Baron Koch: The Switch That Flips Institutional Bitcoin
Transcript — TFTC
Article: https://www.tftc.io/institutional-bitcoin-allocation-baron-koch-switch
Transcript page: https://www.tftc.io/institutional-bitcoin-allocation-baron-koch-switch-transcript
Published: 2026-11-02
Machine transcription, lightly cleaned; may contain errors.
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[0:36] Marty Bent: Aaron Koch, welcome to the show, sir.

[0:39] Baron Koch: Thanks for having me, man. Longtime listener, first-time caller.

[0:43] Marty Bent: Well, I appreciate you joining me. And not only that, but you're lighting mogging me on my own show right now. The setup you have there in that studio is incredible.

[0:54] Baron Koch: Brains got to do things right.

[0:56] Marty Bent: Well, I'm really excited for this conversation. I've been talking to yourself and Christian behind the scenes about what you guys are doing at Brains and evolving on the go. I'm sure we'll touch on that, but more important, we're also excited for this conversation considering your background managing endowments and pensions and getting an ingrained view of TradFi and how that world works and how Bitcoin is looked at by TradFi and institutional investors and how it may become the asset that these types of investors feel comfortable dealing with. And so I think with that in mind, maybe just an introduction of yourself, what you did before Brains, what compelled you to join as CFO and some of the things that you're working on personally within Brains.

[1:53] Baron Koch: Yeah. No, I think it sounds great. And so the last 20 years nearly, I've spent managing institutional portfolios. So endowments, pensions, corporate balance sheets, really like in the low single-digit billions, $3 to $4 billion kind of range. And I do think there's a lot of there's a lot to be said about the process that portfolios like that go through and how they think about allocating to something new. And there's a lot— it seems like it's a brand new thing, but there's a lot of precedent there. But yeah, that's what I've spent my career doing. And I mean, a lot of times people ask, like, how do you go from that to Bitcoin?

[6:32] Marty Bent: Yeah. I mean, before we dive into the Bitcoin stuff, because I love nerding out about this, particularly the post-2008 sort of fund space, because like I told you before we hit record, I'm sure we'll touch on what you guys are doing, in terms of innovation within Brains by the acquisition of this managed futures fund. Because I started my career in managed futures, but I remember I was probably 4 years behind you, but I started my career at a fund during Operation Twist. This is like 2012, 2013 when they were selling the bad assets and buying, switching the durations or switching the mortgage-backed securities with treasuries in that operation.

[7:47] Baron Koch: with? I mean, he was a technical guy, so I mean, he did a lot of different things, but really what he did was make large calls. So I mean, he first came on the scene by calling the dot-com bubble, and then he called the mortgage crisis, and he had some really interesting plays with Saudi Arabia, actually. So I mean, it was It was the kind of portfolio where he would swing 50%, 60% of it. I mean, it was— it's rare. I mean, a lot of hedge funds will make their calls on the margins and this guy just kind of balls out like whatever his call was, he would move his entire portfolio into it.

[9:29] Marty Bent: Yeah. No, it is. And it is interesting too, because I mean, this is probably over a decade ago at this point. You had a ton of managers feeling this way. The one that you're describing actually had the balls to say, you know what? I'm not doing this anymore. But many just went along with it. And I don't think many people realize the extent of the manipulation of markets. I mean, if you're listening to this podcast, yes, you do. But I think most people, particularly participating in markets, have been lulled into a sense of complacency, into a sense of like, this is the way things work now.

[11:28] Baron Koch: Yeah. I mean, I think there's a couple different ways to look at it. I mean, when you go through the academic process of learning how to invest, they split it into those 2 buckets, right? Fundamental analysis, technical analysis, and almost all of what you see is Bitcoin trading on technicals. So I mean, looking at moving averages or fund flows and things along these lines. And really, once an asset matures, there's this— it's really like a seesaw. There's a balance between the two because if one gets overweight, the other one has an opportunity to make money. So, you know, I think that's really where Bitcoin is headed.

