The REAL Reason Why Blackrock is Buying Bitcoin

Anthony Pompliano
8 Apr 202425:10

Summary

TLDRIn this transcript, Robbie Mitchnick, Head of Digital Assets at BlackRock, discusses the firm's journey into Bitcoin and the broader cryptocurrency space. Mitchnick highlights BlackRock's strategic approach, beginning with studying the technology and asset class, and evolving over six to seven years. He emphasizes the importance of client demand, regulatory progress, and the maturation of market infrastructure. BlackRock's entry into the Bitcoin market through ETFs and other investment vehicles reflects a careful, client-focused strategy, with an eye on long-term portfolio construction and risk management. Mitchnick also addresses the misconceptions around Bitcoin's correlation with other asset classes and its role as a diversifier in investment portfolios. The conversation touches on the future of Bitcoin on Wall Street and the potential convergence of traditional finance and blockchain technology.

Takeaways

  • 🚀 BlackRock's journey into Bitcoin started 6-7 years ago with a careful study of the technology and asset class.
  • 🛠️ The development of infrastructure and institutionalization, along with regulatory progress, laid the foundation for BlackRock's moves in the Bitcoin space.
  • 💡 Persistent and growing client interest, despite market cycles, was a significant driver for BlackRock to enter the Bitcoin market.
  • 🏦 BlackRock's decision to engage with Bitcoin was not influenced by concerns over their win-loss approval record.
  • 🤝 Partnerships with firms like Coinbase and the launch of a private Bitcoin fund were crucial steps in building capabilities for asset management within the crypto space.
  • 💪 The successful launch of the Bitcoin ETF in 2023 was fueled by clear client demand and the company's long-built capabilities.
  • 📈 Investors are increasingly choosing Bitcoin ETFs as a more accessible, lower-cost, and convenient solution for Bitcoin exposure.
  • 💰 The diversity of investor types and their varied rationales for utilizing the ETF have been surprising and broad, ranging from small to ultra-high net worth individuals and institutions.
  • 🌐 The market for Bitcoin is expected to continue evolving with the entry of new types of allocators and practices such as rebalancing.
  • 📊 Correlations and the role of Bitcoin as a potential diversifier or hedge within institutional portfolios are key topics of current debate and education.
  • 🔍 Achieving small wins and maintaining a discerning approach are essential strategies for institutions just beginning to explore the Bitcoin and broader crypto space.

Q & A

  • How did BlackRock come to the decision to get involved with Bitcoin?

    -BlackRock's decision to get involved with Bitcoin was not a sudden one. It was a journey that started six to seven years ago with studying the technology and the emerging asset class. The company observed the evolution of infrastructure, institutionalization, and the regulatory climate. Most importantly, they noted a consistent and enduring interest from their client base, which expressed frustration with the lack of efficient, secure, and convenient exposure solutions to Bitcoin. This, combined with the capabilities that BlackRock built over the years, led to their current position in the Bitcoin space.

  • What was BlackRock's approach to integrating Bitcoin into their offerings?

    -BlackRock took a measured approach to integrating Bitcoin. They began by studying the technology and asset class. In 2021, they started working with Coinbase Prime to integrate their trading and custody services into BlackRock's Aladdin investment solution. In 2022, they launched a private Bitcoin fund, which was a critical step in developing their capabilities as an asset manager. By 2023, they had laid the groundwork to offer a Bitcoin ETF, driven by clear client demand.

  • How has the regulatory climate for Bitcoin evolved according to BlackRock?

    -According to BlackRock, the regulatory climate for Bitcoin is not perfect but has come a long way, particularly in the last three to four years. This improvement in the regulatory environment has been a significant factor in BlackRock's decision to move into the Bitcoin space.

  • What was the driving force behind the creation of BlackRock's Bitcoin ETF?

    -The driving force behind the creation of BlackRock's Bitcoin ETF was the consistent and enduring interest from their client base. Clients were increasingly frustrated by the lack of efficient, secure, and convenient exposure solutions to Bitcoin. This, combined with the capabilities that BlackRock had built over the years, led to the launch of the ETF.

  • How has the Bitcoin ETF been received by different investor types?

