← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin & Ethereum Treasury Stocks Rally: How Long Before It Collapses?
00:49:54
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- [00:02]
Jeff Park
That's dope. Let's go.
- [00:17]
Andrew Parrish
Good morning, everyone, and welcome to Wolf of all Streets. I'm Andrew Parrish with Arch Public and I've got Jeff park from Bitwise. We are going to talk all things bitcoin treasury companies, as well as some Ethereum treasury companies as well. Jeff and I were talking offline a few minutes ago and it's as if a week of announcements in the crypto space these days is about a year's worth of announcements from a couple years ago. It's extraordinary the things that are happening in the space. We're going to try and get to a bunch of them here today. So thanks for joining us, Jeff, thanks for coming on today. Appreciate the time.
- [00:56]
Jeff Park
Thanks for having me. Love to be part of the show, Andrew.
- [00:58]
Andrew Parrish
Yeah, absolutely. You know, I wanted to start out with, you know, Tom Lee made an announcement last week associated with and people were surprised. Tom's been a big, big bitcoin bull for a long time and oftentimes when you see Tom, you know, his crypto discussion has most to do with bitcoin. So him going all in on an Ethereum treasury company raised some eyebrows. Wanted you to talk a little bit about the, you know, let's just call the architecture and maybe mathematics behind an Ethereum treasury company and in context with some of the other treasury company announcements that we continue to see, you know, maybe get into Tom's head a little bit and where he thinks things are headed. Deconstruct it a bit for us if you can.
- [01:51]
Jeff Park
Yeah, absolutely. First of all, I'm super pumped that Tom is going to be one of the faces to represent Ethereum. Several months ago I actually went down the exercise of listen out who I thought would be great spokesperson for an Ethereum treasury play. And Tom certainly was actually not on my list for all the reasons you mentioned. To me, he always seemed like a bitcoin bull. But Tom's the hero we need in Ethereum. And the reason I say this is because Ethereum's complex and because it's so complex, it's very hard to carry the story of its value proposition in a compelling way that can be easily understood by what is now the newest class of investors entering the scene, the institutional folks. And, and I do think Tom has that rare energy of bridging crypto native understanding for what the ultimate movement is about, which is this unapologetic resistance towards intermediation and exorbitant privileges that are unduly pressured by those in power, those kinds of things. But you also understand stablecoin and Rails and all the network provisioning to imagine those conversations in a fluent manner. And so I'm excited for tomorrow. I think there's a lot to be done frankly for Ethereum. When in the past people talked about why there hasn't been an Ethereum treasury play, right? Because if you think about it, Bitcoin was first and then Solana was the next one actually. And it kind of skipped Ethereum for a while. And there's other altcoins in the mix, but Ethereum was a little late relative to its stature as the second largest crypto asset. And I, and I joke, it's because Ethereum at some level is like ultimately like anti financial engineering at some level, right? The ethos, the philosophy of its founding vision is almost not to participate in the frenzy of those kinds of mania. But I think the time has come and people have reacted very well to it. So why, why have people reacted well to it? I think it's, it's pretty straightforward. Ethereum is a useful asset, right? I always make the distinction that Bitcoin and Ethereum are really fundamentally different because Bitcoin is not really like a useful asset yet, right? Bitcoin's useful because it stores value, but in terms of productivity gains that it unlocks in people's lives or actual utilities is a little bit muted for now. And Ethereum is the other side of that coin, which is actually meant to be useful, right? This is why it's a proof of stake token in itself. And that's why there's actually active management, management yield that can be generated by being a smart steward of that asset. So you almost would have to imagine a more perfect permanent capital vehicle to own something like Ethereum, which is a living, breathing technology that's constantly changing, might have to live outside the scope of a very highly regulated Rick fund that can't do all the things for how quickly technology is changing all the time. So for example, we still don't have staking in ethics. We will, but the narrative last year already moved on where there's concepts like restaking, right, with eigenlayer and there's other constructs of income generation that's always going to move ahead in technology and regulation just cannot catch up quickly to how crypto moves. So a Treasury company as an operating entity can harness a lot of these things in my opinion, maybe a little bit more efficiently, a little bit more expediously. And those things can be beneficial long term for how investors choose to express their investment in Ethereum, which is, hey, it's not just I can like appreciate in price alone, but is someone doing something with that to generate yield in network provisioning, that I also get a total return exposure to that construct. And I think that's a meaningful unlock for a Treasury play for Ethereum that that's fundamentally different than Bitcoin.
- [05:42]
Andrew Parrish
Yeah, there's, there's, you know, the concept of, you know, technology being a fast moving river.
- [05:52]
Scott
Right.
