, I think you're right, it's gonna happen and the market seems to be pricing that in right now.
- [19:49]
Brendan
Yeah, and when, when we look at staking like that sets the precedent. Like when you look at staking as a whole here, almost every altcoin nowadays is proof of stake. So if Ethereum can get approved first, set the standard, then all these other ETF applications that are going to follow, the majority of them are proof of stake, then that means that it opens up the door for staking on all of those. So I think a lot of people are waiting here and they're watching to see this. Like Robin Hood, for example. Obviously they didn't add staking to their ETFs, but, but they went ahead and added staking to Ethereum and Solana, which is something that they hadn't done previously. And so it's because the demand for staking is there. It's very clear that people want this, institutions want it, like everybody wants this kind of a thing. And I think what we're seeing right now is the prep work. There's also been a bunch of back and forth between, you know, a lot of, like yourself and a lot of these other ETF providers with the sec. I follow the, the Bloomberg Intelligence guys.
- [20:48]
Stephen McClurg
Eric.
- [20:50]
Brendan
I think it's Balchunas or Balconis and James Safe Art. And they're constantly saying like, oh, this was amended. This is back and forth, back and forth. And it's just from everyone. And so I do think we're in the final stages before we, we see this thing come to fruition. And I just don't see why it would be held that much longer, especially when there is just so much positive crypto regulation out there. But yeah, I mean we, we have a lot of these other ETFs. I mean, I know over at Canary you all have applied for like you said, like hbar and SUI and Solana, xrp, Litecoin. And two of the ones that stuck out to me recently were Pengu and Injective. And I've got to ask about Pengu because, I mean, listen, this thing launched, it was big in NFTs. The token launched. You all filed for this on March 20, right? That's pretty early on. You could have looked at it today and said, oh well, they would have filed because of this and that. It's up a thousand percent now in the Last couple of months. But you all filed before this just massive climb happened. Like what brought Pengu on to your radar? And from my knowledge, you all were the first to apply for a Penguin etf.
- [22:02]
Bryce
They actually set the bottom. They bought where they announced it in the market has not gone lower since your announcement. But anyhow.
- [22:09]
Stephen McClurg
That's awesome. Well, it's, it's, it's really, you know, two letters. Ip. I'm a big believer in investing in IP and, and maybe I should jack up and tell you a little bit more about my, my background. You know, I actually took a stint away from traditional finance and worked at Electronic Arts for a couple of years and was, was focused on, you know, purchasing ip, launching ip, partnering with partners. And I know the power of a strong IP behind a brand and behind a game or behind a product. And then even at Guggenheim when, you know, after the financial crisis and you know, yields spiked and then they went down to the bottom and it became very difficult to find good, high yielding bonds. We had to do something for our clients. So I got very invol in purchasing ip. So we did everything from buying the Dodgers and at the time nobody had looked at a sports team for anything other than like, you know, how much can I charge for parking spots? What about hot dogs? What about beer? You know, like those are the things, you know, and butts and seats. Those are things that mattered. And that's what everybody's models were on. Our model was based on intellectual property and entertainment rights. And we really got into that game really early, looking at various types of ip, whether movies or film or music, and really got involved in a lot of different types of IP sports, of course. So I understand the value of IP and brands and Pingu or Pudgy Penguins is the ultimate IP in crypto. There's, there's, there's, there's not even a second best. And a lot of people like Mike pointed things like, well, you know, you got punks, you've got Bored Apes, which did a really good job of. But, but the problem with Bored Apes, it's very exclusive, right? I see Bored Apes is like a country club. You know, when I walk around town, I see people with their country club shirts, you know, their polos, their hats and everybody, you know, they, to let everybody know which country club they're a member of, you know, and it's exclusive. That's what Bored Apes was. It was, hey, I'm in an exclusive club. Look at my Bored Apes. Look at my, look at, look at, look at my, my My, My profile pic. Look at the clothes that I'm wearing. Exclusive Pudgy Penguins is a IP that was created for a broad audience. So not just selling NFTs, but they also have physical merchandise, they've got, they've got Entertainment Online on YouTube, and they've done an amazing job of creating a high quality ip. Highly valuable. Yeah. I mean, there's. Nobody comes close to second as far as the value of that ip. And I also like innovation in financial products. So, yeah, I mean, it's really easy to pump out a bunch of boring, single token ETFs that might do well, but this is something that's a little bit different. And nobody's tried to put NFT into an ETF yet, by the way. I mean, it's. It's hard to get. I want to say 15 years ago, I was working on a fine art ETF, you know, because a lot of, a lot of our clients at the time were invested in fine art. And I was like, what if we could do this in ETF? Very difficult. NFTs make it very easy because of the fungibility. So. So, yeah, I mean, I wanted to do something NFT related and I wanted to be attached to an IP that was highly valuable. And the two worlds collided. I mean, that's really all it was.
