Lawrence Lepard & Greg Foss | BlackRock Bitcoin ETF Debate

hello everybody Welcome to a very special episode I actually had I had a conversation with Greg Foss last week and I had a conversation with Lawrence last week and they had two different stances on the BlackRock ETF um and I thought I was like okay let's put them together so they could talk about it and we also uh we're also very lucky to also have a the head of swan private Stephen lupka and Elliot Johnson and Elliott Johnson is the founder of evolve and they from my understanding and please correct me if I'm wrong Elliot they are responsible for the first Canadian uh Bitcoin spot ETF so I think it's going to be it's a great combination of people to have to have this conversation about what are what what what are the ramifications of the BlackRock spot Bitcoin ETF so uh let's jump straight into it and uh let's bring the guests one up at a time so first of all Elliot how you doing did I get it right did I get what I said right or did I uh yeah oh great to see you uh you know um yes and no let's put it this way there it was another issuer who was 24 hours faster than us because they had the regulator check their filing first even though we were in at the same time so we were building at the same time anyway I like hearing that we're the first uh we certainly were the first to file for an ETF in Canada connected to bitcoin back in 2017 it was going to be related to the CBOE Futures Market back then but we couldn't get regulatory approval uh that in that sense we're the first uh we were then 24 hours late um after the other guys got theirs approved first just for bureaucratic reasons but that's not fair that's that's a technicality that's a technicality that's not fair hey absolutely and and that's something I've been discussing with folks in the US because you guys have a race on your hands too in terms of SEC approvals and um maybe the SEC can look to some of the mistakes done up here in Canada to make it a fair market so absolutely relevant all right and of course the head of swan private he's not in the sun today Steven look how you doing I'm doing great excited to be here this is a great topic I mean a lot of exciting stuff coming you know down the pike with these filings I think it's going to be a great conversation absolutely and of course the two legends of Bitcoin Twitter the macro heavyweights Lawrence Lepard and Greg Foss how you guys doing good I'm not sure it calls that uh yeah great thanks for having us on Nico nice to see you again happy to have you guys on okay so I I kind of want to address the elephant in the room which is you guys had some disagreements in terms of what the consequences of the BlackRock Bitcoin ETF would do Lawrence came from the angle and had a conversation with him and Caitlyn long from the angle of it it could potentially lead to rehypothecation and then Greg you had a different take uh so I want to get your guys thoughts on that sorry Florence you you want to jump do you want to jump on it first yeah so um look we don't know for sure what they're going to do behind the scenes but we do know this is Blackrock and uh they live in a Wall Street world that you know lives off of rehabothecation and you know they they run a system where they can basically know that if they make a mistake they're going to be bailed out by printed money and of course we all know the beauty of Bitcoin is it doesn't allow that um and so they may be stupid enough and I believe they could be they are stupid enough to potentially create paper Bitcoin with this product that the rehypothecation is a very high probability behind the scenes and actually dug into the prospectus and I I tweeted it out and they even had some language in there talking about the adjustment price which was you know they said the the thing will not always track perfectly the price of the ETF won't always track perfectly with the price of Bitcoin and there will be an adjustment price as we make sure we match the size of the Ponder the size of the Bitcoin we hold and I thought okay that's it right there there's there's the window um you know so they could they could sell paper Bitcoin is the way I read it um and you know they're likely to do so um you know based on how they've behaved in the past having said that I I think that they're coming into the space and announcing I mean this is a 10 trillion dollar one of the largest if not the largest asset managers in the country um just removed an enormous amount of career risk for any financial advisor who couldn't put people into Bitcoin because it was scary and nobody big was endorsing it and so now we've got Fidelity these guys a bunch of other people applying I mean this is going to be enormously positive for Bitcoin demand in your average person's portfolio and that's that's a very good thing but um the you know the risk of rehypothecation I think it's very real Greg I know you had a different take on that uh what are your thoughts first of all let's make sure that disagreement is always good especially with a business partner of which uh Larry is one of my business partners in the Bitcoin opportunity fund and as I like to always say um if everybody's thinking alike somebody isn't thinking okay and that was a quote from your famous General George Patton so I have a bit of a different take and it's all in the art of dissecting the language first of all if I'm not mistaken and my friend Elliot is the expert here there's usually forced major language in any ETF like the BlackRock ETF that allows for adjustments in the event of Market dislocation or the like my very simple Layman's understanding of this is Blackrock will have a number of ETF shares outstanding of which all of them are borrowable most of them because the institutions that own those ETFs are going to allow them to be borrowed which means you can borrow them to short them if you want to take a position on bitcoin that's fine shorting is a necessary component of any efficient market as far as I'm concerned but my point was only that the maximum amount of Bitcoin that could be essentially recreated is the number of uh the market value of Bitcoin that's in the BlackRock ETF if they're going to do nefarious activities which include using derivatives or paper Bitcoin exposure from an exchange that doesn't actually deliver the Bitcoin I believe that will risk blackrock's entire reputation across their entire ETF business model such that if I was making that decision as CEO of a ETF company I wouldn't even think twice about it I would not risk my entire reputation of proper pricing and closing prices on an ETF that is supposed to mimic some sort of Benchmark or some sort of asset