How Institutions and Governments Will Enter Crypto , Khashim Arziyev, Binance | ETHSofia 2025

[Music] I think it's fair to say that this cycle can be characterized as an institutional cycle. The majority of price action, the reason why we see the all-time highs, the majority of the technological innovations, they're mostly happening on the institutional side and not on the retail side. how it was previously, you know, in the previous cycles. I personally happen to work with a lot of institutions in Binance. I have a chance to talk to them to understand why are they buying crypto, what are they looking for when they're buying crypto, what are some of the blockers on why they cannot buy crypto and sort of what's the road map are looking like for them in the future.

And I'd like to share all of this information today with you. And perhaps altogether we can derive some alpha from it and understand how they're positioning their portfolios and how potentially we could position ourselves to make some money along the way as well. Uh my name is Kashim. I'm working as an institutional sales manager at Binance. And yeah, let's get this started.

So first, let's talk about the effects that institutions have on crypto. Here you can see this is the Bitcoin price chart. This beautiful red arrow shows the moment when Black Rockck launched their spot Bitcoin ETF. It happened in January of uh 2024. The Bitcoin was at the moment at around $40,000.

And ever since then, we went to an all-time high at around 125. Right now, we're consolidating at around 112, which is, you know, approximately three times growth over that time period. Ever since of January 2024 up until today, uh, Black Rockck spot Bitcoin ETF, IBIT have been able to accumulate 750,000 bitcoins on its balance. They're holding it on behalf of their investors. 750,000 bitcoins, that is a lot.

Um, altogether between different uh ETF issuers, they were able to accumulate approximately 1.2 2 million bitcoins on their uh balance sheets. So there's 21 million bitcoin in total. Between all of them, they have 1.2 million in one and a half years.

That is approximately what? 5% of the total bitcoin supply. Now I want you to run a little thought experiment, right? Try to imagine how many bitcoins you have on your balance, right? maybe on your hot wallet, on your ledger, on your exchange.

Just try to think like how much do I have? And then try to look at the people around you and try to think like all together, you know, if we would combine all of our bitcoins, how many would we have? Like one, three, five, or maybe 10, right? Maybe we have some whales here and we can accumulate 10 bitcoin between all of us. Let's let's continue that thought experiment.

Um, let's try to think what would happen if you take all of your money, right, across all of your altcoins. Maybe you invest in stocks, maybe you own a house, maybe you have some in savings and let's say you take all of your money and you buy bitcoin with it. And then we take all of the money from all the people in that room and we all take buy bitcoin with how many would we have? Maybe 10, maybe 20, right? Maybe we have some whales here and we can accumulate 30 to 40 bitcoin just across this room if we can just get it together.

Now try to compare it to 1.2 million that the spot ETF issuers have accumulated. The point of that exercise I was not trying to like degrade all of you or to downgrade you know how how small our balances are but I was trying to show how big those institutions are and how big of a role they are playing in this cycle. um different slides. So it doesn't end with the ETF issuers.

Then there is a Bitcoin treasury companies formerly known as Micro Strategy nowadays known as a strategy is a company that pioneered and adopted the Bitcoin treasury. The idea behind this is that they are issuing convertible depth or preferred stocks and with that money they buy bitcoin they put it on their balance sheet and then they issue more convertible depth and more preferred stock and they buy more bitcoin. It's very very interesting model that they've accumulated. They started their um treasury strategy in August of 2020 and ever since then they were able to accumulate approximately 650,000 Bitcoin on their balance sheets. 650K.

Now, you know, if we add it to the 1.2 million that the the spot Bitcoin ETF issuers have, all in all, you know, we're going to get to a number like approximately 1.8 8 million in one and a half years. That's that's what like so if we take let's say we round it up to 2 million there's 21 million bitcoin in total that's already like short of 10% of total supply right 7 to 8% is already in the hands of the institutions. Now look at what happened to the micro strategy stock ever since then they were traded at $14.

Look at that. That was a dead stock since 2002. A lot of people in this room maybe were not born in that period yet. Up until 2020, they were traded in that debt range of $14. Then they adopted the Treasury strategy and now they're trading at approximately 350.

You know, 3,000% growth and from the moment of adoption, it's about 20x growth. That's that's pretty good even by crypto standards. There's a lot of different uh Bitcoin treasury companies. It doesn't stop uh with Micro Strategy, but it also doesn't stop with the Bitcoin treasuries only. You know, there's an altcoin treasuries companies now as well.

