Bitcoin spot ETFs has been approved in the U.S. | Chain Reaction Podcast

Hey everyone it's jacqulyn melanic Welcome to chain reaction a show that Unpacks and Dives deep into the latest Trends drama and news with some of the Biggest names in crypto breaking things Down block by block for the crypto Curious on today's episode Our Guest is Michael Sunshine the CEO of grayscale Investments grayscale is a digital asset Investment firm that aims to provide Products and services to institutional And individual investors it's pretty Well known for its grayscale Bitcoin Trust and now its new Bitcoin spot ETF Product the company was founded in 2014 And is one of the world's largest Digital asset currency managers it owns Tens of billions of dollars worth of Bitcoin according to recent legal Filings the firm and its Executives have Made headlines in the past for their Tenacious efforts to get their Bitcoin Spot ETF approved after it was Originally denied by the SEC in June 2022 and later the DC Circuit Court of Appeals has ruled favorite of it and now Everything has changed and grayscales Bitcoin spot ETF was approved so there's A lot to get into Michael welcome to the Show thank you so much for having me Great to be here yeah and so there has Been a lot of terms thrown around the Crypto space in the past couple weeks The 19 B4 the S3 forms before we get

Into everything what is all of that and Can you kind of walk us through the past Few weeks in preparation for this moment Yeah it's it's a good question and I'm I'm happy to be clarifying it because Through the process of bringing spot Bitcoin ETFs to Market here in the US Everybody's somehow become a Securities Attorney Right and started using terms Like 194 and S3 and S1 so 19 b4s are Statutory filings that listing exchanges Make in order to amend their rules to Have shares of new products traded on Them so in the case of grayscale Bitcoin Tross we're listing our shares on New York Stock Exchange and so New York Stock Exchange is filing a 19 B4 to have Shares listed to amend their rules um to Make you know new listing requirements Listing standards for a spot Bitcoin Product in the case of an S1 or in the Our case specifically because Grace Scale Bitcoin trust was an SEC reporting Company before becoming an ETF and Already existed as opposed to some of The other filings come the market um it Filed an S3 and this is also a statutory Document with respect to coming to Market because it allows the shares to Be registered with the SEC which also Needs to be deemed effective before Those shares can come to Market and Trade as an ETF so lot of documents lot Of filings lot of voluming back and

Forth with the SEC leading up to those Approvals right and with all of this Kind of going on when was the moment you Knew this is it this is going to be Approved by the SEC because this has Been an extremely long time coming you Guys have been amazingly persistent to Get to this point I think I've known for 10 years that this was going to happen You know when I joined grayscale in 2014 you know we had about $60 million Of assets and we only had one fund great Scale Bitcoin trust now we obviously Have a family of 17 different digital Asset products but we always intended For gbtc to become an ETF and we always Knew that the investor sentiment would Get there Regulators would get there the Financial adviser Community would get There Etc but if I think back over these Last 10 years I'd say probably the most Critical Milestone or turning point was Really when we got the decision from the DC Circuit Court of Appeals in the Summer of 2023 that decision vacated the sec's Previous denial order of gbtc uplisting And I think it was a moment not only a Validation for us as an asset manager But for the industry as a whole we had Clear Common Sense arguments that we Knew would resonate in a court of law we Were really deeply held in our Convictions and looking back on the last

You know kind of six seven months since That happened that was really the Catalyst that broke the Log Jam and Caused a lot of excitement and investor Optimism around spot Bitcoin ETS to come To Market and many people actually Believe that that moment was the Beginning of what caused this most Recent crypto winter to melt and Ultimately dissa Yeah what do you think the DC Court saw In that ruling opposed to the other Agencies that were kind of against this Going up to this point that made them go Against the grain so to speak well you Know when the SEC green lit Bitcoin Futures based ETFs that was a milestone To be celebrated I think about all these Different Milestones over my decade and Grace's decade in crypto cuz it was Again a moment of validation but what I Don't think was necessarily realized as The implication there is that by Approving Bitcoin Futures based ETFs But Continuing to deny spot-based Bitcoin ETFs the SEC was creating an unfair Playing field and was advantaging the Issuers that were Futures based and Disadvantaging those that were Spot-based and that you know really for Us set off you know this moment where we Realized that federal agencies can't Treat aike issues desperately um and so Really just sticking to as common sense