I would not do it now nyree and I have differing views as to the uh you know the potential for them to do it of course there's the potential I do not argue with the potential what I believe is in the ethics of Wall Street now that in itself might be one of my sillier comments but remember this is a 10 trillion dollar asset manager that's going to risk the entire business for a how much is the Bitcoin ETF going to be by BlackRock I said 50 you're gonna risk a 10 trillion dollar business let's get this straight a 10 trillion dollar Asset Management business for a 50 billion dollar ETF they could grow much bigger than that but I think that is the combined inflows into the Bitcoin ETF why did I say that before Nico because in Canada it was 5 billion the rule of 10 take what happened in Canada multiply it by 10 that's what you get in the United States that tends to work well with GDP with things like um mimicking Financial Risk exposures in different markets so without talking too much more Larry and I always agree on just about everything it's just our degrees of probability that something happens he might put a higher probability that they're going to do it I would say Force measure is always an input into these Bitcoin each or any any ETF whatsoever and Elliott will expand on that and secondly and most importantly I don't risk the entire company business which is built on ETFs because I'm going to put paper Bitcoin in a minuscule ETF relative to the rest of my business just my two SATs thanks guys gotcha okay so before I push push it on to Elliot uh Stephen do you do you have a take and I'm sure you've had clients that have asked you about this as well yeah absolutely so my biggest concern is actually not that they sell paper Bitcoin it's actually that the ETF is too successful and they hold too much spot Bitcoin uh my concern is that they actually hold the Bitcoin and they end up holding over time I'm not putting a prediction on this but I'm not even saying this will happen but if they were to hold several million coins um there's a clause in the ETF filing about being able to decide a fork so if there's a fork of the network that BlackRock reserves the right to decide which Fork is the real Bitcoin so the scenario that keeps me up at night and I'm going to reiterate I'm not saying I expect this to happen and I'm not even assigning a probability to this happening but the scenario that really concerns me is not paper Bitcoin it's three or four million coins end up in the CTF which would be a staggering amount but and then there's some behind the scenes stuff there's a fork maybe it's initiated by you know institutional Capital maybe it comes from somewhere else BlackRock sides with uh more centralized more surveilled less secure more profitable to them Fork that the trust is now backed by those coins they market sell three to four million Bitcoin on the open market tank the price of actual Bitcoin and uh you know most people don't understand the difference that's the concern for me um now so what I the way I relate to it is I kind of fall somewhere in the middle I think the ETF is bullish for price I think it will cause the price to go up I think there's no doubt about that it's gonna drive price up it's bullish for Bitcoin it'll not just inflows into the ETF but other Market participants career risk diminishing other people following suit other companies launching products but but if it is too successful we do run certain risks and we should keep an eye on that and I think the solution to that is actually providing because who's really gonna want this ETF is institutional Capital financial advisors and other sorts of Market participants who have mandates which restrict what they can invest in how they can custody those assets and um various things like that so the solution to not let this get too big is to have alternative products for them which meet their mandates but are not all concentrated in one product fund or company and so I think that's a mission for the Bitcoin builders for people that are working in the space that are building products to build out those options over the next few years and I'm looking at the chat and some people are saying hey I need good news today yikes let me be really clear I'm not saying this happens I'm not saying this happens anytime soon the price is going to go up most likely a lot between now and even a scenario where that happens this is more something that I share to say that we should be alert to and that we should build the products now so in five years this doesn't happen gotcha okay so I'm gonna pass it on to Elliot Elliot after you everything you've heard from Stephen you've heard you know uh Larry's thoughts as well uh what would your response be what's your take especially of someone who actually runs a you know a Bitcoin spot ETF in Canada obviously you have a unique Vantage boy and a unique perspective look I'll start by saying um unsurprisingly I'm not afraid of the BlackRock ETF but I really respect the um level of skepticism the questioning that's coming from the Bitcoin Community because uh it's right and proper to make sure that um all the questions are being asked but you know what we're in a unique position with Bitcoin because you can look directly at the blockchain audit the blockchain to make sure that uh you know the supply is still what the supply expects to be so I I have different views on concentration risk um perhaps than some folks in the sense that I don't think that a large player owning a lot of Bitcoin hinders the ability for the rest of the world that owns Bitcoin to benefit from it because of the infinite divisibility nature of the asset in the sense that you know in theory you could onboard everybody else in a single set if you divide it enough and it's non-dilutive increase of capacity in terms of other people being able to use the asset it doesn't matter uh who has the biggest amount what matters is is the Bitcoin doing something for you that you think is a value and so just to address that point first adoption drives value in this asset class it's the only thing that drives value really it's actually not the structural um uh 21 million Bitcoin because you know you can go and Fork Bitcoin to something else that has 21 million but if nobody adopts it it doesn't make any difference and that I think is the point that defends us against there being a fork that BlackRock then gets to control because you don't want to kill the Golden Goose there's really no point in owning a forked Bitcoin that loses its Allure because it isn't being useful for anybody anymore unlike gold which is still physically gold even if people aren't using it for any form of