I am Pascal St-Jean the President of 3iQ, the first Canadian investment fund manager to offer a public bitcoin investment fund

What would you say to someone who views crypto, in its current state, as a scam and/or a tool for the already wealthy with zero benefit to the majority of Canadians?

I would say at a very basic level, both Canadian dollars and cryptocurrency can be used as money in Canada. When we look at the supply attributes of money, such as the inflation rate, the inflation rate of bitcoin (BTC) remains below 2%, while the inflation of the Canadian dollar is almost 8%. While the price of BTC can fluctuate against Canadian dollars, it does act as a viable alternative to government-issued money. Put yourself in the shoes of somebody who resides in a regime with a tyrannical government or one who’s currency experiences excessive inflation rates. Bitcoin can be easily moved to and from global jurisdictions with little to no government repercussions until it is converted back into the local currency. There is a lot more to cryptocurrency than its price fluctuating up and down - it can be used to send value (remittance payments) around the world.

How do you justify getting people to buy into a scam? What pillows are you using that allow you to sleep at night, knowing that you're luring people into a scam? Final question, why did you decide to become a scam artist?

There are ‘scam’ artists of varying degrees in Crypto as there are in traditional finance. However, that is a minority. The BTC and ETH tokens account for over 60% of the digital asset universe and have proven credibility. When you fold in the 14% of stablecoins that the US government is fast-tracking for regulation and you get to 75% of digital assets having a history of performance and interest in partnership by regulators, NOT banning. 

We are here for dialogues. As we said above - currencies require adoption as does BTC and other digital assets. Like all investment decisions, one must be informed, one reason we chose to be a regulated entity with transparency on process and providing content to inform. We also appreciate that there is skepticism - and why we are engaging forums like Reddit.

What makes this AMA not an advertisement?

First, control. If it were an ad, we would control all incomings inviting softballs from friendlies. This is live and we can’t edit questions.

Second, it does have elements of an ad. As it is meant to increase awareness of our firm in the digital space, but, there is the downside if we do not provide relevant information that resonates with the person and broader audience. Ads are contrived, we are doing this live.

Proof:https://imgur.com/a/Qi9lzcS

The username in your proof doesn't match the username you posted from. Do you keep this level of detail in your crypto workings?

Just updated the post but here is the updated photo: https://imgur.com/a/0ZOHXPH

How many coal plants are you hoping to bring back online in order to mine more Bitcoin?

Yes, some Bitcoin miners rely on Coal energy. But that is because Bitcoin can be mined wherever there is access to electricity and the internet. Where that energy comes from … Well you should ask your local government/utilities administrator! Should we blame the government and other utility companies for using coal? Bitcoin can also be mined utilizing gas flares (converting wasted energy to usable energy). Electrical grid operators can also use Bitcoin mining as a tool to manage the demand curve. The good news is that at least up here in Canada, much of our energy comes from hydroelectric dams and other forms of renewables. Mining can be green depending on the jurisdiction it is being mined in. Arguably, providing security to the world’s largest computer network is a good use of energy, especially wasted energy as it could be stored in batteries first, then used in mining. There are tradeoffs in everything.

As a supplement, here’s a good piece from FoundryUSA, one of the largest bitcoin mining pools: https://foundrydigital.com/bitcoin-energy-fact-sheet.pdf . Also, as a side note, take a look at how much energy Google and other Web2 giants consume on a yearly basis. You can find that information in their yearly reports. Humans like to convert energy into useful tools. For Bitcoin, censorship-resistant, decentralized money not issued by governments could be a good use of energy.

Getting exposure to crypto without the challenges of buying, storing, etc. What would I be missing out on buying into an ETF rather than holding the asset myself?

Some downsides with holding ETFs can include:

• Not having custody of the coins means you can’t send crypto to a friend directly, or use dApps with your crypto
• You can’t use ETF units to purchase anything
• You lose custody of your cryptoassets and rely on a regulated fund manager to store them for you
• The trading hours of the ETF are not 24/7, and trade on stock market hours
• Price spreads and volume can be worse on funds/ETFs than in spot markets

Overall, there are definitely positives and negatives with holding crypto ETFs. The biggest positives we see are: brokerage account integration, the ability to hold crypto exposure tax-free or in registered retirement accounts, and the ability to pursue legal action (against us) if something goes wrong. As we have seen in recent events with CeFi lending platforms, not all companies are subject to the same degree of regulatory oversight like we as fund managers are.

Is the ETF tracking Crypto spot or future based? And what are the pros and cons of such?

Canadian ETFs such as those 3iQ offers hold real spot cryptocurrency, and are not futures based. Sometimes, the price of futures can trade above or below spot prices due to market forces, meaning the pricing of futures-based ETFs may not accurately reflect the current demand for native spot coins.
Having a spot-based ETF also allows for in-kind subscriptions and redemptions, meaning an investor can send BTC or ETH into the fund, securitize it (receive ETF shares), then possibly redeem it back at a later time either in-kind or as cash. Think about crypto ETFs as regulated “wrapper” contracts, that essentially securitize your crypto holdings.

Why buy a Crypto ETF when I could just buy these Coins itself?

