BlackRock Bitcoin ETF Head: Volatility Halved, Bitcoin Shifts from "Get-Rich Narrative" to "Collateral Narrative"

Compiled & edited by: TechFlow

Guest: Jay Jacobs (Head of U.S. Equities ETF Business, BlackRock)

Host: Anthony Pompliano (The Pomp Podcast)

Podcast Source: Anthony Pompliano (YouTube)

Air Date: 2026-09-17

Duration: 50 minutes

Disclosure: The guest is the head of BlackRock's ETF business, and all products mentioned throughout the article—IBIT, ETHA, ETHB, BIDA, BAI, PWR, IDGT, ICOP—are his own products under management. This is an insider's product pitch, so take it with a grain of salt. The host had three sponsored segments during the show (Lava credit card, Token 2049, Simple Mining), which are unrelated to the views in the main content and have been omitted in this compilation.

Key Takeaways

In this episode, a BlackRock executive personally explains the Bitcoin ETF business. There are four pieces of information useful to readers.

First, he acknowledges that Bitcoin's volatility has been compressed from around 80 to 35-40, and believes the compression is structural: ETFs and the options market have given more people ways to participate, long-term buyers have entered, and the market has become deeper. But he also insists that Bitcoin's fundamental character hasn't changed—it benefits when people worry about fiat debasement and geopolitical risk, and in that kind of environment stocks and bonds tend to perform poorly, so its diversification value remains.

Second, the threshold for in-kind creation/redemption (exchanging real Bitcoin for ETF shares) has dropped to $1.5 million, and what truly drives large holders to convert to ETFs isn't custody security—it's financialization: once coins are inside an ETF wrapper, they can be used as collateral to borrow for buying a house or car, or to layer on options strategies. This point is key to understanding large holder behavior.

Third, BlackRock's product discipline: only Bitcoin and Ethereum, because these two account for two-thirds to three-quarters of total crypto market cap. The staking version of Ethereum, ETHB, and the covered-call income version of Bitcoin, BIDA (selling call options on roughly 30% of the position to generate cash flow), are both designed for people who "want to hold coins but want cash flow."

Fourth, AI is already treated as a macro factor inside BlackRock, on par with GDP and interest rates. The real mismatch is in the supply chain: large models self-iterate 24/7 and demand grows exponentially, but a copper mine takes 4 to 8 years to come online, and a wafer fab takes 4 years. His conclusion is to either buy a basket (BAI, actively managed) or buy a segment (power via PWR, data center real estate via IDGT, copper mining via ICOP)—going finer than that isn't something an ETF can hold.

Highlighted Quotes

On Bitcoin's fundamental character:

"When people are worried about institutions, worried about geopolitics, worried about fiat debasement, Bitcoin should benefit. And in that kind of environment, stocks and bonds tend to perform poorly."

On the real change brought by ETFs:

"Before IBIT existed, a lot of advisors and institutions could pretend the Bitcoin topic didn't exist. With IBIT, it has to enter the asset allocation discussion."

On why large holders switch to ETFs:

"We thought what large holders wanted was institutional-grade custody security, but the bigger demand turned out to be financializing Bitcoin. Long-term holders want to buy a house or a car, and being able to borrow against their coins is a hard need."

On product discipline:

"Bitcoin and Ethereum account for two-thirds to three-quarters of total digital asset market cap. We have over 480 ETFs, but we've probably rejected more product ideas than that."

On picking ETFs:

"There are now more ETFs in the U.S. than stocks. Don't just look at the name—names can be very flashy. Open the hood and look at the structure, look at the market makers. The differences are huge."

Full Text

1. The Biggest Impact of ETFs: Turning Bitcoin from "Able to Ignore" into "Must Discuss"

Anthony Pompliano:  The Bitcoin ETF looks like the most successful ETF launch in history. When you filed, I said it would get approved and would be a big deal for the industry. Looking back now, what has the measurable impact on the industry actually been?

