1 00:00:00,000 --> 00:00:04,840 It's fascinating that they decided to launch their own product because Morgan Stanley doesn't have that many products. 2 00:00:04,960 --> 00:00:08,380 What's more indicative is the seven and a half trillion number you said, which is what really matters, right? 3 00:00:08,400 --> 00:00:11,780 They have a lot of money, of wealth that they're managing. 4 00:00:12,100 --> 00:00:16,420 They have trillions of dollars in assets, even at a 1% allocation on average across the board or even less than that. 5 00:00:16,780 --> 00:00:19,480 It's meaningful buying theoretically that could come into Bitcoin. 6 00:00:19,840 --> 00:00:22,620 And now we've seen over 2 billion come in since February 23rd. 7 00:00:22,660 --> 00:00:27,480 So things are starting to perk up or at least stop the, you know, the bleeding or hemorrhaging as we saw. 8 00:00:27,480 --> 00:00:32,700 Bitcoin, it's kind of like gold in the sense that like sometimes it's really correlated to one thing and sometimes it's not correlated at all. 9 00:00:33,220 --> 00:00:37,100 So for the first few months of this year and towards the end of last year, it was very correlated to software stocks. 10 00:00:37,340 --> 00:00:39,640 I'm sure that will stop. It's kind of slowed down now. 11 00:00:39,860 --> 00:00:44,060 I think quantum actually is affecting because I get questions on it from institutional players. 12 00:00:44,580 --> 00:00:49,360 So maybe they're not causing people to, you know, dump all their Bitcoin, but it might be hindering potential demand. 13 00:00:49,680 --> 00:00:52,720 We're in a bear market right now. Bear markets aren't just measured in price. 14 00:00:52,720 --> 00:00:57,060 They tend to have, you know, this sideways to down length of time. 15 00:00:57,060 --> 00:00:59,880 It takes months, if not longer, before things really settle. 16 00:01:00,420 --> 00:01:02,120 Maybe we have already seen the bottom. 17 00:01:02,240 --> 00:01:03,680 Welcome back to Over the Horizons. 18 00:01:03,760 --> 00:01:04,860 I am here with James Safer. 19 00:01:05,000 --> 00:01:06,560 This is his second appearance on the show. 20 00:01:06,660 --> 00:01:08,860 He's a senior research analyst at Bloomberg Intelligence. 21 00:01:09,120 --> 00:01:10,320 James, thanks so much for joining me today. 22 00:01:10,560 --> 00:01:11,360 Yeah, thanks for having me, Joe. 23 00:01:11,400 --> 00:01:11,980 Happy to be here. 24 00:01:12,480 --> 00:01:12,840 Absolutely. 25 00:01:13,140 --> 00:01:14,320 Let's kick things off here. 26 00:01:14,840 --> 00:01:17,520 Lots of crazy things going on right off the bat. 27 00:01:17,820 --> 00:01:20,540 I wanted to ask you, we're three months into 2026 now. 28 00:01:20,660 --> 00:01:24,960 I read up that you had two major predictions as far as crypto ETPs were concerned heading 29 00:01:24,960 --> 00:01:25,440 into the year. 30 00:01:25,440 --> 00:01:29,660 first that we would see well over 150 new ones over the course of 2026. 31 00:01:30,020 --> 00:01:33,980 And secondly, toward the end of the year or into next year, we would see a ton of those 32 00:01:33,980 --> 00:01:34,780 products liquidate. 33 00:01:35,360 --> 00:01:39,100 So now that we are three months into the year, we've seen some crazy price action on Bitcoin, 34 00:01:39,280 --> 00:01:40,700 45% down from the highs. 35 00:01:40,700 --> 00:01:44,840 How can you sort of assess both of these calls and where the state of the market is more 36 00:01:44,840 --> 00:01:45,200 generally? 37 00:01:45,520 --> 00:01:45,620 Yeah. 38 00:01:45,760 --> 00:01:47,920 So on the liquidation side, there's nothing to write there. 39 00:01:48,340 --> 00:01:50,880 That's definitely at least 12 months out from when I wrote that. 40 00:01:51,020 --> 00:01:52,080 So it might even be longer. 41 00:01:52,420 --> 00:01:54,840 It depends basically how long these issuers... 42 00:01:54,840 --> 00:01:59,320 If you want to go with a rough estimate, we'll say it's $300,000 a year to run an ETF, right? 43 00:01:59,380 --> 00:02:00,100 So you get it launched. 44 00:02:00,160 --> 00:02:01,440 It's going to cost you $300,000. 45 00:02:01,620 --> 00:02:04,620 That might include launch fees and stuff like that, but it's a lot of money. 46 00:02:04,700 --> 00:02:05,740 It's not something you can just do. 47 00:02:05,860 --> 00:02:08,300 So if you're going to launch it, you need to get assets and flows. 48 00:02:08,580 --> 00:02:11,560 So there's probably some bandwidth or time with that. 49 00:02:11,740 --> 00:02:15,800 These issuers, when they're launching these products, they're like, okay, we're going to give it a year. 50 00:02:15,880 --> 00:02:17,260 We're going to give it a certain amount of time. 51 00:02:17,260 --> 00:02:19,300 And if it doesn't work out, we'll back away. 52 00:02:19,740 --> 00:02:24,580 Other bigger issuers that have other successful products, they might leave these things out there longer to like, 53 00:02:24,580 --> 00:02:29,240 You know, if it hits the right place, right time, there's say some, you know, crypto coin 54 00:02:29,240 --> 00:02:30,200 that's in the top 30. 55 00:02:30,320 --> 00:02:31,500 They launched an ETF on it. 56 00:02:31,560 --> 00:02:32,500 No one cares about it. 57 00:02:32,820 --> 00:02:34,520 Some big news happens in the crypto world. 58 00:02:34,680 --> 00:02:36,080 It jumps up to top 10. 59 00:02:36,160 --> 00:02:38,820 All of a sudden, they're the only one with an ETF that's holding it. 60 00:02:38,840 --> 00:02:42,960 So if they can sit there and wait and hopefully like strike while the iron's hot and get enough 61 00:02:42,960 --> 00:02:44,220 assets, it's successful for them. 62 00:02:44,320 --> 00:02:45,180 So who knows? 63 00:02:45,280 --> 00:02:47,820 So I mean, as far as the liquidation side, who knows? 64 00:02:47,940 --> 00:02:49,600 As far as the launching side, we're right on schedule. 65 00:02:49,840 --> 00:02:51,440 Definitely over 100 are probably going to happen. 66 00:02:51,540 --> 00:02:53,640 We've seen a whole bunch come to market late last year. 67 00:02:53,640 --> 00:02:55,180 There's still some coming to market now. 68 00:02:55,400 --> 00:02:57,620 The launches have kind of slowed for now. 69 00:02:57,780 --> 00:03:01,840 I think people are waiting for the market to settle in, but they're still launching all 70 00:03:01,840 --> 00:03:02,900 these different types of products. 71 00:03:03,060 --> 00:03:08,280 And we're seeing a whole bunch of altcoins, a bunch of yield options come to market, derivatives 72 00:03:08,280 --> 00:03:09,080 based products. 73 00:03:09,600 --> 00:03:12,980 There's a lot of filings for index and actively managed products. 74 00:03:13,260 --> 00:03:17,820 So T. Rowe Price, which is a legacy, real old school, active discretionary manager is 75 00:03:17,820 --> 00:03:19,940 going to be launching an actively managed crypto ETF. 76 00:03:19,940 --> 00:03:25,360 So all this looks mostly on track for now, but we won't know for quite a while if I was correct or not. 77 00:03:26,000 --> 00:03:27,920 Fantastic. Yeah, no, it remains to be seen. 78 00:03:28,080 --> 00:03:35,080 And I would wager that if Bitcoin remains in the doldrums for a substantial portion of this year, we'd probably see some of those bodies float to the surface. 79 00:03:35,700 --> 00:03:39,340 So speaking of like, you know, Bitcoin is down 45 percent from the highs. 80 00:03:39,780 --> 00:03:41,980 ETF holdings have managed to hold up pretty well. 81 00:03:42,320 --> 00:03:46,940 I put out a tweet just before you and I went live here that I was looking at the price compared to the AUM. 82 00:03:46,940 --> 00:03:49,700 and across all the spot Bitcoin ETFs, 83 00:03:49,860 --> 00:03:52,960 the AUM is only down 9% from the October highs 84 00:03:52,960 --> 00:03:55,020 compared to Bitcoin's price at 45% down. 85 00:03:55,200 --> 00:03:57,920 So very clearly the ETF holders are hanging tough. 86 00:03:58,200 --> 00:03:59,280 What would you attribute that to? 87 00:03:59,480 --> 00:04:01,220 And what do you think the significance of that is 88 00:04:01,220 --> 00:04:02,880 as the market matures 89 00:04:02,880 --> 00:04:04,660 and sort of the market structure changes? 90 00:04:05,040 --> 00:04:07,720 In a few words, boomers are diamond hand holders. 91 00:04:08,020 --> 00:04:09,520 I mean, really that's what it comes down to, right? 92 00:04:09,560 --> 00:04:10,940 When these things were coming to market, 93 00:04:11,100 --> 00:04:12,180 people were telling us 94 00:04:12,180 --> 00:04:13,740 they're going to be soft hands in the market. 95 00:04:13,840 --> 00:04:15,140 They're going to sell at the first sign of trouble. 