39 - Grayscale: $10B Bridge to Crypto | Michael Sonnenshein

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- 📢 DEVS OR BUILDER? APPLY TO FILECOIN ACCELERATOR FOR $20K GRANT http://bankless.cc/filecoinapply ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️LEDGER https://bankless.cc/ledger-20%20 - BEST HARDWARE WALLET TO SECURE CRYPTO https://bankless.cc/ledger-20 💳 MONOLITH https://bankless.cc/monolith - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🚀 ZERION https://bankless.cc/zerion - INVEST IN DEFI FROM ONE PLACE (download it now!) https://bankless.cc/zerion 🤖YEARN http://bankless.cc/yearn - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn ------ Michael Sonnenshein is the Managing Director at Grayscale Investments, the largest digital currency asset management company by far. You may have seen a GBTC or ETHE products in your Schwab account, a way price exposure to ETH and BTC ...wondered what those things are? We're going to talk about that today with Michael. Grayscale has built a bridge for almost $10B to flow into the crypto world, by working inside the legacy system, rather than outside of it. Listen to this podcast to see how Grayscale is helping promote crypto! Retail products: What Greyscale products can the average, unaccredited retail investor buy today? What’s the difference between GBTC/ETHE and an ETF? What are the fees? Accredited investors products ($1m in assets or $200k per year) How do accredited investors power the Grayscale trust? What narratives that are driving the inflows? What are the most popular products with this group? Bitcoin Trust: $39.5 million Ethereum Trust: $9.0 million Large Cap Fund: $1.1 million Bitcoin Investor Study - what were the takeaways? Size of Greyscale relative to supply How much BTC supply - 400k in June (3-4% of all Bitcoin)? As a proportion of mined BTC? How much ETH supply do you own? Can Grayscale do a staked ETH product? Any other yield-bearing products? What’s Greyscale’s next move? Expanding more outside BTC? Getting acquired? AUM size? Specifically with DeFi? Action items: Read reports Bitcoin Investor Study https://grayscale.co/insights/bitcoin-investor-study-2020/ If you’re looking at GBTC or ETHE in your portfolio premium vs spot price first: https://ycharts.com/companies/GBTC/discount_or_premium_to_nav https://ycharts.com/companies/ETHE/discount_or_premium_to_nav 5 - star reviews the podcast! ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, what did you think about today's episode?

• 0:34David Hoffman?

  This episode with Michael Sun and Shine, I thought was really fantastic. I've listened to a number of different episodes with Michael and other members of the Grayscale team about what Grayscale is and what they do. But I never really felt satisfied with other podcasts and how they approach the subject matter of Grayscale and how Grayscale fits into the rest of the cryptocurrency ecosystem. So Ryan, I actually thought you did a fantastic job as host on this podcast. And so tip of the hat to you. I think the flow of conversation and the topics and some of the things that we talked about really did a fantastic job putting into perspective first what Grayscale is and then also its role and relationship to Bitcoin and Ethereum.

• 1:15Ryan Sean Adams?

  Yeah, I think part of this, David, was like, I don't think people totally understand what GBTC is and what ETH are. I got a text from a friend of mine, he's actually an investor. And he's like, hey, I own some ETH and Bitcoin on Coinbase, but I noticed this GBTC and this ETH in my Schwab account. What the heck are they? And so these are, of course, Grayscale products that you can buy inside of a brokerage. I think we spent a lot of time in the first part of this actually talking about what those products are. Are they real crypto? Do they represent crypto? Who has the private keys? Who secures them? How are they priced compared to buying it on spot?

• 1:57Ryan Sean Adams?

  So I think this will be pretty handy for you if you're a retail investor and you're like, hey, I want some exposure into these assets. Should I buy them on Coinbase or some spot market? Or should I? I buy them inside my brokerage, these these grayscale assets, buy them that way. Sort of starts to answer that question. Then we got to talking about how the institutions are coming. They're already here and what they think about things like DeFi and ETH as an asset, which started to get really interesting in the second half, too.

• 2:30David Hoffman?

  When Michael came on to the podcast and before we started recording, I can't kind of gave him the pitch of what bankless is, right? And so I told him that the through line throughout bankless is, you know, how do we live a life with crypto assets and to create a world without banks, right? Which is actually kind of something I think from the grayscale side of things, might be kind of a weird thing to hear. But and that is kind of a little bit true, the the bankless through line and also the grayscale product are a little bit at odds with each other, right? Because grayscale and its relationships with with banks is it's a very bank friendly product, bank friendly environment. But, you know, I think in in the bankless world, we like the banks that like crypto. And that's exactly what grayscale is, right?

• 3:12David Hoffman?

  And to me, what grayscale is, is this gigantic coupler between the crypto world and the legacy finance world. And grayscale is doing a really fantastic job of helping the narrative of Bitcoin, helping the narrative of Ethereum and cryptocurrency really mature. And they have done a fantastic marketing campaign, literally for the cryptocurrency industry, right? Promoting the the the value and merits of crypto to the greater world. And so as far as a financial institution goes, we like grayscale.

• 3:43Ryan Sean Adams?

  Yeah, that's that's interesting that you put it that way because, you know, I I agree with you too. Look, great, I'll be the first to say grayscale is not fully bankless. It is a banked crypto option. However, you know, you've used this metaphor so often of like who who's on the boat, like Noah's Ark and and sort of the flood. Well, grayscale is like the bridge to the ark. It serves as a very useful function to start getting liquidity and start getting value inside of the crypto ecosystem. Now, if we just stay on on that bridge portion and we never actually get to the fully bankless ark, I think that's a big problem. And and personally, that's why. Have a problem with the way Bitcoin is scaling.

• 4:23Ryan Sean Adams?

  It's a lot of the Bitcoin scalability measures seem to happen within custody, within crypto asset banks, within, you know, grayscale type investment vehicles. But I don't think that's where the world is going to camp out and stay. So this is a great first step. And I'm actually like optimistic about what grayscale is doing to help get people on the arc and on the path towards going bankless. You know, Bitcoin and some of these products in a retirement account, that's just the gateway drug. People aren't stopping there. They're going to dig deeper. They're going to discover how to be fully self sovereign without using a bank whatsoever. And that is my hope and why this I think is a really useful episode for us.

• 5:03David Hoffman?

  Grayscale's assets under management have absolutely exploded. They have seven and a half billion dollars under management. And I think there's going to become a really interesting friction, maybe, maybe I'm just speculating here, but between grayscale and the United States, right? Because grayscale is making it really easy to purchase Bitcoin, right? And as a financial tool that is kind of diametrically opposed to the dollar and the Federal Reserve and money printing. It's kind of, there's this interesting relationship between grayscale's growth and the the power of the dollar. When grayscale gets bigger, I see it as, you know, the dollar weakening. And that's and grayscale is doing it from inside the United States, right? The call is coming from inside the house.

• 5:48David Hoffman?

  We didn't talk about this subject with Michael, but I think that is going to be something to pay attention to moving forward.

• 5:55Ryan Sean Adams?