    -The Bitcoin ETF has been received by a broad range of investor types, from small-dollar investors to ultra-high-net-worth individuals, wealth advisory, and institutional clients. The demand has come from various use cases and rationales, reflecting the diversity of interest in Bitcoin exposure.

  • What are some of the misconceptions about Bitcoin's role in portfolio construction?

    -One of the misconceptions is referring to Bitcoin as a 'risk-on' asset. This term implies correlation to equities and fixed income, which is not accurate for Bitcoin. Bitcoin is a risky asset due to its volatility and uncertainty, but it has a fundamentally different macro variable driving it, which is its correlation with real interest rates. Educating institutional investors about this distinction is a key part of BlackRock's engagement with them.

  • How does BlackRock view the future of Bitcoin in relation to cycles and market volatility?

    -BlackRock believes that cycles in Bitcoin are here to stay due to its reflexive nature. The price movements of Bitcoin influence and are influenced by its perceived success and adoption. While volatility may decrease over time, the cycles of bull and bear markets are expected to continue even in an increasingly institutional environment.

  • What is BlackRock's strategy for educating clients about Bitcoin?

    -BlackRock focuses on educating clients about the unique characteristics of Bitcoin and its role in portfolio construction. They discuss the importance of understanding correlations, the macro variables driving Bitcoin, and how it functions as an asset class. This education journey is a significant part of their client interactions and is designed to demystify Bitcoin and foster informed investment decisions.

  • What advice does BlackRock have for other institutions looking to engage with Bitcoin?

    -BlackRock advises other institutions to start small and aim for wins that build familiarity, expertise, and credibility with the technology and asset type. It's important to be discerning and ensure that projects are well-executed. Additionally, everything should be considered from the institution's standpoint rather than individual passions, to ensure strategic and risk considerations align with the institution's goals.

  • How has the involvement of traditional financial institutions like BlackRock impacted the perception of Bitcoin?

    -The involvement of traditional financial institutions has brought Bitcoin closer to the mainstream financial system. It has provided a familiar and convenient way for investors who were previously uncomfortable with digital asset rails to gain exposure to Bitcoin. However, there is still a place for both traditional and digital-native investment exposures, and BlackRock sees a future where the best of both worlds converge in the next generation of financial infrastructure.

  • What has been the most surprising aspect of BlackRock's Bitcoin ETF for the team?

    -The most surprising aspect for BlackRock's team has been the breadth of investor types that the ETF has resonated with and the variety of rationales for wanting exposure to the ETF. They did not expect such a wide range of use cases and reasons from different investor segments, which has been a significant revelation for them.

Outlines

00:00

🚀 Introduction to BlackRock's Bitcoin Involvement

This paragraph introduces Robbie, the head of digital assets at BlackRock, who has been instrumental in understanding the value of Bitcoin and advocating for its integration within the firm. It outlines BlackRock's journey with Bitcoin, starting from studying the technology and asset class about six or seven years ago. The decision to get involved with Bitcoin was not sudden but a result of evolving infrastructure, institutionalization, regulatory climate, and consistent client interest. The conversation also touches on the internal decision-making process at BlackRock and the development of capabilities over the years, leading to the current state of their Bitcoin involvement.

05:02

💡 ETFs and Client Demand

In this paragraph, the discussion focuses on BlackRock's ETFs and the significant client demand that led to their creation. It highlights the company's stellar track record with ETFs and the decision-making process behind launching a Bitcoin ETF. The conversation delves into the client base's reaction to the ETFs, the reasons for the rapid capital inflow into these funds, and the different investor types attracted to Bitcoin access through these ETFs. The paragraph also discusses the role of BlackRock as a trusted name in the industry and its impact on various pools of capital, such as pension funds and sovereign wealth funds.

10:04

📈 Market Dynamics and Portfolio Construction

This section explores the market dynamics and the role of Bitcoin as a part of portfolio construction. It addresses the concept of Bitcoin as a 'digital gold' and the challenges in understanding its correlation with other assets. The conversation emphasizes the importance of education and the need for traditional investors to understand the unique characteristics of Bitcoin. It also discusses the potential future of Bitcoin on Wall Street and the expected convergence of traditional finance and cryptocurrency-native systems.

