Bitcoin Extends Retreat From Record as Bubble Talk Escalates

Summary

The discussion revolves around the significant impact of ETFs on Bitcoin and the broader cryptocurrency ecosystem. It highlights the projected $220 billion in net inflows into ETFs over the next three years, opening up access to crypto for retail investor advisors managing $25 trillion in assets. The transformational effect of substantial capital inflow is emphasized, with a bullish outlook on blockchain technology and its applications. The role of Coinbase as a key player in the industry's growth is also underscored, with expectations of innovation and development in blockchain technology over the coming decade.

Takeaways

• 🚀 Projected $220 billion in net inflows into ETFs over the next three years, a significant increase from the $10 billion seen in the first two months of launch.
• 💼 Retail investor advisors, managing around $25 trillion in assets, are now able to invest in Bitcoin through ETFs, opening up a previously untapped market.
• 🌐 The approval of ETFs is expected to accelerate capital inflows into the cryptocurrency market, despite potential volatility.
• 📈 The transformational impact of substantial capital inflows into new markets is highlighted by the speaker's 20-year experience in financials and fintech.
• 🤔 Speculation on the future success of various blockchain technologies is likened to investing in early-stage technology or biotech stocks.
• 📊 The ETF for Bitcoin is seen as a separate entity from the broader crypto ecosystem, with potential to attract investments from over $100 trillion in capital.
• 💹 The discussion suggests that the Bitcoin ETF will not cannibalize trading on platforms like Coinbase, but rather increase overall interest and trading volumes.
• 🌐 The potential for an ETF ETF and the performance of other cryptocurrencies like Solana indicates a spillover effect that could benefit the entire crypto market.
• 🏦 Coinbase is positioned to benefit from the growth of the crypto ecosystem, with involvement in tokenization, payments, web3 applications, and staking, beyond just trading volumes.
• 📈 Other brokerages like Robinhood and Galaxy could also benefit from the growing interest in crypto, with retail and institutional investors driving demand.

Q & A

What is the projected amount of net inflows into ETFs over the next three years?

The projected amount of net inflows into ETFs over the next three years is $220 billion.

How much net inflow has been observed in the first two months of the launch?

In the first two months of the launch, there has been about $10 billion of net inflows.

What is the significance of the ETF approval for retail investor advisors?

The ETF approval allows retail investor advisors to access and invest in Bitcoin and crypto, which they were previously shut out from due to custody concerns.

What is the total asset value under the management of retail investor advisors?

The total asset value under the management of retail investor advisors is about $25 trillion.

How does the speaker describe the current stage of the market in terms of Bitcoin and the broader crypto ecosystem?

The speaker describes the current stage as being in the 'first inning', indicating that the market is still in its early stages of development and growth.

What is the speaker's stance on the future of other cryptocurrencies besides Bitcoin?

The speaker believes that many of the other cryptocurrencies may end up being worthless over the next couple of decades, but acknowledges that we are in the early stages of development and people are speculating on which blockchains will be successful.

How does the speaker view Coinbase in relation to the crypto ecosystem?

The speaker views Coinbase as a significant player in the crypto ecosystem, benefiting from the broader application of blockchain technology and being involved in various aspects of the industry's growth.

What is the impact of the Bitcoin ETF on Coinbase's trading volumes?

The Bitcoin ETF has led to increased trading volumes for Coinbase, with a reported increase of over 100% in the first quarter compared to the previous year.

What is the potential spillover effect of the Bitcoin ETF on other cryptocurrencies?

The Bitcoin ETF has increased interest in the broader crypto space, leading to more trading and investment in other blockchain technologies and altcoins.

Which other companies besides Coinbase could benefit from the growth in the crypto market?

Other companies that could benefit include Robinhood and Galaxy, which are also public market plays in the crypto space.

What is the estimated breakdown of retail versus institutional inflows into ETFs?

It is estimated that of the $220 billion in net inflows, $160 to $170 billion will come from retail investors, whether self-directed or advisor-led.