  Yeah, I think the truth is right now that nation states are not worried about crypto eroding their reserve currency status at the moment. You know, they're worried about breaking SEC accredited investor rules and that sort of thing. They're even worried about Bank Secrecy Act sorts of things. But that could certainly change. Like when we talk, when we talked to Michael and he said, hey, the majority of people who bought crypto within the last nine to 12 months or so, they bought it because of COVID, because they were concerned about money printing from the Fed. That's why they bought it. As soon as nation states start to feel that pressure on their reserve currency status, you can bet they're going to start to turn their eye on crypto

• 6:40Ryan Sean Adams?

  and all of the crypto banks that power the ecosystem.

• 6:44David Hoffman?

  If there's one big takeaway from this podcast is that grayscale is going to help number go up. With no further ado, let's go ahead and get into the podcast. But first, we're going to talk about some of the fantastic sponsors that make this show possible.

• 6:58David Hoffman?

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• 7:38David Hoffman?

  Zerion also makes it super easy to access interest in DeFi using applications like Compound and Ava in the background. And you can also exchange your assets using the Zerion app, using an exchange aggregator in the background to make sure that you always get the best rates. You can even use the Zerion mobile wallet to add your MetaMask or Argent or another Ethereum address right into your mobile wallet, so you can see your portfolio and engage in DeFi on the go. Here, I just loaded up my Argent wallet, and now I'm going to load up my MetaMask as well. And Zerion will do the same thing. It will add all of my assets and wallets together all in one space and give me a portfolio summary of what's going on. Adding wallets is trivially easy. If you already have a MetaMask, you

• 8:20David Hoffman?

  can get it right into the Zerion app, and it can sync with your desktop app as well. And the best part is you can also buy Ether right into the app itself. Use the Invest tab to look at all the things that you have invested in, as well as other opportunities. And coming soon to the Zerion app is the ability to buy and sell your assets straight from your mobile device. So, download the app. It works on iOS and Android. Go to zerion.io, plug in your wallets, and get a historical report of your portfolio over time, as well as a comprehensive breakdown of all the assets that you own and how much yield they're generating for you.

• 8:55Ryan Sean Adams?

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• 9:40Ryan Sean Adams?

  It's optimized for European listeners. They'll be coming to the US soon. And when you get that Visa card, the Monolith card, tweet about it when you do. I love seeing people unpackaging their beautiful bankless Visa cards. It makes me realize that the revolution is here. Search Monolith in the App Store. All right, let's get to the podcast with Michael.

• 10:12Ryan Sean Adams?

  Bankless Nation, we are super excited to bring on the podcast, Michael Sonnenstein. He is the Managing Director at Grayscale Investments, which is the largest digital currency asset management company by far. You may have seen a product called GBTC or ETH-E in your Schwab account, your Fidelity account. These are products that are a way to give you price exposure to ETH and Bitcoin. If you've ever wondered what those things are, what they're composed of, how institutions see assets like Ethereum and Bitcoin. We're going to talk about all of those things with Michael today. Michael, welcome to Bankless. How you doing?

• 10:55Speaker 02

  I'm great. Thanks so much for having me. I'm looking forward to chatting.

• 10:58Ryan Sean Adams?

  Well, it's been a pleasure. You've been in this space for like, I think, seven years or something now. Is that right?

• 11:03Speaker 02

  Seven years feels like, feels like, oh, I don't know. I think what's the old adage now? A year or like a week in the digital currency world is like a year in the real world, something like that.

• 11:16Ryan Sean Adams?

  Yeah, so I don't know how old you are. That's like Methuselah age. You spent millennials in this space already, but you are now the Managing Director of Grayscale, which is closing in on something like 6 billion assets under management. Last quarter, you guys did about a billion in inflows. How does that feel?

• 11:40Speaker 02

  It's honestly been a true pleasure, and I'm really humbled by the opportunity I've been given to be a part of building and growing this business.

• 11:54Speaker 02

  I couldn't have imagined that we would see this asset class develop and flourish in the way that it has over the past seven years and riding all the ups and downs and stagnant periods. It's really been incredible. We're actually now, as of last night, at 7.5 billion dollars.

• 12:14Ryan Sean Adams?

  Oh, my God. That's partially because Bitcoin keeps growing in price, right? As well as inflows?

• 12:21Speaker 02

  It's not just inflows. I'm sorry, it's not just Bitcoin price appreciation. It's inflows. It's very, very strong, steady inflows. And I'm happy to dive into that with you guys today, but I'd also probably tell you that as proud as I am of being a part of this and really being a leader and helping to shape and mold the Grayscale business and seeing us grow. When I joined, we had 60 million dollars of assets. We now have over 7 billion, like I told you. I started, we had one product. Now we have 10 products. I'm probably more proud of the team of people that I put together. It's a really interesting, eclectic mix.

• 13:04Speaker 02

  Of forward-thinking, thoughtful, caring, intelligent, collaborative people. And I think everybody is really taking what they've learned, working for the most part in the traditional finance world at banks and applying some of those best practices and leaving some of those worst practices behind to build, you know, what we think is the asset manager for the next generation of investors.

• 13:31Ryan Sean Adams?

  It's got to feel like you've been right about a few things in crypto, too, right?

• 13:36Speaker 02

  I guess you could say that. I attribute a lot of it to luck and, you know, happy to talk about what my journey was getting into crypto, but, you know, a lot of it is just, you know, time and place and good luck.

• 13:47David Hoffman?

  Well, Michael, congratulations on all the success. If we were to wind back the clock, like maybe a year or two years, and if somebody told you that in the future, you're going to have $7.5 billion assets in management, what would your reaction have been back then?

• 14:06Speaker 02

  I'll believe it when I see it.

• 14:09David Hoffman?

  Was that going to be a believable number? Or was that something that you actually could foresee happening at that time? Or has this kind of just blown expectations out of the water?

• 14:19Speaker 02

  No, it was always within reasonable grasp. It was just a question of how fast we would get there. You know, even today, talking to you at $7.5 billion, underpinning the Grayscale family of products, I still have to say, it still just feels to me like we're only getting started.

• 14:42Ryan Sean Adams?

  That's super impressive, but I think anyone in crypto knows those words very well because we say them often. Crypto is just getting started and therefore, Grayscale is probably going to be a big part of that story. But, you know, before we talk about institutions and inflows, I actually never heard you, Michael, on a podcast, talk about products from a retail investor perspective. And that's where I think we'd like to start, talking about the products themselves, but like putting a retail investor hat on. So if I'm somebody with a Schwab account or a Fidelity account, some sort of a brokerage,

• 15:21Ryan Sean Adams?

  and I'm based in the US, what do Grayscale's products actually look like to me? So how, can we start there? Maybe like, how does a retail investor buy your products in their brokerage account? What does that look like?

