BlackRock's Crypto Plans for 2025 | CIO Samara Cohen

one of the misperceptions on the crypto side is that ether ETFs weren't as successful as the Bitcoin ETFs where really by all accounts in the ETF World The Ether ETFs had really successful launches so how do we measure that first and foremost for us in the industry a successful ETF is one that delivers what it's supposed to deliver welcome to Bist 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 I'm David hoffen just me today and I'm here to help you become more bankless extremely powerful episode today it's not every day that you have a conversation with someone who oversees $6.6 trillion yes that's trillion with a t Samara Cohen is on the show today and she is a badass Samara is the chief investment officer of etx and index Investments at Black Rock that's basically all of black Rock's ey shares

ETF funds all their index products which is quite a large domain to say the least Samara has an affinity for the modernization of markets which is something that I think we share with her on Bank lists not only is she down in the Black Rock trenches not only is she down in the Black Rock trenches building ETFs talking to clients and producing market-based intelligence but she's also she can also see things from a zoomed but she can also see things from a zoomed out View and can discuss the long Arc of the interaction of technology and

Marcus which I think is truly helpful when we are currently in an age in which blockchain Tech is actually starting to disrupt tradition traditional markets this is one of my favorite conversations I've had on brist in a long time in addition to all the other things that I've already said about Samara she's also just so easy to talk to so I know you're going to enjoy this one bankless nation so let's go ahead and get right into the conversation with Samara Cohen from Black Rock bangless Nation I am very excited to introduce you to Samara Cohen the Chief investment officer of e ETF and index Investments

uh Samar leads the team that manages 6.6 trillion 6.6 trillion with at of black rocks index funds and ey shares ETFs Samara welcome to bankless thank you so much for having me I'm glad to be here so last time we spoke with black rock we spoke with Robbie uh mitnik who's the head of the digital assets team at Black Rock in September of 2024 it's now January of 2025 and you are also not Robbie mitchnick you are Samar Coen uh can you introduce yourself a little bit

more for the audience and illuminate um a little bit of who you are and what you do at Black Rock just so we know who we're talking to sure I listen to the podcast with Robbie which was great and I am a listener of the podcast myself so very happy to be uh having the conversation with you directly uh so I am uh as you said the chief investment officer of ETFs and index at Black Rock uh I'm responsible for the portfolio management of our our index portfolios our ey shares ETFs and making sure they

trade in the market with the you know access high quality that uh investors expect from from my shares I've uh I think of myself though just by way of background as really a uh career markets modernizer I've been in the ETF business for uh just 10 years now but when Black Rock first reached out to me at my uh the job I was that before then which was at a uh a large Investment Bank I didn't know what an ETF was I had to Google you

know what is an ETF uh which was actually relatively typical of a person who was a uh uh growing up in the uh fixed income and derivatives uh division of a bank then but my passion has always been making markets more resilient and more transparent and pretty much more useful for for more people so so that's what brought me from that job to to Black Rock and and into the ETF business I work really closely with Robbie mitnik who's our head of digital assets um and

who has taught me a huge amount of what I know about uh crypto and and the digital assets world but really ETFs are also uh and have been in markets uh a disruptive technology that um uh incite many of the same goals what role does technology play in your job you called called yourself a market modernizer maybe you could illuminate that modernizing word a little bit more what does it mean uh and what have you done to modernize markets

uh is is this like an evolution of technology is this um new novel Financial products how do markets become modernized and how have you played a role in that sure so I I I'll try not to uh get too nerdy and weedy with this answer but I would argue that Technology Innovation is found ational to the modernization of markets and has been for literally Millennia I like talking about you know this um this past uh

spring I took my teen daughter to Paris where she'd always wanted to go and we went to the lou Museum and the one thing I really wanted to see because I knew it was there was this Relic from uh ancient Mesopotamia that was a uh it it was it's considered a toen actually a clay token but it was how you know trade was conducted initially uh thousands of years ago and it was a mechanism to exchange a what was then a real world

asset and and kind of difficult to bring to the marketplace and that you know Clay token thousands of years ago was a technological breakthrough that contributed to to the next phase of markets so it was foundational then and it's foundational now now you know as we said ETFs and and index are both in my title index strategies which are the ability for an investor with not that much money to commit to actually diversify their portfolio by buying hundreds or thousands of line items that