96 00:04:15,140 --> 00:04:20,360 And that's just not how long-term investors operate, particularly the ETFs. People who are 97 00:04:20,360 --> 00:04:23,600 investing in ETFs for the most part, they know what they're getting themselves into and they're 98 00:04:23,600 --> 00:04:27,420 smart investors and they're allocators. So I think part of it is one, people just know the asset 99 00:04:27,420 --> 00:04:32,980 they're buying. And like what you said is correct. So from October 10th to February 3rd-ish, there 100 00:04:32,980 --> 00:04:36,680 was about 9 billion that came out, right? That's a lot of money. But when you take into account what 101 00:04:36,680 --> 00:04:40,940 happened before that, a lot of money went in. And now we've seen over 2 billion come in since 102 00:04:40,940 --> 00:04:45,980 for every 23rd. So things are starting to perk up or at least stop the bleeding or hemorrhaging, 103 00:04:46,100 --> 00:04:50,400 as we saw. Who's to say if it's going to continue going forward? But at the end of the day, not a 104 00:04:50,400 --> 00:04:54,220 ton of money has come out. And the other part of it is the people who are buying this, one, 105 00:04:54,340 --> 00:04:58,780 like I said, know what they were buying. And two, probably right-size their position. These people 106 00:04:58,780 --> 00:05:03,080 aren't putting Bitcoin as 50% or 90% of their portfolio. This isn't 100% of their net worth 107 00:05:03,080 --> 00:05:06,260 where they have to sell because they're worried about having enough cash. This is probably 108 00:05:06,260 --> 00:05:11,180 single digit percentage allocations with our portfolio. And what most advisors and people who 109 00:05:11,180 --> 00:05:14,420 are doing this as long-term investments are probably going to have like a set strategic 110 00:05:14,420 --> 00:05:20,620 allocation, whether it's 5% or what have you. So if you bought at 60,000 and it went up to 120 111 00:05:20,620 --> 00:05:24,500 and it was time to rebalance, you probably sold a bunch to bring it back down to your target 112 00:05:24,500 --> 00:05:30,380 allocation. Theoretically, if you were up there and you bought it down to 120 and it dropped in 113 00:05:30,380 --> 00:05:34,000 half, you're going to be buying more. So I think that it actually might be contributing to some of 114 00:05:34,000 --> 00:05:39,000 resilience. I know a 50% drop isn't very resilient in prices, but considering what we usually see, 115 00:05:39,480 --> 00:05:45,740 like in a bear market pullback for crypto or Bitcoin in general, 70% is what typically happens 116 00:05:45,740 --> 00:05:49,900 and which would put us like, you know, in the $40,000 range. And we're not there yet. I'm not 117 00:05:49,900 --> 00:05:53,040 saying we're never going to get there, but right now it looks like things are just holding up a 118 00:05:53,040 --> 00:05:57,580 little better. And particularly these ETF investors are holding up very well. Well said. Yeah. It's 119 00:05:57,580 --> 00:06:03,020 been, it's amazing to see because it's been very stair-steppy since the ETFs were launched, you know, 120 00:06:03,020 --> 00:06:08,640 in early 2024. And a lot of folks were saying and have been saying, and it seems to be the case, 121 00:06:08,720 --> 00:06:14,260 that Bitcoin's volatility has dampened substantially since the passive flows from these ETFs has sort 122 00:06:14,260 --> 00:06:18,460 of begun to dominate the market. And a lot of folks were questioning what is going to happen 123 00:06:18,460 --> 00:06:23,120 once you start to see a decline, once you see Bitcoin's sort of first bear market with the ETFs 124 00:06:23,120 --> 00:06:26,520 as a major player in the space. And now that you're seeing it, right, they're hanging tough. 125 00:06:26,600 --> 00:06:30,400 And so it's pretty cool to see that everybody's thinking beforehand, which is that, you know, 126 00:06:30,400 --> 00:06:34,320 They're sort of very diamond handed, very methodical, very long term holders. 127 00:06:34,580 --> 00:06:35,520 That's exactly what's playing out. 128 00:06:35,580 --> 00:06:36,300 So it's pretty cool to see. 129 00:06:36,420 --> 00:06:40,140 Speaking of the Bitcoin ETF specifically, and then we'll shift gears into some other topics. 130 00:06:40,540 --> 00:06:45,940 Morgan Stanley, one of the most well-respected regarded financial institutions globally. 131 00:06:46,460 --> 00:06:47,600 Very big news. 132 00:06:47,860 --> 00:06:53,660 So we've known this for a couple of months now, but they just amended and they're approaching their spot Bitcoin ETF filing and launch. 133 00:06:54,240 --> 00:07:01,920 What's the significance of Morgan Stanley choosing to launch their own spot Bitcoin ETF in terms of institutional legitimacy and capital access? 134 00:07:02,040 --> 00:07:05,520 Obviously, they have like seven and a half trillion dollars in advisor AUM. 135 00:07:05,620 --> 00:07:08,720 They're also hiring for a bunch of crypto related roles. 136 00:07:08,720 --> 00:07:11,960 So what's the significance of them choosing to create their own spot Bitcoin ETF? 137 00:07:13,000 --> 00:07:17,760 Yeah, so I don't think it says more that much about the institutional side of it. 138 00:07:17,820 --> 00:07:21,080 I mean, we already have BlackRock involved, some of the biggest, largest asset managers. 139 00:07:21,720 --> 00:07:25,860 Banks are allowing their advisors and wire houses to put this into client portfolios. 140 00:07:26,360 --> 00:07:28,520 So I think that has mostly been settled. 141 00:07:28,660 --> 00:07:31,940 It's interesting that such a large bank on Wall Street is doing it. 142 00:07:32,120 --> 00:07:35,320 What's more indicative is the $7.5 trillion number you said, which is what really matters, 143 00:07:35,420 --> 00:07:35,540 right? 144 00:07:35,560 --> 00:07:38,920 They have a lot of money, of wealth that they're managing. 145 00:07:38,920 --> 00:07:44,880 And like I said, these people that are using the ETFs or advisors, they're not putting it 146 00:07:44,880 --> 00:07:46,140 in massive portions of portfolios. 147 00:07:46,420 --> 00:07:50,880 So they have trillions of dollars in assets, even at a 1% allocation on average across 148 00:07:50,880 --> 00:07:55,140 the board or even less than that, it's meaningful buying theoretically that could come into Bitcoin. 149 00:07:55,640 --> 00:07:59,480 Now, obviously, not all of those accounts are going to buy Bitcoin. It's going to be probably 150 00:07:59,480 --> 00:08:03,200 a minority. It's probably going to be a single digit allocation for most of those people. 151 00:08:03,820 --> 00:08:07,320 But just having this out there is pretty impressive. It's fascinating that they decided 152 00:08:07,320 --> 00:08:11,240 to launch their own product because Morgan Stanley doesn't have that many products. I think 153 00:08:11,240 --> 00:08:14,840 they don't have many products with their own branding. They have Parametric and Eaton Vance. 154 00:08:14,840 --> 00:08:15,080 I believe they have 15 in total. 155 00:08:15,660 --> 00:08:19,840 Yeah, they have Parametric, Eaton Vance. There's another brand that technically is owned by Morgan 156 00:08:19,840 --> 00:08:23,840 Stanley, but it doesn't have the Morgan Stanley branded ETF. So that's interesting. I mean, 157 00:08:23,840 --> 00:08:28,240 they're putting their brand on the line here. And they also filed for Ethereum and Solana ETFs. 158 00:08:28,620 --> 00:08:33,320 So it's interesting in the fact that one, I guess they think they can do just as well as these other 159 00:08:33,320 --> 00:08:38,120 issuers are, and they can get their own advisors and brokers to put the client money in there 160 00:08:38,120 --> 00:08:42,600 rather than going to a competitor like BlackRock or Bitwise or you name it. 161 00:08:43,480 --> 00:08:47,400 Fantastic. Thank you for the color there. So I want to shift gears here and talk a little bit 162 00:08:47,400 --> 00:08:49,100 about the current macro environment. 163 00:08:49,220 --> 00:08:51,000 So obviously, a couple of weeks ago, 164 00:08:51,200 --> 00:08:53,000 we decided to invade Iran. 165 00:08:53,080 --> 00:08:54,040 We decided to begin strikes. 166 00:08:54,300 --> 00:08:55,240 That has escalated. 167 00:08:55,500 --> 00:08:57,260 Bitcoin was doing quite well. 168 00:08:57,300 --> 00:08:58,240 It was doing decently well. 169 00:08:58,600 --> 00:09:00,980 It recovered from its $60,000 bottom. 170 00:09:00,980 --> 00:09:03,640 And then two days ago, major escalation. 171 00:09:03,920 --> 00:09:06,640 Israel decided to strike actual energy infrastructure. 172 00:09:06,800 --> 00:09:09,100 So not actual like holding facilities for gasoline 173 00:09:09,100 --> 00:09:10,560 and crude and other things like that, 174 00:09:10,560 --> 00:09:13,620 but the refineries specifically. 175 00:09:13,900 --> 00:09:15,440 So the actual production facilities, 176 00:09:15,440 --> 00:09:22,280 that caused massive panic and it caused gold to roll over in its sharpest move since what we saw 177 00:09:22,280 --> 00:09:27,680 a couple of weeks ago. Gold is now down 8 percent. Equities are continuing their decline. 