15:06

🗣️ Public Communication and Client Interaction

The focus of this paragraph is on the public communication strategy of BlackRock, particularly regarding its involvement with Bitcoin. It highlights the significance of Larry Fink's statement on Bitcoin as a flight to quality and the impact of such public endorsements. The conversation also touches on the responsibilities of BlackRock as a thought leader and the importance of a measured and thoughtful approach to communicating complex topics. The paragraph concludes with a discussion on the role of correlations in portfolio management and the implications for institutional investors.

20:07

🛠️ Advice for Institutions Considering Crypto

In the final paragraph, Robbie offers advice to other institutions considering involvement in the cryptocurrency space. He emphasizes the importance of starting with small wins to build familiarity and credibility, being discerning in project selection, and maintaining an honest broker stance, focusing on the institution's perspective rather than personal passion for crypto. The conversation also reflects on the surprises encountered during BlackRock's journey, such as the diverse range of investor types interested in the Bitcoin ETF and the various rationales behind their interest. Lastly, Robbie provides tips for engaging with traditional financial institutions.

Mindmap

Keywords

💡Digital Assets

Digital assets refer to content or data that is stored digitally and possesses value. In the context of this video, the term is closely associated with cryptocurrencies like Bitcoin and blockchain technology. Robbie Mitnik, as head of digital assets at BlackRock, delves into the intricacies of integrating these assets into the mainstream financial landscape, highlighting BlackRock's journey in understanding and adopting Bitcoin as a legitimate investment class.

💡Institutional Investors

Institutional investors are entities like pension funds, insurance companies, and investment banks that make substantial investments in various markets. The video emphasizes Robbie Mitnik's expertise in dealing with these investors, particularly in the context of exploring and integrating Bitcoin into BlackRock's offerings, illustrating a significant shift in how traditional financial institutions perceive and engage with digital currencies.

💡Bitcoin

Bitcoin is a decentralized digital currency without a central bank or single administrator. In the video, its role as an emerging asset class that has garnered attention from institutional investors like BlackRock is examined. The discussion includes BlackRock's strategic approach to incorporating Bitcoin into their asset management portfolio, reflecting a broader institutional acknowledgment of Bitcoin's potential as an investment.

💡ETFs (Exchange-Traded Funds)

ETFs are marketable securities that track an index, commodity, bonds, or a basket of assets. Robbie discusses BlackRock's move to create a Bitcoin ETF, emphasizing the firm's confidence in Bitcoin's viability as an investment and its strategic decision to package it in a familiar investment vehicle, thus making it more accessible to a broader range of investors.

💡Regulatory Climate

The regulatory climate refers to the current state of laws and regulations governing a particular industry or sector. In the video, it is highlighted as a significant factor that has evolved to facilitate the institutional acceptance and integration of digital assets like Bitcoin into mainstream financial products and services.

💡Client Demand

Client demand in this context refers to the interest and preference expressed by clients of BlackRock in incorporating digital assets into their portfolios. The video details how consistent and growing client interest in Bitcoin and other digital assets has been a critical driver for BlackRock to develop investment solutions like Bitcoin ETFs.

💡Portfolio Construction

Portfolio construction is the process of selecting the optimal mix of investments based on the investor's goals, risk tolerance, and investment horizon. The video explores how Bitcoin's inclusion in BlackRock's investment strategies plays a role in diversifying portfolios, reflecting a shift in how traditional portfolio theories are applied to include digital assets.

💡Market Cycles

Market cycles refer to the periodic fluctuations in market prices through phases of bull markets, bear markets, and recovery. Robbie touches on the nature of Bitcoin's market cycles and how understanding these fluctuations is vital for institutional investors considering digital assets as part of their investment strategies.

💡Technology Integration

Technology integration in this context refers to how BlackRock incorporates blockchain and cryptocurrency trading and custody technologies into its existing systems. The video illustrates BlackRock's partnership with Coinbase Prime as an example of integrating advanced technology to manage digital asset investments effectively.

