Wall Street Will FOMO Into Bitcoin ETF

Hany Rashwan is the Co-Founder & CEO of 21Shares. In this conversation, we talk about the bitcoin ETF, historical bull markets, tokenization, institutional interest vs retail, regulation, altcoin ETFs, and more.

TIMESTAMPS:
00:00 – Intro
00:40 – Bitcoin ETF thoughts
06:03 – Bitcoin halving
09:00 – Historical bull markets
12:55 – Bitcoin vs others
15:16 – Regulation & geography
21:48 – Tokenization
23:38 – Pros & cons of transparency
30:10 – Institutional adoption
32:00 – Number 21

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Institutional adoption we’ve been talking about it for as long as I’ve known you we’ve been talking about it for as long as I’ve known Bitcoin let me tell you they are finally here this is going to be more than just dipping their toes in institutional adoption is key

For this industry to reach the stages um and to be in the financial system at the level that we all want it to be that we all think it should be but really there is a wall of institutional money and interest that will be a core part of of

Bringing this to wide Mass adoption across every stack all right guys bang bang got Hy here uh you guys are one of the Bitcoin ETF issuers you’ve partnered up with Arc and Kathy Wood uh and fast start out of the gate how do you look at the first

Two weeks or so of ETF launch inflows gbtc selling what’s going on on the market it’s really exciting thank you for having me pump um it’s going a lot better than I think anyone in the space uh would have re would have thought or realized uh going into this it’s uh the

Inflows are very high uh especially for a new ETF uh inflows being high on day one or day two is one thing inflows being this High I think we sold 60 million yesterday or so uh almost two weeks in this is sustained excitement and it it says something um GPT PC’s

Dynamics are super interesting we should continue to see outflows the outflows uh people may not realize are limited so the the market makers are only uh able to sell a certain portion on a daily basis which is why it’s hovering around the 500 million Mark uh per Market maker

And you’ll start seeing again more sustained pressure there but it should stabilize at some point uh there are a lot of others that are selling out of gbtc for other reasons like the FTX Bank bankruptcy estate and that’s part of the downward pressure on on bitcoin itself

But aside from all of that we’ve collected over half a billion in uh in new Bitcoin um in just a few days here so did um a number of other issuers uh as well and so the amount of excitement the level the speed and especially considering the institutional investors

Are not here yet is really really exciting and and blew out of uh blew out of the part completely anything that I thought um this would be now when we let’s take inflows first right I think a lot of the investors who are putting capital in everyone’s like oh it’s

Institutions but to me the institutions take a long time to kind of make decisions uh wrap their head around this financial advisors they may even have to talk to their clients so do you think that this is just retail flows or do you think some of the institutions were kind

Of ready to go and when the approval happen then they could just go ahead and allocate so when people say institutions it could mean very different things um so far this is just retail excitement plus the kinds of Institutions that can move very quickly so it’s family offices

It’s maybe hedge funds or Traders but it’s not who you think of as a long-term Institutional Investor like a pension fund or an insurance company or even on the advisory side where you have advisors that are controlling a large amount of assets on behalf of a large

Number of customers that is not here yet this is not eligible for those guys yet because there are there are all these procedures that you have to go into that includes the product being up for a certain amount of time them picking eligible products there’s a big due

Diligence process that they must do in order to come in um but this again adds to my excitement because what’s really happening is we see this wall of money and we see it and we we understand how large it must be considering that it hasn’t yet hit us and these are the

Inflows uh but it will still take a few months three to six months from now is when you’ll start seeing significant institutional size checks and that’s when people are coming in with single check sizes of 100 million 500 million 50 million whereas now it’s excitement it’s family offices and it’s a bunch of

Traders now when those institutions that are the really large pools of capital start to allocate are you expecting half a percent 1% % do we think that they’re going to be like oh we’re all in on bitcoin let’s go put 5% of our assets like like how do you all kind of

Anticipate this actual size that will move into the market so the first thing is the the inflection point here with the US allowing Bitcoin atfs is that every institution now needs to have made a decision on bitcoin you’re you’re no longer able to say I can’t do this I

Can’t think about it right now everyone needs to make a decision and we’re having a lot of these phone calls and discussions and meetings where they need to figure out are we buying Bitcoin are we not what is our Bitcoin decision then past that is uh which and I think the