178 00:09:28,360 --> 00:09:33,320 Bitcoin is obviously also reversed course, not specifically an ETF question, though I suppose 179 00:09:33,320 --> 00:09:38,740 you could speak a little bit to that. But how are you interpreting this reaction as the war 180 00:09:38,740 --> 00:09:42,180 sort of starts to get going here? And what does it tell you about current market positioning and 181 00:09:42,180 --> 00:09:48,440 investor sentiment. Yeah. I mean, I've decided I'm going to be a geopolitics expert and energy 182 00:09:48,440 --> 00:09:52,360 commodity expert. No, no. I'm not an expert on this stuff, but I'm happy to comment on it through 183 00:09:52,360 --> 00:09:56,900 the lens of energy and what I'm seeing. So obviously, energy prices are going through the 184 00:09:56,900 --> 00:10:01,500 roof. It's surprising, honestly, that it's not worse considering how impactful this could be. 185 00:10:01,620 --> 00:10:06,120 So basically, the markets seem to be mostly expecting this to subside in somewhat of a 186 00:10:06,120 --> 00:10:09,340 short-term nature. Obviously, I'm not going to pretend to know whether that will be the case. 187 00:10:09,760 --> 00:10:11,000 The gold thing is fascinating 188 00:10:11,000 --> 00:10:11,560 because like you said, 189 00:10:11,580 --> 00:10:12,900 it has been a massive sell-off. 190 00:10:12,980 --> 00:10:14,200 There is selling in the ETFs. 191 00:10:14,460 --> 00:10:15,740 Largely, what it has to do is 192 00:10:15,740 --> 00:10:16,660 people tend to think of gold 193 00:10:16,660 --> 00:10:17,740 as a hedge against inflation 194 00:10:17,740 --> 00:10:18,520 and it really isn't. 195 00:10:18,700 --> 00:10:20,640 It's not that great of a hedge against inflation. 196 00:10:20,800 --> 00:10:22,060 Over longer time periods, it is, 197 00:10:22,100 --> 00:10:24,280 but over shorter timeframes, days, weeks, months, 198 00:10:24,340 --> 00:10:24,860 it's not. 199 00:10:24,920 --> 00:10:26,080 It kind of beats to its own drum. 200 00:10:26,400 --> 00:10:28,020 What it is a hedge is against currency debasement. 201 00:10:28,420 --> 00:10:39,174 So it has a negative correlation to the dollar for the most part and it has a negative correlation or it is correlated to real yields So basically what actually happening absent inflation 202 00:10:39,354 --> 00:10:41,354 So if real yields are going up, that's bad. 203 00:10:41,494 --> 00:10:44,014 People are going to leave gold because there's no yield in gold. 204 00:10:44,174 --> 00:10:49,974 And right now what you're seeing is a very strong dollar over the last few last week or two, a couple of weeks, which is bad for gold. 205 00:10:50,034 --> 00:10:50,854 So that's impacting it. 206 00:10:50,914 --> 00:10:54,214 And then obviously real yields are also going up because they're basically pricing out cuts. 207 00:10:54,694 --> 00:10:57,814 So basically the market isn't expecting cuts to happen because of what's happening with 208 00:10:57,814 --> 00:10:59,694 energy prices and things along those lines. 209 00:10:59,794 --> 00:11:05,334 So all of this combining, and I think part of it also has to do with just like reversion 210 00:11:05,334 --> 00:11:06,274 to the mean for gold. 211 00:11:06,374 --> 00:11:08,954 Like it's gone up so much that there are people that are just like, all right, I'm going to 212 00:11:08,954 --> 00:11:09,714 take my profits now. 213 00:11:09,814 --> 00:11:10,534 Things aren't looking good. 214 00:11:10,634 --> 00:11:14,654 And you kind of get momentum in commodities pretty standardly, right? 215 00:11:14,694 --> 00:11:17,074 So I think all of those are contributing to what's happening there. 216 00:11:18,294 --> 00:11:22,234 Obviously, yeah, I won't pretend to know exactly how this is all going to play out, but that's 217 00:11:22,234 --> 00:11:23,294 the way I've been watching. 218 00:11:23,294 --> 00:11:26,574 And it has been fascinating that Bitcoin, you know, it's held up pretty damn well. 219 00:11:26,714 --> 00:11:30,214 I mean, it's funny, depending on like what time frame you want to look at, like if you 220 00:11:30,214 --> 00:11:33,874 go back six months and look what's happened since October, Bitcoin has looked awful. 221 00:11:33,954 --> 00:11:36,934 But if you look since what's happened with Iran, Bitcoin's actually looked better than 222 00:11:36,934 --> 00:11:40,674 pretty much everything else, considering it's holding up decently, although it is down today. 223 00:11:41,034 --> 00:11:45,334 So fascinating to watch, depending on what narrative you want to use, you can argue that 224 00:11:45,334 --> 00:11:47,194 it's awful at doing X, Y and Z. 225 00:11:47,294 --> 00:11:51,114 Or if you want to use a narrow time frame, it's also very good at doing X, Y, Z. 226 00:11:51,114 --> 00:12:11,374 And really, it's almost always way more complicated than that. Bitcoin, from my point of view, has continued making higher lows, which is a positive sign. Who knows what that means? But if if this thing goes on much longer, Bitcoin does trade like a risk asset for the most part. So if you see, you know, equities and all that, everything else kind of fall out of bed, I wouldn't expect Bitcoin necessarily to hold up particularly well when that happens. 227 00:12:11,374 --> 00:12:16,114 absolutely yeah i know it seems like a lot of the initial sell-off was freely front-loaded to 228 00:12:16,114 --> 00:12:21,594 bitcoin it um happened well in advance of the the iran situation but as you mentioned if equities do 229 00:12:21,594 --> 00:12:26,574 continue to roll over i would expect us to challenge those levels uh much lower um question 230 00:12:26,574 --> 00:12:31,754 for you with obviously not a geopolitics or energy expert but speaking about brent specifically the 231 00:12:31,754 --> 00:12:36,834 move is completely insane and we went from i think you know close to 70 a barrel at the end of last 232 00:12:36,834 --> 00:12:42,054 month. Now we're over 110 or close to 110. I can't check the terminal because of my VPN that 233 00:12:42,054 --> 00:12:46,954 I'm on right now. But that said, you know, speaking about demand destruction, obviously, 234 00:12:47,214 --> 00:12:52,794 like oil prices as oil goes. So so does the direction of the U.S. economy. If oil prices 235 00:12:52,794 --> 00:12:56,094 stay here for much longer, what do you think is going to happen? What do you think is going to 236 00:12:56,094 --> 00:13:01,194 happen to investor sentiment? How are people going to start allocating and things like that? 237 00:13:01,814 --> 00:13:05,674 Yeah, I mean, one one thing I've noticed is people really don't understand how energy markets work, 238 00:13:05,674 --> 00:13:09,714 particularly people commenting on Twitter because it's a global market and these things are 239 00:13:09,714 --> 00:13:13,454 different. There's different types of crude that you can get, all these different contracts. And 240 00:13:13,454 --> 00:13:16,794 people just think that because it's always tends to be correlated, that it's always going to be 241 00:13:16,794 --> 00:13:20,394 correlated. But when you have massive supply disruptions, you're going to get things going 242 00:13:20,394 --> 00:13:25,174 in different directions. Spreads are going to widen. There's different costs for when you're 243 00:13:25,174 --> 00:13:29,534 breaking things down, whether it's going to be gasoline or jet fuel or kerosene, you name it. 244 00:13:29,894 --> 00:13:32,894 All these spreads are going wild. It depends not only what's coming out of the ground, 245 00:13:32,894 --> 00:13:34,334 It depends on what refineries are doing. 246 00:13:34,934 --> 00:13:35,954 So it's honestly fascinating. 247 00:13:36,094 --> 00:13:40,854 The one thing I would say is like, if you look at gas prices and you go back to like 248 00:13:40,854 --> 00:13:43,654 2008 when everyone was really concerned, the dollar amounts that we were talking about 249 00:13:43,654 --> 00:13:44,534 then are kind of similar. 250 00:13:45,014 --> 00:13:50,334 So if you kind of inflation adjust or adjusted for wages or what have you, like fuel prices 251 00:13:50,334 --> 00:13:51,334 are really low. 252 00:13:51,594 --> 00:13:54,514 Like even right now, they're comparatively low to what we were used to seeing. 253 00:13:54,594 --> 00:13:59,394 To get to the numbers that we saw in like 2008, 2009, we're looking at like over $200 254 00:13:59,394 --> 00:14:00,774 a barrel type of stuff, right? 255 00:14:00,834 --> 00:14:02,634 I'm sure I'm not the first person to say this. 256 00:14:02,634 --> 00:14:11,754 So obviously, when you increase the cost of energy, everything goes up, the production of goods, the transportation of goods, the transportation of people like all of this is bad. 257 00:14:11,754 --> 00:14:16,154 So then all of a sudden, if your cost of doing all these different things is going up, you're going to be spending less. 258 00:14:16,234 --> 00:14:27,654 It's not good for the economy. So at some level, there's like a perfect level where like, you know, there's enough money around for these exploration, exploration and production companies to like build new wells and bring on new new supply. 259 00:14:27,654 --> 00:14:32,354 But also not enough, not so low that they can't do that or not so high that it hurts demand. 260 00:14:32,634 --> 00:14:35,374 And right now, like I said, things are not that bad. 261 00:14:35,374 --> 00:14:45,074 Like as far as prices are concerned right now, like you would think you would expect it to be worse if you told somebody that straight from use would be closed for weeks on end and there's no end in sight right now. 262 00:14:45,174 --> 00:14:48,914 You would be like, OK, things should be two hundred dollars a barrel like that might make sense. 263 00:14:48,974 --> 00:14:50,594 One hundred and twenty, hundred fifty dollars a barrel. 264 00:14:51,454 --> 00:14:56,474 Again, I'm not an expert, but I mean, if this goes on for a very long time, things could get a lot worse. 