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- [00:00]
A
Today I'm sitting down with David Jakansky. He is an expert in bitcoin, gold investing and all things markets. We get into why Bitcoin has been depressed for several months now, why gold has outperformed, why Bitcoin has not lived up to the expectations under President Trump as the crypto candidate and much more. This is a must listen conversation if you want to know about hard assets, hard money and what comes next in this debasement trade.
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B
David, I'm so glad you're here today. I have to ask you about bitcoin. It's down about 35% from its record high. What's your read on the asset right now?
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C
I feel like it. I'm very intrigued with how it's performed in the last couple weeks and in general basically since the start of this geopolitical conflict. We'll take a step back a little bit further and look at like what has bitcoin done since its peak in October last year. And the thing that in our eyes correlates best to Bitcoin's negative performance or drawdown that we've seen since in October is really the increase in bond yields for Japanese 10 year bonds or just Japanese bonds in general. The carry trade is the cheapest form of leverage a lot of smaller hedge funds can find in this world. And the drop in Bitcoin very much coincides with that like peak where, where yields really started rising in Japanese treasury markets. And then I think looking at what has happened as of late since the start of the geopolitical conflict, we're two months plus into this war that we're in right now. I thought the first four weeks it was amazing that bitcoin actually held its ground. It actually held its ground a lot better than a lot of other assets. And now obviously the transition from March to April, April, everything with beta kind of rallied right from semis to bitcoin and gold and everything in between. But I think there's a real story behind this rally right now. I think there's multiple reasons for a continued rally to be seen. One being the Clarity act and two being, you know, some of the tolls that they were discussing charging on the Strait of Humuth were talked about being transacted in Bitcoin, specifically in response to what the US did to Russia with freezing a lot of their individual members of their economies, individual assets in foreign international banks. So the idea that Bitcoin allows this store value platform that can't necessarily be seized by a foreign government, I think was really eye opening from the world. I just came back from the bitcoin conference in Vegas which was phenomenal. Eric Trump on stage stated that the US has about 300,000 Bitcoin and we're hearing clamoring that other nations are really starting to ramp up their bitcoin purchases or consider creating a bitcoin position. I think again, this being another geopolitical conflict of, hey, you know, in that worst case scenario, it actually might have been pretty helpful to hold on to some bitcoin.
- [03:11]
B
Wow. So those are a bunch of factors you just listed. If we focus a little bit on the, let's say the political variable here. Yeah, I've been very surprised that bitcoin has actually pulled back so much from its all time highs because President Trump supposed to be the bitcoin president, the most crypto friendly policymaker ever was the expectation that hasn't exactly panned out. And as you listed, a bunch of other headwinds. What do you make of, let's say, the political outlook for bitcoin and maybe why the current setup hasn't been as much of a tailwind as we thought?
- [03:48]
C
Yeah, I think one, you know, first and foremost, financial advisors oftentimes hug their benchmark a little bit too far. So we're starting to see adoption from financial advisors in the bitcoin space. I think it took a little bit longer than people expected it would. But with Morgan Stanley launching their own Bitcoin ETF, you know, BlackRock has a Bitcoin ETF. They're, they're launching a cover call Bitcoin ETF. Goldman's launching a cover call Bitcoin ETF. You're starting to see more and more of the ivory towers in Wall street recommend. Usually it's like a 2 to 4. I even, I think I saw one today recommending a 3 to 6% crypto allocation. And you know, there's a bunch of early adopters who do have a pretty significant allocation in client assets, but I don't think it's like broadly adopted at all whatsoever. You know, we, we ran into each other at the Future Proof conference and I went to a number of advisor focused conferences this spring and I would always ask them, do you personally own bitcoin? Say like two thirds to three quarters of them would say yes, they personally own bitcoin, but then maybe 5 to 7% of them would say they actually allocated client assets to bitcoin. And so trying to predict how that adoption curve starts and when the wheel starts turning, it's hard to pinpoint that. I will say you know, the president and his wife coming out with their own coins I think did crypto a disservice somewhat. And I actually think it's good that you've seen those sorts of assets in the crypto space fall so hard and Bitcoin still hold its value. Right. I think it really helps separate Bitcoin from the rest of the pack. But I think you're going to continue to see adoption from the institutional world, the RA world. The Clarity act will definitely help some people in the RA world. Just quote, you know, my E and O, their insurance coverage won't let them allocate to it. And so they're waiting for that. Right. And then at some point there's a very good question of like when is that turning point when you know the norm has a small allocation to bitcoin in their clients accounts and then you're that financial advisor who chooses to be like the holdout against what everyone else in your industry is doing and what your firm is actually recommending. You know, more and more these wirehouse shops tend to just allocate from the top down. They're taught to be salespeople and wealth gatherers and financial planners and not so much on a one to one basis, the portfolio manager. And that comes from the top down. And you know, if the top down is saying 2 to 4%, at some point your clients are going to start asking like why do I keep hearing that BofA says 2 to 4% but like we're on their platform and you have me at zero. I think that becomes a huge business risk to advisors at some point.