💡Risk Management

Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. The transcript shows how BlackRock considers the volatile and uncertain nature of Bitcoin and other digital assets in its risk management strategies, ensuring that their integration into investment portfolios aligns with the firm's and its clients' risk tolerance levels.

Highlights

BlackRock's journey into Bitcoin started 6-7 years ago with studying the technology and asset class.

The evolution of infrastructure and institutionalization in the Bitcoin space has come a long way in the last few years.

BlackRock's client base consistently showed interest in Bitcoin, even through market cycles.

In 2021, BlackRock began working with Coinbase Prime to integrate their services into the Aladdin investment solution.

BlackRock launched a private Bitcoin fund in 2022, a critical step in developing capabilities as an asset manager.

The Bitcoin ETF was introduced in 2023 with massive and clear client demand.

Investors are choosing BlackRock's Bitcoin access over direct investing due to lower costs and convenience.

There are three main investor buckets for BlackRock: end investors direct, wealth advisory, and institutional.

Large pools of capital, such as pension and sovereign wealth funds, are engaging in discussions with BlackRock about Bitcoin.

Bitcoin is considered a risky asset, but its correlation with equities and fixed income is low, making it a potential diversifier.

Bitcoin's macro variable is its correlation with real interest rates, which have driven asset performance recently.

The Bitcoin community has mistakenly embraced the idea of Bitcoin as a 'risk-on' asset.

BlackRock is focused on Bitcoin and Ethereum, with little interest in other cryptocurrencies.

The market for Bitcoin ETFs and institutional investment is expected to continue growing, but cycles of boom and bust are likely to remain.

BlackRock's entry into the Bitcoin market was a deliberate and measured process over many years.

Larry Fink's public statements on Bitcoin as a flight to quality reflect BlackRock's institutional perspective.

BlackRock's advice for other institutions is to seek small wins and be discerning in their approach to new technologies.

The variety of investor types and rationales for using the Bitcoin ETF has been a surprise to BlackRock.

Transcripts

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all right next up uh we have Robbie

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mitnik uh who is the head of digital

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assets at Black Rock um Robbie is uh by

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far I think one of the smartest

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institutional investors um and uh

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operators that has figured out uh some

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of the value proposition of Bitcoin and

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then done immense work internally at

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Black Rock to uh to get them on board

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and uh we we'll see if he was part of

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the Larry Fink orange pill but uh Robbie

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come on

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up all right how did Black Rock decide

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that you guys wanted to get into the

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Bitcoin

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game uh well we didn't just wake up one

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day and make that decision um I think

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that you know you look at our journey it

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goes back really now uh six seven

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years and it starts with studying the

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technology and this emerging asset class

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in a very measured way out of the gate

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right and I think if you look

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at the state of what it was then versus

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what it's

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become that really uh Paints the picture

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of how we ended up making the moves that

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we did right in terms of the state of

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infrastructure and

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institutionalization you know that has

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come a very long way

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particularly in the last three or four

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years right the state of the regulatory

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climate it's not perfect obviously but

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that has come a long way and then most

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importantly for us uh the level of

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interest that we had from our client

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base that was consistent and enduring

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even through the bull and bare Market

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Cycles we saw that very clear pattern

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that our clients were increasingly

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interested in this and increasingly

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frustrated

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by uh the availability of efficient

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TurnKey convenient secure exposure

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Solutions uh with which to get into this

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space and when you put all those

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together and you add sort of the the

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capabilities that we built over multiple

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years then you get to where we are today

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so take me inside the organization um

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you all do this work at some point

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there's kind of a zero to one decision

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hey we we should do something in the

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space um

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ETFs you all have a stellar track record

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I think at uh the time of filing it was

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575 and one um is there a fear that I

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don't want to be the one to be the

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second you know 575 and two or why ETFs

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and kind of how did you build the

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confidence to say hey look we think

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actually we can get this through with

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the with the

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Regulators uh well there's certainly a

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lot of things that we considered in that

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decision but I can tell you that one

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thing that we never considered was what

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will it do to our uh win loss approval

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record um you know it came down to if

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you think about some of the things that

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we did that laid the foundation right uh