Jay Jacobs:  The biggest impact is the number of participants. Before ETFs, individuals had to open an account on a digital asset exchange—that's friction. For many institutions, it was simply a prohibited activity. For financial advisors, the process was long and annoying. After IBIT launched, buying Bitcoin became as easy as clicking to buy the S&P 500 in a brokerage account.

Jay Jacobs:  There's another change that may be even more important. Before IBIT, advisors and institutions could dodge the topic—they couldn't buy it anyway. People at institutions always have a pile of things on their plate. Guess whether they spend time learning about Bitcoin or thinking about stock-bond allocation? Most choose the latter. After IBIT launched, Bitcoin had to enter the conversation: how do we view this asset class, is it appropriate to put in a portfolio. Among the world's most discerning institutions, these internal discussions were greatly accelerated.

2. Volatility Compressed from 80 to 35—Can It Go Back?

Anthony Pompliano:  Bitcoin's volatility has clearly compressed. It used to be an asset with volatility around 80, now it's roughly 35 to 40. Some say it's because Wall Street came in, some say it's ETFs, some say the root cause is the leverage and options stacked on top. Do you have a view? Will this compression persist?

Jay Jacobs:  We don't have a single answer, but several factors definitely contributed. First, ETPs and the options market around ETPs have been built up—there are more ways to participate, the market is thicker, and whether someone needs liquidity or wants to do complex trades, it can handle it. Second, more participants means more research, more long-term buyers, who can offset the short-term strategy crowd. The more participants and the better market liquidity, the easier it is for volatility to come down.

Anthony Pompliano:  My friend Jordi Visser has this "quiet IPO" thesis: Bitcoin over the past year or two is like a company quietly going public, 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 correlation with certain assets. How do your clients position it now?

Jay Jacobs:  The holding structure has indeed changed—there's more long-term buy-and-hold money, which has also suppressed volatility. But we don't think Bitcoin's fundamental properties have changed. It's still a global monetary alternative, decentralized, not controlled by any government, free to move across borders—that's where most of its value comes from. When people are worried about institutions, worried about geopolitics, worried about fiat debasement, Bitcoin should benefit, and in that kind of environment stocks and bonds tend to perform poorly. This diversification character hasn't changed to this day.

3. Product Line Logic: Only Two Coins, but with Variations; Large Holders Switch to ETFs for Collateralized Borrowing

Anthony Pompliano:  There are roughly three paths in crypto products: not touching it at all; listing every coin; or deeply focusing on just a very few. You're the third—Bitcoin plus Ethereum—but you've also done staking versions and yield versions. How do you draw that line in product meetings?

Jay Jacobs:  The starting point is a fact: Bitcoin and Ethereum account for two-thirds to three-quarters of total digital asset market cap, value is highly concentrated, and adoption is still very early. So we first saturate the biggest pools. IBIT is the world's largest and most liquid Bitcoin ETP. For Ethereum we have ETHA without staking, and this year we launched the staking version ETHB, letting investors capture staking yield through the ETP structure.

Jay Jacobs:  There's also BIDA, which sells covered calls on roughly 30% of the Bitcoin position to create cash flow for investors. This was driven by client feedback: many people like Bitcoin's long-term story, but it's zero-coupon and zero-yield, making it hard to fit into a portfolio that talks about cash flow. Connect it to option income, and people stay.

Anthony Pompliano:  What about in-kind creation/redemption? Now large holders can exchange real Bitcoin for ETF shares. I always hear people privately talk about the security issue of holding coins—cold wallet theft, physical security, and so on. Do many large holders think holding ETFs is better than holding coins? Hardcore Bitcoiners would say this violates the spirit of Bitcoin. What do these conversations actually look like?

Jay Jacobs:  When IBIT first launched, regulators didn't allow in-kind creation/redemption; later it was permitted. My original judgment was the same as yours—I thought it was mainly a security need, but security turned out to be only part of it. The bigger piece is financialization. Long-term holders have most of their net worth in coins, they want to buy a house or a car, and being able to borrow against their coins is a hard need. Others want to layer option protection or income strategies on top of their coins, or swap some Bitcoin exposure for S&P 500 exposure. Once coins are inside the IBIT wrapper, there's so much more you can do. The threshold for in-kind creation/redemption has also dropped a lot—now roughly $1.5 million per transaction, much higher before—so the pool suddenly got bigger.

