Bitcoin (BTC) has jumped from $39,000 earlier this week to $44,000 on Wednesday.
Joining us now to discuss the crypto markets is Bitcoin is bit wise asset management, President Teddy Fusar. Welcome back, Teddy Lawrence Jen. It's great to be with you again. Good morning and Lawrence happy belated birthday. Sounds like you had an amazing day yesterday. It was fantastic. It was absolutely fantastic. Nothing happened just the way I like my birthdays. Um No drama anyway, uh but there was drama in the market. So we've been seeing that now with the rally in Bitcoin, uh some people point to an ETF uh potential ETF coming about uh spot Bitcoin ETF, but I'm looking at the tenure yields. Those things are plunging in us government uh in the treasuries. What's going on, what's really driving this market because this seems really, I I'm, I'm gonna be honest here. A little strange. Yeah, absolutely. So you talked about interest rates and I do think that's a dynamic. The last time I was on uh chatting with you Lawrence, we were talking about a rising interest rate environment um and investors feeling more comfortable keeping their assets in fixed income. Uh We think that that dynamic is changing now as investors are now pricing in rate cuts in 2024 and that's making risk assets somewhat more attractive. However, we do think that one of the big drivers, as you mentioned off the top is the, the prospect of a Bitcoin ETF coming online, uh and coming online very soon, I think as you get, you guys know, uh bit wise has been working on a Bitcoin ETF since 2018. Um and everything that we are seeing in the public record right now says that the moment uh is getting closer and closer uh for that to happen, if you just kind of watch the public filings, uh both blackrock and bit wise uh re filed their, their registration statements, their disclosure documents uh this week. Uh you just see a lot more precision uh around certain procedures around certain risk factors. Um And historically, that's the type of thing uh that happens when you're getting closer to the end, closer to approval for these types of novel ETF products. What, what, what's giving you guys the uh indication that that's going to be the case. I mean, I haven't seen anything. Uh all, all the movement I've seen hasn't been from the regulator so much as it's been from the filers. So what gives you guys the confidence? I mean, obviously you've been doing this, as you mentioned for several years. What gives you the confidence now that all of a sudden the SEC is gonna change its mind once and for all we had that, that, uh, lawsuit that recently happened, that said they had to give a reason. But what's to, what's to keep them from saying? Yeah, you know what? Nice filing guys, uh, to shame what happened. But we're, we're not gonna approve. Yeah, Lawrence, it's really this back and forth process that we're seeing. If you look at kind of the history of how these processes have unfolded, these filings date all the way back to 2013. And when those were happening, you weren't seeing the type of updates to the disclosure documents and the materials that you're seeing now. And what that says to, to folks who are experienced with the ETF novel ETF approval process is that there really was not enough dialogue uh between the regulators and the issuers for those changes to need to be made. And what we're seeing now is a pattern of all of the issuers updating and responding to what we assume are comments that they're, that they're getting from the regulators. Um And that's the key indication of what is happening. The other thing that you mentioned was the lawsuit, the gray scale lawsuit, the gray scale one versus the sec earlier this year. And uh what what, what we're now in a position to see happen is that the first batch of applications that need to be approved or disapproved after that lawsuits ruling is occurring in the second week in January And so it's a different scenario than what it was before because we're seeing the first batch of ETF S that need to be ruled on month after that lawsuit occurred. And that kind of changed the dynamic in terms of whether or not there's a likelihood of approval or disapproval. And I just also want to say that this is a a seminal moment for the industry and for the ecosystem, it will be the biggest pipe between the traditional financial world and the crypto ecosystem in the history of the industry. And that's a big deal. So short of playing it in the in, oh, I'm sorry. Uh but just short of playing it in the uh in the, in the actual coins themselves. Are, are you looking at other uh are you looking at equities? What, what other ways to play this, this uh investment thesis now? Yeah, absolutely. A a at bit wise, we have an exchange traded fund that trades under the ticker symbol. Bitq, the bit wise crypto industry, innovators ETF that invests in a basket of stocks of companies that are directly involved in the crypto economy in the