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- [00:00]
A
So it was coming back to this idea of getting off 0,0% allocation to Bitcoin, of course. And what's surprising is that there's still so many institutions that we talk to that are still on zero. And so the big tagline or punchline that we're trying to push is to say, hey, maybe zero is the correct allocation for you, but if it is, then you need to have a good reason for it. Because this, objectively as an asset class, ticks so many boxes in terms of just its performance return versus its risks, potential diversification benefits. How has all the qualities that you look for in a traditional alts bucket, which is what a lot of institutional investors are invested in. Bitcoin has all the pros of alts, but it improves on a lot of the cons. So again, pushing these people to say, hey, why is your allocation zero? You need to have an answer for that.
- [00:48]
B
Hey, I say when we sell.
- [00:52]
C
We are back. Ladies and gentlemen, we're back for another episode of the Last Trade. We are joined once again by Chris Kuyper, vice president of research at Fidelity Digital Assets. Chris, it's a pleasure to have you back on show. The sentiment is not as great as it was last time we recorded, but that's all right. That is why we're having you back on the show today. We're going to work through, get back to the basics and instill some confidence in the market. So how are you doing? Thank you for joining us.
- [01:16]
A
Yeah, thank you for having me. I'm doing well despite the sentiment that we were just talking about. But it's. It's good. Things are still moving along. So the bitcoin network keeps chugging along and so do we. So excited to get into it. And thanks for having me.
- [01:27]
C
Thank you. Chris and Brian. Michael, great to see you both. I think this is the first time that both of you have been on the last trade together in a couple weeks now. So we have the full.
- [01:35]
B
Yeah, it's been a minute.
- [01:36]
C
Full house here.
- [01:36]
B
Full house.
- [01:37]
D
This reminds me of when we had Chris on. I believe it was the first time. And he referenced deep in some bear market in this past decade, telling clients and prospective clients that if you just close your eyes from the price and looked at all the fundamentals, you would think we're at all time highs. And that's. It feels like exactly that when you look at all the inertia and momentum happening in the industry. But when you look at the price, it doesn't necessarily reflect it right now.
- [01:58]
C
It sure doesn't so Chris, why don't we start with what is, you know, what are you seeing? Because as we record this Wednesday afternoon, this will come out tomorrow morning. Bitcoin's trading around 65,000 to Michael's point. Just now, if you were to close your eyes, you would think that things were a little bit better than where sentiment currently stands and where the price is. I would love to. Before getting into some of your recent research, just get a sense of what you're seeing in the market. What do you make of the recent price action? What are you paying attention to?
- [02:23]
A
Yeah, one of my favorite market adages, I come from the tradfi money management world and people love to have lore and adages and I don't even know where this one comes from, but the old adage of it's the market's job to inflict the most pain, pain on the greatest number of people. And bitcoin certainly does that in spades all the time. So we always point out all these things and we think that if we only had this and we got this next year, the price would react favorably. And of course it does the exact opposite. So it's certainly challenging for anyone looking to trade it, which is why we view it as a long term potential core position in a portfolio for a number of reasons. But just as we were talking about before we hit record, that the sentiment is probably the worst I've ever seen. I've. I've been interested in studying Bitcoin since 2012. I've been at Fidelity Digital Assets now for coming up on five years this year. And you know, before when sentiment was this bad, it actually wasn't even this bad. We had really, really bad stuff. FTX blowing up or things that were very obvious, obviously wrong and broken. And this time it's, it's the challenge of looking around saying like, well, what's, what's really the problem here? I know there's been some stuff on Quantum and there's been some, you know, back and forth within the, on soft fork, hard fork, all these different things. But it's tough to point out one big thing which makes this a little bit befuddling, right? But I think it is a matter of psychology and narrative and momentum. It's not new to say something is driven by narrative. That means it doesn't have fundamentals, it's just acknowledgement. Like tech stocks, for example, which is where I started. In the tradfi world you've got something with no cash flows long or little cash flows very long duration. It's going to be narrative that drives that stuff. And right now I think people have a capacity for only a certain amount of narrative that they can hold in their head and follow. And of course, they only have so many dollars, and a dollar can't be in one place at the same time. So people are pointing to the AI thing. And like you said before, we hit record, like, well, AI's been around for a long time. Yeah, but there hasn't been this much momentum in these, these AI names, the chip makers, the memory chips, even old tech guards, for example, like a Dell or an IBM now catching the momentum bid here. People want to go where the momentum is and that's where it is. And it's not in bitcoin right now. But I actually think that's okay. And I know we'll get into this. I think it's the silver lining that bitcoin is finally decoupling. Maybe not the one we wanted, but it's finally decoupling and it's not going up with everything all at the same time, which is exactly what you don't want in your portfolio. Something I, I talk about in the recent report. So that's, that's my current take, but I'd be curious to hear from the rest of the group here.
- [05:06]
B
Yeah, that's really well said, Chris. I mean, yeah, not the, not the decoupling we wanted, but maybe the one we deserve. You know, I, I come back to, you know, there's some really good data around Bitcoin, really more than pretty much any other asset, like, spends the vast majority of its time trading sideways or down, and sometimes pretty aggressively down. And we've talked on this show in the past with you about good volume and bad volume, you know, has a positive skew. So it's, it's positively skewed to the upside, more upside volume than downside. But for the vast majority of time, I think, you know, 96, 97% of time, you know, on given trading day in Bitcoin's history, it's sideways or down. And you have to keep that in mind when we talk about these things of having a long time horizon on bitcoin. It matters more for bitcoin than pretty much any other asset because of these characteristics of its return profile. And so the other thing that's related to this is like, if you miss the, you know, however many days, 5, 10 best trading days, you basically lose all of the return. So like, you know, you're then flat to somewhat down depending on how many of those top days you take out of the data set. And so it just. It just reiterates like one, this is. This is normal. This is kind of how it always is. I would agree with you that sentiment itself, like, apart from just price, does feel particularly bad. And I think in my mind that's related to a few things. I think it's sort of come back to earth from initial trumpet admin exuberance to where now, given a lot of his dealings in the broader crypto space, I think there's probably a negative perception around that involvement and support from the admin, The DAT stuff, the treasury company stuff. There's a number of factors, and I think you're right. There is a bit of a difference in terms of equity market exuberance and momentum with this AI story. That's. That's certainly a factor.