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starting in 2021 we began working with

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with coinbase with coinbase prime to uh

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integrate from a technology capability

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standpoint their Prime brokerage trading

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custody into our Aladdin investment

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solution so that crypto uh specifically

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Bitcoin

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uh out of the gate uh could uh be part

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of the whole portfolio for the Aladdin

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clients that that that chose it to be uh

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and then in

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2022 we uh launched a private Bitcoin

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fund right which was really important in

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term one that was all you could do from

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a regulatory standpoint at that time but

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two in terms of developing the

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capabilities as an asset manager in the

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space that was limited to our largest

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institutional clients in the the us but

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it was a really critical stepping stone

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then you get to uh start at

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2023 and that's when we started to put

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uh the pieces in place to take that next

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step and and deliver the ETF which at

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that point we had uh massive and clear

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client Demand right that they were

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frustrated with how difficult it had

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been to get exposure you had some

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clients who had tried to get exposure in

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this space and they' you know been

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subjected to High fees high risk

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underperformance the price of Bitcoin in

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many cases all three uh or maybe even

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worse they missed it entirely which was

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you know Bitcoin is the top performing

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asset in the world the last decade and

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seven in the last 10 years and they

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missed it because they didn't have the

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the wrapper the format in a convenient

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accessible

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way once you get the approval um I was

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pretty bullish on the ETFs I thought hey

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this is going to be uh quite exciting I

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did not think we would see the inflows

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that we saw as quickly as we saw did you

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all think this would happen and what has

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been your kind of reaction or or you

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know analysis as to why so much Capital

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has flowed so quickly into these uh

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funds yeah it's been uh it's been an

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interesting couple of months um you I

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think investors are resoundingly

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choosing ibit for uh Bitcoin access

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whether that's uh you know new investors

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to the space who weren't willing to do

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it when it had the frictions that you

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know for some Bitcoin direct investing

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uh incurred uh or investors who are

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already in the space but are choosing

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this as a uh you know more efficient

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lower cost uh more accessible convenient

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exposure solution so you put those

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together it's been obviously a lot but

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when we think about our um you know

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business in our client base you have

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really kind of three buckets you could

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you could put it in right one is uh end

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investors direct and that channel you

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know right out of the gate you know has

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been very strong obviously a lot of

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interest in demand right from small

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dollar up to ultra high net worth type

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uh players then you have wealth

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advisory which um you know many of those

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uh home offices are are wealth advisory

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Partners they're still undergoing their

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diligence processes right so for a lot

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of these firms it's it's not approved at

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all or it's not approved other than on a

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unsolicited basis where the the client

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has to ask the advisor can't propose it

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um so that's still you know pretty early

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days and then on the institutional side

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we're having lots of great conversations

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a lot of sort of research and diligence

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and education happening but that's early

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they they just operate on a longer time

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scale and so it'll be interesting to see

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you know as the months and quarters

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unfold how those other channels start to

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come on now one of the things I think

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folks are very excited about Black Rock

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is there's a trusted name and there's a

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lot of relationships and um some of the

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pools of capital that previously have

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not participated you know very large

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Pension funds Sovereign wealth funds uh

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you can kind of go down the line of

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these pools um any insight into what

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those conversations look like so far are

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they open to learning more are they you

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know hey guys I don't want to talk about

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this where are those like kind of larger

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pools of capital

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currently yeah I think I think that

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there is a really really important uh

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discussion debate analysis going on of

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how to think about this from a risk and

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portfolio construction perspective and I

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would say that the um Bitcoin and you

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know crypto industry broadly has not

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done a good job at all of speaking the

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language of traditional investors right

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and one of the I think most confusing

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unhelpful things that happened in the

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postco era was um you had people sort of

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accept this idea that Bitcoin was a risk

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on asset whatever that even means right

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it's kind of devoid of of

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fundamental uh basis that concept to

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begin with but um Bitcoin is a risky

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asset right it is volatile it has a lot

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of uncertainty but risk on is a

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different thing right it implies

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correlation to equities fixed income

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what have you um and what happened was

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Bitcoin has one in our view uh

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fundamental macro variable where it is

