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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Brian Cheung discuss the first Bitcoin Futures ETF set to debut tomorrow, and outlook for cryptocurrencies with Michael Sonnenshein, Grayscale CEO.
JULIE HYMAN: It is a big week for cryptocurrencies. That's as we see the price of Bitcoin pushing up toward its record high, touching 60,000-- and above, for that matter-- and as we anticipate the beginning of trading of a new Bitcoin futures ETF. That's set to happen tomorrow.
To set the stage for all of this and talk about what's new with his company, we are joined by Michael Sonnenshein, Grayscale CEO, which now, as you just told me, has $52 billion in assets under management. So the growth that you guys have seen, Michael, has been incredible. And you guys are growing a little bit further, as well. As we see a lot of new excitement and engagement around the crypto world, you guys are rolling out some new products. And I have to admit, they are tied to crypto products that I had not-- underlying cryptocurrencies that I was not terribly familiar with. So maybe you could just quickly walk us-- walk us through those.
MICHAEL SONNENSHEIN: For sure. Well, Julie, it's great to be back, and thrilled to chat with you this morning. Our announcement today is that the seventh, eighth, and ninth products from Grayscale are set to debut on the public market. So a lot of investors have come to know Grayscale for our Bitcoin trust, our Ethereum trust. We now actually have 15 investment products underpinning the Grayscale family.
And now, we're going to have three more products on the US market. So these are products that are invested in the following protocols. Two of them are focused on privacy. So these are Zcash and Horizen. And the other one is a protocol called Stellar Lumens. So these are the first times that investors are going to have access to these protocols in a security format that they can access right from their brokerage account, alongside the other things that they own.
JULIE HYMAN: So as I mentioned, Michael, this week there's a lot of excitement around potential Bitcoin ETFs. Or not even potential, they've been approved. So it looks like we're finally going to get Bitcoin futures ETFs here in the United States. You guys filed for a spot ETF back in 2017, then withdrew the filing because it was clear that regulators were not going to be open to that. There's a report this morning that you guys are planning to perhaps file again. What can you tell us about it?
MICHAEL SONNENSHEIN: Well, I want to be clear on the verbiage here. So for the Bitcoin futures-based ETFs, there was a statutory 75-day time period that cleared the way for the first of these products to come into the market. And so the media reports are sharing that this product could trade as soon as tomorrow. We at Grayscale, as you said, have been working on a Bitcoin ETF for years, proactively working with regulators and our industry partners.
And so we've been waiting for our regulators to have the comfort they need to allow these products into the market. And now that we believe they have the requisite comfort that they need, it's now time to not only open the door to futures-based Bitcoin products, but also physically backed products. And so we anticipate filing with our exchange partner, the New York Stock Exchange, as soon as we have that demonstrable evidence and these products begin trading in the US market.
BRIAN CHEUNG: Hey, Michael. It's Brian Cheung here. Just to follow up on that, I mean, what does that demonstrable evidence look like to you? Is that having conversations with regulators that, maybe after the first go at these Bitcoin futures ETFs, that there could be signs of wanting to support a spot or, as you describe, physical Bitcoin ETFs, as well? Because we know that you have this Bitcoin trust. We know that you're eager to convert that, when the time is right from a regulatory standpoint, to do so. But just describe to us the delineation between a Bitcoin futures ETF and a spot ETF, and what you're looking for to get that bridge from one to the other.
MICHAEL SONNENSHEIN: Well, I think this is an important distinction for investors, Brian. When you think about a futures product, the exposure is to the actual futures contracts themselves, not the underlying commodity. And so there's been a lot of reports on what the potential cost could be to an investor that goes into rolling contracts from one calendar quarter to the next. On the contrary, a physically backed product will be solely and passively invested in the underlying commodity itself, in which case those frictions don't exist.
So you've seen this play out in things like gold, where most of the AUM for gold ETFs are in physically backed products because gold is much easier to custody, whereas something like oil is not as easy to custody, in which case the futures product for oil has really gotten all of the AUM. And so as we think about what investors want, clearly the success of GBTC has really shown that investors are looking for that exposure in a physically backed or spot-based product. And we anticipate working, again, proactively with the SEC to make that conversion to an ETF and uplisting to the New York Stock Exchange.
BRIAN SOZZI: Michael, we're so focused on Bitcoin futures ETFs, potentially Bitcoin ETFs. Bitcoin, Bitcoin, Bitcoin. I mean, to that end, do you think all this interest in this and potential just flow of assets into these various ETFs will lead to a shakeout in other parts of the crypto market? I mean, there are-- and I don't have to tell you this, there are really a lot of cryptos that are, I don't know, borderline on joke-like.
MICHAEL SONNENSHEIN: Well, the asset class is here to stay, and investors have a general appreciation of that. Investing in crypto is now something thematic, right? Investors have historically gained exposure to energy or health care or tech. Now crypto occupies a sleeve of that portfolio. So amongst that, as a theme for investors, there's never been a stronger desire to diversify. So when you see the ability of investors to now access Zcash and Horizen and Stellar Lumens and some of the newer products that we're bringing to the public market, now you're seeing investors having additional options to broaden and diversify that exposure. And that's a trend that we see no signs of slowing down.
BRIAN CHEUNG: Hey Michael, so I guess just to kind of push back here, what the SEC has said every time they've rejected a Bitcoin ETF has been they're worried about the safety of Bitcoin, they're worried about anti-money laundering, things like that. I mean, what do you think is changing here? Is anything changing here, as they kind of round the bend and say, OK, we're all right with the Bitcoin futures ETF that's pegged to these contracts that are on the CME, but it seems like underlying those-- those underlying concerns about the Bitcoin physical, Bitcoin spot itself still seem to be there, based off of the commentary from Gary Gensler. So how optimistic are you that you will get to a day where they will ultimately allow those types of products to be out there?
MICHAEL SONNENSHEIN: Well, I'd actually summarize a lot of the concerns that the SEC has had about Bitcoin over the years as really being more a function of pricing, right? They've expressed concerns about manipulation in the underlying Bitcoin market price, whether or not there are significant regulated markets that they can surveil, right? These are the types of protections and tools that the SEC, as a regulator, is typically used to seeing.
Now if, in fact, the futures satisfy those concerns for the SEC, well, it's important to take a step back and realize that the futures are, in fact, a derivative of the spot market. And so by allowing or clearing the way for futures-based products, you're also saying that the underlying spot market is something that you're comfortable, as well. And so we do see investors wanting that optionality to have both physical products and futures products at their disposal when they think about how to get exposure to Bitcoin.
JULIE HYMAN: Michael, in the meantime, while you are waiting and having those discussions, do you expect some of the demand to be pulled from GBTC into the likes of the futures ETFs?
MICHAEL SONNENSHEIN: Well, Julie, I think that investors have been very patient with GBTC over the years. We've seen GBTC not only be held directly by investors, but it's also made its way into ETFs looking for digital asset or Bitcoin exposure, into mutual funds, retirement accounts. And GBTC investors now span all 50 states, as well as investors overseas that also are looking for that same type of exposure. And so really, in making this filing with the NYSE, we're advocating on behalf of investors to hopefully be able to give them what they want and what they've been patiently waiting for. And so now, it's really just a question of working with regulators to make sure that all things go through smoothly.
JULIE HYMAN: Yeah. Well clearly, as we talked about at the top, the demand is there, considering the growth that you guys have seen in underlying assets. Michael, it's always good to catch up with you. Obviously, we'll be-- keep in touch about the further progress of all of this. Michael Sonnenshein is Grayscale CEO. Thank you.