Tom Lee, Fundstrat Capital’s CIO & Portfolio Manager and Dave Nadig, Independent ETF Expert, join CNBC’s Dominic Chu to discuss crypto, where it fits in when it comes to ETFs, and how it may be stuck between two narratives right now.

Industry experts Tom Lee and Dave Nadig examined the current state of cryptocurrencies within the exchange-traded fund (ETF) space. While Bitcoin ETFs have seen significant inflows and are considered one of the most successful product launches, the price of Bitcoin itself has remained relatively stable. This is attributed to factors such as existing holders transferring assets into ETFs rather than new money entering the market, and long-term holders potentially selling at high price points.

The discussion also highlighted that the next developments in crypto ETFs may involve staking products for coins like Ethereum and Solana, as well as stablecoin ETFs. However, experts do not expect these new products to match the demand seen for Bitcoin ETFs. The infrastructure companies supporting the crypto ecosystem, such as Coinbase and Circle, have also performed strongly in the market.

The role of crypto in the ETF space

So, another big theme certainly has been around finding alpha in cryptocurrencies. It's been volatile. But, you know, Tom, maybe I'll direct this to you. You've been out there in front as well on this. Money seems to be going into Bitcoin funds. For instance, the price of Bitcoin itself, though, is looking range bound from here. Take us through why, even with more allocative instruments, especially in exchange traded products that we are not seeing as much of a price improvement in Bitcoin when there isn't an actual construct for actually putting money into it. Yeah, that's a great question. I mean, we know Bitcoin ETFs are the most successful product launch like in history. And then someone says, well, if you're going to collect that much money, Bitcoin goes to the moon. But it turns out Bitcoin's risen, but it's kind of churned. I think what happened is a couple of things. One is a lot of these ETFs may have been receiving in-kind exchange. So people have their crypto keys, give it to the ETF provider, and then they just stepped up their basis. So that's not going to push up the price of Bitcoin. It adds to their... It's a wash. Yes, it's a wash. And the second is that the ones who aren't involved in ETFs, but maybe they have $10 Bitcoin, we have clients that have bought Bitcoin at $100, and now it's $100,000. They're not looking to... They don't care if Bitcoin goes to a million. They are probably sellers at around $100,000. So we're churning the base now because 95% of the institutional world doesn't own Bitcoin, but a very significant portion of Bitcoin holders are sitting on huge gains. So I think this is the churn that's happening in Bitcoin now. But of course, the companies that serve Bitcoin, like Coinbase or Circle, have seen huge growth, and they've been the best IPOs and the best stocks. So it's almost like maybe you won't make money trading Bitcoin, but look at the infrastructure providers. They've been great stocks. Dave, the question then maybe goes to you from a macro perspective when it comes to exchange-traded products versus cryptocurrencies. What's the next big thing? Is it going to be maybe Ethereum-based funds, Solana-based funds, or do we kind of diversify out into some of the companies that are involved in the Bitcoin ecosystem, Dave? Well, I mean, it's hard to know with a speculative asset like Bitcoin where a top is and where the flows are. In this one case, I'll correct Tom, there is no current creation in kind for Bitcoin. So nobody's been able to magically transform their low-basis Bitcoin into new-basis ETFs. But that doesn't mean we haven't seen a lot of folks take their exposure out of a wallet situation and put it into an ETF, where let's be honest, it's a whole lot easier to transact. It's actually much cheaper. Buying the cheapest ETF right now is cheaper than most direct cash-to-Bitcoin transactions you could make in any crypto exchange. I think that's been very attractive. So I think that's a lot of it as we've seen effectively Bitcoin move from one wallet to another wallet, the wallet now being on the ETF. The next big thing to happen in crypto ETFs is probably going to be staking. You'll certainly get some stablecoin ETFs, although I don't think you'll expect to see a huge amount of performance out of those. That's not really what they're there for, they're transaction vehicles. But we have two filings present right now for Cayman-based Solana and ETH staking products that would allow people to participate not just in the growth of the coin's value, but in its use in the DeFi ecosystem, where you can actually generate significant yields often a few points above what you might get in a regular, more normal fixed income type instrument. So we'll see those products launch this year, I'm fairly certain. And then from there, there's a long tail of smaller coins, smaller crypto applications, real world assets, NFTs, pudgy penguins. There'll be product launch there, I'm skeptical we're going to see huge demand like the $150 billion we've seen show up in Bitcoin ETFs specifically. Thanks for watching. Transcribed by https://otter.ai

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