Zac Prince: Bitcoin trading has shifted to ETFs and options, regulatory changes will reshape crypto by 2025, and yield generation faces significant challenges

Key takeaways

• Bitcoin’s market dynamics have shifted from spot trading to derivatives like ETFs and options.
• The crypto landscape in 2025 will be vastly different from 2021, influenced by regulatory changes.
• There’s a mismatch between Bitcoin yield demand and available opportunities.
• Regulatory environments have significantly impacted the stability and operations of crypto platforms.
• Current regulatory discussions could lead to a more stable environment for stablecoin issuers.
• BlockFi’s ability to raise capital was heavily impacted by regulatory actions.
• The interest rate environment has changed the landscape for yields in the market.
• Accessing financing in crypto is more challenging and expensive than in traditional markets.
• Galaxy’s premium yield product is generated through its large institutional lending desk.
• Galaxy’s yield offering differs from other CeFi platforms due to its risk management and regulatory structure.
• Bitcoin treasury companies face challenges in generating yield and justifying their valuations.
• The acceptance of crypto by traditional financial institutions is a positive step forward.
• Stablecoins have emerged as a significant application of blockchain technology.
• Tokenized equities are anticipated to be the next significant step after stablecoins.
• Crypto should not be a partisan issue, and bipartisan support is needed.

Guest intro

Zac Prince serves as Head of Galaxy One at Galaxy Digital. He is the co-founder and former CEO of BlockFi, where he launched consumer lending products and established the firm as a key player in crypto before its 2022 collapse. Prince recently returned to the industry after a stint as CEO of real estate firm RE Cost Seg.

The changing dynamics of Bitcoin trading

• Bitcoin’s market is now driven by ETFs, options, and futures rather than spot trading. – Zac Prince
• “The market is completely driven by ETFs and options and futures as opposed to the spot market.” – Zac Prince
• This shift marks a significant transformation in how Bitcoin is traded and perceived.
• The change reflects a broader evolution in crypto market dynamics.
• Institutional adoption is reshaping Bitcoin’s market landscape.
• The shift in market drivers has implications for investor strategies.
• Understanding derivatives is crucial for navigating the current Bitcoin market.
• The evolution of Bitcoin trading highlights the increasing complexity of the crypto market.

Future outlook for crypto

• Crypto in 2025 will look vastly different from 2021 due to regulatory and market changes. – Zac Prince
• “Crypto in 2025 looks absolutely nothing like crypto in 2021.” – Zac Prince
• Political and regulatory landscapes are key factors influencing crypto’s future.
• The evolution of crypto will be shaped by both technological advancements and regulatory frameworks.
• Investors should prepare for significant shifts in the crypto landscape.
• The future of crypto involves navigating an increasingly complex regulatory environment.
• Long-term strategies must account for potential changes in market dynamics.
• The crypto market’s evolution will present both challenges and opportunities for investors.

Challenges in Bitcoin yield generation

• There is a mismatch between the demand for Bitcoin yield and available opportunities. – Zac Prince
• “There’s a lot more money that wants to get a yield on their Bitcoin than there are compelling risk-adjusted opportunities.” – Zac Prince
• Generating yield on Bitcoin remains a significant challenge in the current market.
• The lack of compelling opportunities highlights a critical issue for Bitcoin investors.
• Risk management is crucial for navigating Bitcoin yield generation.
• Understanding yield generation mechanisms is key for Bitcoin investors.
• The market’s current dynamics necessitate innovative yield generation strategies.
• Bitcoin investors must be aware of the challenges in generating yield.

Regulatory impacts on crypto platforms

• The regulatory environment significantly impacted the stability of crypto platforms. – Zac Prince
• “A lot of fraud and crime happened offshore that maybe they would have caught here in the United States.” – Zac Prince
• Regulatory frameworks are crucial for ensuring the operational integrity of crypto platforms.
• The regulatory landscape has direct consequences for crypto companies’ financial health.
• Understanding regulatory challenges is key for navigating the crypto market.
• Regulatory actions can significantly impact fundraising efforts for crypto companies.
• The stability of crypto platforms is closely tied to regulatory environments.
• Investors must be aware of the regulatory landscape’s implications for crypto operations.