- [06:30]
B
Well, I think that disconnect is going to, you know, really pick up in the mainstream over the coming, let's say probably six to 12 months is what I would think. Because if you, let's say you're paying an advisor or you're paying a firm to manage your money and they're not giving you any exposure to what's typically been an outperformer for the last decade. There's going to be a lot of questions, especially as younger investors start to get into those positions, allocating to these firms. What about gold? So gold has been up tremendously over the last year and it's outperformed bitcoin, I think as of I read this morning, 36% over the last year while bitcoin has underperformed. How are you thinking about this asset compared to Bitcoin?
- [07:16]
C
Yeah, I mean I think their, their structural value in our opinion is very similar. It's the store value Concept, I think they just correlate very differently to like risk assets and the M2 money supply. So we have a very bullish case internally at quantify funds on both bitcoin and gold. We've originated a lot of our products around that. But I think it's, it's, it's fascinating to see what gold did specifically during the war. I think if gold hadn't fell during the war, we would be a lot more in gold mania right now in the news than we seem to be. Because if you think about where we were before the war, like gold could do no wrong. Gold was just kind of like on this onless n word uptrend. And since the start of the war, gold has actually performed a little bit more like risk assets. You've seen higher correlation between stocks, bitcoin and gold. It's kind of a cash or beta risk on risk off type market. But I think there's real justification for why gold performed negatively in the first couple of weeks of the war. If you think about who is the increased buyer of gold over the last couple years, obviously it's institutions, but it's also central banks around the world. So in lieu of accumulating so many T bills and treasury bonds, they've now opted to allocate more to gold. That obviously has helped increase the price for the just bitcoin bulls out there. The similarity in supply constraints is almost identical. Bitcoin mines at less than 1% a year, gold mines at less than 2% a year. So they're very similar in their scarcity characteristics. And what will happen as we continue to print infinite amounts of dollars. But going back to that case of the emerging market economy, that has acquired a lot of gold, if you are an oil importer, honestly, I think a lot of countries just did the prudent thing and trimmed the asset that did best and made up for their short fall, which was oil for their economy. And Turkey was the one that was most public about this. You know, when gold was really at the bottom extent of its pullback. Since this war started, Turkey announced that they sold like 6,000 tons of gold or something so that they could buy oil and fuel their economy, which is a very rational reason for oil for gold to have a little bit of pullback. And so while its correlations might not be as negative to equities and bitcoin as it has in the past, it's still an asset that like holds its value strict from a store of value. And that's one of the reasons why we choose it over just a broad basket of precious metals is because all other precious metals, well in some instances also have like store value characteristics. They're also used in technology, whether it's like silver or copper. These are used in our iPhones and to make AI chips and this net so they have a little bit more of a correlation to gdp. So we still expect of all the precious metals, gold to be the least correlated of all the precious metals.
- [10:19]
A
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B
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A
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B
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A
that actually reflects your thesis, visit public.com openingbell that's public.com openingbell now let's get back to the conversation.
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B
I'm so bullish on gold, by the way. And I'm bullish on bitcoin as well. There is a version of this market where bitcoin and gold I think should be at record highs. If you think about, you know, trillions in debt for the US government, geopolitical conflict, the debasement trade hasn't structurally changed.
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C
Yeah, right.
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B
And yet we are pretty far off, I would say, from these record highs.
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C
Yeah.
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B
What do you think that disconnect is?
- [11:55]
C
I think, I think we're in a news driven cycle market where everyone's always looking for that next trade. And everyone looked at the debasement trade, as you stated, as a trade and not a new normal of the environment we're in. And so I think a lot of people looked at it as an asset they should be trading and then they kind of moved past it again. If gold didn't fall a couple percent during the start of the war, we'd be in gold mania right now. Everyone would be talking about this asset that held up so well during all these different market cycles. Inflationary, deflationary, geopolitical tensions and not so. I actually think that like the lack of euphoria makes me bullish that there is a significant leg up that could still occur from this point going forward. Because just like bitcoin, the institutional world has a very small allocation to gold. It is not as big as you would think. Central banks have definitely adopted gold in a faster pace than they had than the institutional world has. But you know, especially the financial advisor, the RA space, they're still very much focused on what is their drift versus their benchmark. You know, especially as you become a larger financial advisor, you're less incentivized to really hunt for real alpha. Your, you know, status quo is making you a whole lot of money. Right? So I honestly, when, when is the gold trade over? Well, when it somehow enters in some form or fashion into the RA benchmark, right? When gold is a benchmark asset and it's like stock spawns and a little bit of gold or a little bit of gold and commodities, like once they're, they're actually benchmarking to something that has that scarcity profile in it, then maybe you can start talking about the trade being a little stretched. But we are very far from that.
