Hello and welcome to Markets Daily, hosted by me, Jen Sani. On this show, we navigate the currents, shaping the crypto markets, providing insights against the broader financial landscape. So whether you’re actively trading or just fascinated by this crazy world that we call crypto. This show is your compas understanding what’s happened where we are and where we are going. Joining today’s show is Canary Capital Group, CEO Stephen mcclurg Stephen. Welcome to the show. Hi Jen. Thanks so much for having me. Of course. Thank you for being here. We are in the fourth quarter. It’s supposed to be all sunshine and roses, but we’re off to a little bit of a rocky start. I like to start the show off by asking my guests what you’re watching. So what are you watching as we head a little bit deeper into Q four? Yeah, I mean, really what I’m looking at is what the fed is doing and what central banks around the world uh are taking action on. So right now you’ve got China uh is moving into a policy of quantitative easing that looks like it could prop up uh inflation and uh the, the value of all risk assets. Uh Bank of England is holding steady on rates and of course, the US dropped uh rates by 50 basis points last month. So those are the most important things right now. And of course, the election uh is gonna play a big part in price action and risk assets including Bitcoin and other cryptocurrencies. If you had to pick one macro factor that investors should definitely be watching in Q four, which one would you pick out of the ones you just outlined? Really? What I would be looking at is government spending and whether it’s the US government or uh the People’s Republic of China uh looking where they’re spending money and of course, other, other, other countries around the world as well. Um I’m watching very carefully as a lot of countries are buying gold on their ballot sheets. Uh Some countries are talking about holding more Bitcoin on their ballot sheets. Uh And of course, uh it is a mixed bag, like as I mentioned before, there’s some uh there’s some countries that are holding tight on policy. Uh Some are, some are hawkish, some are uh dovish. So, so those are really the things that I’m looking at the most right now make sense of that for our audience. What does it mean when countries start holding more gold on their balance sheets? What can we take away from that when we’re trying to apply it to our own investment? Theses Yeah. So, so really what uh holding gold is an indication of, is there an expectation that there will be inflation? Uh Gold isn’t necessarily uh correlated to inflation like most people think it is, but gold usually is what people buy when they have an expectation that inflation is gonna be higher. That also holds true for central banks around the world. When they start buying gold, it means one of two things they have either have an expectation that there’s going to be inflation, either their own currency or the US dollar or most central banks hold us treasuries and dollars on their balance sheet to pay their own currency to the dollar when they have expectation that the dollar is going to be either weak or uh that uh there’s gonna be inflation in the US, which is also essentially the same thing. Uh They do tend to hold other assets other than the dollar and gold is the go to you mentioned uh Bitcoin as well. Is there one specific or any specific country you’re watching when it comes to Bitcoin on the balance sheet and the way it’s maybe moving I I am. And oddly enough, the country I’m looking closely at is the US. Uh So what’s really interesting is that uh the the the Republican candidates this year are really focused on including Trump are really focused on making uh Bitcoin part of the strategic reserves of the country and part of the federal balance sheet. Uh It started off with uh a few Republican senators and congressmen and then it went to uh Trump and then even uh last week we had the first Democrat candidate uh for, for Congress come out and say that Bitcoin should be used as a reserve currency. So I think that trend is going to continue and that most of the Bitcoin that has been seized by the US government for one way or another. Uh politicians are saying that that Bitcoin should be held as a strategic reserve for the US. So if we, if we take that information, we put it into context. What does that mean to you if you were looking at Bitcoin’s performance after the election? Yeah. Well, what’s really interesting is Bitcoin started off as a currency that was held by uh developers and then retail and now institutional now that uh uh Bitcoin spot ETF S have launched, but once they start being held by governments, that’s a whole other level uh that, that we haven’t really gotten into yet. I mean, we’ve gotten into it on a smaller level like El Salvador. But when larger country countries start holding uh Bitcoin as reserves, uh it can really cause price action just like uh gold reserves being held by other countries have caused gold to go up over the last few months. So uh going into the election number one, it’s, it’s a very, it’s a very positive thing for Bitcoin regardless of who wins in my