Bloomberg BusinessweekDay One of Bitcoin Trade Fluctuates Following SEC Spot ETFs Approval
Bloomberg Intelligence Senior ETF Analyst Eric Balchunas and Bloomberg News Cross Asset Reporter Emily Graffeo discuss the Bitcoin market after the SEC approved spot ETFs. Bloomberg News International Economics & Policy Correspondent Michael McKee and Yelena Shulyatyeva, Senior US Economist at BNP Paribas break down US CPI data and Fed policy. Joshua Horwitz, Co-Director of the Center for Gun Violence Solutions at the Johns Hopkins Bloomberg School of Public Health, talks about the school's Defending Democracy report about the increased threat of an armed insurrection. Matt Hougan, CIO at Bitwise Asset Management, talks about investing in Bitcoin spot ETFs. And we Drive to the Close with Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Charlie has been covering it. We've been covering and watching the trading in those eleven spot bitcoin ETFs that were approved by the SEC after the close yesterday. An interesting story just crossing though, having to do with Vanguards offering and this on a day where we saw bitcoin moving in a big way to the upside, a surging past forty nine thousand for the first time since December of twenty twenty one. But it's moved off of that, so we've seen a fair amount of volatility.
Tim Yeah, that story.
Vanguard's brokerage ARM will not offer trading ETFs that invest directly in bitcoin. That's according to a spokesperson. This story just crossing by our own page. Smith and Catherine at Dougherty. We'll tracking all the ins and outs and curves along the long and winding road to a spot bitcoin ETF is bloom Intelligence Senior ETF analyst Eric Belchunis. He joins us on Zoom from New York City. Also on it is Bloomberg News Cross asset reporter Emily Graffeo. She's here in our Bloomberg Interactive Broker's studio. Emily, let's start with you. I just want to talk about how these eleven ETFs are trading.
Are not trading in the case of Vanguard, Well that's all right.
Well, but that makes sense. I mean, what do we know about fun flows into them? Can we can we make any conclusions on.
The first day.
The conclusion on the first day that we can make is that this is a historic day for ETFs. This is likely to be for the greyscale bitcoin trust ticker GBTC. It might be the largest or the second largest first day of trading for an etf ever. Right now, we have about two billion dollars of shares exchanging hands. The total for these eleven funds in total is about four point two billions. So these are massive moves.
To Eric, Eric to just put out that there might be four billion or.
So, yeah, yes, of the total volume traded for all of these ETFs, So you know, and maybe Eric will dive into this grayscale Bitcoin trust. It has already existed since twenty thirteen, So this was converted into an et.
Go to any airport and you'll see an ad for it exactly. Yeah, I know it's everywhere.
But at least for the first day of trading as an ETF, it is topping these records and even the funds that are beginning trading today and we're not converted from a trust. Look at the I shares Bitcoin Trust ticker ib IT that's seeing almost one billion right now, it's about nine nine nine million dollars.
Was the uptick though, right out of the gate, because it feels like it's it's.
Been so the value. The trading volume has pretty much been picking up all day. I've been staring at the volume all day and it's just steadily climbing. We're now at four point two In the first two hours, I think it was about two billions. So it's been pretty consistent all day of this trading activity.
Eric con In, would you consider this a success in the first day of trading?
Oh?
Yeah, I mean this this obliterates all the records pretty much. I bit alone will break biddos first day. Now, there is some complication because there was a couple esgtfs to Blackrock put out where it had one giant institution come in at two billion, and so that one creation made for volume of two billion. So it's a little complicated. But let's just say this biddoh, which was one of the most successful launches I BIT is going to trade more than that. Looks like I bit's going to finished about one point two billion. The whole group of them two point two billion. Now GBTC I don't really count. It does count towards the story, but it's not a fresh new ETF. And when you think about a fresh ETF, and I've been doing this a while, I called the ETF terroodome. Going into the ETF world with nothing is like a newborn being shoved into the Amazon jungle, all right. In GBTC came with all this volume, it's been around, like you said, it's advertised on airports. Came in as newborns. So this is like comparing a grown person with a newborn in my opinion, and I'm going to stick to the newborns. That I will include GBTC because the fact that it traded two billion is alone massive. And yet this BIDDO has traded almost two billion, which will be a record date for it, and it's not even part of this race.
Really well, speaking of the newborns, let's say there are ten newborns out there, Eric, not all newborns at least as when it comes to trading volume, were created equally. I mean, it looks like there are some halves and have nots when it comes to activity right now.
Should we read into.
