How Bitcoin ETFs Really Work with Teddy Fusaro

Sep 5, 2025

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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