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Juthica Chou (LedgerX.com), Joel Edgerton (bitFlyer), Guy Hirsch (eToro), James Putra (TradeStation), Nic Carter (Coin Metrics)
Nic Carter: [00:00:00] Exciting to be here. Thank you. Bitcoin magazine for the opportunity. we're here to discuss, quote, "Get Rich or Die Trying," we have a fantastic lineup of guests. I'll go ahead and introduce. We have Juthica Chou who is, formerly the founder of Ledger X, currently unaffiliated. We have Joel Edgerton, the chief operating officer of bitFlyer. We have Guy Hirsch, who is the USA managing director for eToro. we're currently waiting on James Putra to join. I'm told he will in a moment. We have seven blocks until the Halvening is expected, so this might end up being an abbreviated session, but it should be great nonetheless, looking forward to diving in.
So let's talk about the topic at hand, the Halving. You know, the Halving has been talked to death, here's maybe a different angle. So Bitcoin's security spend is actually going to decline by about half, assuming everything works the way we expect it to. In terms of [00:01:00] Bitcoin's sort of fundamental nature, is this something that concerns you? Is this sort of, actually potentially a shock to the protocol? Juthica, I'll let you take the first stab at it.
Juthica Chou: Yeah, I mean, I think in general, the decline in block subsidy is at least in the abstract going to make it less secure. Now, my personal view is that the orders of magnitude that we're looking at right now are not, substantive, but if one of the things that I, always would've been excited about seeing, and I think over time will evolve, are betting markets that are not just betting on price per se, but are betting on things like hash rate and transaction fee so that we could see what a market is pricing in for a second order effects like that.
Nic Carter: And, James has just joined the show. Welcome James. James is the head of product strategy at TradeStation.
So, let's move on. So would you say that traders on your platforms, three of you, you know, manage, brokerages or exchanges, do they need specific [00:02:00] catalysts to be induced to trade, or is the asset class kind of sufficiently enticing, in its own right?
We'll start with you Guy.
Would you say that we need these Bitcoin holidays to keep liveliness alive for traders or is the asset class just sufficiently enticing in its own right.
Guy Hirsch: No, I think we absolutely do need these holidays.
Bitcoin is based on trust. This is a community , it's analogous to, almost a religious movement or, or a philosophical movement. In terms of how the world should be organized. And, and there are some elements here of a mystique, meaning we don't know, still who created this. There are elements here that are analogous to things that humans do as part of believing in something.
And so, you know, this is an open source code. Anybody could just replicate that and do whatever they want with the code. But people believe in the actual, kind of genesis and [00:03:00] original protocol. And so celebrations like these are absolutely important to create a growing community, growing trust. Some sort of, I would say just more, belief into the fact that this is going to happen, that this is an indication of new world order at some point in the future. And so it's absolutely critical that you're continuing to celebrate these things, we continue to come together as a community, but also show others that, you know, why we're so excited and why we believe in these things.
And at the end of the day, these are the dynamics of these philosophical movements or kinds of religious movements that need to have these things, need to have these pillars in order to grow, and have more trust among the "members" in what we're doing here. So, absolutely.
Nic Carter: And the rest of you, feel free to jump in here at any moment
Juthica Chou: Well, I think for sure there's no downside to having a catalyst like this. And in particular, as you're intimately familiar Nic, a catalyst that, [00:04:00] brings , people with differing opinions. And I love betting markets when there are people who have different opinions about whether this is priced in or not.
The traditional markets, you know, equities get earnings every quarter, macro markets get fed announcements. We get this once every four years, and so I think it's a huge boon for activity and for attention.
James Putra: I think that's the key is the attention. It gets people talking about the asset class and it just brings this wave of enthusiasm around, "What is it? How do we get involved?" It starts to bring new people into the space.
Joel Edgerton: I think I have a little bit more of a contrary perspective. I mean, from a marketing perspective, yes, it's nice to get people involved, but from a trading perspective, the traders are gonna trade regardless of whether this event happens or not.
I mean, they may look at what the fundamental impact, you know, if the miners are, are hoarding their coin and what they're going to do with it. And that may impact on their strategies, but their strategies are going to be implemented, whether there's a Halvening or not. But, from a [00:05:00] marketing perspective, from an excitement perspective, I think yes, it does have quite a nice impact.