• 15:38Speaker 02

  Happy to talk through that. So, you know, for us, we now have 10 products underpinning the Grayscale family. Nine of those products facilitate exposure to a single digital currency. And the 10th product is a diversified basket of large-cap digital currencies. And so we think of the Grayscale product lineup as really almost like a toolkit. And every investor uses the tools within the Grayscale toolkit in a different way. Some investors only use one Grayscale product. You know, every quarter that passes, we see more and more investors adding more Grayscale products to their portfolios and inherently diversifying their exposure within the crypto

• 16:22Speaker 02

  space. But it's, it's, it's a unique constituency of products, and I think we're really serving a broad base of investors. So it's important to make a couple distinctions as I talk about this. I want to try and be as clear as I can be. We continue to raise assets on a primary issue inside, so new, new assets, new shares of our products being created through ongoing private placements. So if you're an accredited investor, so these are mostly high net worth individuals and family offices, hedge funds, institutions, they come directly to Grayscale and can buy

• 17:05Speaker 02

  shares of any one of the products at the product's daily pricing, at its daily net asset value.

• 17:12Speaker 02

  What we've done, though, is we've also made these products available to the public market. And so, so far, six out of the 10 products that Grayscale is responsible for managing and sponsoring have also been "turned on," having public quotations in the US market. And so, those products are for Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, as well as our diversified fund I mentioned, the Grayscale Digital Large Cap Fund. So, if you're an investor, whether you're a large investor, a small investor, you have a lot to invest, a little amount to invest,

• 17:55Speaker 02

  you can go to your brokerage account or retirement account and buy any one of those products in any size or for any period of time that you may want to. And for a lot of investors, that's been a really easy, accessible way for them to gain digital currency exposure in those types of accounts alongside the other assets they're invested in, whether those are stocks like Netflix and Apple and Tesla, or bonds, or whatever it may be. So, we really do serve a whole broad swatch of the community, but it is definitely worth noting that the products on the public market

• 18:34Speaker 02

  have historically and currently do trade at a premium to their actual net asset value. And so, it's something for investors to be aware of, because that means they are buying exposure, oftentimes and historically, at inflated levels of varying degrees. And it's also important to note that we, as a firm, aren't involved in the public trading side of our products. So, the price at which, you know, you mentioned GBTC or ETH, the public ticker symbols for our Bitcoin and Ethereum products, earlier, as we were talking, those products' prices every day in the market are always being driven by market forces. And so, we're not involved in setting the prices or maintaining the prices of those products.

• 19:20Speaker 02

  So, just something else for people to note as they're thinking about it.

• 19:22Ryan Sean Adams?

  Super cool. We're going to get into all of that and I want to camp on this for a bit. So let's keep with our retail investor product on hat on, rather, somebody who has a brokerage account, like any brokerage account, the way you'd look up an Apple or Netflix, you can look up something called GBTC, which essentially gives you price exposure to underlying Bitcoin, the underlying Bitcoin asset, or ETH, ETH E, so E T H E, you can type that into Schwab and get an asset that has price exposure to, to Ether, the asset, of course, it's not the same as spot price exposure. We're going to talk about all of that.

• 20:02Ryan Sean Adams?

  So one quick question before we get in, is this available for international investors too? Or is this kind of US only?

• 20:10Speaker 02

  Oh, no, it's available to anybody on both sides. So on the private placement side, about half of our investors are offshore. And on the public market side, certainly no, no reason that investors all around the world, so long as they can access the US securities market, they should be able to access these products as well.

• 20:32Ryan Sean Adams?

  Okay, and then one nice thing we talked about is you can access them in a traditional brokerage system that you might have, but, but of course, a lot of retail investors, they have the majority of their, their assets in retirement accounts, 401Ks, IRAs, that sort of thing. And they can get, they can get these products inside of those retirement accounts, which is, which is kind of nice. And these are sort of the only large products that, that I know of in order to do that. But one question, I mean, people are used to buying things like ETFs, right? And, you know, generally investors with brokerage accounts, they understand what an ETF is. But what's the difference between a GBTC or an ETH E and ETF?

• 21:14Speaker 02

  Well, so ETFs are different structurally. So they have, you know, constant creations and redemption programs. Meaning that there are participants in the market that are constantly creating and destroying shares. And those forces act to always keep the product as much as possible in line with its actual value. The other difference, because we don't operate a redemption program, is that our products trade on the OTC market, which is where a lot of foreign companies trade in the US.

• 21:55Speaker 02

  Companies like Roche and Adidas and Volkswagen, et cetera. That's where the grayscale products are quoted, as opposed to a national securities exchange like the New York Stock Exchange or NASDAQ. So those are probably two of the biggest differences of our products against what they would be if they were ETFs. Although, it is worth noting that both Grayscale Bitcoin Trust and Grayscale Ethereum Trust are the first two and the only SEC reporting companies with respect to the digital currency investment product space. And what that means is that they file 10 Ks and 10 Qs and have the same reporting obligations

• 22:38Speaker 02

  and standards as investors are used to seeing for other public instruments or public companies. So they're about as regulated and have as much oversight and disclosure obligations as investors should see for other things they invest in.

• 22:53Ryan Sean Adams?

  All right. So that is one, I guess, element of transparency is basically they have the same level of transparency as, you know, a stock might have. But when they're buying a GBDC or an ETH, any of these products, I want to get into like, what are they actually buying? So first, where are the private keys actually held? So if I'm buying, you know, Bitcoin or ETH on Coinbase, then Coinbase is custoding my private keys, of course. And then if I request... Those to be sent or redeemed to a Bitcoin or ETH address that I hold, then Coinbase will go and do that.

• 23:32Ryan Sean Adams?

  But in this case, you know, if I have one of these products in my brokerage account, they can't ever be redeemed for the underlying. Is that correct? And then where are the private keys actually held?

• 23:43Speaker 02

  That is correct. So the two products you're talking about, the Bitcoin product and the Ethereum product, they're each just solely and passively invested in the digital currency for which they're named. So Grayscale Bitcoin Trust holds nothing but Bitcoin. Grayscale Ethereum Trust holds nothing but Ethereum. These products don't use leverage, they don't use derivatives, they don't even have a penny's worth of cash inside of them. They're just passively invested in the underlying digital assets themselves. And Grayscale Custody is the underlying assets underneath all of our products in the Coinbase Custody Trust Company solution.

• 24:23Speaker 02

  And that is, you know, a cold storage solution that, as you may imagine, involves many, many, many, many, many different signatories, parties, time delays, all kinds of things to be able to access any of those coins. So no, investors do not own the Bitcoin or the Ethereum directly. They're owning shares of a trust and that trust owns its underlying digital currency. And that's how investors are getting that exposure.

• 24:52Ryan Sean Adams?

  This is kind of like owning shares of some sort of a, like a gold trust. You know, you already gave the distinction between like an ETF and a trust and why this is different. But lots of people are familiar with gold ETFs or maybe there's even gold trust. I'm not sure.

• 25:06Speaker 02

  Yeah, or if you wanted to gain exposure to oil, there's a product that gives you exposure to oil or to healthcare.

• 25:12Ryan Sean Adams?

  Yeah, and somebody's custoding that, right? So like the gold that you're buying is eventually it's, you know, in some big vault somewhere in London, right? But you're buying exposure to that gold, but there's a, there's an underlying, I don't know, Lloyds of London? I don't know who does that, but there's an underlying vault somewhere that actually holds the physical gold, right?