265 00:14:56,634 --> 00:15:00,274 But I would also say I think the Trump administration knows that. 266 00:15:00,354 --> 00:15:02,054 So they're definitely playing into this calculus. 267 00:15:02,054 --> 00:15:05,474 I don't know how much of it, but they have their goals, whatever they may be, and they're 268 00:15:05,474 --> 00:15:06,514 going to try to reach those goals. 269 00:15:06,614 --> 00:15:09,294 And then they're going to probably try to find some way to get to an off ramp. 270 00:15:09,554 --> 00:15:13,734 But obviously, Iran is attacking other infrastructure from Qatar and all these other Gulf states. 271 00:15:13,874 --> 00:15:15,074 And it's just not good. 272 00:15:15,194 --> 00:15:16,994 It's not good at all for the global economy. 273 00:15:18,194 --> 00:15:18,514 Certainly not. 274 00:15:18,674 --> 00:15:22,394 If this were to persist, right, looking at different sectors, obviously, you have your 275 00:15:22,394 --> 00:15:24,314 ear to the ground as far as ETFs are concerned. 276 00:15:24,614 --> 00:15:28,054 How do investors tend to behave during periods of tremendous uncertainty? 277 00:15:28,054 --> 00:15:31,674 this. Obviously, during the initial shock, like the escalation we saw two days ago, 278 00:15:32,054 --> 00:15:36,594 the correlations jump to one, right? Everybody sells, everybody wants to get into cash. 279 00:15:36,934 --> 00:15:41,394 But as these things persist in months, weeks turn into months and so on and so forth, 280 00:15:41,654 --> 00:15:45,534 where do investors tend to hide out? So right now, I can tell you where the money is going 281 00:15:45,534 --> 00:15:50,614 in ETS for the most part. One, a lot of people had done a hideout in cash. If you go back to COVID, 282 00:15:50,794 --> 00:15:55,314 everybody was selling anything they could to get to cash, even bonds were not doing great 283 00:15:55,314 --> 00:15:57,434 because people just wanted cold, hard cash. 284 00:15:57,494 --> 00:15:58,234 And that's kind of what we're seeing. 285 00:15:58,314 --> 00:15:59,474 The dollar is doing really well. 286 00:15:59,874 --> 00:16:01,734 But if we're looking as far as investments go, 287 00:16:01,874 --> 00:16:03,394 one, people are using put options heavily. 288 00:16:03,574 --> 00:16:05,594 There's a lot of put options being bought right now. 289 00:16:05,834 --> 00:16:09,054 Two, we're seeing, if you look over the last, 290 00:16:09,214 --> 00:16:12,114 call it three to four years, basically since COVID, 291 00:16:12,654 --> 00:16:14,634 tech sector ETFs on the equity side 292 00:16:14,634 --> 00:16:16,914 was the number one sector getting all of the money. 293 00:16:17,054 --> 00:16:18,254 Like every quarter, without fail, 294 00:16:18,254 --> 00:16:20,514 tech sector was the number one quarter for ETF flows 295 00:16:20,514 --> 00:16:21,754 if you were to break it into sectors. 296 00:16:22,254 --> 00:16:25,154 And then all of a sudden, in the third quarter of 2025, 297 00:16:25,314 --> 00:16:30,914 we started seeing some other sectors do well. And then the fourth quarter, so through December, 298 00:16:31,054 --> 00:16:34,594 through the end of 2025, it happened even further, but tech was still number one. 299 00:16:34,914 --> 00:16:39,294 This year, tech is number right now. So far in the first quarter, we're almost at the end of the 300 00:16:39,294 --> 00:16:44,134 first quarter. We only got 11-ish days left, 12-ish days left. The leading sector pulling 301 00:16:44,134 --> 00:16:49,894 in money is energy, then industrials, which is also defense and things like that, and then materials, 302 00:16:50,094 --> 00:16:54,534 so metals and mining and other real assets. And then the fourth sector, as far as we track it, 303 00:16:54,534 --> 00:16:59,694 is thematic ETFs. And within there, it's infrastructure, it's natural resources. So 304 00:16:59,694 --> 00:17:03,954 basically, it's like people are trading, they're not buying, you know, bits and technology and the 305 00:17:03,954 --> 00:17:08,434 mags. They're buying real assets, things that move atoms and stuff like that. So that's where people 306 00:17:08,434 --> 00:17:11,454 are going to. Usually, they also tend to go to utilities, but they're not doing that right now. 307 00:17:11,494 --> 00:17:14,994 It probably has something to do with rates and stuff like that. But for the most part, it's been 308 00:17:14,994 --> 00:17:20,354 fascinating because, like I said, tech has been the number one sector for flows forever. And right 309 00:17:20,354 --> 00:17:24,134 now, it's energy, obviously, benefiting from what's going on, industrials, materials, and then 310 00:17:24,134 --> 00:17:27,934 the thematic ETFs doing well are things that are kind of correlated or go across those three 311 00:17:27,934 --> 00:17:34,434 different sectors, honestly. Perfect. Speaking specifically about atoms and sort of the software 312 00:17:34,434 --> 00:17:39,634 apocalypse that we began witnessing late last year and we're still sort of witnessing to some degree, 313 00:17:40,714 --> 00:17:43,994 couple of the investor behavior that you just spoke about, right? People tend to hide out 314 00:17:43,994 --> 00:17:49,914 in energy and real things rather than sort of in the bits. Do you think that this is a shift that's 315 00:17:49,914 --> 00:17:55,994 going to sort of dominate 2026 and into 2027 where investors are more so focused on real tangible 316 00:17:55,994 --> 00:18:01,234 things rather than sort of software products or even things like Bitcoin maybe and the rest of 317 00:18:01,234 --> 00:18:06,814 the crypto space or do you think this is something that's more temporary yeah I don't know it kind of 318 00:18:06,814 --> 00:18:10,494 depends on what's going to happen here with Iran and the Middle East I would say first of all but 319 00:18:10,494 --> 00:18:16,034 I will say we've been seeing a broadening out from the top of the the you know the mag 7 the 320 00:18:16,034 --> 00:18:20,094 top of the U.S. stock market, really. We saw it with international stocks doing way better last 321 00:18:20,094 --> 00:18:23,594 year, particularly after the tariff tantrum. International ETFs were taking a lot of money. 322 00:18:24,014 --> 00:18:27,974 Small cap and mid cap ETFs were catching up. There's basically been this broadening out of 323 00:18:27,974 --> 00:18:32,074 the U.S. stock market. So maybe not as much money was going to the large names, but it was funneling 324 00:18:32,074 --> 00:18:36,774 down to these other areas. So we're seeing valuations come up in other areas outside of tech. 325 00:18:37,034 --> 00:18:42,594 So I think broadly speaking, that's a good thing. It's been like 15 years that people are like, 326 00:18:42,594 --> 00:18:48,354 the tech sector is too big. The top of the index is too top heavy. And now we're seeing a broadening 327 00:18:48,354 --> 00:18:52,254 out and people are freaking out about it. And I'm kind of like, however it's happening, it's 328 00:18:52,254 --> 00:18:55,494 probably a decent thing that we're seeing this broadening out into other areas of the market. 329 00:18:55,654 --> 00:19:01,734 As far as Bitcoin goes, you're right. One that I wrote earlier this year about how Bitcoin has been 330 00:19:01,734 --> 00:19:07,014 scarily correlated with software stocks due to SaaSpocalypse, if you will. Bitcoin, it's kind of 331 00:19:07,014 --> 00:19:10,454 like gold in the sense that sometimes it's really correlated to one thing and sometimes it's not 332 00:19:10,454 --> 00:19:13,454 correlated at all. So for the first few months of this year and towards the end of last year, 333 00:19:13,474 --> 00:19:17,774 it was very correlated to software stocks. I'm sure that will stop. It's kind of slowed down now. 334 00:19:18,314 --> 00:19:21,274 What was interesting to me is initially like the software stocks are getting bought 335 00:19:21,274 --> 00:19:25,734 hand over fist because everyone's trying to buy the dip and people weren't really buying the dip 336 00:19:25,734 --> 00:19:28,334 in the Bitcoin ETFs because I think they were just afraid it was going to go down further. 337 00:19:28,614 --> 00:19:32,354 But that changed at the end of February. And now we've seen a decent amount of money come back into 338 00:19:32,354 --> 00:19:36,994 the Bitcoin ETFs, whether it's people rebalancing, allocating, trying to call a bottom, at least a 339 00:19:36,994 --> 00:19:41,574 short-term bottom. That's what the flows were telling us. But I won't pretend to know. 340 00:19:42,394 --> 00:19:45,894 If I knew the answer to that question, I probably wouldn't be an analyst. I'd be a portfolio 341 00:19:45,894 --> 00:19:50,214 manager. My guess is we're going to see a consistent broadening out here. But I will say 342 00:19:50,214 --> 00:19:55,214 there are names in these other sectors where their PE ratios and forward valuations are getting 343 00:19:55,214 --> 00:19:59,354 pretty high themselves. So it'll be interesting to see how investors handle that and what happens 344 00:19:59,354 --> 00:20:04,174 with their earnings over the coming year. Right. Absolutely. Talk a little bit about the makeup 345 00:20:04,174 --> 00:20:09,974 specifically of those who are purchasing the crypto ETFs now specifically and why the behavior 346 00:20:09,974 --> 00:20:17,694 in ETF AUM differs so substantially from actual spot Bitcoin price and in what institutions see 347 00:20:17,694 --> 00:20:22,154 that sort of, I guess, retail doesn't see. All right. So I have a lot of thoughts on this. 348 00:20:22,554 --> 00:20:28,014 So you have to stop me from rambling. I apologize in advance. But one, as you said, 349 00:20:28,034 --> 00:20:32,594 if you look at the on-chain metrics like Checkmate and all these other people that are writing a 350 00:20:32,594 --> 00:20:36,154 Rational Root, all these people writing about on-chain metrics. I'm not one of those people. 