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- [00:01]
A
Bitcoin just flashed a major bottom signal last seen in 2022. I've seen more people declaring bitcoin dead in my timeline today than arguably ever before. We're going to talk about that and arguably more positive things with today's guest, Ryan from Bitwise. Let's go, let's,
- [00:37]
B
Let's do.
- [00:38]
A
Good morning everybody. Happy Thursday and welcome to my fourth beachside estate of the week. I think actually we're at a lake yesterday. As you can see we have the plants going in opposite directions because we have very inconsistent wind on this island. It's not, it's not real, it's AI. I'm gonna go ahead and bring on Ryan right now. Good morning, sir.
- [01:00]
B
Good morning. Good morning. Love the, love the setting.
- [01:04]
A
Thank you. So the, the worst things get the like more optimistic and giggly I become. I don't know, I, I don't know if I have a personality disorder or something, but the more people start screaming at me, the more entertained I get and the more it kind of creates a flywheel of me being more positive. But I invited you here because I know that you're a fellow member of strc. Bag Holders Anonymous.
- [01:26]
B
That's right. That's right.
- [01:29]
A
I stand up. I'm Scott Melker. I am an SDRC bag holder since last year.
- [01:33]
B
The first step is emitting it.
- [01:34]
A
Okay, so let's, let's, let's start with Saylor. Obviously STRC has lost its quote unquote peg, which is the incorrect terminology because it's not a stable coin. So people need to figure that out. But yes, it's obviously trading well below par and there's a lot of fear, uncertainty and doubt around sailors future and what will happen with strategy. So listen, you're looking at this stuff all day. What do you think?
- [01:58]
B
Yeah, look, I think, I think you're right. People look at it like a yield bearing stable coin or a money market fund. At least retail investors do and actually do think there's a lot of retail investors who have, have bought into Stretch because there's so many retail investors that are huge strategy or Michael Sailor bulls and fans and that's just not what it is. So, so, you know, do we like to see it around 80 as, as fellow bag holders? Not necessarily, but there was always more risk in that than a yield bearing stable coin or a money market fund. And it depends on your holding period. I think that it will recover near 100 once Bitcoin price rallies and I'm not really worried about the strategy is going to collapse and send the market to zero at all. That's not. That's not the camp I'm in.
- [02:43]
A
I mean, I can't understand how that math would even. Math.
- [02:47]
B
It wouldn't math. And actually, we get a lot of questions about this.
- [02:50]
A
Not the SRC part, by the way. The STRC part could stay below par for a very long time, as far as I know. But either way, if you believe they'll still pay the dividend, you get paid on the dividend on par, not at whatever the price is trading at. So, like, there is an interesting element there, which is the retirees who may have bought this in. And to be fair, like, you'd be pretty pissed. But if you're a retiree who bought STRC for an 11.5% indefinite yield, the price of the asset on a given day actually doesn't matter at all because you're getting paid the 11.5% yield as long as they don't. Or dividend, as long as they don't cut that dividend. But the strategy dying camp was the math, not mathing part I'm talking about because this is not Luna. They're backed by 870,000 Bitcoin.
- [03:32]
B
Yeah, exactly. Stretch could stay below 100 for 10 years, 20 years. They could hike the dividend. It could not change it. They could pause the dividend, they could cut the dividend. That's totally part of the. The. The risk that you took when you invested in Stretch. But nonetheless, I think you're exactly right. Like, you continue to receive the dividend until they change that it reduces your cost basis the way that it's distributed. And then you have strategy itself. They sold 32 bitcoin and everyone is freaking out. The amount of questions that we get from. From clients and investors who are worried about this 32 Bitcoin sale is pretty surprising to me. They bought over a thousand the next week and people are so focused on the. The fact they sold 32. I think it's a good thing that they sold 32. I think we'll look back at this when Bitcoin recovers to 80, 90, 100 plus K and think it was silly that everyone was freaking out.
