On this week's episode of Yahoo Finance Future Focus, our host Brian McGleenon spoke to Standard Chartered Head of Crypto Research Geoff Kendrick, who shared his insights into the evolving landscape where traditional finance incumbents, such BlackRock and Franklin Templeton, are involving themselves in the cryptocurrency sphere via the recently launched spot bitcoin exchange traded funds (ETFs). A spot bitcoin ETF is a financial product that investors hope will pave the way for mainstream capital to flood the crypto market. Currently, the indications are favorable, with fund managers having allocated over $4 billion in net inflows to the eleven spot bitcoin ETFs approved by the US Securities and Exchange Commission (SEC) on January 11. Kendrick anticipates a shift in the US 401K market, with retirement fund managers expected to allocate funds to the recently launched ETFs. Additionally, he projected an overall net inflow of approximately $50 billion to $100 billion into spot bitcoin ETFs in 2024. Regarding ether, he foresees the approval of spot ether ETFs by the SEC in May, leading to a net inflow ranging between $20 billion and $35 billion into spot ether ETFs throughout 2024.
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00:00Today, we're joined in the studio by Standard Chartered's Head of Crypto Research, Jeff
00:08Kendrick, to find out how these dynamics play out in Bitcoin and the crypto market over
00:13the coming months.
00:14Jeff, welcome to the show.
00:16Thanks, Brian.
00:17It's a pleasure.
00:18The Fed hinted that later than expected interest rate cuts could occur in 2024.
00:23In what way could this affect the current climate when it comes to risk assets such
00:27as Bitcoin?
00:28Well, the big picture importance from the Fed in 2024 is that treasury yields are likely
00:33to be not so volatile.
00:34So 2023, we went all the way up to 5%, then we came well back below 4%, and now we're
00:39back above 4% just now.
00:41So this year, that volatility shouldn't really play out, and that's good for very long-duration
00:46assets like Bitcoin.
00:47Now, what we saw last week from the Fed was a pushback from March to likely May or June
00:52in terms of the first cut from the Fed.
00:54We also had the very strong US employment data out on Friday.
00:58As a result of that, treasury yields have been backing up.
01:01So 10-year yields are up about 30 basis points since mid last week.
01:06Actually, Bitcoin and Ethereum and risk assets more broadly have held in very, very well.
01:11And I think that's because we're now in a situation where we know the cuts are coming
01:14because inflation is coming down, most importantly, and the economy remains pretty strong.
01:19So there's a lot of cash just be investing in those new ETFs.
01:23Okay, so on the subject of higher treasury yields and the possibility of rate cuts or
01:29the delay in rate cuts, could this affect Ether more than Bitcoin in the short and long
01:34term?
01:35Normally, Ethereum would underperform if risk assets performed badly, which we would have
01:40probably expected given what treasury yields have done in the last week or so.
01:44But a couple of things have happened.
01:46Risk assets haven't sold off.
01:47You've seen fresh all-time highs in the likes of NASDAQ, NVIDIA particularly, which is sort
01:52of the extreme end, if you like, of tech firms.
01:56And Ethereum in particular is really an extension of that tech industry given its likelihood
02:02around DeFi and other going forward in the multi-year space.
02:05So risk assets have held in pretty well.
02:08And obviously, we also have the Ethereum ETF to come up, which I think is coming in May.
02:12So that flow into the ETF should also help.
02:15There's also the halving and grayscale Bitcoin trust outflows possibly decelerating as the
02:20months go on.
02:21Is this also going to play in as a factor?
02:24I think the grayscale stuff is pretty much done now.
02:26You've had, in terms of since the 10th of January, you've had large outflows, as you
02:30mentioned from grayscale, about $5.5 billion up to the close last night.
02:35Thankfully, you've had good inflows into the other new ETFs, about $7.5.
02:40So the net has been plus $2 billion so far.
02:42That's a pretty good result.
02:44In terms of the new ones in particular, $7.5 billion is a massive start.
02:48This year, I think we get about $50 to $100 billion of net inflows, so a long way from
02:54that just now.
02:55But I think we can now start to build momentum.
02:57As I say, most of that grayscale noise is out of the way.
03:00The FTX component of that, which is about $1 billion in and of itself, is all done.
03:06And so now I'm very positive on those inflows.
03:08And most importantly for Bitcoin, it should mean volatility comes lower.
03:13And so if vol is lower, the asset class again becomes much more attractive.
03:17How serious are fund managers, you know, those big Wall Street players considering
03:21spot Bitcoin ETFs for their clients?
03:24It's extremely important.
03:25I mean, the largest one which people were most excited about was a BlackRock ETF.
03:30That's had almost $3 billion already go into it.
03:33Fidelity has also done extremely well.
03:35So those two very large traditional asset managers that have the ETFs now in Bitcoin
03:40have had very good inflows.
03:42I'd expect that to continue going forward.
03:44And what we're now going to see in the U.S. is the 401k market, i.e. pensions, etc., enter
03:50Bitcoin and other assets in this space when we get the Ethereum one in May as well for
03:55the first time.
03:57So you have a lot of experience when it comes to FX and crypto and stuff like that within
04:04Standard Chartered.
04:05So what is your sort of overall feeling now about the attitude that these big institutions
04:11are having towards the space, towards crypto in general?
04:15Traditional finance is here to stay.
04:16So SCB has been one of the first players in this.
04:20We've been pushing into this space for quite some time.
04:22We have already making markets via Zodiac Markets as well.
04:26So we are here to stay in this space.
04:29And other institutions are also now getting interested, if you like.
04:33So with the spot ETF, the market is becoming more normalized, which I think is necessary
04:37at this juncture of growth.
04:40You'll then start to see a build-out of the options market, the futures market, etc.,
04:45as well as TradFi comes online.
04:48And you'll then start to see some of the bigger institutional money, perhaps reserve managers,
04:53etc., also start to get involved with their counterparts, like banks like ours.
04:57Okay.
04:58Jeff Kendrick, thanks for coming on this week's episode of Yahoo Finance Future Focus.
05:01Pleasure, Brian.