[16:27] Marty Bent: Yeah. And a couple of comments here because I have a vivid— I've told this story on the podcast multiple times as it pertains to the debt. I have a vivid memory And it's because it was my first ever BitDevs in New York. I think it was January or February of 2015. This is 11 years ago, almost 12 years ago now at this point. But I was 23 at the time, 22, and we were in Union Square Park in New York. We're in Union Square Ventures office overlooking Union Square Park. they have a National Debt Clock across the way. And I'd just moved to New York a month before.

[19:36] Baron Koch: Yeah. Yeah. I mean, it's centralized custody, right? And I think it's— there's centralized custody with traditional assets as well. And I think that for the first time, this has really kind of come into play. So it's not, you know, we've always talked to— thought about it really from like a, you know, a control standpoint, like permissionless. You want to have control over your assets. You don't want to outsource it to somebody else. But I think now we're we're finding out that it's, you know, that centralized model is, is really presenting risks that we didn't know there were before. And I mean, like, when— if so, for retail and institutional, maybe it's 2 kind of different things.

[21:21] Marty Bent: What's up, freaks? This script was brought to you by our good friends, the Bitcoin team at Block. Bitcoin at Block. Bitcoin was originally introduced as a peer-to-peer electronic cash system. We all know that the idea wasn't just to buy and hold, it's to use Bitcoin in many different facets. Holding is one facet, spending, receiving is another facet. I've been working towards this for 17 years and Block has put together a whole ecosystem of companies to really bring about the reality of Bitcoin as everyday money. So with Cash App, you can buy, spend, send, receive, earn, get paid in Bitcoin. When you're trading over $2,000, you're not going to pay any fees on that.

[24:29] Baron Koch: Yeah, I think it's helpful, especially with what I've done in my career, to kind of think, again, separate retail from institutional. So I mean, I think in terms of the retail adoption, it's a lot of things that we all have talked about a lot with power law and kind of these cycles and waves of adoption. It's very different on the institutional side. And I think it's commonplace to say like, hey, the institutions are coming. But maybe given my background, I can offer the perspective of someone who was trying to get Bitcoin into a multibillion-dollar portfolio. I think so. The way to think about this is it's really not linear.

[32:06] Marty Bent: Yeah, I remember that paper. I need to go reread it, to your point, because I do remember— I forget the exact contents of it from memory, but I do remember reading it, writing about it, being like, this is pretty big when you consider like Mirren certainly has influence, what Vicente's doing. You got Warsh, you got Druckenmiller. That's what like John Arnold and I've been covering this on the 1031. time sense, your point about the chink in the armor being treasuries being dumped by foreign buyers, it does seem like they're trying to plug that hole at least as much as possible with the stablecoin push and pushing demand for shorter-term treasuries, notes, and bills.

[35:24] Baron Koch: I think it's possible. I mean, I do think that the— I mean, JP Morgan putting Bitcoin at the top of the long-term capital market assumptions is— I mean, it got some play online, but I think it's worth underscoring just how big of a document that is because, I mean, it's Every consultant, every financial advisor, every big allocator, like that's the gold standard, no pun intended, but that's what everybody looks at. And each year, especially around this time, I mean, I think people really look at that document as a way to look at their portfolio positioning and do their risk optimization for their portfolio. And I think it's probably I think some people were probably surprised to see that at the top of the list.

[41:12] Marty Bent: Freaks, look at me. I'm glowing. I've got like an angel's halo going around me. You know why that is? Is I feel good. I feel taken care of. I feel blessed, healthy, happy. And that is because I'm a CrowdHealth member. My family and I have been CrowdHealth members for 5 years now. Literally this month, 5 years ago, we joined CrowdHealth. We've had 2 babies, we've had multiple health events, and we're never going back to health insurance. CrowdHealth is crowdfunded healthcare. So you sign up for CrowdHealth, you pay a monthly fee, you help out with other people's bills, and it's significantly cheaper than health insurance. We were on COBRA as a family of 3 when I left my last job before I went full-time with CFTC, went on The Crowd Health.

[44:58] Baron Koch: Yeah,

[44:59] Marty Bent: this time around too.