Commerce and of course the story of Bitcoin is the combination of a hard asset combined with the adoption curve it's that metcalf's law input component that is the most exciting part actually because it's being combined with a digital Bearer asset so that's something that I think is worth a lot of thought because it's the same reason that I don't think anybody should be concerned that Michael Saylor controls a lot of Bitcoin it really doesn't matter also if you show up to bitcoin as a new person today you might think well I wish I'd come in in 2017. it doesn't matter Bitcoin is as useful to newcomers as it is to folks who've been around for a long time I really think that's fundamental to the asset itself now as it relates to will BlackRock re-hypothecate the Bitcoin they hold in their fund I really think first of all they'd have to be out of their mind to do that because it's a hard asset with auditability and and also bear in mind BlackRock is not um as much as you know I I I'm sympathetic to the argument that um there are uh things that are done a little bit behind the curtains in government or in Wall Street or whatever but this is a far cry from you know the FTX situation in the sense that BlackRock does exist under the laws of the United States it is a regulated entity it's fund as a regulated entity it's going to be audited our product for example we run a fund it's called the Bitcoin ETF it trades on the ticker ebit in Toronto it's exactly the same structure that BlackRock has filed for so if you want to know how their product would work you could look at ours you can come and buy ours in Canada and see exactly how it works we are regulated we are audited every single year e and Y our auditor checks to make sure that all of the blockchain transactions that have happened in the fund match up against the creations and redemptions of shares of the fund and to the exact address on the blockchain where our assets are held in Cold Storage this isn't the same as when you put your money into a deposit account at your bank which means you don't have the money anymore you have a claim against the money from your bank and the bank just co-mingles it with the rest of their balance sheet and good luck figuring out whether the bank has that cash or not and the government can print more of it this is a very linear relationship and that level of detail isn't just possible but it's required by our Auditors because they can look and they can check to make sure that every single transaction that happened in our fund fed through to an actual transaction on the blockchain for the account that is held in trust for the fund at the custodian That's Unique in the sense the Bitcoin ETFs allow that to happen that's not happened with other investment funds and ETFs in the past and it's because of the asset class so look is there going to be rehypothecation of the shares of the Bitcoin ETF for the sake of general you know other activities within financial markets will you be able to borrow shares to short them if you want to take a bet against the price of Bitcoin absolutely for sure but will you be able to very easily mathematically know how much Bitcoin BlackRock is supposed to have by look looking at the AUM and dividing it by the price of Bitcoin and saying therefore this is how many Bitcoin they need to have you will and their auditor will have a burden to check to make sure the Bitcoin is there and so I I think um it's important to maintain this pressure of skepticism um BlackRock and on the financial system but it's a new ball game because we can check and that's that makes it different than gold um and it also is not like other assets within the financial system like equities and bonds and so forth where you have Clearing Houses and a variety of financial Plumbing where people can get their fingers into it nobody can touch the Bitcoin in our fund except for us and we can only touch it to meet the creation and Redemption needs of the investors who are buying and selling our fund and as a result of that it's it's it is very much a different vehicle um and I think the plumbing matters and I think frankly investors you know would uh it's great that people are reading the prospectus and the filings and so on and and and to Greg's Point by the way um Larry I I think uh you know I read some of the tweets you had about the language and the prospectus and it's all language that I've seen many times with a variety of other products um the the concern that BlackRock has um mathematically you can just look at this if you assume they're 54 billion dollars is the expected AUM of Bitcoin ETS in the US within a month or so of launch by comparing it to Canada and taking the same market share that's about 40 of the current liquid supply of Bitcoin um based on the amount that's moved uh more recently than the past 12 months so they're not going to be able to put 54 billion dollars of Bitcoin into the fund at 30 000 bucks a coin it's not going to happen like the liquidity will occur but liquidity will occur at a higher price and so their concern is Big inflow days right what happens on day one if they need 10 million bucks with their reference rate it isn't 10 million bucks available probably at that reference rate at that day um and so their concern is the uh the early friction if the if if they launch and it's just the biggest ETF launch ever and I'm not surprised Council would put language like that into their perspectives interesting okay so I'm going to pass it on back to can I just say Elliot you mean 10 billion not 10 million oh I'm sorry I'm sorry yeah let's be clear absolutely we've got to get our orders of magnitudes correct here okay 10 million is doable 10 billion I think you could easily do a billion or two Without Really blinking in the Market at the current price but it's when you start to really go after those liquid Bitcoin that you're going to start to see the the price have to adjust to provide the liquidity at the price that they are yeah I mean but you're saying if someone wanted to buy it all at once right because if you saw what the micro the Michael sailor strategy which he kind of layered it in over a long period of time and in the process of him doing so it didn't really pump the price running a business that marks and closes on a reference price and the difference is called slippage and your whole reputation is at risk on your ability to track a reference asset price without what's called slippage or in other words you're not tracking that asset you don't have a business if you can't do it properly hey Foster started a thing it's called spy and my my my spy which tracks the s p s p 500 Index not even close this thing is but it's