- [26:00]
Bryce
I love it. It's another bold bet. And I think you're right. I had previously, for the first eight years of my time here in crypto, I was like, all about the fundamentals and all that kind of stuff. And then meme coins burst on the scene maybe three or four years ago, and I was like, I'll never touch it. This is cancer to the industry. And so on and so forth. And then all my followers and listeners would know that, like, back in, I think, July or something, you know, as we started to hire more and more people around here, and people that I'm hiring are like, yeah, like, I'm making all this money on meme coins. This is where the future of crypto is going. All these young, smart people. I'm like, oh, my gosh, I'm the old guy now. I need to figure out meme coins. And my best trade ever in my life, still running, is a meme coin in terms of dollars made. And so it's like, that's just beginner's luck right there for, for meme coin investing. I got bit by the bug and now I'm like, yeah, this stuff is, is super revolutionary just because it's all about, you know, monetizing Attention and monetizing community. And it's just in the same way that, you know, Netflix really and Facebook, you know, all these new ways of, you know, valuing, you know, stocks. People were like, how do we do a discounted cash flow on like, you know, Facebook or whatever? Like that. Does that really capture or like a capm? Like, does that really capture, like the upside here or like the investment case? And it's like you need to start like valuing like, what the attention was and like all the different things that you said with ip, it was like baseball stadiums used to think about, like, what are the hard assets? But you're like, there's so much soft value or intangible value and like, that is not really properly being priced. And like, I guess my question to you, like, in this weird amalgamation is like, how do you think about, like valuing like meme coins particularly? And I. And Pengu is like kind of a meme coin, but like you said, there's IP attached to it. So do you see like, credence and some of these meme coins that are out there that don't have, you know, Walmart partnerships or whatever, but they do have rabid holder bases and people that are like, you know, viral posting and making, you know, content online and really spreading the word, like, is that just some kind of fugazi that's going to be gone? We're not going to talk about that in next year because it's just the current meta.
- [28:17]
Stephen McClurg
Or.
- [28:17]
Bryce
Or is there staying power to the meme coin stuff?
- [28:21]
Stephen McClurg
Yeah, I, I think there's. I think there's massive staying power. One of the things that I want to point out is I'm not a big investor in meme coins at all because I typically don't invest in things that I don't understand. NFTs, I think, get a little bit closer to things that I understand. And to be absolutely clear, I have. The only NFT projects I've ever invested in have been pudgy Penguins. And I'll get into that a little bit more. And then I have personally put a little bit of money into. Into Doge. It's, you know, I typically. But here's how I look at things, right? I look at meme coins very similar to baseball cards. And there are people that are experts at analyzing baseball cards and knowing exactly what's going to be valuable. They buy them, they sell them, they make a lot of money doing it. And most people lose money. Okay? That's, that's the meme coin market. And I'M not smart enough to know which meme coins, or at least I haven't identified one that I believe is going to make a lot of money. I mean, a lot of them have, but I don't know that. It's not my expertise, so I haven't really touched them. My kids trade meme coins all the time. They love it. Right. And I've bought a little bit of Doge just to kind of like be funny and do it with my kids. Right. But that's really the extent of that. Dojan, a little bit of Pepe. But when it comes to NFTs, I haven't yet seen something that I thought was going to be, was going to have massive value. And NFT is more like fine art. What's the difference between a Warhol and a Rembrandt? It's perspective and taste or style. Right. It's preference. And there's a lot of great art that isn't worth a lot of money and there's a lot of bad art that's worth a lot of money. Right. So it's a, it's a different type of understanding to be able to identify that. But what I do understand is ip. So again, I, I, I've invested in penguins because, and, and, and done things on penguins because I understand the ip, I understand the IP on board apes, but I don't think it's going to, you know, have a massive lift like it could, right? It's, it's, it's too exclusive. And then there's a few other ones out there that, you know, a lot of people think they understand and I'm sure they understand it, but it's just not anything that I see value in. Right. But I do understand, I do understand ip. I don't understand art as much, but, you know, I can pretend I love it.
