Eric Balchunas - Bitcoin and ETFs: A Disruptive Power Couple - TOKEN2049 Dubai 2025

All right, good afternoon everybody. Thank you for attending this. Uh you're in for a treat. The ETFs are important. Why?

They're the bridge to about hundred trillion dollars. So uh this is a big deal. Bitcoin and the ETFs to me together are like a disruptive power couple. So, I've been working in the uh, you know, sort of crypto Twitter for two years now, earning a new audience as the ETF guy. I get called Tradfi, Boomer, Suit, and I'm here to tell you why ETFs are pretty cool, pretty punk rock.

They are more disruptive than you think. Do not underestimate them. So, disclaimer, I work in research at Bloomberg. It's a great place. Love it.

Uh, here's my team. We cover ETFs and funds across the world. There will never be another launch like this again. I've been doing this 20 years. I've never seen anything like it.

This was incredible. Mind-blowing. Bitcoin ETFs make up 1% of all ETF assets, but they've taken up like 50% of my brain space. Uh for good reason, though. You never see anything like this.

15 months ago, we had what I call the Kentucky Derby. This is where the SEC lined up 10 different ETFs at once. That never happens. So, as an analyst, this was a fascinating experiment. Who's going to win?

Will it be Black Rockck, Fidelity? Uh what's the fee? What what are the fees going to be like? So this everybody loves a horse race too, right? It was big from the get-go.

So after the first 50 days of trading, IBIT, this is a alltime list. IBIT took in the most money after the first 50 days by far. Number two is FBTC. Four Bitcoin ETFs are in the top 10. Again, astonishing, right?

This is the first 50 days. This chart, probably the craziest chart. If you rank all 10,000 ETFs ever launched in the world as the at the fastest to 50 billion, IBIT got to 50 billion in 227 days. The next fastest all time or the prior record holder was IMG at 1,323 days. So, right, that's pretty crazy.

Four years, less than one year. So, as an analyst, this this really got my interest and I've really thrown myself into this industry and I'm learned a lot and I appreciate that. It's really a fast growing space. This conference in particular is got a buzz. Somebody told me earlier, it feels like a bull market out here.

Like you go to a financial conference, it's different. You know, it's just had a rough quarter here. It just feels very bullish all the time, which is a good sign. Here's the flows. They did come down a little bit, but only a little bit.

And they've also come back up. This chart's like a week old. So, we're about 40 billion net lifetime for ETFs. Our estimate was 10 to 15 billion in the first year. So, 40 just smashes our estimate.

I thought we were pretty bullish. So, they were a big hit. And they now own more Bitcoin than Satoshi, 1.1 million in a year. So, if you're in the Bitcoin space, I don't know why you wouldn't care about this.

This is a lot of Pac-Man gobbling up a Bitcoin. I I would say right Black Rockck alone is about 600,000. They're going to own more than Satoshi alone in about a year, right? Why are they such a hit? What's the big deal?

Well, A, they waited 11 years for approval, but B, they're dirt cheap. 20 to 25 basis points fee for an ETF, and there's no spread. You you go to these some of these exchanges, you get charged like 1% commission when you trade. This is one BIP all time every day. So there's no spread, high liquidity, low fee, big trusted brand names.

Oh, and they got SEC security stamp on them to make advisors and everybody feel comfortable. That's a powerful combination. You put all that together, you're going to see flows. Then you have a nice run after they launch and look out. That's how you have a record-breaking launch of an ETF.

Right now, Bitcoin ETFs own about 5% of all the Bitcoin, maybe 10% of the float since half the Bitcoin's kind of stuck. um they own 9% of stocks, 4% of bonds, 1% of gold. So ETFs own more Bitcoin than they do gold and bonds already and they've been out doing that for 20 years. So at some point ETFs are going to own more of this world than they do any other asset class. So we are joined at the hip whether we like it or not.

The trading volume also is massive. Look at GBTC trading versus when the ETFs came out. Obviously, boom. Why is volume important? It's not assets.