- [13:38]
B
So to push back on you for a second, wouldn't you, couldn't you argue that we got to that point last year when gold became a benchmark asset?
- [13:47]
C
I think people took some nibbles. But the institutional world and the RA space still doesn't have, you know, it's still single digit allocation to gold. It's not like they have 10, 15% of their portfolio in gold. And you know, to quote Lyn Alden, who I'm a huge fan of, like nothing stops this train. And again to them misconfusing the currency debasement concept as a trade and not a new normal. This is the new normal. So I still think, obviously there's lots of gold bugs out there who have been like waiting for this moment for decades and feel very vindicated in their, in their patience. But I do think the rest of the world is lacking a little bit of patience. And everyone's running to the semis or, or memory stocks, etc. Everyone's trying to run to that newest theme, which I totally understand. But these, I believe both bitcoin and gold are deserving of being like stalwarts in your portfolio at all time. You can vary your allocation, you can rebalance it, but they will show negative correlation characteristics. Over full market cycles, you know, stocks and gold have been very, very correlated, especially when stocks have significant pullback pullbacks. Gold does historically very, very well during those periods, similar to Bitcoin, when bitcoin has a 15% or greater drawdown. Gold tends to do very well during those periods. So I would look at this last period as a little bit of an outlier because those who have accumulated so much gold also were in such need of oil at the same time.
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B
Yeah, that's such a good point and I definitely don't hear it talked about enough. If you had to lay out the bear case for these two assets, where would you start?
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C
The developed nation cleaning up their balance sheet and probably a reverse in birth rates. We just need more people and less debt as an economy for people to believe in the long term credit worthiness of treasury bonds. The odds of the US not ending up in maybe not as an extreme of a position as what Japan is in, but some variation of between where we are now and where they are. Where we start instituting all sorts of like yield curve control, where we're buying specific bonds to try to manipulate the yield curve a little bit. It's just like taking money out of one hand and putting the other from the printing press. And you know, at some point the bill has to be paid for that. And could it be kicked down the road a couple years? Absolutely. Could we grow our way out of some of our debt burdens? Absolutely. But that's still going to come with massive inflation and currency debasement over time. I used to say at the start of 2025, the, the bear case for bitcoin and gold was like the Doge task force. But now that has come and gone. Right. But it's really like cleaning up the government's balance sheet. I saw a report that California collects twice the revenue through taxes per capita as Texas does. And yet they just seem to be using the money so inefficiently. Like until we actually clean up some of the government waste and overspending, there is no turning back. And even with that, like we're almost past the point of no return. I mean Social Security is going to run out in a handful of years. What they say like between like 2030 and 2035, like that's not even being considered as a liability on the government's balance sheet right now that they're going to likely have to just make do on all those promises. So I think there's just again going to be more. And this is the level of deficits we're running with markets at an all time high. We continue to see presidents who care about the stock market and the economy. And anytime there's a 15 or 20% pullback, you start seeing things come from the government that tend to inflate everything that generally come along the lines of more printing or more debt issuance. And I don't really foresee a foreseeable future where that changes. Question is, will gold average 5% a year or 7 or 8? You know that I think you can question. But especially if you look at like equities, if you look at capital market assumptions across Wall street, some people have US equities in single digits over the next 10 years. So you know, a 6% a year return from something like gold could still actually outperform your equity portfolio.
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B
Huh. I would be more bullish personally on equities than 6%. I don't see how the market doesn't break one its historical norm. But I think the pace of innovation and also the speed at which markets are moving now, I think things are looking more bullish than less than let's say the last decade. How do you think Kevin Warsh as the new Fed chair fits into this whole macro scenario?
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C
Yeah, I mean it's expected that he will likely try to cut rates. What his number one message is is cleaning up the Fed's balance sheet, which is great. Right. That doesn't slow down the scarcity thing because the government's still going to run these massive deficits. But it's a start and it's a head in the right direction. But it's also at a moment where we're not doing massive amounts of qe but the US stopped doing QT and we're not doing small bits of qe. And that's expected to continue for the foreseeable future. So I'm very interested to see if he what he ends up doing on the QE QT front. But it is expected he's going to try to lower interest rates. And you know it's going to be a fight between is this long standing inflation, is this like a one time pass through cost increase and also what is happening with unemployment. I've said this, one of the things I say often is the concept of a Federal Reserve was created to harness corporate and banking greed. It really doesn't have the tool set to fight government greed. If unemployment is its number one mandate, if its number one mandate is oh my gosh, we're heading towards a 5% unemployment, take the bazooka out and Spray money. Like we're always going to have this disconnect because they can't curb the government from overprinting or issuing debt.