351 00:20:36,454 --> 00:20:41,314 I look to other people through their expertise. It's the OGs that we're selling. It was like, 352 00:20:41,374 --> 00:20:45,214 people were like, oh, why is the price going down? It's like the call is coming from inside 353 00:20:45,214 --> 00:20:49,674 the house. Look at the on-chain metrics. People are dumping their coins. And good for them. I mean, 354 00:20:49,674 --> 00:20:52,654 it's people with hundreds, if not thousands of Bitcoin that are selling some of them, 355 00:20:52,714 --> 00:20:57,614 not all of them, at least as far as we can tell, onto exchanges, right? They're taking some of the 356 00:20:57,614 --> 00:21:13,108 profits Ironically with the ETFs we have seen net selling Like I said there were outflows in in the fourth quarter So investment advisors and hedge fund managers are the largest note holders that we know who hold the ETFs And they sold a little bit in the fourth quarter I suspect they also sold a decent amount for the first half of the first quarter of this year 357 00:21:13,188 --> 00:21:19,688 2026. Though we won't ever know. We just get quarterly answers. We know what they held on 358 00:21:19,688 --> 00:21:26,428 December 31st, 2025. And we're going to know what they held on March 31st, 2026. But we get it on a 359 00:21:26,428 --> 00:21:31,368 a month and a half delay, 45-day delay. So when we're looking at this stuff, it's like we don't 360 00:21:31,368 --> 00:21:35,308 actually know what's happening real time, but I can kind of back into it. And I will say that 361 00:21:35,308 --> 00:21:42,668 the numbers that we do have at the end of September 2025, we knew the number was like, 362 00:21:42,668 --> 00:21:48,468 we knew 27% of the holders of Bitcoin ETF assets here in the US. That number's dropped to like 25% 363 00:21:48,468 --> 00:21:52,788 because we saw some net outflows. So what the real answer is, most of the holders of these 364 00:21:52,788 --> 00:21:56,968 things are retail investors. It's not necessarily the advisors. It's not the hedge fund doing the 365 00:21:56,968 --> 00:22:01,708 basis trade or making markets in these things. For the most part, it's retail investors that 366 00:22:01,708 --> 00:22:05,088 are holding these things. And they're the ones that are diamond hands. And like I said, I think 367 00:22:05,088 --> 00:22:08,748 for the most part, people who are seeking out these ETFs in their brokerage accounts, one, 368 00:22:08,848 --> 00:22:13,128 know this thing is prone to massive sell-offs and two, are right-sizing in their portfolio. 369 00:22:13,128 --> 00:22:17,688 Again, it's probably not massive, massive portions of their portfolio. And if it is, 370 00:22:17,728 --> 00:22:22,148 they know what they're buying at least. So I think all of those things are contributing to 371 00:22:22,148 --> 00:22:26,628 what we're seeing here. But if we look at one second, I have this data in front of me. 372 00:22:27,128 --> 00:22:34,728 So Bitcoin, we know there are the Bitcoin ETFs, they're almost 2413F filers. And it accounts for 373 00:22:34,728 --> 00:22:42,728 like 8% of the market cap of Bitcoin as of the end of 2025. And we know 24 to 25% of the holders. 374 00:22:42,988 --> 00:22:47,468 So if you look down the line of Ethereum, Solana and XRP, the numbers kind of fall off a cliff as 375 00:22:47,468 --> 00:22:53,888 well. But ironically enough, XRP is heavily bought by retail, not 13F filers. Solana, on the other 376 00:22:53,888 --> 00:22:57,888 hand, is heavily owned by institutions. We know 50% of the Solana ETF holders by institutions. 377 00:22:58,508 --> 00:23:04,748 And Ethereum is about 27%, so more similar to Bitcoin. But all of those things, they don't 378 00:23:04,748 --> 00:23:08,828 really give you exactly a clear-cut picture of exactly what's going on, but it's good to 379 00:23:08,828 --> 00:23:13,848 kind of gauge exactly who's buying these things. Absolutely. And it sort of makes sense intellectually 380 00:23:13,848 --> 00:23:18,008 why, you know, retail holders who are buying spot Bitcoin have such a fundamentally different 381 00:23:18,008 --> 00:23:22,848 investment behavior than those who are buying ETFs, right? Those who are buying the ETFs are 382 00:23:22,848 --> 00:23:26,528 passively allocating every two weeks into their retirement account. They're not planning on 383 00:23:26,528 --> 00:23:30,188 touching these things and getting a penalty for the next several decades, you know, and they don't 384 00:23:30,188 --> 00:23:33,408 trade in and out of these things. And they often take up a really small portion of their portfolio. 385 00:23:33,408 --> 00:23:37,208 Whereas like, like you mentioned earlier, the retail investors buying spot Bitcoin, throwing 386 00:23:37,208 --> 00:23:42,168 it into their cold card or what have you, they're usually putting 50, 60, 70% of their net worth 387 00:23:42,168 --> 00:23:47,188 potentially into it. And so even though they like to speak about being diamond handed, 388 00:23:47,408 --> 00:23:51,648 the large amount of their net worth that's in, it sort of forces them to become forced 389 00:23:51,648 --> 00:23:55,328 sellers during sell-offs like these. Yeah. And I would also say there are plenty of 390 00:23:55,328 --> 00:23:58,848 people trading these ETFs heavily, right? The volume on these things is impressive. 391 00:23:59,328 --> 00:24:04,588 The options volume in IBIT alone is extremely impressive. It's extremely liquid market. And 392 00:24:04,588 --> 00:24:07,468 hedge funds are using these things pretty heavily. They're making markets in them. So 393 00:24:07,468 --> 00:24:11,648 there is a lot of trading. It's just that it's not the bulk of the holders, I guess, 394 00:24:11,648 --> 00:24:16,168 is what I would say. Right, for sure. As far as hedge funds are concerned, let's chat about that 395 00:24:16,168 --> 00:24:20,888 for a little bit and talk about specifically the basis trade. Like taking a look at the Bitcoin 396 00:24:20,888 --> 00:24:26,948 ETFs or just the other crypto ETPs more generally is one of the reasons that they are so stable and 397 00:24:26,948 --> 00:24:31,468 the AUM doesn't really decline all that much is because they're using these to create, to make 398 00:24:31,468 --> 00:24:36,348 markets, to do things like the basis trade. And also as far as like the makeup of the holders for 399 00:24:36,348 --> 00:24:40,808 these assets is concerned, what percentage would you say is held specifically by hedge funds versus 400 00:24:40,808 --> 00:24:47,228 everybody else. Okay. So hedge funds are pretty, they're the second largest holder. So they, 401 00:24:47,828 --> 00:24:56,768 so I'll give you investment advisors as of the end of 2025 held 14 billion and hedge funds were 402 00:24:56,768 --> 00:25:04,208 6.6 billion. So they're a pretty decent size holder of these things. Whereas the ETS were just over 403 00:25:04,208 --> 00:25:12,488 $100 billion at the time, right? So as far as the basis yield goes, ironically, I think it has 404 00:25:12,488 --> 00:25:19,848 near zero impact right now because the basis is so low. Bitcoin basis, when I last wrote about this, 405 00:25:19,908 --> 00:25:27,868 which was literally yesterday, is like 6%, right? At the end of 2024 and into 25 and plenty of times 406 00:25:27,868 --> 00:25:32,208 during 25, that number was well into the double digits. Hedge funds are going to be interested in 407 00:25:32,208 --> 00:25:36,948 using these ETS for that basis trade to arbitrage those yields when they're in the double digits. 408 00:25:36,948 --> 00:25:41,208 They're not really here in the single digits. So a lot of the outflows that we've seen, I think, 409 00:25:41,288 --> 00:25:46,328 has been because people are like, all right, now this thing is going below 5% on a basis yield 410 00:25:46,328 --> 00:25:49,368 basis. There's no reason even for a hold of this because we can get risk-free yield in a treasury 411 00:25:49,368 --> 00:25:55,808 at 4% roughly. So they're not concerned with going through this trade. And the same thing is true for 412 00:25:55,808 --> 00:26:01,468 Ethereum. Same thing is true for Solana and XRP. They formerly had massive basis yields. They do 413 00:26:01,468 --> 00:26:06,068 not anymore. So I think they have almost virtually zero impact right now on what's going in the flows, 414 00:26:06,128 --> 00:26:10,488 aside from probably contributing to some of the outflows that we saw from Bitcoin and definitely 415 00:26:10,488 --> 00:26:15,668 from ETH. ETH had its yield was a little higher going from the end of the summer into the fall 416 00:26:15,668 --> 00:26:21,008 of this year. So I think some of the outflows from Bitcoin, from ETH, the fact that they are now 417 00:26:21,008 --> 00:26:24,688 staying low, lower for longer, I think that contributed to some of the outflows from the 418 00:26:24,688 --> 00:26:28,948 hedge funds. Gotcha. Yeah, that certainly makes sense. I want to ask you about Jane Street. 