I get it. But volume is big fish bait. Institutions won't buy anything unless there's a lot of liquidity. And IBIT in particular trades 2 to four billion a day. That's big boy liquidity.

They don't want to be seen. They don't want to move the market. So they like that a lot of liquidity. And these served it up from day one really. They also did well with institutions right off the bat.

If you look at all the institution types, every single one now is represented in the 13F filings. And so I I show you that those are all the all the launches on January 11th last year. You can see the Bitcoin ETF's number of 13 filers is just absurd versus a normal launch. Right now they have about 1,400 different institutional holders. A normal ETF after a year would have like 10.

So again, absurd. They also have options. Options are like, you ever see step brothers when they make the bunk beds and they're like now we room for activities. So many activities. Options are activities for professional investors.

They can do all kinds of stuff. They can sculpt outcomes, hedge, and with options that opens up a world of possibilities for the larger professional types. 2x micro strategy. Even this was a hit. Just slapping 2x on micro strategy, which by the way is ipso facto 4x bitcoin.

And you can't do three and 4x in ETF. It was a backdoor way to get 4x Bitcoin. Look at the the assets in that. This is the most volatile ETF. By the way, they launched another one that's a little more volatile.

But this is about 13 times more volatile than the S&P. But for the DEN crowd, they love that. There's a huge Den crowd in ETF trading, too. I don't judge anybody. They It's totally legal and they have fun with it.

And Micro Strategy, MSTU, and MSTX. And I listen to some Bitcoin podcast where some of you guys I heard use these tickers. So, lot of volume there. That was also a sign. The wirehouses.

This is the big holy grail. They control all the money in America. Morgan Stanley, JP Morgan, these are just starting to open up and on board the ETFs. Look out when they do. At the panel yesterday with Ryan Mitchnik of Black Rockck, he said the decoupling was major because a lot of the big fish investors are waiting for this to be more of a safe haven uh and an alternative, not a tech stock.

They don't want a tech stock. So the decoupling just the one day was enough to field a bunch of incoming to Black Rockck from institutions who were like this is good we want more of this. So the more it decouples and has lower correlation the more capital will be unlocked and invest now with all this success I you're still going to find the haters to this day. Now the new thing is oh these are the wrong holders. These are orange poker chips uh and people are going to flee at the first sign of a downturn.

I am here to tell you that the boomers are going to be better hodlers than you think. They may even be better than you. First of all, just look at them, okay? These people have seen some okay? They've been through like six crashes.

Makes your four, you know, that's more than four. But anyway, also ETF investors are smart. If you are investing in an ETF, you're a smart person. means that you made it through all the intermediaries, all the people trying to sell you BS because ETFs are cheap, fast and good. So if you found the ETF, they don't actually have distribution fees.

So you have to find the ETF. So people who are smart find the ETF and they generally know behavior and good portfolio construction. And that's why they are stronger holders and that's why only 3 to 4% of the assets left in the last downturn. 96% of these people stayed in there. That's a good sign.

And in my opinion, that's why the price was partially stable. I think Michael Sailor and the ETFs bought up I don't know about a million Bitcoin over the past 15 months. Who they buy it from? The dumpers FTX refugees GBTC unlock governments who confiscated and didn't want it. So they took bad owners and made good owners.

And I think that's going to help with the stability because the modern portfolio looks like this. I know you guys are all crypto, most of you, but that the the normal person, I guess, or the average investor would have 85% in like 6040 cheap beta, and that makes them feel good. But it takes 30 years to compound. They want to have fun on the side. They want to spice it up a little.

So, Bitcoin does fit there. Also fits as an alt, but I'd say for now, it's more hot sauce. And the reason you want to, you know, think about the boomers is because they have all the money. This is who owns the stock market in America. 70% of the stock market is owned by people who are boomers or older.

I'm Gen X and we own 27%. It's pretty good. But I would say the younger you are, the more likely you are to use ETFs in crypto. So both of us have tailwinds driving both of our, you know, uh, vehicles rather or in your case an asset class. So, as the boomers pass down some of that wealth also, it it could be good for the ETFs because they are preferred over mutual funds by younger people.

