Arca co-founder and CEO Rayne Steinberg explains why institutional interest in the crypto sector shifted after BlackRock's spot bitcoin ETF application.
Bitcoin is showing signs of resilience as broader equity markets slide and oil prices rise as traders react to the horrific massacres that occurred in Israel after Hamas launched a series of war crimes against humanity. Um Joining us now to discuss is a co founder and Ceo Wayne Steinberg. Welcome Rene. Thank you for having me. Good morning. Good, good to see you. Uh You know, we, we're now in the third day of fighting and one of the, the clearly, it's, you know, one of the most horrific things we've seen in the Middle East with, with hundreds dead civilians dead purposely targeted this, this seems to have been perpetrated. In part, it looks like one of the biggest oil producers in the world Iran involved. And it also upends a potential peace deal with Saudi Arabia, which seems to have been the purpose of this. Uh what does that mean? Ultimately, for the markets right now, particularly crypto that, that we now have this bit of extra amounts of not just volatility but uncertainty after peace was so close at hand. Sure. Uh yes, I mean, the tragedies of the area are incredible and our hearts grow to everybody involved. Um, as you said, we've only had a few days after this and, you know, market reactions, initial ones are notoriously fickle. So it's early to say directionally what's going to happen. But I think importantly, if you look back to a later corollary when we had a geopolitical incident, the Ukraine war and Russia's invasion happened with digital assets and some of the things that are similar and then some of the things that are different, similar war disruption difference, at least so far was the economic and sanction reaction of the world to the Ukraine War, which had a lot to do with digital assets rise. So I think it's too early to say exactly how digital assets are going to react to this. You know, speaking of digital assets, reactions to things, we've had the launch recently of the ECT fa whole bunch of them went live uh just a few days ago, the volumes, let's face it are lackluster. There's no, no two ways to disguise this. What does that mean for the spot ETF potentials, you know, ETF world better than, than most obviously. Um But in many ways, these ETF S were supposed to have almost the same risk profile as the spot markets. Uh granted they had some futures involved. But for the most part, a lot of the same risks. What does this tell us about interest or potentially lack of interest in a spot? ETF in either E or Bitcoin. Uh Not a lot. Um I would say that people are very dubious about some of the issues with the futures, ETS role tracking and the real interest is in a spot ETF and this isn't just for the market tracking factor of it. It's also for the indication of the regulatory body's acceptance of it. I was watching obviously your previous desks talk about FTX and some of the implications and the, the regulatory um that was one of the most important parts about the ETF filing and how the environment really changed. I'm talking about blackrock spot ETF filing. This was an indication, this is, you know, one of the largest asset managers in the world, um very respectful of regulatory environments and not looking to do anything that would not get approved when they applied for a spot. Bitcoin ETF it was a very strong signal to the market uh that the regulatory environment was changing here and in a different way, it, it, it might be changing. But you know, in what happens if they fail though, what happens if a spot this, we expected the, the ETF to do better than they did. What, what happen to crypto should a spot ETF fail if I fail, I mean lackluster and not go anywhere and you know, just a couple of million dollars in transactions in the first day. Sure. Um I think that that would be negative short term, but it's really dependent where you are in this market cycle right now. Um All things considered, uh there is just less interest, less user activity, less traction with digital assets for various number of reasons. Um We think this is very near end of this cycle and things are going to start picking up here. Um But if a spot ETF was launched into one environment versus another, um it could be quite different. Um We often see catalysts, you know, by the news, you know, by the rumors of the news, um we've already seen the catalyst of just Black Rock, you know, filing this driving interest in the space. We're an institutional asset manager as you mentioned before. So a lot of our clients are institutions uh foundations, you know, very sizable entities. Uh Post FTX, there was no almost no interest in this space at all from those institutions because of regulatory clarity, legal concern. You know, a fraud is a very, very cold water event on an entire space, that level of interest completely turned around after Blackrock's filing. And now those type of institutions are looking how to express that interest in digital assets and they only have a few limited ways. So while I expect a spot ETF to do quite well, I think it will still be determined by where we are in the market and it's still a long term play. So I wouldn't say it's make or break either. Um It would obviously be negative but it wouldn't be, you know, make or break. So Ryan, one of the companies that's filed for an ETF is wizardry, which you co-founded. They've also been quite out in the forefront of this tokenisation movement. The only real world assets which seems to be something that trad fire folks are talking about a lot right now. What do you make of that movement and that industry and what it will mean for underlying crypto prices themselves? Because it's really quite a separate operation than straightforward crypto investing. Sure, we're very pro tokenization of real world assets. And as you mentioned, we're an institutional asset manager. We filed for a 40 act product that holds us treasuries all the way back in November of 2018. And they have gone through the regulatory approvals to have such exempt of relief granted. So we're huge believers in this. But again, people have to think on the scale of regulated financial products here in the US, especially in the US. You can even go back to, you mentioned my experience in ETS right now. Everybody thinks ETS are fantastic. These are great vehicles. This is a, you know, a product that was created in 1993 out of the 87 crash. It really didn't get traction for 10 years, honestly. Um when we founded Wisdom Tree, it was still the view of asset managers that ETF S were not going to be that big that ishares hadn't really done all that. There was to be done in ETF S and that was, you know, a full decade after the creation of an ETF. So these are very long tail type of activities. You know, we just finished our final exempt of relief in July uh of 2023. So that's five years uh from filing uh to uh relief. So you need some patience in these. I think you will get uh tokenization of real world assets but their securities uh and legal implications with these and you just have to be patient while they go through. All righty. Well, thank you Ryan. That was a, a co founder and Ceo Rayne Steinberg.