Answer is clearly going to be yes but how much in allocation uh and it it varies it varies from family offices on one end that could be a little bit more aggressive to the Pension funds or the insurance companies on the others but some of the largest institutional

Investors that we are speaking speak to that are actively engaged that are in active discussions that are very excited and making plans I mean even even a 10 basis point or 20 basis point allocation uh from them would completely shift the market the sentiment um and I think be a

Sign of more to come but probably um nothing crazier I think the five and 10% allocations is probably on the fund size on the family office size uh something started lower than that probably how do you think about um the bull market playing into this I I got a lot of heat

Earlier this year when I wrote that the ETF approval probably would not bring us to an all-time high we would still need the having plus loose monetary policy I don’t want to call Victory yet but so far it looks like that may be true we’ll see once the selling pressure kind of uh

Goes away if that is true or not um but do you think that a lot of the interest will come after the having and kind of once people start to wrap their head around you know more of like what Bitcoin is as an ecosystem and as an

Actual system than just oh now an etf’s been approve so I have to allocate to it yeah I think I’m super comfortable with you waving the victory flag already I I agree with everything that um that you’ve just said look most of the people that are buying this could have bought

It in a number of other ways we’re the biggest Global issue of crypto etps right um before this and so where additional buys can really have an impact on our space is when the institutions come in and like we just said they’re not here for a few more

Months so it’s not that the Bitcoin ETF is not going to Herald this new phase and and be of incredible excitement it’s that the institutional flows through the Bitcoin ETF will do that that is still a ways out in the meantime I agree with you there’s a number of additional

Factors here monetary policy being one of them um the world has not healed yet you’re in the investment space I don’t think we’re back I don’t think VC is back I think it’s still quite fragile um we we now see light at the end of the

Tunnel but we’re not so sure how far away it is and it it could be a few months it could be another year and I think monetary policy will need to change in a positive direction to give a more positive sentiment before we start even having a conversation about

All-time highs and a new bull market and all of that I think we’re sort of in no man’s land it’s clearly not a bear anymore but I wouldn’t bet all of it um that that this is a bull market and and that um Off to the Races and have no

Worries um The Happening is a very important factor uh you of course know about it it will make it uh more scarce more difficult which if demand is higher then leads to some interesting um price appreciation and things like that but I think that’s early as well so let’s see

What ends up happening with the happening and let’s really see what ends up happening with the institutional flows in a few months with a background of sensible monetary policy and a soft landing and um starting to reduce some of these interest rates not just in America but around the world and at that

Point we can talk about what does the next bull market look like and what is feeling when you think about um that bull market we historically have seen about 18 months post having we’ve historically seen hundreds of percent of appreciation um but now the holder base of Bitcoin

May be changing a little bit one they rebalance as assets increase uh two the introduction of derivatives um you know many different components are changing here do you expect us to just repeat as bull markets or do you think that there’s a change positive or negative to

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Business frk.com go check them out today I think crypto is a very diverse place it’s not just Bitcoin even though that’s the only asset we’ve mentioned Bitcoin has grown tremendously and still has Room to Grow but clearly it is no longer that seed stage or series a startup and

So if you if you talk about percent gains um it should look very different from say a nent growing area of crypto which for what it’s worth is what we have been seeing with previous bull markets is that we’re inventing something new we’re adding something new

To the crypto space whether that is nfts layer 2s more smart contract um scalability uh Solana summer what Avalanche did what BNB or polygon have been able to do and so I do think that Bitcoin is going to lead the charge here and there’s a lot of attention to it and

It’s it’s still it’s still very much a new asset but it is a more mature new asset so previous uh percent gains for some of the bigger assets are just not realistic I mean if you if you think about how much Bitcoin has gone up in

The last bull market or even crazy you had the one before the one before it um these are outrageous things uh to happen in the short term and I think my we we’ve talked a lot and my single biggest pet peeve on on this whole Space is our lack of long-term thinking um

The we do not need to see 1500% gains for us to be excited about either the viability or the future of this asset class we need to see more users more more customers so I’m comforted by um the onchain metrics that we’re seeing um 21 Co is uh the largest um uh producer

Of dashboards on d.com and we display all the wallet addresses um among other analysis but we display wallet addresses across a bunch of different networks and you can see it steadily going up and to the right more usability more wallets more unique customers not just in Bitcoin but elsewhere

