BlackRock Executive: Bitcoin Volatility Halved, Shifting from 'Get-Rich Narrative' to 'Collateral Narrative'

Compiled by: Shenchao TechFlow

Guest: Jay Jacobs (Head of U.S. Equity ETF Business at BlackRock)

Host: Anthony Pompliano (The Pomp Podcast)

Podcast Source: Anthony Pompliano (YouTube)

Broadcast Date: 2026-09-17

Duration: 50 minutes

Disclosure: The guest is the head of BlackRock's ETF business, and all products mentioned in the text, including IBIT, ETHA, ETHB, BIDA, BAI, PWR, IDGT, ICOP, are managed by him, representing an insider's perspective on product promotion. The host's segments on Lava Credit Card, Token 2049, and Simple Mining are unrelated to the main content and have been omitted in the compilation.

Key Takeaways

In this episode, the BlackRock executive discusses the Bitcoin ETF business, providing four useful insights for readers.

First, he acknowledges that Bitcoin's volatility has decreased from around 80 to 35-40, and believes this compression is structural: ETFs and options markets have provided more ways for people to participate, with long-term buyers entering the market, making it thicker. However, he insists that Bitcoin's fundamental nature remains unchanged; it benefits when people are concerned about fiat currency devaluation and geopolitical issues, while stocks and bonds often perform poorly in such environments, maintaining its diversification value.

Second, the threshold for physical redemption (exchanging real Bitcoin for ETF shares) has dropped to $1.5 million, and what truly drives large holders to exchange for ETFs is not custodial security, but financialization: once Bitcoin enters the ETF structure, it can be used as collateral for loans to buy houses and cars, or to layer options strategies. This point is crucial for understanding the behavior of large holders.

Third, BlackRock's product discipline: they only deal with Bitcoin and Ethereum, as these two account for two-thirds to three-quarters of the entire crypto market value. The staked version of Ethereum (ETHB) and the covered call version of Bitcoin (BIDA, which sells covered call options for cash flow) are designed for those who want to hold coins but also desire cash flow.

Fourth, AI has already been treated as a macro factor within BlackRock, on par with GDP and interest rates. The real mismatch lies in the supply chain: large models self-iterate 24 hours a day, with demand growing exponentially, but it takes 4 to 8 years to bring a copper mine into production and 4 years for a semiconductor factory. His conclusion is to either buy a basket (BAI actively managed) or buy segments (electricity PWR, data center real estate IDGT, copper mines ICOP), as further breakdowns cannot be accommodated within an ETF structure.

Highlights of Opinions

On Bitcoin's fundamental nature:

"When people are concerned about institutions, geopolitical issues, and fiat currency devaluation, Bitcoin should benefit. In such environments, stocks and bonds often perform poorly."

On the real changes brought by ETFs:

"Before IBIT came out, many advisors and institutions could pretend that the topic of Bitcoin didn’t exist. With IBIT, it must enter the discussion of asset allocation."

On why large holders exchange for ETFs:

"We thought large holders wanted the security of institutional-grade custody, but the bigger demand is to financialize Bitcoin. Long-term holders want to buy houses and cars, and being able to use Bitcoin as collateral for loans is a hard demand."

On product discipline:

"Bitcoin and Ethereum account for two-thirds to three-quarters of the entire digital asset market value. We have over 480 ETFs, but the product ideas we rejected may be even more than that."

On choosing ETFs:

"Now the number of ETFs in the U.S. exceeds that of stocks. Don’t just look at the names; names can be misleading. Lift the lid to see the structure and market makers, and the differences can be significant."

Main Content

1. The Biggest Impact of ETFs: Making Bitcoin a 'Must-Discuss' Topic

Anthony Pompliano: The Bitcoin ETF seems to be the most successful ETF issuance in history. I said when you filed that it would be approved and would be a big deal for the industry. Looking back now, what is the measurable impact on the industry?

Jay Jacobs: The biggest impact is the number of participants. Before ETFs, individuals had to open accounts on digital asset exchanges, which was friction; for many institutions, this was a direct prohibition; for financial advisors, the process was long and tedious. After IBIT came out, buying Bitcoin is as easy as clicking to buy the S&P 500 in a brokerage account.

Jay Jacobs: There’s another change that might be even more important. Before IBIT, advisors and institutions could avoid the topic, as they couldn’t buy it anyway. Institutional people always have a pile of things to deal with; do you think they spend time learning about Bitcoin or thinking about stock-bond allocations? Most choose the latter. After IBIT came out, Bitcoin had to enter the conversation: how to view this asset class and whether it fits into the portfolio. The most discerning institutions globally have greatly accelerated this type of internal discussion.

2. Volatility Reduced from 80 to 35, Can It Go Back?

Anthony Pompliano: Bitcoin's volatility has clearly compressed; it used to be around 80, now it’s about 35 to 40. Some say it’s because Wall Street has entered, some say it’s the ETFs, and others say it’s due to the leverage and options piled on top. Do you have a judgment? Will this compression continue?