- [05:52]
Andrew Parrish
Like you can, you can throw the world's largest boulder into that river, but that river is not going to stop flowing. It's going to find its way around that river and to your point, staking and then restaking, finding its way around the regulatory issues associated with it, I think is, you know, people don't think about that, people don't realize that that's what's happening in the space. To that end, you know, you guys at Bitwise are on the front lines, right? Not only with your products but with the conversations you have not only within the industry but, but across Tradfi. So my question is, in terms of the scale of, of Ethereum and let's call it inflows, do you think there's going to be a significant uptick associated with staking becoming part of the conversation and the regulatory rails being adjusted and then there being a, you know, sort of an opening of the floodgate, so to speak, that says, okay, now we're going to allocate more to this particular asset. Do you think that happens?
- [06:54]
Jeff Park
Yes. 100%. 100%. And I should also mention one of the reasons Bitwise as a firm last year made the strategic acquisition of a test and to build Bitwise on chain solutions is precisely for this moment, which is, I think we always me up Bitwise that while crypto feels like a financial asset management service at some level, the reality is we're dealing with technology and you actually have to be an expert in navigating the hybrid combination of both to be a good fiduciary and steward of investor capital. So we knew staking would be a big component of that because that is essentially why people are using crypto. Right. And I think the SEC has also made it very clear the opportunity to generate revenue via network provisioning and running your own validator clients and actually becoming a validator operator. All those things are distinct from traditional asset management services. It leans itself a little bit more towards being a software service provider and that is why ultimately that value capture through the vertical integration is really important. For example, we launched our near ETP in Europe this week. We had a bell Ringing ceremony yesterday and it had staking in it. And a bunch of industry friends reached out to us to ask, hey, who is providing the staking services for your near etp? How proud was I to be able to tell? We are like bitwise actually is running our own on chain staking and we were running our own validators. And I do believe that era has happened and it's entering where the competitive edge and how people are going to assess products will look different going forward. Bitcoin is a commoditized asset at some level because it's not meant to be used in the ways that other proof of stake tokens are. But once the utility comes in play, to me that requires discretion. It requires executive operation and skills. And those kinds of things will then make the product more proprietary to why people will trust a crypto native asset manager versus someone who may not otherwise.
- [09:03]
Andrew Parrish
So probably medium term and longing longer term staking becomes a real sort of benchmark associated with Ethereum treasury companies, right? Like, like that has to be a big part of the math. You, you think that's part of, you know, the, the long term plans associated with, with what Tom Lee is doing with that particular company. You think that's part of the process there?
- [09:27]
Jeff Park
Yes, I absolutely do. I absolutely do. Because this construct of why sometimes bitcoin yield is controversial within the world of microstrategy and meta planet, et cetera is because so far most of that yield financialization has come from the liability side, right? We're talking about how do you get more Bitcoin per share by taking advantage of the cheap cost of capital, leveraging its high volatility. And that is a useful measure of yield, but it's not actually the intuitive way people measure yield. Right? When people think about yield, they're actually asking, hey, how is my asset being productive to give me additional assets?
- [10:05]
Andrew Parrish
Right?
- [10:06]
Jeff Park
And that's what Ethereum is unlocking, which is if you're staking, then you're actually participating in the consensus mechanism to be rewarded. And that does achieve native and organic yield to the asset which then you can imagine has cash flow into perpetuity that you can then discount and imagine that deserves a premium to the multiple of the price of today. And that I think is a much easier construct for Wall street investors to understand how you pay for forward value today in that discounted cash flow model.
- [10:38]
Andrew Parrish
So moving off of Ethereum and back to Bitcoin for a second, because this is, you know, what we're about to talk about is something that I can't stop talking about that. I find fascinating, and that's the truth, that the Bitcoin ETFs have been the most successful launch of a, of essentially a sector ever. The pace and speed and growth and all of those things are completely unprecedented. So you add to that Bitcoin treasury companies, you add to that Bitcoin balance sheet companies, you add to that all the things happening, options, futures, all of that stuff. Where are we headed in terms of the bitcoin ecosystem? And talk specifically about Wall street, because you and I know Wall street loves volatility, the ability to essentially farm volatility, the ability to use volatility and the ability to take a new asset. And there's different pricing now, a new asset that has performed the way that Bitcoin has. You know, Wall street is a little bit of this.
- [11:42]
Scott
Right?
- [11:43]
Andrew Parrish
So where are we at in the timeline of this?
- [11:47]
Scott
Right?
- [11:47]
Andrew Parrish
Where are we at in terms of, you know, Wall street conversations? In terms of where are we headed with, you know, the creation of product? And what does that look like, you know, 12 months, 18 months, 24 months out.