Bit mine immersion. If there's any people here who follow the traditional stock markets and you know, you watch all the the ETFs and maybe you watch CNBC, maybe you know a name of a Tom Lee. This guy is a sort of a he's sort of a legend on Wall Street. He now leads the Bit Mine immersion which used to be a Bitcoin mining company. They decided to change the vibes a little bit.

They restructured to the Ethereum treasury. And the beautiful red arrow there uh shows the moment when the Bit Mine adopted the Ethereum uh strategy, Ethereum Treasury strategy. And that beautiful green candle from approximately $2,000 up until the all-time highs is just the effects of the Bit Mine. And you know, we got to 4,900, which is the all-time high. Now, I think we're consolidating around 4K.

It's across the industry. That's fine. For that period of time, which is approximately four months, they were able to accumulate 2.5 million Ethereums on their balance sheet, which is approximately, you know, 2% of the total supply of the total current supply of Ethereum. It's constantly being issued more.

I do not have a chart of the Bit Mine stock. Um but since they adopted the treasury strategy in June they have went 500% up on the stock. So what's the point right of me telling all this? The point here is that if you are waiting for the alt season, right? Like, oh, when is the alt season?

Is al season coming? Al season is already here. It's just not happening in you know ICO coins. It's not happening in the DeFi coins. It's not happening in NFTTS.

It's happening in the crypto stocks. Happens with the micro strategy. It happens with Bitmine and with all the others. Let's talk about why this is happening and why are institutions buying crypto. Now I have to make a disclaimer here that the institutions so far I've been referencing to them as a single group of people.

It's not really you know there's there's different sorts of institutions. There's governments, then there's asset managers, there's hedge funds, there's market makers or collectively they're known as institutions, but each of them has a little bit different goals, which is why they have a different strategies to achieve those goals. This is why they have a little bit different investment strategies as well. So, they view crypto through the different lenses. Uh, I'm going to try to talk about all of them, but I want us to start with governments first because I think it's the funniest part and they're the biggest cohort in general.

I happen to on board um many different governments on Binance. They're very discreet. uh so I will not be able to mention any names but I had a chance to talk to them and understand why they're trying to buy crypto why they're diversifying and the reasons are differing from time to time but the main two that I was able to identify is they're trying to hedge against the inflation and M2 expansion in the US and they're geopolitically hedging against different events if you think about the first point which is the hedge against the inflation. You can think about it from this perspective. Um a couple years ago there was this nice cute maybe not nice event which was called COVID 19.

You may or may not remember that it happened and which led to majority of the countries leading to a big lockdowns and majority of the countries implemented a very aggressive uh fiscal measures to boost the economy while it was under the lockdown. In the human language, what it meant is that the majority of the governments were just basically printing money and then they were doing what's called like a helicopter money where they were just like basically giving it away to everyone who is locked down. What happened to the US dollar is the Treasury and the Federal Reserve have expanded their balance sheet of M2 by approximately 30%. which means that they just printed 30% more of dollars than they had existing, which led to the worst inflation in decades, you know, in 2022 and 2023. If you are a non US country and you have, you know, your central bank and you have your diversified portfolio of different currencies, you're probably not very happy with your USD um depreciating 10% year-over-year, which is why you're looking, you know, you're looking to diversify from it.

This specifically intensified when we're tying in our second point, which is, you know, the current geopolitical situation. Every day there's something crazy going on in the news which you know I think most of you have noticed. It specifically intensified after Russia invaded Ukraine in 2024 2022 and they got sanctioned. They got cut off from Swift and 300 billions of Russian assets were frozen in the EU. To this day these funds were not giving back to Russia.

I'm not here to talk about you know the political side of things or the moral side of things but purely from the monetary and fiscal side. If you are an eastern country, right? If you're China, if you're India, maybe you're Iran, um Saudi Arabia, you're a country in the Middle East, if you're any non-NATO country, then you're looking at this and you're thinking, okay, so if I do something where I misbehave, chances are there, and you know, it's not guaranteed, but chances are they will cut me off from the banking system and they will take away all of my funds in the developed markets. Next thing you know, you start looking at your balance sheet and you actually are overinvested in the developed market. So you once again you need to diversify away from it.

