Debate Where Should Institutional Capital Flow DATs, ETPs, VC, or Onchain DAS London 2025 Day
Summary
Market Overview: The digital asset class has grown to a $4 trillion market, yet over 75% of institutions have not invested, highlighting a significant opportunity for institutional capital.
Investment Strategies: There's a debate between passive and active investment strategies in digital assets, with passive strategies often outperforming active ones over the long term, especially in equity markets.
Institutional Preferences: Institutions often start with Bitcoin or Ethereum ETPs for broad market exposure, with a trend towards increasing allocations from 1% to 3-5% of portfolios.
Active Management Opportunities: Active managers see digital assets as an emerging market with opportunities for alpha, focusing on thematic investments and token picking beyond major assets like BTC and ETH.
Regulatory Developments: The lack of regulatory clarity has limited onchain investments, but recent regulatory progress is expected to accelerate the launch of more ETPs and increase institutional participation.
Digital Asset Treasuries (DATs): DATs are blurring the lines between passive and active management, offering a way for institutions to engage with DeFi and staking strategies indirectly.
Future Trends: The evolution towards onchain asset management is seen as a major future trend, with the potential for tokenizing real-world assets and increasing transparency through onchain vaults.
Market Resilience: Recent market volatility underscores the importance of diversification and understanding market structures, with a focus on blue-chip assets like Bitcoin and Ethereum for stability.
Transcript
Hello everyone and welcome to our institutional debate panel. Um to set the stage and maybe to state the obvious, we are now a $4 trillion asset class. Um this asset class can't be ignored. Um yet more than 75% of institutions around the world have not yet invested in digital assets. So I think this is a debate that's happening in every single investment committee around the world right now. And what they're asking is not if they should get in, but it's really how they should um invest in this asset class. And we have so many options, right? We can go passive, we can go active, we can invest in venture or liquid. We can invest onchain and we can invest in traditional, you know, traditional ETFs, ETPs. And that's exactly the topic of our debate. So without further ado, I'd love to introduce our panel. Um VC um Ryan and uh please introduce yourselves and and tell us a little about who you are. Absolutely. Uh excited to be here and good to see everyone. Uh I'm Vivic Ramen uh co-founder and CEO of Etherealize. Uh Etherealize is uh a bridge between the Ethereum ecosystem and the traditional financial world. Uh before starting Etherealize, I worked on Wall Street for 11 years. uh Morgan Stanley, UBS, Deutsche Bank, Nomera. So, I know what the old world looks like, the traditional asset manager and sellside world looks like. I know what the new world looks like um with Ethereum technology and we're working to bring both of these together and really excited to be here today. Hi, I'm uh Lewis. Uh I'm a PM at RE7 Capsule. We run 1.5 billion across different strateies including uh directional liquid alpha uh yield VC and we also work with foundations top tier L1's and L2s for um their ecosystem buildout. Uh and I'm Ryan Rasmmanson. I'm the head of research at Bitwise asset management. We are a crypto asset manager that has exchange traded funds, private funds, hedge fund, uh staking solutions. We work largely with institutional investors, so RAAS, family offices, financial adviserss in the states and over here. So excited to be here and and have this conversation today. Yeah. And hello again everyone. My name is Chris Solars. I'm the CIO of Amitus Capital Digital Assets. Um I run a crypto fund of funds investing in both uh liquid strategies and venture strategies and we are anchored by a family office that's based here in London. Um I'm based in New York. Um, but I would love to start maybe with with you, Ryan, because Bitwise is a huge player in the passive space. Um, and perhaps this is somewhat of an easy on-ramp for institutions coming off zero. They understand ETPs. They understand ETFs. They like not paying a management uh a performance fee. It's kind of an easy on-ramp. Can you tell us um you know your perspective there? Yes. Well, that that's the sale uh that we make and and we find that resonates with institutional investors. I mean, most investors and most asset classes take the passive route. And so, there's a world here where it does make sense, of course, to go out on the risk curve and try to outperform the benchmark and take the active side of the equation. But I think one thing that, you know, we know very well and and I know that many of our investors know very well is that passive tends to outperform active uh over the long term. There's there's a a stat that we often talk about with our clients around the uh the out performance that you see passive strategies taken. It's something like 97% of passive strategy or passive strategies outperform active strategies in equity markets over the long term. So really what we have seen in in our seat at Bitwise is that institutional investors who are trying to get off zero, they want to just have broad-based exposure or simple exposure to the market and they'd rather own the market than pick winners and losers. So, we're seeing that happen often with the Bitcoin ETPs. We think index ETSs are going to continue to grow as a portion of what investors, especially professional investors, allocate to. And I and I do think that's because you you want to just own the market, especially when it's just a small part of your portfolio, which for many financial adviserss and RAS and institutional investors, it is a small part of their portfolio. It's a small part of what they think about every day. And and Ryan, can you elaborate like what is the market? Like, are people going into Bitcoin? Are they going into the Bitwise 10 and kind of getting the top 10? Like what is the what are they going into when they go into passive? Uh what are the what what styles and what are the biggest buckets? Yeah, it's that's a good question. So what we've seen historically is that most investors start with Bitcoin. They're getting off zero. They're making a small allocation of Bitcoin and a few years ago that allocation was up to 1% and that was it. Like more than 1% scared investors. Today what we're seeing is that 3% or 5% is typically the starting point. Most of them start with Bitcoin, but some are starting with Ethereum because now you have Bitcoin and Ethereum ETPs. And I think there are those that start with alternatives like crypto equities is really popular in the US for institutional investors because that's a format and a vehicle they're used to. They want to buy a diversified index fund of publicly traded companies. They do that in every other asset class. Why not do that in crypto? So, we run index funds on publicly traded crypto companies uh that we see a lot of people start with if they're not comfortable starting with individual crypto assets. And I think crypto index funds of crypto assets are next once the SEC approves those to launch. Thank you. Well, I'm partial to this this um this side like passive makes a lot of sense, but Lewis, let's get the debate heated here because you are an active manager. You are trying to outperform a benchmark and add alpha, right? All right. Can you give us the other side of of the passive active debate? Yeah, there's definitely a role for both and I definitely acknowledge that. Um I remember when I started investing it was just really about how do I get the sort of broad exposure. So it does resonate. I think the way that I've always thought about crypto especially over the last eight years is it's really just an emerging market and with that comes opportunity. So I remember one of my old bosses um that were living in Russia in the late 90s uh and they were having a great time trying to make you know heads of tales of that market and did phenomenally well but very much in an active way. So the way that I view this is almost like a a period of time that could run for years, decades, who knows where we have the ability to connect with LPs where they want um managers to outperform that benchmark and it's just really a subset of different investors in terms of what they're looking for. Um, but it really depends on your risk tolerance and appetite as well. So, we've spoken to a lot of family officers that actually they're ready or not ready to go into delta neutral strategies, especially the active ones. Um, but that conversation has really changed over the last I would say two years uh because of that regulatory development. And what do you see as the opportunity set on the token picking side? What does it look like today? Why is there such a big opportunity there? um because there's so much the market structure as you are aware of in the last few days um it's challenging but also brings so much opportunity uh so for us we really look outside of you know BTC ETH um a lot of the investors that come to us they say look we actually either define our balance sheet in sole terms we need to outperform soul so what can you do uh to generate those returns so we really look uh down the risk continuum but really in a thematic way to try and find those winners where we find the structural reasons to invest in those tokens. And can you talk a little about your investment thesis? Like I've noticed we all as trady investors, we want to find value. We want to find like a DCF and cash flows and revenue. And even though those tokens are much more valuable today, crypto has always been so narrative driven, right? So it's the balance between value and growth. It's always the conundrum of of an active manager like you. So how do you think about that? like how do you pick your your portfolio of tokens? It's fair to say a few years ago we really were uh predominantly top down where we said look we've got a worldview on perpetuals um very salient topic now um but we wanted to find the best project in that sector. It's fair to say since then what we're wanting to do is more bottom up to say actually from a project to project basis uh who's generating revenue is there any buybacks and I'm not the only fund in saying that we're all looking for the ones where there's structural reasons to actually have a token so we sort of avoid the momemetic side of things uh for the most part and so we're looking cross- sector but really in a bottomup way on a name byame basis and so uh where you have fundamental traction