- [06:56]
D
Yeah. One thing to call out. I don't know why it sparked. Maybe it's, you know, Chris in his role or the subconscious notion of inverting, always inverting, but made me think of, like. Like this is actually a good thing for a lot of people, specifically people that are educated or in the process of being educated. Because that's what Chris and Fidelity Research focus on. That's what we've been focusing on. And this comes back to why you shouldn't necessarily ape in or allocate in size if you're not prepared for it, if you're not educated enough because you'll end up puking it out, versus if you're getting educated and you size appropriately. And this is where some value and diversification comes in, because the volatility doesn't hurt you as much as. But as you're getting educated, you can start to leg into these downward trends and be scooping up more coin per dollar than you would have if you would have gotten at the top. And then if you're very educated and you're overexposed, the idea is that you understand the volatility and then it's your friend on the downside, because you're still producing value and generating some kind of income to buy coins on the cheap. And then it's about lowering time preference, which is just traditional prudence and wisdom around capital preservation and wealth building. So I get. Obviously, like, I've been all in for 10 years at this point, so it hurts when your net worth cuts in half. But personally, like, I've kind of inverted it in the sense of this business and I've been, you know, pinging people in the industry and here internally at this stuff. We're building you kind of pinch yourself because on the other side of this, like you know where this goes and there's going to be very few firms and very few things that exist on the other side and it's going to be, you know, open water. So you just have to keep your head down, continue building and understand the fundamentals. And I think that's so important about the education, the fundamentals because bitcoin has them and there's a lot of other assets that don't. And so to Chris's point, there's a lot of narratives right now. It'll be very interesting to see what persists because we've seen how these narratives can move on a dime where bitcoin we know has a long term trend in its favor.
- [08:56]
A
Yeah. And that long term trend is really interesting when you think of the downside opportunity or potential opportunity here. I think you had a chart or one of you guys had a chart on looking at moving average or momentum bands and we're at one of the lowest bands on that chart. I've seen other ones if you look at like if you're adherent to the power law or something like that, like zoom out, look at these things on, on log charts and you see it's not broken. But we are nearing these very, very low periods and you can go through a lot of different fundamental stats of okay, when we've hit this low before, whatever metric that is, what has been the, the average or median return, 12 months, 24 months after that. And that's the unique thing about bitcoin too. Like you said earlier, we're constantly looking up at that high, like we rarely hit it and surpass it and then we're below it again. Right. If you look at that drawdown chart where it's zero here and you're drawing down, you're always, almost always below that. So you should be used to a state of being underwater from your all time high water mark. That's not unique. But what is unique is that we don't stay down there very long couple years. I think you had a chart too and other people have had charts on this bear market versus others. It's not that unique. Right. But historically at least it's been very, very short. And this is one of the things I put in the report and something I gave a presentation on stage at Consensys with people look at drawdowns of bitcoin and it scares them so much because it's so fast and deep. But they don't look at the Other side, where you come out of it so fast as well and then move on to new all time highs, at least historically. That is very unique for an asset class. And if you look at stocks, you can be underwater for a very long time. And then my favorite chart that I presented was you look at bonds on a real basis. So after inflation, everyone just looks at the nominal drawdowns of bonds, like even a long term bond, like 20 plus years, and it's shallow and short and they think, great, there's stability there. Then you look at the history. We had 40 years where people were underwater on bonds because inflation was so bad. We're 30% underwater on bonds because inflation is picking up again. Yeah, this one here, and that's another macro thing we can get into. We put in our look ahead two years ago, at least I did. I stuck my neck out and I said, hey, inflation has a tendency to roar back every time you think it tamped down going back to the 70s. We didn't get that last year, but now we've got a couple pretty hot inflation prints again and we've got negative real yields again. What is that going to do to all these bondholders? They think they're getting stability with shallow, short nominal drawdowns, but what they can actually eat, what they can actually retire on is a much different picture.
- [11:32]
C
Yeah, this chart actually does a lot of the talking for us because if people are not on video right now, what we're looking at is, as Chris described, the ten year treasury bond drawdowns, nominal versus real. And you can see from mid-1930s, about 1940 to the mid-1980s, the real bond returns were roughly minus 30 to minus 50% any given year. And so Chris, to your point, I think that's such an underappreciated aspect about investing in general. People prefer to see those stable numbers on their screens in their portfolios and they get a little bit sick in the stomach when they see an asset class trading down 40% in six, seven, eight months now. But to your point, when we're thinking about volatility, bitcoin also has volatility to the upside. And that's another, I think, tough thing that a lot of people have challenges wrapping their head around. Because historically when traditional finance talks about volatility, the assumption is that it's a negative thing, but it actually goes both ways. And one thing I wanted to revisit before we get into more of this great research here on your side would be when we recorded last time with you in the fall of 2025. So right around when we were trading your all time highs, we had a discussion around the four year cycle and some people in the comments like to tell me, hey, the four year cycle is not a thing, it's an epoch. Well, whatever, whatever you want to call it. There's a cyclical nature to Bitcoin's price. And at the time we recorded we actually had asked a number of different guests what their thoughts were in terms of is this going to repeat? Is this the end of. And I think what we had discussed on the call was that the four year cycle was diminishing, it wasn't playing out, we didn't have the blow off top that would typically categorize it. But I'm curious now that we have seen a pretty significant drawdown, although it has been less severe than other years, we're sitting close to 50% down from all time highs as we record currently. I'm curious if you're, if your thinking has changed at all as it relates to four year cycles, do you think that, where do you currently stand on that topic? And I guess if you still are strong in thinking that this doesn't repeat going forward, does that imply that maybe you think that the bitcoin's price will recover faster this time around?
- [13:44]
A
I'll reiterate what I think I said. I have to go back on the first one, which is I believe in cycles. There's no reason the cycle is going to go away, but it might not be a four year cycle. I don't see how that magically just keeps going. Bitcoin, of course we can never rerun these experiments and we have all these counterfactuals. It was the halving had maybe a disproportionate effect. It also lined up with liquidity cycles, it lined up with elections. So all those can change. But I don't see why we won't have cycles. We have cycles and everything in nature in financial markets. I don't see why we don't have cycles with Bitcoin, whether they're adoption cycles, liquidity cycles, sentiment cycles, all these things. So I think cycles continue and unfortunately, hopefully we don't go back to the minus 80, 90% drawdowns. I think we do get a little bit of a cushion there, a compression, just because the market's bigger and you have so many more players. And there's a lot of academic research that backs this up too. Like when you have derivative markets enter something like they've seen this with commodities, you actually smooth out volatility because now you've got all these different cohorts and market participants and players, people who want volatility, who want exposure to volatility, who want to trade volatility, who want to hedge volatility. So that tends to get those market efficiencies out. And so there's less volatility. So I do think there will be overall. Doesn't mean we still can't have main major spikes of volatility on both sides, of course. So I think the cycle continues, but it's not necessarily going to be four years anymore. And hopefully it is a little diminished. But bitcoin is one of the freest markets out there in terms of how decentralized it is, how there's no central banks, how there's none of these other players participating that can sometimes move the price around. So we'll see how diminished the volatility gets. Given it's such a free market with time, only a marginal amount of it is trading, but we'll see how that plays out.
