A (3:48)

So yeah, it seems like the fees will really drive a lot of this. But you did mention something about the Morgan Stanley brand. Tell me generally how you think it will fare in competition with other Bitcoin ETFs who will appeal to versus the other ones or who's going to buy it or how you know, will, will it sell itself?

B (4:10)

Yeah, I think it has to be more geared towards long term buy and hold types. Investors like that's the people that are going to buy this right now. IBIT is far and away the largest. It's also. But there's plenty of others with billions of assets in them. I think there's 12 or 13 ETFs now. They're all per for the most part doing pretty well. One thing that no one is touching IBIT on from blackrock is the Volume and the options volume, I mean they have 97 plus percent of the options volume. So if you're trading and hedging and doing a lot of stuff like you're probably going to go more towards ibit, particularly for shorter term type trades. Obviously if you want there's leverage versions of these things as well. So this is going to be geared like I said, much more towards the advisor base, the people who are putting this in their retirement accounts. I mean 14, like I said, if you can get it, the lower cost you can get, the better off you are. Long term. There's competing products, grayscales. BTC is only one bips more expensive but we see like lower, like if you have a fee that's one basis point lower, it can move flows by the billions in the equity size of the market. I don't see why that won't be the same case on crypto for people who are going to be cost conscious. So long term buy and hold investors and particularly advisers and wire people at the wires like at Morgan Stanley obviously we call it byoa. Bring your own assets. Morgan Stanley's wealth platform basically has over 7 trillion in assets. So and they're advocating for some portion or an allocation to crypto or Bitcoin. You just take a small fraction of that, that puts a small fraction of that in their portfolio and it can add up.

A (5:39)

And so for any Morgan Stanley advisors that previously wanted to, you know, put some allocation of bitcoin in their clients portfolios, they probably were sending them to a competing etf. So how does that affect the business of those products?

B (5:58)

Yeah, it'll be interesting. It depends exactly what happens. Because one, if you're sitting on a loss you can and you're going to sell. So say right now a lot of people are probably sitting in losses in their Bitcoin ETFs. We know for a fact the average Investor in Bitcoin ETFs are sitting on a loss. I think the average price is around 83k last I checked. So one of the problems is if you sell at a loss you can't buy something that's substantially similar theoretically because of a wash sale rule. There's a lot of nuance here because crypto technically isn't subject to it. But an ETF is the security that holds an underlying crypto. So talk to your tax advisors. But if you wanted to swap when it was up then there is no time limit. So basically you can't do it immediately on the same day. But if you wait 30 days, I think is the number you can do it. So ironically, the, you know, selling to lock in losses might not be what they're going to do. So one that would be some of the money. Right. Some of the, some of the assets that are going to go into MSBT are going to be people moving from another product because they're going to go into something cheaper now it's the cheapest product on the market. Also advisors coming into the market, new players that are trying to add allocations. If they're going to sort by fees, this thing is going to be at the top of the list alongside, like I said, grayscale and Vaneck. So those are the type investors that are going to come in. Again, it's not going to be the traders, it's those, those people are unlikely to go here. It's easy to kind of eat market share and get flows and do well in aum. But on volume it's hard. And on options, volume and options open interest, it's even harder because volume and the liquidity tends to go to the center. It's like a snowball rolling downhill.

A (7:32)

Okay. And so I saw a lot of commentary, was making a lot out of the fact that Morgan Stanley has 16,000 financial advisors who can help sell this. So talk a little bit about how you think that affects how it competes long term with the likes of Ibid or Bitwise or any of these other products.

