From launching BlackRock's ETFs to co-leading a multi-billion dollar Ethereum treasury, Joseph Chalom’s journey reveals why institutions are now making a decisive bet on ETH as the foundational asset for a tokenized future.
Larry Fink's Crypto Evolution: A Bellwether for Wall Street
- From Skeptic to Advocate: Fink's perspective shifted from calling Bitcoin an "index of money laundering" in 2017 to championing it as "digital gold" and a "legitimate financial instrument" by 2024.
- Key Drivers of Change: This evolution was influenced by hundreds of conversations with clients, regulators, and crypto natives. The increasing maturity of the crypto ecosystem, including partnerships with firms like Coinbase and the listing of products on NASDAQ, provided the "institutional readiness" BlackRock required.
- Chalom's Perspective: "Larry didn't need my help or a yellow pill from anyone. He happens to be an incredibly intellectually curious person... it says a lot that he has the mental acuity and flexibility to learn and come around and believe deeply in this technology."
BlackRock's Deliberate Crypto Strategy: Building Through the Winter
- Long-Term Conviction: The firm's core thesis was that assets like Bitcoin and Ether have a constructive, long-term role in client portfolios. This long-term view meant market downturns were seen as opportunities, not deterrents.
- Doubling Down in the Bear Market: Following the FTX collapse in 2022, when many institutions stepped back, BlackRock "doubled down." Chalom notes that this period was crucial for building the necessary infrastructure and partnerships.
- Strategic Implication: BlackRock's sustained effort demonstrates a key institutional behavior: conviction-driven building is more resilient than speculative, cyclical interest. This approach positioned them to launch their ETF products successfully when regulatory clarity emerged.
The Aladdin Integration: Bridging TradFi and Crypto
- What is Aladdin? Chalom explains that Aladdin is an end-to-end enterprise operating system for managing investment portfolios. It provides a unified view of all assets—from stocks and bonds to derivatives—enabling sophisticated risk management, trading, and operations for trillions of dollars in capital.
- Significance of the Integration: The integration abstracted away the complexities of crypto for institutional users, such as wallet management, pre-funding accounts, and handling decimal points. It allowed asset managers to manage crypto exposure within the same secure, familiar framework they use for all other assets.
- Actionable Insight: This integration was a "good housekeeping seal of approval" that signaled crypto was ready for institutional-grade management. It highlights that the key to institutional adoption is not just the asset itself, but the tooling that makes it fit seamlessly into existing workflows.
The Bitcoin and Ethereum ETFs: A Milestone for Institutional Access
- Meeting Pent-Up Demand: Chalom notes that while the magnitude of the ETFs' success was surprising, the underlying institutional interest was well-understood. Clients wanted exposure but were unwilling to deal with the operational complexities of spot crypto, custodians, and exchanges.
- The Power of Education: A significant part of the effort involved educating financial advisors, home offices, and institutions on the investment thesis for both Bitcoin ("digital gold") and Ethereum. Explaining Ethereum's network effects and yield-bearing properties required more in-depth education.
- The Path to Staking: Chalom expresses confidence that staking for ETH ETFs will be approved by the SEC "faster than people think," viewing it as the next logical step after the approval of in-kind creations and redemptions.
BUIDL: BlackRock's First Step On-Chain with Ethereum
- Solving the On-Chain Yield Problem: The BUIDL fund addressed a key trade-off for on-chain capital. Stablecoin holders needed 24/7 liquidity but were forgoing significant yield (around 4.5% at the time). BUIDL offered a yield-bearing, tokenized treasury that was interchangeable with stablecoins.
- Why Ethereum? Chalom states that institutions prioritize two things above all: security and liquidity. Ethereum's decade-long track record of being "trusted, neutral, and always on" made it the clear choice. Launching on a public, permissionless network also made an important statement about the viability of building permissioned, KYC-compliant products on open infrastructure.
- Strategic Implication: The success of BUIDL validates the thesis that the first wave of impactful tokenization involves bringing traditional, liquid assets on-chain to provide utility to the existing crypto ecosystem. This creates a bridge for capital to flow in both directions.
The Inevitable Tokenization of Everything
- The Roadmap: The trend starts with tokenized money (stablecoins), which could grow from ~$275 billion to $2 trillion by 2028. It then moves to real-world assets (RWAs), starting with liquid assets like treasuries and stocks before expanding to large mutual funds and ETFs.
- The End Game: The ultimate vision is a single, digital ecosystem where crypto-native investors can access the S&P 500 in their wallets, and traditional investors hold crypto assets in their funds.
- Quote on the Future: "Tokenization is going to be the macro trend that will collapse this all into almost a single ecosystem... It's all going to exist in digital format and it'll be in wallets."
Overcoming Institutional Inertia
- The Litmus Test: A Bank of America report found that while 75% of asset managers still have no crypto exposure, the fact that 25% do is a massive increase from nearly 0% just a few years ago.
- Unlocking Trillions in Capital: The core benefit for institutions is risk reduction and capital efficiency. Atomic or same-day settlement on-chain will unlock tens of trillions of dollars currently tied up in managing settlement risk, counterparty risk, and collateral.