wasn't possible actually until really about 30 to 40 years ago and and indexing as a portfolio strategy actually came of age with the first commercial microchip because it actually took more computing power than had been available before to take what had been really a mathematical concept and turn it into a trading reality so that's like a few thousand years of history with technology is the through Point very interesting yeah I really uh I think we

at bankl really appreciate seeing the long Arc of Technology as it relates to markets so I think that's maybe something that we share so understanding the context of once we had clay tokens uh representing real world assets and you know going through the evolution of markets to the worlds of of ETFs as you've just illuminated we are now kind of entering this world of uh modern markets uh integrating with blockchains or blockchains integrating with modern markets bidirectional uh so now we've entered in the world where there's now two very large ETFs uh and and I think

this is just the beginning maybe you could place Us in history now in the modern era where blockchain technology blockchain assets are now manifesting in the real world in in um TR traditional markets but then also it's like a foot in the door right so where does this go for here just Place Us in in history as you see it if you don't mind yeah I love that question because I think it is both a uh you know the uh the Bitcoin ETFs in the US as a category and I should actually say because our Regulators want us to say they are etps not ETFs

exchange traded products and definitions are important um have been around lit like for exactly a year almost to the day of this conversation and you're right this has been I think a watershed moment in markets and yet also the very beginning so what's so important about the Bitcoin etps uh in in my view is that they really created a bridge between these two worlds between the crypto world and

the trafi world one of the things that uh I think surprised us to a degree this year was how useful that bridge was to people on both sides we knew there were trafi investors that um if they were going to allocate to bitcoin wanted to do it in a familiar rapper but there were a lot of digital kind of native investors who also found that the ETP rappers served their needs and we actually have some pretty good data showing that there are investors who

bought their very first ETP uh in one of the Bitcoin etps and uh are now buying other etps so hopefully it's helping both you know digital native as well as trafy investors build more Diversified portfolios that are more customized to to what they need so so that's why it was such an important moment and we really saw in all of the numbers and the flows this year how um embraced this bridge was uh but you know again to your

point this is uh it's the story of one cryptocurrency um and it's the story frankly of gratify rails being very important uh to the uh bringing that cryptocurrency more into the investor dialogue and so I think that's why it is still the very beginning both as we see crypto rails and the crypto Financial ecosystem develop more and also hopefully in my view and I'm interested in hearing your view on this as well develop in an integrated way with what

already exists and works because I think there's always a lot of passion out there to completely disrupt and do things differently and sometimes that is the right direction um as a career uh markets modernizer um I think we you know find a lot of times that the best world is the one that creates Bridges and looks to best practices from multiple places yeah I think people who are deeply crypto

Natives and they believe in the cryptoz of everything might resonate with something that I want to get your take on I think this got uh incepted into my brain with um one of the short stories from Andreas Antonopoulos he kind he called it something like technology inversion and he used the metaphor of dialup internet where the internet and data was squeezed through telephone lines into people's homes and that's what dialup internet was and now uh later we actually just got Broadband we just got cable internet and was much

faster and now when you make a phone call with someone the phone actually goes through on the internet along with everything else that's on the internet you know the YouTube uh Twitter Facebook Instagram uh and then also you know phones and so things flipped things inverted and I think the uh correlation here the the way to apply this to crypto is that right now we have analog versions of these like crypto assets we have uh the Bitcoin ETF the E The Ether ETF but it's kind of the it's the analog it's trying to squeeze the internet through dialup where I think crypto

natives are really looking for the Inver where all of a sudden more of what Black Rock does more of what the NASDAQ does is actually on a blockchain or maybe there is a Black Rock chain one day uh maybe that's a little bit uh futuristic but I'm I'm wondering your take on that perspective so I agree with you that's the vision the crypto natives have I think for me the question is is that the vision that serves markets and investors best at this moment in time I'm not convinced that it is and a lot of times my lens and um you know know it's

interesting I think my my lens on crypto is kind of hard to extract from my lens on being a parent my daughter is uh 16 and she was born uh October 10th of 2008 and so she was born kind of you know 21 days before the uh white paper was was published and it was also during the great financial crisis and while these things are obviously like not correlated um that moment in time was a big one for me and my career and and determining

