One of the things I'm really excited for is to see some of these things play out where supply shock combined with some of the emerging derivatives in Bitcoin, the buying pressure is pretty.
What I think young people have found really worthwhile is that Bitcoin is the thing that is going to store value better than real estate.
But imagine if the supply shock that you mentioned is the lead up to Bitcoin's price action for which now the short is getting squeezed.
you actually have to cover it. And when that happens, I think that's actually the biggest
fireworks for a Bitcoin price action. And once that Rubycon is crossed...
What's up, guys? Before we get started, I've realized that over 50,000 of you guys keep
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this interview and many more to the stratosphere, it would be greatly appreciated. All right,
enough from me. Let's get into the show. Bing bong. I am back with another edition of the
State of Bitcoin podcast where I've got the man, the myth, the legend, Jeff Park of Bitwise in the
house. But Jeff, we've had some recent positive price action here and it seems like everybody is
now starting to wake up to the fact about Bitcoin. But you work at Bitwise and you guys have one of
the larger ETFs in the game. And there's always the narrative that retail isn't really here yet
and that people are still buying the ETFs and that's traditional financial people, right? The
financial advisors now that they have these ETF products. I'm curious, one, where do you think
we're going in this cycle? Do you think we've just even scratched the surface? And two, do you think
traditional finance has even gotten into the game just yet? Man, I think we're still early and we
still talk to a variety of RIAs and financial advisors who are still trying to understand and
wrap their head around Bitcoin. And I think one thing that's been really helpful is that this
year, despite the incredible price action with the stock market and select companies in the tech
sector in particular, the actual kind of outperformer that caught a lot of traditional
investors off guard is gold. Gold is actually leading the way. And I think that opens the
purview to then have conversations about global macro. And there's a wedge in which Bitcoin can
enter the conversation in a thoughtful way, piggybacking off of gold's phenomenal success
this year. So I think that's been pretty additive. And then secondly, everything that has been
unfolding with a lot of chaos and volatility, including the trade war and the tariffs imposed
is coming to a point where I think it's been digested
and people are able to see the impact it's had on inflation.
And all of the measures today, as we've seen it so far,
would intimate that we are going to continue to have a pretty smooth landing.
And we are, in fact, going to get rate cuts later this year.
And I think all of that affirmation is bringing a lot of risk on sentiment
back to the market as well, which is, of course, always additive to Bitcoin.
Then, of course, you had on the back where we've had one of the largest fiscal stimuluses, again, in the backdrop of government spending and the tax cut bill.
And all of these things continue to pound the table as to the importance of having a diversified exposure into something like Bitcoin.
So I think 2025 is really the year that institutional investors have woken up to the reality that fiscal dominance is real.
That's why gold is up.
And now they're considering, hey, can Bitcoin also be a correlated asset in that theme, but uncorrelated in its price action?
Yeah, that's interesting.
You touched on a lot there.
And I kind of want to dive into the more of the macro situation because, you know, you brought up potential rate cuts, right?
So Powell, you know, there's been rumors circulating he's going to step down and all of these things.
Trump is calling for a 300 basis point cut.
and there's a lot of, you know, chatter around that.
And everybody thinks that, hey, once rate cuts happen,
Bitcoin's going to absolutely explode.
And then on top of it, we've got the big, beautiful bill
where they're going to, you know, increase a lot of spending here.
So I feel even without rate cuts that, you know,
once government spending increases,
that Bitcoin's price is going to increase as well
because the way that traditional finance is looking at it
is still kind of almost as an inflation hedge.
Now, I'm curious kind of your thoughts on both of those aspects.
With or without rate cuts, how do you think Bitcoin is going to potentially react here?
Yeah, great question.
I think the biggest driver is really tangential to the liquidity injection that is possible within fiscal stimulus, which is really the question.
Number one is the Fed's balance sheet.
What is the Fed's balance sheet going to be doing for the remainder of the year?
And the second question is, what's dollar strength and where is that trajectory looking like?
And those two things have touch points to what you just mentioned on fiscal stimulus.
But I think those are the key focus points for most investors.
You know, a remarkable stat I'll share with you is that the Fed's balance sheet as a percentage of GDP back in, let's say, 2007 before the financial crisis was something like 5% to 6% of GDP.