- [15:42]
C
Yeah, it's a fair point, I think.
- [15:43]
A
Go ahead, Michael.
- [15:44]
D
I was going to say I don't necessarily necessarily know if this is popular or unpopular. We talked a little bit with Vijay about this. I think part of what broke the cycle or a part of the mechanics of the cycle were the institutional capital and the concentration around it, meaning between MSTR and then the ETFs. I think there's a notion of dampening the volatility that occurred via options and other derivatives that lower the reflexivity and the volatility to the upside. Because like when you think about the move from 40 to 60 up to 126, we've never seen that like steady stair stepping into that price. And we understand, we talked about this with the AI stocks, that that momentum is what drives more people in. We've seen this in bitcoin blow off tops. We didn't get any of that. And so that's where I think has been a notion of the upside and really not having the. The true in our, and I think our previous sense bull market of anecdotes of peers in our network coming in and buying. They never got into this last bull run. And then to the downside as well, I think between whether it's Saylor or also just institutions and sovereign stepping in, we've seen less of a drawdown. And so it just feels, I think everyone feels the atmosphere is a little bit different with everything going on, including just where the price is at post 10. And it's just been A strange position to be in if anybody's been around a couple cycles, that everyone could point to an exact catalyst, what was the top. And then where we're trending down. We've seen all these bullish indicators from institutional pools coming in, but at the same time, we've just been continuing to trend lower.
- [17:22]
C
Yeah, I would love to get into the research report, Chris, because there's a lot in here and of course we won't be able to cover it all on today's conversation, but I want to at least hit the high notes. We did go over one piece already on the bond nominal versus real returns. And just for what it's worth, I think, Chris, you and the team at Fidelity Digital Assets produce excellent research. So when people in my network who are in traditional finance ask me for resources, we of course have things that I'll point them to at on ramp, but always in parallel and pointing them to Fidelity Digital Assets in this piece in particular, in more recent conversations. So this piece is titled Getting off evaluating Bitcoin in 2026 Bitcoin's role in Modern Investment Portfolio. So, Chris, could you give us a little bit of color on the motivation for writing this piece and then we can get into some of the key takeaways and then explore some of the. We have some questions as well, but I want to at least hear from you, just your vantage point on authoring this piece. What sticks out to you.
- [18:21]
A
Yes, so for some context, it was actually an original piece years ago, same title, but we've revisited it, we've updated the data, revamped it quite a bit, simplified it. So it was coming back to this idea of getting off 0,0% allocation to Bitcoin, of course. And what's surprising is that there's still so many institutions that we talk to that are still on zero. And so the big tagline or punchline that we're trying to push is to say, hey, maybe zero is the correct allocation for you. I'll be fair. Different institutions have different mandates and constraints and whatnot. But if it is zero, then you need to have a good reason for it. Because this objectively, as an asset class, as an investment option on the menu, ticks so many boxes in terms of just its performance return, return versus its risk, diverse potential, diversification benefits, how it has all the qualities that you look for in a traditional alts bucket, which is what a lot of institutional investors are invested in. They nowadays have really, really big alt sleeves, whether that's just beyond stocks and bonds or even really exotic Stuff Bitcoin has all the pros of alts, but it improves on a lot of the cons. And there's a chart I gave, I don't know if it's in this report that shows how it draws from both of them. And so I think that's really powerful. So again, pushing these people to say, hey, why is your allocation zero? You need to have an answer for that. And if you don't, here's how we look at it. And again, maybe it's zero, maybe it's not, but at least have a reason for it. And so that's the narrative we've been pushing. And then as we can go through the report itself, but obviously you see it still makes sense on a first principles basis. The investment thesis in our view as a hedge and primarily to protect against monetary debasement, also the byproduct of that consumer price inflation. Diversify the portfol, increase the risk adjusted returns. And then the rest of the report we just stepped through how a traditional allocator would think about like okay, I want exposure, what do I do for position size? And we'd provide some historical as well as forward looking models. Okay, now how often should I rebalance? We provide some data on that. Where do I pull from the bond side or the stock side? We pull some data on that as well. And then my favorite part of the report, just to round this out, is the last section and we got into it a little bit talking about bonds, but forward looking, what's some of the headwinds that we're going to face on a, say a traditional 6040 portfolio? We'd look at both equities and bonds briefly and then obviously why bitcoin may make sense to defend against some of those.
- [21:04]
D
So maybe you were a little surprised about how much uptake it got or maybe not. The thing that comes to mind is this was my either Chris unleashed or Fidelity unleashed report because there was a theme that we've loosely danced around which was not having, or I'm paraphrasing, but not having a position in 2025, 2026 is effectively having a position whether you explicitly admit it or not. And I think like in all good forms we, we not struggle, but we are always have some friction. We produce research, but it's really the, the meme, the thumbnail, the thing that people will remember and then try to get the rest. And so you can imagine how many people shared it versus how many people went in depth and read it. I think you guys really landed that to your point that you resurfaced a lot of the existing content but the way it was packaged, especially in 2025, 2026 with all of the momentum in tradfi and institutional capital allocation is like it is not a fiduciary. You're not doing your fiduciary duty if you don't have at least some position on why you're not recommending or at least understand this asset class. And I think it really hit home there.
- [22:11]
A
Yeah, absolutely. Thanks for that and thanks again to your earlier comments about you sharing our work and promoting it. That's great to hear. So we love to hear it. The more, the more we get it out, the better and lot of people are coming to this conclusion of this is their world. I come from the money management world and you are always against a benchmark and so of course bitcoin, when it's trillion dollars or under, you could safely wave that away, shove it under the rug as a rounding error, but as it gets bigger, you are going to see it included in these world benchmarks. And like you said Michael, having a zero weight is effectively saying we're shorted or against it because you're not even going to, you know, take a market weight neutral position saying I'm agnostic, but I'll just hold the basket of everything there is to invest in. And that would include eventually, as it gets big enough. Bitcoin or even other digital assets on
- [22:59]
C
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- [23:33]
B
I had a question. Just I'm imagining, you know, you probably sent this to a lot of folks that are still on zero. What was the response from those folks? Do they have a better reason today than they did a year or two years ago? And maybe what are the primary reasons? Because I think we're right in that like yes, having a zero allocation is now a form of a position and you need to be able to defend that, particularly as a fiduciary. Right. Like if you're an individual, you don't want to Own Bitcoin for whatever possible reason, like, that's fine. But if you are managing money and charging people to do so, you have. You have a duty to actually think about this critically. And so I think for many years, particularly, you know, before I left the banking space, like, the reasons were very bad and I would like to think that they've improved. But the problem, like this sort of chicken or egg is like, once you go down the path of trying to have a good reason, like, you kind of run out of reasons not to own it. So I'm curious what the response has been to maybe some folks who still are on Xero that you sent this to.