Outlines

00:00

📈 ETFs and the Future of Bitcoin Investment

This paragraph discusses the impact of ETFs on Bitcoin and the broader cryptocurrency ecosystem. The speaker predicts $220 billion in net inflows into ETFs over the next three years, highlighting the opening of previously inaccessible capital for investment in crypto. The introduction of ETFs is seen as transformative for the market, with retail investor advisors controlling about $25 trillion in assets now able to invest without the need for platforms like Coinbase. The speaker emphasizes that the market is still in its early stages, with accelerating flows expected, despite potential volatility. The conversation also touches on the speculative nature of the market, the potential worthlessness of many cryptocurrencies, and the bullish outlook on blockchain technology. The ETF for Bitcoin is considered a separate entity, but the overall trend is towards increased capital allocation in the crypto space.

05:02

🚀 Diversification in the Cryptocurrency Market

The second paragraph focuses on the diversification within the cryptocurrency market beyond Bitcoin. It discusses the potential of an ETF ETF and the performance of other cryptocurrencies like Solana. The impact of the Bitcoin ETF on platforms like Coinbase and Robinhood is explored, with the expectation that increased interest in the crypto space will lead to higher trading volumes. The speaker argues that the ETF has not cannibalized trading but has instead attracted more capital into the market. Coinbase is positioned as a comprehensive player in the crypto ecosystem, with involvement in various aspects of the industry's growth, including tokenization, payments, and web3 applications. The conversation also briefly touches on other brokerages like Galaxy that could benefit from the growing market.

Keywords

💡ETFs

Exchange-Traded Funds (ETFs) are investment funds and exchange-traded products, traded on stock exchanges much like individual stocks. In the context of the video, ETFs are significant because they allow for the investment in Bitcoin and other cryptocurrencies, opening up the market to a broader range of investors, including retail investor advisors managing trillions in assets.

💡Bitcoin

Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. In the video, Bitcoin is highlighted as the primary cryptocurrency that will benefit from the influx of capital through ETFs, and it is considered the biggest pool for investment among the various cryptocurrencies available.

💡Retail Investor Advisors

Retail Investor Advisors are professionals who provide investment advice to individual, or retail, investors. They manage the assets of these investors and make investment decisions on their behalf. In the transcript, it is noted that these advisors manage about $25 trillion in assets and are now able to allocate a portion of these assets to Bitcoin and other cryptocurrencies through ETFs.

💡Fintech

Fintech is an abbreviation of 'financial technology' and refers to the use of technology to improve and automate financial services. In the video, the speaker has a background in covering financials and fintech, which provides context for their expertise and understanding of the transformative potential of the capital flows into the cryptocurrency market.

💡Volatility

Volatility refers to the rate and extent of price changes in financial markets. In the context of the video, the speaker anticipates that the influx of capital into cryptocurrency ETFs will lead to increased market volatility due to the speculative nature of the market and the significant amount of new money entering the space.

💡Blockchain

Blockchain is a decentralized, distributed ledger of digital events that resists data modification, ensuring the integrity and security of transactions. It is the underlying technology behind cryptocurrencies like Bitcoin. In the video, blockchain technology is seen as a key component of the broader crypto ecosystem, with various blockchains being speculated upon for their future development and utility.

💡Coinbase

Coinbase is a digital currency exchange platform where merchants and consumers can buy and sell cryptocurrencies like Bitcoin, Ethereum, and Litecoin. In the transcript, Coinbase is described as the largest 'on ramp' to the cryptocurrency market in the public markets, benefiting from the broader growth of the crypto ecosystem and the introduction of ETFs.

💡Altcoins

Altcoins are alternative cryptocurrencies to Bitcoin. They are essentially other digital currencies that use blockchain technology to secure transactions, but unlike Bitcoin, they operate on different algorithms and may have different purposes. In the video, altcoins are part of the broader discussion on the potential of various blockchain technologies and the speculative nature of the market.

