21Shares Exec on Aftermath of the Halving, Future of Bitcoin Network

I'm super excited to see um a lot more consumer facing applications powered by Blockchain technology. And specifically uh we have the Bitcoin Network, think about the Venmo and the paypal of the world uh secured by, by Bitcoin. These are the things that we haven't seen before, which represents a significant opportunity for entrepreneurs to get used to Bitcoin script, get used to the Bitcoin um environment and trying to, to double down on it. It's Monday, April 22nd, 2024 and this is Markets Daily, a show where we get into the minds of some of the smartest and most experienced investors, traders, analysts CEO S people who are making big moves in the space who have smart and hot takes. I'm Jen Sani. Before we get into our discussion today. Let's take a look at what's going on in the markets this morning. The Bitcoin having happened on Friday and we saw some last minute volatility surrounding events. This is usually a very bullish event, but something feels a little bit different today, we're going to talk to our next guest about that in just a few seconds. But if we take a look at the numbers this morning, we are back in the green for more on the market's action. Let's bring in 21 shares VP and head of strategy and business development for digital assets, lie Z Nding Ellie. Welcome to the show. Thank you for having me then. All right, let's talk about the having. It's what everyone was waiting for. It took place on Friday. We've had a few days to cool down and, and uh reflect on what happened. Uh Talk to me about what you're watching. No, for sure. Uh This is a watershed moment for the entire industry uh for the first time in history. Uh The inflation rate for Bitcoin dropped below 1%. Uh Now at 0.85%. Uh and most importantly, Bitcoin reached an all time high before they had been over the past, you know, 12 to 13 years. Uh We've never had a and high ahead of the h uh And this happened uh many days, many weeks before. Uh the having happened on the 20th of April and then more sequent as well. Uh The Bitcoin structure changed so much uh ever since, uh especially since the last h because for example, the uh revenue from the miners really comes from the block, but as you know, but also from the transaction fees. Um and as a matter of fact, the transaction fees on the Bitcoin Network is spiked to $120 on average. Um in the past week or so, uh which is unprecedented. Um This incentivizes the miners, of course, uh to be able to plug in and secure the network with, uh you know, hashing power. But then mostly what we're seeing today is that the transaction fees on the Bitcoin network are 24 times as large as the transaction fees that we see today on ECIM, um close to $80 million in fees. Um And this is something that we haven't seen before with the rise of ruins and new protocols on top of Bitcoin. So this is the best case for even the layers and the scaling solutions built on top of Bitcoin. Think about, you know, uh the uh fed wire and the banks building on top. We're seeing the same narrative and the same developments as well with the Bitcoin network where we see stacks and more layers built on top to build essentially a defined economy on top of the Bitcoin network. This is something that we haven't seen before. And this is really incredible. Let's talk about runs for a second. You mentioned transaction fees. They went through the roof, they were over 100 and $46 for a medium priority transaction and at 100 and $70 for a high priority transaction that was over the weekend this morning, it looked like they had come back down. What does this tell you about the future for the Bitcoin Network? Like what do you expect to see here? No, a absolutely. I mean, the future of the Bitcoin network um is going to rely both on the base layer as well as on the scaling solutions built on top. And I think for the scaling solutions built on top, allowing consumers at Q and I to transact for remittances or uh doing day to day payments or even business to business payments. Uh this is going to happen top, whether it's only going to be on the lightning network or stacks or any overlays on top. Um And the best indicator for the market to see uh will be when the stablecoin issuers will be on top of these getting solutions so that, you know, fiat back ST coins payments uh could happen on top of the Bitcoin Network. You could also see uh you know, stablecoins built on the back with that Bitcoin as collateral. There are multiple innovations that we could see uh on the back of the Bitcoin network that we haven't seen yet. Uh which is great news down the line even for the miners to be a lot more incentivized to secure the Bitcoin network. And then for the entrepreneurs to ensure that consumer face applications could be affordable uh for uh multiple people around the world. And today, to be very honest with you, half a billion people have access to crypto. So this is exciting to see that we could cross a chasm and having more consumer facing applications starting with payments. Uh that could make sense for multiple people around the world. Uh So I'm quite excited for that Elliot, what does this mean for the price of Bitcoin? And I ask you this because the having is supposed to be this very bullish event you mentioned at the beginning of this interview, we hit an all time high before the having happened. The price seems to be like trickling up and down, not a lot of movement, not a lot of volatility since the having, but something interesting is that that price doesn't really skyrocket until some months after the having some of those charts have been making the rounds on social media to say, you know, just hold on. It's actually one year after the having that we're going to see the price um really take off here. What's your perspective? What does this mean for the price of Bitcoin? Sure. Uh I, I think, you know what we do really well, 21 shares is looking at, you know, history and Blockchain data and market data to understand uh you know, what may be the best indicators for uh market participants. Um I'm going to give you an example. So over the last 10 years, uh Bitcoin experience about 43 times um a drawdown of more than 10% 43 times. This is a chance of having a drawdown of 10% within a day once every quarter. If you extrapolate that moving forward. Um And when you look at that in 2023 we had zero days with a drawdown of more than 10%. Literally, this is an exception. So we should be expecting more volatility. But on the back of that, given the fact that Bitcoin has a supply shock as we know today with the H and then most frequently that we have the rise of investment vehicles like exchange rate funds or exchange rate products in Europe that allow access for banks and brokerage accounts to Bitcoin specifically uh the supply uh to some extent could be limited. Um And of course, a market for Bitcoin uh for the individuals is, you know, people having access to the internet, you know, yet smartphones or any other devices. But at the same time, these could also be an over market as well, which is a market of, you know, financial advisors and wire houses, the Q Bs and Morgan Stanley and of course, the more institutional investors or even uh suffering wealth funds having access uh to Bitcoin