What the ETH Futures Approvals Mean for Crypto with Eric Balchunas

Bankless Station, it's time for the ETH Futures Derby. It just began last week, and the past week has been unprecedented, to say the least. That's a word we use in today's episode. Several, not just one, but several Ethereum Futures ETF launched for the first time in the US, the first time ever. So what does this mean for crypto? Volumes have been surprisingly low. Is that a surprise? Is that bearish? Will volumes pick up? And regardless, if they don't, what do all of these ETH ETFs mean for crypto? Are Bitcoin spot ETFs next? And after that, maybe do we get Ether spot ETFs? David, who do we have on the show today to explain all of this and walk us through these questions?

Mr. ETF himself, Eric Balacunas. He is a commentator on Bloomberg on Twitter and just knows perhaps everything there is to know about these ETF products, the ins and the outs. Eric's going to tell you all the reasons why these particular Ether Future ETF products are dumb and bad and are just simply a means to an end of a much better, brighter future, which we definitely talk about. That Eric thinks is coming very soon this calendar year, which of course is the spot Bitcoin ETFs and a much sooner than expected uh spot Ether ETF than I think Ryan and I were ready for in this show. So

Bullish episode.

There's been a bunch of conversations around crypto twitters like why are people so excited about this futures product? Uh this show will answer that question. It's a means to an end, and that end is much closer than what people think. Meanwhile, while you are getting educated about the spot Bitcoin and Ether futures, ETF and all that shenanigans

David, why is this episode so significant? Why are we spending the time on Bankless, which is a program about crypto? I thought we were escaping the banks here, David. Why are we spending time talking about an Ether futures ETF and the broader implications of that?

Eric really said it well. These products are a bridge, a bridge from the crypto protocols to the world of TradFi. Why do we want that? Well, in my mind, this is a winning of a thumb war for the crypto side of things. They tradFi gets to have their ETFs, which is their composable unit money Lego for their world, but really all the value inevitably flows into our world, into Ether, into Bitcoin through the ETF. This is a this is a win for crypto. It is a stepping stone towards legitimacy. It is the biggest pipes between multiple trillions of dollars of capital and the cryptocurrency market cap, which is just one trillion. And it's really just Bitcoin and Ether, which combined is something like seven to eight hundred billion. So like think of a pipe. It's the biggest pipe that's ever been constructed. On one end of the pipe is 30 plus trillion dollars of capital management by TradFi, that's what I said. And then the 800 billion meager market caps that are the combined Ether and Bitcoin market caps. When a pipe that's very large opens up in ways that TradFi is only going to be ever comfortable with buying crypto, which is in their ETF formats, that is bullish. Uh and like I said, it's not necessarily going to be these products, but these products are the neck necessary prerequisite towards the bigger ones. Eric's explains that it's all in this show that we're about to have right now. So let's go ahead and get right into that conversation with Eric Balakunis, Mr. ETFs. But first, a moment to talk about these fantastic sponsors that make this show possible, especially.

Thankless Nation, we are very excited to introduce you to Eric Balichunis. He's an analyst at Bloomberg Intelligence. He's focused on ETFs, that is, exchange traded funds. And Eric knows ETFs. This last week, actually, last week, by the time you listen to this, nine future ETFs all launched on last Monday. And Eric is going to help us unpack it this week. Eric, welcome to Bankless. How are you doing?

Hey, good. Uh nice to be here.

It's great to have you. You've been covering uh ETFs, specifically crypto ETFs, with a lot of rigor. You are one of the main accounts I go to when I want up-to-date information. And you had this fantastic hype tweet uh last Monday, an unprecedented day today with multiple ETFs all launching at the same time. No clear winner has emerged. All of them were pretty average, lower than I would have predicted, but it's a long run. And remember, these hold futures. ETF investors much prefer physical to derivatives. Okay, so

the ETH futures launched uh last Monday. Tell us, use the words unprecedented. Why is that unprecedented?

Right. So there's been many ETFs, there's three thousand two hundred ETFs in change, something like that. And um there's been many launches. There was a gold launch, there's been oil futures ETFs. So it's not so much that it's uh ether or futures that's unprecedented. What's unprecedented is the SEC approving many at the same time. Normally in the ETF world, when you file determines when you get out. There's like a protocol to that.