And here's the volatility I was talking about when the ETFs launched. Look, the V didn't go down, but the volatility of the volatility stopped. So, at least it's something. I would look for that number to continue to fall in the future. By the way, the other thing is you don't have to cry every time there's a downturn or outflows.

Everybody freaks out. It's going to be two steps forward, one step back. There was one outflow from ARC in like the second month and the outrage on Twitter. I'm like, geez, get a grip. So, calm down a little bit.

Look at this as a 5-year thing. There'll be outflows here and there, but net they're going to see inflows in this category as it grows. ETFs are just as disruptive as Bitcoin and should not be underestimated. ETFs have several advantages. The, you know, I'm not going to read them.

I got to I'm time limited here, but these are powerful advantages. They're also, you know, standard the standardization of all asset classes. They're flexible, uh, democratic. Every everybody gets charged the same fee and they're freedom. You know, again, they're very easy to use.

ETFs are based off of a commodity warehouse receipt. So, we come from the commodity world in a way. Used to be you traded commodities, you had to move soybean oil back and forth. Then they made a commodity warehouse and said, "Hey, you can store your soybean oil here. I'll give you a receipt."

Then commodity traders could trade the receipts back and forth without having to move a bunch of physical soybean oil. So that commodity warehouse receipt concept was just applied to stocks and bonds. Instead of a warehouse, it's called a custodian. And instead of a receipt, it's called shares. So that's why spider is the first ETF.

S&P depository receipts. So when we worry, you know, some people are like, "Oh, this is paper bitcoin or ius." Every bitcoin in ibit is with Coinbase. It's one for one. It's basically like futures, but with physical backing.

Again, another reason they took off. ETF growth is massive. Not as massive as your world, but 32% growth last year in assets is pretty damn good for an industry that's 30 years old. If you guys are doing 32% growth at year 30, I think you'd be happy. We uh project 35 trillion in assets into ETFs and crypto will be part of that.

You know, it won't be like, you know, dominating, but it will it will be a nice slice of this growth. There's also a ton of launches and ETFs. So, you're going to see you're going to get the ETF treatment. Bitcoin, Bitcoin covered call, Bitcoin leveraged. They're going to put all kinds of stuff to appeal to people who want their Bitcoin a certain way.

You know, like Diet Coke, Coke Zero, regular Coke. It's going to be the same deal. And that's good for you because some people want Bitcoin with a little protection. Some people want, you know, they people like things different ways. The ETF market is so good about designing products to fit everybody's needs.

And ETFs are punk rock. The Wall Street does not like ETFs. Look how little revenue they make versus hedge funds and mutual funds. People only launch ETFs because they have to because that's where all the money is. So ETFs again, not that much revenue.

We're as disruptive as you are in my opinion in that regard. It's hard to overstate the importance of Black Rockck and Fidelity, but mostly Black Rockck. Black Rockck has 10 now 11 trillion in assets. That number changes too quickly for me to update. They're big.

And so when Larry Frink says we're doing IBIT, and he goes on CNBC and Fox Business, the advisers of the world who manage Boomer, trust him, and he gives them air cover. Now, they're all not all going to rush in, but over time, this is huge in terms of adoption. And advisers, again, remember, they're managing people's nest eggs. They can't mess around. They can't yolo around.

They've got they don't want to get fired. So, they're conservative. That's why the volatility coming down will help as well. Bitcoin uh Black Rockck is also going around the world showing charts like this which is the lost purchasing power of the dollar since the Fed. I mean this is like used to go to have to go to crypto Twitter to find this.

Now it's Black Rockck is presenting this to their biggest institutional clients. So you are lucky I'll be honest to get this level of sophisticated and b they're they they have a high level of boomer. Remember, they're going to translate the things you talk about into a more palatable message. Vanguard may eventually lighten up. I wrote a book about Vanguard.

Look, right now, you know that movie, uh, She's Just Not That Into You. They're just not that into you. Okay, that normally gets a laugh. It's hot. That's what it is.