Jay Jacobs: We don’t have a single answer, but several factors have certainly contributed. First, the ETP and the options market around ETP have been established, providing more ways to participate, making the market thicker. Some need liquidity, and some want to engage in complex trades, and all can be accommodated. Second, more participants have entered, research has increased, and long-term buyers have come in, balancing out the short-term traders. The more participants there are and the better the market liquidity, the easier it is for volatility to decrease.

Anthony Pompliano: My friend Jordi Visser has a term called "silent IPO": Bitcoin has quietly gone public over the past couple of years, with early holders transferring their chips to a new generation of shareholders, and ETFs are the main channel for this transfer. Now Bitcoin is more sensitive to interest rates and has higher correlations with certain assets. How do your clients currently position it?

Jay Jacobs: The holding structure has indeed changed; there’s more long-term buy-and-hold money, which has also compressed volatility. But we don’t believe Bitcoin’s fundamental attributes have changed. It remains a global currency alternative, decentralized, not controlled by any government, and freely transferable across borders, which is the source of most of its value. When people are concerned about institutions, geopolitical issues, and fiat currency devaluation, Bitcoin should benefit, while stocks and bonds often perform poorly in such environments. This diversification fundamental has not changed to this day.

3. Product Line Logic: Only Two Coins, But with Variety; Large Holders Exchange for ETFs to Use as Collateral for Loans

Anthony Pompliano: There are generally three paths to creating crypto products: not touching them at all; putting everything on; or deeply focusing on a very few. You are the third option, dealing with Bitcoin and Ethereum, but also offering staked and yield versions. How do you draw this line in product meetings?

Jay Jacobs: The starting point is a fact: Bitcoin and Ethereum account for two-thirds to three-quarters of the entire digital asset market value, with a high concentration of value, while adoption is still very early. So we first focus on the largest pool. IBIT is the largest and most liquid Bitcoin ETP globally. For Ethereum, we have the non-staked ETHA, and this year we launched the staked version ETHB, allowing investors to earn staking rewards through the ETP structure.

Jay Jacobs: There’s also BIDA, which holds about 30% in Bitcoin and sells covered call options to generate cash flow for investors. This is driven by client feedback: many people like the long-term story of Bitcoin, but it has zero interest and zero yield, making it uncomfortable to put into a cash flow-focused portfolio. By connecting it with options income, we can retain those investors.

Anthony Pompliano: What about physical redemption? Large holders can now exchange real Bitcoin for ETF shares. I often hear people privately express concerns about the security of holding coins, cold wallets being hacked, physical security, etc. Do many large holders feel that holding ETFs is stronger than holding coins? Hardcore Bitcoin players might feel this goes against the spirit of Bitcoin. What do these conversations actually look like?

Jay Jacobs: When IBIT first launched, regulators did not allow physical redemption, but later it was relaxed. My original judgment was similar to yours, thinking it was mainly a security demand, but security is only part of it; a larger part is financialization. Long-term holders have a significant portion of their wealth in coins and want to buy houses and cars, so being able to use coins as collateral for loans is a hard demand. Some also want to layer options protection or yield strategies on their coins, or exchange part of their Bitcoin risk for S&P 500 exposure. Once coins enter the IBIT structure, there are many more things that can be done. The threshold for physical redemption has also dropped significantly, now around $1.5 million per transaction, much lower than before, greatly expanding the pool.

4. AI is Already a Macro Factor; The Real Mismatch Lies in Mines and Semiconductor Factories

Anthony Pompliano: You discussed AI extensively in your mid-year thematic report. Previously, the market felt that AI was stealing Bitcoin's spotlight, but now it seems both have returned to the same table. Given the long chain of the AI industry, what is your analytical framework?

Jay Jacobs: BlackRock has started treating AI as a macro factor internally a few months ago. Previously, people looked at GDP and interest rates; now, AI adoption rates are variables of the same level: when AI slows down, the market feels it; when AI accelerates, the market benefits. It is that important for the overall price level in the U.S. market.

Jay Jacobs: Many people still view AI as a technology theme, but that perspective is outdated. It is a healthcare theme, a legal theme, a consumer theme, and will touch almost every industry. Buying a healthcare fund does not mean you can avoid the AI line.

Jay Jacobs: We have built a framework for the AI value chain: power companies, data center real estate, chip manufacturing, data holders, large model developers, application layer, platform layer, with dozens of companies globally distributed across various segments.