- [30:52]
Bryce
And you know, so, so for some of the ETFs that, that you have filed for and are, you know, waiting approvals on for crypto, different altcoins, I'm just curious, like, are when you think about, like, where, where some of the value is in different blockchain networks, are you guys, you know, giving a lot of, like, weight to, like, active addresses or like, on chain metrics, you know, that kind of thing? Or are there other kind of, you know, metrics that you pay attention to when determining which, you know, altcoin ETFs you're going to launch?
- [31:28]
Stephen McClurg
Yeah, there's, there's a lot of metrics we pay attention to and it depends on what category of, of products that we're putting that in. You know, if you're looking at active, you know, active wallets, active transactions, real transactions, that's, that's actually a really hard one. There are a few that we've evaluated that way and what that means is they're popular today. Right. Like I, like I look at Ethereum and of course the stats look very good for Ethereum, but it's an older technology, it's slower, it's expensive and it still is versus a lot of things out there. And it's probably at its peak, you know, so I'm not, I don't care so much about what was popular five years ago and where the developers were five years ago. I care about where they're going. And then so of course a lot of the metrics we just described as what's today, what's trending upward. But one of the other things that I look at is okay, have you launched a mainnet and how expensive, how fast and how secure is it? And then also where are the developers looking to move? And we're seeing a lot of developers. SEI is a good example. Right. A lot of old ETH developers are moving over to SEI because the program language is very similar except it's as fast as swe. Right. So I mean that's just a good example. Injective, you brought that up earlier. You know, it's another protocol that is getting a lot of hard looks from developers and people moving on and they're building cool things. So those are projects that I think are going to have a lot of value in the future. So you know, there's today, there's tomorrow and then there's further in the future. And that's how I like to program out our product slate based on those factors. You can't just do a whole bunch of products that were great yesterday, right. Or else you're going to lose tomorrow.
- [33:23]
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- [33:53]
Brendan
So let's say that some of these ETFs get approved by the end of the year. Do you have any kind of estimates for what these inflows could look like into some of these different altcoin ETFs in terms of like USD.
- [34:09]
Stephen McClurg
Yeah, I mean look, I think, I think XRP is probably going to be the, out of the next batch that comes, it's probably going to be the largest. I think XRP does probably three times what Solana does. That's not really very widespread opinion but the reality is is they're deep in the financial system and they're focused on building technology for financial Rails. So if you're looking at financial people that are, that are, that are investing in the various ETFs, they're going to understand XRP before they understand soul. So I, I think it will.
- [34:46]
Bryce
We talk a lot of crap on XRP here admittedly and I, I, it's, it's good to get the, the bull case for xrp if you wouldn't mind continuing to, to lay it out for us.
- [34:57]
Stephen McClurg
Yeah, no, absolutely. No. I, I've, I've talked a lot of crap about XRP as well. But what I'm, what I'm specifically looking at is it is a, it, it is a chain that is, you know, that they are actively designing for financial Rails. They're building stable coins on top of it. They're building, you know, even, even if you look at where the company Ripple is going, which you know, just like consensus it supports the network. I mean they're, they're buying up a lot of companies in various aspects of financial markets so they, they, they truly are quietly building this, you know, these, these Rails for finance that I don't think anybody else is going to be able to touch. And everybody knows about it.
- [35:41]
Bryce
Yeah, it's interesting because like I've always like thought like okay, like Ripple, like the, like to use the XRP ledger or whatever to use Ripple's technology doesn't really even require the XRP token. And so I think everybody was like oh, all the value is going to kind of percolate up to equity holders and not really long term at the, at the crypto layer of xrp. I mean obviously there's hundreds of billions of market cap there in XRP now. And so it's kind of like a fool's errand to say oh, it could never be valuable because it clearly has market value. But I guess so I, I'm get, I guess yeah, we don't need to like go into like a whole diatribe about like you know, XRP and stuff. But it is interesting when there are you know, equity companies out There that also have a token. And like the founder I, you know, Brennan I think was showing on chain, you know, Mr. Chris Larson and and is selling, you know, hundreds of millions of dollars of this into the open market over time. And you know, it just if, if XRP doubles or triples, like it's almost at a trillion dollar market cap and it just seems like that's just very constraining. And so when we kind of take a look at like the investable landscape out there, it's like you know, pengu at a 2 billion dollar market cap with lots of upside potential. You know, why are you gonna, you know, opportunity cost is everything's in market. So why are you gonna like be in something that like if it triples, it's gonna be at a trillion dollar value. So that's just when we say we talk crap on it. Like not like we don't like the, the, the guys and the idea and all that stuff, but just from a day to day investment opportunity that we kind of think about but we could, we could kind of move on. Unless Brandon had another thought on, on that.