does that translate into a reason why the performance of the token could do Well, based on different scenario analysis. So, you're starting with kind of a thematic view and then you pick the expression of those tokens from the bottoms up. That's correct. Can can you just give us a little glimpse of what uh is exciting to you thematically for the next 3 6 12 months from the top down? Yeah, I'll give maybe more obvious one and less obvious one. So, more obvious one um again could be the different types of lending protocols. So, we're very well connected with you know the Ave and the Oiler teams. Um they've seen phenomenal growth. there really at the end of the day could also be a proxy stable coin play. So out of all of the matters that we've seen over the last, you know, couple of days, the one thing that's broken new records from a KPI standpoint is stable coin supplies. We just breached 300 billion. Uh almost like it didn't even register uh on the chart. Um the less obvious one is really bringing IP value on chain. So we're very close to let's say the Pudgy ecosystem uh where there's a lot of um movement and developments to try and get that value um to again certain stakeholders to try and maximize that impact. But really it's not just web 3, it's how do we bridge web two to web 3. And I think that IP value um and unlocking that we haven't really seen before. And VC where do you stand on this on the spectrum passive versus active? I think crypto infrastructure has given us this beautiful opportunity to have every participant choose and so it really will be a mixed bag but how we've seen especially over the last few days of of market turmoil is there is risk to active management and there's things that people crypto infrastructure is still pretty new and pretty um uh it's it's still developing risk framework still developing more userfriendly uh interfaces so with that my view has always been I I grew up on sellside desks on on Wall Street. So, they're active investors. They're they pick bond by bond or or or asset by asset and construct portfolios. I think that institutions will actually be a lot more active in their allocations um across the crypto space. I think that retail probably should start passive because passive for them, someone else can do the management, someone else can do um navigate the different intricacies of DeFi, the different protocols. Um, and that's where there's a whole spectrum of possibility. Ethereum is interesting because Ethereum has a whole DeFi ecosystem. So, the passive way to invest in Ethereum is to buy ETH um, and stake ETH. But the active way is to either invest, put your ETH in to work in protocols yourself, or to use things like digital asset treasuries, which I know we'll talk about, which will invest on your behalf. But basically, the entire spectrum of possibilities um, is is doable. So again, I think crypto is a unique thing where you can actually do active and passive seamlessly. And you know, um, what I think is so interesting about where we are today in the cycle is that if you take all of the venture funds, all of the liquid market neutral, all of the liquid directional token funds and add up all the inflows, you get somewhere around a hundred billion dollars, which as of last week is how much iBit the ETF had in inflows. So you think about like this little drop in the bucket of active management compared to the $4 trillion asset class because remember hedge funds are a $5 trillion asset class in aggregate. Um but relatively digital asset strategies uh active strategies are such are so much smaller which means there's more alpha as well which is exciting and kind of brings me to my favorite point is like we have this meeting of you know it's like the ven diagram of opportunity for this secular story of crypto growing right all the use cases in the product market fit for bitcoin and stable coins and everything else in addition to the active management that's very juicy right So like I kind of love where we are in this almost golden age of uh Bitcoin or sorry of beta plus alpha because you kind of get the best of both worlds there. Um, and by the way, I think the the Bitcoin beta, which almost to me represents the entire ecosystem, is like such a powerful train that I think it makes sense to start with a Bitcoin allocation and then layer on, you know, active management as it feels appropriate because we see in the traditional side most money managers have their long only exposure and they have hedge funds in their different buckets and they're complimentary. Um so maybe we can move on um to I think what's interesting now about this state in time is that year to date the big flows have come from the traditional side into digital asset treasuries in through ETFs rather than the money coming onchain it's come indirectly into crypto via traditional equity and and fixed fixed income routes and that's quite unique um I would have expected it would be the other way in fact that um what we're building towards is an onchain economy, but maybe we have to take one step backward to go one step forward here. Um, but VC, what do you think? I know that you've talked a lot about digital asset treasuries and and have have looked into that. Like, where do you see this going? I think part of it has been a lack of regulatory clarity and infrastructure readiness, both of which are being very, very quickly addressed. I mean, we're speedrunning the adoption curve very very quickly and it's really inspiring. But it is a little a little ironic for for people to understand the power of DeFi. The best way to do that is to look at how a digital asset treasury can deploy assets across DeFi or to learn about staking. You actually deployed through a passive ETF that's going to I mean the ET ETFs will get staking very very soon if not already. So, so that's how everyone can learn about what the possibilities are and once we start seeing earnings reports from these treasury companies saying here's how we generate a yield here and then they'll highlight things like a they'll highlight things like unis swap they'll highlight things like lping that's what'll spark the curiosity and then people will go to the do-it-yourself thing I think there's been such an education gap that most people don't know what unis swap or a is they don't know how to use defi so these bellweathers like like the treasure companies and and the the staked ETFs show the world what's possible and then people will start to trickle their own capital and say why don't we try and do this ourselves why don't we try and generate our own alpha but yeah it is it's it's ironic that had to start with public companies showing what's possible on chain rather than capital going natively on chain but it's all going to converge to the same thing and I'm I'm just excited that now all of it's allowed all of it's possible and the institutions are actually doing it and in general mc what is your view on digital asset treasuries like so much speculation has gone in like are these things of financial engineering? Do they have real staying value? Do we need 200 Bitcoin DATs around the world? So, it's a good question. I mean, it's it's very easy for people to say that there's a bubble and there's too many of these. But if you look, there's thousands of asset managers across asset classes across the across the US. Those are those can range from hedge funds to BDC's to private companies to regulated asset managers to to ETFs. I mean that's proliferated across the traditional financial sector. There is no reason why we shouldn't have a plethora of different kinds of investment vehicles across the digital asset sector. Um the ETFs are are the most obvious and probably going to be the biggest ones, but there are going to be a slice of a slice of capital that can do not riskier but more more interesting things and actually utilize parts of the DeFi economy that traditional ETFs can't do. And so each to me each treasury company can have its own identity especially when you're in a world like Ethereum where there's a lot you could do with the asset and the ecosystem. So some treasury companies can work with layer 2s. Um some can do focus on restaking, some can focus on uh defy integrations like a some can do all of them. So I actually think there's a lot of different room. Um there's obviously a power law. Uh the biggest ones will continue to get bigger. The cool part is you don't need to be big to generate yield in different in different sources. And so I I see a very very robust ecosystem of treasury companies and I think they're here to stay. How do you think the ETH treasury debts do after we get full regulatory clarity from the SEC to allow proof of stake staking for Ethereum? Um, I think that's one of the big benefits of ETH right now, ETH debts, is that they get to get the the internal uh staking yield and kind of the external uh yield as well. But now that ETFs will soon be able to do that as well, does that change the calculus? No, I think it's such a positive sum. There's so much capital that has to come into the space that both can win. Um, I don't think it's one or the other. I do think that the ETH ETFs won't be able to stake 100% of their balance. Um, I think there's going to have to be some sort of buffer there, which is which is completely fine and that's how it should be for a ve a passive a passive strategy. I think the treasury companies will be able to not only stake 100%, but they'll also be able to restake and then take that rest ETH and then lend and borrow against it and use in DeFi. So, you'll be able to do different things that come with higher risk, but also come with potential higher um higher upside as well. Ryan, yeah, I I think that's right. When you if you think about ETH as the benchmark in this scenario, then there is an argument to be said that there will be funds or digital asset treasury companies that try to outperform the benchmark just like in traditional equities. You have a colleague uh actually was saying this to me to me recently, but you have the S&P 500 and then you have variants of it that make slight changes that try to outperform the S&P 500. And capital flows to both of those things. And I think capital will flow to DATs. I think capital will flow to Ethereum ETPs. I think it'll flow on chain and people will stake themselves and it really depends on, you know, if you believe the manager is going to outperform the benchmark, then you'll allocate to them. And I do think that there's interesting things that can be done with DATs that you just simply can't do with ETPs. So, when it comes to staking, for instance, the you can't yet stake Ethereum on ETPs in the US. You can here in Europe, which is wonderful. And once you