B (7:54)

Yeah, so it's interesting in the ETF market there's, there's always been this trend of these people trying to do byoa type products. Right. They're going to launch products that are substantially similar, but they don't have the brand cache of like, say for a large cap US equity etf, there are plenty of products out there that are basically free to get exposure. But still it's the S&P 500 ETFs that matter. With this there is no like underlying index. So it kind of comes down to the brand name. And I, I think one, obviously this is if you're, if you're in this space, one, I think we could end up seeing other people cut fees. Right. If you're charging 25 bips or 22 bips and you're not doing as well, or 21 or 20 or whatever it may be. And you think if you can get even, if you don't go down to 14, if you go down to 17, it becomes a lot better of a conversation for an advisor. Right. If, if IBIT had come out and launched at, you know, 35 or 40 bips, it probably wouldn't be the dominant player it is, but it got to 25, it was substantially similar to the lowest products in the market at 20 bips when all these things went live and BlackRock's brand name and cachet and their Advisor network was able to take off. Obviously Morgan Stanley's at a bit of a disadvantage here. They're, they're coming out two years later. But like I said, and as you said, they have 16 plus thousand advisors, they have $7 trillion in assets. They are officially now recommending I think like a 2 to 4% allocation depending on like the client's growth. If as long as they're like position for growth, not you know, income or conservative portfolio allocations, they're basically saying it makes sense to put this as a, you know, a satellite position in your portfolio. So and then that, that's just one wirehouse, that's just Morgan Stanley. You also have UBS and JP Morgan and all these other things. We recently had Schwab come out with recommendations for putting bitcoin into a client portfolio depending on your growth and conservative characteristics. So all of these things, if you're going to go in, the number one thing you're probably going to look at one, it might be track record. So it, like I said, it could be a slow burn. So if this thing is out for a year or two, there's no issues. It's still the lowest on the market. It could, it, it will be definitely beneficial. But yeah, that's, that's the way I think it's all going to play out. And I'd be interested to see if we see some other players lower fees to compete.

A (9:58)

All right, so yeah, let's dive a little bit more into the fee thing because I remember the day it was announced you tweeted in all caps, wow. And I wondered like why your reaction was so strong.

B (10:11)

Morgan Stanley isn't known to be the vanguard of anything. They are not out there offering super low cost fee competitive products, let alone the leader in the clubhouse again absent fee waivers. So like they also don't launch a ton of ETFs. Most of their other ETFs that are out there are technically under brand names. They own a company called Eaton Vance and Parametric. So Most of the ETFs that are out there aren't like Morgan Stanley branded ETFs. So one, it's just fascinating from when they file that they were going to do this because like I said, you can make the argument if you can make the argument that Morgan Stanley should launch a Bitcoin ETF, then why don't they just launch their own S P500 ETF or every other ETF in the sun and then just have only their clients invest in those? And that's not what happens. It doesn't work that way for the most part because of, you know what I said about liquidity coalescing as like a ball rolling downhill. But they have a view here and I wonder. Part of it is they obviously think they're going to put client portfolios into it. And they, they're basically, they, I'm guessing they're offering this at cost to them. Like there's probably no money being made at 14 bips on this. I don't know what they're paying Coinbase and their other BNY Melon and these other administrators for the fund, but I think it's won that. And I think also they see how much money and they see crypto is growing. There's a lot of money still on like defi rails and crypto and people who don't have, you know, legacy assets like exposure to equities and bonds or an advisor or broker to do this stuff for them. So I think part of this might also just be branding and marketing for them. Like, look, we have the lowest cost bitcoin product. We understand this thing. Let us come to us and we'll make a portfolio for you. We'll do long term financial planning. So I think there's a whole bunch of ways you can game out why Morgan Stanley might have done this.

A (11:47)

Okay, so you kind of hinted before that potentially their entrance could spark bitwise or it's not bitwise BlackRock to drop their fee. But as you mentioned, because a lot of people are underwater at the moment, like there might be just a period where, where people aren't moving money initially. So in general, like how do you think things will shake out initially? Like, do you think that BlackRock will cut fees? You know, do you think that people will switch or like. Yeah, just, just generally. How do you see competition playing out?