- [37:18]
Brendan
Well, I did have a thought, but it kind of stems off what we were talking about. Like what do investors care about? Because you know, if we look at this, I think that there's a pretty different investment thesis for like a couple of these different tokens. If you look at Pangu, if you look at xrp, if you look at like Solana or Sui or Hbar, like I think that they stem and not only like their mission and what they do, but also like where they thrive. Like some have really high developer activity and user activity and then others have a really strong just like retail community behind them. Like you look behind XRP and the XRP army is like one of the fiercest forces to ever go up against and they have this giant XRP army and then you look at Penguin and it's kind of like bridging the gap here between meme coins. And like you said ip and you know, even one of my buddies from my hometown is like hey, we just had a Dave and Busters open up and there's a pudgy penguins thing in side of it and it was so fun to play. But you look at this and then you have like ip, you have retail community, you have actual developer and user activity. What do investors who are looking to put money into these ETFs, what do they care about the most?
- [38:34]
Stephen McClurg
Yeah, look, I mean, you know when it, when it comes to say financial advisors, they, they're going to look back and they're going to say okay, how long has this thing been around? What's the returns? What have the returns been? Is there an active community? You know, they're going to start going through this long, long due diligence process and I think something like SOL or XRP is going to be looked at more like an Apple or a Microsoft. Whereas Pingu, which, you know, again I'm a huge believer and I see the upside just like you do Given, given you know, the size of its market cap, it's still a micro cap slash pre IPO company. Right. So there's also a lot of risk as well. So like you know, financial advisor is not going to necessarily get behind a Pingu token because of its, its short history and its size. Whereas you know, they, they typically like to come in at the later stages. I mean that's, that's just really, really what it is. They're not going to take a risk with their, with their clients money. But the retail audience, which is much smaller when it comes to, you know, dollars that they spend, is going to look at that and is going to take bigger risk on things like Penguin.
- [39:46]
Bryce
And, and there's different, you know, classifications I would say of you know, investors definitely like yeah, like some of the financial advisors wouldn't but there's plenty of hedge funds that are out there that would certainly look to, to you know, either make a market in Pengu or just outright be long or short it. So yeah, it is super, super interesting and I think these products are just gonna overall, you know, enhance liquidity and just be great for, for the crypto market. But I kind of wanted to zoom out high level just and get your thoughts on, on this new meta dats. Right. And we've kind of digital asset treasury companies, people might know them as like corporate treasury companies. And like we've talked a little bit tangentially around it during this episode, but I wanted to kind of dive in and particularly on this point Dats versus ETFs because many, this is like kind of the hot discussion is like well are we going to buy the ETF or are we going to buy, you know, the Bitcoin ETF for example or are we going to buy Micro Strategy? And that's like kind of the, the classic example. And then Micro Strategy says well we're like levered Bitcoin and so we have operating opportunities to, to go and acquire more. And you know, you know they have a lot of like flexibility and the ETF is just like it's just a static structure. Where does, you know, A, what do you make of the DAT boom and is it sustainable? Maybe And B, how does they, how, how should investors broadly think about them in their portfolio like compared to just an etf?
- [41:17]
Stephen McClurg
Yeah, look, I mean I'm, I'm investing in some of these. Right. Likewise, I also am going in eyes wide open because we're in a bull market and everybody's a genius in a bull market and these things will likely continue to do well in a bull market. I don't know how well a lot of them are going to do in a bear market. So I'm, I'm cautiously optimistic. But I also, if, when I see the change from bull to bear market, which could happen in October, could happen in December, could happen at any time, but when it looks like that's going to change, I'm, I'm not owning a single one of these.