Nic Carter: this is a question for the room, so anyone feel free to dive in here. the March kind of explosion we saw in crypto markets was characterized by the decline of leverage in the system, generally. And a lot of the signs we've seen since then have evidence that it was mostly a spot driven rally. What do you make of this? Is this kind of a fundamentally healthy way for the industry to operate or is leverage not something really to be worried about too much?
Joel Edgerton: from my perspective , I come from more of a traditional finance and a hundred X leverage, 125 X leverage. For me, it is not very healthy. I mean, it may increase, profits for the exchanges, it may help create liquidity, as well. But, in general it's not healthy when your customers get knocked out of their positions, particularly when [00:06:00] you have an immature infrastructure that, you know, a lot of people, if you go on Twitter complaining that they're, they were automatically deleveraged while they had a winning position.
and that's not good for your customers. Right? So I, I think in general we need to be a little bit more careful with leverage with bitFlyer in Japan, for example, the government has reduced it by law to two X. You can't do more than two X leverage in Japan, and you're not going to see a hundred X and 125 X, leverage kind of in normal, healthy markets, I think.
Juthica Chou: I think leverage is obviously, it has to be prudent with it. and all things considered. I think the Bitcoin space has actually given that a lot of these platforms are unregulated as managed leverage, decently well. But it's, in a way, I think it's going to be natural, particularly for Bitcoin because you have an underlying that is fixed in issuance, obviously, which is why we're all here. and then on top of that, you have, you know, Satoshi’s coins, you have Hodlers, you have coins [00:07:00] being held in cold storage, so your flow is fairly low. And so in order for people to get exposure. it's natural that it would come from levered products, it would come from, you know, things like futures and derivatives that we're seeing. So I think particularly given the nature of Bitcoin as an underlying, it makes sense. And obviously I agree that it has to be done in a responsible manner.
Guy Hirsch: I would say that, you know, my interest is to see that the, you know, not just spot transactions growing, but also, you know, peer to peer, meaning peer to peer transactions where people just moving Bitcoin from one to another.
the more people get accustomed to it, then the more they feel comfortable. getting it from a friend, getting from family member, getting it from a business as either a form of payment or a form of. you know, "digital gold" the better the industry as a whole will be. So leverage is a very sophisticated, high-risk endeavor, that I think should be reserved for people who are very skilled at that. And, sure. I mean, people [00:08:00] can do it if they feel confident and if they feel comfortable with the risks that they're taking. But largely speaking, I think, growing in the spot transaction on Bitcoin and growing the peer to peer transactions in Bitcoin between, individuals is what we should care about us as an industry.
Because at the end of the day, and this is, I think what we're trying to create here, as in trying to create a new monetary system in a way, that will expand and get to everyone wherever they are in the world.
James Putra: I want to touch on what Joel said, really, the infrastructure is not there yet across much of the industry, and you know what?
We need to make sure as providers that when a customer says they want to purchase Bitcoin, whether it's on leverage or not, that we can deliver that purchase for them. what you find with a lot of the different infrastructures is they don't yet have mature margin and systems, and there's not yet a guaranteed clearing of these transactions.
So like in the U S when you trade options, you have guaranteed [00:09:00] clearing of your options trades or futures trades, it just doesn't exist yet in crypto. So there's possibilities that customers think they buy assets, that they're just not able to be delivered because some of the infrastructure is just not there and the margining systems will not be able to properly get the assets and customers purchased.
Nic Carter: Great answers, guys. for those of you that are affiliated with, exchanges or brokerages, what are some tools that you're giving your users to express their opinions on events like the Halvening?
What's something that you're excited to see your users taking advantage of?
Guy Hirsch: I'm happy to take that first. eToro is a social trading platform. So inherently we have a social feed where people can post their ideas or thoughts, about the Halvening or about why people should sell Bitcoin, or why they should buy ETH or, or whatnot. So it's inherent, it's native to our operations. and we're happy to see people [00:10:00] posting their ideas or thoughts. from around the world. We're live in 140 countries, so it's just fantastic to see, , how they react to one another and how they post about it. So this is, it's the fact that this is what makes us unique, other than the other, and kind of talk about, themselves.
