Greg King, CEO of Osprey Funds, discusses with David Lin, anchor for Kitco News, why Bitcoin could cap at $100,000 or even $200,000, as well as when a crypto ETF could be launched in the U.S.
We're here to talk about the direction of Bitcoin and the rest of the crypto market with Greg king. He is a CEO and founder of Osprey funds. Greg, welcome back the show. It's great to be here again, David, you have several funds, a Bitcoin fund, and you're creating a, an ETF soon. Let's let's let's let's hold the audience suspense in just a minute for just a minute.
We'll talk about that. Um, Personally, I've been waiting for a bit for a, for a crypto ETF for forever, but, um, uh, hasn't, hasn't, hasn't hit this side of the pond yet. Now. Uh, I'm looking at the Bitcoin price, $44,000 significant run-up since it's lows earlier in the month, last month as well. I've been reading media, a bunch of articles are bullish on Bitcoin.
Where do you stand? So we've been bullish for a long time. Uh, obviously building a business in the crypto space, uh, we're believers in Bitcoin and, and all that technology. I think the last few months have been challenging for people. Bitcoin was locked in a range from basically 30,000 to 40,000, um, which is kind of unusual for Bitcoin.
It moves around, but people are. It moving either up or down, not sideways. Um, but we do see a breakout. Um, if, you know, examined the technicals, uh, it looks like once it's broken out of this, a $40,000 upper limit, um, seems to me that, that, that was. Probably be the base of support going forward. And so we think it's, uh, you know, emerged from that, that kind of channel.
But again, our focus is more longterm. We're not sort of market prognosticators. Uh, what we think is that crypto led by Bitcoin, but also more so all points as things move forward is here to stay. Because at the end of the day, this is really technology, it's new technology and it's riding a wave towards, um, decentralized movements.
And I think that's just. In the popular culture at this point and not going away, we've spoken last time. And you mentioned that, uh, Bitcoin's historic price cycles usually end with a 900% appreciation. Is this cycle any different? Yeah, I mean, we have a, I think three major moves to draw from there. Uh, that is the average in these bull runs after a period of consolidation.
Um, I think if memory serves the, the minimum was 400% and then there was one around 1700% in terms of those bull runs over periods of a year or two. I wouldn't see this necessarily as any difference. So if you measure from the last, all time high. Uh, that was in place for more than a hundred days, roughly 20,000, um, you know, 900% move.
What's this a 200,000, but a 400% move. You know, it puts it basically at a hundred thousand. So, um, you know, again, we don't make price calls, but I don't see those numbers as being unattainable in this, in this bull run at all. What could challenge Bitcoin right now? What could take its place as the biggest cryptocurrency in the world?
Or perhaps draw money out. Of, uh, Bitcoins, uh, Bitcoin wallets around the, yeah. Well, that's a really interesting question with a lot of answers. Um, I think that, uh, Ethereum has always talked about, and as the number two, it should be. Um, and whether or not it passes Bitcoin in terms of total market cap is, is still up for debate.
I mean, I, I do think that that's possible. However, Ethereum won't replace Bitcoin. Ethereum is a totally different product. It's not been designed the same way as, as Bitcoin has to perform the same function. That big point is. And so you have fundamental differences. Bitcoin is a finite supply. Ethereum doesn't, um, Ethereum is transferring to proof of stake.
Uh, methodology where it's a big point stain proof of work. So they're really two different things and we believe that Bitcoin is establishing itself as a digital alternative to gold, a reserve asset. It's got a lot of volatility and that needs to smooth out over time, but it will do so, uh, we believe as Bitcoin just becomes larger and larger and more accepted by institutional investors.
Ethereum though is a really unique situation because they, they essentially have, um, I won't say a lock, but certainly the first mover advantage on the whole movement. And, uh, that infrastructure is being built largely on Ethereum. Although there are other platforms like algorithms, a salon, and some others that people are looking at, but, uh, that's what really was driving, uh, Ethereum at the moment.
So that could continue. Um, and just briefly, are you concerned about Ethereum, uh, or defy security risks at all? Just this one. $600 million of was hacked, is an investor. Would you now look at a headline like that and think to yourself? Hmm. Maybe I should park my money in somewhere that's less, less prone to be hacked.
So this is I, this is a beautiful question. So one of the reasons, um, we do what we do is to provide an extra layer of comfort to investors, right? I mean, we're creating funds that essentially just hold the cryptocurrency. We have the Bitcoin fund OB TC. Oh, then we have a polka.fund and the algorithms on, on, but they just hold one coin.
And sometimes we get ask, like, why would you ever do that? Like, who needs that? Um, but the reality is that if you're customizing your own coins and tokens, you do have to take a little bit of extra care and you do have to worry about where they're held and, and things along those lines. Um, now that doesn't obviously.