- [04:25]
A
Yeah, I agree. I also, like, find it so interesting to sort of watch the emotion surrounding these things because you can tell that people are just like, they attach their entire personality at some point to, like, this thing has to fail. And yeah, yeah, massive flywheel of emotion. But like, even forget strategy, Bitcoin yesterday did drop below 60. I think it went the lowest. It's been since 2024 but like by like $12 or something. Right. I mean swept those lows but we're like we're sitting the same range like we've been in the low 60s for all of June.
- [05:00]
B
Right. I saw that, I saw that news article like lowest price since 2024. Actually read the beginning of that article was assuming that it was going to say like lowest price and it's like a much further period back. People who are so, so focused on short time frames and investing in bitcoin really surprised me because the long term thesis around bitcoin is still so strong that if you really have high conviction in that, which you should have in order to invest in size in it, then you should be happy at these dips. Right. I mean I know a lot of folks who have long term conviction in bitcoin who are adding to their positions reducing cost basis if they bought above this point. And to me it makes sense that you're going to have volatility in a new asset class. But the journey is up into the right eventually.
- [05:42]
A
So this was the. We have to address it because it's in the title.
- [05:46]
B
Yes, let's do it.
- [05:47]
A
Bitcoin Supply and loss reaches record high 10.83 million bitcoin it's a lot. I mean you consider that there's only 20 million out there and 5 million are lost. Right. So I mean you're really talking about probably of the active bitcoin that exists is probably 60, 70%. Right. Which is crazy. Almost 11 million.
- [06:05]
B
It's a really high number.
- [06:06]
A
Yeah. Or held at a loss while long term holders control a record 14.8 million coins. So I mean you got long term holders have been adding I believe at a massive rate here at the lows after they were the big sellers I think on the way down from 120, although I see mixed metrics on that. I'm not sure how people track that exactly but I mean this is the highest it's ever been and the previous highs of this metric were always the bear market lows.
- [06:33]
B
Yeah, look, these metrics are a little bit tricky to track and there's always a bit of a chart criming going on in dual. Dual axes charts. But, but nonetheless I, I think that these are the types of signals you look for in crypto winners to understand where are we in the cycle? That actually is a question that we're getting a lot is where are we in this crypto cycle? Because I think what people have become used to, even those that aren't deep in crypto markets, but those investors and Nutritional financial advisors are aware that bitcoin has historically moved in these four year cycles. They're more aware of the having, more aware of the having now than they were for five years ago. And so I think these metrics are things you can point to to say, look, if you're going off of history, we're getting relatively close to seeing many of the signs you want to see to feel confident that you're at a bottom. But then you have weeks like this week and last week where bitcoin falls from 65k to 59k and people freak out because people are humans, they're emotional. But nonetheless, I think, zoom out. We're much higher than we were five years ago. I think five years from now will be much higher than we are today. And that's why I'm a holder and a buyer of bitcoin, of stretch of many other crypto assets at these prices.
- [07:45]
A
So I want to circle back to Saylor a little bit because obviously there's the, I think irrational fear that he completely blows up, but I think that there is a rational fear that he will not be able to buy as much. And then if you extrapolate that to was he the only person buying? That I can understand as a fear case, a legitimate fear case.
- [08:07]
B
Yes, I think that's right. I will say that the rationale would have told us all along that Sailor was not going to be able to buy in the same size that he was buying indefinitely. Like at some point you don't want to hold 20, 30, 40% of the supply of a market. So I'm actually not shocked that it's starting to slow down. I think you're exactly right. Especially when you look at Q1, when you look at last year and the year before, Strategy was a huge buyer of bitcoin. They were the biggest buyer in Q1, for instance. And when you stack demand versus supply for Bitcoin, which is the easiest way to think about price, it matters that demand side of the equation is falling and less than new supply or just not as strong of a force. But I think new buyers come into the market and that's what's happened time and time again. Saylor wasn't always buying bitcoin. He didn't start buying it in 2009. Right. There was a period where you went from the early retail investors to Saylor and strategy to ETFs. Right now we're in this dip, but I believe ETFs will be the major force behind buying Bitcoin going forward. And I don't think that's a one or two year thing, I think that's a multi decade long thing. As ETFs, Bitcoin, ETFs, crypto index, ETFs, et cetera, work their way through the financial system, which they're still in the early stages of doing and are going to be a massive source of demand for Bitcoin. So Saylor strategy, less of a force going forward, ETFs offsetting by more as a bigger force going forward.
