The Last Trade E049: Invert, Always Invert with Fidelity’s Chris Kuiper

Brian Cubellis (00:02.798) And we're live, back with Chris Kuyper from Fidelity. Welcome back. Thank you. Great to be back. Feels like it's been an eternity since we last had you on. Wasn't that long ago, September 15th, 2023, lead up to the end of last year, lead up to the ETF approvals and launch earlier this year. A lot is going on. We've had the price rip to all time highs fall 20 % below that. We're settling a little above where it fell. last month we had the halving. It's not going on in six months, seven months, however long it's been. What are your thoughts generally over the last three months of 2023, the first four months of 2024? Yeah, so we had the 2023 bull market, 155%, which seemed like in traditional finance, people weren't even paying attention to. It's just funny how we get so accustomed to... the large swings in numbers, but it just doesn't even feel that much. But I have to remind myself if this was an asset class that I was looking at or a stock back in my former traditional finance days, 155 % rally in one year, one calendar year would just be absolutely phenomenal. But it seems like people weren't even really picking up on it in the traditional finance world until the very end of the year. And then going into 2024 with obviously all the chatter around the exchange trade products being approved. And so. Brian Cubellis (01:39.662) We got the approval price pulled back at least 10 % there. And everyone said, see classic by the rumor, sell the news, wall street adage. And I was, I was in that camp. I was kind of expecting it as well. You saw this in the data. You saw things like open interest moving up. You saw perpetual futures. The funding rate spiked to 30 % on the annualized basis. So a lot of speculators obviously anticipating the exchange traded products. And then when it happened, all of that kind of unwound. What I was not expecting, and I think a lot of people were not expecting happily, I can say, is the flows we saw into these products weeks after. So end of February, beginning of March of this year, absolutely phenomenal flows of hundreds of millions of dollars per day, even on some days. And the big question, of course, was where is this all coming from? Who's buying it? And it was a bit of a head scratcher for me as well, because I thought, If anyone's really invested into Bitcoin and they've done the homework and they've come around to the idea that this deserves a core allocation, they're on the investment thesis, they've already made their allocation. There's plenty of ways before these products to get exposure. It was not that hard. And obviously, Fidelity and others like yourself had been offering these services. And so I had to believe that a lot of it was speculative. money just flowing into it. They saw the rally last year. They finally said it's easy to get exposure. Their finger was on the buy button and they kind of plowed in. And so then the question now that we're faced with was how many people are going to stay in if they were just in it for a trade as the price has now pulled back a little bit again, we've digested some of those big gains. You know, at one point we're up almost 70 % just this year alone and this is on the rally of last year. And so we've seen definitely some outflows now. The dust has settled. We had about three weeks of net outflows. But interestingly, I do think there is a pretty good cohort of people who are buying it for the longer term. And it's the people who maybe already had an allocation, but now they can also allocate in accounts they couldn't before, namely the IRAs, the 401Ks, that sort of thing. And, you know, I can't say too much on it, but even our internal data supports this. One of the largest types of accounts. Brian Cubellis (04:00.238) that have bought these products are IRAs. So it'd be people like you and I who we've maybe already gotten our exposure, but now we want to unlock a new avenue or a new account where we can get exposure to Bitcoin through these products. So we've also seen this in the data with the outflows. The outflows haven't been as much as you would anticipate with the price being down. So I do think there's still a full cohort of people who have made that core allocation. There's going to be a lot of traders too. You see that in the volume, the trading volume. And then the final thing I'll say here before continuing to just ramble on is, is the underappreciated story. I think that people aren't, aren't fully grasping. They, they conceptually know this, but I don't think they're fully grasping the numbers is that this is going to be a long, slow burn, I think of demand. All of these products, they're still going through compliance procedures. they're going through the due diligence. A lot of them aren't even on the major platforms yet. And it just takes time. And anecdotally, this is what we're hearing. We're hearing from advisors and others that we're not soliciting it. It's only clients coming to us. So that's another unlock that has to happen. And when they're doing it, they're not talking about, let's do 5, 10%. They're saying, let's dip our toes in at half a percent. And even that is still a huge number with this tens of trillions of dollars of advisor and RIA market. So I think that's the bigger story over the next 12 to 24 months. And I don't think people are fully grasping how big those numbers can be and how steady of a bid that could create under this whole market going forward. Yeah, I think it's very underappreciated. I actually got dinner with my neighbor on Tuesday night. He's a wealth manager at Morgan Stanley, and he was explaining to me that they're going