- [24:31]
A
Yeah, I'm smiling because that completely tracks. Brian of I'm going on my fifth year at Fidelity, and when I started the excuses, or what I like to say the excuse du jour were really. They were the. It's. It's a fad. It's a Ponzi scheme. It's like Beanie Babies. It's going to. And of course, these still come up, but this was like the most prominent ones. People said, it's just code. How could I ever invest in that? It's only used for illegal and illicit purposes. Those were all early. As we've moved forward, I've noticed the excuse du jour shift to things that are more sophisticated. Right. Oh, I don't know if it's actually correlated or I'm not sure about the security or how would I hold it or stuff like that. So they are moving in the right direction and they are getting to be questions or excuses of more about logistics or compliance, or they're maybe somewhat interested, but they still say things like, well, I just don't know how to do XYZ with our current structure, or something like that. So they are getting better. The question that's hard to suss out is are these real, genuine excuses, like, if they were to go away, they would actually invest or they just. The excuse du jour where they have no intention of getting off zero. But they've just come up with the latest and greatest excuse, unfortunately. So there is that. I would say what I'm seeing is I'm still hearing it from all over. One pension event I was at, one of the people said, it's clearly a generational thing. He said with a straight face, I would rather own art. I can touch art, I can feel it, I can look at it than Bitcoin. I was at a big family office event. It was a council of all these family offices. That's been around for decades where they get to together and share strategies. And very many of them said they had exposure to quote crypto, but when you asked, almost all of them were through a structured fund or VC fund type of arrangement. So they're much more comfortable doing the equity investment, the private investments, the picks and shovels, the layers of management. And I think maybe a bit cynically there's a bit of a bias there so they don't have to take the full brunt of the decision themselves. If they outsource it to multiple different allocators, um, they can spread that quote risk around. So that's one of the things I see as well. But hopefully, hopefully this, this can trend continues though where they are asking more sophisticated things and the, the hurdles become more operational. Not philosophical against it.
- [26:57]
D
It's really just one thing real quick. It's really fascinating because of the, the whole notion of bitcoin mean a platypus. It's like this idea that you can, it's like the Internet, but you can buy an allocation directly to the network and it's hard for them to wrap their head around. And then what you described around a rather own art and generational, it's like almost like a fractal or a mirror of like AI. You know how there's just so much stigma on the AI front, there's people that have embraced it, but a lot of people rather put it back in the genie, back in the bottle. It's the same thing with this. It's like people would rather this thing didn't exist and hope for every excuse why it won't exist or persist in the future. And it's just a matter and function of time before you have to like, you know, face it.
- [27:41]
C
Yeah. Another thing that comes to mind as well, Chris, based on your comments, is that a lot of these portfolios are typically allocated to active managers. And to your point, a lot of it in the venture space. And I think that just is a testament to the fact that commodities and assets that bitcoin would maybe most resemble are typically not owned in traditional portfolios. And so when I'd imagine trying to make the case for owning bitcoin in a portfolio, it's just a more challenging proposition because we're so used to, at least in the past, call it 50 years or so, so used to everything having to fit into a bucket of either equities or credit. And then you can kind of work into different types of allocations, whether it's public or private. And is it public? Is it in the public, you know, is it government credit, is it private credit, et cetera. And I think Bitcoin is unique in the sense that, well, A, it's digital. And you mentioned the anecdote around art and there's just generational differences. Maybe older people on the margins would rather own physical assets rather than digital assets. But then there's also the aspect of, well, I'm still. People are still trying to figure out, well, how does this actually fit into a portfolio? And a lot of people I think are as well are trying to justify maybe fees as part of a relationship or trying to justify outperformance over Bitcoin as an index. And the best analogy I can kind of come up with at the moment would just be looking back at mutual funds and how long it took the ETFs to disrupt the mutual fund complex. But then once it got mass adoption, critical mass and momentum, it became the standard because it was more efficient. Most people just wanted to own a broad index and kind of set it and forget it. And so I think maybe bitcoin is going up to. Is looking at similar challenges right now where it's still less than two decades into it. A, it's a totally different type of asset, and B, there's just a lot of friction inherent to how people allocate capital. And so I'm curious, is that, you know, is that typically how you'd categorize it as well, or is there anything else that, based on what I just shared that, that you'd want to react to there?
- [29:39]
A
No, I think that's. Those are really good points. And I'll be careful here because on the one hand, I've been in the financial services industry my entire career and super smart people, we come up with all kinds of amazing financial products. If you just look at the history, like you said, like mutual funds to ETFs or, you know, I used to cover REITs. REITs weren't even around until like the 90s, right? Real estate, investment trust. So these different vehicles for investors and even everyday investors to invest in things they couldn't before open up new asset classes. Like, that's the story of financial innovation. And you go beyond that, insurance and all these other products, like, it's great. The flip side is there's a lot of complexity and there's a lot of people, for good or bad reasons who love the complexity. Either because they think they're smarter than the market, or they might have, you know, more ill meaning or ill intentions behind that. And another phrase that comes to mind is what someone told me once about the financial services industry of financial products are sold, not bought. So a lot of people do not go and look at a menu of different things that they could buy with all the structures and fees and ratios. They're sold them by someone, someone maybe they trust or whomever. And so to your point, yeah, it's a lot easier for some of these people to buy and get sold of different structure than just holding plain bitcoin because they're familiar with that. It's the world they live in. Maybe they're, they think correctly or not that the complexity will give them an edge or they can outperform bitcoin when all along we might see the greatest, the greatest opportunity here is just simply buying and holding bitcoin unencumbered. You know, just the basic core holding and holding it for the long term. But of course that's, that's a harder sell and it's a harder thing to do psychologically for people.
- [31:24]
B
Yeah, the other, the other thing I might add to this dynamic is like the people that are, are searching for a different way to get quote, unquote exposure, whether it's through a fund of funds vehicle or the picks and shovels, as you mentioned. I think part of the rub there is that they aren't viewing bitcoin as money. Right. They are very much viewing it as an investment similar to some AI stocks. Right. And so they are saying, well, how do I know that this is the be all, end all, winner take all new form of digital money? Don't I want exposure to the whole crypto complex? So I think that's historically also been a part that has troubled folks with the sort of how do I fit this into the portfolio question? Because it's like, well, now you're taking me, you're asking me to take a bet on one of these technologies when in reality it's very different. If you actually understand the fundamentals, the monetary properties, how they're immutable. And this comes back to what we were talking about earlier around narrative versus fundamentals. Yes, bitcoin's narrative may be out of favor right now, but its fundamentals are completely unchanged. Whereas if you compare that to AI, stocks have great narrative right now, but the fundamentals there are a little bit more challenging because you have to deal with market competition, new companies, like there's all these different elements to assess and diligence, whereas money's money. And so I think that's been a big sort of hang up for folks on the allocator side is that they're not, you know, they're perceiving it like any other investment. They're not perceiving it as money or savings technology.