- [09:35]
A
Yeah, I mean that's kind of the natural progression of any assets maturity I would imagine. Right. And I think that's been the story actually since the 120s. Right. We've saw for the first time the high conviction whales who are never sell like fundamental Bitcoin will become the global reserve currency at some point. Either becoming disillusioned with the government and institutional involvement, which maybe is one conversation, or they just finally looked at that balance and were like, I have $30 billion in Bitcoin, what the fuck am I doing? Yeah, maybe I should take 10 billion of that out in some tax efficient manner and go do the yacht thing for a while.
- [10:12]
B
I think that's exactly what I would do.
- [10:15]
A
Now we see the same transfer of maybe sailors, the buyer to the ETFs, being the buyer. I mean you can't continue up indefinite with the same people providing the floor.
- [10:25]
B
Very, very true. If you look at something like the gold market, which has grown from like 2 1/2 trillion 20 years ago to more than 25 trillion today, that's a massive growth in a market rate. 10x over 20 years is really incredible, but it had a lot of volatility along the way. You had these 30, 40% drawdowns at times in the price of gold. It's already down more than 20% from its all time high. It said what earlier this year. So I think people just get, they forget that bitcoin is a new asset class going after a massive market, but early in its journey. So the volatility that we're seeing is of course something that you should expect this transition from early adopters who have made incredible amounts of money, $30 billion should sell it and go buy their yachts. But buyers continue to step in and they're continuing to, you know, help provide a floor to bitcoin. Now where that floor exactly Is, is not 100 0. Yeah, but I don't think it's 0.
- [11:24]
A
Yeah, I have, I have it on Good information that it's probably zero.
- [11:29]
B
I don't think it can go lower than zero.
- [11:31]
A
For what it's worth, let's talk about the ETF. 6 billion just left Bitcoin ETF. So that's a kind of a terrible image of it. But there's all these articles going around obviously that we're on like a historically bad run here with the ETFs where like the 2008 Lions, you know, can't, can't get a win. Six billion. I think it was 6.4 or something in 30 days. You obviously have that data at Bitwise. How bad is this and what, what does it take to reverse it?
- [11:57]
B
Look, I think that when people saw the record breaking numbers of ETFs for Bitcoin and really strong numbers originally for ETH, extremely strong numbers for Solana, even in October and November when prices were crashing from the flash crash, Solana was seeing net positive ETF flows. Hype's done incredible from an ETF flows perspective. I think when people see those things, they assume that there's never going to be outflow days, which is just wrong. All ETFs have inflows and outflows as they work their way into the market. It's actually remarkable the amount of inflows that we've seen into crypto ETFs in just a two year period. There was always going to be outflows. This is not that abnormal to us. You have folks that are selling crypto ETFs and dipping into that in their portfolio to buy things like AI equities, to allocate to things like the SpaceX IPO. That's not just, that's not like a, a thing that we're assuming. We're actually talking to investors, huge investors. I spoke to a few endowments recently who said, look, we tap into liquid crypto and we need to raise cash in our portfolio for other opportunities. And that's exactly what they're doing right now. It's a capital rotation, but rotations go around in a circle and eventually capital make its way back into crypto. And I think that's going to be one of the catalysts that take us out of the bear market.
- [13:18]
A
Yeah, I mean, the sentiment has been just that either people hate us or nobody cares. Right. I think there was kind of that quip that Scaramucci and Novogratz had on their podcasts where he's like, yeah, man, we're exhausted, we're tired.