[44:59] Baron Koch: Yeah, exactly. And I mean, it seems like it's kind of learning the lessons of the past. I mean, when you look at 2022, it's like you talk to your neighbor and they're like, okay, Bitcoin is at risk. And it's like, no, it's not Bitcoin, it's the centralization of Bitcoin, and that's the attack vector. And so, I mean, I think what the selling— I mean, we're likely to have this sell-off. It makes sense. But to your point, it was pretty shallow. And I think it's probably a lot of like, you know, just collateral damage, people trying to take their coins off Binance or maybe even Coinbase or the like. But it's not, it's not sort of this existential threat to Bitcoin that you would think could be, could be possible. So I think it's a positive sign. I mean, who knows what'll happen from here, but— Yeah. I mean, I think the resilience certainly makes it more attractive.

[45:50] Marty Bent: Yeah. And I'm just looking at the historic price chart here on my other screen, and obviously we're not out of the woods yet of this Binance hack. It's yet to be determined whether or not we go lower or stay here or even go higher. But just comparing it to FTX in 2022, in October, late October of 2022, we were trading at $21,000. When FTX happened, we fell to $15,000. So the market fell 20%. after that hack, or that wasn't even a hack, that fraud. And this is on a bigger magnitude in terms of just amount of coins, amount of money stolen from the exchange, and we're holding in there pretty tight right now.

[46:53] Baron Koch: Yeah. And I think one of the other things that we've been talking a lot about is like, so not just Bitcoin itself, but you mentioned your managed futures background. And I think having real sophisticated risk management on Bitcoin could be another driver for adoption. I mean, I think that when you look at how these decisions are made, a lot of times it has to do with managing the risk around it. So, I mean, for most retail people, the strategy should just be just buy it and hold it. But some of these institutions don't really have that choice. I mean, they have to understand what the tail risk looks like and what the strategies are to mitigate it.

[51:23] Marty Bent: Soybeans, coffee.

[51:24] Baron Koch: coffee, everything.

[51:25] Marty Bent: Yeah.

[51:25] Baron Koch: They're not doing covered calls. They're not buying puts to protect their exposure. They're doing these more active management strategies. And I think, why not just, instead of waiting to get burned, why not just jump to that stage and start to implement these sort of approaches on Bitcoin? And again, it's not for everybody, but for certain, especially larger corporate holders of Bitcoin, I think this is where the market's heading. And been talking to a lot of people about that and getting really great feedback in terms of like other people thinking along similar lines. And you see certain large Bitcoin holders starting to hire traders from the commodities world and thinking about things this way. And, you know, it's a, it's a novel idea, but I think it's something that is logical and makes sense. And however it unfolds, I think something along these lines is what's going to be sort of next for Bitcoin.

[52:19] Marty Bent: What type of scale do you need, do you think, to implement these strategies? But not only implement these strategies, but do it in a way that it materially advances the market structure of Bitcoin. Does that make sense?

[52:35] Baron Koch: Yeah. So in terms of the size that you need to execute it on your own portfolio, it all has to do with the number of strategies you run and the liquidity, the depth of the liquidity of the futures market. So Where things stand now, it's hard to run a really robust set of strategies for under $2 million of notional exposure, but using futures, it doesn't take that much. It's very cash efficient. So I mean, you can put up 20%, 30% of the notional amount, but anything below $2 or $3 million, you get all kinds of rounding errors and it's hard to really execute the strategies well. I think that's kind of the cutoff. is around that, I'd say, $3 million mark.

[53:21] Marty Bent: Okay. Yeah, it is fascinating too because it's been a while since I sat in the analyst chair at the Managed Futures Fund, but just throughout my time in Bitcoin, particularly Bitcoin mining specifically, because I wrote all the commentaries for the funds, and so I had to explain why commodities markets were moving in certain ways. So I was doing research on Boko Haram in Nigeria and how it was affecting the sweet crude markets there. if there was a fungus outbreak in coffee beans in Brazil, being able to write about how it was negatively or positively affecting coffee prices. And it's funny now as the Bitcoin mining industry has matured too, one of the things you follow for commodities is weather.

[54:37] Baron Koch: Yeah, it's crazy. And there's a book, I don't know if you've read it, but it's The World for Sale, I think is what it's called. And some of the stories, I mean, it's exactly what you're talking about. Just the actual, like, the movement of physical commodities across the world is a, is like a real logistical problem. And some of the stories that come up with it about like, you know, people flying to meet with the, the leader of this country and, um, like one conversation moving just like massive amounts of commodities and running ships while there's missiles flying over overhead and things like that. The book is, it's like a, it's like reading a, an action thriller basically.