kind of where I wanted to spend the rest of my career and really wanting to if I was going to continue a career in markets which is my passion and what I love doing I wanted to be a part of increasing resilience access and transparency in markets I think though that the vision of uh crypto which has um huge benefits from a transparency auditability perspective I think where I call into question that Crypton native vision is around the

degree of centralization that's ultimately most important because again as apparent the more uh like the more decentralized a world the more you have to become the expert yourself um and I think that really the reason trade intermediaries have grown over you know decades centuries Millennia is because people want to focus on the things that they're expert in and they are sometimes very willing to trust an

intermediary however uh crypto can make that process of uh trust work better I'd like to zoom into the here and now as you mentioned the Bitcoin ETFs are almost one year old The Ether etf's about six months old how should we evaluate the development and progress and success uh of these ETFs how are the tracking versus expectations so I think um one of the uh one of them I feel like I am uh becoming increasingly bilingual in um uh uh uh trafi markets uh as well

as crypto I'm much more no I'm more like a tourist crypto okay and uh you know I have more fluency in trafi markets but it's interesting to me increasingly to see the misperceptions on both sides of that divide and one of the misperceptions on the crypto side is that the uh ether ETFs weren't as successful as the Bitcoin ETFs where really by all accounts in the ETF World The Ether ETFs had really successful launches so how do we measure that first

and foremost for us in the industry a successful ETF is one that delivers what it's supposed to deliver so it tracks the underlying index with um absolute Precision it's one of the reasons that Bitcoin ETFs became important because what we were hearing from investors was that they didn't have many ways um outside of actually holding Bitcoin you know in self- custody or on Exchange they didn't have many ways to hold it in

a kind of you know trafi wrapper where they could view it alongside the rest of their portfolio in a way that tracked they were buying a Futures ETF which as you probably know for reasons around position limits mrack they were buying proxy stocks and so the tracking of the ETF the Precision of that is uh number one how we measure success number two is Market quality and what we mean by that is it takes really an ecosystem of players to create uh trading volumes

liquidity um access on exchange for us it was the authorized participants who were agreeing to do create and redeem in the ETF so making sure all of those things are in place we call that market quality both the Bitcoin ETF and The Ether ETF um have tracked they've had high Market quality High particip now the flows have been different um and this kind of gets me to uh you know misperception number two and there's definitely misperceptions on both sides but that's that creating an ETF drives

flows it doesn't investors and investor sentiment drives flows and in 2024 for investors the thesis around Bitcoin was much more tangible than the investment thesis around um eth and and that explains the you know disparity in in flow however um they've both been I think that you know the Bitcoin ETF as as you probably know really beat all ETF

records in history but the E ETF was still in the top 20% of ETF launches in the United States this year so we feel them both as successful it's interesting to hear that you're saying that it's really the marketing the narrative uh the identity of the eth ETF that uh can be the reason why investors buy versus don't buy and I think this is definitely something we learned as an industry is like the Bitcoin story is just so easy to tell it's very simple 21 million limit it's digital gold that's it and then The

Ether story just doesn't have that same Firepower that same punch uh we asked Robbie I remember a similar question to this but that was again back in September uh and also since then ether ETF flows has picked up significantly in the last month or so I'm wondering if there's any new conversations uh that you're hearing from clients or any just so what's the gossip Mill sound like in in the terms who are people who are buying the Bitcoin ETF or the E ETF is there anything different than when we checked in for four or five months ago I

don't think there's that much that that's different I will um give my take on a couple of things that you just said and actually David as a fun fact I should tell you how I um how I started listening to the podcast because I think I'd listened to it from from time to time and if you recall um the SEC really surprised the industry with its approval of eth ETFs that happened in May um we were uh the industry was ready for it to happen and we were you know kind of had the Playbook from the Bitcoin etps but

but that was a surprise and so and and if you remember and you guys covered this very closely that period of June through early July we really weren't sure when trading would start um and so we were you know looking at everything our portfolio Readiness trading operational as well as the um education strategy uh around how we would position the ETFs when they came out so I was uh one weekend a lot of my favorite content in crypto has actually been through um podcast versus a lot of