Crypto ETFs consolidate crypto holdings into brokerage accounts. These ETFs can be purchased on Margin, or even in tax-advantaged accounts like TFSA’s in Canada. Crypto ETFs also handle cold-storage custody for you, so there are increased guards in place for regulated wrappers such as ETFs.

What are the benefits of an ETF vs ETP such as Grayscale?

Canadian ETFs, such as those 3iQ offers, have monthly and annual redemptions. Grayscale products are OTC and offer no redemption mechanisms, meaning flows out of the fund have to be sold on secondary markets (OTC exchange) to other investors rather than through the primary market (fund manager) which sells the real crypto. This is how some funds can trade at drastic premiums and discounts on the stock market compared to their Net Asset Value. Management Fees are also generally more advantageous on the Canadian ETFs.

Does the fund management company offer any ETH staking funds or ETFs? Could staking rewards be funneled in the ETF?

We are aware of Ethereum’s transition to proof-of-stake (PoS) which would enable validators to earn native yields. However, as a regulated investment fund manager (Funds, ETFs) the company is subject to OSC/CSA regulatory approval. Any changes to existing products, or release of new staking products, would be subject to regulatory approval and oversight. While we can’t say the exact course of action we are taking, note that we are at the forefront of securities innovation here in Canada and are taking the merge seriously.

As an investor, what does news of the fund’s expansion into other exchanges mean for me?

Generally, new exchange listings can positively impact trading volumes as the distribution of the ETF is increased. For some fund structures, like closed-end funds (not ETFs), premiums and discounts can also be impacted. However, both ETFs and closed-end funds have redemption mechanisms in Canada, unlike some products in the USA.

What crytpo would you all in, if forced, to avoid the coming financial meltdown?

If one, it would be BTC. In a meltdown, correlations go to 1, and credit issues often emerge. BTC is the most decentralized, censorship-resistant digital asset. In the digital asset trilemma of scale, decentralization, and security, BTC delivers strongly on security and decentralization, but less so on the scale. This trade-off helps in a meltdown and is why they call it Digital Gold.

This is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of investment advice

What is your longer term outlook on ETH as an investment post Merge?
Been seeing the same people talk about efficiency and the works. But what are the driving factors that are going to solidify an investor's decision on buying into ETH?

I think a lot of it comes down to usability. We are increasingly seeing ETH being used not only as an investment, but as a necessary coin to use when interacting with Web3 technologies such as decentralized exchanges, non-fungible tokens, and more. Once Ethereum pivots to proof-of-stake, we could see an increasing number of traditional enterprises pursuing their own initiatives on Ethereum (without fear of being anti-ESG) where they can provide and extract the most value. Another thing to note is that, in our view, investors like to reside where the technological breakthroughs happen. We have seen a lot of chains mimic, or fork existing Ethereum technological breakthroughs. Ethereum by large has the most active, independent developers which are not sponsored by official foundations. They are coming in and developing at their own free-will. This is a major catalyst in our view as it shows organic adoption of the network beyond purely price speculation, and development spurred by grants from official foundations.

When it comes to post-merge, an interesting concept to think about is the lack of daily selling pressure from miners which may not have the network’s best interest at heart. Post-merge, this daily sell pressure subsides (assuming miners sell daily to pay for operational expenses). Miners make around ~14,000 ETH per day (~$20mm per day in USD), give or take, which are typically sold on the market. Another concept to think about is simple supply and demand economics post-merge. Inflation rate of ETH could decline quite substantially, depending on network activity. Presuming demand stays the same or increases, the laws of economics state that prices go higher. We’ve highlighted several potential impacts on ETH in a research piece here: https://3iq.ca/digital-asset-bulletin-issue-13-the-merge/

What's the best single product to invest in to get broad crypto exposure?
How broad would broad be in this case?
Seems like there are so many coins with new names making headlines everyday

Tough to say. For regulated, publicly-listed products on the Toronto Stock Exchange, you are limited to just bitcoin (BTC) or ether (ETH) at this point in time. For broad exposure, we offer a 3iQ Global Cryptoasset Fund, which holds a variety of crypto assets; however, it’s structured as a mutual fund trust for accredited investors.
When we think about broad exposure, it’s important to note that a lot of investable assets are actually issued on Ethereum and use the Ethereum Virtual Machine (EVM). This includes NFTs, stablecoins, and more. One could argue that simply owning ETH gives you some theoretical proxy exposure to the success of any of those above concepts, as those tokens and applications require ETH to function, putting upside pressure on ETH prices as demand rises for any of those above use cases. Even layer-2 solutions, at some point, will use ETH or pay the Ethereum mainnet in fees. By holding ETH, you can capture the value accrued back to the mainnet.

If the Merge isn't the catalyst we needed to save crypto at this level as someone on the sidelines looking for a moment to get in, what should I be on the look out for?

In saying ‘be crypto’ you mean if the Merge does not facilitate a ‘bottom’, we think Regulation is a near-term, positive catalyst that will drive institutional adoption in support of that ‘bottom’. Last week’s White House press release on the findings from the Office of Science and Technology (OSAT) on the potential for crypto mining to provide carbon offsets is an example of the government's growing acceptance of crypto as a positive agent of change. Very different from the mainstream media narrative.  See our recent research for more on the trajectory and tenor of the US regulatory efforts.