as well. Um So of course, over, you know, the long run, uh we know that there's a supply of 21 million Bitcoins. We have to include the coins that or last forever or dormant or the coins of Satoshi N A moto and then extrapolate that to uh the super market. But I, what I would say is that we should be expecting of course, uh a lot more Relativity. Uh but then more sequent, a lot more interest uh from an educational perspective for many people that were historically uh you skeptical to have access to this asset class. So this is exciting. I don't have a price tag to be very honest with you. Uh But I would be expecting a lot more productivity going forward. Ellie. I want to turn now from Bitcoin to Ether. I know that Arc invest in 21 shares have applied with the SEC to offer a spot E ETF what do you think the likelihood is that we see an approval on that product uh in May here in the United States? No, it's a, it's a great question. Uh Thank you so much for uh for asking this. Uh as you know, we have a pending application so we cannot specifically uh talk about our pending applications uh with the A SCC. Uh But we're quite excited to give an easy access uh to investors as long as they want it. Of course, um multiple assets selling with Bitcoin Ether. Uh But I cannot give you a specific uh you know, uh odd on whether this would be approved or not. Uh But we are definitely excited to give an easy access to crypto. Um And we will wait for an answer from the financial regulator. OK. If we move away from your application specifically and look to Hong Kong, they've approved a spot Ether ETF over there just I want to get your perspective. Um Does this put Hong Kong in an interesting position when it comes to the competitiveness of ETF S or maybe do you think this puts some pressure on the United States when it comes to the potential for having this product here? No, absolutely. I think a great tide lifts all boats, right? Uh So this is fantastic for the as a class to see more regions opening up to exchange products. Uh whether it's in Europe or in Hong Kong or any other places. Uh This is a great way for people to have an easy access with the banks and brokerage account. Uh This is what people need and we've seen the PT and Demand as well uh in the US uh for, for Bitcoin. Um and we could be expecting a lot more as well uh with uh over, over products. And uh this is really exciting for the A class. OK? And outside of Bitcoin, outside of Ether when it comes to your work and what you do when you look at the crypto space, what are you most excited about? What are you watching? It doesn't have to be anything that we've spoken about today. No, absolutely. So, so we talked about this a little bit earlier. Um So I'm super excited to see um a lot more consumer facing applications powered by option technology and specifically uh we have the Bitcoin Network think about the Venmo and the paypal of the world uh secured by, by Bitcoin. These are the things that we haven't seen before, which we present a significant opportunity uh for entrepreneurs to get used to Bitcoin, get used to the Bitcoin um environment and trying to, to double down on it. Um And this is really exciting to see that. Uh there are a lot of entrepreneurs in the tax environment. They are looking into this space very seriously or leveraging like a network. We've seen that with conveys as well uh in all firms. And I think um these are the things that really excites us because uh this is going to really allow us to cross the chasm and making sure that people get more comfortable. We've seen that in the early days of the internet where people were actually quite scared to use credit cards to buy, you know, flight tickets or, or you know, over uh activities happening over the internet and we're still there on the consumer facing side with, with Bitcoin and, and if they of course over base layers, um and I think we are going to see coming out of the last bear market, a lot more consumer facing application starting with payments uh that could allow people to be a lot more comfortable with this asset class without even realizing that they're using production technology. I mean, think about the volume of stablecoins well, us coins um in 2022 it was well over $18 trillion. Um the entire year compared to $14 trillion for visa and $7 trillion for Mastercard. So here we see the need for having access to uh you know, a we backed a wrapper on the Blockchain. And again, the rise of the organization as well shows again that multiple financial institutions even black work, for example, launching big really shows again that these as class is here to stay that people do not just want to launch investment vehicles, but also trying to leverage technology. The same way we've seen media companies leveraging internet protocols like TCP/IP and SMTP for sending emails. And these are the things that that will really help you as a class to move forward quite quickly. And this is coming really fast, Ellie, we do go to wrap here but I have to ask you since it sounds like you're very bullish on the Bitcoin ecosystem. Ethereum was thought to be that consumer facing chain. I know there were several issues that Ethereum still has to solve to gain mainstream uh adoption and that ecosystem is working on solving some of those problems. But do you think that Bitcoin could uh overthrow or outpace Ethereum with all the developments that are going on in the Bitcoin ecosystem when it comes to being a more consumer facing chain and offering um different ways to interact with the ecosystem? I think it would take some time uh for, for Bitcoin to mature and reach the scale of the PM. Um because of the fact that 70% of everything that is happening within D five really happens on the on the DI and FM later to uh we see also non EBM chains as well like Solana coming to rise, uh trying to compete directly with cheaper fees and faster settlement time. Um So I think there is a lot more competition uh when it comes to the smart contract vertical. Uh think about, you know, the the war between I Os and Android. Uh We see the same thing right now uh if you want to extrapolate to production technology as well. Um So, so Bitcoin is in it of itself super interesting because as a store of value, this is a clear winner. Uh But as a smart contract platform was payment platform, uh we have yet to see uh how dominant it could be. Uh But I still think that as long as we have consumer facing applications with the base layer is decentralized, uh censorship resistant and accessible verbally for people with the right risk controls. Uh This is exactly what, you know, people like you and I would need. Um and I don't think people would try to figure out whether they're using, you know, Android or I OS unless you have to update your, your operating system, right? So, uh these are the things that I'm really excited about and I think from a security perspective, of course, economy is the world's largest uh Blockchain in the world, clearly the more secure uh by, by multiple metrics. Um So I think this is really exciting to see what could happen as well on the beco network, but uh definitely if am is a force to be reckoned with um and also the layers in Town Ellie. Thanks so much for joining the show this morning. Thank you for having me, Jen.