the the stuff that I normally read and so I was just searching through podcast and I saw this podcast called the Great eth pitch off and I thought I thought well this sounds like it could be useful and so I listened to that and um and I actually thought it was really uh I I I thought it I mean you guys were were uh funny but also very uh thoughtful and and educational and uh and so that was actually when I what we go for yeah well you get the combination of things you've covered a lot of things

really well I think but um but uh that's when I started listening to the podcast so but I will say this I think your frustration then which is a little bit of what you just said was that it was just harder to explain it was a tougher narrative I actually think that's true but I don't think that's the Crux of the issue investors are smart and the uh what we call self-directed or individual investors who are really driving the success right now of the Bitcoin ETP range from you know really small

investors to very sophisticated um uh investors it's a very broad space and I think generally speaking they understand the difference they don't buy the investment thesis at this moment in time to the same degree it's not as relevant as the Bitcoin thesis is in a moment of time where we have heightened geopolitical tension concern over kind of broad-based uh disruptions concern over the dollar deficits so all

of these things play really well into the Bitcoin thesis on top of which what's really in investor psyche right now I think is that 2022 was a brutally hard year for trafi investors because stocks and bonds went down together that was a historical you know event and it really made people think about how do I diversify my portfolio what are the you know is there are there um alts that can create some sort of ballast in a

traditional kind of 6040 Equity Bond portfolio and there's a really interesting um analysis you can do around the potential that Bitcoin plays in that scenario where at the same time particularly for the US investor who is in um uh whether it is through an active strategy or an index strategy you know likely pretty exposed to Mega cap Tech I think often they feel that the um eth story is uh less of a diversifier and

more of an amplifier to some of the exposures they have so I think that the you know both you know the industry um as well as investors are are on that educational journey and it's not that they don't get it I think that Bitcoin has just been more more relevant at the portfolio conversation right now yeah yeah there's there's always just a maybe narrative Market fit asset Market fit for the times that we are inside of uh and I I think there is just a lot of like geopolitical relevancy over the

last few years and maybe Bitcoin is simply just a stronger player in that sort of environment I'm wondering does Black Rock provide any recommendations in terms of allocation for investors interested in holding exposure to bitcoin the Bitcoin ETP or The Ether ETP does that is that something that you guys do and if so what are those recommendations so we're not an investment adviser we don't provide investment advice but we do put out investment research and it's generally rooted in uh risk and how we look at portfolio risk and we do that across asset classes Count's strategies um and

we have started writing about Bitcoin we haven't yet uh written about eth in the portfolio context because most of this year I mean again eth is you know uh um six months old versus Bitcoin a year old so so initially with Bitcoin it was really educating around Bitcoin the asset class and also importantly for the digital native investors who understand Bitcoin educating around etps and the ETP rapper and we're still on that Journey with eth over the last few months though we did write um uh twice

and we'll continue to do so on bitcoin and the portfolio so we wrote about Bitcoin as a diversifier and the reasons we think it's interesting uh or or you know relevant for investors who are thinking about an allocation to bitcoin to think about um the potential diversification aspects of of Bitcoin versus you know uh uh uh equities and and bonds and and in the traditional 60/40 portfolio then we actually took it a step further and uh I

think probably about a month ago we wrote a piece that I think is really interesting on portfolio interactions of Bitcoin and that's the first place we talked about potentially sizing an allocation and this of course is for an investor who has determined I am you know interested in participating in Bitcoin because there's lots of investors particularly on the institutional side who aren't there yet but who are who for investors who who want to incorporate Bitcoin in their portfolios how do you think about it in the context of a diversified

portfolio and we thought an interesting framing given that so many investors are um already in some way exposed to the you know mag 7 um stocks we looked at a portfolio risk contribution of different levels of Bitcoin allocation and how that would compare to a MAG 7 stock um and that's not to say that Bitcoin is at all like any of those stocks is different but taking a risk centered

approach to how to think about a Bitcoin allocation and its contribution to overall portfolio risk we thought was something that investors would really understand and that came out of the lot a lot of the conversations that we have with our clients and where we came out in that piece was that a 1 to 2% allocation to bitcoin got you to the same level of risk contribution as a MAG 7 stock and going above 2% would um uh

exponentially increase the risk uh contribution so if you were to go above 2% you were really making a very strong view on bitcoin specifically versus trying to keep it in in the bounds of this Diversified portfolio now who are the people that are consuming this information who is this is I'm sure very robust analysis who's the intended audience for who is supposed to hear that information so we talk to uh uh investors uh across the