through the process at Morgan Stanley to make it so they don't they can only allocate. Right now they can only allocate if their clients solicit it, but they're going through the process to get educated internally so that they can actually go sell these products. And talking about that slow burn, I think people are curious, like how much demand, you alluded to it, but how much inflows could these unlocks for these wealth managers bring to these ETF products? Brian Cubellis (06:21.55) Yeah, absolutely. I mean, you can do kind of the back of the napkin math of what's the market, tens of trillions, if at least half of those people or 25 % of those people want an allocation, then they do whatever you want to say, one, 2%. You're talking about a lot of money here. And critically, that's money that's not just trading in and out of the do -it -yourself, the self -directed brokerage people. It's the advised clients. So they're... only checking their portfolio with their advisor quarterly or semi -annually or annually. And so they're making changes at the margins, they're rebalancing every year. I do think that's the bigger demand story. And again, people, we all know that conceptually, but then if you think about the actual numbers and the math and then how many coins are on exchanges, that continues to go down. How many coins are being put away for cold storage long -term? I think it could be a pretty interesting dynamic in the next, say 12 months plus, and then you add in all the other macro stuff on top of that and it could get really interesting. We talk about dampening volatility and the individual retirement accounts are funny because it helps in the countercyclical bit in the sense of people buy out of those accounts on both sides, either their net new position because they don't think of those assets as being available or long -term savings. And then what I've seen in previous firms is, general and I think to your point, Chris, is that individuals that had exposure, either when the market starts to correct, they look for liquidity to buy more Bitcoin, or when the market is in its natural down cycle and their education is proceeding or growing and their conviction is growing, they're also looking for more liquidity and then those individual retirement accounts are a natural place to tap into. And so I think that also helps like this, the natural bid, but then also from a volatility perspective. going, you know, moving forward. Yeah, absolutely. And especially if they, they put these things on autopilot, like a lot of people do, and they, they create rules, you know, a good advisor usually creates some of these rules with the plan. And as long as they follow it, of course they're all humans, but as long as they follow it, they should be adding more when their positions down. So if they said, I'm going to do 5 % market has a 50 % drawdown, they're going to add more into that down market. And then of course, when it goes up, they're going to take some off the table. So. Brian Cubellis (08:47.117) It will be interesting to see as not only this whole asset class just gets bigger and that dampens the volatility, but then also as you get these other players that we haven't had before, these other types or investor personas, if you will, that we haven't had before. I think that's going to be really interesting. Yeah. So what you mentioned in the start of that was you sort of talked about the different cohorts of who would be buyers of these ETF products. And the key bit in there to me was that from what you guys are seeing or hearing, you think it may be largely people who have already adopted Bitcoin or crypto, maybe, who are now allocating their IRA funds into these ETFs, which is to say that the head. There's been nobody new yet. There hasn't been on the whole, not a lot of fresh new interest, new eyeballs arriving yet, which sort of lines up with what you'd expect from a market cycle point of view of traditionally, we've seen a lot more interest when Bitcoin is at new highs and still running hot. And that's when people can't resist showing up who have not participated before. So is that what, you know, I guess that's news to me and it's exciting to hear because it's would potentially mean that if the having does what it has done historically and we start to have another rally here into new all time highs that only then, especially as these RIAs start to clear these ETF products for inclusion in how they're operating. we could start to see a whole new cohort of new investors arriving to Bitcoin via the ETFs that have yet to partake at all. Is that kind of your sense or perspective there? Brian Cubellis (10:49.133) Yeah, I think that's definitely part of it. So if you kind of think of how this this works out, you know, like I said, we don't know exactly. There's obviously clearly a bunch of retail traders given the volume and some of the stuff we've seen on our side with our data. But like I said before, one of the largest accounts is IRA. So you could probably presume, like you just said, those are people who are already on board. The the net new will either be driven by just the price, which is the greatest advertiser for Bitcoin. And of course, people are. going to be looking at that and realizing it very soon, especially if we go back and break the all -time high once again. And historically, that's been a really interesting period when you hit and barely break the last all -time high of years ago, and then you pull back and then you come back and you blast through it the second time. But I think the bigger story is once these products get turned on on all these platforms, so as you were all just saying earlier, a lot of advisors, they can't. They can't