[55:41] Marty Bent: Yeah. Outside of these, getting to the 5th level of the maturation of the market structure, what are— and obviously the institutions stepping in, but what other kind of— because let's focus on hash rate. You're at Brains, and I've talked to Jan and Christian and others at Brains about this, but I think I've always strongly believed, again, when we're talking about broader Bitcoin market structure, one of the fundamental base layer markets that needs to be figured out is hash rate futures. And obviously there's been a ton of development there, but I still think the futures market around hash rate is still nascent. Can you give me an update on what you're seeing there?

[56:53] Baron Koch: Yeah, 100%. I agree. And I think it's— I mean, there's been people that have really pushed that market forward. I mean, I know Luxor launched their hash rate derivatives marketplace, and there's startups out there that are doing different kind of markets on difficulty and things like that, where it's like, I think the problem or the difficulty from my perspective is really getting enough market participants to make it liquid enough to really work. And it's one of those things that you can't really push. It just has to kind of emerge. And we're certainly not trying to compete in that marketplace necessarily, but I think it's inevitable. It's just a matter of having enough liquidity and enough market participants to where you go from that zero-to-one moment and get the network effects to have it be fully efficient. So yeah, I mean, I think it's going to happen at some point. It's just a question of enough people really participating to make it function well.

[57:51] Marty Bent: Yeah, because there's so much execution risk. I always thought there was a need for a forwards contract at scale, like Bitcoin miners and exchanges going together, and the exchanges being like, we'll give you X amount, we'll give you X amount of cash upfront for a 5% discount to spot in the future when you produce the Bitcoin, something like that. Yeah. I still feel like those types of structures need to come to market, and then it's great to see people like yourself and the team that you're putting together at Braiins and the acquisitions that you're doing to bring that type of mindset to this market.

[58:32] Baron Koch: Yeah, I think one comment there is, I mean, when we talk to miners, it's, you know, in the traditional finance world, you bring a hedging idea, you say, look, we've got this exposure, let's hedge it. There's zero resistance. I think one thing to note is in the Bitcoin space, like if you approach a miner and say, look, I've got this hedging strategy, there's a larger percentage than you would think just tell you to fuck off, basically. Like, look, I'm in this for Bitcoin's upside. I'm not interested in any puts or any downside. Like, I'm in it. It's either going to work or it's not. I think there's like this resistance to it just because of the type of person it takes to run a Bitcoin mine.

[59:36] Marty Bent: Yeah. No, I wonder, like, Bitcoin mining finds its place in demand response. And obviously you have companies like Bathhouse in New York using the heat from the miners to mine their jacuzzis. Like, is there some sort of— when Bitcoin mining just becomes a positive EV sort of tangential process in a larger business with bigger plans? Is that when the— are those the type of actors that are necessary to engage in that type of hedging strategy, not just be Texas hedge long the whole time?

[1:00:15] Baron Koch: Yeah, I hope so. I mean, you saw the thing with the water heater that came out last week. That's kind of interesting. Yeah, really cool. And we actually, when I was at the Bitcoin Park here in Austin, I forget if it was— I forget what the event was, but they— BitAx had this thing set up where they were, they were cooking steaks with the excess heat. They were like sous vide cooking steaks during the conference. It's pretty cool. I hope so. I hope that's the way it goes.

[1:00:43] Marty Bent: So what, what's the plan moving forward? I want to talk about the fund that you guys acquired, if you're comfortable. What's the plan there?

[1:00:54] Baron Koch: For sure. I mean, I think the plan is to really find product-market fit. So, I mean, we picked up this team of guys from the traditional commodities world who are super tenured, super senior, have done this for 30 years, and have all of the processes and infrastructure in place to really offer something legitimate to Bitcoin holders. And I mean, they spun out of a commodity merchant, have done this in-house and really, really know what they do, what they're doing. And so, I mean, it's education first. I mean, we're trying to put out white papers and have discussions with people just to kind of explain the concepts and the approach and then really start to, start to size up and prove it at scale.