419 00:26:28,948 --> 00:26:35,488 One of the it's for some reason, whenever Bitcoin's price declines, everybody wants to create a story as to why it's happening. 420 00:26:35,788 --> 00:26:44,748 And to some degree, it makes sense, like it's sort of a traumatic response to what happened in 2022 when we had a million and one successive explosions from different bucket shops all around the world. 421 00:26:45,288 --> 00:26:48,888 But in 2026, it just seems to be in 2025 into 2026. 422 00:26:49,168 --> 00:26:51,488 It just seems to be good old fashioned selling, de-risking event. 423 00:26:51,588 --> 00:26:55,848 But people are trying to create a scapegoat, a bogeyman as to why Bitcoin has underperformed everything else. 424 00:26:56,548 --> 00:27:01,728 So can you talk a little bit about what Jane Street actually does and sort of dispel this myth? 425 00:27:01,768 --> 00:27:02,808 If you believe it's a myth. 426 00:27:02,868 --> 00:27:06,728 Otherwise, if you believe that there was actual price suppression going on, please feel free to explain. 427 00:27:07,068 --> 00:27:10,228 But for the viewers who may not be aware, talk a little bit about that. 428 00:27:10,988 --> 00:27:13,268 Yeah. So, I mean, for the most part, they're market makers. 429 00:27:13,268 --> 00:27:15,208 They do have some prop money, I believe. 430 00:27:15,548 --> 00:27:18,808 But what they're doing is they're just putting constant bids and ask out in the market. 431 00:27:19,428 --> 00:27:25,528 It is weird that mid-morning, almost every day, you tend to see this massive dump and people are calling it the Jane Street dump. 432 00:27:25,848 --> 00:27:37,008 I won't say that. I mean, maybe there is somebody out there kind of suppressing price. But for the most part, like I said, if you look on chain, people are dumping their coins. Like it's supply and demand. If there's enough people, the price will meet it, right? 433 00:27:37,008 --> 00:27:50,448 So one, they have like extremely advanced technology to do to make a lot of money just constantly being out in the market offering to buy and offering to sell at prices that are slightly far apart, like barely far apart. 434 00:27:50,528 --> 00:27:52,328 So they earn only that little bit in the center. 435 00:27:53,048 --> 00:28:04,208 And it's almost a money printing machine for them and other people who are very good at it, namely Virtu and Citadel and GTS Securities and some of these other firms that are out there making markets in anything. 436 00:28:04,868 --> 00:28:11,088 So, yeah, I'm not a buyer of this idea that Jane Street is, you know, causing Bitcoin's price suppression. 437 00:28:11,408 --> 00:28:15,368 Ironically, Eric Bouchoudis, my boss, is a little more like tinfoil haddish on this. 438 00:28:15,528 --> 00:28:16,468 But, yeah, I don't know. 439 00:28:16,908 --> 00:28:18,328 They're out there to make markets. 440 00:28:18,428 --> 00:28:21,168 They're constantly going to be offering to buy, constantly going to be offering to sell. 441 00:28:21,468 --> 00:28:24,628 And those prices are going to be a little bit far, like just a little bit apart. 442 00:28:24,628 --> 00:28:26,288 And they're going to make the difference in the middle there. 443 00:28:26,288 --> 00:28:27,628 And I just don't know. 444 00:28:27,628 --> 00:28:33,848 maybe there's some people within Jane Street that are just getting even more selfish and trying to 445 00:28:33,848 --> 00:28:37,748 get make as much money as possible. But yeah, I don't know. I just can't imagine that they would 446 00:28:37,748 --> 00:28:41,848 be doing this, but I've been wrong plenty of times before. It made no sense to me why Sam was so 447 00:28:41,848 --> 00:28:46,368 greedy, SBF. So maybe there are people out there, but I'm going to say, yeah, I don't necessarily 448 00:28:46,368 --> 00:28:51,848 believe this whole idea personally. I'll have to have Eric on the show next so we can both wear 449 00:28:51,848 --> 00:28:56,988 tinfoil hats and we'll chat about that. Fantastic. Well, James, one of the other things, 450 00:28:56,988 --> 00:29:02,068 sort of piggybacking off of this, and we talk about software stocks briefly, is what has driven 451 00:29:02,068 --> 00:29:06,888 the correlation between Bitcoin and software stocks? And maybe in your view, what has kind 452 00:29:06,888 --> 00:29:11,748 of driven the sell-off in Bitcoin more explicitly? Some folks said it was quantum risk, but if it was 453 00:29:11,748 --> 00:29:15,768 actually quantum risk, then Bitcoin would have, quantum stocks probably would have soared while 454 00:29:15,768 --> 00:29:19,408 Bitcoin declined, but both of them were correlated to one another. So it's not necessarily quantum 455 00:29:19,408 --> 00:29:25,008 risk. And it's not, you know, Bitcoin native selling exclusively either. It's not something 456 00:29:25,008 --> 00:29:26,828 that happened on October 6th. 457 00:29:26,828 --> 00:29:29,628 Now there has been some sort of systematic selling 458 00:29:29,628 --> 00:29:31,908 because some sort of market-making shop, 459 00:29:32,008 --> 00:29:34,868 Wintermute was the most commonly cited one, 460 00:29:35,148 --> 00:29:35,948 having blown up, right? 461 00:29:35,968 --> 00:29:37,468 So it's not like a systematic selling regime. 462 00:29:38,068 --> 00:29:39,168 What do you think has caused this? 463 00:29:39,188 --> 00:29:40,988 Is it just pure de-risking Bitcoin 464 00:29:40,988 --> 00:29:42,728 still being treated as a risk on asset 465 00:29:42,728 --> 00:29:43,948 or is it something deeper than that? 466 00:29:44,868 --> 00:29:45,928 So there's a few theories here. 467 00:29:46,028 --> 00:29:48,248 One, obviously, people have been saying 468 00:29:48,248 --> 00:29:50,108 it's a high beta tech stock, Bitcoin that is, 469 00:29:50,168 --> 00:29:51,168 for a long time now. 470 00:29:51,848 --> 00:29:53,028 Some of it has to do with like, 471 00:29:53,128 --> 00:29:54,888 if you're holders of the same things, 472 00:29:54,888 --> 00:30:01,328 If you're highly levered in mag seven and software stocks and you're a big believer in Bitcoin, you know, Silicon Valley, those types of things. 473 00:30:01,328 --> 00:30:08,428 If you're all holding the same stuff, if one goes down, the others are likely to go down because they're going to have to sell to, you know, handle whatever they have to handle. 474 00:30:08,748 --> 00:30:09,668 That's one theory. 475 00:30:10,368 --> 00:30:12,288 I guess that's possibly true. 476 00:30:12,408 --> 00:30:16,548 I think quantum actually is affecting because I get questions on it from institutional players. 477 00:30:16,788 --> 00:30:21,848 So maybe they're not causing people to, you know, dump all their Bitcoin, but it might be hindering potential demand. 478 00:30:21,848 --> 00:30:31,948 And so there's plenty of other people out there who have talked about this that, you know, people aren't going to, you know, if they were considering putting this as an allocation of their portfolio, maybe they're not like, like I said, dumping their Bitcoin. 479 00:30:32,068 --> 00:30:39,848 Maybe like I'm going to wait off until I know more about this quantum risk or, you know, Bitcoin Core decides to like do something with BIPs 360 or what have you. 480 00:30:39,888 --> 00:30:43,828 Right. The other part of it is obviously something bad happened on October 10th. 481 00:30:43,828 --> 00:30:49,128 You can blame whoever you want. You can say that it was Binance's fault for the way to index pricing on some different assets. 482 00:30:49,688 --> 00:30:50,328 Things blew up. 483 00:30:50,428 --> 00:30:52,108 People had hedges on different exchanges. 484 00:30:52,308 --> 00:30:53,588 They got stopped out of trades here. 485 00:30:53,988 --> 00:30:56,048 And so that means their hedge wasn't on when they were going down. 486 00:30:56,108 --> 00:30:57,408 They thought they were going to be fine. 487 00:30:57,528 --> 00:31:01,968 So whether or not Wintermute themselves or just people in general who trade on leverage 488 00:31:01,968 --> 00:31:03,948 and stuff got blown up, it doesn't really matter. 489 00:31:04,028 --> 00:31:04,768 People got blown up. 490 00:31:04,768 --> 00:31:05,728 And I think that hurt things. 491 00:31:06,248 --> 00:31:08,968 The other part of it is like there's still plenty of people out there that believe in 492 00:31:08,968 --> 00:31:10,068 the four-year cycle completely. 493 00:31:10,068 --> 00:31:13,128 And so at some point, it's like a self-fulfilling prophecy. 