- [13:31]
B
Yeah, you know, we're not going to win the Money from the people that hate us. That's fair. We never were. We weren't going to add 125k who everyone said bitcoin was a scam. We're certainly not at 60k. But I will say there is a big camp that just doesn't care about crypto right now. I spent a lot of time going to traditional finance conferences and it is clear in these conversations with financial advisors and family offices and allocators that they are fully focused on other opportunities in the market. I mean you look at things like microns up, I don't know, 15% pre market today on earnings. Right. While Bitcoin's down 30 over the past year and chopping down and sideways, they're just more fascinated with what's going on with AI and chips and the tech boom and less with crypto. But that attention moves with the market and eventually, probably sometime in the second half of this year, we're going to see a recovery in crypto prices. Momentum will come back into the market and I think capital will follow. I expect the conferences that we're at in October, November, December, they're going to be a lot more interesting crypto than there was the ones I was in in April, May and June.
- [14:41]
A
So you mentioned the sailor 32 selling question. Being consistent. You're obviously on the road, you're pitching your products. But I've always kind of viewed bitwise as the front line of the bitcoin and crypto pitch in general. And then maybe it then eventually gets down to your own products versus everybody else's. What are the other kind of big questions you're getting right now or the concerns that you're addressing? Because there was a while there where there were none.
- [15:04]
B
It was all, yeah, we start with education first. That's that. That's what we do here. A bit wise. And it's what's helped us build the brand in the business over the past decade. Right. We're really here to be the partner when it comes to how to script to work. How should we be thinking about it right now? We are getting a lot of questions about Sailor but. But people aren't that deep into the weeds. All they've seen is some headline from the Wall Street Journal or on CNBC that said Michael Saylor sells bitcoin and they don't understand that. It's like.0004% of the Bitcoin that strategy owns. They don't understand that. They actually telegraphed this sale on an earnings call saying, look, we're going to do it, to inoculate the market that we will sell bitcoin at some point and added that we also will buy net more bitcoin in the long run. So I think they just don't have the full picture. People love to run with these headlines of like, bitcoin is dead. It's going to zero. Right. And they don't think about the big picture. But I think the, the ignorance of the full story is the opportunity for those of us who follow the market closely and look at these moments as times that you might want to allocate.
- [16:14]
A
You said you kind of dropped the idea of a Wall Street Journal headline that might be negative. How crypto exchange became a major hub for illicit Iranian cash. Well, listen, I'm sure this, this is probably a legitimate story, by the way. So it's not like I'm saying that they're just throwing stuff out there, but this basically says that as we know, North Korea hacked Iran. I mean, hacked, hacked. Bybit. Excuse me. And I mean, if you kind of take a look at the details, the way it's positioned is that somehow all that money was laundered through, like, to Iran, through the center, through Coinex, to Iran Central Bank. But it kind of seems like they all just went to the same laundromat. But either way, like, not, not favorable.
- [16:54]
B
No, not favorable. And we kind of spoke about a little bit earlier that there are people that hate bitcoin and hate crypto and are going to hate bitcoin and crypto. And stories like this is what they reference when they say crypto is a complete scam. Right. And I think you have to look at a lot of things to understand that this is a small part of the market that you're going to have bad actors in every single market. Right. And, and Chain House puts out a great report that shows the amount of illicit transactions relative to the, to the broader market. And it's something like 1 or 2%, which isn't that different than other, you know, major currencies. Cash, I believe, is, is more than that. But people are still going to see that. They're going to say, look, I told you crypto was a scam. It's being used by the Iranian government, who the US Is at war with. It's being used by North Korea. Those are obviously bad actors who are, who are using it. So who's really using this thing? The fun thing about that question is you can point to things like stablecoins, which are continuing to set record highs in terms of transactions, payments in aum, you can look at things like tokenized stocks, which, like, is it up into the right chart? That is incredibly beautiful. Whether it's volume or aum of tokenized funds, like those are the people actually using crypto over the long term. And we're in the early, early, early stages of the growth of those categories while the amount of illicit transactions on the networks is falling, which is exactly what you want to see.
- [18:24]
A
Yeah. And I mean, to my knowledge, from what we've seen and heard from Besant, is that because it's on blockchain rails, most of this money easy to go ahead and freeze. Right. I mean, 10 so, so you got, I think it was. They said 500 billion at this point or something. Was that right? Maybe it's 500 million. I don't remember a lot of money that I think must have been 500 million. 500 billion seems like way too much. $500 million, I think, is how much they, you know, between tether and the exchanges and everybody, they've already seized or frozen in Iranian assets, which is much easier than doing it in gold.