• 25:30Speaker 02

  Correct. Yeah. I don't want to tell you that that's true across the board because some of the products you're referencing do use derivatives and aren't one for one. I can, you know, say with assurance that our products are fully invested in and backed by the, the digital asset that we're, that we're, you know, naming each product for.

• 25:52Ryan Sean Adams?

  Okay, so now let's get back to keeping our retail hat on. Let's get back to the fees, right? So obviously, when you buy crypto on Coinbase or something at spot price, you might be paying some transaction fees to a Coinbase, for example. But you're not paying annual management fees after you make that purchase. But these products do have an annual management fee. Is that correct?

• 26:15Speaker 02

  They do. The same way all investment products do.

• 26:19Ryan Sean Adams?

  Got it. And that fee is what, like 2.5% or so, or does it range?

• 26:23Speaker 02

  It depends on the product. The Bitcoin product has a 2% fee. The Ethereum product has a 2.5% annual fee.

• 26:30Ryan Sean Adams?

  Gotcha. And I imagine some portion of that goes to like pay for custody, but also general administration of these products themselves by grayscale. Is that correct?

• 26:39Speaker 02

  Yeah, I mean, that's the only fees that there are. There's no upfront fees. There's no backend fees. There's no performance fees or carry or anything like that. And actually, investors often ask about this. So it'd be great to set the record straight with your audience, which is that if you invest in these products, it's not like you're going to get some separate bill for the management fee or that somehow what you're investing, something is being deducted away from you. It actually is all behind the scenes. And what I mean by that is that the management fee accrues daily in the digital currency itself. So if you buy a great-scale Bitcoin trust,

• 27:24Speaker 02

  and that has a 2% annual management fee, well, every day of the year, the Bitcoin-to-share ratio decays by 1/365 of 2%. So we actually take the management fee out in the underlying Bitcoin itself. So just want to set the record straight on that so people don't think it's anything other than that, which is truly the way most commodity-based or a lot of similar investment products structure their management fees.

• 27:57Ryan Sean Adams?

  Michael, does that mean that grayscale pays itself in Bitcoin and Ether as its profits?

• 28:04Speaker 02

  It does. Our revenues are derived solely from our management fees, so we are taking the price risk on the underlying currencies themselves.

• 28:14David Hoffman?

  So when Bitcoin goes up, when Ether goes up, Grayscale actually is, well, you guys just have as much exposure to the industry as anyone else. I think that's actually a really great way to align the values of crypto with what you guys are offering. I think that's really cool.

• 28:30Speaker 02

  Indeed, it is.

• 28:32Ryan Sean Adams?

  Another thing that you mentioned on price, so again, keeping the retail investor hat on, right? So the one thing to keep in mind is the management fee, and I think folks know what that is. If they purchased mutual funds or stocks, they've seen those sorts of fees before. That's different than buying in a spot, of course. And the other thing that you mentioned earlier, and I want to dig back into this to make it clear, Michael, is that there can be a premium to NAV price if somebody is purchasing a GBTC or an ETH in their brokerage account, right? And you mentioned that's because there's a secondary market, right, for retail investors in the brokerage, essentially, and that's where

• 29:13Ryan Sean Adams?

  they're paying. You guys don't control that price, the market does. But it's something for retail investors to keep in mind, because I think I was looking this morning, maybe GBTC was about 15% over NAV spot price, something like that. But Ether has been up to 800% over spot price at some points this year. It's down a lot from that. But that represents a premium to what they could be purchasing ETH at, an 800% premium for what they could be purchasing ETH at an exchange. Is that correct? Anything more you'd say on that?

• 29:52Speaker 02

  It certainly is. Again, all of that's driven by market forces and not something that Grayscale is dictating or putting into the market.

• 29:59Ryan Sean Adams?

  Yeah, totally get it. But it is definitely something for folks to keep in mind as they're evaluating their investments here, because that can fluctuate up or down, and you guys really have no control over how it fluctuates.

• 30:13Speaker 02

  That's exactly right.

• 30:15David Hoffman?

  Michael, does that premium simply imply that there is so much demand for crypto that people are willing to pay that premium on the legacy stock market in order to have exposure to these assets?

• 30:27Speaker 02

  I think it really is driven by market forces, so it's really hard to say. You know, I think one thing that certainly may be attributable to driving that premium is the fact that, you know, there is, you know, no redemption program and this is, you know, really the way in which investors get liquidity is this robust secondary market. But also because of the novelty and the, I guess, yeah, I guess really novelty, you know, there are no other, you know, listed securities where investors can gain exposure to digital assets right alongside the other things that they're invested in.

• 31:06Ryan Sean Adams?

  It does seem over time that that premium does tend to drop, right? GPTC has dropped quite a lot in its history and even we're seeing ETH drop quite a lot. Is that kind of your general anticipation that it will kind of drop?

• 31:22Speaker 02

  It will be hard to predict. I think over time, you know, markets have a way of ensuring that that things get ironed out and, you know, information gets disseminated and we try to do our very best certainly to make people aware of, you know, all of these kinds of risks that relate to investing in products, whether they're ours or other investment products for that matter. And over time, I think the market works all of those things out.

• 31:51David Hoffman?

  You guys, there is so much left in this interview. We talk about Grayscale's Drop Gold advertising campaign, which has really been the biggest advertising campaign to come out of the crypto space to targeting the rest of the world. We also talk about the value proposition for Grayscale for retail investors as well as Michael's future predictions for how large the Grayscale Trust will grow in assets under management. But first, before we get to those conversations, we're going to take a moment and pause the interview to talk about some of the fantastic sponsors that make this show possible. When you own crypto, what really matters is the Security and ownership over your assets. Being a part of the Bankless Nation means having complete sovereignty over your crypto. The easiest way to do that is with a Ledger hardware wallet.

• 32:34David Hoffman?

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• 33:20David Hoffman?

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• 34:03David Hoffman?

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• 34:44David Hoffman?

  across the various DeFi protocols and regularly migrates your deposited stablecoins between the DeFi protocols that are returning the best yield at the present moment. Yearn is a system that is just a little over four months old, so things are still very much an experiment. However, this hasn't stopped people from depositing over $700 million worth of assets into the Yearn system in order to find yield on Ethereum. Perhaps the people that deposited all this money were tired of constantly making daily transactions to follow the best DeFi interest rates, and maybe the gas fees that they were paying ended up eating too much into their profits. With Yearn, it doesn't remove the risk of these various protocols that it leverages, but it does remove the overhead of constantly trying to make sure you're finding the best yield and also so that you

• 35:29David Hoffman?

  don't have to pay for gas to switch up your assets. Check out the products that Yearn has to offer at yearn.finance. That's Y-E-A-R-N dot finance, which they also have a nice statistics page to see what other people are doing.

• 35:43Ryan Sean Adams?

  So what do you think the value proposition overall is for the typical retail investor? You know, it comes to mind that one is, hey, you can really easily get some price exposure to these assets inside of your existing retirement accounts. So if you have lots of money in a 401k and you want to diversify into crypto, you can, you can kind of do that. So as long as your kind of, your retirement account is locked in the brokerage, this could be an attractive way to essentially put those funds to work in crypto. Is that the, the bulk of the value proposition, at least for these retail investors?