Financing challenges in the crypto industry

• Accessing financing in the crypto industry is more challenging and expensive than in traditional markets. – Zac Prince
• “Accessing financing for certain parts of the crypto industry is more challenging and more expensive than in the traditional market.” – Zac Prince
• This creates opportunities for credit-oriented investors in the crypto space.
• Understanding financing structures is crucial for crypto investors.
• The differences in financing highlight a significant market dynamic in crypto.
• Investors should evaluate the opportunities presented by the crypto financing landscape.
• The challenges in accessing financing reflect broader market dynamics in crypto.
• Credit-oriented investors can capitalize on the unique financing challenges in crypto.

Galaxy’s approach to yield generation

• Galaxy’s premium yield product generates yield through its institutional lending desk. – Zac Prince
• “The yield for that product is generated from Galaxy’s institutional lending desk.” – Zac Prince
• Understanding institutional lending is key for navigating Galaxy’s yield offerings.
• Galaxy’s lending desk size is significant in the crypto industry.
• The operational mechanics of Galaxy’s product provide insight into yield generation.
• Galaxy’s approach differs from other CeFi platforms due to its risk management structure.
• Investors should be aware of the differences between Galaxy’s offerings and competitors.
• Galaxy’s yield product highlights the importance of institutional lending in crypto.

The role of Bitcoin in corporate treasury management

• Companies should focus on building their business before integrating Bitcoin into their treasury strategy. – Zac Prince
• “Build the business first and then have owning the Bitcoin as part of your treasury management strategy.” – Zac Prince
• This reflects a strategic viewpoint on Bitcoin investment for companies.
• Understanding the distinction between business fundamentals and financial engineering is crucial.
• Galaxy’s crypto treasury strategy involves a significant portion of Bitcoin holdings. – Zac Prince
• “A significant portion of it is in primarily Bitcoin holdings.” – Zac Prince
• Companies must balance their Bitcoin holdings with broader business strategies.
• The integration of Bitcoin into treasury management requires careful consideration.

Galaxy One’s regulatory compliance

• Galaxy One operates within a clear regulatory framework, unlike many tech startups. – Zac Prince
• “There’s nothing that we’re doing at Galaxy One that is in a regulatory gray area.” – Zac Prince
• Regulatory compliance is crucial for Galaxy One’s operational strategy.
• Understanding the regulatory landscape is key for navigating crypto business operations.
• Galaxy One’s compliance approach contrasts with the fragility experienced in previous ventures.
• Investors should be aware of the importance of regulatory clarity for crypto companies.
• Galaxy One’s strategy highlights the significance of proactive compliance measures.
• The regulatory framework provides legitimacy and stability for Galaxy One.

The potential of tokenized equities

• Tokenized equities will be the next significant step after stablecoins in the financial ecosystem. – Zac Prince
• “The next step after stablecoins is tokenized equities.” – Zac Prince
• This highlights a clear prediction about the evolution of financial products.
• Understanding tokenization is crucial for navigating future investment opportunities.
• Tokenized equities could create a more efficient and accessible investment landscape. – Zac Prince
• “Why shouldn’t somebody in… access all of the same investment things that you can access in a brokerage account in the US?” – Zac Prince
• The potential benefits of tokenization emphasize financial inclusivity.
• Investors should be aware of the regulatory challenges surrounding tokenized assets.

The impact of economic conditions on crypto platforms

• Economic conditions will affect consumer willingness to engage with new financial platforms. – Zac Prince
• “In risk on modes where the economy is booming… folks are generally more willing to try a new platform.” – Zac Prince
• Understanding consumer behavior shifts is crucial for platform growth strategies.
• The relationship between economic conditions and platform growth highlights market dynamics.
• Interest rates significantly influence the financial products offered by crypto platforms. – Zac Prince
• “Our checking account will move up and down with the risk-free rate.” – Zac Prince
• Investors must be aware of how economic conditions impact financial products.
• The rate environment plays a crucial role in shaping crypto platform offerings.

The evolving landscape of stablecoins

• Stablecoin adoption is still in its early stages globally, with many functionalities yet to be realized. – Zac Prince
• “We’re still early in the stablecoin adoption story globally.” – Zac Prince
• This highlights the ongoing evolution of stablecoins and their potential growth.
• Understanding the current state of stablecoin adoption is crucial for investors.
• Stablecoins have emerged as a significant application of blockchain technology. – Zac Prince
• “Our killer app has been the dollar dollarized yacht.” – Zac Prince
• The regulatory progress of stablecoins is crucial for their future in finance.
• Investors should be aware of the potential growth and adoption of stablecoins.