I'm gonna risk my entire reputation on that no you are not you have to put in bells and whistles in order for an event that will allow you to grow over time this is a 4 pm Mark type of decision and slippage kills the business very simple over to you Elliot well yeah Greg just to add to your point um microstrategy reports uh quarterly results many many weeks in arrears from whatever it is that they do in their business when BlackRock launches their ETF everybody is going to be looking at that on screen all day and looking at the amount of volume traded the world is going to know how much Bitcoin they're going to need to buy at their reference price the next day it's not it's this is a transparent thing it really is like this is completely different they're not going to be able to go and accumulate it over a period of time quietly and then somehow move it into the ETF because the ETF is just a straight up pass-through and so you know I I look at the flows of my product and my competitors products each and every day I know what's coming in and what's going out I can see um because of shares outstanding how much was created or redeemed I know exactly how much everybody needs to trade and this is the thing about ETS is that they are a transparent um vehicle that trades on the exchange that really is quite hard to to hide from and you're not going to be able to hide from 10 billion dollars of traded volume and then and then just you know I I mean unless unless BlackRock has their own Supply they've been gathering for for months now and they can somehow but even so they have to cross it at their reference rate so it doesn't matter if they're the seller they might have 54 billion dollars of Bitcoin today somewhere in their system but they have to cross it at their reference price and they're using the same reference rate we're using which is a survey of the six biggest exchanges in the final hour of the day from three to four pm so they have to hit they need that Bitcoin at that price and so it's it's a completely different ball game it's not like um it's not like running a corporate where you can you know announce later what you did last quarter not sure okay so I I want to pass it back on to Lawrence uh you know after you heard what Elliott had to say after you heard what Stephen had to say and what what Foss had to say and would it be fair to say Elliott that doesn't gold have to the gold ETFs don't they have to adhere to the same type of Regulation uh yes I believe so um there's a question though of uh auditing their vault and auditing how much gold there is in existence that I think makes it completely different uh experience but yes I mean look absolutely like the the uh I guess the challenge is going to be you know uh what happens if you believe that BlackRock doesn't have the Bitcoin that you think that they say that they're supposed to have right if you they don't have the gold that they say they're supposed to have what are you going to do about it I think with Bitcoin what will happen is the price of Bitcoin will adjust to assume that uh they're gonna have to go buy some more if they get redeemed but gotcha all right Larry what's your take on all this well look it it all it all just goes to whether or not you know they're nefarious in their in their dealings I mean I think that probably have enough loopholes in the prospectus and I recognize they're all standard but um and they they have a way of doing business that that allows them to you know create paper over and above you know what they what they say the reference price is and you know it's called rehypothecation and if they do that um they'll be effectively creating paper Bitcoin I mean you know they also have probably the ability and it was the prospectus was 1285 pages I you know I bogged down I couldn't read the whole damn thing but I'm guessing some some people have read it all and I'm guessing that somewhere in there they've reserved for themselves the right to you know to buy paper Bitcoin or to buy contracts representing Bitcoin from Sub sub parties I mean I know in the gold perspectives they definitely Reserve that right I'd be kind of surprised if they didn't reserve it here but like I say I haven't had time to go I've got better things to do than read 1285 pages so uh you know even if they haven't reserved that right my suspicion is that they could do it um you know and claim that constructively they're trying to give people exposure to bitcoin and by buying pay for Bitcoin that that solves the problem so um you know you have to remember that these people play by their own set of rules they always have um you know and they change the rules when it suits them you know I mean look at the look at the nickel short squeeze look at the change in the uh um you know in the short selling rules in 2008 um you know these people think they're Gods you know they're they're Fiat gods and they think the rules don't apply to them so you know they'll probably get carried out if they do it you know I mean Odell and pish had a great uh WD what Bitcoin did broadcast unless we say let's start over the weekend and they agree with me I mean they basically you know these guys they it's like the Scorpion and the Frog I mean they just can't help themselves so we'll see I mean it's it's possible that they'll be honest and they won't around with it but um you know I I think that to assume that they won't is is not the correct assumption I think there's a better than 50 chance that they will I mean when Bitcoin did what it did which is to say when it launched and went up 5x you know between 2018 and 2020 you know that the big run from 10 grand to 50 Grand I mean alarm Bells went off in every Central Bank and every monetary Authority in the world and they all said holy we're you know we we got to figure out how to get our arms around this thing and you can bet that they've been devising ways to get their arms around the thing um you know they're it's an existential threat for their system so to believe that you know we know they've cheated in the past to believe that it's an existential threat and then to not you know um think that there's a possibility they're going to play with it uh it's just like what you know of course they're going to try and play with if they can and that's how I see it guys I gotta jump off because I got a hard stop at 4 30 but yeah continue I mean we got a lot of other wisdom here so um Larry I appreciate you joining us yeah okay thanks guys see you thank you Larry thank you brother thank you good to chat with you all right guys before we before we uh before we keep going I want to give a shout out too because I know I know Greg's going to be there I know