- [32:48]
A
Yeah. And that goes back to the very first report I ever did at Fidelity, Bitcoin first. Going through the things you're all familiar with and have been talking about forever of bitcoin as an emerging monetary good. And that's how we've always said you should look at it. And there's two sides of that coin unfortunately, because I'll tell people, start with bitcoin, it's the simplest, it's quote the dumbest network in some ways. All it does is produce blocks and process and make sure bitcoin, the number of bitcoin there are the same and they're not double spent in all this stuff. And that's the point. All this other stuff is more complex. So start with bitcoin first. So that's the easiest to understand from a technical level, but it's the hardest to understand on the investment side because like exactly, you said you're making a pitch for an emerging monetary good money itself. And that's really, really hard people to wrap their head around, especially in the finance industry. It's like trying to tell a fish what water is. Right. It's all around them. They've swum in it their entire life, but they've never questioned what is money itself.
- [33:46]
C
Yeah, and one other aspect too that Brian, you brought up earlier and then Chris, you reinforced with some of your recent comments just on the fact that Bitcoin spends 96% you said Brian. Right, 96% below all time highs. And so, so that's actually a tremendous benefit. Even though on days like today I just want to stay in bed, I don't want to show up to work. But it's actually tremendous benefit to anyone who has a long term orientation to just saving or investing.
- [34:15]
B
Right.
- [34:15]
C
And so I think the through line here, the positive and all the negative sentiment is the fact that if your conviction remains unchanged and the bitcoin fundamentals remain unchanged, which they do, then this is actually a, this is about as good of a setup as you can get. If you're willing to continue to save or invest however you want to categorize it in bitcoin and I think a lot of people would benefit. I know there's some contention with the bitcoin industry around like financial advisors. I think financial advisors play a tremendous role in preserving people's wealth and helping them meet their financial goals. And I Think a lot of people would benefit from just kind of taking the approach of almost having like a trusted. Like almost think of yourself of having just someone trusted telling you to sit on your hands. Because. Because that is exactly what financial advisors tell their clients in equity markets. Now, equity markets don't have the same amount of volatility that Bitcoin does. And Bitcoin investors tend to have a higher concentration in the asset than other investors do. But you're best served in these types of scenarios in these markets we're currently living through to just do exactly what everyone else does in traditional markets, just sit on your hands and continue to allocate. And so I think that's so important to reinforce, especially on days like today, in just the past couple of months, where sentiment is beaten down so much. It's important to remember that. And I'm not sure, Chris, if you want to go into anything else there before, there's a couple of charts I want to pull up on your report here.
- [35:36]
A
No, I second that. And I agree. The financial advisor's role is, to me, probably more value add in the psychology side, the therapist side, if you will, which is what a lot of these advisors do and have to do. They're more like a coach or a personal trainer. Right. They're trying to get you to. To do the right thing that you don't want to do and constantly battle that psychology.
- [35:58]
C
Yeah, I'm like Michael's therapist, for what it's worth. But I want to pull up this chart here because it stuck out to me, Chris, when I was first looking through the research. So for people who aren't on the screen here, we're just pulling back up the research report. There's a couple of different sections in terms of where does the Bitcoin position come from, how should the portfolio be rebalanced, and then alternative position sizing models is something that caught my attention. Crazy, Chris, where you specifically talk about a mean variance optimization framework. Are you able to explain what that means in the context of just identifying the highest Sharpe ratio and then where you landed with the assumptions here and what that research led you or what you produced here in the research as it relates to Bitcoin as part of a portfolio?
- [36:41]
A
Yeah, so fancy words here. Mean variance optimization. It's basically saying, let me give you this model some assets and I'll give you the assumptions of what the average return will be, the risk in terms of volatility, and then you optimize that portfolio to give me the percentages of those assets that give me the highest Sharpe ratio. So mix these together and give me the highest Sharpe ratio. And it's a reminder for people. The Sharpe ratio is your above average return over the risk free rate. So your excess return is what they call that. So risk you're taking above investing in something just like a three month T bill divided by your risk, which is for better or worse, your volatility, your standard deviation. So basically give me the most return I can get for every unit of risk I take on. And we put in stocks, bonds and bitcoin. And what's really interesting about this is stocks we kept at the past 10 year historical numbers, which we're being very generous because this has been one of the best decades for stocks. And this data went through the end of last year just to make a Note there. So 14.5% per year for stocks. Amazing volatility of 15.5%. Not bad. Bonds, okay, bonds have had a rough past decade, 2% returns with volatility though of only 5%. So they're supposed to be that typical ballast, the thing that has a low correlation to stocks. So they're, they're keeping the portfolio steady while stocks are providing the juice of the returns. All right, so we're being pretty generous there with the historical stuff. Then we put in bitcoin. Now if you took the last 10 years of Bitcoin, it'd be amazing. It's like 70, 75% compound annual growth rate. Yeah, your volume is like 60, 70%, but that's still amazing. So we said we'll assume returns go down to only 25% per year. 25% cage, bigger compound annual growth rate and we'll even keep volatility high at 50%. So not quite, quite as high as it's been, but still really, really high. We're cutting returns by like two thirds and we're only cutting volatility by a little bit. So you plug those in and the model spits out this. If you start with the 6040 portfolio, you can see on the screen there, your average, your expected return would be 9.5% with a little over 10% volume. Overall Sharpe ratio of 0.6. If you want to take those assumptions and maximize your Sharpe ratio, you'd have about 90% stocks, 10% Bitcoin and 0% bonds. Your return would go from 9.5% to 15.5% per year. Your volatility would go up 10% to 16%. But because that return is going so far up, your Sharpe ratio goes from 0.58 to 0.73 as you see there. So so very interesting results of one way to look at this. If you want to give more of a forward looking expectations or assumptions rather than just taking like earlier in the paper, we just take a historical look at Bitcoin and people say yeah that's great but you're either using really small Data set like five years or you're taking 10 years or more and you're getting these really fantastic returns for bitcoin. So of course that's going to look great. And so what we tried to do here is we said okay for fine, we'll take the returns down of bitcoin a lot, we'll keep the returns for stocks. And if you want to maximize your Sharpe ratio, which is one thing a lot of portfolio managers do, you can also look at this from other ways like risk budgets and stuff. This is what it would spit out. 90% stocks, 0% bonds, 10% bitcoin. Again not recommendation, just a hypothetical illustration.