And straightforward an argument as that Is really what I think was the compass That kind of guided our entire case in Front of the DC circuit and ultimately Got us the outcome that we wanted which Was unanimous decision from the judges And and vacating of that denial and I Kind of want to go into something I Talked about in the intro grayscale spot BTF application unlike others focuses on Converting its gbtc product into a spot Bitcoin ETF right some people may Understand understand this but for the Listeners who don't what does this mean For those who own gbtc and now those who Want to buy this where does that kind of Place you yeah so we actually really use The term uplift um rather than Conversion and the reason is that going Into gbtc ETF approval there were Already you know 20 some odd almost 30 Billion dollar of assets inside gbtc Hundreds of thousands of shareholders Shareholders from all 50 states and so Upon that uplisting from where gbtc was Trading the OTC market to then trading On the New York Stock Exchange you know There was no there's no action that Shareholders needed to take you just Simply saw the trading venue of where Your shares were listed change the Symbol remained the same meaning that You know you saw gbtc in your brokerage Account or your IRA or wherever you hold

It and the the next day you also still Continue to see gbtc so no tax Implications no you know trigger points Or anything like that other than just The listing venue where shares of gbtc You know was trading and so for folks That are looking to allocate to Bitcoin In a brokerage account retirement Account you just got to punch in gbtc or Call your financial advisor and ask them About gbtc and you can buy gbtc you know Through through any of those types of Brokerage or retirement platforms you Know you said in the past and other news Segments that gbtc is a popular Investment vehicle and you brought up Some of those stats before I'm curious How much demand do you expect to see Flowing in over the next few weeks to Months well um I think going into the Bitcoin ETF approvals there was Certainly a lot of pent up Demand right By and large many industry Watchers and Industry you know observers particularly Around the financial advisor and advised You know Market you know realizes that Even just here in the us alone there is About $30 trillion worth of advised Wealth and so I'm certainly not coming On to talk to you and say $30 trillion Is going into Bitcoin that is not what I'm sayock yeah let the record state I'm Not saying that but you can say with Certainty that by and large the advised

Wealth Market has not been participating In this asset class they haven't had Spot products for Bitcoin made ailable To them because those advisers that pool Of assets usually uses products that are Sitting you know on the Shelf within Their brokerage house that's been Approved that's gone through you know The certain due diligence and so I think Over time what we'll find is that Advisers will be appreciating more and More the benefits of including Bitcoin In their clients portfolios as a Diversification tool increasing the Total you know their absolute return Strategies building more efficient Portfolios and you'll start seeing some Advisers putting you know a quarter of a Point of their client's assets um and Maybe more aggressive advisors will Start putting you know you know one two Three maybe 5% of client's assets into Bitcoin through through spot Bitcoin ETFs and so that's just the advised Market but on the other end of the Market you have you know direct Investors you have institutions you know The ETF wrapper is something that is Really tried and true here in the US There's thousands ETFs that have Provided access to all different kinds Of asset classes and so it's a moment of Validation both for you know Bitcoin as An asset as well as the ETF wrapper as a

You know investment Innovation and Really bringing those two together and On the context of institutional Investors and maybe this applies to even Retail investors whose employers don't Let them invest in certain apps like Ramen hood or things that are not Monitored per se why does regulated Bitcoin exposure matter opposed to just You know going out and getting it the Way some people do today well I think For a lot of people and I think this Really D you know comes back to the very Ethos of why and how we started the Great scale business a decade ago we Recognize the asset class we recognize Its transformative properties and we Recognize that there will be ever Increasing demand for it but we also Recognize that it's new and with new Means that investors were going to have Challenges where do you buy crypto and How do you transfer it and store it and Safekeep it And so if you can instead give investors This Transformative you know asset class Through a traditional form a familiar Form like an ETF well then perhaps You've now taken something that was Unknown or novel to them and really Brought it to them in a format that is Digestible and actionable and I think That's really why there's so much