494 00:31:13,268 --> 00:31:17,008 If enough people believe that in the four-year cycle and it's going to happen and all those 495 00:31:17,008 --> 00:31:20,748 other things, October 10th, all the other stuff I talked about just contribute to it combined with 496 00:31:20,748 --> 00:31:26,188 all of that. I think there's some truth along all of those things as to what caused the price 497 00:31:26,188 --> 00:31:31,648 collapse. But man, it was an aggressive, aggressive collapse. Talk about taking the escalator up and 498 00:31:31,648 --> 00:31:47,922 the elevator down So yeah I won pretend to know exactly what caused this but some of it is just like this asset tends to trade on a very technical and momentum way And momentum was going down and it just continued to go down And there was just no stopping it at that point And then you take into account all those other things I 499 00:31:47,922 --> 00:31:51,462 just talked about. Those are all my theories. That's kind of what I think has happened. I don't 500 00:31:51,462 --> 00:31:56,802 think it was one single thing. I just think it was all of those things. And we're in a bear market 501 00:31:56,802 --> 00:32:00,902 right now. And I mean, how cold is this winter going to be? I don't know. I won't pretend to 502 00:32:00,902 --> 00:32:04,662 know. I won't know how long it's going to be, but bear markets aren't just measured in price. 503 00:32:04,742 --> 00:32:09,082 They tend to have, you know, this sideways to down length of time. It takes months, 504 00:32:09,082 --> 00:32:13,982 if not longer before things really settle. Maybe we have already seen the bottom. At least we have 505 00:32:13,982 --> 00:32:18,682 near term, but I'm not going to pretend to know. Fantastic. One thing I do want to ask you 506 00:32:18,682 --> 00:32:22,562 specifically about Bitcoin's price action, not where we're going, but what may be happening, 507 00:32:22,762 --> 00:32:26,462 you know, 5, 10, 15 years from now, the way that this asset's going to behave. You know, 508 00:32:26,482 --> 00:32:30,462 it wasn't five years ago that the Larry Finks of the world were saying that Bitcoin was, 509 00:32:30,462 --> 00:32:33,902 you know, this terrible, horrible asset and you should avoid it. And Brian Armstrong was sort of 510 00:32:33,902 --> 00:32:38,342 one of the biggest advocates for BTC and a bunch of other stuff. But these days, it seems a little 511 00:32:38,342 --> 00:32:43,162 bit flipped. It seems like the biggest proponents and biggest advocates of Bitcoin and other crypto 512 00:32:43,162 --> 00:32:48,382 products are not the heads of Bitcoin and crypto specific companies, but they're institutional 513 00:32:48,382 --> 00:32:54,482 leaders, right? And given that, given that this is the sort of going trend, obviously, it has had 514 00:32:54,482 --> 00:32:58,962 some sort of impact on Bitcoin's price action at the margin. We saw a much more stable bull market 515 00:32:58,962 --> 00:33:00,422 than we ever had before. 516 00:33:00,962 --> 00:33:02,962 And even though we did see 517 00:33:02,962 --> 00:33:04,602 a pretty substantial price decline, 518 00:33:04,722 --> 00:33:07,502 most of the ETF cohort sort of hung tough there. 519 00:33:07,822 --> 00:33:11,162 Over the next 5, 10, 15 years, what have you, 520 00:33:11,682 --> 00:33:14,682 obviously, as the ETF holders 521 00:33:14,682 --> 00:33:17,062 become a larger proportion of the buyers 522 00:33:17,062 --> 00:33:17,902 on any given day, 523 00:33:17,982 --> 00:33:20,502 a larger proportion of the actual holders of this asset, 524 00:33:20,862 --> 00:33:22,842 it's going to become a more stable asset, right? 525 00:33:22,922 --> 00:33:25,262 That's been evidence over the last couple of years. 526 00:33:25,462 --> 00:33:27,402 And if this persists, it certainly will continue. 527 00:33:27,402 --> 00:33:45,622 Are you also of the belief that given the higher prominence, if you will, of these ETF holders as it declines in volatility as a result of that, do you think that that's also what's going to change Bitcoin's correlations so that it's no longer traded like a risk on high beta tech stock? 528 00:33:45,822 --> 00:33:53,542 Or is there something else in your mind that would have to occur in order for Bitcoin to finally break its correlations and trade differently, right? 529 00:33:53,622 --> 00:33:56,042 Trade more in line with what its monetary properties allow it to. 530 00:33:56,042 --> 00:34:22,602 Yeah, I mean, one, the quote you're thinking of from Larry Fink is an index of money laundering. Obviously, he's changed his tune there. And one thing, when you ask about who are the holders of these things and what's happening, I do want to point out, like, I just came back from an ETF exchange conference. It's Exchange ETF. It's a conference for the ETF industry. And so many people were talking about tokenizing ETFs, tokenizing stock, you know, stable coins, changing the rails, changing the way you're tracking who holds these things, your custody. 531 00:34:23,282 --> 00:34:27,502 Issuers are looking, talking with index providers in the crypto space. 532 00:34:28,102 --> 00:34:35,762 Things are firing on all cylinders from the TradFi point of view into building in this space, not just with Bitcoin, but also crypto more broadly. 533 00:34:36,082 --> 00:34:40,182 So I think all of those things are net positive for the crypto industry. 534 00:34:40,322 --> 00:34:45,882 Obviously, the Clarity Act will make that a lot cleaner if they can get that passed through, which Bloomberg Intelligence is pretty positive on. 535 00:34:45,882 --> 00:34:48,762 They think it could happen in this year. 536 00:34:49,242 --> 00:34:51,342 We're 60% odds, I think, technically. 537 00:34:51,342 --> 00:34:57,122 my colleague down in DC. So that'll be positive. And then what was the main point of your question? 538 00:34:57,222 --> 00:34:59,562 I forgot where I was going with that. Do you think that it's going to, 539 00:34:59,702 --> 00:35:03,382 like the higher amount of ownership from this ECA? I remember now. 540 00:35:03,702 --> 00:35:06,642 It's going to be the thing that changes its correlations or will it have to be something 541 00:35:06,642 --> 00:35:10,342 else? Yeah. When I wrote that piece, I was talking about before where I talked about the 542 00:35:10,342 --> 00:35:16,002 high correlation to SaaS software stocks. I basically also included the thing where like, 543 00:35:16,042 --> 00:35:20,542 it has all of these properties that are as good, if not better than gold in every metric you could 544 00:35:20,542 --> 00:35:26,982 think of aside from being a stable value or at least having a lot less volatility. 545 00:35:27,482 --> 00:35:29,422 And the volatility is going down over time. 546 00:35:30,122 --> 00:35:32,162 I don't know if it'll ever get to that level. 547 00:35:32,382 --> 00:35:36,302 I think it will always have some level of volatility, which is honestly a good thing. 548 00:35:36,382 --> 00:35:40,022 People view this more as a portfolio diversifier than anything, at least in my world. 549 00:35:40,562 --> 00:35:44,442 And like I said, if you're rebalancing when it goes way up or way down, that's technically 550 00:35:44,442 --> 00:35:44,742 good. 551 00:35:44,822 --> 00:35:47,482 You get good risk adjusted returns, things like Sharpe ratio. 552 00:35:47,662 --> 00:35:49,522 So all of that, I think, is positive. 553 00:35:49,822 --> 00:35:54,642 Volatility is going down, which again, I think is ultimately positive for the gold narrative. 554 00:35:54,742 --> 00:35:55,922 But people like to trade this thing. 555 00:35:56,002 --> 00:35:56,642 It's a risk asset. 556 00:35:56,742 --> 00:35:57,602 There's only 21 million. 557 00:35:57,702 --> 00:35:58,522 So it's cap supply. 558 00:35:58,702 --> 00:36:03,662 So there's not a lot of the only way you can adjust supply to meet demand is or vice versa, 559 00:36:03,902 --> 00:36:06,262 adjust demand to be supply is by selling coins. 560 00:36:06,342 --> 00:36:09,102 There's only 1 million coins left to be mined or less now. 561 00:36:09,102 --> 00:36:12,762 So in other commodities, you can drill more, go to new places and build new things. 562 00:36:12,822 --> 00:36:16,522 It might take months or years to get that online, but you can do it. 563 00:36:16,522 --> 00:36:21,702 there is no way aside from other people selling the assets they already own on exchange to adjust 564 00:36:21,702 --> 00:36:24,982 to those things. So I think anything that's going to have a cap supply is going to have some level 565 00:36:24,982 --> 00:36:30,722 of volatility. But yeah, overall, like you said, we never had a blow off top, which makes me feel 566 00:36:30,722 --> 00:36:35,382 somewhat possible that we won't have like a blow off collapse down below that 70% level I was 567 00:36:35,382 --> 00:36:40,302 talking about earlier. But I mean, I guess it remains to be seen, but you're right. No matter 568 00:36:40,302 --> 00:36:46,542 how much you or I or even BlackRock argue that this asset is a digital store value, it's a hedge 569 00:36:46,542 --> 00:36:51,402 against currency debasement, the market doesn't, they don't care. The market doesn't give a shit, 570 00:36:51,762 --> 00:36:57,682 right? It's down, it's down 50% and they don't care. So until the market, you know, starts to 571 00:36:57,682 --> 00:37:03,842 agree with UI, BlackRock, Bitcoin maxis, you name it, it's going to be traded like a risk asset, 572 00:37:03,942 --> 00:37:07,302 at least in some way. And honestly, right now it doesn't matter because it's still not that 573 00:37:07,302 --> 00:37:11,962 correlated to stocks. Yes, it's somewhat correlated. It goes up to, you know, 0.3%, I mean, 30%. 