More Fund Managers and Advisors Will Gain Exposure to Bitcoin Through ETFs
More fund managers and advisors will gain exposure to Bitcoin through ETFs. We may see a wave of cryptocurrency ETF approvals, although it will be a “survival of the fittest” competition, with some succeeding and some not. This means more capital will flow into these assets, especially with no pressure like GBTC or ETHE as before. Last time we had to deal with a lot of redemptions, but now everything is net new building. So, I think these trends are setting up for the second half of 2025, when everything will look very bullish, especially now that the meme coin frenzy has subsided, so there’s nothing negative or scary weighing on cryptocurrencies right now. We are like ready. But I think this is still a situation of “the tail wagging the dog”: in a world where risk assets are indiscriminately sold and investors are fearful, cryptocurrencies cannot succeed. I really can’t see how these two can coexist. Perhaps Bitcoin will rise slightly due to decoupling, I still have doubts about it, but I think we still need to get through the current moment if we want to see these things realized in the second half of the year 2025.
James Seyffart:
Yes, I’ll stop here. In fact, the situation is far worse than you think. As for what you said about Bitcoin, honestly, before the election, my view was that no matter what happened, Bitcoin would be fine. It didn’t try to replace some things that the SEC has been chasing after like decentralized finance (DeFi), so it won’t automatically be classified as a security. Bitcoin was not a security to begin with, and even Ethereum has not been classified as a security by the SEC under the Biden administration. I agree with your view, I think Ethereum’s endorsement is much more complex than Bitcoin. If you ask me, even on our own podcast, I used to think that a Trump victory would be more favorable for assets in other categories like Ethereum and Solana, because they are doing a lot of things and they are trying to do things well. However, under pressure from regulators like the SEC, CFTC, OCC, many things cannot be done, and these agencies have been consistently opposing this innovation.
Bitcoin is digital value storage and transfer, and it has already completed this aspect, and most of the time it has not faced much opposition, right? But as you said, the advantage of Bitcoin is that its acceptance is much higher. Bitcoin’s narrative is very easy to understand. It is digital gold, digital value storage. I see it as an option for digital value storage, although it has not been fully realized, it is still a risky asset. Can it happen in the future? Some say it can’t, but I think, without a doubt, the likelihood of it happening has increased from a price perspective. Whether it really happens is another discussion, but undoubtedly, the market has made a decision, and the likelihood of it happening has increased. That’s my view. So, I think all these factors and different platforms starting to accept and promote Bitcoin will make the promotion of these other assets slower.
We were very bearish on the amount of assets Ethereum ETF could get, compared to the loyal supporters of cryptocurrencies and Ethereum. Compared to the Bitcoin maximalists, they say Ethereum ETF will get almost nothing, but we think it will get funds in proportion to Bitcoin’s market value. In fact, we even underestimated this proportion, as the launch of Ethereum ETF in the United States experienced net outflows due to the EPE pressure you mentioned, until Trump’s election changed that. Earlier this year, they went from outflows of $60 billion to inflows of $32 billion, but since then, part of the funds has flowed out again, especially at the end of January and early February. So, the promotion of Ethereum is indeed more challenging. If you listen to different people’s views, they would say that investors holding “Magnificent Seven” stocks should have some of their funds exposed to sh*tcoins like Ethereum, Solana, or other altcoins that have submitted ETF applications, which is the actual promotion. But in reality, promoting this is much more complex than promoting Bitcoin, as you mentioned earlier, Bitcoin’s dominance is gradually strengthening.
The Performance Difference Between Bitcoin and Cryptocurrency Company Stocks: Why Are Coinbase and MicroStrategy Performing Better?
Andrew Yang:
I am also curious about your views on another issue, the performance difference between Coinbase and some other cryptocurrency stocks and Bitcoin. Like Bitcoin and MicroStrategy, they have performed significantly better than some other cryptocurrency-related stocks and assets in the past three to six months. Their performance is far superior to other cryptocurrency-related areas, while those cryptocurrency-related stocks seem to have little reaction. I want to know how you see this difference.