Excitement about the introduction of These products MH in the beginning you Kind of talked about how you always knew This would happen and this is a Monumental moment many people are Calling it watershed moment how would You define what this means for the Crypto space Oh I wish we had even more Time for this answer than we have it it Really means everything for the crypto Space you know it wasn't even that much More than a year ago that we were seeing Headlines calling for you know the end Of crypto on the heels of the FTX Collapse or things like that and you Know a year later look at where we are Where you have some of the largest Institutions asset manager in the world Publicly getting involved in crypto um The introduction of spot Bitcoin ETFs That have been you know in such high Demand and and and you know been so long Sought after and it's not just a moment Of validation it's a starting point and I say that because this is in my opinion Just the beginning I think this helps to Normalize the asset class in many ways For many investors and in their eyes I Think it then for many investors as We've experienced grayscale causes them To diversify into other crypto Investments firms like ours have filed For ethereum spot products and you know Want to continue to see the opening up

And the accessibility of this asset Class and so I think in many ways while It has certainly been a long-term Commitment of my team to deliver on gbtc As a spot Bitcoin UTF and we're proud And thrilled and and thankful to Everyone who's been patient and with us Along the way but at the same time it Also feels like it's just the beginning And there's so much work to do in front Of us and that's really the stuff that Keeps us really excited and motivated Yeah I feel that you know as a reporter In the industry it's exciting when Things like this happen and it keeps me Motivated too so yeah all right let's go Into a quick break and then we'll go Into some of the details [Music] After and we are back as I mentioned I Wanted to talk about some of the details There's a lot of talk about fee Structure for Bitcoin spot ETFs we've Seen Fidelity set theirs at 0.39% ARC Investments is at 0.8% how should investors go about Thinking about this and what really Matters yeah so I think when it comes to Fees you're obviously seeing quite a bit Of dispersion in the market and that's Not new um you know there are various ETFs on the market that give you Exposure to the S&P 500 and they're Carry different fees there's different

Funds that give you exposure to Gold They carry different fees ultimately now With spot Bitcoin ETFs you know the same Is going to be true here and I think we Want investors to have choice and choice Has always been something that uh we've Known about and we've been prepared for That you know gbtc wouldn't be the only Spot Bitcoin ETF but others would come To Market as well and so for investors Thinking about you know which product to Use there's a lot of factors to take Into account and fee is just one of them For some investors they may think about You know who the issuer is is it Grayscale a crypto specialist company or Is it a more storied you know asset Manager that they already use products From who has all various types of Products in market and crypto is just One of the things they're doing how long Have these funds been around right Grayscale and gbtc have been around for A decade some of these other funds are Just getting started how big and how Liquid are these funds can investors Buy In and sell out with the ease that they Want to gbtc is really really big it's The largest in the world you know so I Do think that there's quite a bit of Differentiation there and that's okay I Think that creates a a healthy market And um investors having choice is a good Thing as it stands how much gbtc is

There for grayscale right now yeah so Gbtc holds over 3% of the outstanding Bitcoin Supply and so it's the largest Bitcoin Fund in the world 10 of billions Of dollars and obviously grayscale is Going to be competitive you guys are Going to want to be the top dog if not The top dog in this situation but do you Think having multiple spot Bitcoin ETFs Is a good thing or a bad thing I I yeah Like I'll reiterate I I think it's a Good thing I think it's going to create You know good Dynamics in the market Investors should have choice I think You'll start seeing um and you begun to See some fun marketing um and Advertising campaigns you know grayscale Is certainly no danger to that we really Like to meet investors where they are we Advertise you know today and I think you Know over a dozen airports around the Country throughout TV you know across Programmatic you know social Etc and so There's going to be competitive Dynamics And that ultimately I think is a good Thing for investors and there will Ultimately be you know several of these Products on Market that you know matter That have significant AUM in them and I Do believe a rising tide will lift all Boats and we want you know as many Investors as possible to be drawn to This asset class because again spot Bitcoin ETF very very exciting but it is