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highly correlated with

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equities and that is it is massively

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short real interest rates right it is

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short nominal rates and it is long

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inflation expectations and real interest

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rates is nominal rates less inflation

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expectations so it's massively short

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real interest rates

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and real interest rates drove every

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asset Under the Sun between 2020 and

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kind of early 2023 right they collapsed

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therefore a lot of assets including

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Bitcoin rocketed and then they surged as

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fed started hiking and inflation

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expectations rolled

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over and so the Bitcoin and Community

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sort of embraced this idea that it was a

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risk on asset which um I think was

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problematic for two reasons

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uh one because it was actually

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counterproductive to them but two more

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importantly it's fundamentally it's

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probably wrong right if we think about

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long-term

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fundamentals and what it means to be a

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global decentralized scarce

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non-sovereign asset a lot of those

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fundamentals paint you know Mike was

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talking about some of these Dynamics and

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challenges the US fiscal situation and

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otherwise they paint a very different

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conclusion in terms of how to think

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about it versus other assets on a

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long-term basis so what's happened is

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those institutional investors they get

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kind of this digital gold

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hypothesis but then they look at the

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past data from you know 2020 to 2022 and

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they go well you know long-term

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correlation was low but then it spiked

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so you know how do we think about this

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in portfolio construction so that's the

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kind of education Journey that we're

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on now you guys just um I think put in

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application uh or announced a new type

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of fund um that is going to partner with

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securitise um tell us a little bit about

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what's the general idea there um and

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should we expect Black Rock to now go

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from Bitcoin you know kind of building

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this fund On ethereum and Here Comes

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everything else and as Mike said you

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know dog with hat is going to be the

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next uh fund you guys launch like how do

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you think about what that fund is and

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then kind of like the long taale of

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that um crypto Twitter would would love

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to believe that dog with hat ETF is

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coming next I actually don't know what

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dog with hat even is didn't get that

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reference but um you know that answers

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that

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question what what I can say is that um

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for our client

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base it is Bitcoin overwhelmingly number

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one their

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focus a little bit in

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ethereum and very very little everything

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else and when you think about it in

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terms of you know various metrics and

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dimensions I mean Bitcoin 52% of the

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market cap of the whole asset class

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ethereum but 17ish today maybe 18 and

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the next that is even sort of investable

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is like three right uh and so there just

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Worlds Apart there in terms of you know

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track record liquidity product Market

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fit investor narrative Clarity all these

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things right so that's where um I think

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there's some misplaced uh speculation

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that there's going to be a longtail of

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of others from us and that's really not

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where we're focused now as large pools

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of capital come in whether it is

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actually you know the pension Sovereign

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weals Etc or just a lot of capital flows

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into the ETFs um it feels like the

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ground under underneath the Bitcoin

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Market is shifting a little bit there's

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new types of allocators um things like

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rebalancing which is you know basically

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blasphemy in the Bitcoin Community uh

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now come into play and so do you expect

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volatility to dampen do you expect the

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end of the kind of the fouryear cycles

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and the big boom and bust how do you see

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the market moving forward given these

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ETFs and other institutional

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players yeah it's a great question I

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certainly don't think um we've seen the

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end of Cycles uh in Bitcoin I think you

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know by its

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nature um there's reflexivity in it

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right which is and that's and that's

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hard for a lot of traditional investors

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to wrap their heads around as you think

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about it you know if you think about a

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stock the stock price goes up but now it

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looks more expensive on a PE basis or or

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what have you uh and it goes down it

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looks cheaper on a PE basis um with

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Bitcoin when the price goes up the

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probabilities of success and adoption in

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some sense is as digital gold are also

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changing when and when bad things happen

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the price goes down those probabilities

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you know are also changing so you create

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reflexivity and um that just reinforces

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the idea that you're you're going to

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have these Cycles I think that they're

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still here to stay so people need to be

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wary of you we'll have bull markets

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we'll have bare markets too uh even in

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this sort of POS institutional World um

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and then what becomes interesting is how

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do you think about the direction of

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volatility right because volatility over

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time has has pretty steadily come down

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so maybe that continues to come down uh

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certainly returns going forward uh will