And I think it was maybe like 800 billion or something like that.
Fast forward today in 2025, the Fed balance sheet as a percentage of GDP is north of 20%.
It's something closer to 25%.
And it's in the trillions, right?
Now we're talking it's in the $6 to $7 trillion of balance sheet acquisition growth.
So that, I think, is actually a pretty domineering theme as to how people are trying to understand where is the direction of the market in terms of what is the Fed's balance sheet going to look like next year in the way that they're trying to find ways to dispose some of the assets and its liabilities.
So that's the open question. And that has a lot of impact to market liquidity, global liquidity, dollar source and funding, and all the things that really come to intersection for Bitcoin investors.
But here, I think the general good news is that the Fed's been generally pretty accommodative, I think, to understanding that trajectory in a pretty thoughtful way, which is, I think the biggest pushback that you hear often about the rate cut delay versus Trump wanting it urgently is rooted on this notion that the tariff price escalation is really like a one-time endeavor.
Right. Like if tariffs happen and it raises consumer price, let's say it raises it by 10 percent.
That's a one time event. It doesn't have 10 percent increasing every year thereafter.
Right. Tariffs is a one time hit. And actually, the Fed generally should be guiding policies towards the rate of change and not solving for one time hits.
So I think the sympathetic side of why people would say the Fed needs to start cutting rates is to be accommodative of the fact that inflation has come in.
And if it actually goes up one time, it doesn't mean the rate of inflation itself is changing.
It's just a one-time hit.
And I think people are coming around to that because people are seeing that inflation is
slowing post the hits that have occurred.
And it's not going to be a thing we live with, right?
It's just a one-time adjustment.
So it is important, I think, at some level that we do get some accommodation on that front.
But really, the most important thing is the long-term rate.
And people will be focused on the long end of the curve, which is actually where most of the business financing opportunities and economic growth is happening.
To that point, this goes back to the Fed balance sheet.
There is an asset liability mismatch right now on the Fed's balance sheet, right?
The Fed is literally losing money every year because the assets they've purchased are at a loss.
They're underwater because they engaged in a kind of maturity transformation where they're long, a variety of long duration assets.
And of course, most of the liabilities they have are short term in nature, right? It's currencies outstanding. It's the Treasury General account, and it's the bank reserves. And those are all generally short term liabilities. So that's the open question. You know, how is the Fed going to affect the disposition of its assets in a way that promotes the chance for long end of the tail of the yield curve to come in? And when that happens, I think that's actually the biggest fireworks for Bitcoin price action.
So then what do you think the fireworks of the Bitcoin prize action entails? Is it starting to get these corporations FOMO into it? Is it a multitude of factors? Where do you think the fireworks are going to, I guess, kind of come from, I guess, the big bag holders, so to speak?
I think that eventually it'll be normalized for every institutional investor to own Bitcoin.
And that means we'll have incrementally new buyers.
Bitcoin, like a commodity, always moves based on marginal supply and marginal demand.
It's really that simple.
And I know you know it, Brandon, because you followed it.
And that's why we see these asymptotic cliffs to the ups and to the downs.
And because there's no relief pressure otherwise than the fact that there's buyers and sellers.
And there's no manipulation of that quantity nor price in which you can smooth it.
So that's the most important thing.
Are there rails for institutional adoption?
And I think the two big story here is one, stablecoin adoption is happening.
And stablecoins, I think, is mostly used today to participate in the crypto economy for where Bitcoin is the pristine collateral for there to be additional leverage that can be built in the system.
And then two, you may have seen the Federal Reserve actually just put out a note where they are allowing banks to custody digital assets and crypto assets.
And they've sketched out kind of the safekeeping rules to which they would want this to be permissible.
But the punchline here is the banks are coming.
The banks are going to offer crypto custody services.
And once that Rubicon is crossed, you no longer have to deal with the notion of your investors asking whether crypto is like a safe thing to hold or not.
And once you know, like the names you're trusted and involved with are in the space, that's a huge, huge boon.
So that will just promote more investors to come in.
It'll allow brokerages to actually permit more freely spot Bitcoin trading and all those things.