• 36:16Speaker 02

  I think that's certainly one of them. I think a lot of investors have no, you know, real understanding of the, the digital asset landscape because it's new, right? And that's, that's not their fault. And so I think they have difficulty figuring out where are the best places to buy or transfer or how to transfer, how to store, how to save, keep digital assets and, you know, to kind of, you know, go around or alleviate any of the aforementioned challenges. They have the ability to buy that same exposure, but through a, a titled security, which I think is just a much more familiar experience to them, not to mention, you know, doing it in a, in a tax advantaged manner.

• 37:00Ryan Sean Adams?

  You're saying like, so someone like my parents, for example, they're not maybe comfortable with creating a whole new account on this thing called Coinbase, but they're very comfortable with the brokerage and they're also scared of like private key management. This essentially gives that to them all in one package.

• 37:15Speaker 02

  Exactly.

• 37:15Ryan Sean Adams?

  Can we talk a little bit about the accredited investor side? So if that's how it looks from a retail perspective, accredited investors have a different set of options because they can buy these shares directly from you. And of course, in the US, there are accredited investor laws that mean an accredited investor is a person with over a million in assets or 200K per year. You guys, of course, didn't put these laws in place. They are such as they are in the US and I for one think that we need to rethink these laws entirely and not make them based on wealth.

• 37:53Speaker 02

  It changed a little bit. I don't know if you guys caught wind of this, but the SEC actually just updated the definition. So it has expanded and that does allow more people to then be considered accredited investors. Things like having certain types of licenses, like securities licenses and things like that. So they are rethinking some of that and I'm sure it will continue to evolve over time.

• 38:16Ryan Sean Adams?

  I hope they do and I hope they rethink it. Like my understanding is these newest changes open it a little bit, but it's kind of a crack in the window. It's still not giving the average retail.

• 38:25Speaker 02

  I think that's a fair assessment. It's a step in the right direction and I think we're right alongside you. You know, we believe in, you know, the democratization of the capital formation process and you know, people should have access to make certain investments. And you know, if they're sophisticated enough, et cetera, it shouldn't solely just be based on income or kind of network.

• 38:47Ryan Sean Adams?

  Yeah, absolutely. Okay. But so say there are accredited investors listening to this. They have a different option, which is they can buy these shares directly from grayscale. And then how does that work? Do they have to hold them for some period of time? And then essentially they can, if they want, they can exit them into the public market as GBTC or ETH-E and there's sort of an arbitrage opportunity there for them?

• 39:12Speaker 02

  So yeah, that's that's exactly right. So investors, if you're accredited, they can buy shares, newly created shares, the fund directly from us at NAV. And in our Bitcoin and Ethereum products, there's a statutory six-month holding period before they can sell those shares on the public market.

• 39:32Speaker 02

  And it's really as simple as that. Investors are doing this in a taxable way, in a non-taxable way, putting these in retirement accounts, et cetera. But there's, there's, you know, quite a few options there.

• 39:45Ryan Sean Adams?

  That's pretty cool because there, I guess, for that, for that class, there is a, an arbitrage opportunity there, there it seems like, because ideally, they'd be, you know, they could purchase at, at more close to NAV price, basically, and then sell it a little bit higher in the secondary market. That's, that's probably the, the carrot there for them. But when you guys are talking about inflows, and we, we sort of kicked this off in the intro, saying that you guys did a billion in inflows in Q3. Those inflows are all coming from these accredited investors, right? So you, you, you're not tracking the amount of purchases on secondary markets in brokerages and things like that. The inflows are actually coming directly from accredited investors. Is that correct?

• 40:27Speaker 02

  Correct. So when we're talking about raising assets or expanding our, our investor base, we're talking about new inflows from accredited investors, exactly.

• 40:37Ryan Sean Adams?

  So who are these investors?

• 40:41Speaker 02

  Well, I think one of the most interesting things about it is the fact that we are dealing, well, let me first say this. I think most people think that crypto investors are just one kind of individual.

• 40:56Speaker 02

  And, or one kind of entity, or someone with just, you know, a cert, very specific investment mandate. We actually are really empirical evidence of the fact that that is in fact not the case. So we deal with high net worth investors, family offices, hedge funds, registered investment advisors, financial advisors, endowments, pensions. It really runs the gamut. But I think what's even more interesting is the fact that it's not any.

• 41:28Speaker 02

  Any one kind of investor. So you have this maybe preconceived notion that it's people that are momentum traders or people that are, you know, technology investors. And actually, when you look at our investor base, it's everybody from global macro funds to risk arbitrage funds to venture investors. I mean, it's literally deep value investors. It really runs the gamut. So I think we like to try and make it as clear as possible that folks understand that while crypto is something that we feel now must be considered by all investors, the same way you should consider everything that's out there as you think about building

• 42:11Speaker 02

  out a diversified portfolio, that it will not be something that should end up being in everyone's portfolio because it's not for everyone, but it at least needs to be considered. And we certainly have evidence that it's not only being considered, but it's being acted upon by investors of all different sizes and investment mandates.

• 42:29Ryan Sean Adams?

  When people in crypto repeat, "The institutions are coming," is this what they're talking about? Are these the institutions?

• 42:35Speaker 02

  I think a lot of people have been saying, "The institutions are coming." I think grayscale is the evidence that the institutions have been coming, are here, and only more of them are showing up.

• 42:48David Hoffman?

  Michael, what's been the catalyst, would you say, for such a rise in the assets under management for grayscale?

• 42:56Speaker 02

  Oh, well, I think you have a confluence of a bunch of really interesting factors at the moment. I think that there is the narrative that's generally well received now, which is one of, you know, assets like Bitcoin are a digital gold or digital store of value and, you know, maybe can can help insulate investors' portfolios when markets get rocky or there's instability or things of that nature. And perhaps that's such a now widely held notion because we're living in a world that is really and truly characterized by digital as opposed to physical. Physical exchanges.

• 43:40Speaker 02

  And so perhaps as people think about what constitutes a store of value or an inflation hedge or any kind of instrument that may be a flight to safety. It probably should be one that's much better suited for a digital environment than a physical one. And so you'd certainly see that differential between something like Bitcoin and something like gold. I think a lot of investors are excited by the potential of certainly Bitcoin being a value mechanism for transfer around the world. And so I think we look at how fast information moves around the world, you know, pretty much seamlessly and for free. But somehow value has not kept pace with the speed at which information moves.

• 44:22Speaker 02

  And so they're excited by Bitcoin's potential to, you know, move value around the world instantaneously and and pretty much for free.

• 44:31Speaker 02

  I think, you know, those are kind of some of the newest and most widely held reasons that we're hearing from investors that they're excited about investing in digital assets like Bitcoin. I think we've also seen over the last year quite a propensity of investors to get excited about Ethereum and the idea of DeFi or decentralized finance and all these new applications that are being developed on protocols like Ethereum. And so we've seen a material uptick there as well. And then I think certainly we'd be remiss to not discuss, you know, within 2020 itself.