4. AI Is Already a Macro Factor; the Real Mismatch Is in Mines and Fabs

Anthony Pompliano:  Your mid-year thematic report talked a lot about AI. Previously the market felt AI was stealing Bitcoin's spotlight, now the two seem back at the same table. The AI industry chain is so long—what's your analytical framework?

Jay Jacobs:  Inside BlackRock, we started treating AI as a macro factor a few months ago. People used to look at GDP, look at interest rates; now AI adoption rate is a variable of the same rank: if AI slows, the market feels it; if AI accelerates, the market benefits. For the overall price level of the U.S. market, it's just that important.

Jay Jacobs:  Many people also treat AI as a tech theme—that view is outdated. It's a healthcare theme, a legal theme, a consumer theme; it will touch almost every industry. Just because you bought a healthcare fund doesn't mean you've dodged the AI thread.

Jay Jacobs:  We built a framework for the AI value chain: power companies, data center real estate, chip manufacturing, data holders, large model developers, the application layer, the platform layer—dozens of companies globally spread across each segment.

Jay Jacobs:  Today's biggest mismatch is the speed gap between supply and demand. Large models are writing code to improve themselves, 24 hours a day; companies worldwide decide to increase AI investment in days or weeks. Demand is exponential. But on the supply side, a copper mine takes 4 to 8 years from construction to production, and data centers and grid rebuilds are all bottlenecked on copper; if optical interconnects replace copper interconnects, you need indium, and indium is a byproduct of zinc mining—again several years; even if you just need more GPUs, a wafer fab takes about 4 years to come online. Demand is measured in days, supply in years—that's the biggest dislocation in AI today.

Editor's note:  Indium is a rare metal used in lasers and optical communication devices. It has almost no standalone mines and is mainly obtained as a byproduct of zinc smelting. His point is: even if the technology path shifts to optical interconnects, upstream materials are still bottlenecked by mining cycles.

5. Inside the ETF Business: More ETFs Than Stocks, and Names Can Deceive

Anthony Pompliano:  How fine can you slice products? Memory gets an ETF—what about liquid cooling chips? Sliced fine enough, there could be thousands. How do you decide down to which layer?

Jay Jacobs:  Three criteria. One, does it solve a real client need—is this segment an exposure clients can't reach otherwise, or one that needs someone to define it. Two, is there positive expected return—bundling things that aren't worth anything together is pointless. Three, can you build a high-quality ETF. When you slice down to a sub-sub-sector with only two or three names left, it doesn't look like an ETF anymore and simply can't be made into one—it's just a tiny basket of stocks.

Jay Jacobs:  So our approach is: people who want convenience buy BAI, the actively managed AI ETF, run by Tony Kim, who rotates through selections across the value chain; people who want to do it themselves buy segments—power is PWR, covering companies in power generation fuels, generation, and distribution by index rules; data center real estate is IDGT; copper mining is ICOP.

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

Jay Jacobs:  This is one of the fastest-growing client channels. ETFs were always the most democratized tool—what a retail investor buys in a brokerage app is the same exposure the world's largest institutions buy. But end investors vary greatly: some want laser-precise exposure with strong conviction; some just saved their first $100 and want something like a pension. Different products, different education.

Anthony Pompliano:  There must be things you haven't pulled off, right? From the outside you've won with Bitcoin ETFs, won with AI. What keeps you up at night?

Jay Jacobs:  Education can always be done better. Another is a real problem: there are now more ETFs in the U.S. than listed stocks, this year is another record year for ETF launches, and active ETFs have surpassed index ETFs. There's so much choice that investors simply can't choose, and names can deceive—a bunch of ETFs all sound like AI ETFs, all sound like power infrastructure ETFs. Open the hood and what they hold and how the process is designed differ enormously.

Jay Jacobs:  Take BIDA as an example—we deliberately used a '33 Act structure rather than a '40 Act structure. The '