So yeah, now I think it's just a little bit of like the final last mile of getting broad-based
infrastructure buy-in for not you and me who have already been in the space, but for those who've
been looking with a lot of curiosity, a lot of interest, but maybe with still a tinge of that,
is this still sketchy? And when you have the Federal Reserve actually saying,
we have rules, that discounts a lot of those things away.
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Yeah, so then, all right, so it seems like then all bets are off, right?
Once institutional kind of gets those handcuffs off, so to speak.
And then, but the narrative around Bitcoin right now, at least it seems in the traditional
financial space is that because now it's an over $2 trillion asset, it's the sixth, seventh asset
in the world by market cap, depending on the day. It's kind of on that back and forth with Amazon,
but that the volatility is going to go down. And that's actually going to be a benefit for
the traditional institutional investors. Now, what you're kind of lining out here seems like
there's going to be more money that's coming in, right? It's going to be bringing in more investors.
So more money to me would mean that even though it's a higher market cap, we would still have a lot of that volatility.
Now, are you kind of on the same wavelength there?
Or do you think more along the lines of the traditional financial, I guess, viewpoint here where the volatility is going to go down over the years?
Yeah, I think there's many ways to quantify volatility.
volatility can mean something as simple as standard deviation close to close daily observations over
rolling window of 30 days 60 days 90s it could also mean however the distribution of fat tail
events that can happen more or less than normal which is a vol of vol construct so what i'm trying
to intimate here is do you consider an asset that's not moving very much day by day but then
moves 30% one day to be volatile or not volatile, right?
Yeah.
The intuition here is that volatility matters for the moment in which it happens.
And the distribution of those events are equally important as the severity of those events.
And my guess and belief is Bitcoin in general will continue to have fat tail events.
It will continue to have high vol events where one day it could go up a lot and one day it
go down a lot simply because, like I've said before, Bitcoin's price is set by the marginal
buyers and sellers. And it's actually not that important what the total market cap of the actual
asset is. It's not dissimilar from how oil, for example, remains volatile, right? Like oil could
be the biggest commodities market on earth where there's an incredible buyer base and seller base
on the product of use case of the global economy.
And yet oil is very volatile in moments of distress
or news events where people have been unexpectedly
or unhedged towards these outcomes to geopolitical affairs.
So my instinct is Bitcoin will look more like oil
in the way that it trades,
where there will be high vol events.
And because of that, I think the volatility,
it could look muted day to day,
But it doesn't mean that it's actually like a fixed income asset. If anything, it will still, I think, have lots of peaks to troughs in the ways to give investors a great room of outperformance and underperformance based on active management.
Yeah, that's very interesting. And I really like the way you put that about still having those highly volatile events. But it's been kind of interesting in this cycle where I think we're getting the volatile events based more on Bitcoin related news opposed to maybe geopolitical or macro type of factors.
Now, to me, that almost feels like it's going to be kind of short-lived where now soon everybody's going to have this massive wave of adoption where, you know, this company's buying Bitcoin, this company's buying Bitcoin, these new ETFs, this government's buying Bitcoin, what have you.
But soon I feel like it's going to be normal place.
And then, you know, it's going to be more kind of ingrained into just the overall macro landscape.
Do you kind of see that development here right now where it's, you know, hey, maybe Bitwise or, you know, BlackRock or somebody's announcing something and that sees the giant wave up.
But then on the flip side of things, like eventually everybody's going to own Bitcoin and it's just going to be more ingrained in just everyday business and life.
i think it's a good question i i think um
you know we we who live in crypto every day can also develop a sense of myopic perspectives
towards what bitcoin represents to us but the reality is like when we step out of this bubble
like there are still a lot of people who don't understand bitcoin who really who really don't um
i was just having a conversation with one of my college friends uh really you know bright person
And, you know, even today, I would say she's fairly dismissive about Bitcoin because there are like fundamental gaps in understanding of what the social benefits of Bitcoin is.
There are still a world of people out there who consider Bitcoin to be unproductive, wasteful, and actually a wealth creation scheme that has no value proposition to a productivity creation scheme or a value creation scheme, which you and I would fight back and say, actually, the most valuable thing is having the ability to store your wealth in a way that is censorship resistant.