- [12:03]
Jeff Park
Yeah, great question, great question. This moment where every day you wake up and there's a new announcement of a company buying Bitcoin on their balance sheet, therefore becoming a Bitcoin treasury company and finding mimetic distribution for free really reminds me of the same rushed energy of how unstoppable retail investors were 10 years ago when they were trying to buy bitcoin. Which is to say, at some level the opportunity is so great that everyone just does what is in their best self interest. And maybe a year ago it was somewhat controversial to imagine GameStop doing this. And of course Saylor has paved the way to at least make it not as controversial at the time. But now you wake up and every day there's a new company. Another one got announced. Morano, I think, was announced yesterday. You may have seen the press release come out of a company called Reserve One, which is actually a new de Spac to come to market to raise a billion dollars to buy indexed crypto assets. And it's actually spearheaded by really institutional people, right? You got Jamie Leverton from Hut 8 and you got Sebastian from Coinbase. And these are not your typical kind of kids in the garage, like trying to trade on Mount Gox. These are real people. And so I think what you're seeing is there's an insatiable appetite for people understanding what the opportunity is and it's coming and you have to almost overwhelm the energy to get it all through the door in the way that it's just becoming unstoppable. And the meta here is that it's global. So once it's global, it's really not up to one jurisdiction to be able to halt it because it'll just pop up elsewhere. And capital flow is actually the most important thing in modern day finance to imagine the empowerment of a sovereign of the financial engine. So you actually are entering that world where capital is competitive at a global scale with these treasury companies. And that's why you see the success of Matte Planet, for example, where it's trading at a richer multiple to something like MicroStrategy because Japan has its own conditions of yield starvation that gives it a structural moat. And people are now deciding do I buy MicroStrategy or do I buy Metal Planet? These are American investors by the way. And so you actually can't just imagine like you're railed into your own jurisdiction. And that decision doesn't have ramification across the world. It absolutely does. So I think all of this is starting to hit reality where Wall street understands there's opportunity, as you've hinted. And so where are the opportunities coming? First of all, I think I've counted over 15 billion, it's probably higher now dollars that are coming to market in these Treas in the next few months and quarters upon SEC approval of the merger consummations. And hey, the bankers are doing really well, let me just put it that way.
- [14:51]
Andrew Parrish
Yeah, yeah, bankers are doing really well.
- [14:55]
Jeff Park
And actually, you know, I say that a little facetiously, but the truth is that there's going to be more businesses now around these opportunities too because every one of these tickers will be volatile. There's going to be an option chain associated with it, there's going to be retail investors who want exposure to it and there's going to be structured products around it. So we launched, I want to say about three weeks ago, the first Gamestop covered call strategy at Bitwise. And it's another way to get volatility harvesting while being aligned to the business of a Bitcoin treasury that also happens to be a video game retailer and Pokemon card distributor. I don't even know that that's actually like their biggest business at this point, which I find hilarious. I was walking into New Jersey at a mall and there was a huge line of people, it was like 10am and I was like, gosh, what is, what game is coming out today where there's like this line of adults like trying to get in the store And I asked one of the, one of the dads and he's with his kid and he's like, oh, we're here for like the Pokemon trading card drop. And I was like, oh my God.
- [15:57]
Andrew Parrish
Yeah, yeah, it is, it is. So it sounds ridiculous until it's no longer ridiculous, right? Like, right, like, like that's the truth of any opportunity slash trend that it sounds ridiculous until it isn't. So again, the concepts of Bitcoin or Ethereum or Solana all were ridiculous at some point, at some point on the, the pyramid of, of finance, right? All of that ridiculousness has gone away. You know, where do you find volatility? Where do you find opportunity? And if it happens to be in a line for Pokemon cards at GameStop, then, then that's where you find it, right? It's compelling to me that, you know, even four or five months ago, you know, Goldman put out a note about, hey, listen, if you want to be involved in crypto, we'll do this, this, this, this, this, this and this for you. Just call us, just get involved.
- [16:53]
Scott
Right?
- [16:54]
Andrew Parrish
And that was six months ago. You know, where are we at now? That's going to continue to happen. You know, I take a look at the scale of again, the broader Bitcoin ETF market and it's just huge, right? It's, you know, hundreds and hundreds and hundreds of thousands of Bitcoin now are essentially stationed in Bitcoin ETFs. That's going to happen across probably the entire crypto class. And I think that we find ourselves in 2026. Again, to your point about volatility, again to your point about going and finding performance, you know, we're going to have a 2x version on both sides of, with, with new ETFs, right? A 2x long, a 2x short, and it'll be Bitcoin, it'll be Ethereum, it'll, it'll be others. There will be additional versions of these ETFs that say, well, if you get 20 upside in Bitcoin, we'll lock that in and we'll, we'll protect you. The downside, one of those already exists. I forget who it is. So there's not going to be a slowdown of this asset class because the, the appetite on Wall street for new. And you and I know this, okay, so there's not been much new across Wall street for about 20 years, right? I mean, there, the IPO market almost went to, to nothing. And this is again, something that we should really talk about. The crypto IPO market, where that's headed over the next 12 months. And all that capital that's going to rush itself into the space, forget about ETF flows, forget about Bitcoin, treasury companies. We're going to have, you know, enormous amounts of inflows, whether it's exchanges or otherwise. Public companies essentially printing new currency out of thin air when they go public. Now you have equity shares that are, you know, it's new money. Talk about what that may do to the space. When we see again a continued rush of, of IPO opportunities. We've, we watched what happened with Circle. My goodness, there's so much to talk about. You know, Circle versus Coinbase, you know, where do we go? Let's start with the IPO stuff. Let's go down that road. What are your thoughts there?