Side note like random thing who here have been following the price of gold recently. All right, that's that's a lot of people. So you guys would know what I'm talking about. The price of gold right now is at $3,800 which is the all-time high. Gold is 40% year-over-year.

It's growing 40% year-over-year, which is, you know, it's pretty good. 40% year-over-year, even by crypto standards. Like, oh, that's that's pretty good. But keep in mind, gold is the biggest asset in the entire world. It's 10 times bigger than Bitcoin.

It has $20 trillion in market cap, and it grew 40% year-over-year. What type of buying power can drive gold to go 40% year-over-year? Governments. So, for those two specific reasons, they were diversifying their balance sheets from developed markets to gold. They were drawing it 40% year-over-year.

And for that exact reason, let's tie it back to the crypto. They're buying now Bitcoin. You're asking, well, you know, they're buying gold. Why are they buying Bitcoin? Bitcoin is a better version of gold.

It's more scarce. There's only 21 million of Bitcoin. While you can still keep finding gold underground, it happens every now and then. And you can transact with Bitcoin, which you cannot do with gold. If you know, Russia and China, they have tons and tons of gold, you know, somewhere underground in their vaults, nicely secured.

And, you know, it's nice. It's nice and it's pretty good. But, you know, you go and try to pay for, you know, I don't know, rice or some random raw materials in the international trade and you need to send five tons of gold to China. Good luck. It's not it's never going to happen.

Which is why they're diversifying into Bitcoin because this is something that can be settled in the international trade. So, what do they think about different cryptocurrency? As I mentioned, crypto is not a single asset. It's a lot of different assets and different subclasses of those assets. So let's go through each of them and understand what do institutions think about different of them.

We already covered that pretty much bitcoin uh is seen as a digital gold by both institutions and private institutions and governments. Governments are diversifying their balance sheet. Um private institutions are pretty much doing the same thing. So in this way they're aligned. Now when we talk about the RWAS, this is when things get a little bit more interesting because this is the part where they're trying to rebuild uh the current system that they have.

Um I don't know how many people here have been using the traditional brokerage systems. I don't know if anybody here has been using the interactive brokers. This is the clunkiest and the hardest to use system in the entire world. and everybody knows it. Which is why the current idea is to tokenize every single thing from the traditional markets on chain.

It starts with equities. It starts with stocks. You can tokenize metals. In fact, Tether has been doing it. There's already an available uh tokenized gold.

I believe it's on Ethereum. A couple of other private companies have tokenized gold. You can keep doing it with silver, copper, diamonds. put everything on chain. You can keep doing it with the commodities, oil, livestock.

I guess the the point which is the most interesting to try to fight people when it comes to tokenization is the tokenization of private equity and private credit and things like fine art because those are the investments that are usually available only to the institutional investors. But if it can get tokenized and put on chain then it can get democratized and the retail investors ple just like us can get an access to them as well. That's why private institutions are really bullish on this. Governments are not really this is outside of their realm. They really don't talk about that.

When it comes to other cryptos, this is when the mental model really shifts because so far we've been talking about Bitcoin. And we've been talking about you know bitcoin they they think look at the bitcoin they're like oh fine that's just digital gold right the analogy is there very easily to understand when they think about the rwas analogy is also there you think like hey it's already an existing asset in the real world let's just tokenize put it on chain let's get our market share let's get like nice commissions and fees let's make money out of it makes sense when it comes to other cryptos you cannot draw a parallel between you know an existing asset and you know try to implement your existing frameworks to it. Try to think about Ethereum or Salana or Avalanche, Polygon, you know you you can keep going about different L1's, L2s, unis swap token. You can go into the meme coins. You cannot say like hey they're behaving exactly like stocks and we can measure it you know in a you know through this discounted cash flow model or through you know those different you know trafi models.

You can't really do it. Tati people can do it. Frankly, crypto people cannot do it as well. There's there's no way to properly measure the fair value crypto assets. It's a very very new industry which is why governments are usually skipping on those investments.

Uh but private um but private institutions are every now and then bullish on them and they usually use the venture capital framework. So if you're familiar with how VCs work, they usually approach, you know, early stage startups from the perspective of, hey, who's the founder? Can I bet on that founder? Can I what's the trend there? What's the total addressable market?

And then you do your like the probability distribution of this working out and then you invest in it. That's how majority of private institutions view crypto. The other side of it are the quant people, but I'm going to leave it outside of the discussion. Stable coins. This is an interesting one.