Spectrum um largely the investors that we talk to directly are advisers um who have you know their own uh clients and we also talk to institutions and then we do make a lot of um information available uh on our website for individual investors we'd have to check though David before uh I I'm not sure if this piece is like I forget like on if it's on the website for anybody but uh we do put the diversifier piece is out on our website for everybody the portfolio allocation

may be for advisors and institutions but we really write for all of those audiences yeah I guess since you have $6.6 trillion dollars in ETFs and index products the maybe the answer to who is reading this is some chunk of whoever is operating that 6.6 trillion dollars of of ETFs and and index well but remember this the $ 6.6 trillion dollars um doesn't have any crypto in at all that's all of our Equity ETFs our fixed income ETFs the only crypto that we hold

because you would know this one of the things about the index and ETF portfolios is they are completely transparent we publish Holdings on a daily basis so the only crypto in those portfolios right now is actually in the two crypto etps Bitcoin and E right I would like to get your opinion on what we want to see out of the ETFs in in 2025 if there was like a a rubric of sorts with things that you wanted to see the Bitcoin ETP and the eth ETP check

off as achievements in 2025 this year what might be on that list what's some things that you feel like are pretty safe that we're going to get what are some things that are maybe a little bit harder that you're optimistic for and then maybe what are some some potential stretch goals well so first of all I think that this um work being done around Bitcoin and the portfolio construct is really important and I hope we see more of that in 20125 I hope that conversation becomes less about Bitcoin or not Bitcoin and more about how is Bitcoin um

manifesting in the portfolio where is it useful where is it not useful and look the experience of the next you know few months and the next year is going to be very instructive um in terms of of where that goes it's important to remember that relative to you know lots of other asset classes Bitcoin still has a pretty limited history so there's lots of investors who say hey conceptually this makes sense but it's really hard for me to do the type of you know back testing and analytics that I'd want to do with kind of you know call it 10 meaningful

years of of trading data so the more M Market Cycles we weather the more data that comes available the easier it is to kind of integrate Bitcoin into the broader conversation around um risk and and asset return so that's number one number two which is a little bit more specific is I think the um launch of options on the Bitcoin etps was a really important moment in November generally speaking options ecosystems are really

good for markets they tend to create more balanced trading Dynamics you will have buyers on the way down sellers on the way up um and so seeing how that plays out um is going to be really important on the other hand and I was having this conversation um with with someone yesterday actually with um uh Bob pizani on on CNBC Innovation and complexity go hand inand and there are lots of people who are really excited about launching and pitching um

options-based strategies and some of those will be really useful for investors um and some of them may be really hard to uh understand and so I think the more options are incorporated into you know product strategies around Bitcoin the more important it is that we really put out good clear education on on what investors are buying but generally speaking options help investors uh go in multiple directions it helps them kind of tailor their exposures participate

with limited downside um you know uh uh achieve income and so um I think think the uh the development and and the use of options ecosystems is going to be interesting you know we've even seen interesting Dynamics in in the last few weeks where as you expect um when options were launched there was so much more demand for calls versus puts so upside protection versus downside protection that started flipping a little bit and that's going to give us a lot of information and transparency

around investor sentiment and that level of transparency actually is really creative to healthy markets so when I think about the Hallmarks of a more mature um resilient Market the development of this options ecosystem in etps um I think will be helpful both for the underlying crypto assets and also probably for their um digital native derivative markets which don't have as much transparency as they will need to really achieve more uptake among

investors I'm going to quote friend of the podcast Alex Thorne here Black Rock ibit options are absolutely dominating uh the volume on ibit is dominating versus the vanilla ETFs also Etha the Black Rock uh ether ETP has also recently started to take the lead on volume on the ethereum side the question is um what has black rock done to Foster that growth or was that all just emergent and just part of the product of maybe the elections or just the times that we are in is there anything from the top down side of things that black