- [19:20]
Jeff Park
Yeah, I think what the IPO of Circle has shown you is that crypto has really become mainstream in a pretty domineering way. So the convergence of crypto and tradfi is actually happening right in front of your eyes where the line to distinguish the businesses are just becoming less. And that's actually a good thing ultimately. Right. So when you have Coinbase and Kraken for example, saying they're going to digitize securities to let them trade on chain, and you have Robinhood essentially bringing crypto trading capabilities plus actually building their own chain on Arbitrum to provide on chain trading solutions for crypto assets and other securitized tokenization products, it just shows you that it's no longer a black and white decision when you're a Robinhood investor. You are ultimately betting on the upside of an engine that will come from tokenization now. So that's becoming normalized. And likewise with Coinbase, when they are buying Deribit and it's the largest derivatives exchange for crypto assets and that's then you're making a bet a little bit on like, is Coinbase going to build like the next big Trafigura kind of entity in the world, which is like, you know, commodities financing is a huge business and it's actually the underbelly of most of the global economy that doesn't get enough attention by the news and retail investors. But folks like you and I who have looked at these over the years through the lens of Wall street recognize like that that is a beast. Like what, what Trigura does is, is actually like so mission critical for commodities trading as a business around the world that like, without them the world would actually kind of like suffer quite, quite meaningfully. And, and now like if you accept crypto as something of a strategically equal value of a commodity and you're building the largest trading houses around those, well, that's a very valuable business. So people can start doing the math and drawing the connection. So all to say, I think that the continued IPO of crypto equities will be hugely significant for the industry. Not because people are saying I want crypto exposure, because it signals that crypto has matured to the point of integration for where it's possible to imagine revenue that is more akin to the business models that people understand. So I think that's why Circle was a big hit. People understand stablecoin at some level deeply because it's a financial product above all. And when you have the likes of Gemini and Kraken and chain analysis and others in the mix that are actually useful in the service provisioning that they've had for years, I think underwriting that is not like underwriting a crypto company anymore. These are operating companies that are building real revenue generating businesses with real clients and customers that are understandable to a model that Wall street understands. So I think it's going to continue.
- [22:17]
Andrew Parrish
Has the tokenization conversation found its way in a meaningful sense to Wall Street? Are they aware of, of where this is headed? Are they preparing for, you know, the tokenization of assets that end up trading 24 7? Where, where is that conversation right now? What are they resistant? Are they understanding, hey, this is, it's only a matter of time.
- [22:46]
Jeff Park
I think Wall street is still trying to understand tokenization from the perspective of the practical implications of their ex that might be challenged. And then on a going forward basis where new opportunities are. And really when I think about tokenizations, there's two vectors. One of them is what I would call kind of more of like a tokenized security model where you're actually becoming the uniswap of long tail assets that historically hasn't had liquidity for. So think about all the private equity funds, private credit funds, even venture capital, venture equity exposure that doesn't have a lot of liquidity beyond like the occasional secondaries market, right? If you could bring liquidity to those things in a tokenized security format, that is a pretty powerful vector. And then the other is the opposite, securitized token, which is done to say like there are ways to imagine offshore investors wanting access to American assets that historically have not been able to do so easily. Right? So for all kinds of reasons, it's really hard sometimes, if you're living in Japan, for example, to do, to buy American stocks in Korea to buy American stocks and whatnot. But crypto is really good at actually permissioning this flow in a very easy way where that doesn't have to necessarily be a border of friction. So I think there are some innovations happening right now, and this is, I think, the alpha of the moment, which is some of these crypto companies are finding clever ways to allot a certain amount of shares that otherwise would be onshore to be available for offshore investors. So what does that mean? It means you can now create parallel markets. You can create a pricing differential for those who want stocks as a jurisdiction of one versus others who might want it for another. This might sound really familiar to you because it sounds a little bit like tether, which is there is the cost of holding Treasuries that Americans demand. But we know that offshore investors have a much cheaper cost of capital in wanting to hold Treasuries. Right. For example, they don't even need to earn interest on it, and they're happy to hold it because they just want dollar exposure. That pricing differential can come to stocks. And when that comes to stocks, it's actually a big boon, I think, for American exceptionalism because it'll lower the cost of capital in some ways. Where offshore investors want to own things like Tesla and they're willing to get lower compensation than an American otherwise would because their opportunity cost is just different from where they are versus us. And that's actually, I think, long term, like very good for America.