Yeah, sure, well, I'm definitely reading into it. I mean, this is basically a horse race. We've never had a bunch of atfs lined up to launch in the same day. Hence the Koentucky Derby phrasing we're using for this and the horse race memes which I've been drawing up all day instead of working. So if you look at Blackrock, they're gonna be like a lead horse, and then next you got Fidelity, then you got arc B all them and bit B bit wise all them over one hundred million. That's a monster success. You have four that I would call smash hits by any measure. Then you go the second half a little less. Franklin sixty four million, pretty good total twenty four but we'll call those like you know, back of the pack, and then there's a couple below ten million. And so just as I figured, at the end of the day, there's gonna be one gld stud liquidity, probably the Blackrock one. Then there's gonna be like upper middle class. Then there'll be a middle class. Then they'll be like one or two poor people who like I just didn't ever get it going. And ultimately you'll you will see some liquidations. So that's how it goes in any category, and it will probably go that way here.
Whoever said the investment world was fair, what's really fun us? I'm just gonna say, and Eric is amazing, but you definitely need to get sleep this weekend, all right, So Emily, come on in, because I do wonder if they're not all going to be the strongest players or get the most volume or activity or track the most investors. Should we assume that there's going to have to be some consolidation later on that a couple of funds are just not going.
To make it. Yeah, I think there are some expectations. I was speaking with Athanasio Sara Fegas, who works with Eric, and he said that he might expect some of these to close, but we really have to see, and I think it's interesting because this is just the first day of trading. So, like you had mentioned at the top of the hour, there are some brokerages that a lot of retail investors use, like Vanguard, like Merril, where you can't even buy the funds yet maybe yet, maybe not, maybe you'll never be able to. We'll have to see if they change that rule. But this was really just you know, the institutional trading, so we could see more organic flows coming in the weeks, in the months ahead, when these funds are actually added to more broker dealers. I actually spoke to one financial advisor today who said, I want to buy this. I can't yet, it's not on my platform yet, but when it is added, I'll be buying it. And then, of course the actual flows we won't be able to see until at least tomorrow. We'll see on that.
So is the.
Price of these funds? Forgive me if I sound kind of stupid, but is it related to the price of bitcoin? Is it related to the demand of the funds? Like what is really driving the trade? Let me, Eric, let me throw that to you first, Like what is it?
Yeah, So I think for advisors and people who are not like hardcore crypto people. They think this is a mission. All right, that's a whole different like mindset. Everyone else thinks this is a little hot sauce to put on otherwise boring portfolio. Sixty forty low cost. It's a beautiful thing, but they got to wait thirty years as these things compound. Compounding returns is the magic that we're all here for.
But that's boring.
You gotta wait thirty years. So there's I think a growing hot sauce bucket in every portfolio. This is where Kathy Wood lives. Kathy would and bitcoin have a lot in common. Yeah, this is a what if they're right and I don't want to kick myself off in ten years. That is what is going to get people to make a small allocation to this, even if they don't really understand it.
But just to confirm Eric, it tracks the price of bitcoin, and the price that we see has nothing to do with people buying or selling it. It has to do with the price of bitcoin, right.
Well, yeah, they're intertwined. I mean the price of bitcoin moves as it does now, the ETFs will be a player in the price of bitcoin because if they get flows, that's a one for one buy for bitcoin. So flows equal buy bitcoin, out flows equal sell bitcoin. But there's many other things that are buying and selling bitcoin. So if the ETFs make up say two three percent of the bitcoin market, that would be like around what it is for gold.
Last question, Emily, twenty five seconds. So now, like what do you, as someone who watches this have to focus on.
I really want to see the flows. Maybe we'll get some tomorrow, depending on when these trades settle, but like this is the trading volume that we got today. Tomorrow we'll be able to start seeing which funds actually had net inflows, because trading volume doesn't tell you if it's by or so.
And is there a difference between kind of what the funds were kind of already planning to kind of have for the fun versus like kind of new organic interest. Right, yeah, we get that, we'll see that.
We'll see those net inflows or outflows tomorrow because like Grayscale Bitcoin Trust, there's a lot of trading volume. Might be some selling in there too.
You guys are amazing in the coverage Bloomberg Intelligence Senior ETF analyst Eric Balchunis, and of course Bloomberg News process at reporter Emily Graffael. Thank you guys.
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Right, so we know the news. I was listening in at a thirty I stop everything. I'm out of my shower. I'm like, I got to listen to Mike McKee breaking down the CPI.
Wait, what time was this? How did you get here? So actually with the timeline here.
Actually I think I was. I was done, and I was like walking out, okay, because you.
Were like god here before I did. And I listened to Mike, IM like I had to stop.
Did a helicopter wal.