But that in itself can sometimes still fall pretty flat on people who want to unlock real productivity gains.
So I think we're still early in that journey, especially on the institutional front.
We're still working at Bitwise to get our ETF approved across a variety of different wire houses and the bank platforms.
And we still have these conversations around this, that very basic fundamental principles and tenets about Bitcoin and the security risks that can exist in the space.
Because people are still not used to the idea of things you can't hold, right?
Like, what do I own this thing that I cannot touch?
You know, it's still a conversation we have.
And so you have to assume like there's still a world of investors out there who still haven't wrapped their head around it that want exposure.
And actually, that's why I think these Bitcoin treasury companies at some level are another version of like creating inflows like ETFs, because people actually just know wrappers they like and know and they're comfortable with it.
So people like ETFs because it shows up in their brokerage statement and it says, hey, you own these assets worth this amount and here's a tax cost basis.
And they know that because they've seen it before.
And it's right next to Facebook stock and Amazon stock.
It's still a line of code.
Like Bitcoin, it didn't change.
It's still this amorphous thing.
It just lives now in your brokerage.
And that's enough to get like people over the hurdle
because like, oh yeah, I trust the ETF format.
I know what a 40 act fund is
and I know what grantor trusts are.
And these things give me comfort.
Operating companies are similar.
There are people who understand securities.
They understand that like value creation
can happen through an executive team
with operational excellence and financialization of its capital structure,
where the job of a CEO is capital allocation.
And they understand this approach to investing.
So it also then opens up to investors who can buy something like MicroStrategy
and get exposure, which is why, I don't know if you've seen lately,
but now Vanguard is the largest MicroStrategy shareholder.
Vanguard, who hates Bitcoin.
right so like these these wrappers are actually quite important and the thing that we're really
excited about for the second half of this year is there's a wall of money coming from these treasury
companies that are going to be price inelastic indiscriminate buyers of bitcoin and as we've
touched upon again before bitcoin will move based on that marginal demand and price pressure so and
when it does it has the chance to move very violently to the up and i think people have forgotten
that it could happen because we haven't seen it in some time, but it can. And the implied
volatility market, I think as of last week, finally started to adjust for that. This whole
year implied volatility has been going down lower and lower and lower from 60 to 50 to 40 to even
below 40. There were times in gold's volatility was higher than Bitcoin's, believe it or not.
and then hit its real kind of peak low.
And then now we're on the up and up
where implied vol is actually, you know,
pricing in the possibility for more movement,
which is very exciting
because I think that's how Bitcoin is going to win.
One worry that I've always had about Bitcoin
is it has to be more volatile than gold
because that's actually what young people want.
They want volatility.
And it's not just the price appreciation they care for.
They actually like volatility, leverage,
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All right, enough from me.
Let's get back to the show.
Yeah, 100%.
And I think that's probably part of the reason why we've seen such a big gambling uptick as well,
is just the young people really want to get those boom and busts and that volatility.
But you mentioned Vanguard buying MSTR, being the largest shareholder.
JP Morgan, Jamie Dimon is a huge anti-Bitcoin.
Every week, it seems like he's saying something new about how Bitcoin's terrible.
and JP Morgan just rapidly increased their shares of MSTR in Q1.
And for those of you guys who come to the show a lot,
I love to show that chart of just how big that exponential growth
of JP Morgan's holdings of MSTR is.
But you said something big about that the violence swings up.
The narrative right now is there's a lot of Bitcoin getting taken off exchanges.
There's about a little over 2 million Bitcoin left on exchanges.
The OTC desks are running out.
Do you think that there's, you know, that that potential of like a supply shock that we have here?
Because, you know, I think that the biggest selling point for me, at least initially with Bitcoin was the digital scarcity aspect.
And I think that that's still a big gap for a lot of people.
You know, even though they see that ticker on the screen that they could buy, you know, right next to their Apple stock or whatnot.
I think the underlying asset is something that's so unique that people are just going to try to keep buying those ETFs or buying these holding companies.
And they're going to realize very quickly, like, hey, you know what?
This is the first time I wasn't able to buy more of an ETF.
Or there's that potential of that supply shock.