can stake, then sure, we'll stake the assets, but you can't do liquid restaking. you can't do a number of other activities in DeFi with ETFs like you can with digital asset treasury companies. So I think it just comes down to a little bit of you know choose whichever vehicle that you want to allocate to. If you're happy with just the benchmark with a little bit of staking yield then I think you'll buy an ETP and there's a small fee associated with that but you know exactly what you're getting. If you want to try to outperform the benchmark perhaps you go with a digital asset treasury company or you'll go with an active fund that is participating on chain more directly. And some of it comes down to access for what it's worth. Some of it's just the reason why we've seen capital flow through ETPs and through DATs instead of directly on chain as you mentioned is an access question and most of the financial advisors that we speak to and the RAS that we speak to and the major warehouses still can't fully access Bitcoin or Ethereum ETFs which surprises a lot of people because the Bitcoin ETFs launched in January of last year but only one of the the four major warehouses in the US have approved access to Bitcoin ETFs for their wealth managers which means 75% of those big before can't actually buy the ETFs. So, they then can buy DATs. Uh they can buy Bitcoin Dats, Ethereum DATs, other DATs because those those just look like other equities to them. So, I think it's an access thing and I think it's a just do you want to underwrite individual companies to outperform the benchmark or do you want to just own the benchmark in a cheap easy to access vehicle that you're familiar with? Louis, just really quickly going back to the first bit of the uh the panel, I actually think DATs in a way are kind of blurring the lines between passive and active because obviously there's an asset management piece to it as well. So, ironically, I kind of want to see more DATs because, you know, they're going to be using the underlying DeFi protocols. That's great because hopefully I've got exposure to them, but then also they may need asset managers and look, we've been doing it for nearly 5 years on chain. Um, and so it's really across Ethereum. We're now hearing it on the Salana side as well where it really needs a bit of a DeFi boost. So really in a way like what's good for that I kind of would argue it's kind of good for me on the active side because they're almost crossing that bridge from passive to active. Can we talk a little about I guess VC your your future envisions um institutions going onchain directly? Um can we talk about the evolution there? Like what do you think is the the the playbook for that eventually happening? because right now we're going the opposite way, right? We're going through these old um uh inefficient systems and I just think rather than uh putting a putting Bitcoin into a DAT, we need to tokenize Nvidia and and start truly trading equities, right? But we're going the opposite way. But to get there, you know, how do you see like what do you see the the road map over the next five 10 years looks like? I think it's interesting because we're actually going both ways uh at the same time which is again and it's just it's inspiring to see how much innovation is happening. All we needed was a regulatory regime change and then the willingness of every institution to actually figure out how to come up with a crypto strategy just just exploded. So it's been it's been incredible to see. I think that what we've seen is cryptonative strategies and assets like staking like using ETH getting exposure to to to Bitcoin for example that has gone through public markets rappers. So that's that's what goes into DATs and that's what gives retail and others exposure to to DAT but the opposite's also happening too. People are also in parallel saying let's bring the real world onto public smart contracts block blockchains like Ethereum. they are tokenizing equities, they are tokenizing um fixed income instruments and and real estate assets and I mean as much of the world as possible and that actually requires people to be more cryptonative because you can't take a real world asset tokenize it and then wrap it back in a public equity um than you're then you're going right where you started. So um to for people to use real world assets on chain they actually have to interact with the actual blockchain infrastructure and that's what we're focused on because that's where the real unlock comes in. Um, tokenizing Nvidia gives access globally to one of the most important stocks in the in the entire world. It also allows it to trade 247, also allows it to plug into all these different DeFi applications. That's functionality that the traditional finance system does today anyway. You can still borrow against stock, but you have to go through 17 intermediaries and it it's it's hard and it's inefficient. Um, if you can plug into a for example, that's that's going to unlock a lot more. So I think it's going both ways, but the institutions are going to figure out that they can actually cut a lot of their costs and unlock a lot more efficiencies if they use onchain protocols for real real world assets at the same time to spread the the universality and the upside from Bitcoin and ETH and others, putting those into public markets, vehicles, ETFs, and treasuries. Um, we're going that way, too. You know, I I love your point about kind of winning on both sides. One of the the biggest developments I see in the onchain side of asset management is the rise of of vaults this year, right? We see billions and billions going in. I don't see billions of dollars going into like classic Cayman structure GPL funds just yet. I think that's coming. But we do see the ease of onchain money flowing into vaults. And you know, I think of them almost as an uh you know, the onchain hedge fund. You get full transparency. You have daily liquidity. You can see the history how they've made money. You can see in real time what the yield is. This is transparency that I don't get as an investor into most hedge funds all the time. So I love this development and I I think it is the future and I know Lewis for example at RE7 you guys have done quite a bit in this already. Like that's the other side of your business but can you comment a little bit on that? Uh yeah so it's a part of the firm that's grown to basically a yard now. Um, one of the reasons why it's grown so much was well, one of the the opportunity, but really allowed us to tap into capital in a much easier way, uh, where you don't have to find, you know, type of investors that are able to pull in, you know, a fund structure or a master fund. Um, so when we looked at, you know, this brainstorming idea around vault, we kind of thought of it as like this new frontier of of DeFi, that customizability, that flexibility, but also that transparency. And what's amazing and it's definitely a learning for me over the years is with vaults you really have to it's all a relationship game at the end of the day and how many stakeholders that you have to bring together. Um being one of the earlier players to do it has really helped because you have the relationships with the oracle providers, you got the relationships with the lending protocols dot dot dot. So what a great example that we had earlier this year, really fortunate to work with the world liberty guys uh to help distribute USD1. Uh and so the stakeholder setup there was you had the Binance Smart Chain and they had the incentive to grow their ecosystem in TBL. Uh you had World Liberty that had I think 90% of their supply and maybe the top 10 wallets. So they had a distribution problem. Uh but when it comes to incentives, we're realizing quickly that everybody wants to be part of that vault infrastructure. So with the Oracle providers, it's really about how do we better our infrastructure? How do we supplement the incentives even higher where we're not taking any incremental risk uh but actually they're just offering more of their native tokens. So we do that calculus but it's very much you know when I was in Singapore I was thinking I was going in for many conversations around liquid alpha but actually would say 50% turned into oh we're actually launching vaults. Is there something that you can do there? It was eye opening. um people that again standard charter and all these guys that you wouldn't think we would even think about doing it. Um but that's amazing because it started at the genesis of a brainstorming idea about a year ago, year and a half ago. Um but now it's grown to one of the biggest parts of the business. By the way, Lewis, I love how casually you dropped a billion dollars as a yard. I think when I grow up, I want to be I want to be that cool and nonchalant. Um very cool. Um Ryan, Ryan, can we talk please about where we are in the um SEC regulatory adoption cycle? We've talked a little about the upcoming We had the Clarity Act first of all in um in in July and now we have the the next uh broader uh uh act coming up to regulate the rest of of everything in in digital assets. I think this will really bring in the next wave of money and we already see over 100 ETFs lined up, right? Do you have any insight to share there about what to expect, where we see the flows, etc. Yeah. So, the past 12 months really in the regulatory and legislative space in the US has been phenomenal. It's been just the most incredible amount of traction and activity and a long-term tailwind as one could possibly imagine. And we've been at Bitwise just working day and night to file for as many ETPs as we can to bring these products to market to think about how are investors going to want to gain exposure to stable coins as they grow from 300 billion to three trillion and they want to express their interest in that allocation. Does a publicly traded equities ETP that has companies like Circle or Coinbase make sense or do you want to provide some kind of thematic stable coin crypto asset ETP something like that? All of those things have been happening and then it went on pause when the government shut down. So, we've had a bit had a bit of this this kind of sprinting and then stopping. But what we believe is going to happen is once the government shuts opens back up, there's just going to be an onslaught of ETPs launched and there's going to be something like 25 of the largest crypto assets will meet the generic listing standards that the SEC rolled out, which means that it's a much easier path to listing as an ETP in the US than historically it's been. you won't have this 240day waiting period that you've had for the Bitcoin ETPs and for the Ethereum ETPs. So, we're really excited about that. I think