But obviously we have much more than that in terms of trading tools. that are built on our social, kind of social trading capabilities. But by and large, eToro , is one of you can actually have a social feed that is tied to investment, tied to training, and tie to kind of , grow your wealth.
Joel Edgerton: For bitFlyer. we have obviously very strong technical tools. our founder was from Goldman Sachs, so we have a lot of, you know, more sophisticated trading tools. Obviously, we have the API , but you see a lot of the large institutional, customers, you know, they have their own way of doing things.
They want, they have their own tools, but I think there's still a lot. to be done as far as Bitcoin analytics and data to get that information advantage. it's [00:11:00] still very early days, I think, for these types of tools. and that's a very fertile ground and there's a lot of companies getting into that space.
but I think that is an area that we need to do better. there's too much of an emphasis on technical trading. I think we can do more on fundamental investment as it gets accepted as payment rails and it gets more into the real economy. Maybe there's things that we can do around that area.
I think there's also a lot we can do with analytics and AI that are not in there yet.
James Putra: We see on our side, we have the spot market, but underneath the TradeStation brand, we also offer a variety of other asset classes. So we see this. In showing in the spot trades, but also some more creative cash carry arbitrage between the futures products offered by the cruise broker dealer, and the spot buy trades in crypto.
We do see a lot of, kind of interesting movement between the different asset classes offered underneath that firm umbrella.
Nic Carter: Great answers, Joel. I, I mean, I hope you're not pandering to me. I'm a [00:12:00] huge advocate of, of, you know, trying to discover fundamental analysis, you know, building out analytics techniques for really understanding, , Bitcoin and crypto assets, , at a deep level.
So maybe on that topic. what do you consider the fundamentals of Bitcoin to be? If you could, you know, select one or two metrics or themes you think might actually constitute a fundamental for Bitcoin? I dunno if there's anything you guys could think of, which, which you find particularly important.
Joel Edgerton: I mean, for me, I'm not that smart[laughs]. I think
there is a lot to be done as far as, particularly on the payment side, as far as how we integrate into the real economy, but it's still early days as far as that integration. So what are the fundamental drivers, particularly on the demand side. Beyond just institutional investors in trading and everything like that, when the payment rails go in place and you start seeing things priced in sats, that's where I think fundamentals would really have a much [00:13:00] more fertile ground to grow in. I think though, there. Are ways that we can look at fundamental investing, that have not really been explored in a lot of detail.
There are not enough studies done on it yet, but I've seen some interesting ideas out there, or people are starting to dig into it. but if I knew that right now, I would have another company on the side.
Guy Hirsch: So, I, I think, just to chime in here, I think that the, it's true, Bitcoin doesn't have any fundamentals. So we, thought long and hard about this and , we then partnered with a company called Tai. And, what they're doing is basically looking at sentiment analysis.
They're trying to figure out if sentiment is somehow tied to, or it's a pricing indicator, right? Maybe that's start of a fundamental. And so they're scrubbing the, you know, the Twitter firehose, removing all the bots and all kinds of the accounts that are suspicious, kind of, making the data clean and trying to understand what is the sentiment around bitcoin.
And then based on that , [00:14:00] doing a regression analysis and see if that's some indicator. of price movement. Hedge funds have been doing that for a while, with equities. And that has been proven successful for some of them. And so, some crypto funds have been using this tool to, and we've been trying to make that available to our customers on eToro.com And, You know, it's, it's still, I would say, something that we are investing in and researching. , but it is true there, there are no fundamentals. But maybe, sentiment , is, the closest we can get.