B (12:22)

Yeah, I don't know for sure. I wouldn't bet my life on BlackRock cutting fees. That said, they are extremely competitive and they will like cut off their own leg to save the arm, to save the body kind of thing with. They've done this the past, in the past in the ETF world. They're also, it's, it's 11 bip, so it's not that crazy. And like I said, they are the leader in the Clubhouse and they're the most liquid, they have a lot of advantages. It's these other players that are, you know, now, you know, one of the more expensive products in the market that might drop a couple bits to get more competitive, I think to eke out, you know, some sort of competitive advantage. What, what do I think will happen? Like I said, if you're trying to tax loss, harvest, you know, some losses in Bitcoin and you're in an ETF and you're looking to what to do, I don't understand why you wouldn't consider just going to the lowest cost product, assuming you are, have no problems, you're not concerned about the risk of the way these things are structured and this thing is structured like every other product out there. And like I said, if you're an advisor who's extremely cost conscious, like, and you're coming to the market, you're going to go here. So I do think we'll see some money in the same way that we saw when these ETFs launched. We had 11 launch on January 10, 2024. A lot of the money that went into IBIT and Bitby and arcbe and all these other products, hodl, it came from Grayscale's GBTC because it was charging 1.5% and people were waiting for a cheaper, more efficient product. There was a lot of people just genuinely annoyed at Grayscale even though most of it wasn't their fault. And money poured into these other products. I don't think it's going to be quite that bad. I mean, 1.5% is a world of difference compared to 25 bips. Right? So like, I don't think you're going to see money pouring out or even 21 bips, but you could see some money move. And we do see advisors that will just completely move all of their assets into the cheaper product for their clients just to save a few bips on, on an, on an investment.

A (14:04)

All right, so in a moment we're going to talk a little bit about what this move means for the broader, you know, category of bank ETFs. But first we're going to take a quick word from the sponsors who make this show possible. Step into a new era of wealth. Discover nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Borrow against them without selling. Trade a wide range of cryptocurrencies all in one platform, now available in the US with 30 days of exclusive privileges for new clients. Experience Wealth Club Premier access, enhanced interest rates, reduced borrowing costs and crypto cashback on swaps. Get started today@nexo.com Unchained. Etherfi is giving Unchained listeners 15% cash back on rideshares, groceries and restaurants right now, which honestly is kind of wild for a card like this. On top of that, I'm getting 3% cash back on every single transaction using my actual crypto. No conversion fees, no nonsense. My bank never once did that. And it goes beyond just spending. You can borrow against your holdings at 4% or less, which is super useful if you don't want to sell your assets. You can also earn on all major assets up to 8% APY just by holding. And moving money is just easy. No hidden transfer fees, no friction. It just works globally. If you want to check it out, go to Ether Fi Unchained to claim your offer. That's Ether Fi Unchained. Bitcoin changed how money works Citraya changes how Bitcoin scales Citraya uses Bitcoin as both the settlement and data availability layer. As Bitcoin's application layer, Citraya enables the first trust minimized BTC on a fully programmable platform and a native StableCoin for Bitcoin CTUSD. Citraya offers Bitcoin capital markets with lending privacy payments, Bitcoin yield trading and predictions. Citraya expands Bitcoin's utility without sacrificing its security. Citra Mainnet is live. Get started at Citraya XYZ Unchained. Back to my conversation with James. So Morgan Stanley also filed for ethereum and Solana ETFs and I wondered if there was anything notable that you saw about those filings and also what it says to you that they made those filings about their crypto strategy overall.

B (16:41)

Yeah, initially we only saw the Bitcoin and Solana and people were like, oh my God, are they just going to skip Ethereum? That was the first thing that jumped out at me. But honestly the thing that really jumped out at me is one that there's no really differentiating factor here, right? Like sometimes you see a product come to market and it's like very differentiated in some way. Some of the Ethereum products have unique staking now. Some retain the assets, some distribute the the staking income. That's all interesting but like there's nothing really that fascinating. Like I said before, like it's just, it's holding Bitcoin so it comes down to brand and fees. I think it's interesting they chose those three. I, I tend to think of them as the big three in my mind. Even though I know Solana is at the third largest by market cap. But by some metrics it might be. So yeah, I think it's interesting the sense that they're going after the big three and they're going to launch those products now that we've seen this one come in at 14 bips, which is the lowest in the market. I would not, I'm. You basically now have to completely expect they're going to come in as the lowest products on the market for those two products as well. But they're obviously leaning into the space. This isn't like a one time thing and like I said there's, it's not just they want to offer these products and their advisors, they want to make money on it. Like I said, I think there's an ulterior motive here slightly to, you know, look like the big bank that is leading most into crypto. Particularly when you have people like JP Morgan is doing a lot of stuff with blockchain and crypto and under the things. But like Jamie Dimon is very vocal that he does not like it at all. So like as if you're going to consider going, if you're, you know, pro crypto, pro bitcoin, what have you, and you're considering getting an advisor, you're much more likely now to consider Morgan Stanley over, you know, UBS or JP Morgan or whoever else.