Don't go there? Well, well, speaking of that hotter than anticipated inflation data tempered market bets on a FED rate cut in March, let's get to it. Let's get to the breakdown. Michael McKinney's with us. He's Bloomberg News International Economics and Policy correspondent here in studio, also with us. Lucky for us, as Juleanna should like give a senior US economist at BNP Pwry Boss Mike as I said in studio Yolena over at BNP's offices in New York City. Welcome, Welcome, welcome. So, Mike, it sounds like hotter than expected, But I feel like it's not terrible. Shouldn't does it? Is it a major reathing for.
All of us?
Okay, it's not.
It was something of a reathing for futures traders, but not for anybody who'd been sort of paying attention because it was expected that we would see headline go up, went up a tenth more than the consensus for the month, but the core was right on at three tenths, and then the core year over year went down as forecasts, so there's still some progress there. There were some areas that were a little bit of a surprise. Used cars went up and they've been going down, and there was an expectation they would still be going down. Gasoline prices went up a little bit during the month, something you didn't think about. And then insurance medical and especially auto insurance have gotten more expensive and that just doesn't seem to stop. And it's very interesting with this Tesla story today in hurts because the idea is, as I understand it, that cars are getting more complex because of the computers and stuff, and so insurance companies are raising rates because they feel that they may.
Have a more huh interesting right, yeah, that is h Yeah, the areas of stickiness we're really interesting. Hey, Mike, I kind of want to go off script and get your take on a redhead that's crossing the Bloomberg terminal. Right now, we're hearing from Christine Legard, who's speaking an interview on French television, that rate cuts can start once data confirm an inflation pat path, and that the rate cuts, I should say, can't give a date for ECB rate cuts, though the ECB is likely at peak rates.
Any surprises there.
No, it's basically I think the various central banks are passing around a song sheet and they're.
All, yeah, I'm gonna say, it doesn't sound too different than what I've heard from the Central Bank.
You know.
It's the idea that the inflation path down to the target of two percent is exactly what Loretta Mester told us today, what Jay Pole has been saying, what John Williams said yesterday, that there's nothing really new there and can't give a date for ECB rate cuts. Why would you want to do that?
I want to mention another headline from her because she's said, as history suggests, a Donald Trump victory would be a threat, and that under a President Trump for a second term, US interest not aligned with Europe. So some other stuff in terms of about geopoliticals.
Something we've done that is interesting because normally a central banker, especially somebody else's central banker, wouldn't get involved in US politics, and so it's kind of interesting. I'll let the people who write for the Bloomberg Opinion expound on that, but it's kind of interesting that there is enough fear of Donald Trump that people would say that.
We hear it a lot, and I've heard it from top folks at some banks off you know, not wanting to necessarily go on record or say they are, but that is one of their biggest concerns about what that means. Hey, Ylena, forgive us. Forgive us. As we went through some of the headlines, talk to us about what jumped out for you in the inflation read we all said weekly jobless today, And of course Mike's great conversation with the Fed Cleveland Bank President Lorettamester.
What really jumps out to us here is that there are a lot of impediments to a faster decline in inflation, and that is seen everywhere in pretty much every single component, major component of CPI. So whether it's called goods, we see that, you know, the declines in core goods were interrupted this month, it was for because of used car prices. Yes, we do expect a little bit more room for this inflation here, but you know, with what is happening in the Red Sea, the developments there that may push shipping prices higher, that may you know, prevent further significant improvement on that front. In terms of shelter housing has uh, you know, has the activity in housing has picked up and that may prevent more significant decline and shelter prices and of course course services x shelter. That depends a lot on what happens in the labor market, and labor market remains you know tight. We saw another low reading in jobless claims this morning. So the bottom line is that this data just adds to evidence that you know, the Fed may not need to rush to cut rates. So we are expecting the first rate cut in May, not in March.
So on that. Let's get to a little snippet of Mike's conversation with Fed Bank of Cleveland President Lorettamester, who, as Mike said, this reporting really changed her mind and she did on that March rate cut. Here's what she had to say.
I think March is probably too early in my estimation for a rate decline, because I think we need to see some more evidence. I think the December CPI report just shows there's more work to do, and that work is going to take restrict and monetary policy.
So, Mike, comment in your conversation, as listening to it as I was working through and getting ready for our show, what was the most significant? Is it that what she said or is there anything that you too?
I think you would take the what she said about March as important enough because she's a voter and she's she's been hawkish. But I think she probably is reflecting what most people are thinking, because certainly that was what John Williams was saying yesterday.
It's just too early.
But I've been looking at the futures pricing for March. And after she spoke, it backed off a little bit and then came right back again. And one of our ECO team people in Washington sent me a message is when are the markets going to start listening?
I have no idea tenure.