Um and if we continue to do that I’m not really that worried about the price too much um I’m sort of a unique crypto CEO and you’ve made fun of me uh for this a few times I don’t really know what the price of Bitcoin is on a daily basis nor

Do I care I’m really in this for uh the long term the long term and so I look at all these other factors and I find things that are incredibly comforting and exciting now we’ve been talking about the Bitcoin ETF there’s also a whole long tale of other assets and uh some of

Them are starting to get uh some ETFs or ETP type coverage how do you see the difference between like the king of the industry in Bitcoin and kind of dominance of market cap versus everything else and and the interest That Wall Street may have in those assets so again it’s different levels of

Uh development stage uh we are the world’s largest issuer of crypto etps and we have 50 or so etps around the world um with assets uh that are small like arbitrum optimism algorand and Bitcoin ethereum Solana Etc um there’s a tremendous amount of Interest across the

Board it takes a while though so Bitcoin has come across the line um I can talk to much about ethereum we have an active filing there but we globally have have been very excited about ethereum and bringing the rest there are challenges once you um incorporate things like

Staking there are challenges when the regulatory uh rules have not been fully written there and so it may take a while but it’s also inevitable um and I think we we we should be able to see across the world um more acceptance so other countries that may have only allowed us

To list say Bitcoin and ethereum are now allowing us to list alts and so on and so across the board I think more regulatory Clarity um dealing with the Bad actors as we have and as we are continuing to do should allow us to open up uh more availabilities for everything

Across crypto not just Bitcoin um Bitcoin is going to be very exciting at one point if you look at specific Industries at one point there has been a dominant company that sometimes has a disproportionate amount of influence or uh market share of that company and and

So again I go back to usability as long as we’re building applications that more people are using that are making people’s lives better hopefully we get to a world where Bitcoin is a small part of the crypto climate um and the crypto landscape not because Bitcoin has has has shrunk or

Anything like that no it’s growing and growing at a really nice Pace but because everything else is being developed and growing as well when you think about regulation obviously Bitcoin green light ethereum we’ll see other assets don’t seem to be yet Up For Debate what’s changed in the United states on the

Regulatory front and then is us uh taking inspiration from maybe other places on regulation or other places following the US like how do you see the relationship on the regulatory front so uh I’ve been in this for a while now and I do think the US is taking inspiration

From other places uh the amount of things we have been able to do at 21 shares around the globe um we’re still not able to do in a lot of geographies including America um some of the products that we have on on the European market um are abs are quite special and

Complex and will not be allowed in specific geographies for a while um that said I think there’s um time has passed uh and a lot of interest has has been maintained and so in a way this has become way too big to ignore it’s not going to go away there’s

Significant interest and at this moment it is far safer far more efficient far more institutional if you think about our service providers the market makers the custodians now we’re we’re dealing with a very different caliber and a very different class of people than even what we were

Doing a few years ago um around the globe that have entered the space um and clearly that has an influence on the regulatory view on this now when you look at that geography regulation is one piece of it but also investor interest asset interest Etc can change geography to geography what are

Some of the things maybe that you’ve seen in Europe versus the United States that would uh surprise people we’ve seen a lot more interest in for example short or leverage depending on geography and types of investors I think we have the world’s only short crypto etps we have a

Short Bitcoin and a short ethereum very good hedging um different strategies but they also appeal to different geographies um there are a lot of geographies that want to enter this space but need AIDS in order to do that um I’ll give you two examples very quickly um one

Is a significant amount of people that are interested in Gold that are gold bugs would be interested in Bitcoin and a lot of the early bitcoiners were fans of gold so one of the things that we’ve done is we’ve combined the two in various ways in specific geographies and

It’s been quite successful we’ve combined for example products that have mostly gold with a little bit of Bitcoin location or products that are mostly um volatility reducing Bitcoin with a cap on the upside again to ensure that more conservative investors or more conservative geographies feel more comfortable going into such a volatile

Asset and learning more about it that’s one example another example is our efforts in the Middle East um where the largest issuer crypto etps in the Middle East as well we’ve listed in Dubai we’re working on a bunch of other geographies um there are a number of for example

More conservative Islamic banks that cannot invest in non Sharia compliant assets so we’ve spent a lot of time uh ensuring that all of our products that are eligible to be Sharia compliant are Sharia compliant such that these very large places like Saudi Arabia the UAE qar Etc um are able to buy these