• 45:09Speaker 02

  We have seen such a crazy world over the past year. We saw this massive deleveraging in the market in March as the COVID-19 pandemic brought the global economy to a grinding halt. And even though crypto actually sold off even harder, it dropped almost 50% in a single day than other asset classes did. This was a year where, although it's happened many times before, I think there was a lot more eyes and ears keeping, uh, keeping tabs on crypto. Is that it came back harder and faster than probably it ever has before. And was once again, um, a, a real.

• 45:54Speaker 02

  Moment for crypto and Bitcoin and Ethereum to really demonstrate their resiliency to the investment community. And I think in a world now that is characterized by perpetual money printing and fiscal stimulus intervention, a lot of investors are thinking about what assets like Bitcoin may have actual verifiable scarcity and thinking about the juxtaposition of having an asset like that in their portfolio compared to, you know, a fiat currency like the dollar, which somehow seems to be getting printed to no avail. And so it's kind of those kinds of conversations we're having about investors that I think is really not only

• 46:38Speaker 02

  moving a lot of investors off of zero, but we've also really deepened a lot of our investor relationships this year who are using any of these pullback opportunities to really average down or opportunistically add to their positions.

• 46:52David Hoffman?

  We've definitely been beating the drum on the Bankless Podcast about how 2020 has been the year where the world begins to understand how Bitcoin fits into it, how, what niche Bitcoin provides. And I think the evidence of the massive inflows of value into the grayscale trust are just very strong evidence of that. However, over the last, you know, six, nine months, we've seen, while there's generally been overall bullishness of digital assets and Bitcoin, there have been like instances where there are certain like market news cycles or market events or news events that people really get excited about. Like one of these would be the Paul Tudor Jones memo or MicroStrategy putting Bitcoin on its

• 47:35David Hoffman?

  balance sheets, followed by Square. When you guys are conversing with your customers or your investors or people that are putting, you know, value into the grayscale trust, are there like peaks of interest around events like this? Or is it more of kind of just a, a low and sustainable interest rather than, you know, any volatile interest at a momentary notice?

• 48:01Speaker 02

  You know, investors surprise us all the time. There are people who are investing now who have been kind of sitting on this idea for the last six or nine months. And when they see the likes of PayPal and, you know, other important milestones transpiring, it gets them off of zero. It's really tough to say. What I do like to promote as much as I can, though, is having been in the space for the past seven years. I have dealt with and had the fortunate opportunity to deal with some of the world's most storied, intelligent, you know, public investors who have seen, you know, everything in careers

• 48:43Speaker 02

  that are double or triple, you know, the length of my career and have navigated all kinds of things. And I continue to remind all these people that no matter how smart you are, no matter how many things you think you've seen in your career, I tell people that I've never seen somebody really successfully time their exposure to this asset class. And that you either need to decide you want this exposure or you don't, you should size your allocation appropriately. And, you know, I think for most folks, we try to encourage them to take a more medium or long-term horizon because we do think it's so early for the development of the asset class.

• 49:22David Hoffman?

  Do you guys at Grayscale make any effort in trying to learn who or why or what motivates people who are interested in purchasing, you know, GBTC or ETH or, you know, adding value to the trust? What goes on? What are the communication channels between you guys and your customers and also you guys and your investors?

• 49:41Speaker 02

  Sure. So, you know, I think we have what we hope is a really robust communication channel. We issue and publish a tremendous amount of content so that we're keeping investors informed of things that we feel are important for them to know and understand that is, you know, about this ecosystem, which is changing every day. I think that causes our investors to be pretty proactive with us as well. Certain areas of the market they'd look to get exposure to, certain products they're interested in us launching for them in the future. Certain questions they have about, you know, events taking place in the ecosystem or

• 50:23Speaker 02

  how we might think certain announcements or certain initiatives may impact the asset class. Regulatory changes, things of that nature.

• 50:32Speaker 02

  I think what we find, though, is that ultimately it's those investors that really spend the time thinking about and researching and working on their understanding of crypto because it is so different from all the other things they've ever invested in. Those are the ones that we are still having a hard time finding anybody who really does the work. Really, really does the work on understanding crypto. We still can't find someone who does that and doesn't come out on the other side of that research totally amazed by the asset class. Doesn't mean they end up necessarily investing, although often they do. But it's usually those who kind of balk or reject the asset class or those that just haven't spent enough time understanding it.

• 51:14David Hoffman?

  So using these communication channels that you have with your customers and investors and then also understanding that on the other side of the equation, we have, you know, a lot of excitement around events like Paul Tudor Jones Memo or MicroStrategy. How does, do you guys use these, the information that you get from your customers and investors to change up your messaging, to kind of iterate and refine how you guys pitch your products? Is there anything about that process that you can shed light on?

• 51:41Speaker 02

  Totally. I think if we're hearing often from investors about similar issues that they want unpacked, then we try and host a webinar around that idea or bring in speakers for that kind of idea or publish ourselves on that kind of an idea. You know, I think we try to be as proactive and as non-reactive as we can be so that, you know, we sitting inside this ecosystem every day can do our best

• 52:11Speaker 02

  to stay in front of investors and what they want. But it's a very quickly evolving landscape, as I'm sure you know.

• 52:19Ryan Sean Adams?

  So Michael, I was running through your last report and looking at like, what are the the most popular products? It seems, it seems, correct me if I'm wrong, it seems like Bitcoin is far and away the most popular, 40 million in inflows, 12 month trailing. Next was the Ethereum Trust with 9 million. Then you, then you had the large cap fund and sort of everything else. Is that generally how it goes? It's like Bitcoin number one, it's ETH coming in number two, and then it's kind of everything else? Or what's sort of the popularity of products been recently?

• 52:50Speaker 02

  Yeah, I think what we've found historically is that Bitcoin was usually most investors' first foray into the asset class. We have seen this, the emergence of this kind of Ethereum first or Ethereum only investor, which has been really interesting. And then we've also seen a lot of investors pouring into the grayscale digital large cap fund because it gives them the ability to make a single investment and in doing so, gain broad-based exposure to the asset class, right? It's a basket of large cap digital currencies. That being said, a lot of the other themes within our product lineup still resonate with investors quite a bit. The idea of financial privacy and investors investing in Zcash and Horizon,

• 53:35Speaker 02

  investing in Litecoin and Stellar and XRP. I mean, I don't feel like at this point there's anything that's really an under-loved product in the grayscale lineup, but I think from your perspective, it's easy to see why you may think that because they all have varying degrees of AUM and sizes of AUM, rather. But it's also not really an equal footing. Each of these products were launched at different times and different market conditions. So it's a little tough to say.

• 54:03Ryan Sean Adams?

  So you mentioned DeFi being one of the, the kind of the three pillars of narrative that you've seen increase this year. What is the thesis for Ether in particular? Is it sort of exposure to the upside of DeFi? Or why are these institutional investors attracted to Ether? Or even in particular, the Ether-first investors? Why do they do that?