Is just below four percent. It's been kind of like staying.
At four percent.
The influences the two and that went down the yields went down on the two years today, but the ten years up now is that because of deficit issues. The government came out with a big deficit number today and that could be influencing it as well as the idea that inflation is going to take longer to go away.
So Elena, how many come on back in here? You llanis shalitava given what we've learned in the past few weeks about higher for longer, which I would argue is not anything new, but it seems like the market is not necessarily paying attention to that. As Mike paraphrased one of our colleagues, there, how many rate cuts do you have priced in for this year? And repeat again once again when you see them starting.
So we see them starting in May and basically the fit cutting it at every remaining meeting this year. But in terms of when the markets will start listening, I think we need to really get attuned to what the FIT officials are saying about the label market. Governor Waller is speaking next week, and that's probably going to be the highlight of next week in terms of the FED speak. He was very early on talking about the beverage curve and how the labor market can normalize without us seeing a significant increases in the unemployment rate. But will he start if he starts talking about the labor market, that maybe, you know, there are some risks to weaker developments there, So that could be a signal to the markets that the FED is really attuned to both sides of their mandate, not just inflation, but they are also starting to look at what is happening in the real economy and in the labor market. And you know, Lorettamester kind of hinted at that as well in Mike's interview. So that's when we're probably gonna see some reaction.
She did talk is focusing on balancing, or on balancing, the Fed balancing both sides of the end date this year, right, Yeah.
Well, they're concerned with making sure that unemployment doesn't skyrocket while at the same time keeping the pressure on enough.
Hey, Mike, just the last minute that we have with your earnings kick off tomorrow. We hear from some of the biggest banks over the next few days. Is there anything that these CEOs or executives could say that would change the path of the Federal Reserve? Does a FED pay attention to the commentary from CEOs like this.
Well, they do, but they're talking to them all the time, so it won't be new news to them. But basically, what we'll all be kind of watching for on the economic side is what the set asides for bad loans are. How bad do the banks think that lending is going to be So far it hasn't been terrible. And then what kind of business they're seeing in credit cards and deposits? How is how are customers perceiving the economy these days? Are they depositing more money, are they savings accounts going up? Or are they borrowing more? The data we've seen from the FED is they're borrowing more to.
Spend quickly ten seconds. Is there an economic data point or something that you're watching on that front?
Next thing, Well, we got that earlier this week.
The credit numbers.
No.
What I mean in terms of ECO data in general, Well, we have.
PPI tomorrow and retail sales next week. Okay, so stay tuned.
Okay, I will, but I'm not watching the spotcast for your hips. It was a cold shower.
That was morning.
The hot water hit. You're still working. This is Bloomberg.
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Hey, here is something sobering. Every day, more than one hundred and twenty people in the US are killed with guns, twice as many are shot and wounded, and countless others tim are impacted by acts of gun violence.
I got some even more disturbing numbers for you. Since twenty fifteen, over nineteen thousand people have been shot and wounded or killed in mass shootings. In twenty twenty two alone, over six hundred people were killed, with over twenty seven hundred wounded. Both the number of mass shooting incidents and the number of people shot in them have increased since twenty fifteen, reaching a high of six hundred and eighty six mass shooting incidents. Carol, that was just in twenty twenty one.
Yeah, we see them all the time. It feels like it's a problem. It's an old one, and it's one watch by the Johns Hopkins Bloomberg School of Public Health their latest thoughts in a new report defending democracy addressing the dangers of armed insurrection. With more on it is Joshua Horwitz. He's co director of the Center for Gun Violent Solutions at Hopkins the John Hopkins Bloomberg School of Public Health. He's on zoom from Baltimore, and a reminder that the school is supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. Mike Bloomberg, by the way, also donor to groups that support gun control, including one that he helped launch, every Town for Gun Safety. Joshua, nice to have you here with us. Again. The problem does not go away. Talk to us about the report though, and how you guys wanted to look into it and research it, especially as we are, you know, counting down to another presidential election. Here with a matchup between two candidates that have met up before.
Yeah, thanks thanks for having me. I really appreciate you guys covering this topic. And as you mentioned, gun violence in twenty twenty one and twenty two has certainly been on the rise. We did see some have sens and reductions in twenty twenty three, but it's uneven and not across the board everywhere. So it's still a gigantic problem, a gigantic public health problem, which is one of the reasons that we're so passionate about this.
But in this new report, there's been.
A lot of proliferation of firearms, especially assault weapons AR fifteen's a lot more open carry and concealed carrying this country, and not surprising, that's bleeding over into our politics, into our democratic process. And what we're trying to do in this report is to give policymakers and executives tool to make sure that the voting places are safe, that are that the halt, that our legislatures are safe, and that are democracy is safeguarded from people who are trying to threaten that with firearms.