- [41:58]
Bryce
Yeah, and it makes sense. It's, you know, I think in, in a bull market, like if you're getting, you know, levered beta or whatever, like really, really, really long crypto, like it's going to look and, and feel really good in a bull market. But on the downside, leverage works both ways. Yeah, right. It's like a double edged sword, 2x leverage.
- [42:16]
Stephen McClurg
You're getting twice the returns in a bull market and twice the loss in a bear market. So yeah, it also depends on how these are managed and how they're structured. I think there's a lot that are going to be just fine if all they're doing is holding a certain cryptocurrency in their treasury as a asset. Of course its asset value will go down in a bear market, but if it's one of these, I mean I've been pitched some there where it's like, yeah, we're going to take Bitcoin, but we're going to, we're gonna lend it out and we're gonna, or we're gonna lever it up and get extra returns off of it. I'm like, yeah, that, that works really well for, for Celsius, for ftx, it's not going to be a great look.
- [43:00]
Bryce
Yeah, it's, it's a tough game to play, you know, and I think the ETF game, you know, not to take anything away from it, it's, it's a more straightforward game. Right. Like with an etf, you know exactly what you're getting. You know, it's, it's this security one for one. Right. If you have, you know, one share of this Bitcoin etf, it's worth, you know, X amount of bitcoin and it's a very straightforward thing. When you introduce maybe some of this, the operational companies to it, it just confuses things a little bit more and yeah, great on the way up and potentially damaging on the way down. But, and again, kind of to continue like the zoom out from, from where we're at in the market, like there's all these new metas, there's all, you know, a lot of money coming in with the ETFs and stuff. But, but what's really driving kind of crypto market prices. And, and this is kind of like just in, in wrap up. In summary of the discussion we've had today. There's, there's lots of capital flows coming in, but what really is driving it? Is it like these inflation fears that Larry Fink, he'll go on TV and say Bitcoin could really replace the dollar now based on the debt fears and the inflation fears associated with it. Or is it kind of like on the other side sort of, you know, the, the, you know, the tech people saying. Or is it everything like what. Why are people coming into crypto so, so greatly right now?
- [44:18]
Stephen McClurg
Yeah, I mean, look, I've used Bitcoin as my savings vehicle for the last 10 years and I don't, I don't even really own anything in the bond market anymore. So Bitcoin is my savings, you know, just, just plain and simple. It'll go up, it'll go down, but you know, if, if you have a long enough time horizon, you know, and of course I'm not blind either. You know, I could, you know, if I see something that could overtake Bitcoin. A lot of people think that Bitcoin is the end all, greatest currency of all time. And, and today it is, tomorrow it may not be. So I'm trying to be aware of the fact that something could, could change that. But until then, it is my savings account. But what's really driving prices right now is flows into the ETFs. And as these ETFs are out there longer and have more of a track record, they will attract more capital and more, you know, more permanent capital, particularly the Bitcoin ETFs and the ETH ETFs in the future. Some of the other ones, the treasury companies I think are, it's more of a short window of flows coming in. It's the same hedge funds over and over again that are investing in these. They're driving the price up, they're selling out really quickly and they're moving to the next one. But the price is maintaining because there's people that are, that are buying it on the back end that isn't sustainable. So in the long run, ETF is going to be the preferred vehicle. In the short run, these treasury companies are, are definitely going to do well. But again, in a bear market, I think they lose more money than, than what an ETF will.
- [46:06]
Bryce
Yeah, no, makes perfect sense. Well, Stephen, I wish that we could, you know, kind of go all day. I kind of have a last question. It's something that we kind of like to, to pose to people if we can. And it's just over. You know, you've been in the market a long time and I'm just curious, like, I don't want to say price targets for bitcoin or anything like that, but, but how, how big could this market get? Just illustrate for us. You know, somebody told me once that, you know, asked, you know, how big could this market get? It was, well, the Internet bubble, adjusted for inflation at its peak would be $50 trillion in today's terms. And so the, the bitcoin bubble, you know, could be greater than 50 trillion. And I was like, wow, that's, that's crazy. And at the time it was like, well under a trillion dollar market cap. And so do you have any, like, frameworks for thinking about how high this market could go? Some people say, you know, it could subsume the market cap of gold. Like, how do you kind of parallel this in your mind and then we'll let you go.