574 00:37:11,962 --> 00:37:15,422 For the most part, it sits around 20, 25%. If you look over the last 10 years, 575 00:37:15,862 --> 00:37:20,802 that's a pretty uncorrelated asset to risk assets in general. It has plenty of inusyncratic, 576 00:37:21,262 --> 00:37:25,702 unique things that happen to it that affect what happens. So yes, under the surface, 577 00:37:25,862 --> 00:37:30,222 all the ETF holders might cause it to be slightly more correlated. But I mean, the data isn't 578 00:37:30,222 --> 00:37:34,102 showing that it's like some massive correlation and it does everything over the entire time the 579 00:37:34,102 --> 00:37:34,722 ETS have been out. 580 00:37:34,922 --> 00:37:35,922 It's correlated to tech stocks. 581 00:37:36,022 --> 00:37:36,522 That's not true. 582 00:37:37,002 --> 00:37:41,062 There's been plenty of times where it showed up as pieces of stability like it is right now. 583 00:37:41,902 --> 00:37:42,282 Very well said. 584 00:37:42,462 --> 00:37:42,842 Very well said. 585 00:37:43,002 --> 00:37:44,862 I want to ask you a little bit about index rebalancing. 586 00:37:45,042 --> 00:37:48,082 Tomorrow, the S&P 500 is slated to rebalance, I believe. 587 00:37:48,602 --> 00:37:51,262 So talk a little bit about the significance of that. 588 00:37:51,342 --> 00:37:54,142 I know you had recently put out a piece about it if you want to touch on it. 589 00:37:55,142 --> 00:37:55,382 Yeah. 590 00:37:55,382 --> 00:38:02,782 I mean, there's over $10 trillion in passive products that track the S&P 500. 591 00:38:02,782 --> 00:38:08,022 So any sort of changes going into or out of that index can move a lot of money around. 592 00:38:08,742 --> 00:38:12,682 So two of the names going in, they're getting upgraded from the S&P mid cap, are related. 593 00:38:12,902 --> 00:38:18,722 They're basically, they got investments from NVIDIA because they're rated to the data center supply chain and things like that. 594 00:38:19,122 --> 00:38:20,182 So that's two things going on. 595 00:38:20,282 --> 00:38:21,262 Vertiv is another company. 596 00:38:21,382 --> 00:38:28,602 And actually this company called EchoStar is going in, which is basically kind of, most of its value comes from its holding in SpaceX, which is unique. 597 00:38:28,722 --> 00:38:30,022 I don't even know why they're going in there. 598 00:38:30,022 --> 00:38:33,862 But yeah, on March 20th is what's known as the triple witching. 599 00:38:33,962 --> 00:38:38,482 It's when a bunch of options contracts settle, futures options, futures themselves. 600 00:38:38,742 --> 00:38:40,222 A whole bunch of stuff is going to happen tomorrow. 601 00:38:40,322 --> 00:38:41,902 And the S&P 500 is rebalancing. 602 00:38:42,242 --> 00:38:43,142 All these things are going to happen. 603 00:38:43,222 --> 00:38:45,262 We're going to see massive, massive amounts of volume. 604 00:38:45,322 --> 00:38:46,802 And you take into account what I was talking about before. 605 00:38:46,882 --> 00:38:51,302 There's a lot of put options out there in the market on the index, on stocks themselves, 606 00:38:51,382 --> 00:38:52,082 all of these things. 607 00:38:52,802 --> 00:38:56,122 It's going to be a fascinating day in the markets tomorrow, particularly around the close. 608 00:38:56,122 --> 00:38:59,742 But yeah, that's all I would say for the most part. 609 00:38:59,742 --> 00:39:03,522 There's not a lot going on there as far as crypto related goes, but it's going to be crazy. 610 00:39:03,742 --> 00:39:04,662 It's going to be fun to watch. 611 00:39:05,182 --> 00:39:05,962 Probably be some fireworks. 612 00:39:06,982 --> 00:39:08,362 Probably be some fireworks indeed. 613 00:39:08,862 --> 00:39:09,942 James, thank you so much for coming on. 614 00:39:10,062 --> 00:39:11,722 We managed to cover quite a bit. 615 00:39:12,002 --> 00:39:17,162 As the name of the show suggests, Over the Horizon, one of my favorite things to talk about is what's coming up next. 616 00:39:17,922 --> 00:39:23,682 You know, over the next three to six months, one year plus, you can talk about ETF developments. 617 00:39:23,762 --> 00:39:25,242 You can talk about Bitcoin specifically. 618 00:39:25,242 --> 00:39:29,662 wherever your mind is at, what are the big things that you see on the horizon that you feel are worth 619 00:39:29,662 --> 00:39:35,562 talking about? So if I want to stick with ETFs, I would say, and I'll stick with crypto, I'd say I'm 620 00:39:35,562 --> 00:39:39,042 most excited to see what's happened. There's a whole bunch of these index products coming to 621 00:39:39,042 --> 00:39:43,042 market. Obviously, most of the money right now is in Bitcoin specific products. Morgan Stanley is 622 00:39:43,042 --> 00:39:47,042 going to launch their Bitcoin ETF soon. So it'd be interesting to see how that does compared to the 623 00:39:47,042 --> 00:39:51,042 fact that we already have 11 on the market. This is like a very saturated market, but they have 624 00:39:51,042 --> 00:39:55,362 captive demand. We call it a BYOA, bring your own assets. So that's something I'll be watching 625 00:39:55,362 --> 00:40:00,062 because that should launch within the next, I would say weeks even based on what we've seen 626 00:40:00,062 --> 00:40:03,982 from the filing recently, but time will tell. The other side of it that I'm paying attention to 627 00:40:03,982 --> 00:40:08,102 within crypto, which again, isn't going to be massively impactful to Bitcoin itself, 628 00:40:08,102 --> 00:40:12,182 but I think anything that helps the industry will probably be positive for Bitcoin development. I 629 00:40:12,182 --> 00:40:17,442 don't think Bitcoin itself needs the Clarity Act, but the industry as a whole will benefit from the 630 00:40:17,442 --> 00:40:21,102 Clarity Act getting passed, hopefully, or theoretically, that'll be a positive catalyst 631 00:40:21,102 --> 00:40:27,942 for the space. But yeah, as far as this world is concerned, I'm most excited to see where the 632 00:40:27,942 --> 00:40:34,182 demand is for these index-based or actively managed crypto ETF exposures, whether or not 633 00:40:34,182 --> 00:40:38,622 they garner interest from advisors or retail investors, you name it. But yeah, I mean, 634 00:40:38,682 --> 00:40:43,442 sticking with that, obviously, the thing that I'm most impactful in watching is what's going on in 635 00:40:43,442 --> 00:40:48,682 the Middle East, but I don't know how, I have no prediction on what's going on there and what have 636 00:40:48,682 --> 00:40:53,022 you, but that'll have the most impact on anything we talked about today. Markets more broadly, the 637 00:40:53,022 --> 00:40:57,022 economy, you name it. Excellent. James, thank you so much. Yeah, you know, obviously you and I can 638 00:40:57,022 --> 00:41:01,122 monitor the situation, but we're definitely not going to pivot to Middle East and energy and 639 00:41:01,122 --> 00:41:05,522 wartime experts. Speak for yourself. I'm now transitioning to be an expert there, just like 640 00:41:05,522 --> 00:41:10,522 everybody else at Crypto Twitter. Exactly. Once every two weeks, whenever the current thing changes. 641 00:41:10,822 --> 00:41:12,082 James, thank you so much for coming on, man. 642 00:41:12,242 --> 00:41:13,562 It was a blast as usual. 643 00:41:13,982 --> 00:41:16,702 Before we sign off here, where can people find you if they want to find more of your work? 644 00:41:16,782 --> 00:41:19,402 Yeah, obviously all of my work is on the Bloomer Terminal. 645 00:41:19,682 --> 00:41:22,602 So if you have access to Bloomer Terminal, you can see anything I'm writing. 646 00:41:22,822 --> 00:41:23,722 That's where it's all going to be. 647 00:41:23,722 --> 00:41:27,502 But I do T-Summit with charts and a little bit of data on Twitter. 648 00:41:27,902 --> 00:41:29,782 So J-S-E-Y-F-F. 649 00:41:30,182 --> 00:41:32,582 And then a little bit on LinkedIn as well, too. 650 00:41:32,662 --> 00:41:34,042 So you can find me any of those places. 651 00:41:34,222 --> 00:41:39,402 We have a weekly TV show on Bloomer TV called ETFIQ that I help with and am on pretty regularly. 652 00:41:39,402 --> 00:41:45,602 But mostly you're going to find me on Twitter if you don't have access to a Bloomer terminal or X, I should say. 653 00:41:46,442 --> 00:41:51,502 If you have $25,000 a year roughly lying around, I would highly suggest buying a terminal so you could read James's work. 654 00:41:51,582 --> 00:41:54,422 But if not, you can find him on X and that will be linked in the description here. 655 00:41:54,802 --> 00:41:55,502 James, thanks a lot. 656 00:41:56,262 --> 00:41:57,282 Thanks, Joe. Thanks for having me. 657 00:41:57,282 --> 00:41:59,722 And then there's a point which does nothing. 658 00:42:00,142 --> 00:42:01,282 Bitcoin is something like that. 659 00:42:02,322 --> 00:42:04,102 Bitcoin is 17 years old. 660 00:42:04,442 --> 00:42:07,062 18 years is a $2 trillion asset. 661 00:42:07,702 --> 00:42:09,702 I could care less with Bitcoin trades for. 662 00:42:10,042 --> 00:42:12,402 It's just a matter of the money, the money, the money.