- [25:25]
Andrew Parrish
So explain to people that are trying to figure out the difference between, let's just call it trading, quote, unquote, traditional stocks here in the United States, you know, let's call it 9:30-4.
- [25:39]
Scott
Right.
- [25:40]
Andrew Parrish
And then you have Gemini doing something where they're, you know, they're doing a different version of it and they, you know, did a bunch of announcements last week, and it's in the EU and it's a version of tokenized trading of, of, of these same assets, the same big names. What is the material difference there that people should be aware of?
- [26:02]
Jeff Park
Material difference as in, like the operational risks?
- [26:06]
Andrew Parrish
Yeah, just, you know, you're, you're talking about the difference between, you know, something that is tradable 247 versus not being tradable 24 7. Is, is there a material difference? Maybe that's the question. Is there a material difference or is there not?
- [26:21]
Jeff Park
No, I, I, I, I'm not totally sure about the value proposition of a 247 market for all like securities in the sense that liquidity is still best when There is a flywheel. And that's why even today, like most of the trading happens between 9:30 and 10:30 and most of the trading happens between 3 and 4pm it doesn't really matter that it's open from 11am to 2pm I mean, of course it does and you need it, but it's not like that's when people decide they're going to trade. Meaning liquidity begets liquidity. And there is some value to having these opens and closes because it accelerates the urgency to trade and act per day. I do think the real value proposition is that you're opening a whole new class of investors who previously couldn't access these assets before. I think that's the win. The win is there are Europeans who want to own American stocks, who can't own American stocks very easily unless they go through some roundabout ways to opening special brokerages or getting special financial advisor relationships. And if you build something on chain in a sandbox that is regulatorily blessed, then you could have those capital flow much more easily onshore.
- [27:37]
Andrew Parrish
Right, right.
- [27:38]
Jeff Park
Which is what you want, right? At the end of the day, the number one goal of the United States will always be can we become the center of the financial economy where capital continues to flow into our markets, our securities, our assets.
- [27:53]
Andrew Parrish
Yeah, yeah. It is a, it's something to really watch the, the melt. The sort of the mind meld associated with crypto exchanges becoming, you know, finance traditional financial centers and then traditional, you know, financial centers becoming, you know, quote unquote, you know, crypto friendly.
- [28:15]
Scott
Right.
- [28:16]
Andrew Parrish
The, the, what's happening there? Last week, you know, Scott didn't know this. You probably do. You know, Coinbase has 120 million customers. And I said on the show, they've got 120 million customers and JP Morgan has about 85 million customers. He's like, what, what, is that real? And he Googled it while we were on the show and he's like, holy smokes, that it's real. So talk about where that goes.
- [28:45]
Scott
Right?
- [28:46]
Andrew Parrish
So, you know, we can talk about day to day announcements, we can talk about shifts and changes in technology, but there's also a, you know, a demographic shift going on here associated with the scale of customers at Coinbase, the scale of customers at Robinhood versus take any significant regional bank, like a fifth, third or a Huntington or whatever, a pnc, whatever happens to be, they don't have as many customers as Robinhood does.
- [29:17]
Scott
Right.
- [29:18]
Andrew Parrish
So where does that shift go? And again, what does it mean for, you know, crypto folks? It's it's, it's something, right?
- [29:26]
Jeff Park
Yeah, yeah, I think. Great question. I think the most unique thing about crypto is that at the core it's a retail business. And what that means is that ultimately it's a little bit of a distribution business where the value of the customer relationship you hold is incredibly powerful. And that's actually not that different from like, for example, how Apple has wanted to enter the financial arena through partnerships. Right. Because Apple actually doesn't want to become a bank. Right. There's a lot of issues and challenges from a regulatory perspective of the cost of capital to become a bank. So Apple's saying, hey, I'm not going to be the bank, but I know my customers are amazing and they love me and I can give you the Goldman branded credit card or I can do the things with Wall street and financial services to build distribution engines where I own the customer relationship and therefore I own the pricing power. I think crypto is unique because while at the core it's a financial service, it's really actually a distribution business too, just like Apple. And so for companies like Coinbase, I'm very bullish on their stature in this country and beyond because it's a gateway to which there is a trusted relationship that is extremely captive. So, you know, there are times people say, like, why would people trade on Coinbase at the fees they charge to retail versus other cheaper providers? You know, you know, Coinbase is expensive and look, people pay it because they like the distribution relationship. And you know, at the same time, like, why did Circle and Coinbase achieve on the consortium where Coinbase achieves like half of the distribution rate for onboarding usdc? Because people use Coinbase to get onboarded and Circle is right there being popped up as the choice of your deposits and that's worth something. So I think the future of most of these crypto businesses will have to be really focused on distribution by engaging the clients and customers at a really, really direct level. I would say it's even similar for us at bitwise, which is, you know, we're a little unique in the sense that we have a social presence amongst the crypto and financial advisor community where we're very available, active and we're engaged. You know, you don't really get to see that across some of the other ETF issuers, especially, like, in the traditional space. Right. Think about like, for example, like how often you've thought about like, I don't know, calling up like, like, like an ETF issuer that, like, is peripherally in this space, but you don't even know who to talk to. Like who's the person that I would reach out. I don't know. Think about Calamus, for example. They're building structured products notes, they're building it on bitcoin. I think it's super exciting. Who's the person at Calamus you want to talk to?