crypto ecosystem. And what we're seeing throughout this run up in crypto and in Bitcoin that we've seen over the last couple of months is not just that the coins are doing well, it's that the, the, the, the companies that are the picks and shovels that build and support this economy are rallying really strongly too. We're talking about exchanges like Coinbase, which has had a stellar second half of the year. Bitcoin miners, uh and other service providers who provide their, their, their business into this ecosystem are really rallying around this uh this, this movement in crypto in the second half of the year. And we think investors are pretty excited about that as well. Do you think an A TF approvals priced in or do you think we're gonna see the price skyrocket if we get an approval next year? So that, that's a big question, Jen, I think uh in instead of talking about will the price skyrocket next year? I think what I'd talk about is a few other dynamics that are driving the market right now. The first thing I would point to which is a remarkable statistic is that 70% of Bitcoins have not moved in the last year. And what does that say to you? It says that long holders of coins are not selling their assets despite the fact that we have a move that's up around 100 and 70% for the year. Those holders, those long holders are not selling, this is an all time high on this metric by the way, where long holders are not selling their coins. And I think that if you just reflect back on where we came from, a lot of the, the the Bitcoin holders who were willing to sell their coins. Uh during more uncertain times when the market was trading below 20,000, they appear to be out of the market right now. And what did the, what are, what are those holders gonna do in the face of what appears to be more good news for the asset is a really interesting question. The other thing that I that I come back to every, every four years, like a broken record is the Bitcoin having uh Ryan Rasmussen, who's one of our uh our investment analysts here at bit wise, uh has a tweet out last week or this week, uh detailing some of the numbers there in, in, in about four months. The Bitcoin having is going to occur. And what that means is that the Bitcoin Blockchain is gonna issue fewer Bitcoins one half as many Bitcoins as they're currently issuing right now. The reward in every Bitcoin block that gets mined is gonna drop from uh six and a quarter. Bitcoins down to 3.125. And that's just a major change in the amount of new Bitcoin that's coming to market in the course of the year at current prices. With the current reward, it's about $14.5 billion annually and that's gonna get chopped in half to $7.2 billion after the after the having occurs. And I think that that is not from my perspective, fully priced in, I know there's a, there's an ongoing uh debate that occurs around this every time it comes up. But from my perspective, that's another major part of what's driving the market right now. You mentioned mining stocks a little bit earlier. What do you expect to see there once the having happens? It's, it's, it's the same thing. I mean, we have fewer Bitcoins coming to market. Uh And the way that Bitcoin has typically responded in its history has been that every four years at a time that is closely linked to when the having occurs, we see significant rallies in the price of coins and we do have these other dynamics that we talked about a minute ago. We have Bitcoin ETF which is a massive change in the market infrastructure coming online. Uh We have an interest rate environment that is changing and would likely be uh more beneficial to Bitcoin in general. Um But this having is something that like clockwork has been synchronous with a rally in the price of Bitcoin over the last uh since Bitcoin has, has been in existence. There's one other thing that I want to talk about that. I don't think that the market is perhaps paying as much attention to as we are. I think the removal of the B overhang in the last month where we saw a coordinate uh Department of Justice action against Finance founder and former CEO uh Chen Ping Zao. Uh I think that is a major positive for the market. It removed a significant risk, a systemic risk that I think was there uh of finance uh being uh uh a problem different than the types of problems that it was rightfully prosecuted for. Um And a pattern that we've seen over time too is that as the market matures, we enter this mainstream error where we the the less reputable actors, the less reputable procedures and processes that existed early on in Bitcoin's development are being replaced uh with, with companies and actors that are leaning into regulatory compliance, investor protection transparency. You see companies like Blackrock and bit wise who are attempting to bring fully regulated, fully transparent products into the marketplace. And I think that's a major part of the story as we enter 2024 as well.