What’s next for bitcoin ETFs?

This is an audio transcript of the FT News Briefing podcast episode: ‘What’s next for bitcoin ETFs?’

Josh Gabert-Doyon
Good morning from the Financial Times. Today is Monday, January 22nd, and this is your FT News Briefing.

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Poland has won a major concession from the EU in its fight to limit food exports from Ukraine. Investors piled into bitcoin ETFs. And Ron DeSantis has dropped out of the 2024 US presidential race. Plus, executives in the oil and gas industry might have a pipeline problem.

Jamie Smyth
Young people in particular are worried about global warming. When it comes to their career choices, they want to work for companies that align with their values.

Josh Gabert-Doyon

I’m Josh Gabert-Doyon, in for Marc Filippino, and here’s the news you need to start your day.

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Farmers in Poland aren’t happy about Ukrainian food exports. They’ve been protesting and blockading the border over the issue. And in response, it looks like the European Union is ready to make some concessions. The blockade originally put in place pretty good trade conditions for Ukraine after the Russian invasion. But since then, Poland has been complaining that the influx of Ukrainian produce is hurting its agricultural sector and driving down prices. The EU’s top trade official now says that they’ll be looking to add new safeguards, and that Poland will be able to block Ukrainian imports. The proposal still needs to be approved by the European Parliament and the majority of member states.

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The Securities and Exchange Commission OK’d bitcoin ETFs earlier this month, and it’s been a bit of a wild ride. Bitcoin exchange traded funds have started to bring in big money for asset managers, upwards of $1bn in the first few days of trading. Now those asset managers are trying to pitch new cryptocurrency funds too. Here to talk about all this crypto news is the FT’s Will Schmitt. Hey. Will.

Will Schmitt
Hey, Josh.

Josh Gabert-Doyon
So the SEC grants their approval. We get the arrival of these new bitcoin ETFs. How have they been trading so far?

Will Schmitt
Well, since they started trading on January 11th, you know you had 10 all launching at once that day, what’s happened is you’ve had a couple of products do really well, but you’ve also had investors pulling money out of one of the largest and most expensive bitcoin funds, the Greyscale Bitcoin ETF, which existed previously as a trust, which is a different legal structure and now exists as an ETF.

Josh Gabert-Doyon
OK. And how is the actual price of bitcoin doing since these funds launched.

Will Schmitt
Not great, Josh. It’s dropped quite a bit. And I don’t have a great answer for you on why that is. One thing that has been happening that could be affecting it is regarding Grayscale’s Bitcoin ETF, which is massive. I believe it was about $28bn when they converted it into an ETF earlier this month. Because of the previous structure of that bitcoin trust, investors were not easily able to get their shares out. Now that it’s an ETF, which you know is famous for being a very liquid investment vehicle, Grayscale has sustained a couple billion dollars, if not more, at this point of people pulling their money out. Now, a lot of that money is going right back into some of these other ETFs, all of which charge substantially less than Graycale is charging. But because there’s a lot of selling activity there, as well as maybe not seeing the record demand that some people expected, you’ve seen Bitcoin dip down a little bit.

Josh Gabert-Doyon
OK, so few ups and downs straight out of the gate. Are there any asset managers that are doing particularly well with these new ETFs?

Will Schmitt
Yeah. So far Blackrock and Fidelity, I think, have had the most inflows. Again this is going to be something that shakes out over the next several months if not years to come. And then one surprising one I think just based because it’s a smaller firm that not many people have heard about it outside of the investing community is a company called Bitwise. They haven’t had quite the success of Blackrock and Fidelity, but given the fact that their total assets under management are so much smaller, the fact that they’re right behind those guys is pretty impressive.

Josh Gabert-Doyon
OK. And are other asset managers trying to get in on the game? Are there other bitcoin ETF products out there?

Will Schmitt
Not in the spot bitcoin market, but you’re starting to see on the fringes of this some of the little more esoteric products starting to pop up. Proshares, for example, is a firm that is filing to launch products that would double your leverage to bitcoin or offer you the ability to short bitcoin or double-short bitcoin if you so chose. So you’re starting to see as managers kind of expand the bitcoin investable universe by looking into other areas that more traditional vanilla ETFs have already had success in.

Josh Gabert-Doyon
So obviously a lot of energy behind these crypto ETFs. Do you think the excitement is going to continue or is this going to flame out?

Will Schmitt
I think it’s definitely reasonable to assume that you’re not going to be seeing $1bn every five days. With any ETF launch, generally you’re going to have this burst of initial demand, and then when it settles, it kind of plateaus at a certain point. What’s interesting about the bitcoin ETF in that regard is that a lot of these asset managers are not necessarily tying their hopes to just getting a bunch of day one assets and then going from there. They are waiting for investment advisors all around the country to become a little bit more comfortable with the idea of recommending bitcoin to their clients. They’re banking on at some stage, you know, investors, advisors being like, hey, would you consider Mr or Mrs Investor adding 1 per cent of your portfolio to bitcoin. And as that happens over time across numerous advisory accounts, that is where they’re expecting to see the real long-term flows and the real sustainability of these products.