- [47:01]
Stephen McClurg
The way that I think about the price of bitcoin, by the way, I don't think bitcoin's in a bubble at all right now. I actually think it's underpriced. But the price of bitcoin, the way that I see it, the two most important inputs are, number one, adoption, and we're most getting close to the top of that adoption curve. So that's why you have prices going from basically a penny to a hundred thousand dollars. That's your adoption curve. The second input, and this is the one that's more valuable right now, is now that we're getting close to the.
- [47:31]
Bryce
Top of the adoption curve, meaning most people have already. Does that mean most people have already adopted bitcoin?
- [47:37]
Stephen McClurg
Well, most capital has. Oh, got it right. So I don't think it's, it hasn't been adopted by a ton of people, but as more and more people come in to adopt it, it's going to be people with, with smaller wallets. Right. A lot of the larger wallets already have. So you're talking about, you know, a few, a few hundred bucks per person, you know, so, so that's where we're, that's where we're approaching, you know, we're in the capital market system. You're going to continue to get adoption through the capital market system. But, but, but individual adoption isn't going to drive the price up a whole lot because there's not a large share of wallet coming in. But where we're at today is as we're ending our adoption curve from a dollar perspective, we're more into the, you know, one bitcoin's worth, one bitcoin argument that supply isn't increasing except for what's being released by the network through mining. So it really has more to do with what everybody else is doing. So global monetary supply. So that's the major metric that I look at is global M2. And based on that, Bitcoin should be at about 140, 150. And once it hits there, it will likely drift upwards with, with global M2. Of course, more adoption will increase the price some, but I think that, you know, law of large numbers isn't going to be a large percentage there. So it's really, it's really going to follow how much, how much money global economies are willing to print.
- [49:13]
Bryce
Hey, it's a tale as old as time. It's, it's really what got me into crypto in the very, very, very, very beginning. That very first presentation, I was like, wow. I, you know, at the time, you know, just graduating college, I was like, man, I didn't even know. We weren't even on the gold standard anymore. Like, who, who, who's hiding all this information from me? And then the, you go down the rabbit hole and you're like, they just print money backed by. Wait, what? By other debt. So we have more debt based on more debt. Like, when does this ever end? Like, how do you opt out? And I think you're really right. I mean it's. Once you get to this sort of crit, I feel like we're getting to critical mass. Like for me, that 100k was critical mass, where it's like that chain reaction gets too big to fail. Those are very dangerous words. But like, it just, you know, it's, it's just too big to like stop the momentum at least. And so we, it feels like we're getting to critical mass. 100k was a big, you know, a big dog to beat. And once we get to 150, like you said, it's like if we don't have resistance there, well, why is it going to show up at 175 or 200? It's probably just going to keep, you know, eating away, slowly grinding higher because it doesn't seem like the central banks are interested in slowing down the issuance of new paper. And it doesn't even seem like, you know, that we could go down a whole another rabbit hole. Maybe we'll have you back on again to talk about some, some interesting dynamics that are going on. But like, even with State, we didn't even get to talk about stablecoins. But like, you know, I, I think the writing is on the wall that we're about to issue a boatload more debt because they're praising stablecoins and fast tracking stable coins. And the whole idea is like they could hold, you know, $4 trillion worth of U.S. bonds. And so, you know, it's like they're, they're trying to continue to issue more and more debt. The stable coins are going to be the buyers of that debt. They're going to export it to different countries. It's going to be a whole, a whole new cycle, a whole new liquidity cycle. It's going to be awesome. I'm going to be here for it. Brendan, you'll be here for it. All the Crypto 101 listeners will be here for that. Hopefully. Hopefully. Stephen, all of the altcoin ETFs that you have filed for, by the, by the time we speak next, we'll all be active in trading. We really appreciate your time. It's a great period in the market. Bull market vibes are high.
- [51:24]
Stephen McClurg
We.
- [51:24]
Bryce
Where can people follow along with you the journey for Canary Capital and some of the stuff if we want to get invested?
- [51:32]
Stephen McClurg
Yeah, look, probably the easiest place for me is Twitter. I don't post a whole lot, but sometimes I do, so it's even McClurg and then of course, Canary, you know, Canary Capital is our website so you can find out a lot of information there.
- [51:48]
Bryce
Awesome. Well, Stephen, thank you so much for joining us here at the Crypto 101 podcast. And for everybody at home listening, thank you for joining us. And we'll be back same time, same place next week with some more great guests. Take care.
- [52:12]
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