James Seyffart:
I think this goes back to the issue of risk with other cryptocurrency assets that I mentioned earlier. MicroStrategy is an independent entity, it is a leverage play on Bitcoin. Coinbase, on the other hand, is like an index fund for the cryptocurrency space, at least in some ways I think so. But overall, Coinbase is an investment in a broader cryptocurrency ecosystem, while MicroStrategy is entirely dependent on Bitcoin.
Another issue is that, although I say Bitcoin is a risky asset, when you have a company doing a lot of other things and it trades on the stock market, the situation is different. It’s like real estate investment trusts (REITs), or other assets I mentioned earlier, where the value of the stock does not always perfectly reflect the underlying value. The market is not completely efficient, its value does not come from the discounting of future cash flows, but it fluctuates with the overall market risk. In this case, I think Coinbase is affected by this, the stock price has been dragged down, time will prove this. But in terms of optimism, there has never been more optimism about them. They have won case after case in court, but that doesn’t mean they will make more money if the entire cryptocurrency ecosystem continues to lose value.
Yes, that’s right. In fact, that’s why I’m most looking forward to the IPO frenzy, hoping it will happen, because it will add more diversity to the investment landscape for cryptocurrency companies. Because right now, the market mainly has Coinbase, which is the largest exchange and the creator of Base, they have a range of assets, and also some cryptocurrencies on the books, but most importantly, a brokerage firm. Then there’s MicroStrategy, as you said, it’s a leverage play on Bitcoin. Then there’s the entire mining sector. In fact, there are also several issuers that are mining companies, but they are now more traded as stocks of AI data centers rather than as cryptocurrency companies, which is one of the reasons why they are not performing as well as Coinbase, Bitcoin, Ethereum, etc. Because the decline of cryptocurrencies combined with DeepSeek news completely disrupts the entire investment logic, making it challenging to invest in these companies because you don’t know which other companies to invest in, right? So, having more choices in the market is very important to me, it will help broaden the investor base, as there will be more real companies to invest in. I think this will help the healthy development of the market.
James Seyffart:
I completely agree with what you said. I would like to add that mining companies, especially gold mining companies, particularly small gold mining companies, are similar to Bitcoin mining companies. Although these Bitcoin mining companies are not small companies, if you look at their stock trading in the U.S. market, they are still relatively small companies. These companies operate in a similar way, depending on their fixed costs, if they can grow at scale, they can make larger profits. One of the most volatile products in the world is a triple leveraged small gold mining company ETF. It includes many small mining companies. You see these companies with extremely high volatility because their profits are highly dependent on the fluctuation of gold prices. If their fixed costs account for a certain percentage, when the gold price rises to a certain level, exceeds their costs, their variable costs will also increase, but they can still make a profit, and then as the price continues to rise, it becomes leveraged profit. Bitcoin mining companies are also in the same situation.
Personally, I think many of these companies are not the best companies in the world, they are completely dependent on one factor. If your energy costs rise or something like that, the risk is great. Therefore, I think this is another reason why many people understand this, when they see these companies, they will find that these companies are highly capital-dependent, and involve many other issues. So, I usually think that they start to diversify, move towards a more general direction, like AI computing, rather than just Bitcoin, which is a good thing. I think the most successful companies will be a combination of both, like if they don’t use it for AI computing, you can use that energy for Bitcoin mining, and so on. But obviously, I’m not a mining analyst, but for those trying to figure out why these companies are so volatile, they are basically leveraged investments. Once the Bitcoin price exceeds a certain point, and the company’s mining costs are determined, for them, this is like a leveraged exposure to the rise.
Alex Tapscott:
Yes, I think AI and cryptocurrency are separate but related technologies. There is some intersection between them. You need computing power to secure these blockchains, at least with Bitcoin, and you also need computing power to handle all the AI-related work. So, it’s really interesting to see how they develop together.