investors will all of a sudden have this big menu that they can choose from. Now, most of the investors that we speak to, these financial adviserss and RAS don't know that much about crypto or they're early on in their journey and so they're excited about Bitcoin. They've maybe heard about Ethereum because they hear about stable coins and tokenization. Maybe they've heard about Salana. But once you get past those assets, we really don't get a lot of questions. maybe XRP, maybe the Cardano question every once in a while. So, I think it's going to take time before flows go into those assets certainly. I do think there will be more crypto enthusiasts investors who do want to go out down the risk curve and they want to choose the lower cap assets. But I also think what's going to happen is you're going to see more thematic and more index funds come to market which is another element of these generic listing standards that's going to be a huge unlock for asset managers like us at bitwise is we can now offer more interesting and and compelling and kind of um you know own the market with a basket of assets rather than having to bolt on your own kind of portfolio. So I think that will be where a lot of capital flows. Certainly, if you think about the ETP market today, it's like a 20 trillion market. It's a huge market. And right now, Bitcoin ETFs and Ethereum ETFs are like 1% of that market. And I think that will grow to 10% or more of the ETP market once we have more ETPs, once we have index ETPs and once we have much more options for investors. And now that we have that regulatory clarity and we have the the the lack of an attack on the industry from regulators and from the administration, investors are sighing a bit of relief. They feel like they can start allocating. They feel like they can go tell their clients they own crypto. And I think that's also a huge a huge unlock. I think a lot of people are actually missing how big of a catalyst that is and how many years that's going to push continue pushing the industry forward. Just really quickly, it's interesting thinking about the reverse of that. So, I just had a notification saying uh you know the S&P putting sort of stable coin data or risk ratings on chain through chain link. Point being is that obviously there's a lot of um sort of real world data that could be plugged into web 3. So, one of the things from a vault infrastructure standpoint that we're exploring is um indices, onchain indices and kind of reviving that old chestnut that we saw a couple years ago. Um, but you could conceivably do it over anything. So, we've been experimenting back in the day with AI agents. Was there any appetite there? But, you know, there's a huge design space. Um, and if we're able to do it in an efficient way and you know, collapse the cost of of managing it in a vault setup, then that's pretty intriguing. So it's almost like the reverse of what you guys are doing and seeing what the opportunities would be from that. Yeah. you know, um Ryan, you mentioned a few times like the benchmark and I think what's underlying all of this is that right now we're uh a lot of the service providers um and index providers are almost in a war to figure out who is going to be the S&P 500 of crypto because once you identify what it is whether it's an equal weighted top 10 equal weighted 100 asset weighted whenever we find this out and people really start to benchmark that we get the passive flows and we get everything that's kind of indexed to that and you know and look no further remember um Coinbase was um introduced into the S&P 500 in May um and then by June all the catch-up that had to happen it was the best performing single stock out of 500 it was up like 40 or 50% and that's exactly what we will see but right now I see you know so my my role dayto day is to cover um crypto managers and I see almost every other manager has a different benchmark and of course the game is for them to um produce a benchmark that they that they look better against, that they're producing higher returns, higher alpha against. But um you know, it's it'll be interesting to see how this shakes out because eventually eventually we will come to some consensus that this is the you know, this is the S&P 500 of crypto. Maybe it will simply be Bitcoin itself or or maybe it will be some kind of index of all of it. But really, it's all over the place. And and that's why there's so many opportunities. There's no standardization yet. Yeah, I think we're very early on in in the journey to be completely honest. I think Bitcoin is broadly looked at by the investors that we speak to as the market or as the benchmark. Of course, at Bitwise, we're biased that we believe the Bitwise 10 large cap crypto index will be the S&P 500 of crypto. So, of course, I'm a little biased to that. But what we've found is that investors like the idea of, hey, I can just buy this one fund. I can own 80% of the market and I know that it's managed by people that spend 100% of their time thinking about the crypto market, right? Because most of the institutional investors who are allocating to crypto 1 to 3 to 5% are spending even less of their time than that on the crypto market. They're thinking about bonds and equities and tariffs and trade wars and fiat debates, like all of these different things. And so what they want is just one-stop shop. And that could come through things like DATs or or like for instance we have an index of DATs. So if they want exposure to that theme or they want exposure to a bunch of companies that are out trying to outperform the index and they can get that exposure through an index fund or they can go through a vault for instance and kind of try to outperform the benchmark. But I think the benchmark is Bitcoin. I think like I said before indexing is going to be a huge a huge part of that and ultimately the benchmark will transition to something like the Bitwise 10 large cap crypto index. Yeah, I hope so for for your sake. Um, one cute analogy I've heard which I I'm quite partial to is that bench bit Bitcoin is the benchmark for almost the equity like benchmark and the ETH staking yield is like the risk-free rate. Like if you can't beat 3%. Because remember like if you invest in the risk-free rate you don't get appreciation but with investing in Ethereum you get the hope hopefully price appreciation and your risk-free rate you kind of win in two ways. So, like that's exactly what you want to own is the risk-free rate with asymmetric upside. Um, but I kind of like that. That's kind of like the the cost of capital is you should at least be getting that kind of risk-free free free rate of return. Um, we have a few minutes left. Um, I think this weekend was such a shock for the whole in fact it was a shock in one sense, but it wasn't. We knew that we would have a big liquidity crisis coming someday. We didn't know it was going to be this weekend per se. Um, but I think we were all kind of expecting that eventually this is what crypto does. It has crises, it recovers, it grows stronger, and it gets better. Um, but main any any takeaways from any of you guys about how we how we performed, how the industry performed, how where we go from here? I'll go first. I mean, I was fortunate to look at the whole developments with a pretty level head because we don't take leverage in the fund, thank God. Um, takeaways and we're talking about it backstage actually very briefly. Um, for me it's really understanding how things work, especially on the per side. Um, and hearing of large entities that have positions on, let's say, Hyperlquid and not realizing that they could be liquidated even if they're on the right side of the market sometimes on the bets. Um, I think it's just a bit of a wakeup call to really understand that there's no system that is perfect. Educate yourself in how it it works. Um, that's definitely the the highest level takeaway. And I think from a market structure standpoint, you know, we're still pretty constructive overall. I think market right now in the short term is trying to find its footing. So there's a a bit of a recalibration period I would say right now. Um but from a macro standpoint nothing's changed despite the sort of liquidation event that we did see. So I think for us zoomed out um we still think a lot of these kind of fractalss have been respected so far. Um but we're really going to be taking it week by week, day by day. Do we think this was a flash crash or the beginning of something more uh long term? I'll jump in. I I think that this past weekend it's it's fortuitous timing for this panel because it actually captures everything we were talking about. It's the first active versus passive. The people that were passively just holding spot, especially the the index type crypto assets, Bitcoin and ETH, they didn't really sell off that much. I mean, it really honestly wasn't that noticeable um if you're just passively holding spot. So, it shows that people that start to mess around in more active strategies with 100x leverage in tokens that don't really have that much liquidity or or honestly are have an inflated market cap. Those are the ones that got absolutely destroyed. And that's where um do-it-yourself active may be a little bit tougher and maybe this the call to action is let's concentrate on a few blue chips and um like like Bitcoin and ETH and then use a much smaller portfolio size for alts. So, that was one takeaway. Does it happen again? We flushed out a lot of leverage. So I mean it was almost this felt more like a flash crash that we bounced back from than a structural issue. Um and the structural issues were exchanges were very quickly um uh identified and then we'll get past them. But I think I think we're going to resume our our uptrend very shortly. Yeah. To be honest, for me the reminder um was the power and importance of diversification um in your portfolio. Like not just from from strategy but also counterparty, right? Like which exchange are you on? Which instruments are you trading? There was so much going on and you know over these last few years I've been pitched by so many of these different funds and different trading different SMA strategies. And to see 1.6 6 million uh accounts um be delivered automatically was such a shock. Like some of these had pitched me how great their risk management were and I'm finding out where all the bodies are buried, how many of them are worth zero. Like gone from 100 cents on the dollar all the way to zero and you can't recover from zero. Um so for me having this like diversified approach really uh is just was just reinforced u by this crisis we had this weekend. Um and I think we are basically out of time. I want to thank my panelists and thank you all.