- [20:08]
A
Real quick, we'll get right back to the interview. Just wanted to pop in and say if you like this content, I write a newsletter every single morning called Opening Bell Daily. I cover macro, the stock market, asset prices, why things are going up, why they're going down, and and if you want to get that for free, you can sign up at the link in the description.
- [20:27]
B
Let's get back to the interview. One thing about Warsh is that he's really built this reputation as a hard money guy. So I think that you could make the case that it's supportive of gold and bitcoin. David, let me ask you about the funds you've built at Quantify. Can you walk us through why those are unique in the from the view of Bitcoin and gold?
- [20:52]
C
Yeah. So we have three ETFs in the marketplace right now, one under the stacked brand and two under the income stacked brand. But they all work very similarly. They are 200% total exposure ETFs. BTG is Bitcoin and gold. ISPG is the income stack. Bitcoin and gold is SB is stocks and Bitcoin. So you're meant to get two exposure to exposures, two different asset classes at the exact same time. So BTGD and ISPG are both 100% Bitcoin and 100% gold in the same ETF. But unlike traditional leverage ETFs, by adding some embedded diversification in there, you remove some of the path dependency and this becomes a leveraged vehicle that you can actually buy and hold. And it's not magic. It. You know, buying a 2x S&P 500 ETF will get you 2x returns in the S and P if you actively trade it. If you trim it on the way up and you buy it on the way down, you have to be an active trader. All we're doing is essentially embedding a lot of the responsibility of the day to day trading into the ETF and rebalancing between two somewhat uncorrelated assets. Whether it's bitcoin and gold or stocks and Bitcoin. We're soon to also release stocks and gold in the income stack lineup as well. And what's really unique about what we've done on the income stack lineup is traditionally when you hear derivative income, you think you have to choose between total return or income. That's actually the exact equation we solved for so the fixed nature of the Income Stack lineup is the exposure. That means we'll rebalance up to twice a day to ensure or get as close as humanly possible to 100% exposure on both assets. I think a lot of people are enamored with the derivative income space, rightfully so. I think this world is expensive. Having some supplemental income is good. I also think it convinces some people to take some cash off the sidelines. I think as we all get older, we all realize, oh, maybe I shouldn't have sat on like that cash in my savings account for the last 10 years. So I think it pulls some cash off the sidelines, but oftentimes it comes at a sacrifice of total return to the underlying asset. And that's because your exposure will drastically vary between rebalancing periods versus we have our rebalancing period is a half a day. So we're always resetting to keep that 100% exposure. So far, we launched Income stack lineup in January and they're both outperforming their benchmarks. Obviously Bitcoin has been down a little bit, but we're seeing a really nice uptick here as of late. And so again, traditional derivative income strategies will have a floating exposure and one option strategy. They'll do just monthly options or just weekly or just zero dte. And so we flip that. Instead of having a fixed option strategy, we have a fixed exposure and a floating option strategy. Sometimes we'll do longer dated calls and puts, sometimes we'll do zero dte or anywhere in between. And that's where we try to drive some alpha. So it's truly like a hedge fund like offering in the, in the ETF space. And it allows you to get on, get a little bit of leverage in your overall portfolio where you're not on margin. Our account is not on margin. We're getting this leverage primarily on the income stack lineup through options in btgd, through futures. So there, there is no margin call that's going to come, which is amazing. And it gives you a little bit of leverage with forced diversification, I think especially asset classes that are not equities, it's really hard for individuals to take advantage of the closest thing we have to a free lunch in markets, which is diversification. Diversification doesn't just mean own semi uncorrelated assets. That means actually rebalancing between them. And so even for people who have, whether it's stocks and Bitcoin or Bitcoin and gold, do they make those difficult trades? Did they trim bitcoin in October and add to equities or gold. Have they been trimming gold or equities and adding to bitcoin now? And oftentimes the answer to that is no. Or they're trying to time it. Wait for some perfect trade. You don't need to be perfect, you just need like a plan on how to rebalance. So embedding that into a tax efficient wrapper for the income stack lineup. Our other messaging is we're very diligent to not over distribute. We want this to be an asset that one has full upside participation on these assets, but also can appreciate over time. And so I think a lot of people's distribution rates are a little bit aggressive in this space that you can't really expect the fund to generate that much return over long periods of time. And while our distribution rate of 20% right now seems still actually quite high, that's on a 200% exposure basket. So the unlevered distribution rate is actually pretty, pretty reasonable. Wow.
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B
I know you guys are doing a lot of great work at Quantify and where can investors go to find more information about this?
- [25:40]
C
Yeah. Please subscribe to our website in quantifyfunds.com, follow us on Twitter Quantify Funds and got lots of good information coming out.
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B
Fantastic. David, I really appreciate your time and we'll have to do this again soon.
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C
Thank you. I appreciate it.