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In this episode of “Bitcoin Bottom Line,” host Steven McClurg is joined by Greg Foss and Josh Olszewics to discuss obligations. McClurg and Foss met when they were co-investors in the company responsible for bringing exchange-traded funds (ETFs) to Canada for the first time. Through a spot bitcoin ETF, the company reassured regulators in Canada that a bitcoin ETF could operate without being manipulated.
Institutional Adoption Through Bitcoin Products
At the start of the episode, McClurg mentions that the last time he and Foss were together, they discussed gas flaring and how it could be used to mine bitcoin. Foss explains how he has seen this type of energy harvesting progress in Canada. Although Canada does not have as much flare gas as the United States, according to Foss, the company it is involved with owns 400 megawatts of power which are old peaking plants, located along the pipeline. Trans Canada. This company plans to mine bitcoin at these factories, supporting the network in the process by being paid when consumers need excess power.
McClurg and Foss then discuss the two different potential audiences for bitcoin adoption: first, being an intermediate audience, which consists of financial advisors, and the second being institutions. Neither audience feels comfortable owning bitcoin directly. Miners and a bitcoin spot ETF seemed to be the two main ways to appeal to these audiences, even if mining was too niche. McClurg and Foss found that companies wanted a correlation to bitcoin, but not through mining or owning bitcoin themselves.
Stakeholders believe that institutions will enter the bitcoin space soon enough. Foss shared that Fidelity, one of the world’s largest asset managers, believes that by 2026 bitcoin will be a major asset class.
Bonds are not enough to save pensions
Foss is a huge bond skeptic: “There’s no more yield in bonds, so everyone’s retirement relies almost entirely on equities as a driver of performance. If pension funds become underfunded, there will be a lot of upset retirees and an upset president. He goes through the math to prove why bonds won’t save pension funds and how owning bonds is a risky bet. Foss describes bitcoin as a long volatility asset and the counterpart which is a short credit, “When you have short credit, you have long volatility.” He continues that bitcoin is the best asymmetric return opportunity he has seen in his 30 years of risk management.
The trio end the episode expecting an arms race with central banks racing to buy bitcoin. They speculate that the Federal Reserve might try to raise rates a few times starting in March 2023, but markets won’t be able to handle more than two or three rate hikes. Ultimately, they think the Fed’s hands are tied and may not be able to raise rates at all. Foss ends the episode by telling listeners, “Learn the math, sell your bonds, and buy some bitcoin.”