Debate Where Should Institutional Capital Flow DATs, ETPs, VC, or Onchain DAS London 2025 Day
Summary
Transcript
Hello everyone and welcome to our institutional debate panel. Um to set the stage and maybe to state the obvious, we are now a $4 trillion asset class. Um this asset class can't be ignored. Um yet more than 75% of institutions around the world have not yet invested in digital assets. So I think this is a debate that's happening in every single investment committee around the world right now. And what they're asking is not if they should get in, but it's really how they should um invest in this asset class. And we have so many options, right? We can go passive, we can go active, we can invest in venture or liquid. We can invest onchain and we can invest in traditional, you know, traditional ETFs, ETPs. And that's exactly the topic of our debate. So without further ado, I'd love to introduce our panel. Um VC um Ryan and uh please introduce yourselves and and tell us a little about who you are. Absolutely. Uh excited to be here and good to see everyone. Uh I'm Vivic Ramen uh co-founder and CEO of Etherealize. Uh Etherealize is uh a bridge between the Ethereum ecosystem and the traditional financial world. Uh before starting Etherealize, I worked on Wall Street for 11 years. uh Morgan Stanley, UBS, Deutsche Bank, Nomera. So, I know what the old world looks like, the traditional asset manager and sellside world looks like. I know what the new world looks like um with Ethereum technology and we're working to bring both of these together and really excited to be here today. Hi, I'm uh Lewis. Uh I'm a PM at RE7 Capsule. We run 1.5 billion across different strateies including uh directional liquid alpha uh yield VC and we also work with foundations top tier L1's and L2s for um their ecosystem buildout. Uh and I'm Ryan Rasmmanson. I'm the head of research at Bitwise asset management. We are a crypto asset manager that has exchange traded funds, private funds, hedge fund, uh staking solutions. We work largely with institutional investors, so RAAS, family offices, financial adviserss in the states and over here. So excited to be here and and have this conversation today. Yeah. And hello again everyone. My name is Chris Solars. I'm the CIO of Amitus Capital Digital Assets. Um I run a crypto fund of funds investing in both uh liquid strategies and venture strategies and we are anchored by a family office that's based here in London. Um I'm based in New York. Um, but I would love to start maybe with with you, Ryan, because Bitwise is a huge player in the passive space. Um, and perhaps this is somewhat of an easy on-ramp for institutions coming off zero. They understand ETPs. They understand ETFs. They like not paying a management uh a performance fee. It's kind of an easy on-ramp. Can you tell us um you know your perspective there? Yes. Well, that that's the sale uh that we make and and we find that resonates with institutional investors. I mean, most investors and most asset classes take the passive route. And so, there's a world here where it does make sense, of course, to go out on the risk curve and try to outperform the benchmark and take the active side of the equation. But I think one thing that, you know, we know very well and and I know that many of our investors know very well is that passive tends to outperform active uh over the long term. There's there's a a stat that we often talk about with our clients around the uh the out performance that you see passive strategies taken. It's something like 97% of passive strategy or passive strategies outperform active strategies in equity markets over the long term. So really what we have seen in in our seat at Bitwise is that institutional investors who are trying to get off zero, they want to just have broad-based exposure or simple exposure to the market and they'd rather own the market than pick winners and losers. So, we're seeing that happen often with the Bitcoin ETPs. We think index ETSs are going to continue to grow as a portion of what investors, especially professional investors, allocate to. And I and I do think that's because you you want to just own the market, especially when it's just a small part of your portfolio, which for many financial adviserss and RAS and institutional investors, it is a small part of their portfolio. It's a small part of what they think about every day. And and Ryan, can you elaborate like what is the market? Like, are people going into Bitcoin? Are they going into the Bitwise 10 and kind of getting the top 10? Like what is the what are they going into when they go into passive? Uh what are the what what styles and what are the biggest buckets? Yeah, it's that's a good question. So what we've seen historically is that most investors start with Bitcoin. They're getting off zero. They're making a small allocation of Bitcoin and a few years ago that allocation was up to 1% and that was it. Like more than 1% scared investors. Today what we're seeing is that 3% or 5% is typically the starting point. Most of them start with Bitcoin, but some are starting with Ethereum because now you have Bitcoin and Ethereum ETPs. And I think there are those that start with alternatives like crypto equities is really popular in the US for institutional investors because that's a format and a vehicle they're used to. They want to buy a diversified index fund of publicly traded companies. They do that in every other asset class. Why not do that in crypto? So, we run index funds on publicly traded crypto companies uh that we see a lot of people start with if they're not comfortable starting with individual crypto assets. And I think crypto index funds of crypto assets are next once the SEC approves those to launch. Thank you. Well, I'm partial to this this um this side like passive makes a lot of sense, but Lewis, let's get the debate heated here because you are an active manager. You are trying to outperform a benchmark and add alpha, right? All right. Can you give us the other side of of the passive active debate? Yeah, there's definitely a role for both and I definitely acknowledge that. Um I remember when I started investing it was just really about how do I get the sort of broad exposure. So it does resonate. I think the way that I've always thought about crypto especially over the last eight years is it's really just an emerging market and with that comes opportunity. So I remember one of my old bosses um that were living in Russia in the late 90s uh and they were having a great time trying to make you know heads of tales of that market and did phenomenally well but very much in an active way. So the way that I view this is almost like a a period of time that could run for years, decades, who knows where we have the ability to connect with LPs where they want um managers to outperform that benchmark and it's just really a subset of different investors in terms of what they're looking for. Um, but it really depends on your risk tolerance and appetite as well. So, we've spoken to a lot of family officers that actually they're ready or not ready to go into delta neutral strategies, especially the active ones. Um, but that conversation has really changed over the last I would say two years uh because of that regulatory development. And what do you see as the opportunity set on the token picking side? What does it look like today? Why is there such a big opportunity there? um because there's so much the market structure as you are aware of in the last few days um it's challenging but also brings so much opportunity uh so for us we really look outside of you know BTC ETH um a lot of the investors that come to us they say look we actually either define our balance sheet in sole terms we need to outperform soul so what can you do uh to generate those returns so we really look uh down the risk continuum but really in a thematic way to try and find those winners where we find the structural reasons to invest in those tokens. And can you talk a little about your investment thesis? Like I've noticed we all as trady investors, we want to find value. We want to find like a DCF and cash flows and revenue. And even though those tokens are much more valuable today, crypto has always been so narrative driven, right? So it's the balance between value and growth. It's always the conundrum of of an active manager like you. So how do you think about that? like how do you pick your your portfolio of tokens? It's fair to say a few years ago we really were uh predominantly top down where we said look we've got a worldview on perpetuals um very salient topic now um but we wanted to find the best project in that sector. It's fair to say since then what we're wanting to do is more bottom up to say actually from a project to project basis uh who's generating revenue is there any buybacks and I'm not the only fund in saying that we're all looking for the ones where there's structural reasons to actually have a token so we sort of avoid the momemetic side of things uh for the most part and so we're looking cross- sector but really in a bottomup way on a name byame basis and so uh where you have fundamental traction does that translate into a reason why the performance of the token could do Well, based on different scenario analysis. So, you're starting with kind of a thematic view and then you pick the expression of those tokens from the bottoms up. That's correct. Can can you just give us a little glimpse of what uh is exciting to you thematically for the next 3 6 12 months from the top down? Yeah, I'll give maybe more obvious one and less obvious one. So, more obvious one um again could be the different types of lending protocols. So, we're very well connected with you know the Ave and the Oiler teams. Um they've seen phenomenal growth. there really at the end of the day could also be a proxy stable coin play. So out of all of the matters that we've seen over the last, you know, couple of days, the one thing that's broken new records from a KPI standpoint is stable coin supplies. We just breached 300 billion. Uh almost like it didn't even register uh on the chart. Um the less obvious one is really bringing IP value on chain. So we're very close to let's say the Pudgy ecosystem uh where there's a lot of um movement and developments to try and get that value um to again certain stakeholders