Curtail every risk that can exist around these products. Um, but it does kind of help, you know, Joe investor who maybe doesn't want to bother with all that hassle to kind of know that their, their assets are held in a fund. Um, it's custody with a reputable third party, like Coinbase or fidelity or some of the other players.
And they don't really need to worry about misplacing keys and things like that. So that, that hack was, uh, obviously a problem. And I find it even more interesting. The guys returning the money now. They have only returned half of it. So, uh, the other half is yet to be located. They claim they're only doing it for fun.
Quote unquote. So some someone someone's having a laugh. I'm probably not the people at poly, but somebody else, uh, Greg, let's talk about this ETF that you're thinking about launching. Uh, could you talk about it? Well, I can, I can speak to it generically. So we, we have our, our Bitcoin fund ATC. Um, you know, our intention has been to, uh, convert that to an ETF.
We're still proceeding down that path. Uh, nothing official's been filed, but I can just state that that's our intention right now. But I think, uh, we in the market, uh, everybody got a little more color recently from. Uh, Gary Gensler when he appeared before the, um, uh, Aspen Institute or whatever it was, uh, and spoke about the sec stance, not just on Bitcoin ETFs, but a whole host of issues.
Um, and you know, if you kind of re parse through his comments pretty carefully, it does seem like there's a path forward. I, I stick to what I said earlier this year that we're not going to see it happen in 2021. Um, I think that, uh, 20, 22 is probably the earliest. We see any kind of Bitcoins yet, but it does seem like there might be some light at the end of the tunnel.
However, he seems to prefer features based ETFs, which. Uh, makes some sense. We filed a futures based, uh, ETF in 2017, which back then was, uh, way too early. Uh, we have not refiled it, but the reason regulators might prefer that is because, um, a futures contract is a regulated instrument. There's a lot more oversight there, uh, versus the actual physical Bitcoin.
As pure of a play for investors, but you do have analogs in the ETF world. For example, the biggest gold ETF holds physical bars of gold, but the biggest oil ETF does not. It does not hold barrels of oil. It simply rolls oil futures, contracts. And of course that can be problematic as it was in early 2020 when, uh, oil futures went to negative $37 for a minute there.
Um, so, you know, Those types of issues would have to be thought through with respect to Bitcoin. And I'm curious how Bitcoin would ever go negative oil is different because there's physical demands and storage costs and things. But, um, there does seem to be light at the end of the tunnel for a Bitcoin ETF through the Gensler administration.
Although it's definitely needs to be his way or it's probably going to be the highway. Okay. So just to clarify, your ETF is a Bitcoin ETF, or is it an ETF comprise of several different tokens? So we have, um, a sauna is strictly speaking in ETF. Nobody has an ETF in the U S you have a Bitcoin fund that just holds Bitcoin.
Um, and well, I'm talking about your future plans for an ETF. You don't have to go into this well that I do that I can tell you, but, uh, we, we are, um, The existing ETF, if converted to, to an ETF or the existing fund is converted to an ETF, uh, would hold the physical. We're considering other, other options that may involve teachers, but we haven't followed anything there yet.
So I can't really comment how much of the altcoin market is regulated right now. Do you know. Y'all just regulated securities, just floating around in the wild, wild west. Yeah. So that is one of the major questions. And part of what Gensler was talking about is, you know, how many of these things are securities.
You literally have thousands of crypto coins and tokens that are out there. And at this point can be created pretty easily by people. Who know what they're doing. Uh, and so the question is how do you, uh, make a determination? Do you, as the sec, just simply deem, you know, thousands of these things, securities, all in one fell swoop, um, or do you go line item by line item, analyzing each coin and token its characteristics, how it was created and destroyed.
Right. But if you paint with a broad brush to now, all of a sudden, um, exchanges and even individuals are in violation of all kinds of securities laws, right? And so you would need to grandfather them in and you need to say, okay, you know, you need to comply as of a date in the future, but then you need to enable them to comply.
So some of these second and third order effects are being talked about by the industry. Um, you know, internally and behind the scenes, because if Ginza were to come out and require, you know, large players in the space to, to register, let's say a securities exchanges, well then all the other agencies would need to allow them to do that because that's not even clear that that, that those, those moves would be allowed.
So there's quite a bit of coordination that would need to happen. Um, you know, amongst regulators, not just the sec, but other agencies as well. So it's a very big. Issue and, you know, unfortunately they've allowed it to evolve to this point before really getting serious about. Speaking of regulations. Uh, Greg, what do you think about the infrastructure bill specifically as it relates to cryptocurrencies?
There was a clause in there that states that a crypto brokers quote, unquote, need to provide information on the clients. The IRS, the controversy here is that it's unclear who the brokers may be. It, it could be, uh, they could be dealers. They could be a financial institutions, institutions. They could even be minors.