💡ETF ETF

An ETF ETF, or Exchange-Traded Fund ETF, is an ETF that invests in other ETFs, typically focusing on a specific sector or theme. In the context of the video, the discussion of an ETF ETF suggests that there is potential for diversification beyond Bitcoin into other cryptocurrencies and blockchain technologies.

💡Robinhood

Robinhood is a financial services company that offers commission-free trading of stocks, ETFs, options, and cryptocurrencies through its mobile app and website. In the video, Robinhood is mentioned as a key player in the retail investment space, with a user base that is active in cryptocurrency trading.

💡Galaxy

Galaxy, in the context of the video, likely refers to Galaxy Digital, a Canadian-listed company that provides financial services and investment management in the digital asset, cryptocurrency, and blockchain technology sector. It is mentioned as another public market entity that could benefit from the growth of the cryptocurrency market.

Highlights

$220 billion of net inflows into ETFs over the next three years is predicted.

There has been $10 billion of net inflows in the first two months of ETF launch.

ETFs have opened up additional capital that was previously inaccessible for crypto and Bitcoin investments.

Retail investor advisors, managing $25 trillion in assets, are now able to consider crypto investments with ETF approval.

The early stages of ETFs suggest that flows are accelerating, with potential for increased volatility.

The transformational impact of substantial money entering a new market is highlighted, with a focus on financials and fintech.

The shift in tone regarding the crypto market is attributed to the introduction of ETFs.

Speculation on the future value of cryptocurrencies, with many potentially becoming worthless over the next few decades.

Blockchain technology and its application in the broader crypto ecosystem are seen as highly bullish.

The ETF for Bitcoin is considered a separate entity but still contributes to the overall growth of the crypto market.

The discussion around the Bitcoin ETF cannibalizing trading volumes is debunked, showing increased interest and trading in the broader crypto space.

Coinbase's role in the growth of the crypto industry, beyond trading volumes, is emphasized.

Coinbase's involvement in various aspects of the industry, including tokenization, payments, and web3 applications, is highlighted.

The potential for ETFs to impact the price and discussion around Bitcoin, with a focus on the broader implications for altcoins.

The spillover effect of ETFs on other cryptocurrencies like Solana is discussed.

Galaxy and Robinhood are mentioned as potential beneficiaries in the brokerage space, alongside Coinbase.

The importance of retail investors and self-directed market in the predicted $220 billion of net inflows.

Wealth management advisors are expected to allocate some funds to the new asset class, driven by customer interest.

Transcripts

Some of your notes have been pretty extraordinary in terms of the sheer

scale of money that is entering this space and where you see some of the

price points going. Can you just talk us through your main

thesis of what the ETFs could do for Bitcoin and the ecosystem more

generally? Yeah, happy to, Caroline.

And thanks so much for having me on. So we put out a note earlier this week

and we are talking about $220 billion of net inflows into these ETFs over the

next three years. So for context, there's been about 10

billion of net inflows over the first two months of launch, but we see that

accelerating quite a bit. And the reason being is that we've

essentially opened up a lot of additional capital that historically, up

until January this year was shut out of investing in crypto and in Bitcoin,

specifically the biggest pool that is retail investor advisor by money,

there's about $25 trillion of assets where advisors really want to custody

the money within their own custody and not move it out to somewhere like

Coinbase. And so ultimately now these advisors

with the ETF approval can start to look at that.

But I think we're in the first inning. I don't think advisors have really been

allocated yet. So we see flows actually accelerating

from here. So there will be volatility.

But you know, in my career covering financials and fintech for 20 years, you

know, follow the flows and when there's money coming into a new market and it's

substantial, which we think it will be with these apps, it's really

transformational. It is amazing that we have been talking

some of these cycles for years, but only now do we hear the likes of you, Devin,

talking about $220 billion coming in. And we had Bernstein yesterday out with

a note saying we are entering this monster cycle for crypto.

What changed your tune? Was it the ETF?

