Valerio Baselli: Hello and welcome to Morningstar. 2024 could be a breakthrough year for digital assets and cryptocurrencies. To talk about that, today I’m joined by Ophelia Snyder. She is president and co-founder of 21Shares, the world’s largest issuer of crypto exchange-traded products.
So, Ophelia, after the crypto winter experience in 2022, the crypto space has rebounded sharply, with Bitcoin up 140% for the year-to-date. Now, as 2024 approaches, investors are wondering whether this is just a flash in the pan or whether something fundamental has changed. What is your take on that? Do you think this positive trend on Bitcoin will continue overall next year?
Ophelia Snyder: I do. The market overall has changed quite significantly. There are a number of catalysts as we’re heading into next year, which really do change the way crypto markets work and the Bitcoin order book and how we look at Bitcoin markets. Bitcoin halving is being coupled with an already quite illiquid supply, at the same point in time where we are expecting increased institutional adoption through the spot Bitcoin ETF, as well as increased adoption, potentially through another nation state, namely Argentina, incorporating Bitcoin more fully into their monetary policy. That combination of features is quite bullish in terms of providing both regulatory clarity as well as increased demand. The regulatory clarity is coming in a couple of formats. It’s both a cleanup of some of the overhang from black swan events in the prior year, whether that’s FTX and Binance. A lot of those situations are now becoming resolved. And I think that’s kept a real dampener on sentiment in the market, which we’re now seeing come off as a lot of those actions are now reaching their end. And it’s positioning the market for a really interesting 2024.
Baselli: Of course. You mentioned it, along with ARK Invest, 21Shares has the first application in the latest batch of bids to get a landmark spot Bitcoin ETF in the US, with BlackRock, Fidelity and others following. So, why would such approval be so important for the market? And what about being possibly the first issuer?
Snyder: So, from a market perspective, the ETF is a really easy, simple to use on-ramp. And we’ve had them in other jurisdictions, especially in Europe for many years. Actually, the company is celebrating five years of offering these types of products. So, this is absolutely not our first try in this product category. And then, we’re obviously a market leader in Europe.
One of the reasons this is such a big deal is that it helps provide both some of that regulatory clarity that I just mentioned, but also just an easier way for people to buy these products. And I think there’s been a lot of focus on retail in the context of these ETFs. But actually, these are really important institutional tools. It provides simple solutions to custody, to trading, to tax, to tax reporting, to advisors’ fiduciary obligations in America around how they do these allocations. That’s a very, very big structural change.
I think we’ll likely see multiple issuers come to market hopefully early next year with products like these. And I think it’s going to be very important to look at how these different issuers position themselves. I mean, for us, we’ve been doing this for many years. We were bringing that operational expertise to market and we’re quite excited about it and hopefully seeing some real changes here.
Baselli: Right. So institutional investment, regulation, artificial intelligence, which one of these trends will be dominant in the crypto space next year, in your view? And do you see any other possible drivers?
Snyder: Regulations are an interesting one because I actually think that’s a lot of what’s happening right now. I think in the coming months we’ll see that come to a head and complete its current cycle. But I think it’s one of those things that once it’s done, it’s not going to be an ongoing driver of valuation. I think AI is really interesting because essentially AI and blockchain are very important compliments to each other and I think AI is taking over the world.
The reason I see them as so complimentary is that it’s suddenly going to become really important to be able to prove that you’re a person, to prove that you are who you say you are, to prove you aren’t a machine, to ascertain ownership of certain things, or even as simply as to allow two computers to enter into a legally binding agreement together without a human being involved in that interaction. All of those types of things can really be enabled through blockchain tech. And I think that’s going to be a big question we as a society need to answer in the coming months and years. And I think blockchain will play an important role in that discussion.
Baselli: Very interesting. Finally, after that, the US authorities filed a lawsuit against Binance and other exchanges in June. A couple of weeks ago, Binance basically pleaded guilty and agreed to pay a roughly $4 billion settlement. Is this a watershed for the future of crypto world in your view? And more broadly, what is your judgment on the whole thing?
Snyder: Maybe it’s a contrarian opinion. I actually think it’s great. Goes to regulatory clarity. I think the situation with Binance, and these lawsuits has been an overhang on the market for quite some time and a preoccupation of the market given some of the broken trust with other major institutions in the crypto space from the year prior. And I think this resolution is helpful. It’s helpful for the market to move forward.
I think we’ll see more of that. I think a lot of these lawsuits are beginning to get cleaned up. Some of the stuff that’s happening with XRP, you’re seeing some early indications from the discussions with Coinbase and the SEC – I imagine also with Binance and the SEC who haven’t settled yet in terms of providing that regulatory clarity. It’s going to be an important component of the path forward. I think Binance is one piece of this, but if you take all the different elements of regulatory action that we’ve seen over the last 18 months and all the different events in crypto, I think together they make a watershed moment. I think they make for a change in how this market approaches regulation, approaches transparency and approaches its commitment to customers. I think that’s a really positive thing for the industry as a whole.
Baselli: Very clear. Thank you so much, Ophelia, for your time. For Morningstar, I’m Valerio Baselli. Thanks for watching.