- [40:20]
C
Can I just say real quick before Michael, I really appreciate this approach, Chris, just because, because to your point, a lot of times people will pull up the data and they'll include the 10 year price performance of Bitcoin or even the all time price performance of Bitcoin. And it's not to say that didn't happen, it did. But I think it really does skew the data in terms of what in just in terms of expectations. And as we know, especially from the past six to 12 months in Bitcoin, expectations are incredibly high. So I like that you grounded, you grounded the data here in terms of really level setting the, the CAGR at meaningfully lower than where it has been in the past 10 years. Because I think this is a more accurate representation of where expectations should be. Now that doesn't say Bitcoin can't outperform where, where you let the data lie here. But it does at least I think deliver a little bit more credibility than where a lot of people tend to point at like 15 or 10 year historical returns. Not to say that again this should be dismissed, but it should be taken with a grain of salt. Salt in my opinion, whether you've been in Bitcoin for 10 months or 10 years, managing your bitcoin wealth has been a fragmented experience. One place to buy, another to custody. A patchwork of providers for your ira, your loans, your estate plan and everything in between. Every additional platform is another point of failure. And that is why we built Onramp Finance, a unified platform for your entire Bitcoin life. Enhanced brokerage cash bearing accounts with earn rates up to 5%. A card that earns cash back that you can use to stack more bitcoin multi institution custody IRAs and built in inheritance planning all under one roof. The genesis program is live and spots are filling up fast. You can sign up in five minutes at onrampbitcoin.com and use the code TLT to lock in one year free of multi institution custody and our highest earn rate.
- [42:13]
D
Yeah, I on this note on the research I wanted to zoom out just a little bit and it's going to be a little broad Chris. And so you could take it in any direction but just the overarching sentiment, you know, based on building this business and the number of conversations we've had publicly and personally I've gained a lot of appreciation where Fidelity sits in this market because it took a lot of courage, you know initially 10 plus years to get in this space when everyone was laughing and thinking it's crazy. And you see it paying off, it's been slower. But when I talk with individuals like I like to think of very sophisticated people park their assets. With Fidelity you see this all the time with the ETFs as an example. I'm sure you hear it because we hear it a lot where the these this gets lost on a lot of people. But majority of bitcoin still sits offline in cold storage. And those individuals do that because they understand the counterparty risk that has existed for 18 years in Bitcoin. But at the same time those individuals recognize that they can't hold all of their assets in self custody. Maybe their retirement accounts, maybe their just X, Y and Z family members inheritance. And they all come and tell me that they go to Fidelity over Anyone else specifically ETFs because of fidelity investing in vertically integrated owning the custody stack. So I'm just curious like how that's changed in your five years the sentiment internally because that last report we talked about in the Sentiment I feel like a couple years ago would not have maybe been okay to discuss in that vein. But then also just with the industry there's no shortage of tradfi firms coming in this space. But they can't put they haven't produced the level of reports that you guys had in the investment. And just curious how you think about the industry, what you're hearing from the market. I know you're limited in what you can share but anything you can share I think's insightful for us. And then also the audience.
- [43:53]
A
No, that's it's a interesting question. And like I said, coming up in five years, there's definitely been a shift and rightly so. I often say I've learned at Fidelity we're just as much or more a risk management company than a financial services company. Been around over 75 years. So risk management is in our, our blood and our DNA and everything is taken very, every step is taken very cons. Considerately, we do things a little slower sometimes for that reason and you see why that that is and how that's paid off for, for the company as a whole. And it's also a really big company and to their credit it welcomes a lot of different voices and opinions and we have lots of different business units and there is none right now and never has been, quote, a house view on Bitcoin in terms of, of what it is, what it should be worth, how it should be allocated. So it is left up to these different business units within Fidelity. And when I started there were quite frankly and understandably some people that were very skeptical, to say the least, of bitcoin and digital assets. And it's been interesting to see them come around to realize, oh, this is real as they understand the technology. This is a breakthrough in technology. This is here to stay. This is being worked throughout the entire DNA of Fidelity. I think when I started you could characterize us as is like a little more of a startup or just past the startup stage. We were originally spun out around 2018 from our R and D center and you know, legally we're a separate llc, but we've been integrated more with Fidelity. We're the custody behind the retail brokerage, crypto trading and product. We're behind obviously the custody for some of the exchange trade products. So you see how it's being integrated all within in the company. And yeah, there has been a clear shift too in some of the messaging where we've become more comfortable with some of these things and some of this research here. And again, as long as we're truthful and honest and that's what we strive to do, try to be very balanced and factual. That's one of the highest compliments we get for our research is I love your research because you guys aren't sensational. You try to give us all the risks and the disclosures and the pros and the cons. And so as long as we keep doing that, hopefully all of this will speak for itself and, and all the positives of this space will continue to emerge and other people will continue to catch on as well.
- [46:13]
D
Yeah, it's really cool to see. And one thing just to add to that and contextualize is you were mentioning earlier the advice or guidance around owning the spot asset unencumbered. And I think that's super interesting because you don't hear a lot of that. You hear of different products, different services, maybe meeting the market because they don't necessarily understand the commodity like nature. And so you may want to attach it to something else. And I think that's where sometimes it's a feature and then sometimes it's a bug in the quote unquote bureaucracy or 75 years and things moving slower that risk management profile. But in this industry that's the thing that keeps you alive because being isolated, just working in bitcoin the past 10 years, you see the individuals and the firms that are very conservative stick to the first principles and build conservatively in that way last in their cycle after cycle. And so I think that's just a huge component because it may be slower. But you can imagine when this thing really takes off and pensions have to allocate fidelity is where they're going to go to because of the analysis, but also the understanding that I just need direct exposure via fidelity in their best in class custody versus thinking about everyone that was positioning all these other like constructs where bitcoin was attached to something else that either don't exist anymore, underperformed. When these institutions finally get their size and they put it on, they're going to go to the place that's been talking about and has the track record and there's not many firms doing it because bitcoin's so early. And then in the tradfi space there's a lot of education that still hasn't been done. So they get attached to the shiny objects. So you guys are just, I, I'm just realizing over our conversations and learnings from what we see that you're just priming yourself. It just looks like the slow race, but long term it's going to position you guys really nicely to take a lot of market share.
- [47:57]
A
Yeah, I hope that that proves to be true and we'll continue to, to be diligent about it. But yeah, thank you for those, those words and it is what we do and, and hopefully everyone else will, will come to see that as well.