Yeah, we've been consistently constructive on the space and you know,

I cover Coinbase, which is in our view kind of the biggest on ramp in the

public markets into the industry. I think you guys touched on it.

There's a lot of speculation going on. You have Bitcoin and then you have, you

know, 20,000 other cryptocurrencies and I think that many of those

cryptocurrencies are going to be worthless when you look out over the

next couple of decades. That being said, we are in the early

innings and so people are putting their chips on various blockchains that they

think will have development on top of them.

And just like you would in a technology stock or even a biotech stock that is,

you know, in its formation days, you know, it's going to take ten years to

get to commercial application. And a lot of these blockchains are in

their first inning and people are speculating on which ones it will be

utilized. And so I'm very bullish on the

application of the blockchain technology that's kind of the broader crypto

ecosystem that Coinbase is benefiting from.

And then the ETF for Bitcoin is, in my opinion, kind of its own animal.

But we do see again, you know, we think people are going to increasingly move

some money, you know, small amounts, but small amounts.

Now you open the door to, in our opinion, over $100 trillion of capital

in us that potentially could look at allocating something here and we're shut

out. You know, much of that until January 11.

You mentioned Coinbase and just a disclosure that my husband is a director

over at Coinbase, but I am interested in that outside of the space of just

Bitcoin, Bitcoin is sort of hoovered up all the oxygen in terms of being able to

shine a light on the price, being able to talk about the ETFs.

But there is talk of an ETF ETF, there is still Solana doing very well, for

example, other altcoins. How does that spillover effect continue?

Yeah, it's a great question, Caroline. I think there was a lot of discussion in

the market leading into the Bitcoin ETF that would be cannibalistic in that

everybody would just trade the ETF and then that would hurt Coinbase.

We were taking the other side of that argument.

I think the evidence is now clear that in reality what's happened is there's

been a significant amount of more money that's moved into the broader spit, both

of Bitcoin where Coinbase is participating, a lot of trading of the

underlying assets in the ETF and then elsewhere, but their volumes are up over

100% trading volumes over the first quarter last year.

And a lot of that's happening in all of these other assets because again, people

are more interested in learning about the space and taking views on other

blockchain technologies and which ones could be successful.

And so that's really what's happening. I think we're still kind of in the early

days of that as well. That's Coinbase.

But then Coinbase is also, you know, in our opinion, going to have their hand in

virtually every aspect of how this industry grows, whether it's

tokenization of real world assets, whether it's, you know, payments and

remittance and development of web3 applications, do they have their own

blockchain called base? You know, they're very active in staking

and there's going to be a lot of innovation in this industry that I don't

think is even happened yet. So Coinbase to us is really a play on

that growth, even more so than just trading volumes.

And you know, the exchange activity. It's interesting that Bernstein called

out Robinhood as the key play. You've got a $25 price target, I believe

in that particular company. Where else could be benefiting in terms

of brokerages? Is it all about the institutional play

and the retail play still? Yeah, I think Galaxy is a name.

They're Canadian listed right now, but that's Michael Bloomberg, right?

As you guys mentioned, they're clearly a public market play here.

We know a lot of the private players in the space and there's a lot of really

interesting companies in the private markets.

Robinhood clearly has an investor base that is, I think, in the demographic

that is active in crypto. It's not as big of a driver for their

business model. Coinbase is really a pure play on the

crypto ecosystem, both trading but then also development.

And how is blockchain used over the next 5 to 10 years and they're going to

participate in all that. I think Robinhood has, you know, their

tentacles into some of that. But you know, Robinhood, a broader

brokerage, which is good, a lot of the other brokerages really, you know,

they're they're barely there yet. And that's also, in our opinion, part of

the opportunity is self-directed market. I would put in that bucket of your

retail investors and we estimate of that $220 billion of net inflows, 160, 170

billion of that is still going to come from retail, whether self-directed or

advisor led. And I've covered the wealth management

market for 20 years. These are folks that, again, they're

relatively conservative, but they want to invest where their customers want to

invest. And I think the people are going to want

some small access to this new asset class.