A spot ethereum ETF is ‘a matter of when, not a matter of if’: Grayscale CEO Michael Sonnenshein

Grayscale CEO Michael Sonnenshein joins ‘Squawk Box’ to discuss calls by Coinbase for the SEC to approve Grayscale’s application for a spot ethereum ETF, how likely an approval will be, the state of the spot bitcoin ETF market, crypto trading outlook, and more.

>>> WELCOME BACK TO “SQUAWK BOX. COINBASE CALLING ON THE S.E.C. TO APPROVE GRAYSCALE’S APPLICATION TO LAUNCH A SPOT ETHEREUM ETF THE LAWYER SAYING, QUOTE, ETHER’S PROOF OF STAKE HAS DEMONSTRABLY STRONG GOVERNANCE THAT EXHIBITS ROBUST CHARACTERISTICS ACROSS OWNERSHIP CONCENTRATION, CONSENSUSLY WID TY AND GOVERNANCE MITIGATING RISKS OF FRAUD AND MANIPULATION.

IT IS NOT THAT OFTEN WHEN ONE OF YOUR COMPETITORS SAYS GO HELP THESE FOLKS. >> WELL, WE DO HAVE AN APPLICATION ON FILE. GRAYSCALE SPONSORS THE TICKER, THE LARGEST FUND IN THE WORLD, AND SPOT ETHEREUM ETF IS A MATTER OF WHEN, NOT A MATTER OF IF

>> YOU SAY THAT BECAUSE WITH SUCH CONFIDENCE. >> I SAY THAT WITH CONFIDENCE BECAUSE MY TEAM HAS BEEN DOING THE TOUGH WORK TO MOVE THIS INDUSTRY FORWARD, WORK CONSTRUCTIVELY WITH REGULATORS, FOCUS ON DISCLOSURE, INVESTOR PROTECTIONS AND THAT’S BEEN TRUE FOR BITCOIN, PROUD OF THE WORK

WE DID WITH GBTC. >> IT TOOK A LAWSUIT TO GET GARY GENSLER TO BACK DOWN ON THIS, RIGHT? AND WE JUST HAD GARY HERE RECENTLY AND YOU SAW THE INTERVIEW, I WOULD LOVE TO GET YOUR REACTION TO IT, BUT LEFT TO HIS OWN DEVICES, THIS IS NOT THE

OUTCOME HE WOULD HAVE PREFERRED. I THINK THAT’S — AT LEAST IN BETWEEN THE LINES THAT’S WHAT I THINK HE HAS SAID. >> HE ACTUALLY WROTE A PRETTY STRONG DISSENTING LETTER AROUND THIS AND FOCUSED ON THE GRAYSCALE LAWSUIT. >> WHICH BEGS THE QUESTION ON

THE ETHEREUM FRONT IF THAT IS TO MOVE FORUM IN A MEANINGFUL WAY, DOES THAT REQUIRE ANOTHER SUIT >> IT EARLY TO SAY TOO EARLY TO SAY I THINK WE HAVE A SIMILAR DYNAMIC IN THE MARKET WHERE THE S.E.C. HAS ALLOWED FOR AND APPROVED ETHEREUM FUTURES ETFs TO COME TO MARKET.

THE DATA SUGGESTS IN A VERY SIMILAR WAY TO BITCOIN THAT SPOT BITCOIN AND BITCOIN FUTURES HAVE A TIE, THE MARKETS HAVE A 99.9% CORRELATION, SAME IS TRUE AROUND ETHEREUM WE HAVE A VERY SIMILAR DYNAMIC HERE. >> GIVE US A LITTLE BIT OF A BEHIND THE SCENES OVER THE LAST

MONTH AND A HALF SINCE THIS HAS NOW HAPPENED, THERE HAVE BEEN OUTFLOWS FROM YOUR FIRM, A LOT OF INFLOWS APPARENTLY, TO BLACKROCK AND SOME OF THE OTHERS, I NHAVE SEEN YOUR ADS O SUBWAYS AND OTHER PLACES HOW HAS THE BUSINESS CHANGED >> I THINK IT IS ABOUT AUDIENCE,

RIGHT? I THINK THAT GBTC IS UPLISTING, HAVING COME TO THE NEW YORK STOCK EXCHANGE, PAVED THE WAY FOR ALL THE OTHER ISSUERS TO COME TO MARKET AS WELL HAS REALLY OPENED THE OPPORTUNITY FOR A MUCH LARGER AUDIENCE OF INVESTORS TO PARTICIPATE IN THIS

ASSET CLASS FOR THE FIRST TIME THE PRODUCTS ARE FUNCTIONING VERY, VERY WELL, TIGHT SPREADS, CLOSELY TRACKING THE UNDERLYING BITCOIN. IT HAS BEEN A MAJOR SUCCESS. >> BUT STRATEGICALLY FOR YOU, IS YOUR GOAL TO GET MORE INFLOWS OR FRANKLY JUST TO PREVENT OUTFLOWS, GIVEN THAT YOU WERE