James Putra: That's what's kind of exciting
about this market though,
there's a discovery of all these different ways to look at the data, and people are coming up with new, different ways to slice this every
really interesting to see what our customers
also just other bits of the market. So it's green fields right now, so let's find the good
. Yeah, I like to say we haven't had our Graham and Dodd moment just yet. hopefully one, sometime soon. And the, the slight irony in that we're [00:15:00] about to celebrate actually in six blocks time, a change to supply or a, or the Delta and supply, which, you know, I tend to be much more focused on the demand side factors as you guys,
are pointing out. so on a different topic. we've seen a lot of talk in 2017 around, you know, part of that 2017 rally was predicated on the institutions coming. with the idea that, things like the CME futures products. Would unlock the potential for institutions to express a view on this asset class.
to some degree we've seen that happen, you know, with the Paul Tudor Jones news, and, you know, I could probably name a half dozen entities, I would consider institutions that are active in the market. but there's a lot of kind of semantic confusion on this. So I would pose the question to you, what does an institution mean to you?
What, does that term mean? and how important is that really?
Juthica Chou: I would say like when people initially I think, talk about institutions and currently talk about them, they're referring [00:16:00] to or has historically referred to the traditional financial institutions, and I think the reason for that is less about the dynamic behind who's actually investing in Bitcoin.
And more. About the amount of capital that they could actually put to play in this market, especially relative to its market cap. And so I come at it from more of this, the latter side, which is that institutions can really be anyone, that is, , just built enough of a capital base, enough of the
corporate and company behind it. So it doesn't necessarily have to be the traditional folks. And I think in that vein, we shouldn't necessarily cater to the traditional folks, but, there's no question that Paul Tudor Jones and Rentech and these guys coming in is probably what people had in mind in 2017.
and probably a lot of who they were building for. and maybe are currently still building for.
Joel Edgerton: I agree with Juthica on this though. I look at the institutions as kind of two different groups. There's a group that's, you know, comfortable with risk and those guys are [00:17:00] already into Bitcoin and derivatives and everything like that.
and they're really just being held back by, you know, what are their strategies? How do they take advantage of the asset class? and also liquidity. but there's another side of the institution side, which is the pension funds, the insurance companies, asset managers, where there's huge amounts of money.
Those guys are gonna move much, much slower. They first have to go through the risk management committee. They have to look at operational risks. They have to look at counterparty risk. There's a lot of different things for them to move that money over. And when they do move it, it'll be an experiment.
They'll look at it for a couple of years, see how it reacts in different times and different economic situations. So I think, yes, the, early adopters are already in as far as institutional money, but the massive amounts of institutional money are going to move much, much slower. but I think that the real question for us is, you know, why are we waiting for institutional money?
Why don't we grow ourselves and buy the institutions? Just like with the early days of internet, you had AOL buying time Warner, [00:18:00] where is that AOL time Warner moment for Bitcoin? Where you know, we are beginning to change the traditional infrastructure to the new infrastructure. That I think is the more interesting question for us on the institutional side.
Guy Hirsch: So just to maybe add to that, I think we all agree that, you know, crypto and BTC in particular is an uncorrelated asset class. And so a lot of financial disciplines are calling to. basically diversify your portfolio by adding it in order to maximize your returns in a way.
So the question is just how, you know, how much exposure you want to it and so on and so forth. But I think what we're being taught about the Russification and whatnot is being answered by adding , Bitcoin to your portfolio. we've also been seeing, I think a few university endowments, which are particularly slow to, to adapt, maybe part of the group that, that was mentioned before, but they are trying that, it is indeed in a pilot phase, but they are experimenting with Bitcoin
so that's, that's good. I would say, to Joel's [00:19:00] point that . The way I think to get there is indeed not to wait on institutions, but actually try to go the route of the financial advisors and financial planners. And, , when the average Joe or, you know, families , is planning on, investing savings, thinking about their future.
The way to do that is maybe get more education into financial advisors, financial planners, and get more households to put 1% of their net worth in Bitcoin. And I think if the demand will grow that way, and if we enable financial advisors to get comfortable around that, give them the assurance that they are, you know, the equivalent of qualified custodians out there.
And there are good players out there and, , they can be comfortable that they won't be. some sort of a, you know, get rich scheme type of thing. Then we have a real chance of seeing much, much greater adoption. And from that, these intuitions might be more interested in looking at this asset class. [00:20:00]
Nic Carter: given that we have about five blocks to go before the having, I've got my champagne ready here. I've been instructed to wrap this up, so I thank you all for your participation. Really fantastic conversation. and, we'll let BTC magazine take it away from here. So thank you all.