So that's what this approach is about.
We have a number of recommendations in this report, including limiting the carry of open open carried firearms and can concealed carry, making sure that we further regulate paramilitary activity, limiting firearms and polling places and legislatures, and making sure that we use all the tools at our disposal, that when we know someone's in danger, someone's in danger, someone's threatening an elected official, threatening the democratic process, that we use some of these new extreme risk laws or red flag laws of states have passed to make sure that we prevent our political violence.
I'm sorry, are we talking about the United States here? We are talking about because it doesn't sound like we are. I have to tell you, I cannot believe we're talking.
About to mouth to me while you were talking. I can't believe we're doing this.
Like this is this is this is not normal, Joshua, that we're talking like talking about people being threatened, like the concern about people being threatened by gun violence when they're exercising their democratic right to vote.
Look, I don't I don't you know want to remind us that Gabby Giffords was obviously almost killed while while exercising her right to meet with her constituents. We have seen armed political violence at state capitals. We've seen our political violence in Charlottesville. You know, to Unite the Right rally and obviously in January sixth we saw a violent insurrection at the Capitol. Now, fortunately DC has actually has some good laws, the ones that were reckoned, some of the laws that we're recommending, But you know, in these other states, some of these other states don't have it, and there's been lots of incidance of voter intimidation. So we need to jealously gut our democracy. And it's you're right, it's hard to believe we're talking about the United States, but it is something that we must prepare for.
So in this research, you also have a stat half of those surveyed, and it refers to I guess some of the research that was done agreed at least somewhat that in the next few years there will be civil war in the United States. About two percent of the respondents in that same study thought violence was at least somewhat justified and to achieve a wide array of political objectives, reported being very or completely willing to kill someone to advance an important political objective. I mean, I'm not sure I understand how we got here, but I feel like in talking with our Josh Green, we have talked a lot about the political divisiveness and the rise of populism on both sides that maybe helped us here get coming off of the financial crisis. Having said that, I feel like there's no will to kind of de arm or unarmed the United States.
Well, I think we got here because we've really allowed a really ridiculous interpretation of the Second Amendment where there's you know, even you know, elected at first talk about the individual right to fight government tyranny, and we have to fight, we have to combat that. The Second Amendment is about the individual right to serve in an hour militia under state control. It has nothing to do with individual rights to take up arms against the government. So I think, you know that's number one, but number two states are doing things about this.
Other more states need to do that.
But we've seen recently Virginia and Colorado take strong action to protect their legislatures, their polling places. And what we're what we're getting across here is that we need to do that in every state because there's no reason people should be intimidating going to the polls. There's no reason that you should have to walk through an armed gauntlet to go lobby or legislature or get your exercise, your First Amendment rights.
So we're out of.
Balance here in the United States and it's hurting our democracy.
Well, I just want to try to understand the argument for why people should take guns to to these places. What have you heard in terms of pushback when you've tried to work with these legislatures in different states to enact rules about this. I mean, what do they say if they don't agree with you?
Well, I have a lot of experience in Virginia because I've spent twenty years working in that state capital and for the almost for eighteen of those we had to contend with people who are armed within our hearing and when we were at a hearing, there were people who were armed in the hearing rooms, you know, through the halls of the legislature, legislature and in polling places. And you know they make an argument, well, look, you know I have a right to carry a gun wherever I want. I want to be safe. And my point is, well, you're in the state capitol, they're law enforcement all over the place, and what you're doing is really intimidating other people from exercising their votes and it's exercising their rights. So it's a mix between I just want to exercise my right, which I don't buy at all. And the second thing is I need to have a fire arm with me at all times for self defense, which I don't buy either, especially in those locations. So I'm not sure it's a rational argument. I think it's a much more emotional argument. But again, we have elected officials in this country who are giving cover to that type of idea, right. I mean, during the inauguration in two thousand, Ted Cruz were a mask that said come and take it. That's a militia slogan, right, That's what they often say, Latin mulan lavae, come and take it. So we have elected officials at the highest levels giving cover to this, and you know, in addition to all the things we need to do from a policy perspective, we must condemn this idea.
Joshua, I feel like folks who are listening or watching right now are like, yeah, we've been talking about this for a long time. They know that, you know, something happens, we get a headline, everybody reads it and moves on unless they are, you know, impacted personally. What do you say to the public at large about this situation which has been going on for years now, right, And as you say, some states are making progress, But what would you say to the public at large about the situation and maybe what needs to be done or how they should be thinking about it.
Number one, wake up.