- [32:24]
Andrew Parrish
Nobody knows.
- [32:24]
Jeff Park
You don't know. But, but, but the thing is it's actually really important to know who that person is because crypto is a direct retail customer facing business. That's ultimately ethos of how we think about the certainty mediation. Right. And so I think that will continue to be evergreen and true.
- [32:41]
Andrew Parrish
Yeah, it is. Let's just say I'm not bullish on bank branch builders. You know, the space, the traditional banking space. Even though JP Morgan just erected a sizable structure in New York City that has diamonds all over it, surprisingly it, it remains something that in three to five years, where are we at, right? In three to five years, are we in a position where some sizable traditional financial organizations have purchased crypto exchanges or crypto assets and that's how the meld actually happens? Or do we find ourselves in 1997 through 2001 and it's potentially the other way around again, because equity values actually matter. I mean the reality is, you know, Coinbase's, the equity is pretty powerful stuff right now.
- [33:42]
Scott
Right.
- [33:43]
Andrew Parrish
So do we find ourselves in a place where traditional organizations surprisingly may get acquired by, you know, a, a crypto tech firm? It does it. Which one happens?
- [33:58]
Scott
Right?
- [33:58]
Andrew Parrish
I think, I think both will probably happen. You know, I've got a lot of, a lot of friends at your former firm, Morgan Stanley. There are a lot of rumors swirling around about them making some, you know, pretty significant, you know, crypto acquisition. Won't say what else I've heard but, but, but that's running around at that firm. So to that, to that end, like there's going to be some cross pollination that is that either happens organically or is this, or is somewhat forced via, via, you know, acquisition process. You know, again, just talk about that because that has to be part of the conversation that you hear from time to time, right?
- [34:41]
Jeff Park
For sure, for sure. Absolutely. And yet, you know, what I would say is financial services companies in general have a very, very poor history of acquisitions. Very, very poor. And it's actually not that hard to intuit why, which is so much of the business in themselves carry a kind of culture where it can sometimes be difficult to bridge across the various verticals that can be a part of the industry. So for example, right when Morgan Stanley acquired Smith Barney and Dean Witter in his early years, that was a very tough integration because the culture of like, you know, white shoe investment bank partnering with something that's a little bit more readily available, if you will, as like a commoditized kind of financial service is like they're different cultural brands, they're different human capital and they don't see eye to eye. And so that took a lot of work. And James Gorman deserves so much credit for how he's actually built wealth management into a powerhouse at Morgan Stanley. But that's an exceptional story, right, because we've also seen how it didn't work in many other places like Goldman for example.
- [35:57]
Andrew Parrish
Well, one could make the claim, one could make the claim that, that the Morgan Stanley Smith Barney thing finally worked because effectively the great financial crisis happened and they were forced to almost disintermediate their. That's right, their reliance on investment banking income.
- [36:15]
Scott
Right.
- [36:15]
Andrew Parrish
So that Morgan Stanley went from 8020 to, to 8020 the other way. Like, you know, they're getting the lion's share of their revenue from wealth management revenue.
- [36:26]
Jeff Park
Yeah, it was a super controversial bet at the time and it paid off handsomely. And you know, Goldman too then made a bet, right, which is they're going to build a consumer facing business. So if you remember, they had this whole thing with Marcus, they had this whole thing with their consumer financing business and they built a, they actually hired a bunch of technologists to build like a fintech platform. And we know how that story ended. It was not great. And people will attribute that to a culture problem, right? Which is like it generally is kind of a back office function within banks. And if you're trying to lead with it energy to build a front office capacity, there's a cultural clash. And so in some ways I think of crypto caught in a similar dilemma, which is crypto is a tech. Yeah, but tech is not what Wall street is known to lead with. Right. Actually it's never about the technology that unlocks value propositions on Wall street. It's the last thing on the list.