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come down it's not going to return 124%

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a year uh over the next decade like it

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has uh the prior decade so these are the

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kinds of conversations that we're having

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we're getting lots of questions from our

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investors and that's a big part of the

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education Journey now um when Black Rock

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decided to do this uh it struck me as

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literally the executive team the CEO all

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the way on down there's got to be a lot

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of Buy in to get to this point um I was

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shocked when Larry thinkink went on

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television and said people are buying

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Bitcoin because it is a flight to

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Quality um I joked with friends uh I may

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have tweeted and said it's almost like

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he's the chief marketing officer of

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Bitcoin um put aside the honorary title

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so so you came up with that title yes I

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came up with that title not you um but I

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I certainly didn't to talk a little bit

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about um you know this idea of Black

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Rock going out and talking about it

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because you guys could have just filed

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an ETF right but but actually having

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Larry or others from The Firm talk about

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this and this idea of flight to Quality

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it's very different right if a bitcoiner

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goes and says that people okay whatever

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but when a firm that frankly has built

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their reputation on helping investors

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find quality assets and allocate for the

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long term has done a very good job of

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doing that says it it has a different

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weight to it and so how do you guys

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think about you know maybe internal

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thoughts versus you share with clients

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versus kind of you know Public

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Communication around

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this yeah I think you know when you have

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topics that are novel and complex our

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clients expect us to be a thought leader

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and a thought partner with them right so

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so that comes with the territory and and

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that's what you know made our digital

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assets Journey over six seven years be a

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a very deliberate measured process right

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because we understood the know the

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import of our weight and our voice and

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to get to a point where we are today

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that took a lot of study and experience

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and

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education um and you know the things

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that that we say come from a a measured

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thoughtful place right it's not by

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accident one of the things you and I

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have talked about recently is

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correlations and I think this is one

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very misunderstood um but also two uh

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sometimes it can be hard for people to

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do the work to really understand what

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what the facts are there and so how do

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you all think about correlations inside

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of these portfolios and maybe positives

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or negatives based on those

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analysis yeah I mean I think it's

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probably the single most important uh

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debate right now in thinking about

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Bitcoin where you know historically

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bitcoin's long-term average correlation

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been uh close to zero slightly slightly

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positive but close to zero but it's had

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periods where it's spiked similar to to

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gold gold has had periods as well where

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it spiked actually if you put their

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correlation charts in the time series uh

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they look remarkably similar um but

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that's a really important thing for

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institutional investors when they think

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about portfolio construction because

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they're trying to understand in a small

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allocation is this risk additive to the

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portfolio or actually is it potentially

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a diversifier or even a hedge right so

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that's a really critical conversation it

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also is important for um you know and

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investors to understand because it's the

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reason that um you know Bitcoin is

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generally not appropriated in a large

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concentration in a portfolio because in

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a large concentration its

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volatility becomes a huge driver of risk

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but in a more modest concentration than

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the fact that generally it's been

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uncorrelated and has different

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fundamental drivers that's where you

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know potentially becomes a a a different

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source of return and and even in some

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cases a diversifier so that's a big part

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of the education

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journey is there a like average

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allocation size you're seeing from

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clients or uh a range that you're

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actually seeing them put out there and

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and I always joke that you know when

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people ask me I'm like scared to say

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anything other than 1 to 5 per. right

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like that just seems like okay you say

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that you're not crazy um but I've seen

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you know many uh large institutions talk

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about much higher percentages in some

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cases and so like what are you actually

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seeing people do yeah I think I mean

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obviously it depends on investor

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archetype and circumstances and and all

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those factors but you know I could say

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anecdotally what we're seeing is kind of

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the normal range um for those clients

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who are allocating whether we're talking

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about in in you know financial advisors

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on behalf of their clients or large

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institutions it tends to be kind of in

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that one to 3%

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range and then where are we going with

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Bitcoin and Wall Street right on one

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hand um I think a lot of people who

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bought Bitcoin early like the fact that

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it was outside the system um Black Rock

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other financial institutions creating

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ETFs and people buying that uh brings it

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a little bit closer into the system but

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maybe 10 years from now like what does