- Actionable Insight: The institutional adoption curve is still in its early stages. The primary driver will not be hype, but the demonstrable economic benefits of a more efficient financial system. Investors should watch for milestones in settlement efficiency as key indicators of this shift.
The Leap to ESBET: From BlackRock to an Ethereum Treasury
- Why ESBET? The decision was driven by a deep conviction in Ethereum's long-term potential and the opportunity to build an institutional-grade company. The strategic partnership with Consensys and its co-founder, Joe Lubin, was a key differentiator, providing deep ecosystem expertise.
- The Mission: ESBET's goal is not just to be a passive vehicle that buys and holds ETH. The company aims to actively support the ecosystem, influence institutional adoption, and build new businesses with ETH-denominated revenue.
- Strategic Focus: "I'm here for the macro Ethereum opportunity... this is going to be a decades-long mega trend."
The Investment Thesis for Ether: High-Octane Money
- The Value Framework: Referencing a Consensys report, he highlights a historical correlation: for every $2 of Total Value Secured (TVS) on Ethereum, ETH's market cap has tended to appreciate by about $1.
- Total Value Secured (TVS): This metric includes high-quality liquid assets like stablecoins, tokenized real-world assets, and the value locked in core DeFi activities (lending, borrowing, exchange).
- Projecting Future Value: With projections for TVS reaching $4-16 trillion in the coming years (from firms like Boston Consulting Group), this framework suggests a significant potential upside for ETH's valuation, even if the correlation becomes less linear.
- Beyond Finance: The thesis doesn't even account for future growth from non-financial applications, such as AI agents transacting on-chain, which could dramatically increase network velocity and demand for ETH.
ESBET's Strategy: More Than Just a Treasury
- Key Differentiators:
- Institutional-Grade Operations: Building a team with deep experience in both traditional finance and crypto.
- Strategic Partnership: Leveraging the expertise and network of Joe Lubin and Consensys for staking, restaking, and identifying business opportunities.
- Building Businesses: Using its ETH treasury to seed protocols, provide liquidity, and launch synergistic businesses that generate ETH-denominated revenue.
- Primary Metric: The company's North Star is increasing ETH per share (or "ETH concentration"), ensuring that all capital-raising activities are accretive to existing shareholders.
ETH vs. Bitcoin Treasuries: A Comparative Analysis
- Productive Asset: Ether can be staked to generate yield (3-4%+), which translates directly to revenue for a public company. This revenue can then command a valuation multiple, creating a "righteous life cycle" that Bitcoin cannot offer.
- Ecosystem for Building: The Ethereum network is a programmable platform for building a vast array of applications. This allows an ETH treasury to do more than just hold an asset; it can actively participate in and build on top of the future of finance.
- Chalom's View: "If you think about what global finance is going to be built on and what real world economy can be built on, it's not going to be on the Bitcoin network. It's going to be on the Ethereum network."
The Mechanics of an ETH Treasury
- Capital Raising: The primary method to date has been At-the-Market (ATM) offerings, where new shares are issued to buy more ETH when the company's stock trades at a premium to its net asset value.
- Future Financing: Chalom indicates that ESBET is exploring convertible bond offerings as a future source of capital. He argues Ether is an ideal asset for this, as its native yield can cover the debt service costs, and its volatility is attractive to convert investors.
- Risk Management: A key focus is avoiding excessive leverage and maintaining a lean operational cost structure to ensure resilience during market downturns.
Addressing Market Puzzles and Misconceptions
- The Education Gap: Bitcoin's "digital gold" narrative is simple and has been told for years. Ethereum's story as a store of value, a network for decentralized applications, and a platform for the future of finance is more complex and requires significantly more education.
- Price Action vs. Buying Pressure: The massive buying from ETH treasuries has not caused a parabolic price rise due to a combination of factors: sellers taking profits after a near-doubling in price, remaining market liquidity, and the ongoing process of educating a broader investor base.
- Lingering Misconceptions: Institutions still grapple with the perceived competition between Ethereum and its Layer 2 ecosystem, failing to fully grasp that L2s derive their security from and add value to the mainnet.
The Future of ETH Treasury Companies and Potential Risks
- Market Consolidation: Scale begets scale. Companies with the most liquid stock will be able to raise the most capital via ATMs, creating a flywheel effect that will likely lead to 2-4 dominant players.
- Primary Risk: The biggest danger comes from smaller players taking on imprudent risks to catch up. This could involve chasing unsustainable yields with high counterparty, credit, or smart contract risk, which could taint the entire sector.
- Prudent Strategy: Chalom stresses that the long-term play requires a disciplined, risk-managed approach. Downturns are not a threat but an opportunity to accumulate assets at a lower cost basis.
Conclusion
This conversation underscores that the institutional embrace of Ethereum is a strategic, multi-decade shift, not a short-term trade. For investors and researchers, the key is to look beyond daily price action and focus on fundamental drivers like the growth of Total Value Secured and the operational strategies of treasury companies.