Steven's going to be there and maybe Elliot joins us as well I want to give a shout out to the Pacific Bitcoin Festival scan the QR code on your screen right now and it will take you uh to the website and you get 21 off you could use the promo code real Bitcoin do it right now literally takes two seconds anyways back to the conversation uh Greg I'm gonna pass it on to you in response to what uh what uh what Larry said anything's possible um I'll just go back to uh my belief that you have an auditable Ledger that we've never had before if we're worried about forking how about ironic gold fund and then I fork it into a fund that holds tungsten bars painted gold just because I think that you know that's what the new gold is going to be the market will decide Stephen you at the end of the day are the you make an economic decision and don't forget there's black rocks of the world and then there's nodes and there's Miners and you know it it's not a simple thing to Fork uh Bitcoin as we saw with the user-adjusted soft Fork uh uasf I mean it's a beautiful thing Bitcoin and we can worry about a lot of things or we can look at it as a um a potential onboarding wrap where Bitcoin gets a q Sip and I went through this and why I think it's positive that Bitcoin gets accusip and how that gets adopted into institutional portfolios that someday eventually become keys that you hold in Cold Storage okay Bitcoin held in Cold Storage I I like it but trust me it's not easy to teach an old Boomer like myself multi-sig or cold wallets or you're playing with this thing and if your fat thumb hits the wrong key it's gone like I know it's not but an old guy who doesn't work on iPhone as well as the young kids these things worry me so there's a process um that allows for onboarding that makes it more simple for the world including institutional investors to uh to adopt it and most importantly it's an auditable Ledger that's what I keep going back to there's one number that you got to worry about 21 million physical Bitcoin very simple and then finally a shout out to my friend Elliot Johnson who I'm glad you brought that up Nico because I think Elliott provides tremendous amount of value on any podcast or for that matter at any conference that discusses these things I know I'm not an expert in operations of ETFs of any kind the creation Redemption process of any kind I'm not an expert of and then particularly with respect to the creation Redemption process for a physical spot Bitcoin ETF that relies on the world's most secure Ledger man oh man I want someone else in that job that's why we're lucky to have Elliot here and I think you'd be lucky to have him at the Bitcoin conference in uh Pacific Bitcoin conference in uh uh La as well Santa Monica but that's just my two SATs okay all I know is if I'm the smartest guy on the in the room when it comes to anything you guys better find another room okay I try to surround myself with people like Larry Lepard and Stephen and Elliot Johnson I'm here to learn I have a Viewpoint you guys could take my viewpoint and say go pound sand Foss your Viewpoint ain't worth the gunpowder to blow it to heck okay cool I'm good with it just understand that nothing is a hundred percent certain unless one thing there is one thing that I can go to the bank with with a hundred percent certainty Fiat money will continue to debase on an accelerated basis because it's pure mathematics accordingly and don't overthink stuff okay act accordingly the fastest horse at the race it's called Bitcoin you better own some don't overthink it thank you over to you guys Amen to that um Stephen you have a response yeah um so I think I think a couple a couple things right like we need to when we're discussing this conversation of like forks and uh you know other conversations about the actions BlackRock may or may not take I mean it's important to remember the block size War it's important to remember segwit 2x like the history of Bitcoin tells us that large players have attempted to influence the code they have attempted to influence the development trajectory of Bitcoin they have attempted to influence uh witch Fork which version of Bitcoin is valid um and so there are different ways that that perspective could be worded perspective could be worded right like it doesn't have to be BlackRock reserves the right to describe to define the the fork right like if you're saying the market should decide and I agree the market should decide and did decide segwit 2X then the Clause should be the fork coin with the highest trading price after you know six months and they can just hold both there's no rush they don't need to sell them immediately it doesn't matter one bit they could say whichever one's trading at a higher price after six months after a year that's the one that's the one that they could take it outside of their own hands but you know instead they have imbued themselves with the discretionary authority to decide which fork and that's where we can't relax right like we've seen this play out before we've seen coinbase try to influence we've seen grayscale try to influence it we've seen miners try to influence it they didn't succeed they didn't succeed and so we were successful in the block size War um however one of the things the ETF why were we successful in the Black Block size or one must ask that question one must ask okay so how did the owners of Bitcoin the hodlers how did they Prevail against these large entrenched corporations that wanted to increase the block size that wanted to do these things and the answer is like the hodlers were very educated they understood Bitcoin really well they cared very strongly about which trajectory it took and obviously they you know were correct all other Forks of Bitcoin which took this trajectory or trading for a fraction of bitcoin's price um but when you have an ETF and we come into this next Epoch of growing adoption of mass adoption what changes the average holder of Bitcoin is no longer in this era very educated on bitcoin they don't understand Bitcoin as well as the bitcoiners who fought in the block size Wars right like that most likely will be the trajectory you're going to have a lot of average people that just buy it in the ETF they don't know much about it and so that's not your intransigent minority that's not your group of Die Hard hodlers that are willing to fight and sell the fort coin and approach it in this way and so we need to be more on guard not less on guard than we were then and especially when you're dealing with an entity like BlackRock that is way bigger than coinbase was during the block size War right they have so much they have the ability to pull in so much more Capital