A (18:20)

So you feel like part of their strategy is to lean into this space as a way to appeal either to a new demographic or as a selling point for anybody that's considering a different or you know, considering investment advisors.

B (18:34)

I have to think that's part of this. Yeah, that's, that's my, I think I'm not the first person to say this, so I don't want to act like this is my own, like I came to this unique insight all on my own. But I, my, my view is that has to be of part, part of what's, I mean even still 50, 60 pullback here, there's still a lot of money in crypto and bitcoin and they tend to be very, a lot of these people with most of the money are very judgmental against tradfi. So if you can, you know, even pull some of them away and get those new assets in or convince people to put more assets with you, it could work out long term as, as a very profitable, you know, marketing expense in some ways.

A (19:12)

And so now that we're seeing Morgan Stanley step into crypto in a big way. Do you think we'll see anything from the likes of JP Morgan or Goldman or like how do you think competition will play out?

B (19:23)

You know, I, I saw a couple people were like, why wouldn't every bank and every wirehouse just launch a new Bitcoin, Ethereum and Solana ETF or what have you? I, I don't know this, I, like I said I was surprised that Morgan Stanley filed. Just because you're going to launch a product doesn't mean you can differentiate it via brand. And what have you to, to, to do this and now Morgan Stanley has done this. But I don't know, maybe I, like I said, I, I wasn't expecting Morgan Stanley to do this. That caught me, caught me off guard. I just assumed like these wirehouses allowing you, like we talked for years when this thing first came out, most places still didn't even let you buy the ETFs. Like a lot of people didn't understand that like they, they are guardians here at the wall allowing like certain funds to be investable in certain funds that are not investable. And it took well over a year for most of these places, even longer to even allow people to invest in them. So Morgan Stanley only allowed it like the third, fourth quarter of 2025. So like this is a very new thing for them and they're leaning hard into it and I gotta, you gotta give them kudos. They're not, they didn't come in and then say we're gonna charge, you know, 20, 30 bips or the most expensive product in the market. They came in and undercut everyone and we're like, we're gonna, we're being serious here. Then you have to respect it.

A (20:34)

And so what was their justification for, for not allowing it before and what is it that changed their mind about that?

B (20:42)

I think they were just always doing research, right. Like there's no way to know without talking to the due diligence team. But I've talked to a lot of these, they're called, they're called etf, due diligence. And it's the same process for active managers. A lot of times it takes years. They're going to look at the manager's decision making process, they're going to look at how the fund is structured. They want to understand where the, where the underlying assets are being custody. They're kind of game plan out any potential risks and usually they need like three years of history for like an active manager or a fund before they Even consider allowing their clients to invest in it at these big wirehouses. Usually smaller IRAs and stuff like that will move much quicker. That's who we saw the real early adopters of the Bitcoin ETFs aside from just normal retail people buying in the brokerage accounts. But they have all these processes set up because they don't want to go into an ETF that's just going to liquidate a year later and mess up their allocations and or has tons of risk that, that weren't properly disclosed. So they just usually take a year or two years or three years or even more before they even allow these funds to be bought on their platforms. And even then there's tiers of what is allowed and what isn't allowed. Like there's limits on how much you can buy. There's limits on who can buy. If you don't meet like certainly risk taking ability or like ability to ability and willingness to take risk. You can't buy these things. So all of those things it just takes time. For these banks, these are huge institutions. They're battleships. I mean they're aircraft carriers. They're not going to flip a switch on for this new asset. So they actually move quick when you think about the Bitcoin ETFs. But I think part of it is it's just holding an underlying asset. So they just need to study Bitcoin. It's been around for a long time now. It's not like they need to understand what a portfolio manager is going to do with these investments.