Josh Gabert-Doyon
Will Schmitt is the FT’s ETF reporter. Thanks very much, Will.

Will Schmitt
Always a pleasure. Thank you.

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Josh Gabert-Doyon
Ron DeSantis has suspended his campaign for US president. The Florida governor dropped out and endorsed former president Donald Trump in a video he posted to social media on Sunday. That makes it a two-person race for the Republican nomination. Trump and former UN Ambassador Nikki Haley will next face off on Tuesday in the New Hampshire primary.

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It’s getting harder and harder to convince young people to join the oil and gas industry. Enrolment is down in US petroleum engineering courses, and some colleges in the US and Europe have dropped the courses altogether. That means companies are having to make a big push to try and recruit new workers. To talk about whether the industry can overcome this hurdle is the FT’s US energy editor, Jamie Smyth. Hey, Jamie.

Jamie Smyth
Hi.

Josh Gabert-Doyon
So, Jamie, why is it getting harder to get people to take oil and gas jobs?

Jamie Smyth
Well, I think there’s really three main reasons for this. The first of them is really climate change concerns. Young people in particular are worried about global warming. When it comes to their career choices, they want to work for companies that align with their values. Another part is that, well, actually, young people are concerned about their long-term future and careers. So if you think about the oil and gas sector, well, we’ve just had COP28 in Dubai and there of course, there was an agreement to phase out fossil fuels in the future. That’s also a reason. And maybe there’s a third point here, and that is that the oil and gas industry, it hasn’t been a particularly good employer in the past. It does pay very well. But because it’s an industry that suffers from booms and busts, it also tends to lay off large numbers of workers at once. So that has tended to make young people think twice about entering the sector.

Josh Gabert-Doyon
And so how are these recruitment issues actually impacting the industry? Are we seeing any problems at this point?

Jamie Smyth
So particularly smaller oil and gas producers are finding it much tougher to recruit graduates and to recruit the type of trades that they need to keep their operations going. The larger companies, Chevron, Exxon, say that they aren’t having a major skills shortage problem, that they are able to tap into young people. And that’s probably because they can pay higher wages than the smaller companies. However, this could become a major problem for them down the line, particularly with the big fall-off and student applications for oil and gas related subjects. So it’s something that they’re certainly putting a lot of effort in to try and turn around.

Josh Gabert-Doyon
Yeah. So what is the industry doing then to get more young people interested in oil and gas?

Jamie Smyth
It is investing in more scholarships for young people, to bring them through university education. Last year, for example, Exxon donated $16mn to universities worldwide. One of the more interesting moves here was Harold Hamm, the famous billionaire, godfather of shale industry here in the US, he actually made a $50mn donation to create a new institute for energy in Oklahoma. And one of the other very interesting moves by the industry is that some companies are trying to change the perception of their industry. You know, they’re spending a lot of money on media campaigns. They’re also going on to platforms which are popular among young people, such as TikTok, Twitch, and they’re promoting their traditional products and trying to change the discussion and the negative perceptions that have really hit the oil and gas industry, particularly amongst the young.

Josh Gabert-Doyon
OK. And if these efforts don’t work, I can imagine that’s going to be a pretty big problem down the road for these companies. But is there also an argument that it could sort of be a win in the fight against climate change?

Jamie Smyth
Certainly it would, yes. Climate campaigners, one of their main goals is to try and end oil and gas production. And if young people are turning against the industry, that would certainly help them achieve those goals and help the energy transition. The oil and gas industry is going to be in a fight with the new, newer low-carbon industries such as solar, wind and hydrogen, these other sectors. So we’re going to see this big scramble over the next decade, I think, to try and recruit and retain your workers.

Josh Gabert-Doyon
Jamie Smith is the FT’s US energy editor. Thanks for your time, Jamie.

Jamie Smyth
Thank you.

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Josh Gabert-Doyon
Before we go . . . 

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Josh Gabert-Doyon
Davos wrapped up on Friday. Now, if you didn’t get a chance to participate in all the glitz and glamour in the Swiss Alps, don’t worry, we have a few lines you can use at your next high altitude social gathering.

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Josh Gabert-Doyon
Artificial intelligence dominated the conversation at this year’s Davos. AI was front of mind for leaders in business, tech, politics and finance.

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Josh Gabert-Doyon
And those first movers were playing nice with regulators.

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Josh Gabert-Doyon
But there was a common refrain among those discussing the future of AI.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.