- [48:10]
C
Chris, I know a lot of people are wondering just where things kind of go next here. And so when we last spoke, you mentioned, if I recall correctly, you pretty much had a view where you expected inflation to kind of come back in waves. And so what we've seen this year is, is inflation has been ticking up a lot in part due to what's been happening in the Middle east and just tensions around energy and all the downstream inputs for other costs associated. And then not only that, but then you in the report talk about kind of forward looking. How can investors think about the 6040 portfolio? We touched on the bond piece already in terms of nominal versus real. We could touch on the equity component in terms of valuations. But if you were able just to contextualize everything that you're seeing right now in terms of terms of what we've already discussed on the traditional side and then where things sit from a geopolitical lens, you know, just things are a little bit, the market environment is quite uncertain still. Today you have just the back and forth between peace, war in the Middle east, people don't know what to do in terms of capital allocation and inflation is coming back. We kind of had expected that rates were coming down this year and now they're likely remaining put or going up. And so I'm just curious how you think about that as an analyst. You know, what are the things that you're paying attention to and what should investors pay attention to to for the rest of the year?
- [49:29]
A
Here we just put a quick little blog or article on our website phillydigitalassets.com where we revisit our 2026 look ahead. So we're not even quite halfway through the year, but we are eager to see what's been panning out and what hasn't. And for my sake, I went over in the original piece how gold had its third or fourth best year ever on record at 65% and noting how gold's outperformance or its best years have come in clusters historically. Now of course we don't have a ton of data since we depeg from the dol and gold was allowed to trade freely. But the data we do have shows it does come in these waves, these tectonic shifts. And that's why I said in the original piece I wouldn't be surprised if gold had another great year. Now of course it started hot out of the gate and we've come back in. So right now I'm not very correct on that call, so I'll own up to that. However, one piece we did have there was we see signs and wouldn't be surprised to see more shift away from the dollar system and towards things outside of the dollar system and the traditional financial system. So of course we Saw that with a certain country accepting Bitcoin as payment as quote tolls or quote insurance for these oil tankers. And of course everyone gets a little uneasy about that. But I think it just proves the point that Bitcoin truly is geopolitically neutral money or a neutral commodity at worst. And that means other people may use it, people you don't like. But that proves the point of it's doing what it's supposed and it's showing that characteristic. Right? The same with gold. We just had an article in the Financial Times today about the ECB and others. I know you guys have tracked this, how these central banks are aggressively buying gold and gold is now outnumbering their other reserves in terms of Treasuries or the US dollar. They're diversifying out of the US dollar based system and outside of the traditional financial system for these reasons. Now, not to say the dollar is going to collapse or anything, you know this. These are tectonic shifts or it's like driving an aircraft carrier. They take time to do these things. But I wouldn't be surprised, getting to your point of looking ahead now to see inflation come back and for the Fed to let it run hot because we have such a large federal debt now and our interest expense is I think running now close to 1.4 trillion. So if those rates go up, of course that creates a very big problem problem. So why not let keep rates where they are, let inflation inflate that debt away. We've cited in our research multiple times, links to that famous IMF paper many years ago saying when countries are highly indebted, there's three choices. You either have to raise taxes, rein in spending, tighten your belts, or financial repression, inflate that debt away, get a negative real yield which we now have based on the one month, three months, six and maybe even one year Treasury. Now inflation at 3.8% is running ahead of that, that Bitcoin has traditionally done very well in a negative real yield environment. So if I were to look at some of the catalysts or things that could get us out of this terrible slump, I think that's the big one. These are structural problems that aren't going away. And as much as momentum is going to AI and everything else, people are going to have to pivot back and look at these things as they rear their head. And I think nobody is talking enough about bond yields right now going up to highest level since I think like 0708, not only in the US but in Europe and Japan, everywhere else. Because these problems are so structural, they can't just be fixed overnight. Right. So I think the bond yield, the bond market's sniffing that out. It's sniffing out higher inflation, it's sniffing out higher oil and energy prices that will continue to go downstream and work throughout the total global economy. I think people really underappreciate how complex and connected the world is, especially when it comes to energy markets, and how that doesn't go away overnight, similar to how we shut the world down. For Covid, just as an example, you can't shut down a world economy, you can't shut down a world energy system overnight and expect to just turn it back on and everything to go back to normal when infrastructure has been destroyed and everything else. So we'll see how that plays through. But that's the bond side. And then real quickly on the end with the equity side. One thing we point out in the report is it's a crude measure, but it's a nice, easy, simple one to have for just 1, 1 chart, which is the CAPE ratio. So Robert Shiller, the Yale economist there. There it is. And professor. So if you're not familiar with the Cape. So it's the cyclically adjusted PE ratio, price over earnings, very crude measure of valuation, not perfect. But over the long term, you know, it's the old adage, the market's the voting machine in the short term, which is what we're seeing, the sentiment, but a weighing machine in the long term. So things come back to fundamentals, they come back to cash flow in earnings over time. And so cyclically adjusted just means taking the last 10 years and averaging it. So you're getting a more holistic picture of the whole boom and bust or cycles, the economic cycles in here. So the green line shows when it's high, the market looks really expensive on a PE ratio basis. So you would expect if you invest when the market's rich, your returns over the next 10 years are going to be very, very low. Right. Oh, I'm sorry, that's the blue line. And then of course, when the blue line is the other way around. Sorry, I'm mixing myself up here. Read the report. I know it's hard to do on the screen here, but the point is we've had this huge divergence, right? So you would think the market's been so rich we should have very low returns, but we've actually had very high returns. And so the question investors have to face is, is this model wrong? Does it no longer hold for whatever reason in. It doesn't apply anymore or do these things come back and the market will be a weighing machine in the long term and we will have, according to this chart, a decade of very low single digit returns in the stock market on average for the next 10 years. Doesn't mean it's going to crash. It just means you're going to have very subpar performance from your equity bucket if these relationships and valuations tend to mean revert.
- [55:46]
B
Yeah, that's very well said. One thing I just wanted to go back to that you mentioned around, you know, bitcoin kind of just doing its job and on a, on a stage and on a level which I think, you know, years ago people theorized around, you know, this notion of bitcoin being for enemies, it being this neutral settlement layer, we're seeing that play out in real time. And I would say it's not just the fact that it's the adversarial nation using the money or the rails, it's that it's that in tandem with the United States being pro crypto bitcoin, putting together regulations, establishing a reserve of some kind and having more and more people at least speak positively of it as this thing that matters and is important. So you have both of those things which you would think would be somewhat opposed, but that actually proves the entire thesis of it is this neutral thing, that it doesn't matter who uses it, it's a useful tool. And so, yeah, I think it's pretty. It comes back to the fundamentals component because that's kind of the biggest fundamental there is, is this monetary story, the debasement story, the move to a multipolar world and the need for a neutral settlement layer and a neutral sound money. That's ultimately the only narrative that bitcoin needs. I think other things obviously get attached to it over time and that fuels various exuberant rallies. But that's really the core narrative and the core thesis that, you know, people should come back to during these times.