to try and maximize that impact. But really it's not just web 3, it's how do we bridge web two to web 3. And I think that IP value um and unlocking that we haven't really seen before. And VC where do you stand on this on the spectrum passive versus active? I think crypto infrastructure has given us this beautiful opportunity to have every participant choose and so it really will be a mixed bag but how we've seen especially over the last few days of of market turmoil is there is risk to active management and there's things that people crypto infrastructure is still pretty new and pretty um uh it's it's still developing risk framework still developing more userfriendly uh interfaces so with that my view has always been I I grew up on sellside desks on on Wall Street. So, they're active investors. They're they pick bond by bond or or or asset by asset and construct portfolios. I think that institutions will actually be a lot more active in their allocations um across the crypto space. I think that retail probably should start passive because passive for them, someone else can do the management, someone else can do um navigate the different intricacies of DeFi, the different protocols. Um, and that's where there's a whole spectrum of possibility. Ethereum is interesting because Ethereum has a whole DeFi ecosystem. So, the passive way to invest in Ethereum is to buy ETH um, and stake ETH. But the active way is to either invest, put your ETH in to work in protocols yourself, or to use things like digital asset treasuries, which I know we'll talk about, which will invest on your behalf. But basically, the entire spectrum of possibilities um, is is doable. So again, I think crypto is a unique thing where you can actually do active and passive seamlessly. And you know, um, what I think is so interesting about where we are today in the cycle is that if you take all of the venture funds, all of the liquid market neutral, all of the liquid directional token funds and add up all the inflows, you get somewhere around a hundred billion dollars, which as of last week is how much iBit the ETF had in inflows. So you think about like this little drop in the bucket of active management compared to the $4 trillion asset class because remember hedge funds are a $5 trillion asset class in aggregate. Um but relatively digital asset strategies uh active strategies are such are so much smaller which means there's more alpha as well which is exciting and kind of brings me to my favorite point is like we have this meeting of you know it's like the ven diagram of opportunity for this secular story of crypto growing right all the use cases in the product market fit for bitcoin and stable coins and everything else in addition to the active management that's very juicy right So like I kind of love where we are in this almost golden age of uh Bitcoin or sorry of beta plus alpha because you kind of get the best of both worlds there. Um, and by the way, I think the the Bitcoin beta, which almost to me represents the entire ecosystem, is like such a powerful train that I think it makes sense to start with a Bitcoin allocation and then layer on, you know, active management as it feels appropriate because we see in the traditional side most money managers have their long only exposure and they have hedge funds in their different buckets and they're complimentary. Um so maybe we can move on um to I think what's interesting now about this state in time is that year to date the big flows have come from the traditional side into digital asset treasuries in through ETFs rather than the money coming onchain it's come indirectly into crypto via traditional equity and and fixed fixed income routes and that's quite unique um I would have expected it would be the other way in fact that um what we're building towards is an onchain economy, but maybe we have to take one step backward to go one step forward here. Um, but VC, what do you think? I know that you've talked a lot about digital asset treasuries and and have have looked into that. Like, where do you see this going? I think part of it has been a lack of regulatory clarity and infrastructure readiness, both of which are being very, very quickly addressed. I mean, we're speedrunning the adoption curve very very quickly and it's really inspiring. But it is a little a little ironic for for people to understand the power of DeFi. The best way to do that is to look at how a digital asset treasury can deploy assets across DeFi or to learn about staking. You actually deployed through a passive ETF that's going to I mean the ET ETFs will get staking very very soon if not already. So, so that's how everyone can learn about what the possibilities are and once we start seeing earnings reports from these treasury companies saying here's how we generate a yield here and then they'll highlight things like a they'll highlight things like unis swap they'll highlight things like lping that's what'll spark the curiosity and then people will go to the do-it-yourself thing I think there's been such an education gap that most people don't know what unis swap or a is they don't know how to use defi so these bellweathers like like the treasure companies and and the the staked ETFs show the world what's possible and then people will start to trickle their own capital and say why don't we try and do this ourselves why don't we try and generate our own alpha but yeah it is it's it's ironic that had to start with public companies showing what's possible on chain rather than capital going natively on chain but it's all going to converge to the same thing and I'm I'm just excited that now all of it's allowed all of it's possible and the institutions are actually doing it and in general mc what is your view on digital asset treasuries like so much speculation has gone in like are these things of financial engineering? Do they have real staying value? Do we need 200 Bitcoin DATs around the world? So, it's a good question. I mean, it's it's very easy for people to say that there's a bubble and there's too many of these. But if you look, there's thousands of asset managers across asset classes across the across the US. Those are those can range from hedge funds to BDC's to private companies to regulated asset managers to to ETFs. I mean that's proliferated across the traditional financial sector. There is no reason why we shouldn't have a plethora of different kinds of investment vehicles across the digital asset sector. Um the ETFs are are the most obvious and probably going to be the biggest ones, but there are going to be a slice of a slice of capital that can do not riskier but more more interesting things and actually utilize parts of the DeFi economy that traditional ETFs can't do. And so each to me each treasury company can have its own identity especially when you're in a world like Ethereum where there's a lot you could do with the asset and the ecosystem. So some treasury companies can work with layer 2s. Um some can do focus on restaking, some can focus on uh defy integrations like a some can do all of them. So I actually think there's a lot of different room. Um there's obviously a power law. Uh the biggest ones will continue to get bigger. The cool part is you don't need to be big to generate yield in different in different sources. And so I I see a very very robust ecosystem of treasury companies and I think they're here to stay. How do you think the ETH treasury debts do after we get full regulatory clarity from the SEC to allow proof of stake staking for Ethereum? Um, I think that's one of the big benefits of ETH right now, ETH debts, is that they get to get the the internal uh staking yield and kind of the external uh yield as well. But now that ETFs will soon be able to do that as well, does that change the calculus? No, I think it's such a positive sum. There's so much capital that has to come into the space that both can win. Um, I don't think it's one or the other. I do think that the ETH ETFs won't be able to stake 100% of their balance. Um, I think there's going to have to be some sort of buffer there, which is which is completely fine and that's how it should be for a ve a passive a passive strategy. I think the treasury companies will be able to not only stake 100%, but they'll also be able to restake and then take that rest ETH and then lend and borrow against it and use in DeFi. So, you'll be able to do different things that come with higher risk, but also come with potential higher um higher upside as well. Ryan, yeah, I I think that's right. When you if you think about ETH as the benchmark in this scenario, then there is an argument to be said that there will be funds or digital asset treasury companies that try to outperform the benchmark just like in traditional equities. You have a colleague uh actually was saying this to me to me recently, but you have the S&P 500 and then you have variants of it that make slight changes that try to outperform the S&P 500. And capital flows to both of those things. And I think capital will flow to DATs. I think capital will flow to Ethereum ETPs. I think it'll flow on chain and people will stake themselves and it really depends on, you know, if you believe the manager is going to outperform the benchmark, then you'll allocate to them. And I do think that there's interesting things that can be done with DATs that you just simply can't do with ETPs. So, when it comes to staking, for instance, the you can't yet stake Ethereum on ETPs in the US. You can here in Europe, which is wonderful. And once you can stake, then sure, we'll stake the assets, but you can't do liquid restaking. you can't do a number of other activities in DeFi with ETFs like you can with digital asset treasury companies. So I think it just comes down to a little bit of you know choose whichever vehicle that you want to allocate to. If you're happy with just the benchmark with a little bit of staking yield then I think you'll buy an ETP and there's a small fee associated with that but you know exactly what you're getting. If you want to try to outperform the benchmark perhaps you go with a digital asset treasury company or you'll go with an active fund that is participating on chain more directly. And some of it comes down to access for what it's worth. Some of it's just the reason why we've seen capital flow through