Well, this week's Real World Asset Summit wrapping up in Brooklyn, New York. The conference showing the strong demand for bringing traditional assets on chain via crypto rails and also managed yield vaults were a hot topic of conversation. They are automated smart contract based investment pools that collect digital assets and deploy them into predefined strategies to generate passive returns. Well, joining me fresh off the conference is GSR's Managing Director of Asset Management, Andy Baehr. Andy, great to have you back. Thank you so much for joining me today.
Good morning Remi, how are you?
I'm doing well. So you are coming off of RWA Summit that took place in Brooklyn. So what do you make of the conversations that were taking place there?
First of all, it's my kind of conference where the kind of blazer to t-shirt ratio is pretty good. There were representatives from Lynn Martin from New York Stock Exchange was there, other stock exchanges and derivatives exchanges. Big asset management companies, BlackRock, Franklin Templeton, T. Rowe Price, the crypto asset managers were there, New York Life Investment Management was there. Just about every possible constituent or player in this space who is looking to move into tokenizing everything was there, and it was a very serious conference, a lot of build. Let's just take a look at the size of the market right now, right? The original OG tokenized assets are stable coins, right, tokenizing dollars. That's still over $300 billion. That's eight times as big as the rest of the market, right? The rest of the tokenized market for treasury funds, equities, other things, commodities, gold, about $35 billion. So nascent, right? But still this idea that all assets will have a second life or maybe even its first life later in tokenized form is what the industry is looking forward to. And of course, with their length of vision, this is something that can be achievable. So it was very constructive, very well-participated, and I think there was a lot of energy there.
Yeah, and 2026 has been quite the year for crypto. We've been seeing plenty of volatility, but I understand when we're talking about some of the areas of focus, vaults have been in the spotlight as well. So give us an understanding of some of the conversations you're having with stakeholders. Well, vaults are fascinating and let's just describe what they are for viewers. Usually it's going to be, you know, I can have all of these different sources of yield and DeFi. I can go on Aave, I can go on Morpho. But what if somebody can just basically create a portfolio of different either, you know, sort of price assets or yield assets, put them into one place and have that place emit a token and I just hold that token. That's basically what a vault is. It's a managed pool of assets. more frequently around yield than around portfolios of growth assets. And there are thousands of them now, and some of them are quite big. It's a very, very efficient way to, in an on-chain way, in a completely DeFi way, in fact, for managers to express a view or express some skill in portfolio management and deliver an outcome. So there's a lot of questions over how they should be or whether they should be regulated in the United States, who's going to use them, how they can be distributed. Right now they're a discovery vehicle. People who use them around the world use them because they find them and they say this is attractive, I want to buy it. How they're going to get distributed and grow and how they're going to be, I guess, stationed in different jurisdictions alongside traditional portfolios remains unclear, but very exciting technology. We're thinking about how to participate at GSR as a management and we'll see where things go, but we love what we see so far.
And of course, the big question is surrounding demand. So here we are in the month of September, and when we look ahead to not just next week, but the rest of this month, there's a lot coming down the pike, whether we're talking about the macro focus, rates, as well as what's going to happen when it comes to politics, especially surrounding clarity. There's a lot to consider here. So tell us what's happening when it comes to the conversations and the demand, especially with all this infrastructure being built.
You've framed it perfectly because we have our kind of fast money and slow money kind of dichotomy right now. The fast money is wondering what's going to happen next now that we've kind of plateaued with the price of majors. There's a little bit better volume in the perpetuals market, which we like to see, a little bit better funding spreads there, a little bit better exchange volume. But still, we have second shot at clarity. We still have a lot of uncertainty around the Fed and now around the Treasury about the rest of the yield curve. Oh, gosh, we have midterm elections. Oh, gosh, we have a war going on. So there's a tremendous amount of uncertainty, which, again, has kind of, for the moment, stalled the market at this level. gets to not look at that. They say, what are people going to want? Right now, in the real world asset space, much of the perpetual activity on platforms like Hyperliquid have been on real world assets. They've been on equity futures or commodities or things like that. Are people going to want to buy and hold stocks on chain in wallets? Are they going to want to do it in brokerage accounts? Right now, I think it's fair to say that the supply that's being built kind of overwhelms the demand. There isn't really a distribution infrastructure set up to be able to push these things into portfolios. But at the same time, I was having conversations about index products, structure products, annuity, annuities, target date funds, bond funds, mixed portfolios, model portfolios. There is a lot of energy and funding right now amongst these big constituents to pave the way for these things to operate on blockchain rails. And the best news is a lot of the chains are participating. I saw Ethereum, Solana, Avalanche, MNR, all these Second and third tier chains are all participating. DeFi is participating as well. Stellar is participating. So it's great to see the breadth. And I think there's a lot of hope. I feel re-energized about the medium and long term. Short term still feels very uncertain. Yeah. And as you mentioned, we do not have a crystal ball for the short term, medium term or even long term. But when we look at the price action for Bitcoin, it goes without saying that it's been quite the summer and we saw that move above that 80k level. So what is the next big catalyst that you're paying attention to?
It could be any number of things. I think the August 19th move, we were all, we all had our, you know, our binoculars focused on looking for any possible catalyst and boom, you know, things happened and we got to this level. So that was a breakout and a little bit of a surprise. The market is not as tightly coiled as it was on August 18th before that breakout happened. So the next move up may not be as spectacular. I don't think there's as much, let's say, potential energy for another breakout higher or lower. But I think the market isn't going to object too much to trending higher from here, given the progress it's made over the last three weeks. So I would say that the drift lower, but maybe drift higher faster, gives me kind of a positive vector from here, going into more certainty around interest rates, the election, and the geopolitical situation. feeling, you know me, I'm never over-constructive just to be a cheerleader, but I think I feel a little bit constructive right now about how Q4 is going to go. Just remember, we think about these attention spans of the market in quarters. We're coming up to the end of the third quarter. That's usually a time when things shift and you have a seasonal change, so it might take a few weeks.
Yeah, and Andy, finally, before I let you go, you mentioned seasonality. And of course, as we are in the month of September, it does also mean that we are approaching the end of Q3. And that means Q4 is right around the corner here. So as we look ahead, what do you think is key when it comes to risk? And what does that mean for demand?
You know, the the the election, the referendum on the election amongst the electorate is often the stock market. The referendum on in the global markets is going to be the 10 year. And so, you know, I hear more podcasts, crypto podcasts talking about the US 10 year.
Sure.
which means I should probably be looking at the US 10-year a lot more. Different pundits will have different levels where they're comfortable, but if anybody thought we'd be here five years ago, I think they would have expressed a little bit of anxiety. And then you have the Treasury really trying to actively contour the yield curve. So I think the 10-year has got to be something that over the next couple of quarters is really going to steer sentiment. in a big sort of oil tanker kind of way. Whereas in the meantime, sentiment will be driven by stock prices and growth assets, especially as we get towards the election. But people, don't take your eye off that tenure. If it starts to climb in a way that we don't like, then turbulence could lie ahead.
Yeah, absolutely, Andy. A lot to keep our eyes on, both from a fundamental as well as technical perspective across all asset classes. So I appreciate your time today. Thank you so much for joining us, as well as weighing in with all of your perspective and insights today. Thanks for having me. Thank you, Andy.