I mean I wrote a book about this in two thousand and nine warning people if this was going to happen, and people said, oh no, that will never happen, and then we have an insurrection at the capitol, right, And so what I'm asking instead of speciaying oh yeah, go to the next headline, this is an opportunity to talk to your state legislators, to talk to your policy makers, to make your voice heard and saying I want the right to vote, I want the right to petition and talk to my legislators without the threat of army insurrection. And we need to be able to articulate why this matters and what needs to get done. And I encourage people to read our report Defending Democracy. It's on our website to give you all the tools you need to have a coaching argument about this. So if you're sick of it and you're sick of seeing it, and you're to get off the couch make your voice heard.
Read the report.
All the tools are there to really be effective advocates in this space.
All right, we really appreciate your time and getting to discuss this subject. It's so important and it is amazing and like I said, not a new problem, it's an old one, so appreciate it. Joshua Horwitz, co director of the Center for Gun Violence Solutions at the Johns Hopkins Bloomberg School of Public Health, on zoom from Baltimore.
You reminded of Johns Hopkins Bloomer School of Public Health, supported by Michael or Bloomberg, founder at Bloomberg LP and Bloomberg Philanthropiece, and Mike Bloomberg is also a donortor groups that support gun control, including every Town for Gun Safety.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
But one of the things that we've talked about for a long time is and following the SEC proval of spotpy conyf says what it would do to the price of bitcoin, you know, volatile trading. We've been looking at a lot of things. We've definitely seen a bit of a volatile trade today.
Yeah, we really have.
So bitcoin surged past forty nine thousand for the first time since December of twenty twenty one, trading commencing on the first US ETFs that invest directly in the biggest cryptocurrency, only to back off and go boblo forty six thousand right now, Carol, Remember this trade's twenty four to seven right now, Bitcoin's out off forty six thousand, three hundred.
Let's go ahead and say so kind of a big swing.
Today, right exactly? All right, So Voice Bloomberg has often talked to about the trade overall and what's been going on in the crypto world. Is one of the eleven that got the SEC approval for its spot bitcoin ETF. We're talking about bit wise. Matt Hogan is with us, back with us chief investment officer at the crypto index fund manager bit White Bitwise Asset Management joining us on zoom in New York and Bitwise.
It's a little coin. Yeah, I know it was there.
ETF down about four point seven percent, but we did see a lot of pressure on most of these names. Matt I'm good to have you here. I've got to say all of us have been burning the midnight oil this week because of you. Guys. Welcome back to Bloomberg. What can you tell us about the first day of trading fun flows? What are you seeing?
Thank you so much for having me. It has been a very long and an exciting day. I think this has been a tremendous reception for bitcoin ETFs after ten years. Across the suite, you saw more than four billion dollars in trading volume. Obviously, not all of that will translate into net inflows, and while we won't know the flows for a couple of hours, I can tell you here at bit wise that we experienced significant demand on the buy side investors coming into bitcoin into our ETF BV, the lowest cost bitcoin ETF to launch today. We saw a substantial demand and you'll see inflows in the hundreds of millions of dollars.
Okay, let's talk about these fees. What's the break even level of assets that are needed for this fund to be profitable?
Yeah, you know, these funds are relatively simple products. At the end of the day, they take bitcoin and with a regulated third party custodian. It's not like our other products where their index funds and oversight and the same level of management. This do one very simple thing. So in constructing these products, what you do is you price them as low as you can to economically deliver it to clients because the less they pay, the more they keep. Obviously, at twenty basis points for B B, we're planning on this being a very large product. We think the market for these product is measured in the tens of billions of dollars or more. At those levels that become very sound businesses. But we're pleased a bit wise to have a broader business to build this on top of, and that helped us get to this aggressive price point.
Sorry, what is the did you say the break even level?
I might have missed it.
Yeah, I didn't provide a break even specifically the ETF. But you know, look, I think these ets will be a success if there are billions of dollars, a billion dollars or more.
Okay, Well, and you know, is this for retail or wealth advisors? You know, what is your expectation about who is going to be ultimately the investor for this?
Yeah?
I think a lot of investors go towards ETFs because they give them a great deal of peace of mind. They're not buying bitcoin on an app or an offshore exchange. So I think there'll be some retail demand. But the real market here is financial advisors. Financial advisors have been wanting to access bitcoin for a number of years. We know because we talk to them every day, and they want to do it through an ETF. And that's a really big market. That's a you know, thirty trillion dollar market, take your figure, but that's a new market that's been unlocked. That's the primary audience for these ETFs.