opinion. Uh But number two, there’s, there is a conversation happening right now where uh the Democrats are seeing what the Republicans are doing and they’re, you know, they don’t want to lose those votes. So uh I’m hopeful that the Democrats also adopt a stronger policy for their platform uh around cryptocurrencies. You mentioned ETF S there and I want to get a little bit into the institutional discussion given that you were previously at Valkyrie when the Valkyrie Bitcoin ETF uh was launched, talk to me about how you’re watching ETF performance. I know recently there has been geopolitical tension that’s weighing over risk assets. We’re seeing this impact ETF S, we’re seeing consecutive days of net outflows. How do we make sense of, of this if we are watching, what’s going on with both the Bitcoin and Ether ETF specifically in the United States? Yeah, absolutely. Well, what I’m seeing is more on the Bitcoin side. You’re getting, you’re getting some institutional adoption. Now, most of the people that are buying the Bitcoin ETF is retail, it is financial advisors, but uh for a lot of pension funds and insurance companies and even sovereign wealth funds that trade securities in the US and hold securities in the US. Uh the Bitcoin spot ETF has been a way for them to get access. Now, eventually these institutions will focus more on uh separately managed accounts, uh institutional investors typically don’t hold ETF S. Uh they uh they, they hire managers to build custom portfolios for them. That’s not in the realm of ETF S. But now that the spot ETF has been launched for both Bitcoin and Ethereum, uh you’re seeing a lot more interest and uh validity to these investment instruments which will cause some of these institutional investors to buy more Bitcoin. Ethereum actually took an interesting turn and uh I had actually predicted that uh Ethereum would have less than 10% of the net inflows that Bitcoin had when it launched. Well, it actually was less than zero because it was, it’s been net outflow so far. So there’s been a lot of e that’s been held captive in the gray scale product and now that the it’s opened up and the other uh ETF S have opened up, you’ve seen net outflows. So I, I actually don’t see a whole lot of institutional demand for Ethereum uh which a lot of people expected there to be, which is why uh I had decided not to watch it, Ethereum uh ETF when everybody else did. Uh but uh but I do think that institutional investors are looking for the next thing, right? So, so Bitcoin obviously, but uh Ethereum is sort of its category is older technology. So they’re looking at things like Solano or ripple or H bar or, or, or avalanche, you know, a a uh these are the, these are the the, the next generation technologies that they’re looking at uh as opposed to Ethereum. Tell me a little bit more about that. Why do you think the interest is straying away from Ethereum? The second largest Cryptocurrency by market cap to some of these other projects? Yeah. So I remember back, you know, I, I left traditional finance for a couple of years to go work at a video game company called Electronic Arts and it just so happened to be that it was when the iphone came out. Now everybody had a blackberry in their pockets. And previous to that, they all had um palm pilots. So I kind of can I kind of look at Ethereum probably more like a palm pilot but maybe like a blackberry where there’s some, you know, cute applications that are being built on it. Uh not really that useful but uh but a lot of people were building and, you know, they, they did things but once the iphone came out and people realized the power of the iphone, which by the way is, was built on uh the usefulness of the blackberry. Even though everybody had a blackberry in their pockets, everybody abandoned it. And uh I don’t think you could find one person on the street that has a blackberry anymore. So even though uh Ethereum owns the market for uh for, for protocols of its type, uh these newer uh blockchains like, like Solano for instance, and like H barn like ripple, um, really are going to take over and, uh, and, and, and replace uh Ethereum that really hasn’t been iterated on a whole lot in the last few years. Steven, I see the headline now, Ethereum, the Blackberry of Web three. I think a lot of people will hear you say that and be upset. There are a lot of people who have made really big bets on the Ethereum ecosystem. Look, there’s a lot of people that made really big bets on the Blackberry and lost a lot of money when that stock went to basically nothing. Um I, I hate to say it, you know, people get upset when they, when their bags shrink. But um but that truly is the reality now, I mean, look, things are still being built on Ethereum but uh the reality is, it’s not, it’s not, it’s not fast enough uh other, other, you know, and it is not even like great for enterprise purposes, in my opinion. I hate and, and I, you know, I didn’t mean this to be a, you know, bag on bag on Ethereum. But um you know, hopefully things will change there. But, you know, let’s use H bar for an example, just, just for a minute. Um you know, H bar uh is, was really built for uh