Um I decided to put this as a separate category because both governments and private companies are actually interested uh in them but for different reasons. Private companies are interested in stable coins for the same reason they're interested in other cryptos. They view it through the fintech perspective. You know, if you've seen a circle going IPO, it's another, you know, altcoin season type of growth. Um they it's a a trillion dollar total addressable market which is why every single institution and their mother are currently looking to launch a stable coin just to try to capture a small market share.

If they can capture a small market share you know 10 20 billion 30 billion that'll be fine for them and that will justify their investments. So it's just pure capitalism. But from government perspective, this one gets a little bit more interesting because governments use it as a they view it as a strategic way to expand their influence on the world. And think of it from this perspective. Let's let's think about, you know, the US.

Um you know, everybody's familiar with the dollar. um I'll call it USD fiatcoin in this context. The US has approximately what 300 400 million population. So from the perspective of the US government, there's 300 to 400 million of USD fiat coin holders. This is something that they can work with.

All right, cool. Uh dollar also happens to be a world reserve currency, which means that majority of international trade is held in dollars. Majority of investment is held in dollars which means you know like when we try to buy stocks or certain funds we also do it in dollars. We have to hold some sort of dollars. So it means that not only their uh population uses dollars but the people from outside of the their country also uses dollars.

That's that's also the holder base of their USD fiat coin. When it comes to stable coins, right, USDT, USDC and the other ones, the opportunity here is to even further expand the market of USD fiat coin holders. And this really targets the retail, the regular people in the emerging markets. I'm talking places like Latin America, talking places like Africa, Asia, Central Asia. I'm personally from Kazakhstan.

I've spent 18 years there. And we have our local currency is called 10. And when I was a kid, you could exchange $1 for 150 10K. Today, the course is $1 for approximately 500 10K. It took about 15 years.

So the course crashed for you know approximately 300% from 150 to 500 and we're not even taking the inflation into the account of like 10 15 20% a year. So what it means is that holding a 10 is actually like a really bad idea. Like if you live in Kazakhstan and you hold 10 gay for 10 years, you probably lost a lot of your purchasing power. Which is why and Kazakhstan is not the only country you can go to any country in the Africa, any country in Latin America, any country in the Middle East, not any country, but most of the countries in the Middle East, very very unstable currencies, very very unstable currencies. And the governments there are usually not allowing people to sell it for dollar or they're putting a lot of limitations to sell it for dollar because obviously they want the population of their countries to hold their own currencies.

The opportunity that the tether and circle and the others are opening for the population in those countries is to get the access to dollars. you are switching from your unstable currency to a more stable currency which is USD and then you can put it on a you can put it on you know commino or some other lending platform and get you know 4% 5% API per year that is a great investment proposal for anyone in the emerging countries what it means for the US is that they're expanding the holder base of the USD fiat coin not only through their own populations but through the populations of other countries which actually like what it ends up happening is that if more people buy dollar then the relative strength of dollar goes up in the FX market now for different macroeconomic reasons which I I won't have time to explain it to you mo most of the time the US government doesn't want a strong dollar they want actually a weaker dollar or they want a balanced dollar so whenever there's an expanded holder base of the dollars and the strength goes up, they're incentivized to do something to decrease the value of dollar. And what they're doing is they're printing more money. So what it means is that the stable coins expanding the coverage of dollar across the world actually opens the opportunity for the US government to print even more money and finance whatever the needs that they have um to achieve their strategic goals, which is why they're really bullish on it. Uh the current uh Treasury Secretary Scott Bassant, he's actively campaigning for he was campaigning for the stable coin regulation.

It actually went into the law with the Genius bill a couple of months ago and he's still very bullish. He's actively working on that. So to summarize, both institutions and governments are really bullish on this thing, but for different reasons. institutions are trying to build companies which they can profit from but governments are looking to use this to expand the holder base of their fiat currency so that they could have more leverage in their uh fiscal policies. um what does it mean for all of us right?

So if you are trying to build your portfolio nowadays and you think well how can I get on the same hype train with the institutions and make sure I don't miss out and get you know the alpha from what they're buying as well. The main points are Bitcoin, gold, blue chip, cryptocurrencies that are working in tandem with the treasury companies and the technological stocks. That is all on my end. Thank you all for listening. [Applause] [Music] Heat.