Products and are able to buy it in large volumes across the board and so specific populations sometimes times are looking for or need or are more comfortable with different things and is our job as a global player to uh think about that customer by customer and offer that to

Them at the end of the day when you see geographies maybe that don’t get that much attention South America um Africa compared to I’d say like North America Europe and Asia um is that just hey they’ll get there eventually obviously we see Kelly in South America right you

Know kind of really pushing stuff uh Central America’s upand cominging I think user of some of these Technologies we also see places like the Middle East who now seem to be leaning in much heavier so what what about some of the geographies that don’t get talked about

That much so I think this is um this is super super interesting and it’s a core part of how we think about things at 21 Co um I would put I would put the non- troubled Middle East as part of Europe and Asia and so I actually think it’s in

The same bucket like Asia on some Financial regulations sometimes they’re they catch up um and that’s one bucket we do very very well there but this is an area where tokenization really plays a big role and what I mean by that is there’s a significant interest um in some of these

Geographies in crypto but perhaps the way that they would like to get exposure to defi assets or the way that they are able to get exposure to defi assets um is an index not in ETP form but in erc20 form and that’s that’s why we have built a lot of our products

In tokenized formats as well so that you can buy access to an index or a basket or a strategy as an erc20 token as a Solana token or as an ETP ETF or whatever and I think that’s possibly how a lot of these geographies may end up participating here which I would argue

Um is going to LeapFrog the whole industry and the whole world into a direction where actually they’re using the newest rappers tokens which will at some point replace all the old rappers that you and I know and work with whether that’s mutual funds ETFs funds private funds in general um and so it’s

A very interesting ground for experimentation and it’s a very fertile ground uh that is full of excitement but the infrastructure just may not be there I’m Egyptian it’s a big country big economy stable lots of interest in crypto but the financial markets the Egyptian Stock Exchange is not something

That is heavily used people are not buying stocks as much but the amount of wallets in that country per capita is probably higher than some other places what about tokenization in terms of like these real world assets that seems to be a topic that’s becoming more popular you’re talking here about ETFs

That could be tokenized where are we in that potential ution and how do you see that evolving the infrastructure is is there to support it the issue with real world assets has always been the same which is what’s the tradeability how do I exchange these things um and it is

Unclear right now that there is a huge Market that is ready to buy them in this form uh and that’s that’s been the impediment historically and that hasn’t changed I think there are hybrid approaches here so I think stable coins are a form of tokenization it is

Tokenizing the US dollar the Euro or other currencies I think the Commodities that we have seen gold especially uh with some gold stable coins is tokenization and so I think that before we get to real world apartment assets or real estate assets or even sometimes sometimes I love how complex people are

With the first examples of you know uh can we be trading sugar Futures prediction markets at some point but can we just trade silver first um in a in a scalable way and so I do think that when we talk about real world assets things like Commodities things like ETFs which

Already have trading are far easier to uh ramp up and put in this new tech wrapper rather than something that even in the traditional world is highly IL liquid today now in that World um there’s a governance component there’s also this idea of um transparency auditability Etc um we

Saw bitwise publish their Bitcoin wallet address I’m guessing now that everyone will do something similar to to some degree what are the pros and cons of this transparency coming because I think everyone’s like oh it’s awesome that we can go see but then we also saw somebody

Send some SATs to the wallet address and now it’s like an over collateralized thing which actually may be a bad thing and so talk a little bit about pros and cons and as somebody who is an issuer you can publish the wallet address but how are you all thinking about it

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And we wish them the best um I think we’re under the philosophy that a great tide will lift all boats and and we’re not at war with each other um we disagree with this approach um for a variety of reasons and I and I and I can

Go through it it is something that we could have done many years ago in Europe as well but we’ve chosen not to due to some of the things that you brought up I think transparency let me start with this transparency is absolutely vital it is required um the concept of an audit

Double Entry bookkeeping is so wonderful uh and the issue that then comes um up is well who is doing the audits um can they be trusted is it a manual process so anything that automates that anything that offers additional verification is absolutely vital there are a number of reasons why a financial

ETF issuer should not simply share a Bitcoin wallet address as some people have have noticed and mentioned and been concerned by it’s one wallet we don’t have the same setup um we have a dozens of wallets it’s a segregated wallet multiple wallet structure that ensures clear separation of