I'm guessing too. You know, we've been talking about a lot matt in terms of an advisor. They're going to say, you know, why wouldn't you maybe just throw a small portion of your portfolio? Because, as our Eric Balchuna said, you know earlier, what if all these guys are right in the crypto world and bitcoin really does become something substantial longer term? So what kind of allocation do you think some of these advisors might be? Is it a fraction of a percentage? What is it? How how small and how small can it be?
That?
And you skys still do very well.
Yeah, absolutely, it's a great question. I do think until the ETF, advisors could just say I can't access it, they no longer have that excuse. They can access it in a regulated low cost ETF like bb I suspect most advisors will be looking at it one percent to five percent allocation, and again, this is a very large market and more people than just advisors can make that allocation. But if we see those kind of allocations become the norm again, you'll be looking at this market being you know, tens and tens of billions of dollars. I've seen estimates up to two hundred billion dollars, So this is a very large market, even at those small allocation sizes.
So one to five percent, you guys are in it. Then for the long term, no problem.
Absolutely, we're in it for the long term.
We've been in this market for seven years, we expect to be in it for another seventy. This ETF is a big part of that puzzle, and we're excited to get in the market.
A big part of the conversation that we've been having over the last few days over and over again is the question about utility when it comes to when it comes to the actual bitcoin as a currency. We know that stocks provide future cash flows, some provide dividends to their shareholders, fixed income. If you buy bonds from the government, they're backed by the full faith and credit of the US government. But bitcoin exists as this different asset class. What's the case for utility here.
Yeah, there's a near term case for utility and then a long term case for utility. The near term case for UK utility is a non sovereign store of value like digital gold, a way to protect yourself and exist outside of the fiat system, which is subject to debasement and inflation. And that's driven Bitcoin's returns up to this point, and I think we'll continue to be the primary driver for a few more years. Long term, the destination where Bitcoin is going is to be an alternative settlement.
Rail for the world. The world may not.
Always want to settle its primary transactions on politically controlled currencies.
Before Bitcoin can offer that potential, it has.
To be much much larger and much much more liquid, and much much more established than it is today. That's why this ETA is actually important for bitcoin because it pushes us further on that journey.
Are we there yet?
By no means be could we be there by twenty thirty or twenty thirty five. That's bitcoin's ultimate destination. We took a big step forward today.
Matt, Yes or no. The first time there's a hack, is everybody going to run for the exits?
Oh, there's never been a hack of the core bitcoin blockchain. One of the beautiful things here, yeah, is these bitcoin are held in regulated third party custodiums, so it provides ethiks of mine.
All right, good to check in with you, Matt Hogan. Thank you so much at bitwise Asset Management. This is Bloomberg.
I'm Romarck the journal.
Now about you let me drive?
Oh no, no, no, no, no, all right, please travels great, I want to drive.
It's a good question.
This is the drive to the globe long form thing. Well by yold it on Bloomberg Radio.
All right, TikTok. Everybody just got about seventeen and a half minutes left in today's trading session. A bit of a volatile one, as we know, dealing with some economic news. Uh, dealing with just kind of where we go next here? Yeah, said policy the economy.
Yeah, and you know what, looking through our next guest investments thoughts and changes. Did you see anything on spot bit coy tf's you know I did not.
Okay, that's okay. We got some picks, income, we got some equities.
Let's get to our drive to the clothes with Sire Simana, Senior Global market strategist at Wells Fargo Investment Institute, joining us on zoom from Charlotte, North Carolina. Samir, good to have you with us. I know you did not send us any thoughts on the new spot point spot bit quinn ETFs, but can we just start there, and because it's what everyone's talking about today and yesterday, do you have any thoughts on on this new asset class being available through ETFs?
You know, a big picture already talked about how crypto and especially bitcoin, you know, have kind of matured over time and probably do have some you know, allocation within a well diverse, fied portfolio. And I guess, you know, having it be a little bit easier to implement probably isn't a bad idea. I think that being said, you know, this has been so well telegraphed and the price is you know, close to almost doubled over the past six, you know, to eight months that you know, probably be a little bit cautious with respect and kind of kind of timing and adding that allocation over time. But I think more broadly, I think it just speaks to how much momentum positive sentiment there is in these markets right now.
Yeah, it is kind of interesting. I mean, are you getting are you feel fielding a lot of questions though, Samir about people like, hey, Samir, how do you feel about this? You know, you know, new round of ETFs, if you will piccoin ETFs, like should we have some exposure to them? Because as our Eric Beltuna said, like what if? What if these guys are right that this becomes something significant in our world in terms of bitcoin.
More broadly, yeah, I mean, thankfully we've been talking about this for a few years now, and you know, there have been other ways to gain exposure to the asset class. So you know, hopefully, you know, there's one of those things where at least, you know, some of our clients have had, you know, a chance to kind of get exposure through through the you know, other means.