Do you see that potentially happening this cycle with the amount of buying pressure that's going on?
I do. I do.
And there's one fundamental misconception, I think, in the Bitcoin community about what these financialized Bitcoin exposure means.
These synthetic paper, as people call it, to be diluting Bitcoin kind of price action or ownership.
And most of the violent upswings actually happen because there a liquidity gap in which there are folks who are short and they need to cover And from that perspective even though these short exposure types of things can feel like it paper money it is one of the contributing factors
to price movement in a way where price and elastic buying and selling behaviors are introduced.
So, you know, I think it's ultimately a positive thing that we get a diverse market for Bitcoin's price action where you get the chance to have both buyers and short sellers in the mix, because ultimately those are volatility fueling agents.
it's also why micro strategy has had a lot of volatility beyond the fact that it is of course
buying bitcoin on its balance sheet there are financial arbitrageurs who are out there and
they play different games of shorting trading gamma against it these options can also create
different kinds of pin risks and all this financialization like adds some path dependency
to the price action in a way that if it's concerted in the right fashion are really,
really good for Bitcoin. So I think one of the things I'm really excited for is to see some of
these things play out where the supply squeeze, as you've mentioned, the supply shock combined
with some of the offsite positioning that could exist within the financial community,
leveraging derivatives in Bitcoin can all come to a point where the buying pressure is pretty
immense. So for example, these Bitcoin treasury companies that are coming online right now,
a lot of these are through pipes that have not been registered yet, which means you actually
can't actively trade those. But if you thought you wanted to hedge some of those risks right now in
the way that you're long these instruments, you might go out there and you might short Bitcoin
or you might short micro strategy, right?
Because you're doing a pair trade.
But imagine if the supply stock that you mentioned
is the lead up to Bitcoin's price action
for which now the short is getting squeezed
and you actually have to cover it.
That has this double kind of amplifying effect
on these violent upswings that can be ultimately
what sets the price higher.
And this is the most important thing, Brandon.
I've always described Bitcoin as a flow asset
and not a state asset.
And what I mean by that is the market cap of Bitcoin is actually irrelevant because it's not like a stock where like a market cap is justified on its operating cash flow and a multiple of that as a valuation metric to justify whether the present value of that is worth or not worth paying for that today.
Bitcoin's not anything like that.
Actually, Bitcoin is just a thing that people buy and sell at some price.
And the only thing that matters to people are their cost basis.
So if they're really in the money, they made money.
If they didn't, they didn't.
So if Bitcoin goes from 100K to 500K, right?
Let's say there's gaps to 500K.
And like, there's a bunch of people that lost money.
And there's a bunch of people that made money.
And eventually they all netted out.
The price is just there.
It's 500K.
Like, it actually doesn't need to come back down.
That is the new price in which people are transacting and people are coming in and coming out.
And that's what I mean by when I say it's a flow asset.
It's just a medium of exchange for a time in which people come in and come out.
They might buy Bitcoin to store value and they might sell it one day to get dollars back.
But that thing is reflective of value at a certain time.
And it doesn't mean that there's any sense of that market cap in itself being an anchor to like what the spot asset should be worth today.
Because it's not really like a state asset.
yeah and that's very really interesting that you think that yeah i mean the shorts i mean it makes
all the sense right because i mean yesterday we are maybe two days ago now we had like 1.3 billion
in shorts liquidated in 60 seconds and instead of bitcoin just going from you know 119 to 120 it
shot past another you know a couple percentage points because of that and obviously the more
money that comes in the more shorts are going to potentially be and then that just you know is going
to be amplifying every single day. And then, you know, the more violent swings, it seems like it's
all for the extremely bullish news here going forward and the bullish price action. But, you
know, I've seen a recent interview with you that you talked about getting to one Bitcoin as the new
American dream. You know, the narrative right now is that retail still hasn't shown up yet.
I want you to dive into a little bit of that mindset, too, that you kind of see shifting here,
because outside of the price action,
like if we have this giant swing up,
it almost seems like getting to one Bitcoin
would almost be unattainable.
But do you think that that is one,
the new American dream
and that people are still going to be,
I guess, kind of shooting for that here going forward?