Funds um it’s cute when someone sends SATs to uh a product and makes it over collateralized it’s a nightmare when someone sends something that you cannot identify that could possibly be North Korean or Iranian that could then give pause to advisers that as we’ve mentioned on this uh on this chat

Already are key to the institutional demand and things like that and so there is a way of doing this we will soon published our way of doing this with demonstrable real proven proof of Reserves which we should be doing but without displaying a single Bitcoin wallet address where everything is is

Located so overall I hope that crypto if anything brings more transparency to the markets we are actively pushing in this direction but uh I was reading your newsletter uh this morning you can have companies verify their financials without giving us access to their bank accounts and that’s where crypto

Comes in that’s where oracles come in that’s where a lot of interesting Tech can enable that to happen and we will uh very soon talk about how we’re going to do this uh but we absolutely want to share with everybody exactly how much crypto there is and have that be proven

And have that be out of our control when you think about um test attesting to financials audits Etc um is the world going to kind of coexist like what an onchain world and an offchain world and the way that we’ve done things in finance for a long time

Will coexist now with this new like onchain type verification or do you think actually the onchain world maybe doesn’t have as much legs as people hope it does I think the best comparison is cash with our electronic forms of payments and I’m guessing that we mostly use our credit cards and bank accounts

On this call but you could go through the world operating in cash so at some point um everyone will be pressured in a good way I think to become more uh transparent to become more onchain to be able to do all of these things in an automatic programmatic way it’s not that

You can’t do the other system and it’s not that the other system won’t exist and it won’t exist for you know specific Pockets uh of Industry specific pockets of geography specific pockets of people but buy and large I think the pressure will be on this system that we all agree

Is not corruptible that we all agree is just computer code and Mathematics that we can all verify and trust and of course I think they will both coexist the real question is which one will be bigger and my my my prediction is that crypto and everything as it gets

Tokenized and therefore entered the crypto universe is going to overtake the world um much in the same way that most of us are paying with electronic forms of payments electronic Banks rather than cash or barter even though we still do that in some Pockets what are you most excited about

Going through kind of this bull market what are the things that you’re thinking about or uh you’re looking forward to that maybe people aren’t paying enough attention to yet institutional adoption institutional adoption we’ve been talking about it for as long as I known you we’ve been talking about it for as

Long as I’ve known Bitcoin and let me tell you they are finally here this is going to be more than just dipping their toes in institutional adoption is um is key for this industry to reach the stages um and to be in the financial system at the level that we all want it

To be that we all think it should be and that hasn’t been the case for a very very very long time um the in institutions have been flirting with it dipping their toes here or there um but really there is a wall of institutional money and interest that will be a core

Part of of bringing this to wide um Mass adoption across every stack and uh we should we should remember that this is a very unique Market where the retail was the one that led uh typically in financial history it’s almost always institutional money that leads and then

Retail follows as a result I would argue retail reaped all of the biggest rewards but institutions given their size and given how large this is still have a profound effect to make and it will it will cause this industry to grow up it will cause this industry to have staying

Power it will cause more Innovation and more competition and for anyone that cares about crypto like you and I that is the single most exciting thing thing that we could be working on this year my last question for you is uh there’s an obsession with the number 21 21 shares

21 co uh 21 in terms of fees where does the obsession with 21 come from do you do you know the answer to this it’s l to bitcoin I do not 21 million Bitcoin that’s the maximum that will ever be created well I know that I didn’t know that was where

You got the 21 from though that’s where we got the name from that was the inspiration it was an homage to bitcoin because it is this thing that has like you said enabled bit uh the rest of crypto uh to function it is the big um gorilla in the room that is impossible

To ignore and we wanted to pay tribute to that in some way um a couple years ago we wanted to launch the world’s cheapest uh Bitcoin and ethereum etps and so we ended up uh doing that in Europe at 21 basis points and so when we came to the us we replicated that

Strategy and matched the pricing that we already had in Europe um at 21 basis points it’s uh it’s a little tongue and- cheek with the company but we like it um and we’re big fans of uh maintaining history and and paying our respect to bitcoin I love it makes so much sense uh

Where can we send people to find you on the internet or find out more about 21 Co and 21 shares 21 shares.com uh 21.co is the company side if you go to 21 shares.com from around the world it will figure out where you are and it will

Give you the products that you are eligible to buy awesome I appreciate it very much I’ve enjoyed watching you build this business and uh I think that you’re on on the right track so we’ll definitely do this again in the future thank you so much