Technically speaking, maybe that could apply to you as well. Since you're a fund manager of cryptocurrencies, what do you. Yeah, look, I think that, um, that bill, uh, that language was hastily drafted. Um, I think some of those amendments need to be considered and implemented specifically, uh, limits. And, and to me, uh, amendment, I believe that was right.
That amendment was blind. There was some procedural blocked by senators who shall remain nameless for, you know, trying to raise more money for more military spending or something. But, um, here's, here's what I. Here's what I think is I'm hopeful that that 2,500 or 2,700 page bill, which was tried to, you know, ramrod through, um, the longer it doesn't get passed by the house, the more holes will get poked in it because people will actually have time to read the thing.
Um, and so it may kind of fizzle and need to get redone. And at that point, I think cooler heads will prevail because there was a, uh, a bilateral consensus on some of these. Crypto amendments, right? Um, you had Republicans and Democrats agreeing that, Hey, anyway, this is nonsense. So, uh, you know, Yeah, not too overly concerned because I'm, I'm, I guess have a little faith that it won't get passed in this current form, uh, through the house.
Uh, but you know, stranger things have happened. And if it, if it did get passed and enforced in the broadest sense possible, that would be, uh, very damaging to the industry. Right? Well, let's, let's talk about that worst case scenario, despite the low likelihood, what could happen to the industry, what would need to, uh, what changes would need to take place effective immediately?
Um, you know, I think we we've had some calls with some experts on this and, uh, the changes are so broad reaching that it, you know, it's impossible for me to answer in a soundbite. What I will say is as an asset manager, um, I don't think we're in the crosshairs. I think there are others. Um, more concerning things happening in crypto, whether it's, uh, Newt coins and tokens being sold to retail investors as unregistered securities, or whether exchanges are operating outside of exchange rules, um, or whether some of the lending platforms and platforms are, um, you know, operating without the proper investor protection.
So I think the asset managers are probably the least of the concerns, however, You know, we would have to take a careful look at the language and how it might apply to our business. So we're doing that now, but hopeful that it will be changed. Are you concerned about, um, the potential, uh, what we saw, what China did to its minors?
It basically banned them and that they had to move out and we saw an immediate drop in the hash rate that more or less correlated with the drop at the. Could something similar happened in the west. For example, if the, uh, United States said, look, you guys aren't allowed to mind here. Is that a possible risk to you?
Or do you think the administration is just completely different from that of China's in their attitude? Yeah, I think, um, generally we're going to take a. Cautious approach, um, than, than what China has done. And I, I don't see that on the horizon in particular, um, from the United States, but, um, you know, my view on the, on the China situation was that that's, that's the longterm, uh, good thing.
Um, Too much of the mining production capacity being concentrated in a jurisdiction like China. So, um, you know, uh, that, that is probably helpful mid to long-term. I really don't see that happening in the U S okay. We'll just find a way to tax it instead. That will probably be the U S approach. The infrastructure bill.
Okay. I'm surprised there was, if I, when I first read the headline, I thought, okay. What does the infrastructure bill have anything to do with cryptos? Why is that even. I don't, I don't know. Maybe then you're probably not old enough to remember the bridge to nowhere, but, uh, things happen. Yeah. Yeah. Maybe they're trying to raise more taxes to finance the infrastructure bill that's maybe what's, they're looking for ways to find, to find more money.
Um, I'm curious, finally, I'm curious to know how you pick coins to manage you've you've you've decided on a Bitcoin fund. You, you mentioned your, you know, in polka dots. What are the criteria broadly speaking for deciding, look, I want to manage this coin. You know, why not a Lite coin? Why not? Uh, you know, uh
she don't owe it history without talking about Sheba. You knew. Right, right, right. Um, so what we do is we're trying to take a, uh, a systematic approach. And, um, you know, identify layer one points that we think are going to be promising. And so when I say layer one, that means coins that are involved with building the infrastructure of the blockchain ecosystem going forward.
Uh, Ethereum would be a great example of that. We don't have an Ethereum project for other reasons, uh, yet, but, um, you know, polka dot and Al Grande are two potential backbones. Uh, for some of the, uh, crypto projects that are getting built out, um, you know, I could go into some of the benefits of each of those, but, uh, you know, focusing go to our website if they want to check that out.
Um, but we're trying to pick what we think are going to be some of the backbones of the ecosystem as we build out and then move down into layer two and three types of protocols. So. Uh, we want to do that. And we also want to be first to market. Um, you know, we do have some competitors in the space, so we're looking for opportunities that have not been brought to market.
Um, and, uh, we do plan, you know, a much broader offering of, uh, index-based products and active based products sometime soon. So we love to come back and talk about that when we can absolutely. Well, follow up then. Thank you so much for coming on the show today and leading us on the crypto markets. Thank you.
And thank you for watching Kitco news. I'm David Linn. Stay tuned.
Okay.