In this episode of Rabbit Hole, Dave Nadig sits down with Teddy Fusaro, President of Bitwise Asset Management, to dive deep into the mechanics and implications of Bitcoin ETFs. They break down how creations and redemptions really work, the SEC’s role in shaping the market, custody and compliance issues, and what the future of tokenization may hold. If you’ve ever wondered how crypto and traditional finance connect at the ETF level, this conversation offers a rare inside look from one of the industry’s leaders.

Topics Covered:

• Evolution of ETFs and lessons for crypto ETFs

• How Bitcoin ETF creations and redemptions actually work

• The SEC’s restrictions and why cash creations dominated early on

• Transition to in-kind creations and their efficiency benefits

• Concerns around custody, AML/KYC, and “bad” Bitcoin

• Transparency of the blockchain and proof of reserves

• Custody risk, Coinbase’s role, and future diversification

• Common myths: paper Bitcoin, tax advantages, and wash sales

• Why large holders are moving into ETFs (estate planning, collateral, convenience)

• How this paves the way for multi-asset crypto ETFs

• The bold future: tokenized ETFs and on-chain finance

Timestamps:
00:00 – Bitcoin ETFs and echoes of past ETF debates
01:19 – Introduction of Teddy Fusaro, President of Bitwise
02:59 – ETFs as “weapons of financial mass destruction” concerns
04:12 – SEC’s stance on in-kind creations and custody rules
07:00 – How cash creations work in practice
10:59 – Benchmark pricing and execution in Bitcoin markets
14:28 – Transition to in-kind creations and cost savings
20:05 – AML/KYC concerns and custody protections
23:11 – Transparency of blockchain and proof of reserves
26:50 – Coinbase custody and single-custodian risk
31:00 – SAB 121 and the rise of traditional custodians in crypto
32:08 – Myths about tax advantages and wash trading
35:12 – Why big Bitcoin holders are moving into ETFs
37:47 – Implications for multi-coin ETFs
39:00 – Future of tokenization and on-chain ETFs
40:33 – Closing thoughts and where to follow Teddy

ETF innovation or madness?

In this episode of Rabbithole, Dave Nadig is joined by Bloomberg’s Eric Balchunas for a candid and wide-ranging conversation on the explosion of new ETFs—some useful, some ridiculous, and some outright dangerous. They debate where the line should be drawn between investor freedom and regulatory responsibility, why the current ETF boom feels different, and whether the rise of private markets and derivatives in ETFs is creating cracks in the financial system. From yield-maxing “hot sauce” products to private equity in public wrappers, this is a no-holds-barred look at where the ETF industry is heading.

🔍 Topics Discussed:

Why not all ETF buyers are your mom—and why that matters

The ETF rating philosophy: truth in labeling over moral judgment

ESG ETFs and the dangers of overpromising

The rise of “YieldMax” style products and their behavioral appeal

Are leveraged and options-based ETFs pushing the ecosystem too far?

ETF structure vs. mutual funds during liquidity crises

When ETFs outgrow their underlying markets (and what that breaks)

The problem with private equity ETFs and mark-to-myth pricing

Buffers, derivatives, and the new face of retail-friendly structured products

Eric’s crypto ETF thoughts, hopes for a uranium spot ETF, and more