A (22:19)

And what is the demographic of the typical Morgan Stanley wealth client? Is it quite a bit older than

B (22:26)

I would have an average or I actually am not 100 certain but I would say all of these are, it tends to be skewed much older. These are high net worth individuals. I mean we're not talking always billionaires but these are usually people that make and have a ton of money. They tend to be much older. So you know Morgan Stanley bought, I think E Trade, they bought a few different things to like try and like skew younger and get more technology into the, into their wheelhouse. So I like I said I think a lot of this is a way for them to market to the younger demographic and the specific crypto demographic demographic even if you're younger, a millennial Gen Z and a couple years from now and if you're an advisor, we've been saying this for a long time advisors, many of them still don't believe in the space at all and can't couldn't really even talk to it. That's not really the case anymore. They've done their research and the as long as you've done your research, you understand what's going on, you can articulate why you don't think it should be in portfolio or why it should be. I think most people would be okay with it but the advisors and people that couldn't even explain what it was or why it shouldn't be in a portfolio, they just didn't like it because it was scammy or fraud fraudulent in some way. Like that doesn't fly anymore. It's an active decision at this point not to have any sort of crypto in your portfolio. Like for a while it's like if you wanted to add it, that's good that you're taking a risk. But now at this point it's so large that it's an active decision not to own it. The real neutral decision is to own some market cap weighted version exposure to it which is still very small for the size of the asset class, but it's still a decision.

A (23:49)

Okay, and last quick question on this. If you were to project what the AUM would be of the Morgan Stanley ETF, ETF or a Bitcoin ETFs generally in about a year, I'm curious what you'd say because of what you talked about the slow roll earlier. Earlier.

B (24:04)

Yeah. So I think Eric, my boss and colleague put the over under one year out at 5 billion and that's flows. So Aum, I mean if bitcoin doubles from here it's AUM is going to double. Right. So like when you look at aum, there's two things that affect it. It's the money going in and the performance, the underlying assets.

A (24:19)

And that's for Morgan Stanley.

B (24:20)

Well, everyone so like yes, for Morgan Stanley, for msbt, I mean right now there's a, I don't even know a hundred billion dollars in these things. They peaked at like 180 billion so they actually held up really well during this massive sell off. So yeah, I, I would, I, I think I would take the under on his 5 billion over under but he basically nailed the over under on the first day trading volume. So I won't second guess him. But yeah, I, I, like I said, I think it's going to be a slow burn. I think a lot of the traders and people who are trying to make short term tactical bets are still going to lean towards IBIT because of the liquidity it has. But honestly this thing Will work just fine for whatever you want to use it for. And particularly if you're trying to allocate longer term, you're going to see people move there. So I wouldn't be surprised if this thing has billions, particularly with that, you know, 16 plus thousand advisors, 7 trillion assets. Even if you put a small fraction them at the 1 to 2% allocation to 4% allocation they recommend, that's a lot of money that can come in from Morgan Stanley directly.

A (25:22)

Yeah. All right.

B (25:23)

It could take time. It might not happen in a year. It might happen. Sorry, I didn't mean to cut you off, but it could take a long time.

A (25:29)

Yeah, yeah. And obviously the bitcoin price is, you know, it's going to affect that. So let's switch topics before we wrap. Strategy just posted a $14.5 billion unrealized loss and then immediately went back and bought more bitcoin. So I wondered what you thought would be the point when this could be a problem for shareholders or if you thought the fact that the Fair Accounting Standards Board changed the accounting rule makes the loss like, less meaningful to investors.

