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- [00:00]
Ryan Reynolds
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- [00:37]
Host
Let'S welcome in our next guest for this special edition of Markets Daily, 21 shares, US head of US business. Sorry, Federico Brocade joins us now. Hello.
- [00:47]
Federico Brokati
Hi. Nice to be with you both.
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Host
Nice to have you here. And he's looking for an argument. So I apologize.
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Co-Host
Let's get into it.
- [00:54]
Host
All right. Let's just talk about what's going on in the markets. This morning on MARKETS Daily, we like to talk about the markets of the day. Last I checked, bitcoin was at around $107,000, kind of remaining steady amongst all of the geopolitical tensions we've been experiencing over the past month or so. Talk to me about how you're looking at bitcoin.
- [01:14]
Federico Brokati
Yeah, look to me, this is a sign of the tremendous maturity that we're seeing from bitcoin in the market today. We've been talking about bitcoin as this macro kind of uncorrelated asset for the last five years, let's call it. And it's finally kind of maturing and happening right before our very eyes. You know, typically in the past when we've looked at bitcoin's price performance around some of these geopolitical events, the first few days, it's called the three to seven day window, tends to show a lot of downward pressure on bitcoin prices as investors are fleeing away from risk on assets. But recently what we've seen is actually bitcoin staying steady in that 100, 110 range. And I think there's a few things that we can attribute to that. The first one is the institutional buyers are coming into the market for the first time. And these are buy and hold investors that are taking up as much of the liquidity that they can from bitcoin markets and not trading as actively around some of these events. The other thing we're seeing, you know, is a lot of support from Washington, D.C. and even if it's Regulatory support for crypto markets broadly. And it's not necessarily just specific to Bitcoin. That certainly trickles into investors confidence in the asset, which is definitely the flagship product, if you will, from a digital asset perspective.
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Co-Host
Today I'm a little surprised. I'm going to try to get an argument started supporting this can be mild, that usually we've seen inflows now several days in a row, mostly in bitcoin, mostly in the United States. But in that trading rate, that trading range, except for Sunday, has been 50 straight days of a 10% range. Yeah, there's not a lot of momentum to attach yourself to with Bitcoin's price. I'm a little surprised that there's that much inflows. Is it, as you say, new and new money coming in or is it Arabs versus futures or is it money to support options trading? Where do you think that, where do you think those ETF holders are stashing these products?
- [02:58]
Federico Brokati
Yeah, no, it's a great question and actually one of the questions that I love speaking about the most. If we look at Bitcoin ETF flows from the US alone this year, just year to date numbers, we're somewhere between 12 to 13 billion in net new assets that have come into the market. If you add to that what we saw in 2024, we're almost reaching $50 billion of organic flows coming into Bitcoin. And these ETFs, all they do is buy the underlying asset. So this is directly impacting the number of investors that are participating in this market today. To us this is a sign. Yes, there hasn't been maybe over the last 30 days this tremendous upswing upwards from the 100k price level. But if you zoom out, Bitcoin is still returning double digit growth on an annual basis or on a year to date basis. And when you compare that to other flagship risk on indices, whether it's the S&P 500 or a NASDAQ index, this is still far above anything we're seeing in the rest of risk assets today.
- [03:53]
Host
Andy, that's an interesting point you make. I mean, I'm also a little surprised, but for a different reason. You know, a lot of the headlines are we can start an argument, I think that more and more corporate treasuries, yes, are, are coming to fruition. People are buying bitcoin. Better Planet just surpassed Tesla as the fifth largest corporate holder of Bitcoin. And yet we see the price remain.
- [04:17]
Co-Host
That's right. It hasn't, it hasn't spurred a price, it hasn't spurred a price drive, there just hasn't been momentum to crack through that all time high so far. I do appreciate the point though that even staying pat and holding that range for such a long period of time, there had to be buyers, not just sellers. Right. So every time you see a price go up from 102 to 107 some something's been behind that. So we'll see how much longer this range can hold. You have a lot of filings out there. We know you can't talk about them. The SEC is expected to respond some of them as early as next week. Right. Where who will be the first owners of these new ETFs and in some of the other names that you file. This is a almost a different asset class than Bitcoin. Right. Where do you expect the first few major holders to be?
- [05:05]
Federico Brokati
Yeah, it's a great question and I think at 21 shares we have a little bit of hindsight benefit here based on our European business. So in Europe we have over 45 different ETFs tracking over 25 single assets. And we've been able to see how adoption shifts from the moment the product is launched all the way to, let's call it two, three years down the road. Typically in our hypothesis for the US market going forward will be first time buyers or early buyers of these products will be crypto native or crypto adjacent individuals that have assets inside of a brokerage account, a tax advantage account, and they actually want to continue contributing parts of their portfolio to crypto and ETFs happen to be a fantastic way to do that in a cost effective and secure way. Over time, as you continue educating the market about the underlying assets and the value propositions of each project, that's when you're going to see these new joiners or these newcomers to the market, whether they're advisors, whether they're RIAs or they're individual investors that might not be as crypto familiar as others. And that's really where you know, having a strong story to tell together with the ETF is a really effective way to bring capital. But you do need to have that underlying narrative around what the asset is doing, what the use cases are and what the ultimate value proposition is for a portfolio.