And the SEC,

for the first time ever, broke from that. And

we have heard back channel that

the reason they did this is because um remember the ProShares Bitcoin Futures ETF launched two years ago.

It had like a three-day head start on the rest

and it has like 97% of all the volume of its peers and 94% of the assets.

So I think the SEC wanted to eliminate that what we call first mover advantage because they didn't want to sort of like give one ETF uh that that sort of, I don't know, it's almost like playing Kingmaker, although in the e Futures category there's not a ton of assets, so it's not like you're going to become a king. But obviously, having them all out at the same time is interesting to us and because it is unprecedented

and a foreshadow for the main event, which would be the spot Bitcoin race, where we do think they'll also let many issuers out at once. When you have many issuers out at once,

it puts a lot of pressure

on marketing.

And uh maybe fee and other variables uh when you're not first out. So that's why we've seen a little jockeying from like Banneck,

who has a lower fee. Also, they've said they're gonna donate 10% of the profits to charity. They've had some commercials, um, Bitwise

kind of coming out and saying, you know, we're more crypto native, that's our thing.

And then ProShares, you know, probably saying, I haven't seen them do too much marketing yet, but obviously, my guess is they're trying to tap their current Biddo clients

because they've already got that as a major hit product. So

All of them are trying to play to their advantages, and it's just interesting to see who will win because generally in an ETF category, there's really only one stud liquid

uh you know ETF that

uh has

the majority of the volume.

And when you have the majority of the volume, it's a good place to be because uh you you have pricing power.

Uh when other ones come out that are lower fee,

uh it's harder for them to penetrate your liquidity.

Uh for the people who like to trade, they value liquidity. So that's why to this day, GLD is still the most traded gold ETF, even though there's

dozens and many more cheaper.

And something like EEM, which is the iShare's Emerging Markets, there's been

many cheaper, four times cheaper, and EEM still trades a couple billion a day because there's definitely a crowd who just loves liquidity and prefers it. So those are the dynamics in this race that, as an analyst, is interesting.

uh to look at. Although I gotta say, there's really not been enough volume overall to really make anyone a winner yet. It's gonna take a while. Normally you know in a couple days. I think this one it will take a couple weeks.

I think bankless listeners are certainly familiar with the idea that uh liquidity is this black hole. The network effects uh lead to a single dominant winner. Eric, I want to ask about this signal that nine different products are all launching at once. You call this unprecedented. What what should we know about this thing the significance of so many suppliers coming into the market all at once to serve this product?

Yeah, so it's actually not nine. It was nine ready to launch. One of them withdrew just like any horse race where, you know, you know like in the Kentucky Derby there's a few scratches. Uh volatility shares dropped out. Kelly I think was late to launch.

I'm missing one. And then Valkyrie was more of a name change, but anyway,

Just to make a long story short, there's seven or eight on the market. And remember, a couple of them have Bitcoin and Ether together. So I wouldn't call those exact replicas, but there's definitely, without a doubt, three straight Ether ETFs, and then three or four Bitcoin plus Ether. All of those launching at the same time.

And so

I think if you're in this community, and I try to tell people this

you know, Ether and futures, in my opinion.

Are are not like you've spot Bitcoin. That's always been the holy grail.

So this is neither of those. This is not Bitcoin. It's Ether, which to me,

from my point of view, you guys may differ from the in the crypto world and Matt Hogan thinks Ether is going to be bigger than than Bitcoin.

But to me, it's like the no name opening band before the headliner. You know, you go to see a band and

like you're like, uh, you know

I'm sure it's like that for a lot of institutions too, to be fair right now, right? Right.

Yeah, this is the band you just talk to your friend through and just, you know, you just okay, let's get through it and let okay. Then when your band c the regular band comes on that you came to see, you go crazy.

Um

and I think that's what this feels like. It's just like a opening event.

And other the other thing is not only is Bitcoin,

I think, way more um i interesting to casual people,

but the the idea that it's spot.

There's something about derivatives that's like spring advisor repellent on the ETF.

They don't like ETFs that hold futures contracts. Um it came it really comes from a history of ETFs when there was like natural gas and oil futures ETFs.

There are certain commodities where you can't do spot because, like, if you did an oil, you can't an oil spot ETF would require the ETF issuer storing barrels of oil in a warehouse, and the oil goes bad, it's dangerous, it stinks. Um, you can't do it.