enterprise use. It’s being utilized very actively for enterprise use. So I’m kind of getting back around to why did I get into the space to begin with. In 2016, it was really the enterprise applications and look what Ethereum did was great. You know, it’s kind of like, again, kind of like the palm pilot. You know, I remember having the palm pilot and it was so cool because I could download it to my computer, download emails. I could go away, answer emails, plug it back into my computer and then boom, you know, and it worked and, and it really was uh a building block for everything else that came. But uh the reality is, is, you know, sometimes technology is outdated and sometimes better technology comes in and people buy and, and utilize that newer technology. Um You know, so, you know, I don’t, I don’t hate on anything that Ethereum has done in the past. But, um but no, it just hasn’t really kept up but it’s not really practical for, for the enterprise uses uh that, uh you know, that, that other blockchains are being built for. I think there are probably some young people listening to this show who are Googling what a palm pilot is right now. And that really, I think dates both of us but, or, or a Blackberry, by the way, some people don’t want to know. I mean, the blackberry movie came out recently. So I’m hoping that maybe, you know, it made its way into popular culture for at least long enough for people to, by the way, I still have a blackberry II, I kept it from 2011 just as a momento of, of what happens when, uh, you don’t continue to iterate and, um, and, and, and update when you have competitors. That’s a great reminder. I mean, I probably have one hanging around at my parents’ house or something. I should get that and put it up on the wall as some motivation to continue innovating in my life. So I don’t get left behind like they did. Exactly. Hey, everyone did. You know, 52 million Americans own cryptocurrencies. That’s not just a number. It’s a movement, economic, social and political, decentralized, finance, Blockchain and digital currencies are more than buzzwords. They are the future this November, it’s on us to show up and step up. We need to protect crypto to ensure it continues to fuel innovation and freedom for our families and businesses. Don’t let this opportunity slip by the future of crypto is on the line. Make your voice heard this November and pledge to vote now at stand with crypto.org backslash pledge. All right. Um You mentioned H BAR, I know that you recently launched the H Bar Trust with Canary Group. So, uh you do have some interest there. Talk to me about the conversations you’ve had that led you to kind of choose H Bar as the trust that you’re gonna launch and what kind of interest is there. Yeah. So, so what I was looking at when, uh, when we were launching Canary Capital is OK, look, we’ve, you know, I spent seven years working on getting Bitcoin to a play, you know, working with on, on Bitcoin, making sure that, you know, Bitcoin got into an ETF and, uh, and, and I worked on several other, um, iterations of that, you know, along the way, uh, to try to get creative. Uh, one of them being, you know, the first Bitcoin futures ETF that traded on, on NASDAQ and some other, you know, and some other products like that. But when we launched Canary, we’re like, OK, well, we’ve done that. What’s next? OK. And, and I kept going back to enterprise applications, right? Um you know, Bitcoin has established itself as the, as the dominant Cryptocurrency. Uh But as far as protocols go, uh where, where, where’s enterprise going to go, right? Um You know, if you’re say Oracle or Intel or Boeing, you know, what blockchains are you going to use or if you’re a, a payment system, what blockchains are you going to use? So we kind of went through the list and said, OK, well, you know, H bar is one of the top ones for enterprise users because it is, um you know, it is designed a little bit more for, you know, for corporations. Um You’ve got, uh you know, Solano is doing a lot of great things. Um Ripple, which is something that was designed completely differently. 10 year, you know, over 10 years ago is doing a lot of interesting things on uh transfers and um you know, um you know, interoperability and uh and even creating its own stable coin on that network and that network runs at a, at a very uh very fast and very cheap. So, uh so there’s a lot of interesting opportunities there, by the way, even like Litecoin again, you know, Litecoin sort of, you know, was, was very popular in 2005, 2006, 2007, kind of faded out a little bit. But now Charlie Lee, the founder is back involved with uh the Light Coin Foundation and iterating and making light coin better. So it’s almost like taking all the aspects of the lightning network and in reintegrating the back end. So, so really interested in the light coin as well. So, so those are the things that I’m really focused on. It was like, OK, in each category of, of, of either enterprise solutions or exchange, which which which cryptocurrencies are, are probably in the lead right now. So that’s really why we focused on um on some of those. Tell me a little bit