ETPs and through DATs instead of directly on chain as you mentioned is an access question and most of the financial advisors that we speak to and the RAS that we speak to and the major warehouses still can't fully access Bitcoin or Ethereum ETFs which surprises a lot of people because the Bitcoin ETFs launched in January of last year but only one of the the four major warehouses in the US have approved access to Bitcoin ETFs for their wealth managers which means 75% of those big before can't actually buy the ETFs. So, they then can buy DATs. Uh they can buy Bitcoin Dats, Ethereum DATs, other DATs because those those just look like other equities to them. So, I think it's an access thing and I think it's a just do you want to underwrite individual companies to outperform the benchmark or do you want to just own the benchmark in a cheap easy to access vehicle that you're familiar with? Louis, just really quickly going back to the first bit of the uh the panel, I actually think DATs in a way are kind of blurring the lines between passive and active because obviously there's an asset management piece to it as well. So, ironically, I kind of want to see more DATs because, you know, they're going to be using the underlying DeFi protocols. That's great because hopefully I've got exposure to them, but then also they may need asset managers and look, we've been doing it for nearly 5 years on chain. Um, and so it's really across Ethereum. We're now hearing it on the Salana side as well where it really needs a bit of a DeFi boost. So really in a way like what's good for that I kind of would argue it's kind of good for me on the active side because they're almost crossing that bridge from passive to active. Can we talk a little about I guess VC your your future envisions um institutions going onchain directly? Um can we talk about the evolution there? Like what do you think is the the the playbook for that eventually happening? because right now we're going the opposite way, right? We're going through these old um uh inefficient systems and I just think rather than uh putting a putting Bitcoin into a DAT, we need to tokenize Nvidia and and start truly trading equities, right? But we're going the opposite way. But to get there, you know, how do you see like what do you see the the road map over the next five 10 years looks like? I think it's interesting because we're actually going both ways uh at the same time which is again and it's just it's inspiring to see how much innovation is happening. All we needed was a regulatory regime change and then the willingness of every institution to actually figure out how to come up with a crypto strategy just just exploded. So it's been it's been incredible to see. I think that what we've seen is cryptonative strategies and assets like staking like using ETH getting exposure to to to Bitcoin for example that has gone through public markets rappers. So that's that's what goes into DATs and that's what gives retail and others exposure to to DAT but the opposite's also happening too. People are also in parallel saying let's bring the real world onto public smart contracts block blockchains like Ethereum. they are tokenizing equities, they are tokenizing um fixed income instruments and and real estate assets and I mean as much of the world as possible and that actually requires people to be more cryptonative because you can't take a real world asset tokenize it and then wrap it back in a public equity um than you're then you're going right where you started. So um to for people to use real world assets on chain they actually have to interact with the actual blockchain infrastructure and that's what we're focused on because that's where the real unlock comes in. Um, tokenizing Nvidia gives access globally to one of the most important stocks in the in the entire world. It also allows it to trade 247, also allows it to plug into all these different DeFi applications. That's functionality that the traditional finance system does today anyway. You can still borrow against stock, but you have to go through 17 intermediaries and it it's it's hard and it's inefficient. Um, if you can plug into a for example, that's that's going to unlock a lot more. So I think it's going both ways, but the institutions are going to figure out that they can actually cut a lot of their costs and unlock a lot more efficiencies if they use onchain protocols for real real world assets at the same time to spread the the universality and the upside from Bitcoin and ETH and others, putting those into public markets, vehicles, ETFs, and treasuries. Um, we're going that way, too. You know, I I love your point about kind of winning on both sides. One of the the biggest developments I see in the onchain side of asset management is the rise of of vaults this year, right? We see billions and billions going in. I don't see billions of dollars going into like classic Cayman structure GPL funds just yet. I think that's coming. But we do see the ease of onchain money flowing into vaults. And you know, I think of them almost as an uh you know, the onchain hedge fund. You get full transparency. You have daily liquidity. You can see the history how they've made money. You can see in real time what the yield is. This is transparency that I don't get as an investor into most hedge funds all the time. So I love this development and I I think it is the future and I know Lewis for example at RE7 you guys have done quite a bit in this already. Like that's the other side of your business but can you comment a little bit on that? Uh yeah so it's a part of the firm that's grown to basically a yard now. Um, one of the reasons why it's grown so much was well, one of the the opportunity, but really allowed us to tap into capital in a much easier way, uh, where you don't have to find, you know, type of investors that are able to pull in, you know, a fund structure or a master fund. Um, so when we looked at, you know, this brainstorming idea around vault, we kind of thought of it as like this new frontier of of DeFi, that customizability, that flexibility, but also that transparency. And what's amazing and it's definitely a learning for me over the years is with vaults you really have to it's all a relationship game at the end of the day and how many stakeholders that you have to bring together. Um being one of the earlier players to do it has really helped because you have the relationships with the oracle providers, you got the relationships with the lending protocols dot dot dot. So what a great example that we had earlier this year, really fortunate to work with the world liberty guys uh to help distribute USD1. Uh and so the stakeholder setup there was you had the Binance Smart Chain and they had the incentive to grow their ecosystem in TBL. Uh you had World Liberty that had I think 90% of their supply and maybe the top 10 wallets. So they had a distribution problem. Uh but when it comes to incentives, we're realizing quickly that everybody wants to be part of that vault infrastructure. So with the Oracle providers, it's really about how do we better our infrastructure? How do we supplement the incentives even higher where we're not taking any incremental risk uh but actually they're just offering more of their native tokens. So we do that calculus but it's very much you know when I was in Singapore I was thinking I was going in for many conversations around liquid alpha but actually would say 50% turned into oh we're actually launching vaults. Is there something that you can do there? It was eye opening. um people that again standard charter and all these guys that you wouldn't think we would even think about doing it. Um but that's amazing because it started at the genesis of a brainstorming idea about a year ago, year and a half ago. Um but now it's grown to one of the biggest parts of the business. By the way, Lewis, I love how casually you dropped a billion dollars as a yard. I think when I grow up, I want to be I want to be that cool and nonchalant. Um very cool. Um Ryan, Ryan, can we talk please about where we are in the um SEC regulatory adoption cycle? We've talked a little about the upcoming We had the Clarity Act first of all in um in in July and now we have the the next uh broader uh uh act coming up to regulate the rest of of everything in in digital assets. I think this will really bring in the next wave of money and we already see over 100 ETFs lined up, right? Do you have any insight to share there about what to expect, where we see the flows, etc. Yeah. So, the past 12 months really in the regulatory and legislative space in the US has been phenomenal. It's been just the most incredible amount of traction and activity and a long-term tailwind as one could possibly imagine. And we've been at Bitwise just working day and night to file for as many ETPs as we can to bring these products to market to think about how are investors going to want to gain exposure to stable coins as they grow from 300 billion to three trillion and they want to express their interest in that allocation. Does a publicly traded equities ETP that has companies like Circle or Coinbase make sense or do you want to provide some kind of thematic stable coin crypto asset ETP something like that? All of those things have been happening and then it went on pause when the government shut down. So, we've had a bit had a bit of this this kind of sprinting and then stopping. But what we believe is going to happen is once the government shuts opens back up, there's just going to be an onslaught of ETPs launched and there's going to be something like 25 of the largest crypto assets will meet the generic listing standards that the SEC rolled out, which means that it's a much easier path to listing as an ETP in the US than historically it's been. you won't have this 240day waiting period that you've had for the Bitcoin ETPs and for the Ethereum ETPs. So, we're really excited about that. I think investors will all of a sudden have this big menu that they can choose from. Now, most of the investors that we speak to, these financial adviserss and RAS don't know that much about crypto or they're early on in their journey and so they're excited about Bitcoin. They've maybe heard about Ethereum because they hear about stable coins and tokenization. Maybe they've heard about Salana. But once