B (26:03)

I don't think it makes it less meaningful. I think if you're an investor in strategy, like you want them to do this right, you're investing in them so they can allocate and buy more bitcoin. You just hope it doesn't, you know, trade at a massive discount and what have you. There's only so much you can do. But like this is what you're, you're signing up for, sailor, to do this in perpetuity. Like that's what he said he's going to do. Obviously he's doing unique stuff with his preferreds. I know he announced more stretch buying. I mean, they're buying a lot of bitcoin. So yeah, I don't know. I, I am somewhat concerned about like the tail, the tailwind effect here. Like it's just spiraling in a positive direction. Tick typically right now because they're still buying, it's concentrated. So those are minor concerns. But the fact that there's losses here, I mean, you should understand this at this, at this point. I mean, this asset class and strategy itself has dealt with 70 plus percent drawdowns in Bitcoin and all these things. And so if you're signing up to be a shareholder and you're upset that he's buying more bitcoin, you probably shouldn't be a shareholder.

A (27:03)

And I wondered if. So I know this is a question more about bitcoin, but it could also Just be about institutional investors and how they view bitcoin. But as we just mentioned, sailors buying hundreds of millions of dollars of bitcoin weekly, it's not really moving, moving the price. You know, what do you think that says either about the bitcoin market or about the general attitude of institutional investors to bitcoin right now?

B (27:26)

Yeah, it's funny. So I talk to institutions who are all aboard and I obviously talk to institutions who think, again, this is pointless and there's no reason to do this. I mean, bitcoin feels like a coiled spring. It feels like it's going to have to go in one direction or the other. It keeps making like higher lows right now, which I guess is technically positive. But I'm not a technical analyst. I'm not going to predict the price. But obviously there's people still selling heavily. If he's buying hundreds of millions, billions of dollars of bitcoin and we're still right around 70k. But I will say on the flip side, this thing has held up pretty damn well for what's gone on in the Middle east and Iran. If you had told me that the weekend of when the US first started hitting Iran that bitcoin wasn't going to go back to its recent low, I would have been like, no way. So I think, I don't know, I, I don't know what it says about the price. It says there's obviously a lot of selling. I don't know how much of it is quantum risk and people concerned about that or what have you, but this thing is very range bound. But this is an asset class. Like we're in a bear market. Typically bear markets, particularly with bitcoin, are measured in two ways, percent drawdown and length of time. And we are nowhere near how long a normal bear market lasts. So I think some people are just, you know, people are dipping their toes in the water, but I don't think anyone's buying hand over fists. This thing is a momentum asset and right now it's stalled.

A (28:47)

Okay, so last question about strategy before we go, which is last year there were a couple opportunities where it could have been added to the S P500. Right now, you know, what do you think the prospects are for that? And yeah, just.

B (29:01)

Yeah. So it goes back to those accounting standards you talked about a minute ago. So they're not eligible because they have a massive loss sitting on their, on their financial filings. The way to get in one, they're, they, they were, they're large enough now to get in the problem that they don't have is you need to have. The most recent quarter has to be positive earnings and the prior four quarters together also has to be positive. Obviously the most recent quarter is negative, as you said. So they basically naped bitcoin's price to go up for them to get into the S P500. They were eligible. The S&P500 committee decided not to put them in. I think they. There's a lot of concerns and reasons why they might do that. But the S P committee is an active committee. They make very active decisions. Some of the names, one of the names they put in this most recent quarter didn't make much sense to me personally. I really don't know why they did it. It had to do with a company that owns a lot of SpaceX, but really there was way other more particular companies that I thought were higher on the list of qualifying for the index. So you gotta remember one, the S P 500, yes, it's an index, but people control it. And two, yeah, they're dependent on the price of Bitcoin because now their income is determined by their unrealized losses and gains of those holdings.

A (30:14)

All right, well, yeah, well, I guess it, it tied its fortunes to the price of the coin. Yeah. That is what will determine that. All right, James, well, it's been so fun chatting with you again. I'm so glad we were able to have you on the show. Thanks so much for joining Unchained.

B (30:29)

Thank you, Laura. It was nice.

A (30:32)

All right, and thanks to everyone for joining Live Stream. We will catch you next week.