It's the I going to blame it on the heat. Okay. Anyway, Vanguard just doesn't want you around. I think it'll change, though. Vanguard is trying to be an adviser.

And as they in be an adviser, you have to give people what they want. They want private equity, you got to get it. They want crypto, you got to get it. So, as they build this other branch of their business, which is early, they're going to have to have access to crypto. Also, the guy who runs Vanguard now, new CEO, used to run Black Rockck's ETF division, and he's one of the fathers of IBIT, so he's clearly into it.

But Vanguard's 50 years old and is like a cult. It's going to take a while to move them on this. They're like an aircraft carrier. It's going to take a minute. So, I do think they're going to let crypto ETFs trade over time, but it's not going to be quick.

And I doubt they'll ever launch a Bitcoin ETF, but I think just opening up their platform and letting it trade will probably happen eventually. All meme ETFs will be lucky to grab 20% of the category. We have I developed a little rhyme if you want to hear it. The further away you get from BTC, the less assets there will be. Uh, I just don't see much going on.

I When the Ether ETFs were launched, I referred to them as the opening band having to follow the headliner. And I think I said small potatoes. Man, you don't want to piss the Ether people off. I'm still hearing about it. I didn't mean to insult them, but come on.

Following Bitcoin's launch is just absurd. You know, it's just that was the biggest launch of all time. They have 5 billion. That's that's pretty good. But again, it's 5% of the hundred billion that Bitcoin has.

It's tougher to explain Ether to to a regular person. It's tougher to explain Salana. Bitcoin is easy. Digital gold. These other coins need two or three sentence phrase, three-word phrase to get the message across.

That will probably develop over time. I have some ways that I explain it, but right now I think it's just confusing on what this even is versus Bitcoin, which is easier. Ether could be silver to Bitcoin's gold or maybe Salana or XRP or maybe all three. In the precious metals category, gold has the vast majority of the assets. Probably be the same for Bitcoin.

But silver, platinum, platium, and then other commodities like oil, corn, coffee, they basically fight over the 20%. And I think that's what we'll see here. Here's the current state of it. So Bitcoin actually has more like 90%. I do believe that will be eaten into a little bit.

the more coins that get launched, the more energy put behind those coins. But like I said, spot Bitcoin ETFs is just such the And everything else I just think will will be really they'll get theirs, but it's not going to be any anything like the phenomenon that this is. Now, we have 72 new crypto ETF filings. Okay. As soon as Trump won and Gendler was out, literally when he was going to the parking lot to get into his car, they just filed like a 100 ETFs.

They were like, "Oh my god, fine. The cat is gone." Uh, so you have Dogecoin, Litecoin, uh, Salana, XRP, Bonk, Trumpcoin, Melaniacoin, 2X Melania. I'm not kidding. So, they're going to throw everything.

I call it the spaghetti cannon. They're going to throw everything at the wall and see what sticks. There will be one of these coins will go on some ridiculous tear and it's going to have such a shiny object moment that people are going to go, "Ooh, that's cool." So, you will find one will have its day in the sun. But again, this will be small potatoes and assets versus Bitcoin.

But it will definitely get a lot of coverage because it's new. It's interesting. And so we do think this summer we'll probably see XRP, Salana, Litecoin approved by the SEC in spot format. The other one's hard to say. Although again, as I said in the stage yesterday, I don't know how you don't approve a Trumpcoin ETF when that's literally your boss.

Because if the SEC says, "Oh, this isn't suitable for retail." I mean, what does that say about the coin itself? It's a weird pickle. The SEC chairman is in there. So, I just think they have to lean on the side and just let it all out.

and Hester Pur who is probably one of the bigger voices in the SEC now is a true libertarian. She wants to give people choice but just disclose all the risks. So I do think we'll see a lot launched and it should be very exciting. Uh and it's really I always say ETFs there's never a dull moment but in crypto truly never a dull moment. And so with that here's a couple ways to find me on Twitter.

Uh I have a TV show and a podcast all about ETFs if you want to learn more. And I wrote two books. And with that, I want to thank you for your time.