THE LEADER IN THIS SPACE TO BEGIN WITH >> WELL, I THINK IT IS ACTUALLY THE QUESTION WE’RE ACTUALLY GETTING MOSTLY FROM INVESTORS NOW IS WHERE ELSE SHOULD THEY BE INVESTING? A LOT OF INVESTORS WERE ABLE TO BENEFIT FROM BEING IN BITCOIN AS

EARLY AS THEY WERE BECAUSE WE WERE IN BITCOIN AS EARLY AS WE WERE THEY’RE LOOKING ACROSS THE REST OF THE GRAYSCALE PRODUCT FAMILY AT OTHER ASSETS AND OTHER AREAS OF THE MARKET AND WHERE THEY CAN GET INVOLVED IN DIVERSIFYING THEIR CRYPTO EXPOSURE. >> WHAT DOES THAT LOOK LIKE THEN

TO YOU >> WE’RE SEEING INVESTORS ACTUALLY TAKING NOTE OF ETHEREUM, RIGHT, BUT GRAYSCALE HAS WELL OVER A DOZEN PRODUCTS IN THE MARKET AND WE’RE SEEING ROBUST TRADING VOLUMES THERE, INVESTORS LOOKING TO DEPLOY CAPITAL IN OTHER AREAS OF THE MARKET SOME OF THEM TAKING A

SECTOR-BASED APPROACH TO THEIR CRYPTO INVESTING. >> DO YOU THINK YOUR COMPANY, GIVEN WHERE YOU ARE IN THIS SPACE, IS AN INDEPENDENT FIRM TWO YEARS FROM NOW A I ASK BECAUSE WE HAVE A DOZEN COMPANIES THAT ARE EFFECTIVELY TRYING TO BE IN YOUR SPACE,

BLACKROCK, OF COURSE, SORT OF ROLLING IN AT A VERY AGGRESSIVE SPEED. >> SURE. >> YOU DO HAVE ENORMOUS AMOUNT OF MONEY UNDER MANAGEMENT, IF YOU WILL, BUT PART OF STRATEGICALLY YOU HAVE TO SORT OF DEAL WITH IS THIS IDEA THAT THEY CAN GO ELSEWHERE, YOU HAVE

FEES THAT ARE HIGHER THAN MOST OF THE OTHERS. WOULD IT MAKE SENSE FOR YOU TO BE WITH SOMEBODY ELSE? >> IT COULD. I WOULD BE LYING IF I DIDN’T SAY THAT THOSE TYPES OF CONVERSATIONS AND THOSE OPPORTUNITIES OVER TIME HAVE STARTED TO PRESENT THEMSELVES AT GRAYSCALE. I THINK THE INVESTMENT COMMUNITY

AS A WHOLE REALLY TOOK NOTE OF THE GRAYSCALE LAWSUIT. AND THE VICTORY THAT WE HAD IN THAT LAWSUIT AND, YOU KNOW, OUR EYES AND EARS ARE OPEN AND SOMETIMES PEOPLE ARE APPROACHING US ABOUT STRATEGICALLY WORKING TOGETHER, BUT NOTHING TO ANNOUNCE. >> ON THE BITCOIN FRONT, IS YOUR

SENSE, WE HAVEN’T GOTTEN TO A PLACE WHERE ALL THE ADVISERS WERE ALL APPROVED YET TO BE OFFERING THIS AS A PRODUCT SIX MONTHS FROM NOW, THEY MAY. HOW DOES THAT CHANGE THE BALANCE OF ALL OF THIS WHEN ARE WE GOING TO SEE — WE’RE SEEING MEANINGFUL TRADING,

BUT MAYBE WE SEE LOTS AND LOTS OF TRADING, JUST IS THIS STILL A HUGE COMMUNITY AND WHAT DOES THAT MEAN LONG-TERM IN TERMS OF PRICING. >> I THINK THE ADVISE MARKET IS VERY IMPORTANT FOR BITCOIN AND CRYPTO IN GENERAL. ABOUT $40 TRILLION WORTH OF ADVISE WEALTH HERE IN THE U.S.

OVER THE NEXT COUPLE OF MONTHS, I DO THINK YOU WILL SEE THESE PRODUCTS BEGIN TO GET APRPROVED ON ADVISORY PLATFORMS. MY TEAM WAS HOLDING A SEMINAR IN DALLAS WITH INVESTMENT PROFESSIONALS. AND IT IS CLEAR THAT THERE IS STILL A KNOWLEDGE GAP AMONGST THOSE PROFESSIONALS AS TO HOW TO

APPROACH THE CONVERSATIONS WITH THEIR CLIENTS. FOR US, IT IS A REMINDER WE HAVE TO EDUCATE ADVISERS BECAUSE THEY’RE EITHER SCARED, THEY KNOW HOW TO APPROACH THIS, IT IS SO