Yeah, yeah, I absolutely do.
I do because the reason people value homeownership
in this country in the model of capitalism we have today
is because real estate happens to be
one of the most protected asset class in this country. If you're a real estate investor,
there are tons of strategic structuring tax advantages to which the asset class is 100%
supported by the fabric of America's economic engine. So the store value that homes represent
as a result is very much like a generational mindset. And I think what young people are
realizing today is that these home values are actually not that reflective of anything that
the home is actually worth. It's probably worth a lot of other things as to, you know, just living
a life that you want to live, whether you might have kids you want to send schools to, and these
like social things matter. But at the end of the day, that doesn't have to come by ownership, right?
That can be a rental model. And actually, if you leave the US, like if you go to Europe, for example,
there's a whole norm out there where renting is the thing you just rent and live uh and actually
i didn't i didn't even know this until very recently apparently in the in the london real
estate market none of the homes you actually own are even um real deeds like all of the land for
the most part is generally owned elsewhere with like a hundred year 500 year lease type
um things that ultimately go back to the crown so like you actually don't even own
the land for most of the condos and like homes you'd buy in London, which is crazy because like
you actually don't even think about that here in the US. But all to say, like what I think young
people have found really worthwhile is that Bitcoin is the thing that is going to store value better
than real estate. Sorry to cut you off. But basically, I was going to say, so then everything
seems to be shifting from that $300 trillion real estate market towards Bitcoin. Is that what you
see coming? I think it's entirely possible that we'll see some of that depression come to real
estate as a result. Look, real estate is not free in the sense that it's not just buying the home.
There's a lot of servicing costs that gets associated with it on a maintenance basis,
right? So first of all, let's take the mortgage out of the question for a second, which is
obviously a servicing cost. There's usually like, of course, there's the property tax, right? And
that property tax is anchored to the home value to which the inflation of the home value inflates
the tax, which inflates the state's tax on you. And so the whole like race to the bottom of these
fiscal and state deficits is reflected in real estate too. And then you of course have like
common charges or like whatever community charges you might have in your home ownership.
And those things are also administrative and they do go up with inflation. So all of these things,
you're locked in where the cost of carry is actually indexed to inflation and usually more.
Bitcoin doesn't have that. I think this is a profound thing. Like Bitcoin, actually,
if you just have it, you don't actually have to keep paying more money to just keep the same
amount of Bitcoin. It's the other way around. People come in and help you realize the value
proposition of Bitcoin's growth in the network. Real estate really is the opposite where you just
have to keep spending money to own it. And you have actually no way to control any of those
exogenous variables. If the state says they're going to raise property tax, or if Trump comes
out and says the tax deduction is changing, all of those things are out of your control.
And you're at the whims of ultimately what the federal government wants to exert on its tax
basis. So I think this is a broader movement where young people are fed up and they don't want to let
others control their destiny in ways where they feel like they're constantly getting shafted by
things they cannot control and decide. Bitcoin just gives you such incredible freedom and ownership
and peace of mind that you own what you own. It cannot be inflated away. They can't put a tax on
it they're not gonna you know like have it in a situation where like you have to liquidate it
against your own will like it is safely with you i think there's something really peaceful and
beautiful about that that young people have embraced as comforting uh and i don't blame them
and i and i think that's also why bitcoin is always going to win uh where where the general
trend of society is this disillusionment with governments and centralized intermediaries that
don't seem to have their interests at heart.
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Yeah, and I think that that's kind of the shift that we're seeing, right?
I mean, you know, I think River put out a study here recently that detailed that more Americans own Bitcoin than own gold.
And that includes the ETFs and all those different aspects there.
And I think we're starting to see that flock over towards Bitcoin as more of that safe haven asset for a multitude of reasons, not only just because of the real estate stuff that you're lining out to, but more as the inflationary hedges as well.
So do you see that shift as well that people, maybe the gold bugs are starting to get over?
Or is that just a narrative that us Bitcoiners like to tell each other that, you know, the gold bugs are finally starting to see the light of Bitcoin?
I think we have some clients at Bitwise who are big investors of both now more than before.
So I think there is an awakening of that trend, though I will also say it's pretty bifurcated.