so like these discussions earlier in the conversation I'm kind of going back to some earlier comments of like oh no they're not going to pick a bad Fork because it could financially jeopardize the ETF well that's exactly what coinbase tried to do that's exactly what grayscale tried to do nobody thinks they're picking the bat Fork everyone thinks Bitcoin would be better imagine the government comes to bitcoin there's regulation in Congress where they say this thing is just it's too it's too private we can't surveil it enough it's it's really worrisome if this doesn't change we're gonna pass all this legislation making it illegal for you BlackRock to run this ETF because it's not surveilled efficiently uh sufficiently and so which decision is financial suicide there right like if that's what BlackRock is facing of surveil or die then the rational decision is to try to support the fork right so this idea that like any scenario where you might possibly support a fork would be economic suicide I think like doesn't fully Encompass the wide range of incentives that like would be possible here um and so again like I come back to my or argument the way you avoid this is bitcoiners bitcoiners build Bitcoin uh aligned custodial products for institutions the institutions don't want to hold it on a treasure maybe we can sell them on some sort of multi-sig that's one road but you need to build them and Foss brings up another point with like a q-sep like these ETFs fit into these institution systems bitcoiners need to build something that fits that and they need to do it in a way which is consistent with the Bitcoin ethos um that is what will ensure that this thing doesn't balloon out of control and we have time to do it I don't I'm not saying this happens quickly but what will prevent this from happening is bitcoiners continuing to build with these institutions in mind and what bitcoiners need to understand when thinking about these institutions is that they have different requirements than you and me you and me can get a hardware wallet you and me can do it this way they need to do it a different way and we need much more sophisticated much more Bitcoin native ways to sell them so we don't just hand the bag to Blackrock yeah uh Elliot uh I'm sure you have a what would your response be to Steven's take I agree a lot with um with that perspective um I've said since we launched our first Bitcoin ETF that um there's gonna be a day where nobody needs Bitcoin in an ETF uh because that's when we have adoption that's when you know I mean and it's not just it's I mean obviously on chain everybody doing self-custody is one view of a future adoption that people are striving for but between now and then the other thing that could get rid of Bitcoin ETFs is a necessary structure is just um all the banking systems allowing you to hold Bitcoin within your bank account I mean that's as simple as that because like it isn't that hard to integrate the asset into there but you know I would kind of highlight a few things here I mean one of them is I'm very much in the camp of everything is good for Bitcoin and I'm very much in the camp that Bitcoin is for everyone and so if you really want to explore that it's like free speech it means there needs to be people you don't like who get to use it too and that in you know it means if you're skeptical of Wall Street you're skeptical of the banks that's fine but they also get to participate in Bitcoin and I think there's also there's a there's a false um equivalence people put towards having a lot of Bitcoin to having a lot of influence over Bitcoin I don't think those things are the same blackrock's influence over Bitcoin is going to be a function of the marginal flow that they will receive into their product not the total aggregate amount once they've built up their large fund so they're going to have an incentive to make sure that they are supporting the fork that the community believes is the is the is the official Bitcoin if there ever is a Ford and we recently had experience with this and I know I may get some nasty emails from some uh Bitcoin um folks in your audience but we do have an ether ETF as well and as a result of that product we had the experience where they moved from proof of stake to proof of work and there was a fork in the um in the asset and we had to decide which one to go with because theoretically the old proof of work version was the one we had built the product on top of but the new one was the one that was being adopted by the community and obviously that one that was adopted by the community was the one that retained its value and the other one withered away and and was never really worth anything but the manager does need a lot of discretion in terms of how to decide I'm not sure I agree that we should put they should be putting a recipe into a perspective of how to decide I think it is a um it's it's a judgment call each and every person has to make like we have to make it as bitcoiners as well right if there's a fork in Bitcoin I have to sit down and look at my own Hardware wallet and decide you know do I want to keep both do I want to move one do I you know what do I want to do everybody has to that's the interesting thing about digital assets and the possibility of forks but at the end of the day the there the I just keep coming back to the fact that the value is from the community it's the growth in the network that's far more exciting frankly than than BlackRock getting I think BlackRock is going to do a lot for mind space in terms of adoption I think as Greg has mentioned many times having that q-sip having that vehicle that is custody within the traditional financial industry opens the door to a ton of Institutions you know I've said before many times that the other thing about it is Blackrock signaling to the rest of the financial industry that it's okay means it opens it to institutions who either use their product or hold their own Bitcoin on their balance sheet or hold their own Bitcoin in custody for themselves this is the starting point for so many people and as as crazy as it sounds regulatory Clarity is a thing for big institutions I mean for people who are you know know more on the libertarian side of digital Finance you look at it and you say well how come more rules increase Freedom isn't that the opposite and yes I think there's an argument for that on an individual basis but if you're a pension plan or you're a corporation or what have you you need to make sure what you're doing fits within the rules of the um the the system that you're in the system that you've been in your entire career and blackrock's ETF is going to do that and it yes I think it's obviously