I think that being.
Said, it is good to kind of maybe have that vehicle available going forward. But again, I think the tricky part is just you know, it's just so overdone right now that you know, people probably fall in one to two camps. Either they probably are kind of more on the the savvier cutting edge and maybe you have already figured out how to do it, or they probably don't fully understand what bitcoin and crypto are and they're probably gonna be much more hesitant. So I get the sense that those who want to be in are probably in at this point.
Yeah, you make a really good point.
Hey, I just want to get your take on take a step back and just think about the global economy. We got inflation data that came in a little hotter than expected this morning. Surprising to me, Carol that we didn't see more of a move when it came to yields, given that inflation data was a little hot. But as you know, Mike McKee and Yolena shol Yetva.
We did pop like on the news a little bit. It couldn't hold, right, No, it did not hold.
Yeah, back off.
That was a little surprising to me. But like they said, you know, things are moving in the right direction, Samir, I mean, does it make you think differently at all about asset allocations or your outlook for global fixed income given that, you know, investors think, and they've priced in a series of rate cuts this year, and it seems like this last mile of inflation is going to be a bit tougher to get down.
Yeah, I mean, I think it'd be fair to say that at least the long end of the Treasury rates curve is probably priced for perfection. I mean, we literally just this week rolled out an alert, you know, downgrading long term fixed income from most favorable all the way back down to neutral. You know, we've kind of gone to that feeable positioning around four and a quarter and kind of stuck with it throughout kind of that move up to five percent on the tenure, and then this recent move lower just left us scratching our heads with respect to again, you know, to your point that last mile inflation will be very difficult. Real rates as measured by current inflation relative to the tenure is still pretty you know, kind of low, right, You're not really getting compensated on that long end to take the risk if inflation is going to kind of get stuck in this three to four percent range depending on which figure you're looking at. So from our standpoint, again, this is a great time to maybe park out in the short end, but we probably wouldn't be taking a lot of risk on the long term end of the curve.
Yeah, it does make sense, right, We're getting much more clarity when it comes to expected monetary policy. We know it's tricky as we get near the end of this cycle for the FED to get it exactly right and not overdo it, but it does feel like we have a lot more view viewership if you will, or view when it comes to the short term. Having said that, on the quity side, I think, Samir, I'm looking at the eleven major industry groups in the S and P five hundred this year, and energy is the second worst performing. It's down about two and a half percent. We've seen a lot of consolidation, a lot of deals happening in this space. You guys are upgrading the energy sector from neutral to favorable. Let's start there, how come?
Yeah, so that's same alert. We upgraded energy and we down great financial Have you speak to both on the energy front? I mean, you know, look, if the market's going to run on soft landing, right, if the FED has somehow engineered this, which maybe we're a little skeptical, but let's say they actually have engineered this well. In that scenario, I can't imagine oil sticks in the low seventies, which is pretty much where it is right now. I can't imagine that you don't have at least some additional profitability on the energy equity side. And so this soft landing narrative is pretty much left energy kind of by the wayside. And honestly, if there is a little bit of an economic you know, stumble, we think that you know, energy prices and crude prices probably already you know, what could be kind of a mild to moderate recession anyway. So you know, for all those different reasons, we saw probably as close to a pretty launch based on valuations, based on this narrative that's kind of taken hold and just the relative performance.
Why do you why are you skeptical that the FED can pull off this soft landing, you.
Know, just because it takes you know, so much in terms of being able to judge the lags. I think there's a lot that you know, we're seeing right now with respect to the consumer hitting in their pocket. You know, I just read a headline today on Bloomberg talking about how delinquencies are rising on credit cards, So you know, when you take all those different things into into account, and the fact that you know a lot of people for whatever reason, you know, either they're not selling their homes, or they're not moving, or they're not taking out new loans, have been able to avoid those higher interest rates. The problem is, eventually you will have to buy a new car, buy a new home, move, you know, all those different things, and when you do, there's a pretty good chance that you're going to be paying a rate that's maybe two to three x what you last paid.
All right, got to leave it on that note. Hey, Samir, thank you so much. Samir Simana, Senior Global market Strategist. It was for Investment Institute on Zoom from Charlotte, North Carolina. You mentioned those credit card delinquency The rates have exceeded pre pandemic levels, while the share borrowers making only the minimum payment climbed above ten percent for the first time since twenty nineteen. This is according to a Federal Reserve Bank of Philadelphia report. So yeah, that can be very trembling.
That's why we're going to wait to hear from the big banks, including Bank of America, tomorrow about what they're seeing when it comes to low loss provisions and charge offs.
And credit cards.
Yeah, it's a big one.
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