There are, yeah, I almost don't see any people mid-curving gold and Bitcoin.
Like basically, they're very passionate about either embracing it or antagonizing it as a gold investor.
There's no one that's like a gold investor that has like no opinion on Bitcoin, which I think is kind of telling, which ultimately means they understand it's either a competition or a substitution.
and both of them, you're either supportive
or you're going to be against it.
And that reflective of truly what Bitcoin is It can be a substitute but it could also be a compliment And in my case I love gold just as much as I love Bitcoin too They both valuable to me And at the same time
you know, you might feel like they're actually more differentiated where you couldn't have that
view. Ultimately, I think what it comes down to is the price action. If you think that there's
benefit in portfolio diversification where the correlation between gold and bitcoin is
small enough to warrant the ability to push out the efficient frontier of your modern portfolio
by owning both then that's easy to explain right that's just mad and and i think that will get a
lot of people over the hump and so far i think people have shown that actually having both gold
and bitcoin is additive and we actually launched a product in europe where we actually have a
Bitcoin and gold as a mixed index basket strategy because it's done well together than actually
independently of each other from a risk-adjusted return, from the ability to earn return on a vol
unit basis. So I'm a proponent for most people to consider owning both and that we shouldn't
necessarily antagonize each other's interests because I think long-term we're actually all
pretty much aligned. Gold bugs and Bitcoin investors have so much more in common philosophically
than they might even know.
I mean, I agree.
Like, I mean, Peter Schiff to me is like a perfect example.
Like I agree with like 99% of the things that he's saying
with the overall macro economy.
It's just his view on Bitcoin.
He just, for some reason, just won't agree
and won't come over,
even though he was at the Bitcoin conference
and spoke there this year,
which I thought was crazy.
But I think it's just a sign of the times
that eventually they'll all bend the knee
and maybe he just realizes at this point it's his brand to be against Bitcoin, but who knows.
But I definitely think that that's going to be a growing trend.
But we've talked about the ETFs a little bit.
You guys just made a big announcement here recently about your ETF product,
actually this morning as we're recording it.
So why don't you detail a little bit about that announcement
and we can discuss a little further about what the implications are, you think?
Yeah, absolutely.
So when we launched the Bitcoin ETF, one of the things that we were really proud of was we launched it in the ways that crypto investors would find alignment for all the virtues of the blockchain technologies for which Bitcoin can empower transparency and DYOR and all the proof of asset stations to the ways in which people really want this idea of trust, but also verify.
So we had our custodial wallet addresses that were shared.
So any of us can click and go on Block Explorer and check that we actually do own the Bitcoin that we said we do in the Bitcoin ETF.
And I think this was really popular and well received by the community.
Today, we made the announcement that we're going to actually do something a little bit different,
which is we are partnering with a firm called The Network Firm, and they're actually a CPA accounting firm.
and they are bringing to us what is really a proof of reserves report that brings several
benefits. One is we now have the ability to verify both sides of the ledger, not just the assets,
but also the liabilities from the ability that they can navigate as an accountant.
And then they also therefore give us an independent examination as verified by such a third party
while still leveraging all the public keys that we have historically shared in the past.
So I think in a way, this is like one step up to how people have attacked the proof of reserve construct by sharing that it's not enough if you don't have the liabilities also existing side by side to see the net effect.
So this is one dimension of going forward on that. But the other part is really that we were having a lot of conversations with institutional firms who still had some worries about these public key addresses posing different kinds of risks in the future that might be unanticipatable.
and this was a way to show, well, we can address all of these things together at once
and the benefit that everybody can feel better off.
You know, the reality is my view and broadly, I think most crypto investors view would say that
sharing your public keys actually doesn't introduce like an actual technical risk from a security perspective,
but maybe it does introduce some kind of diminution of your privacy, for example.
And maybe there's something to be said about privacy that institution investors have a different standard for and actually would find that to create different kinds of OPSEC risks that they think is still unwarranted.
We think that the ETF is actually one of the most transparent, predictable, and automated things that could never exist.
Literally, we just buy Bitcoin based on client demand.
And that's it.
It's a passive vehicle.
So there is no real OPSEC risks that could arise out of it.