- [37:22]
Andrew Parrish
Yeah, well, just a reminder that Goldman bought United a huge IRA RIA years ago. That was a complete disaster. The transaction was the transaction and it worked out for Joe Duran.
- [37:37]
Scott
Right.
- [37:38]
Andrew Parrish
But in terms of the actual culture and it working together, it was, was a complete mess, an absolute mess. So the question then becomes, you know, how do those, how do those two industries compete?
- [37:52]
Scott
Right.
- [37:53]
Andrew Parrish
Crypto as tech, financial services as Banking, these, these, these huge behemoth organizations that have been around for some of them 200 years. Right there, there, there is a, you know, there's a, there's a competition going on and that competition is simply for customers.
- [38:10]
Scott
Right?
- [38:11]
Andrew Parrish
Like scale of customers. Again, most people in the crypto space because we're so siloed oftentimes, you know, Coinbase is Coinbase. It's just existed forever and it's the biggest, blah, blah, blah. But in reality, you know, if you, if you, if you zoom out, it is an absolute behemoth. Is an absolute behemoth that is acting like a tech company and is pressing and pressing and pressing. It's, it's, it's one of the stories that again, two years from now I want to look back at some of these conversation and say, did we think that, you know, did we think that this is where we were headed? And so it's just a part of the, the conversation in crypto that I'm really interested in because. Yeah, yeah, going that way and somehow it's going that way.
- [38:59]
Scott
Right?
- [38:59]
Andrew Parrish
There's, there's not, you know, you don't have two dozen quote unquote crypto companies pounding on the OCC's door to, to, to, to get, you know, closer and closer to banking or just banking licenses. That, that's not happening just for fun. There's a reason why it's happening, right? Because they have, even some exchanges that you've hardly ever heard of have 20 million customers, 10 million customers, 15 million customers.
- [39:26]
Scott
Right.
- [39:27]
Andrew Parrish
That's meaningful, that, that's of scale across financial services and people don't realize that.
- [39:33]
Scott
Right?
- [39:34]
Jeff Park
That's right. I think more likely what you're going to see is consolidation even amongst the traditional players. So you might have seen some time back, Boney and State street almost looked at tying together, but it was rebuffed. And I thought that was the funniest story on earth because at some level I think they're both like old giants of the space with probably a F grade on technology and they're looking at crypto and ATS's and all these custodial models popping up, companies like Securitized entering the arena and they're realizing, hey, our business might change and, and they would rather merge with each other.
- [40:11]
Andrew Parrish
Right.
- [40:12]
Jeff Park
And I think it goes back to some cultural understanding of like where that gap can be in terms of how do you protect the clients, as you said, acquire more businesses. But, but the generational trend as you've mentioned is clear. The, the, the young technology Embracing industry and consumers will win. And, and so I think there's incredible secular tailwind for companies to exist.
- [40:35]
Andrew Parrish
So making sure I unpack a little bit of insider baseball because there's about 12 people watching this podcast when, when, when Jeff says Boney. There's 12 people on this watching that know what Boney is? That's bank of New York melon. Okay. So BNY Mellon and State street are effectively the biggest custodians on the planet. They custody, you know, a lot of money, right? Trillions of dollars. So just making sure I unpack bank of New York, which traditional folks call Boney. But those two coming together would be outrageous. But that's kind of to the point about how do traditional financial companies look like? Oh, that's a smart idea because we both do the same thing. And so there wouldn't be enormous adjustments or changes, and maybe cultures would work. So you're right. Maybe there is a pathway where, you know, crypto grows and, and traditional financial, you know, models grow as well. I don't know. We'll see. We'll see how that plays out. Jeff, thanks for taking, for taking the time today. I'm gonna let you jump off. We're talking some March public stuff, but bitwise is doing some extraordinary things. Your work is fantastic. We could do four more of these and talk about other concepts that you've broached just over the past three months. Just a huge fan of your work. So thanks for taking the time. Thanks.
- [42:00]
Jeff Park
Likewise the feelings mutual. And like we said, there's a newsful every week. So by the time I'm sure we get together, the world will have shipped underneath their feet once more. So look forward to being back on. Nice to see you.
- [42:12]
Andrew Parrish
Thanks, Jeff. You bet. Yeah. So taking the time now to talk about arch public.
- [42:19]
Scott
Right.
- [42:20]
Andrew Parrish
So one of the things that, that Jeff has talked about again and again and again associated with not only crypto markets, but traditional markets is, you know, what is yield? Where does it come from? And correctly Jeff has talked about, you know, the best place to find yield is volatility.
- [42:37]
Scott
Right.