- [57:15]
C
Chris, I know we're coming up on time today. There was two other topics if you want to touch on either of them briefly. Just general thoughts on stablecoin landscape, role in of stablecoins in the proliferation of the digital asset space. Also kind of in parallel, we didn't really touch anything on the political or regulatory side. So if there's anything that you wanted to speak on as it relates to the Clarity act or even just what we've seen seen year to date in terms of state level adoption, strategic bitcoin reserve, I know it's been pretty quiet on that side. But I'm just curious if you have any thoughts on any of those topics before we conclude today's conversation.
- [57:51]
A
Yeah, not a whole lot, unfortunately. You know, it's something we definitely monitor all of these things. One of the things I will note in going back to our look ahead, years ago we said we wouldn't be surprised to see the final, the final group or institution adopt Bitcoin, which would be central banks. And so we got country obviously individuals first, companies on the corporate balance sheet. Then we got countries again at the periphery states and then the final institution to do it would be central banks. And we didn't see that for years. And then this last year we finally saw the Czech national bank do a little bit. Now people of course say, well it was a quote, test account. A million dollars doesn't really mean anything. They're probably not going to add more. But to me, I take the opposite approach of like this is a huge positive because they didn't just write on it, they actually did it. They realized they had to get their hands dirty and figure out how these things work, how it moves, how you actually hold it. So kudos to them. The governor of the Czech national bank actually spoke at the bitcoin conference I was at a few weeks ago and if you haven't read it, the report is excellent. It's actually very similar to the getting off zero report we put out in some way showing how they also came to the independent conclusion that you add a little bit of Bitcoin to your balance sheet and you don't increase your risk that much, but you can potentially increase your risk adjusted returns. These are actually their words and his words on stage because it has a low correlation. And they, he, the, the person, the governor saying this on stage says, you know, it's not that much different than like adding some venture capital or something that you're familiar with. So I thought that was actually really interesting to not only see that action the report and then actually hear a central bank governor on stage say these things. And, and again it's at the periphery, it's small, but these are the things that happen, right? They have to start there and then they work their way inward to the people who need it even more. So from a macro perspective. So that's about all I have on that. I mean obviously the stablecoin piece is interesting and something we're watching. Interesting that it's stalled out a little bit. Although if you look at the correlation of stablecoin growth with the price of Bitcoin. It's pretty well correlated so it might just be a matter of price. But I'm also wondering where the next leg of growth from stablecoins comes from. I think it could be more on the payment side. We've actually seen a little more interest on the corporate treasury side, believe it or not, which I think is really interesting where they're getting more interested in stablecoins and then I think this one's a little further out. And you, I think you all know more about this than I do, but I've been really interested to hear about all the agentic stuff with AI potentially using stablecoin. That could be another leg of growth for stablecoins as well.
- [60:31]
D
Yeah, I don't think it gets discussed enough, the inertia and momentum across all the different aspects, aspects you talked about. Like if a central bank is R D in this, that means that a bunch of others are that haven't talked about it and then they're prepared for where the future is going in the same way we've heard from all the different firms, the Walmarts, the Amazons, the Googles, R and D and we've seen What Stripe, Visa, MasterCard, MasterCard just got their bit license. Like everyone's preparing the framework because I think they can see the writing on the wall whether it's this year, next year we had Genius ACT pass. I think it goes into effect next year. We have Clarity ACT up on the docket. I think it just got sent, submitted and so yeah, you just have to pay small attention to the space and you can see where the, the trends are going. The only other thing that's kind of you were referencing the, the central banks and we had VJ last week and if you close your eyes and you think about a monetary good monetizing in real time, this is effectively what it would look like. It would look like from the ground up. And if you did the thought experiment of like in a transition from you know, salt to bead or beads to whatever else. And then before gold it wasn't like a kingdom taking all their gold or their salt and transferring to is like this slow bottoms up approach that is very similar to like what we're seeing now. And so I think that's just a big thing. We, we lose sight on that. There's a, it's a, it's a challenger game, it's the early adopters, it's retail, it's individuals, it's individuals looking and having the foresight from a competitive landscape on how they can get an edge. And the a lot of the incumbents is where the credit again goes back to Fidelity. Because they. I always remember that conversation, the anecdote of sitting in a room and how can we disrupt ourselves. How this all started in the fidelity. That's how like everyone should be thinking about the world is whether it's AI or the money. It's like what's the thing that we're not prepared for? The unknown. Unknown. And how should we start doing diligence and educating ourselves on it.
- [62:20]
A
Yeah. And we love the gradually then suddenly phrase in the bitcoin world. But that's how I see this play out with the payment, the stablecoin stuff and especially things like adoption with central banks. It's like the game theory, when you play it out, says that people ultimately will have to adopt this or die. Right. And then all of a sudden it's not just a theore thing of maybe we should do this and maybe be prepared if something happens or not to, oh we have to or we're not going to survive. So all of a sudden all the incentives align and that's when things really take off. Yeah.
- [62:52]
D
The last thing, maybe just on that. And Liam, I'll credit him for. For sharing this. Maybe you guys have thought about it. This is really where like Lindy in financial services and liquidity and flywheels come into play and being a first mover, because we've seen this with the blackrock ETF now tbd, where that plays out. But whether it's spot custody, whether it's lending, changing the custody model, like what we work on, that it's not a foregone. I think a lot of incumbents think that they can just get in two, three, five, ten years later and they'll be able to play at the same level that they play in other markets. And I don't necessarily know if that will be the case because that longevity and that credibility from being there early compounds over time. It's kind of what we've seen even with Coinbase and the custody side of things.
- [63:34]
A
Yeah, I've gotten a really good appreciation being at Fidelity, seeing how even something like custody takes so much time, as you obviously know, to get right and to think about everything and to testing and there's all this tacit knowledge that you don't realize is carried with the people in the firm and within the firm's culture and everything. You can't just take that somewhere else or export it or it doesn't become best practices for everyone overnight. People have to find this out sometimes the hard way, hopefully not. But they got to test and learn and trial and figure out all of these things. And obviously with the brand new technology and asset class, everything is new to everyone. So absolutely it takes time and the more you build up and compound that knowledge and tacit knowledge, the more of a moat you build for yourself.
- [64:20]
C
Well, Chris, thank you so much for your time today. Always enjoy having you on the show. We certainly will have you back on in the coming months maybe before we round out the year here. And maybe sentiment will be better by then. I think it can only go up, right? So I would hope so. But Chris, where should we, where should we send people to?
- [64:35]
A
Yeah, you can find all of our research for free@fidelitydigitalassets.com and then myself, I'm on X @chrisjkuiper.
- [64:43]
C
Thank you so much Chris.
- [64:44]
A
Thanks Chris.
- [64:44]
B
Appreciate it.
- [64:45]
A
Thank you. My pleasure.
- [64:46]
D
Thanks, Chris.
- [64:46]
B
Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show Notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com contact to schedule a consultation with one of our private client advisors.