you get past those assets, we really don't get a lot of questions. maybe XRP, maybe the Cardano question every once in a while. So, I think it's going to take time before flows go into those assets certainly. I do think there will be more crypto enthusiasts investors who do want to go out down the risk curve and they want to choose the lower cap assets. But I also think what's going to happen is you're going to see more thematic and more index funds come to market which is another element of these generic listing standards that's going to be a huge unlock for asset managers like us at bitwise is we can now offer more interesting and and compelling and kind of um you know own the market with a basket of assets rather than having to bolt on your own kind of portfolio. So I think that will be where a lot of capital flows. Certainly, if you think about the ETP market today, it's like a 20 trillion market. It's a huge market. And right now, Bitcoin ETFs and Ethereum ETFs are like 1% of that market. And I think that will grow to 10% or more of the ETP market once we have more ETPs, once we have index ETPs and once we have much more options for investors. And now that we have that regulatory clarity and we have the the the lack of an attack on the industry from regulators and from the administration, investors are sighing a bit of relief. They feel like they can start allocating. They feel like they can go tell their clients they own crypto. And I think that's also a huge a huge unlock. I think a lot of people are actually missing how big of a catalyst that is and how many years that's going to push continue pushing the industry forward. Just really quickly, it's interesting thinking about the reverse of that. So, I just had a notification saying uh you know the S&P putting sort of stable coin data or risk ratings on chain through chain link. Point being is that obviously there's a lot of um sort of real world data that could be plugged into web 3. So, one of the things from a vault infrastructure standpoint that we're exploring is um indices, onchain indices and kind of reviving that old chestnut that we saw a couple years ago. Um, but you could conceivably do it over anything. So, we've been experimenting back in the day with AI agents. Was there any appetite there? But, you know, there's a huge design space. Um, and if we're able to do it in an efficient way and you know, collapse the cost of of managing it in a vault setup, then that's pretty intriguing. So it's almost like the reverse of what you guys are doing and seeing what the opportunities would be from that. Yeah. you know, um Ryan, you mentioned a few times like the benchmark and I think what's underlying all of this is that right now we're uh a lot of the service providers um and index providers are almost in a war to figure out who is going to be the S&P 500 of crypto because once you identify what it is whether it's an equal weighted top 10 equal weighted 100 asset weighted whenever we find this out and people really start to benchmark that we get the passive flows and we get everything that's kind of indexed to that and you know and look no further remember um Coinbase was um introduced into the S&P 500 in May um and then by June all the catch-up that had to happen it was the best performing single stock out of 500 it was up like 40 or 50% and that's exactly what we will see but right now I see you know so my my role dayto day is to cover um crypto managers and I see almost every other manager has a different benchmark and of course the game is for them to um produce a benchmark that they that they look better against, that they're producing higher returns, higher alpha against. But um you know, it's it'll be interesting to see how this shakes out because eventually eventually we will come to some consensus that this is the you know, this is the S&P 500 of crypto. Maybe it will simply be Bitcoin itself or or maybe it will be some kind of index of all of it. But really, it's all over the place. And and that's why there's so many opportunities. There's no standardization yet. Yeah, I think we're very early on in in the journey to be completely honest. I think Bitcoin is broadly looked at by the investors that we speak to as the market or as the benchmark. Of course, at Bitwise, we're biased that we believe the Bitwise 10 large cap crypto index will be the S&P 500 of crypto. So, of course, I'm a little biased to that. But what we've found is that investors like the idea of, hey, I can just buy this one fund. I can own 80% of the market and I know that it's managed by people that spend 100% of their time thinking about the crypto market, right? Because most of the institutional investors who are allocating to crypto 1 to 3 to 5% are spending even less of their time than that on the crypto market. They're thinking about bonds and equities and tariffs and trade wars and fiat debates, like all of these different things. And so what they want is just one-stop shop. And that could come through things like DATs or or like for instance we have an index of DATs. So if they want exposure to that theme or they want exposure to a bunch of companies that are out trying to outperform the index and they can get that exposure through an index fund or they can go through a vault for instance and kind of try to outperform the benchmark. But I think the benchmark is Bitcoin. I think like I said before indexing is going to be a huge a huge part of that and ultimately the benchmark will transition to something like the Bitwise 10 large cap crypto index. Yeah, I hope so for for your sake. Um, one cute analogy I've heard which I I'm quite partial to is that bench bit Bitcoin is the benchmark for almost the equity like benchmark and the ETH staking yield is like the risk-free rate. Like if you can't beat 3%. Because remember like if you invest in the risk-free rate you don't get appreciation but with investing in Ethereum you get the hope hopefully price appreciation and your risk-free rate you kind of win in two ways. So, like that's exactly what you want to own is the risk-free rate with asymmetric upside. Um, but I kind of like that. That's kind of like the the cost of capital is you should at least be getting that kind of risk-free free free rate of return. Um, we have a few minutes left. Um, I think this weekend was such a shock for the whole in fact it was a shock in one sense, but it wasn't. We knew that we would have a big liquidity crisis coming someday. We didn't know it was going to be this weekend per se. Um, but I think we were all kind of expecting that eventually this is what crypto does. It has crises, it recovers, it grows stronger, and it gets better. Um, but main any any takeaways from any of you guys about how we how we performed, how the industry performed, how where we go from here? I'll go first. I mean, I was fortunate to look at the whole developments with a pretty level head because we don't take leverage in the fund, thank God. Um, takeaways and we're talking about it backstage actually very briefly. Um, for me it's really understanding how things work, especially on the per side. Um, and hearing of large entities that have positions on, let's say, Hyperlquid and not realizing that they could be liquidated even if they're on the right side of the market sometimes on the bets. Um, I think it's just a bit of a wakeup call to really understand that there's no system that is perfect. Educate yourself in how it it works. Um, that's definitely the the highest level takeaway. And I think from a market structure standpoint, you know, we're still pretty constructive overall. I think market right now in the short term is trying to find its footing. So there's a a bit of a recalibration period I would say right now. Um but from a macro standpoint nothing's changed despite the sort of liquidation event that we did see. So I think for us zoomed out um we still think a lot of these kind of fractalss have been respected so far. Um but we're really going to be taking it week by week, day by day. Do we think this was a flash crash or the beginning of something more uh long term? I'll jump in. I I think that this past weekend it's it's fortuitous timing for this panel because it actually captures everything we were talking about. It's the first active versus passive. The people that were passively just holding spot, especially the the index type crypto assets, Bitcoin and ETH, they didn't really sell off that much. I mean, it really honestly wasn't that noticeable um if you're just passively holding spot. So, it shows that people that start to mess around in more active strategies with 100x leverage in tokens that don't really have that much liquidity or or honestly are have an inflated market cap. Those are the ones that got absolutely destroyed. And that's where um do-it-yourself active may be a little bit tougher and maybe this the call to action is let's concentrate on a few blue chips and um like like Bitcoin and ETH and then use a much smaller portfolio size for alts. So, that was one takeaway. Does it happen again? We flushed out a lot of leverage. So I mean it was almost this felt more like a flash crash that we bounced back from than a structural issue. Um and the structural issues were exchanges were very quickly um uh identified and then we'll get past them. But I think I think we're going to resume our our uptrend very shortly. Yeah. To be honest, for me the reminder um was the power and importance of diversification um in your portfolio. Like not just from from strategy but also counterparty, right? Like which exchange are you on? Which instruments are you trading? There was so much going on and you know over these last few years I've been pitched by so many of these different funds and different trading different SMA strategies. And to see 1.6 6 million uh accounts um be delivered automatically was such a shock. Like some of these had pitched me how great their risk management were and I'm finding out where all the bodies are buried, how many of them are worth zero. Like gone from 100 cents on the dollar all the way to zero and you can't recover from zero. Um so for me having this like diversified approach really uh is just was just reinforced u by this crisis we had this weekend. Um and I think we are basically out of time. I want to thank my panelists and thank you all.