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Bitcoin on Wall Street look like and

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what are these asset managers doing and

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and what are maybe the changes to the

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market or or even to the

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players yeah well I think um you know

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that there's some irony in the fact that

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with uh the Bitcoin ETF and IIT we took

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a Crypton native investment exposure and

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we put it in a traditional Finance

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rapper and with tokenization we're

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taking traditional Finance investment

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exposure and we're putting it in a crypt

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native rapper and that may seem

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contradictory but it it's really not

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because across our client base there are

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those who are uh not comfortable yet

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with digital asset rails but they want

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those investment exposures and they want

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that in a you know convenient familiar

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wrapper and we have clients who are

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comfortable and fluent on uh blockchain

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infrastructure interacting with digital

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assets and they want traditional

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investing exposures in that format

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because it's digitally native Global

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programmable instantly transferable Etc

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and that uh dichotomy will persist for a

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while but eventually I think we expect

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there will be some convergence that

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looks like sort of the best of the old

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system and the best of this new

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technology fused into to a Next

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Generation infrastructure set in in

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finance and I'm not going to ask you for

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a price prediction um but you have been

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working on this for a while you your

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team is out of Black Rock do you have

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advice or maybe lessons learned from

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going through that process inside a

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large Organization for those that work

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at other institutions that may say hey

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look I you know we're not doing

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something or we're just starting our

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process what are some of the things that

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you thought were important and and you

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look back like hey I'm glad we did this

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as part of the research analysis and

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then also maybe things that you

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personally or people on your team

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probably would share with them if they

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want to be part of that group to to go

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and talk it inside of their

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corporation yeah I'd say two things

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maybe um one is you have to look for

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opportunities to get small wins so you

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may have Ambitions of you know what what

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you would hope an org might do but you

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don't start there you build familiarity

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and expertise and trust and credibility

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uh with smaller prizes but demonstrated

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successes that help people get

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comfortable with with the technology and

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and in this case you know a new asset

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type um but you have to be be careful

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because it's not throw everything at the

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wall and see what sticks right you want

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to have a high win rate where the

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projects that you advocate for are

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effective and well executed because

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there's lots of orgs that became

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disillusioned with blockchain and crypto

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because they took a try everything

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approach and got bogged down in a lot of

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bad ideas that went nowhere so be

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Discerning and have some early wins and

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the second piece is you have to be an

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honest

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broker you don't work for

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crypto you work for your institution so

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everything when you think about um you

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know strategy and ideas and risks that

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that may be taken have to be from the

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standpoint of the institution not an

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individual who happens to be passionate

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about Bitcoin or crypto and wants to see

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you know this come forth in the

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world and my last question for you is um

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through that whole process what have you

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been surprised by the amount of inflows

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the type of people buying the ETF maybe

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something internally like like just what

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surprised you uh because I think it

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would really I help us identify like the

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difference between expectations and what

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ended up happening and and so like those

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surprises is probably are pretty

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informative as

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well you know I think the biggest

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surprise has just been the breadth of

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investor types that um the the ETF has

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resonated with and the uh level of

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variation in rationals for wanting the

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ETF so we talk about you know small

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dollar all the way up to ultra ultra

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high net worth we talk about wealth

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advisory

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institutional and Myriad use cases and

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rationals for well I used to hold this

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way and now I prefer to hold through the

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ETF because X or because why or because

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the there's just been way more of those

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than I think we ever

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expected and for those that would like

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to work with black rock what is your

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suggestion so that you don't get

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harassed when you get off stage maybe

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you share that so we could save you some

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time well I think one of the things

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that's um important to understand

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working with large traditional Finance

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institutions is it's kind of similar to

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to what I was saying a moment ago in a

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in a different context which is you kind

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of have to build your way up to it right

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we're not going to be someone's first

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large traditional Finance large Asset

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Management client right there's sort of

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a track record that gets built over time

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you look at the partners we've worked

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with in this space so it's you know

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coinbase or Circle or securitize they

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all started in places and built that

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credibility long before before we

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ultimately you know entered the

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Partnerships that we

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did Robbie mitnik everyone thank you so

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much

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