- [42:37]
Andrew Parrish
Volatility, harvesting volatility, farming, whatever kind of, you know, moniker you want to give it. Volatility is an opportunity. And the opportunity associated with volatility right now can really be found in not only crypto markets, but to some degree adjacent to crypto markets. We now have some adjacent crypto associated equities, and we'll have more of those as time goes by. But volatility is the thing and volatility is the opportunity and arch Public, our, our products, our tools, our algorithms, acts absolutely thrive and gobble up volatility on your behalf. So while we have a bunch of case studies, while we have a bunch of, let's just call them, you know, stock products that when people reach out to us, have conversations and say, hey, you guys, put out this post, you guys put out this case study. I want to get involved with your products and I want them to do what you talked about. Just, just give me that version. At the same time, our products are completely, completely user driven, right? So if you're a, you know, sort of a, a mid level trader or an expert trader and you want to grab our tools and get your hands on all the pulleys and levers and do some really cool stuff, use 11 versions of our Bitcoin yield and arbitrage products, use three versions of our Solana arbitrage product, use four versions of our new Sui product on Kraken. You have the opportunity to do that. If you want to do that and you're not an expert, well, what can you do? You can get involved with our concierge program. You can have five conversations, one conversation, 12 conversations with your concierge program team. They can dial all that stuff in with you on your behalf, and then you're benefiting in ways that are extraordinary. The reality is our tools are institutional level tools. When institutions like Goldman, institutions like Point72 institutions and hedge funds that, you know, find themselves on this channel, often talking their book, the way that they scale into or scale out of positions is algorithmically. They use tools like the tools that we offer to the public. They use those tools internally to be able to scale into positions or scale out of positions. You have access now to those tools with Arch Public and our firm. And by the way, those tools are free forever. So if you're using a smaller amount of capital or you just want to dip your toe in before you go all in, for example, with our, our concierge program, those tools are free to you. So you could be using a setup on Solana, a setup on Bitcoin, a setup on xrp, a setup on Sui with Kraken. You could be doing all of those things at the same time for free to see how our tools work, to see how our team communicates with you and serves you, and get comfortable, get comfortable with the tools. Because the truth of the matter is we just put a case study out. It's on our, our, our Twitter page from July of last year to July of this year. If you'd have Been using our stock arbitrage strategy. With bitcoin, you effectively versus buy and hold, you would have ended up with 1.5 bitcoin versus 1.2 on buy and hold. But more importantly, because of volatility farming and taking advantage of volatility, you'd have ended up with a significant amount of cash as well associated with yield.
- [46:40]
Scott
Right.
- [46:41]
Andrew Parrish
So you end up with, with, let's call it, you know, 25, 30% more Bitcoin over one year, and you ended up with almost 20% in yield associated with the strategy as well. That's 40 upside to just buy and hold. Right. So our strategies can do a plethora of things for you. It's just a question of what do you want to get accomplished? Accomplish.
- [47:05]
Scott
Right.
- [47:06]
Andrew Parrish
Do you want to accumulate more of an asset or do you want to focus on, you know what, I've got enough bitcoin right now. I'm satisfied with my stack, but it just sits there. I want it to do something for me. Well, we can dial in our bitcoin yield algorithm for you, have conversations with us. The bottom line is institutional level tools at the crypto level are still in their infancy. Institutional level algorithmic tools absolutely exist in traditional finance in a massive way. To give you an example of that, Chicago Board of Trade and their trading floors no longer exist. Literally, they no longer exist. So the building that they were housed in and the floor that was in movies with people shouting out and a bunch of different boards, that is a ghost town down. Nobody shows up anymore in the city of Chicago, doesn't know what to do with the space. It's all done algorithmically. Anybody that's scaling into position, it's done algorithmically. Scaling out of a position, done algorithmically. Go look at, you know, CNBC right here and what it looks like on the floor of the New York stock exchange today versus 20 years ago. There were 5,000 people there yelling and screaming at each other 20 years ago. There's nobody doing that there.
- [48:28]
Jeff Park
Now.
- [48:28]
Andrew Parrish
It's all done algorithmically. That technology has not made its, its way to crypto in a meaningful way. It's here now with Arch Public. So talk to us, have a conversation about it and, you know, see how we can do a great job both servicing you and putting you in a great position. That's all we've got for today. Great conversation with Jeff. Fantastic conversation with Jeff. Some serious alpha involved there with both Bitcoin and Ethereum, treasury companies, crypto IPOs that are coming to market, volatility farming, you know, gamestop being a, a, a bastion of, of Pokemon card collecting now, all things that are extraordinary, the changes and adjustments and new technology that continues to happen in the world of finance because of crypto is something to watch and behold. And Jeff and Bitwise are at the cutting edge of it. So thanks for spending the time. We'll see you.
- [49:50]
Jeff Park
That's dope.