• 54:25Speaker 02

  It's tough to say. I mean, I do think a lot of it is probably attributable to DeFi. I think, you know, this year has been a really strong performance year for Ethereum. It's probably doubled the return that Bitcoin has had this year. They both had very strong years. And so a lot of that could be investors wanting to participate in that robust return stream. But it's early to say. It's really only in the past quarter or two that we really started to see that emerge. And, you know, as you're noting, we put out this report on a quarterly basis to look at our investor base and flows and try and give investors actionable intelligence. And, you know, it's up on the Grayscale website and we invite people to check it out.

• 55:09Speaker 02

  So I think for us, this can be one of those metrics that we continue to revisit, you know, quarter after quarter.

• 55:14Ryan Sean Adams?

  What's kind of the take on DeFi among these institutional investors? What do they think about it?

• 55:19Speaker 02

  I think some of them are meeting it with a lot of optimism and excitement and others with skepticism. I think that for a lot of them, if they spend some time in and around DeFi, they're starting to realize that, you know, we're not just talking about the digital currencies themselves, but actually, you know, they're able to start sinking their teeth into actual applications of these technologies, which I think helps them to understand them more than just as, you know, digital versions of money.

• 55:51Ryan Sean Adams?

  As far as allocation goes, you know, we're always thinking through sort of allocation of like fiat versus crypto. You know, different people in bank lists take different approaches to that. What does a particular, a typical portfolio allocation look like for this group? In terms of percentage of assets outside of crypto and percentage in crypto?

• 56:12Speaker 02

  Great question. I think it really depends. I think it depends on risk tolerance, time horizon. But I'd say broadly, the lower end of the spectrum is probably someone investing, call it 20 to 40 basis points. So we're still talking about way under 1% of their portfolio. I'd say our more aggressive portfolios are probably teetering on, you know, call it 4, 5, maybe even 6% of someone's portfolio.

• 56:38Ryan Sean Adams?

  Within that more aggressive group, that 5, 6% plus group, within crypto, what does their portfolio look like?

• 56:49Speaker 02

  Usually in every day that passes, more and more diversified. I think a lot of those portfolios are anchored by Bitcoin. But I think now what we're seeing is such a propensity of investors to not only appreciate the diversification benefits of having crypto exposure in their investment portfolios, but even further benefits by having diversified exposure within their crypto portfolio or crypto holdings.

• 57:15Ryan Sean Adams?

  One thing that I really appreciate about what you guys are doing is you're basically starting to sort of mainstream this asset class. And you recently put out an investor study. This one was Bitcoin focused. But there were some interesting takeaways from that. One that I took away was that more than half of US investors right now, and I think this was a, correct me if I'm wrong, but a general survey of investors that you did. More than half of US investors are interested in investing in Bitcoin right now. And that's up something like 20% from the previous year. Is that a surprising finding?

• 57:51Speaker 02

  Not for us. I mean, a lot of the, so we publish this study every year and we just published it in the last week or so. And, you know, I think it's a lot of the things we're talking about. It's the resiliency of this asset class. It's the asset class's ability to create diversified return streams for investors. It's the staying power of the asset class. You know, a lot of people have called Bitcoin dead or the digital currency asset class, you know, dead multiple times. And it kind of just keeps getting challenged and coming back stronger. So we're not surprised. And if anything, we're just encouraged by the propensity and interest of investors wanting to have digital asset exposure.

• 58:33Ryan Sean Adams?

  You know, the other crazy takeaway, I think, from that investor study, and I encourage folks to read it, we will include a link to our show notes, is that 63% of those that invested in crypto and Bitcoin recently did so because of COVID, as a result of COVID. So the money printing meme, it seems, is actually showing in the data of investors taking action and going and buying some crypto due to COVID. Is that surprising to you? Or is it kind of like, shrug your shoulders, yep, we thought that was the case and it's happening?

• 59:09Speaker 02

  The latter of the two. People are, you know, paying attention to the world around them, navigating an investment environment that's, that's very different. And, you know, crypto thankfully is now part of that.

• 59:25Ryan Sean Adams?

  Another, I think, interesting topic of conversation within crypto is just the sheer size of grayscale, perhaps relative to the supply of these crypto assets. I mean, you guys are getting pretty darn big. How much Bitcoin supply does grayscale hold today? I'm not sure if you disclose that generally, but.

• 59:44Speaker 02

  Oh, we certainly do. Yeah, we own more than 2.5% of the floating supply of Bitcoin today inside the grayscale Bitcoin trust product. So it's not us, it's our investors, right? We're, we're just the sponsor of the investment product.

• 1:00:00Ryan Sean Adams?

  2.5%. How much for Ether? Do you, do you know that off the top of mind?

• 1:00:06Speaker 02

  Off the top of my head, I want to say it's also about 2%. But that statistic I don't have as readily available. So.

• 1:00:18Ryan Sean Adams?

  Grayscale is just like gobbling up these crypto assets, it seems like. And another interesting stat that, that you put out is as a proportion of the amount of mined Bitcoin or mined Ether, the amount that gets essentially gobbled up by grayscale investors is, is super high. I think I read in 2020 in your report that of the new issuance of Bitcoin, grayscale inflows were basically 77% of that new issuance. So it's like, it's like grayscale is gobbling it up almost as fast as it's getting minted and awarded to miners.

• 1:00:53Speaker 02

  That is, that is, that is true. That is definitely true. And yes, actually, we, the grayscale Ethereum trust does own over 2% of the outstanding Ethereum float.

• 1:01:03David Hoffman?

  Ben, that's an insane number. Do you know of any other institution that owns more Bitcoin than, than not, well, not owns, but holds more Bitcoin than grayscale?

• 1:01:14Speaker 02

  I do not.

• 1:01:15David Hoffman?

  That's well, tip of the hat for that. So congratulations on being being number one. I know in Ethereum, we we like to look at our, you know, ETH locked in DeFi metrics for, you know, how much, you know, a DeFi protocol has locked up in its faults. And I think on the on the Bitcoin side of things, the Bitcoin held by grayscale is the Bitcoiner equivalent for that. So congratulations on on being number one holder of Bitcoin.

• 1:01:39Speaker 02

  Thank you.

• 1:01:41Ryan Sean Adams?

  I do have a flip side to that because I think as bullish as that is, I think for asset appreciation, and let's call it the institutionalization of these asset classes, Ethereum and Bitcoin, there's also an element that, hey, like, are these crypto assets getting trapped in old finance, getting trapped in legacy banking? Is that really what we want? You know, I've commented before that sometimes, if you think about buying crypto in an ETF, you're still on the traditional banking system rails. You're almost stuck inside of a brokerage jail. So if you have ETH in an ETF, you can't stake it. You don't hold your own private keys. You can't really use it in DeFi yourself, and you can't send it to an ETH address.

• 1:02:27Ryan Sean Adams?

  What's your reaction to to that criticism that, hey, like, great scale could end these, in general, custody through some sort of crypto banking system could become too big? And then crypto essentially loses the plot a little bit. It becomes much more like the legacy financial system, and we lose the ability to transfer and do this finance in a peer-to-peer way. Do you think that argument has some merit?