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Host
When do you anticipate those newcomers to come and what's going to be the catalyzing moment that brings them in if they are still sitting on the side the of sidelines?
- [06:26]
Federico Brokati
Yeah, I mean look, I'll pick Bitcoin as an example of what we've seen in the US and what's bringing in newcomers now? The first year of flows for Bitcoin was really all driven by retail investors in the US what we've been seeing this year now, since January onwards, is really a big massive pickup in advisors across the country that allocate assets on behalf of their own investors. And these are institutions that typically act as fiduciaries. They need to perform lengthy due diligence processes on these products. And the fact that we're seeing this uncorrelated, or let's call it less correlated returns for Bitcoin versus other risk assets is certainly that catalyst that you mentioned that is bringing more professional investors into the market. Today.
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Co-Host
Market observers are going to be watching this new stampede of new products hit. Presuming that we get approval from the SEC and successful launches. What should people look at? They'll be indicated with information about inflows, but should they be looking at volume? Should they be looking at impact on price? What kind of things are going to lead people to believe that certain or all of this new class of digital asset ETFs is successful right out of the gate?
- [07:30]
Federico Brokati
Yeah, look, I think oftentimes people use flows in the ETFs as a bellwether for how successful these products are. The reality is that ETFs typically take three to five years to scale to a meaningful position. If you look back in history at the first ETFs are ever launched, you know, SPX or Spy rather was the original ETF and that took two decades to take off.
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Host
Right.
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Federico Brokati
Obviously time timelines are compressed. Now ETFs are the investment vehicle of choice. So typically what we look at from an issuer perspective is what are the flows, what are the volumes? What is the trading activity in these products look like? Is there a lot of client activity or is there more buy and hold long termism in these products? And ultimately based on market caps for each asset, we'll judge the success based on flows.
- [08:12]
Host
I want to talk about this letter that you joined Vaneck and Canary Capital in sending to the sec. It is calling for the reinstatement of first to file principle for ETF approvals. As we saw with the Bitcoin and ETFs, a group of ETFs were approved at the same time. Talk to me about what prompted the letter and what a first to file principle would mean for people who are purchasing ETFs.
- [08:35]
Federico Brokati
No, it's a great question and it's something that we're definitely very passionate about. At 21 shares. You know, when it comes to first of all principles in the ETF industry here in the US we believe this is a large reason that we've seen so much innovation from a product perspective in the US market. Issuers that come up with new ideas, with new creative ideas and are able to put them in clients portfolios in a really meaningful and impactful way have been rewarded by being the first to file and having a first mover advantage if you will. Obviously with the Bitcoin ETFs and with the Ethereum ETFs, the SEC was challenged with a first of its kind moment, right, where all these different filers or issuers wanted to come to market with a brand new product that really hadn't been seen in the market up until that point. So I think they took a logical approach which was to batch all of the issuers together at once. And now that we are in a more settled state, let's call it from a, from a market perspective, we want to see that first of all principle come back because we believe it's going to spur more innovation, not just from firms like 21Shares, but from all of the industry participants and ultimately the people that benefit the most are, and investors who are able to take advantage of some of that innovation.
- [09:40]
Co-Host
Do we, do you think that as the ETFs come out and you have broader, I guess, ownership base and you have some of the actual physical assets locked up in, you know, in trust for the ETFs that volatility would continue to come down in some of the alternative names as it has for Bitcoin.
- [09:56]
Federico Brokati
Absolutely, absolutely. You know, to restate some of the flow numbers that we've seen. 50 billion inflows into the ETFs alone. Those are primarily buy and hold investors.
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Co-Host
Right side of the select 5, 6% of all Bitcoin is held in ETF trustees.
- [10:11]
Federico Brokati
And then you add the corporate treasuries that are adding Bitcoin to their balance sheet. That's another right to 3%. And as that grows and then you add governments and sovereigns on top of that and all of these new buying bases that are actually long term investors, we're expecting not only to pass the all time high numbers of long term holders of Bitcoin, but to actually reach the very top of that scale.
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Host
Federico, thanks so much for joining us here at the desk. We hope you enjoy the rest of your day.
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Federico Brokati
Thank you. Thanks for having me.
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Co-Host
Nice to see you.
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Federico Brokati
You too.
- [10:38]
Host
That was 21 shares. Head of US business Federico Brokati.