Jay Jacobs: Today, the biggest mismatch lies in the speed difference on both the supply and demand sides. Large models are self-writing code to improve themselves, iterating non-stop 24 hours a day; global companies take days or weeks to decide to increase AI investment. Demand is growing exponentially. But on the supply side, it takes 4 to 8 years for a copper mine to go from construction to production, and data centers and power grid reconstruction are all stuck on copper; if optical interconnects replace copper interconnects, you need indium, which is a byproduct of zinc mining, and that takes years; even if you only need more GPUs, it takes about 4 years to bring a semiconductor factory into production. Demand is calculated by days, while supply is calculated by years, which is the biggest mismatch in today's AI landscape.

Compilation Note: Indium is a rare metal used in lasers and optical communication devices, with almost no independent mines, mainly obtained as a byproduct of zinc refining. His point is that even if the technology route shifts to optical interconnects, upstream materials are still constrained by mining cycles.

5. The Inside Story of the ETF Business: More Than Stocks, Names Can Be Deceptive

Anthony Pompliano: How detailed can products be broken down? For instance, an ETF for memory, what about liquid-cooled chips? If you break it down further, there could be thousands. How do you decide how deep to go?

Jay Jacobs: Three standards. First, does it solve a real need for clients? Is this segment something clients cannot reach on their own or need someone to define exposure? Second, is there a positive expected return? Creating something that is worthless when bundled together is pointless. Third, can a high-quality ETF be created? When breaking down to just two or three names in a sub-segment, it no longer resembles an ETF and cannot be made into one; it’s just a small basket of stocks.

Jay Jacobs: Therefore, our approach is: for those who want convenience, buy BAI, an actively managed AI ETF managed by Tony Kim, who rotates stock selection within the value chain; for those who want to be hands-on, buy segments: electricity is PWR, covering companies involved in power generation fuels, generation, and distribution according to index rules; data center real estate is IDGT; copper mines are ICOP.

Anthony Pompliano: Now independent investors and self-directed money are growing rapidly. Do these people want the same things as institutions?

Jay Jacobs: This is one of the fastest-growing client channels. ETFs are inherently the most democratized tools; the exposure retail investors buy in brokerage apps is the same as what the largest institutions buy. However, there are significant differences among end investors: some want laser-precise exposure with strong convictions; others just want to put away their first $100 like a pension fund. Different products require different education.

Anthony Pompliano: You must have things that don’t work out, right? From the outside, it looks like your Bitcoin ETF has won, and AI has won too. What keeps you up at night?

Jay Jacobs: Education can always be improved. Another real issue: now the number of ETFs in the U.S. exceeds the number of listed stocks, and this year has seen a record number of ETF issuances, with actively managed ETFs surpassing index ETFs. There are so many choices that investors can’t make decisions, and names can be misleading; many ETFs sound like AI ETFs or power infrastructure ETFs. Lifting the lid to see what they hold and how the processes are designed can show huge differences.

Jay Jacobs: For example, with BIDA, we specifically used the 33 Act structure instead of the 40 Act structure. The 33 Act is the structure used for Bitcoin and gold ETFs, and the cost is that investors will receive a K-1 tax form, which is a bit more troublesome but has higher post-tax efficiency. We chose it knowing it was more complex and then put effort into explaining why.

Jay Jacobs: There’s also the trading aspect. We don’t do market making, but we consider market makers' pain points when designing products. Two ETFs with the same name, one backed by a large group of market makers, will have a better trading experience during market turbulence and liquidity crunches. So my advice is simple: don’t just look at the names.

Compilation Note: The 33 Act and 40 Act refer to the U.S. Securities Act of 1933 and the Investment Company Act of 1940, respectively. A K-1 is a tax form for partnership structures, more complex than the ordinary 1099 form, typically received in mid-March, making tax reporting more cumbersome. His point is that structural choices affect post-tax returns, and ordinary investors wouldn’t even think about this layer before buying.

6. Generational Transition: Parents Ask About Large-Cap Stock Funds, Kids Ask About Bitcoin Funds

Anthony Pompliano: Let me share some data from our side. On our own financial platform, user assets are about 20% in primary residences, with crypto only at 10%, while the majority is still in stocks. My audience is all from the crypto circle; you’d think they’re 90% in coins, but that’s not the case. There’s always a gap between narrative and data.

Jay Jacobs: This aligns with what we see. Millennials are the first tech-native generation, but social media isn’t native to them; many got flip phones only in high school. Generation Z is born into social media, and Generation Alpha will engage with the financial world in ways completely different from their parents.

Jay Jacobs: This has very concrete implications for business: advisors need to serve two generations simultaneously. Baby boomers ask about your large-cap growth fund, while their children ask about your Bitcoin fund. IBIT's success is partly because advisors realized that the product list they discuss with the two generations is different, and they need to bridge this gap. Moreover, there’s a massive wealth transfer from baby boomers to millennials coming up.

Jay Jacobs: However, one thing will not change: the fundamental principles of portfolio management do not vary by generation; the old truths about risk and return remain unchanged, while the tools and asset classes have evolved. Advisors need to maintain their methods of managing money while learning to communicate with each generation effectively.

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