going to have an impact on demand because it's going to bring a whole bunch of new people into the ecosystem but it's also going to make it way less weird for people if they are if they know that their Pension Plan has some Bitcoin in it maybe they have a bit of a Bitcoin ETF position with their Investments with their advisor if they then come across the opportunity to self-custody a bit of Bitcoin so that they can take some with them on vacation and use lightning to pay for things when they're overseas without having to change currency to something else this is how adoption happens it doesn't happen with people saying I relinquish everything I ever known and now I adopt the new thing all of a sudden it happens when you can get to the point where Bitcoin is not an exotic thing for you it's something normal you feel like you know about it that opens a door for you then to do a bit more in terms of using it you have friends who have it they do the same thing this is all positive stuff it really is and so um I think the main thing that I would just like to leave everybody with in terms of my opinion on this is that um this is not a situation where there are two forces in opposition to each other I don't think that's the right frame to think about it I don't think it's the existing Bitcoin community and now BlackRock and the Giants of Wall Street and we're gonna be in Conflict I just I really believe that that's not true I think I think you can believe that that's not true and still believe there are Bad actors in Trad fi and there may be bad actors within regulators and others and so on but I really think think this is actually about people coming together I really do think that it's that the BlackRock is not going to want to be short any Bitcoin compared to what they say they have because they're not going to want to have to chase that price if they need to go and meet a Redemption by trying to buy it somewhere in the open market it there's a reason that grayscale has so much actual Bitcoin in their fund that the scarce asset here that everybody wants is the Bitcoin itself like you you don't want other things you want the actual Bitcoin I think I think everybody understands that right now and I think that's why that's why you see BlackRock interested in getting into the space they don't want to be left behind they don't want to launch an ETF when Bitcoins at 300 000 bucks they want to do it now at 30 000 is better easier to get in they probably wish they'd done it at three thousand yeah so gentlemen we are at a 45 minute Mark so Stephen I want to get your thoughts and then and closing thoughts from Greg and then Steve and I are gonna go a little back and forth towards the end so uh Stephen so you've said a couple things that BlackRock will need to support the fork from the community um and also that like you know basically Wall Street and uh Bitcoin aren't in opposition Bitcoin Community aren't in opposition I agree with you on most of what else you said uh in terms of this is going to bring adoption adoption does look like these other things happening it does bring in capital flows some people need different starting points this will be bullish for Bitcoin people want to own Bitcoin I totally agree with you there um but on those comments of BlackRock will need to support the fork chosen by the community why my rationale for that is because the value of the fork comes from the size of the network this is about metcalf's law no that's why this is why Twitter threads does it sorry this is why Facebook threads does not really threaten Twitter I mean it does because they come with their own network but it's why Noster is harder to start you the network that attaches itself to the asset decides what where the value is yeah uh that's not true right like there is no Christ is not set in some sort of deterministic sense by the size of the network there are very big networks that have little value there are like it's just that's not where price comes from so there's no there's no like deterministic rule where more people like if BlackRock Market sells three million dollars of Bitcoin BTC on Fork day like Bitcoin trades at a lower price than the fork I I look I that's I I'm not actually debating price I'm talking about value and Greg often draws this distinction and the value of the Network that has the adoption is going to be the one that is going to be desirable and maybe on Fork day with a market sell because BlackRock picks the wrong Fork the price of the more valuable Network drops in which case congratulations everybody bitcoin's on sale good for all of us but you're you can't you you can't stand in front of the crowd that is moving in a certain direction and protect and and fight against that this is I really believe this is true I I think that it's going to be the value of the Network that has the community is the one that wins as it relates to a digital asset with scarcity because otherwise you have nothing you have like you have something of nobody's using it and you have no value so I don't disagree with you about market price I don't disagree with you they can go and sit on the price if they dump everything but I don't think it ends there and that's why I think they're going to be ultra careful because if this thing is 54 billion dollars for them they're not going to want to kill it by doing it wrong so they have an incentive and they're aligned and then they're part of the community That's My overall argument coinbase yeah no I hear you I don't I don't mean to yeah can I can I jump in coinbase had the same incentive right coinbase they started their company right they had Bitcoin you buy Bitcoin there and what you saw is despite the fact they had that incentive despite the fact that their business like you know they continually on bitcoin they continually moved away from it they tried to harm it um and so like it's not because there are other incentives and BlackRock has trillions of dollars of other incentives they have this whole business which may be much larger if if pressure comes right like there are a million other revenue streams that can place Financial pressure on BlackRock like their incentive isn't just like keep this one little ETF going it could be a big ETF but um my my problem isn't like there is a probability that what you're saying is correct there's maybe a large probability that BlackRock does not do anything to malign Bitcoin they don't support any negative Forks I'm not even saying it's my base case that they do do that right I'm not saying that but um the way I hear and maybe it's not the way you intend it but the way I hear your phrasing uh you speak with a lot of certainty that they want and