- [18:57]
B
Yes, exactly. This is another thing that a lot of people who hate crypto don't understand about crypto. So these are decentralized databases that are by nature transparent, which makes it easier in many instances for law enforcement to track funds. And with the amount of exchanges that comply with kyc, aml, et cetera around the world, it makes it even easier to catch the bad guys. That doesn't mean every single theft or hack or ransom is going to be caught again. It's not going to be the case with every other asset where you see this type of activity happening. But it does make it easier. Companies like Chainalysis work with law enforcement to track this. We, we was a year and a half ago, we had someone from the FBI cybercrime unit come into one of our all company meetings just to kind of do a, a talk on what they're seeing when it comes to cyber crime. And they said that exact same thing. Look, it's easier for us to track criminal activity on blockchain networks than off blockchain networks. We actually love the fact that criminals are using this because it helps us track them and map the web of fund flows. And so a lot of people who hate crypto and say, look, it's used by scammers don't understand the underlying properties of crypto that make it valuable and innovative.
- [20:18]
A
Speaking of things that are valuable and innovative, I don't know if you saw this kicker right here. But Standard Chartered who by the way has become like over the past few years like the most gratuitous and hyperbolic predictors that we have in the market. I think you know, like it's unbelievable but came out. But this one AAVE can soar to 3500 bucks by 2030 on DeFi Revival says Stan Chart. I don't know who Stan Chart is, to be honest, but I mean what's ave now? Like 80 bucks or something? I don't even know.
- [20:50]
B
Yeah, this is an incredible price target. I, I think they also put something out on Uniswap recently as well. I think, you know, look, price targets are inherently always going to be incorrect. It's impossible to predict price. And then in the precisely timeline on it.
- [21:06]
A
Yeah by 2030 is that's way bolder
- [21:09]
B
than eventually that's what, three and a half years away. I mean look, if it happens, good for the analysts and the team that that called it.
- [21:19]
A
But.
- [21:19]
B
But defy I think is having a moment. I think revenue generating apps and blockchains are having a moment. Those of us, you know, I'm sure you feel this way, but been in the industry for long enough, you say yeah, these things generate cash flow. We've been saying that. We've been actually screaming that from the rooftops. And now I think investors, major banks, asset managers, economists coming around to understand that. And that helps drive the thesis for why you would own these assets. And in a post gensler world we're actually able to see projects create value crawl mechanisms that allow investors to participate in the revenue these applications and these blockchains generate. And that's a huge step forward. So we've made a ton of progress over the past three, four or five years. Price right now is down to where it was in 2024. I say so what we're investing for the long term in this asset class and we're still early in the journey.
- [22:13]
A
Yeah, that makes sense. So what are you guys focused on now? I think last time I had Matt on or he kind of alluded to the fact that the you know, single asset ETFs are probably reaching close to their finish line for what the market will support. I think the hyper liquid one was obviously successful but you know, I don't think we get to coin number 97 on coin market cap for a single asset ETF. So are we talking about index funds in the future? What are we looking at as the most likely future products?
- [22:43]
B
Yeah, look, people love to get into our DMs and comments on Twitter saying like you should launch an ETF or why haven't you launched an ETF for some crypto asset that a lot of people haven't heard of and they don't understand that. There's a couple things you need. A, it has to meet the standards of the SEC and have the infrastructure around it.
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A
Right.
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B
Liquidity, custody. You have to have market makers that and APS that'll participate, etc.
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A
Right.
- [23:07]
B
Doesn't happen for every asset. You also have to have demand from investors. It costs money to launch and maintain ETFs. There's legal fees, there's trading fees, there's custody fees, there's all these things that we have to pay as an ETF issuer that if there's not demand for the asset, that means you won't generate revenue to offset the fees. People just don't understand that. I do think if you zoom out and look at where we're headed, it's index funds for the most part. Just like you index into other asset classes, whether it's financials, energy, AI, tech. I think investors will use index funds to allocate to crypto. And when we look back 10 years from now, index funds will be bigger than most single asset spot ETFs. Maybe not Bitcoin, but potentially. But other than that, I think they will be.