[1:03:15] Marty Bent: Yeah. And is the pitch for your managed futures strategy, because when I was working at the fund, it was basically just portfolio insurance. That's what we were fighting for. It was like, hey, we're not fighting for 20% of your portfolio, we're fighting for 5%. And when shit hits the fan, we'll be here to outperform to make sure you're you're diversified in these assets that will perform well when the market's going to shit.

[1:03:43] Baron Koch: Yeah, exactly that. I mean, it's not something that makes sense at 30% or 40%. It's really like you said. I mean, I think the max it could make sense for somebody is 10% or 15% to have. And I think it's exactly that. It's there for when things go wrong. It's there as insurance. And it actually pairs really well with a lot of the you know, kind of yielding strategies that people are doing because it's positive gamma, positive convexity. So it's like when those strategies fail, this really does well. So I mean, if you're, if you're, if you're somebody who does these yielding strategies, which, you know, I have my opinions on, but a lot of people do them. And I mean, I think if you do them, like, it makes sense to pair it with something that can complement it and really come in when, when those struggle.

[1:04:31] Marty Bent: What are your thoughts on the yielding strategies? Do you have your thoughts about that?

[1:04:37] Baron Koch: I mean, I kind of alluded to it earlier. I mean, I think bankers are more than happy to come in and sell these strategies to people and charge large spreads. And I think that's kind of where we're at is just these bankers or former bankers know that this is the highest margin thing that they can offer. And that's what's happening right now. And I mean, You don't get the yield for free. You take a risk there, and I think the risk is misunderstood. How much do you get burned? I mean, I think we got to get burned to really realize how bad it can get.

[1:06:05] Marty Bent: Yeah, that makes sense. This has been fascinating. What haven't we covered that you think we should touch on before we wrap up here?

[1:06:18] Baron Koch: I think, I think we hit it all. I guess we'll, we'll find out if, if the internet's going to eat itself, if agentic swarms will just like take us all over and we'll go back to the, back to the Stone Age. But if that doesn't happen—

[1:06:31] Marty Bent: Nothing ever happens, Baron. Nothing ever happens.

[1:06:34] Baron Koch: Yeah, no, I think I saw your, your post last night of Don Draper just sitting zen with the fire in the background. I think that's, that sums up my My current view. You

[1:06:45] Marty Bent: just have to ride the wave. It's going to be chaotic. You have to go in with the expectations that we live in an age of chaos, and it's much easier to find peace when the chaos is expected. And I think the chaos should be expected, definitely in the short term, and I think even in the medium to long term as we transition into the digital age. at an accelerating rate. I think we're firmly in the acceleration phase right now.

[1:07:13] Baron Koch: Yeah, 100%. Yeah. I mean, it feels good to be on this side of the fence, honestly. I mean, I think it's much more honest and much more real. And I mean, when you— I mean, we're on a Bitcoin standard. I mean, when you live on a Bitcoin standard, you're living an honest life and it's tougher, it's more volatile, but it's real. And I think that gives me hope. I mean, it gives me hope for the future. I think it gives me hope for capital allocation, gives me hope for culture. I mean, I think even just like the impact on the way people interact with each other when you're on a Bitcoin standard in some form or another, whether it's you personally or your company or your portfolio, I think it injects a level of honesty that's less comfortable but more real. And I think that gives me hope for the future.

[1:08:00] Marty Bent: Likewise. It's been a pleasure, sir. Where, where should we point people? Where can they find out more about you, what you guys are up to at Brains?

[1:08:09] Baron Koch: Yeah, anything Brains on X, BaronCoch21 is the handle. I mean, we'll keep you updated with the progress on the hedge fund, the managed futures strategy, and might have a couple other tricks up our sleeve at Brains. Should be a fun '27.

[1:08:28] Marty Bent: Here's to a fun '27, freaks. Peace and love. Okay. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad-free, make sure you download the Fountain podcasting app. You can go to fountain.fm to find that. $5 a month gets you every episode a day early, ad-free. Helps the show, gives you incredible value. So please consider subscribing via Fountain as well. Thank you for your time, and until next time. Okay.