I think that certainty is dangerous for the community to accept broadly I think we need to look at this as this is a good thing this is a good Milestone uh this represents the success of Bitcoin this will drive up the price of Bitcoin but we cannot get complacent here and we cannot trust we can't trust them it doesn't mean we have to assume they're out to get us that they're going to try to uh you know Boogie trap us at every you know uh opportunity but we can't we can't trust them like we need to keep building and we need to build products that make them obsolete right and by the way I'm not arguing against that and I I just want to make it super clear I really think the skepticism of the community around this and the questions being asked like they're amazing as an asset manager running a Bitcoin ETF I'll take any question I hope that BlackRock does too and I've like nothing but respect for this conversation so uh I'm with you I and and it's a fair point I am probably speaking with more certainty than I should because we don't know the future and I guess if if BlackRock wants to try to destroy Bitcoin for the sake of some other incentive they might have uh the ability to provide some harm so uh points well made uh I don't want I don't want you to think that I'm I'm saying like this is absolutely the way it's got to be and I certainly don't think any bitcoiners should stop asking questions of BlackRock or evolve or anybody else in the traditional Financial community and let me apologize let me just apologize on the metcalf's law Outburst I have been debating people on price models for the last 7 72 hours it's a hot button it's a sore spot I apologize for my outputs there um okay so gentlemen we are reaching the top of the hour Greg I want to give you an opportunity to say your thoughts so very quickly uh you know this went from uh BlackRock re-hypothecating Bitcoin somewhat into a pricing discussion of Bitcoin which Stephen has spent a lot of his time and uh I got uh my opinions out there too look um there is a difference between price and value markets are set that way Stephen and I have uh have traded our back and forth on that live by this rule it won't get you in trouble set a Target but not a time or give a direction over time but don't give a price Target that'll keep you out of trouble people all right because you can't model price and time with any degree of certainty that's a Fool's errand you can give a direction there's an old saying when the genius points at the moon the fool looks at the finger don't be looking at the finger people look at the Moon the genius is Bitcoin I think we're overthinking this a lot adoption is key I want to thank Elliot my friend from Canada for coming onto the hot seat I support free open markets a lot of the markets on Wall Street are manipulated and essentially closed this is very important keep the good dialogue happening I'm here for this I will die on this hill this is so important for adoption for the children I view this as an overall net positive not 100 certain again the only 100 certainty Fiat debasement prepare yourselves accordingly thanks for having me thanks Greg I really appreciate it Elliot thank you so much for joining us on the stream today I really appreciate you gentlemen coming thank you thank you so much thanks Nico thank you thank you both thank you Elliott thank you Greg Stephen how you doing man uh I I love that I love where that conversation went but before we continue the conversation guys scan the QR code on your screen right now we'll take you directly to the pacificbitcoin.com website you can use the promo code real Bitcoin get 21 off your tickets Steven will be there I'll be there Foss will be there as well you definitely don't want to miss this celebration I want to use the last 10 minutes or so to talk about uh to talk about Stephen Stephen you you you're part of swan private so why don't you explain to everybody what swan private is and what you guys do over there yeah so I lead the Private Client team for Swan that's our concierge private wealth division so we work with larger buyers High net worth individuals we work with all sorts of clients who are looking to come into Bitcoin but they want a little hand holding they want there to be somebody on the other side of the phone that they can call anytime they have a question anytime whether it's about the ETF or something with their account or wire transfers or how to set up custody right so these are issues that we want to be we want to have real human beings knowledgeable bitcoiners Financial experts that are available to help people on their Bitcoin Journey um you know I I joined Swan about three years ago to lead this team to grow this side of the company and it's grown tremendously we have thousands of private clients we've helped people stack uh you know huge numbers of Bitcoin and what we learned is just in the Insight behind private is that none of these exchanges are doing this you're not going to get on the phone with someone at coinbase you're not going to get on the phone with someone at binance like and if you're allocating you know a material amount of money for you and your portfolio you deserve to have you know the best service and the best information and the best people to hold your hand if you're new to bitcoin if Bitcoin is something you want to get into but you're not sure about all this you're not sure about how to set up your wallet you're not sure about how to do these various things and that's what we do at private uh as well as events and research and products and all sorts of things gotcha and if people have any questions about that could they reach out to you directly yeah absolutely you can email me anytime Steven swanbitcoin.com that's Steven with a V you can also just go to private click on the swan Bitcoin or uh landing page just click private and you can you can talk to the team you can hit a button to talk to the team so and I think people could find you on Twitter as well right yeah find me on Twitter just look up my name Stephen lupka I'm very responsive on Twitter DM me anytime so uh always happy to chat awesome well thank you so much for joining us today Steven really really appreciate it guys that was the live stream special if you enjoyed the show you know what to do smash that like button and uh you know consider subscribing if you feel like what we said and what we talked about provided you some value but until then guys we'll see you on the next one and uh take care everybody peace out

Channel: Swan Bitcoin

Views: 24,448

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Id: ctgP4Dja0Us

Length: 57min 12sec (3432 seconds)

Published: Mon Jul 24 2023