• 1:02:52Speaker 02

  It's certainly not our intention. I think rather the role we play and who we are as an actor. I think we are certainly out there as really big advocates of this asset class. I think we are hopefully viewed as a as a positive actor, right? That I think in the absence of our offerings, you would not be having as many people or as many institutions or investors. Getting into crypto, right? A lot of these investors are coming to grayscale because they can't buy and hold crypto directly. And so the grayscale solution really is that entree for them into the asset class that if it wasn't there,

• 1:03:35Speaker 02

  would not be drawing them into kind of either what digital currency exposure can do to their portfolios or help them kind of unpack the ways in which we think that digital currencies as a technology are going to kind of transform a lot of the systems and things around us. But at the same time, you know, those who may have a gripe with our, you know, taking Bitcoin out of circulation and putting it in a financial product or taking Ethereum out of circulation, putting it in a financial product. To that, I would say it's really kind of evidence of where we are in the life cycle of this asset class. If it was that much easier, and it is becoming orders of magnitude easier for folks to access this directly,

• 1:04:20Speaker 02

  then, you know, what we're seeing and why grayscale is in the position it is, is because by and large, digital currencies exist outside of the traditional financial system and for a lot of people, aren't as accessible as they'd like them to be. It's not as easy as buying a stock or a bond or an ETF if you want to buy and hold Bitcoin. And if you lose a private key with Bitcoin, you don't have a reset button or a 1-800 number to call or, you know, things like that. So, you know, I think it's certainly a role that we're excited to be playing. We want to provide educational content. We want to be providing actionable intelligence to investors. But I think the role that we've, you know, come to assume within this community

• 1:05:04Speaker 02

  is one of wanting to grow the asset class together with other industry participants. And we're just excited of kind of where we are. And again, we just feel like we're just getting started.

• 1:05:18Ryan Sean Adams?

  Could you do things like a staked ETH product inside of a trust? Or maybe at some point when SEC lets us an ETF? Or any other sort of yield-bearing crypto asset products?

• 1:05:28Speaker 02

  It's all possible. I'd say at any one time, we probably maintain, call it 20 to 30 different product ideas of things that we'd like to bring to the market. It's really just that balance between where we're finding opportunities, what's permissible, what fits into the legal and operational frameworks that we want to make sure that we're adhering to, to bring our investors the best products we can and make them actionable and trustworthy for them. And at the same time, hearing from investors where they're interested in putting exposure on and what's important to them and building out their portfolios.

• 1:06:04Ryan Sean Adams?

  Speaking of going mainstream with investors, you guys have put together a series of pretty brilliant ad campaigns recently. Can you tell us a bit about that and the reaction from them?

• 1:06:15Speaker 02

  Yeah, so I think advertising is one of those areas that we have a lot of fun with as a team, and it's a really collaborative effort. Most of 2019 was characterized by our hashtag #dropgold campaign, in which we had a national advertising campaign that aired on television and across social media platforms and display ads and banner ads and pretty much everywhere you could possibly think of where we are part of a now very solidified portion and a big portion of the investment community

• 1:06:57Speaker 02

  that believes that digital currencies like Bitcoin are in fact the next inflation hedge or the next store of value or have in fact emerged now as a digital gold or a digital inflation hedge. And so this whole idea of younger generations waking up from, I guess, these older, antiquated or preconceived notions that somehow gold is going to be the asset that does that.

• 1:07:28Speaker 02

  And their portfolios going forward and we tend to say, well, this is a wake up call. There are other things that have now emerged that you can use in your portfolio as a tool besides gold to achieve those outcomes. And we believe that with about sixty eight trillion, and again, sixty eight trillion dollars, moving from older generations down to younger generations over the, uh, over the next twenty five years. We believe that today, the way a lot of those assets are postured in things like gold, will, as they move and are passed down to younger generations, get reallocated. And it's not to say, and again, I want to be clear, we're not saying sixty eight trillion dollars is moving into Bitcoin or digital currency. But we'd be hard pressed to believe that that younger generation of investors

• 1:08:13Speaker 02

  is going to be investing in assets like gold, of which they have no tangible experience, doesn't really resonate with them. And it's a generation that grew up on Instagram, Venmo and, and airline points and credit card points, right? This is the generation that is going to grow up on Bitcoin, um, and digital currencies. And so we are paying attention to and are trying to create a wake up call that investors should be looking to where, where the, you know, skating to where the puck is going, right? If, if that's how investment preferences are going to change over time.

• 1:08:45Speaker 02

  And so, you know, that is an idea that we're, we're really, you know, still very enthused about. And I'd say over the lot, a course of a lot of two thousand twenty, um, we've had a history of money campaign, um, which we're also really excited about, which I think for a lot of investors has helped them to realize that we believe that digital currency very well may be the next stop on the train, if you will, in the evolution of money. And so we have a national television commercial now that goes all the way back to rocks and salt and animal skins and, you know, every single form that money has taken over the course of time.

• 1:09:25Speaker 02

  And eventually gets you to paper money, um, which is, you know, for the most part, a foregone conclusion at this point. And now kind of helping people to understand that, you know, perhaps digital currencies are the next evolution. Next step in the evolution of money in, you know, giving again, that kind of that call to action to wake up and understand what this is and make sure you're paying attention to this.

• 1:09:48David Hoffman?

  Michael, I want to thank you for your time and coming on the Bankless Podcast. And there's nothing that gets me more excited and more bullish about this industry than a national ad campaign that talks about the merits of Bitcoin and crypto. So tip of the hat for leading that charge. I want to finish up with this one last question. What's Grayscale's next move? Where are you guys going to expand?

• 1:10:10Speaker 02

  I think probably on the product front. And I'll have to come back and talk to you guys more about it. But we have 10 products today, and we're seeing some really interesting opportunities. And we are hearing from investors about certain opportunities they want to be able to get exposure to. And, you know, I think we're, we're always hard at work at HQ, thinking about additional products to launch and expanding our product family. And I'm excited that we'll be doing some of that in the months to come.

• 1:10:43Ryan Sean Adams?

  Michael, I want to thank you again for joining us and coming in front of the Bankless Nation, talking about these things. It's been a pleasure.

• 1:10:49Speaker 02

  Thank you. Thanks for having guys. This is great.

• 1:10:52Ryan Sean Adams?

  Awesome. Bankless Nation, some action items today. We will include these in your show notes. You should read the report that Grayscale put out, the Bitcoin Investor Study, to see some of those specific metrics we were talking about. Also, number two, if you have a Fidelity account, a Schwab account, go take a look at GBTC and ETH in the portfolio and compare them to NAV price. We'll include some links where you can do that. Finally, five star reviews. David, how are we doing on five star reviews with Bankless?

• 1:11:24David Hoffman?

  We can always do better with five star reviews, can't we, Ryan? Five star reviews gets Bankless Podcast to the front of the iTunes Investing and Finance Charge, which we are already in the top 100, but we want to be in the top 10 by the time that Bitcoin and Ethereum go completely mainstream. And so we need your five star reviews to help get that done.

• 1:11:44Ryan Sean Adams?

  Absolutely, guys. Of course, risks and disclaimers. None of this today was financial advice. ETH is risky, Bitcoin is risky, crypto is risky, and certainly, when you buy them in great scale products, they can be volatile and risky as well. As always, you could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.