- [23:55]
A
I mean, isn't that how people want to invest historically? I mean, you know, like you passively do that in your 401k or your Roth IRA and that's it. IRA and that's it. Right. You just let it happen and you want a broad, broad exposure to, you know, the entire market and go back to sleep.
- [24:14]
B
Exactly. I think, you know, look at Vanguard, like Vanguard became the beast that it is on low cost index funds. I think that's where we're headed for crypto. And what index funds also do that I think people don't fully understand is create passive flows into these assets. You mentioned 401ks that people are allocating to index funds in their 401ks. That means that every two weeks there's some amount of capital flowing into the constituents or the holdings of those index funds. So if you think about, okay, there's a top 10 crypto asset index fund like the Bitwise 10 large cap crypto index, if that exists and people are buying it in their 401ks. That means that every two weeks capital is flowing into the assets in that index, which is passive demand that grows and is continual over time. I think that's where we're headed Yeah,
- [25:05]
A
I agree with that. We just need the thirst for it to come back and it will. The appetite. Yeah, I mean you guys, I'm sure highly confident that I am as well. Are there any catalysts you see in the future, anything that like particularly is on your guys calendar that hey, maybe this will be the thing that sparks interest again? I know that's an impossible question by the way, but.
- [25:27]
B
Well, you know, we talk to thousands of clients throughout the year and I will say what's happened over the past three months and even up through this week is there's interest in perhaps three different categories. Overwhelming interest I would say. Stable coins is something we get asked about all the time. Tokenization is something we get asked about literally every single day and people are really interested in that. And then there's the risks we get asked about like quantum risk. That's definitely something that more and more investors are thinking about when it comes to bitcoin and crypto because they see the things like the executive orders on Quantum that were just signed. The thing to point out there is like two out of the three are positive catalysts, one is a risk, but it's being addressed. Focusing on stable coins and tokenization. The fact that that's what's driving interest right now rather than price I think is really important. The fact that we have Visa and Stripe and MasterCard and BlackRock and Franklin Templeton and UBS building stablecoin infrastructure, tokenizing assets are huge long term tailwinds and they bring legitimacy to an industry for those who thought it was only for these crazy speculative crypto traders. And so I think those really, really matter and are massive catalysts but they take time to build. It's taken us what, six, seven years for stablecoins to get to 325 billion in AUM. Yeah, that was a Freudian slip I guess. And tokenization, just so we're early in the journey. But those are major catalysts that I see going forward.
- [27:08]
A
I know we're right about time. Anything else I might have missed?
- [27:11]
B
Look, I think AI and crypto are going to have their moment right now. It's all AI. I think we're going to have the, the convergence of AI and crypto. And a lot of crypto companies, a lot of crypto blockchains are going to benefit from the AI tailwind. So you know, don't get shaken out by bitcoin touching a price it hit in 2024. We're in it for the long haul and I think the long term outlook for crypto is very, very positive.
- [27:36]
A
These plants are getting shaken out. They are. They are. No wind in the world that could do this. The.
- [27:44]
B
The waves are coming in. The plants are moving left to right. It's great.
- [27:48]
A
Looks good. It looks pretty real to me.
- [27:51]
B
Yeah, whatever.
- [27:53]
A
I'm gonna go for a swim after this show. Thank you, Ryan. Appreciate having you on. I I said before I realized that we've talked about a hundred times on X spaces and I realized that, like, you're the last remaining face at bitwise that probably hasn't been on YouTube and it was a total mistake. So I'm glad we got you on
- [28:08]
B
and have to get you back.
- [28:10]
A
Have to get you in the bullpen, you know, into the rotation.
- [28:12]
B
Yeah, would love to. Would love to be in here more often. Appreciate you having us on and. And love the show.
- [28:19]
A
Awesome, man. Thanks, Ryan. We'll see you soon. Thanks, everybody. That's dope.
- [28:36]
B
Let's do.