more about how you do that analysis. I mean, when you look at um something like HR or Hadera, how do you do that analysis and, and uh think into the future that actually this is something that uh enterprises would want to build on over XY and z other chain. Yeah. Well, you know, and I just think about myself, you know, what, what would I, what would I use? Right. I mean, you know, way back in my career I was, you know, I was more on the corporate finance side and, uh, you know, and, you know, and, and I, and I think about, ok, well, what, what is a very powerful tool that I could have used in those days? Or even I think about my bond trading days, right? And I think about, ok, what? Yeah, and this is the whole reason I got a Blockchain to begin with. Right. It’s like, ok, there’s a better way to trade bonds, there’s a better way to trade securities. What are the ways to do that, that, uh, that are scalable, uh that, uh that would make these, uh, that would make trading more efficient or transfer of money more efficient or even uh other types of applications more efficient. So the analysis really comes into. Ok. Number one, is it, is it scalable? Uh, is there adoption? Right? Because, you know, just because something works really well, doesn’t mean that people will adopt it. Think about the CD. Remember the CD? Well, there’s another thing called the Mini Blast from the past episode. Yeah, I know. Right. That’s what happens when we get old guys. Um, so I love it. I love it, but the mini disk was actually better technology than the CD. It was, it was about 1/4 of the size. Uh It didn’t skip. I remember I had this old Jeep Wrangler and I had a CD player in there and they’d always get stolen because, you know, like people just pull them out and it’s a Jeep and then finally I replaced it with a mini disk and nobody wanted the mini disc player. But the C DS always skipped in the Jeep because, you know, it was like kind of, you know, hit Bob so it would skip and scratch. But the mini disk never did that. And anyway, the mini display was, was much better technology than the CD didn’t have all the scratches. It was in a case. But no, but it just didn’t get the adoption that the CD did because it wasn’t, it was poorly marketed. So marketing does play a play a factor, adoption does play a factor. But more importantly, uh you know, the, you know, scalability and usability uh are super important there. I love that. We got C DS in mini disks, the blackberries and we even spoke about the revival of light coin. This is probably my favorite episode. I’ve recorded. It is real nostalgic for me. I love it. All right, we are nearing the end and I also like to ask all of my guests this. So I will pose the question to you. Um If you look at Q four, if you’re thinking about allocating a portfolio, given all of the, uh, knowledge and expertise you’ve gained over your years in your career. What assets would you be looking at? Yeah, that’s, I mean, that’s a great question. I mean, and I’m gonna go pretty broad here because, you know, we do, we do run a fund that, uh, you know, kind of can allocate to anything, you know. But, uh, I, you know, we are, um, in a, in a bull market in crypto right now, uh we’ll probably in this bull market for at least another year. Um If, if not, you know, slightly more than that. So for mo more for safety, I always love Bitcoin. I’m always highly, I’m, I’m always more highly allocated to Bitcoin than not because it’s one of those assets that I believe will not go to zero that will always have some kind of demand and even if it drops 20% a day, which you know, is, is, is, is, is viable. Uh It will, it, it, it, it, it has always come back, you know, and, and uh but uh but we are in a good bull run for cryptocurrencies including Bitcoin. And then I try to trade around some of the other cryptocurrencies a lot that I’ve already mentioned. Uh But we also trade bonds too. So, you know, I’m an old bond trader. I can’t help myself use that for more hedging and risk mitigation uh in the portfolio. But uh but given that interest rates are expected to drop another, you know, my opinion, 25 basis points in November, another 25 and December, it’s actually pretty good for bonds because when yields go down, bond prices go up. So, um, I, I do like hedging, you know, in a, in a Barbell, uh, holding bonds. Uh, I’m no longer really allocated to, uh, mining stocks, I think, you know, we had a nice run in Bitcoin mining publicly traded stocks last year. Uh It is a good time to be building mining facilities and it is a good time to be buying. Hash but um but, but, but, but the Pepco’s will probably underperformed Bitcoin Steven. Thank you so much for that alpha and the insight you provided on this show. Thanks for joining markets. ST Thank you and thank you to our audience for watching. If you enjoyed this podcast and any of the other podcasts on the Coin Desk podcast network, you can subscribe. We are available on all podcast platforms and if you prefer to watch or on youtube, like subscribe. Thanks for watching. Thanks for coming on this journey with me to better understand the crypto markets and we’ll see you next time.