Also about a larger story of it really Being the beginning of how to open up This asset class more broadly yeah that Kind of Segways into the next question I Had for you is I asked earlier how you See demand evolving for gbtc but how do You kind of see the greater crypto Market and ecosystem shifting in the Coming days and weeks or just even Longterm now that we have this yeah There's such a good opportunity around This and I appreciate the question Because we face this every day with our Clients a lot of investors have Increasingly been thinking about their Crypto exposure and is it solely in Bitcoin and solely in ethereum because You know those are the two assets They've heard the most about and they're The largest assets within crypto by Market cap and earlier in 2023 we Actually decided to try and be a guide As best we could for inv investors by Providing them a framework for how to Think about the asset class overall and So if you think about this in terms of Traditional companies or public equities We have the GS codes right we know what Companies are Healthcare companies what Companies are energy companies what Companies are you know financials but we Don't really have that for crypto and so Our team developed something called the Grayscale crypto sectors and it was

Really intended to be that guide to help Investors explore the rest of the crypto Asset class understand the Differentiation between different crypto Assets their use cases their adjustable Markets and ultimately make crypto Investing accessible and realize that Just because two assets are both crypto Doesn't mean that they're necessarily Competing with each other right they Might actually be complimentary in some Cases so we think we're in the early Days of that but we also are excited how The great scale crypto sectors can Really frame some of those conversations Investors understanding of crypto Developing the vernacular around crypto And I think you're going to see a lot More of that in 2024 and Beyond and Speaking of the future what else should We look out for from Gray skill I feel Like it's so unfair to ask that but as a Reporter I have To um well we're we're a firm that likes To bring future forward products and Exposures to our investors and so we're Always thinking about unique investment Exposures unique rappers unique ways to Access the market and really leaning Into to ourselves as a crypto specialist To be that partner to investors to Advisers as they want to navigate crypto So it has been a tough but fun and Certainly rewarding slug to get here to

A spot Bitcoin ETF but I'll I'll end it By saying our work here is certainly not Done it is it is just the beginning Agreed and Michael one last question got To ask do you think the SEC chair Gary Gensler is now a Bitcoin fan you know It's interesting I think if I remember Seeing some YouTube videos at points you Know the when he was a professor yeah Yeah like you talk classes about Bitcoin So you know I don't know if you can Actually call somebody a fan just Because they educated people about Something you know what I will say is Everybody is entitled to their own views And um and that's and that's fine but When it comes to the public domain and Protecting investors Etc um you know I Hope that there's recog That you know my team and I have done Our best to pave the path for regulated Access appropriate disclosures invest Protections um to really bring crypto to As many people as possible and a lot of That's been through SEC collaboration so I sure hope he's a Bitcoin fan but um Would be very tough to to outright Column one that was a nice response Michael thanks for entertaining that one And thank you for coming on today to Talk about all this thank you for having Me always good to chat We'll be back every week with the top News on the crypto ecosystem Catch Us on

Tuesdays for interviews with experts in The web3 space you can keep up with us On Spotify Apple music or your favorite Pod platform And subscribe to our Companion newsletter also called Chain Reaction links to the newsletter and the Stories we talked about can be found in Our show notes and be sure to follow us At chain reaction on Twitter chain Reaction is hosted by myself Anita Ramaswami along with my co-hosts Lucas Matney and Jackie Mel We are produced by Asad karney and our Associate producer is Maggie stamitz With editing by Kell Keller Bryce Durban Is our illustrator Alysa Stringer leads Audience development and Henry pette Manages Tech crunches audio products Thanks for listening and see you next Week


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