But at the same time, it's important that we try to be institutional in the ways that can bridge the gap between crypto and the mainstream investors.
And I think this is one step ahead in that direction where everyone's going to be able to win off of now having some additional proof of reserve constructs with its liabilities.
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Enough from me.
Back to the show.
Yeah, so I mean, I do agree that it is really unique that everybody in the Bitcoin space is very much about privacy.
But then they want the ETFs to show these proof of reserves.
So, and it seems like it's been kind of like a hot button topic, right?
Like some companies have now published it.
Some ETFs have published, you know, their wallets.
You guys obviously were a leader and a forefront at that at the beginning.
But, you know, from your perspective, do you think that it's going to be more of a, I guess, a norm to potentially, I guess, go towards, like, are you guys viewing this as somewhat of setting the standard?
where it is kind of like an institutional worry for you to publish your Bitcoin addresses
just because of the way that traditional finance has gone about it.
And this can kind of help weather some of those worries, at least initially,
and that we'll get to a point where maybe everybody's publishing their addresses down the line.
Or do you see it kind of, I guess, staying in the realm of traditional finance here for some time?
Yeah, it's a really great question.
I think the journey to crypto is never always foreseeable in the community's reactions and involvement to what they want to strongly hold to their belief system.
At the core, there is a fundamental tension between crypto and institutional investors, right?
The fundamental tension is that crypto really believes in provenance for which that they are the non-custodial owners.
And institutions are built off of a totally different structural mechanism, which is you actually have third-party experts that are able to do the hard work to ensure compliance of the assets and its functions and its strategies that relies upon that expert servicing.
And so at times it is a fundamental chasm,
but I think this is a really neat way for us to bridge it because we're still
leveraging what is really powerful within what is possible within proof of
reserve with also a company that is able to be both a CPA and also a crypto
native to bring this accounting package in an authentic way to institutional
investors. And I think that's kind of the unlock here.
at the end of the day what the other thing that i don't ever dismiss is that most humans are
actually really really bad at having no insurance and having uh every responsibility fall on you
right that's why you still hear about people who lose their coins and whatever and they can't get
it back and and they wish they had someone else they could rely on who could help them recover
their keys or unwind a transaction or all that stuff. And the reality is the whole ethos of
crypto is it's immutable and irreversible. But that's a very scary, scary thing for most humans.
Most humans do not want that level of responsibility at all. It's why people choose
credit cards as a way to spend their money than debit cards, because they like having the idea
that they can appeal and repeal.
So just recognizing that is important.
And I believe that truly most Bitcoin investors
who love Bitcoin are already going to own it
pretty much in the way they want.
And we're trying to just broaden access.
Our number one goal here truly is,
can we find more ways to broaden access points
for more investors to discover Bitcoin?
And hopefully that just leads them down the journey
further and further to this self-individualized
sovereign model that i think ultimately crypto supports but is is um is still one that institutions
will abide by in the format they know and trust yeah i definitely definitely agree right i mean i
think that the people that are you know utilizing these etf products that's what they're comfortable
with right so um you know i think that there's there's a way and broadening it for and allowing
access to, you know, thousands, millions of people to, you know, to get more access to Bitcoin is
definitely the way. And eventually everybody will kind of find out what's the best way for them to
hold Bitcoin, whether it's, you know, self custody, which obviously, you know, huge proponent of here.
But, you know, I think that this initial exposure and whether it's through, you know, a brokerage
account or something else is definitely the way to go. But Jeff, you've been very generous with
your time. So thank you so much for coming on the show. Why don't you tell people more where they
can find out about you and find out about Bitwise and all the stuff that you guys have going on?
Yeah, absolutely. Thanks for having me again, Brandon. I'm generally on X. My handle is dgt10011.
I also have a sub stack that's viewable on my profile link. Otherwise, you can find me with
a Bitwise crew. We're generally around the country, different conferences, different points. I'm here
in New York, feel free to say hi if you're in town. And otherwise, we'll all see each other
online. Amen to that. Jeff, thanks so much for everything you do. And I'll put all that in the
show notes. So thank you guys for tuning in. Thank you guys all for tuning in to another great
episode of the State of Bitcoin podcast. If you found some value in this one, please hit that
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