initiate the conversation. They can't quote, sell it. It has to be client led. The client has to come to them. And then they might be able to say, okay, I kind of accommodate that. Some firms still won't even do that. But once they're on platform, they're fully vetted. Then they've got the green light to actually go and proactively market this to their clients or educate them. And that's when you could get a whole new cohort. Because now we're to the point where put aside, all the stuff about the politics and even the investment thesis and store of value and all of that. And if people just start to look at this, especially advisors through an objective lens of the statistics of it, it's going to be very hard to ignore. You know, one by one, all these dominoes keep going down. Before it was, well, there's no way I can support it. There's not an exchange traded product or it's too young. It's too small. It's too volatile. All of these things have now been dismantled one by one. And so as an advisor, they have very few excuses to not at least look at this. Now, that's not to say it's, it still might not be right for some people, of course, but the, the, the running out of excuses to push this aside and not deal with it. And now they have to deal with it. They can deal with it. It's not at all a burden anymore with these, these products in terms of opening new accounts and paperwork and, tracking the cost basis and all that kind of stuff. And so I think that's where, where we're at now where, Brian Cubellis (13:10.573) They've got a fiduciary duty, a lot of these, and they should be looking at this. I always like to invert it where before I would say, here's all the cases for Bitcoin and here's the investment thesis. And I say not to take Charlie Munger, who I respect in many ways, but of course he absolutely hated Bitcoin. So hopefully he's not rolling over in his grave, but his famous phrase is invert, always invert. And so that's the thing I'm trying to push now, just invert it and say, why don't you own this? I mean, on paper, this is the best performing asset. It's not correlated to other stuff in your portfolio. And as, as you know, as finance people, that's the Holy grail. The only free lunch in finance is to add something that's not correlated to increase your risk adjusted returns. and you can just go, go through all the ticks of this and say, why you tell me why you don't own this anymore. You're running out of excuses and volatility is still the big one. We can talk about that, but I think that's just a convenient excuse because. They all own stuff that's just as volatile or even more volatile than Bitcoin. So it's their job as a risk manager to handle the volatility, not just say it's off the table entirely. Yeah, I love it. I love the image of the future that that paints. And I think I would love to get your thoughts on this. I think one of the things that has surprised me about the first three, four months of the ETFs has been the extent of reflexivity. Let's call it that in the flows behavior from demand in a sense that when the price was running pretty hot in February, March, there was a ton of demand. There was $500 million per trading day coming in, 9 ,000 Bitcoin per day for a while there, 10x what we were mining at the time per day. And then it slowed down, right? And then you had these net outflows. As the price went down, suddenly the ETF, net ETF behavior was outflows. And of course, GBTC is a big part of that story, both in January and in April. But I was a little surprised, I think, about the extent of how ETF flows sort of acted a lot like we see with retail Bitcoin buyers on exchanges. They pile in when the Brian Cubellis (15:35.757) prices going up and then they sell when the price is going down and that reflexivity reinforces itself. But what you're talking about here with the slow methodical burn and increasing rate of burn towards managed wealth moving into these ETF products and Bitcoin in general, that would replace that reflexivity with a a more passive, consistent bid. Is that, I guess, would love to get your thoughts on, was the reflexivity over the last three, four months surprising to you guys? And then do you think that that will continue or be replaced by a different trend? No, I agree with most of that. I do think there is the reflexivity, like you talk about it. It amplifies it, especially because these have the, the cash create structure rather than in kind, they have to go out and. buy and sell all of these coins. And so that kind of adds to it as well, I think. But over time, we'll see more products built on top of it. We don't have options on these yet. So that will help. You know, historically academic research has shown derivatives markets over time do help dampen volatility because you can move some of that speculative behavior to those. And then over time too, like you're saying, you're going to get a bigger cohort owning these for the longer term rather than just trading them. And of course, once they launched, It was the traders, the speculators that really want to get out of the gate and start trading with these, right? I don't think there was a lot of people who were just dying to put it into their accounts right away if they hadn't already, as we talked about before. So I think that will definitely dampen the volatility over time. And then just going through the financialization process of all of this. And we don't have a lot of corollaries, but we've seen some, for example, gold. We mentioned this in our recent volatility piece. Gold had to go through a price discovery process once it was open for basically all investors. Not only did we sever the ties to gold, the dollar to gold in 1971 with the Nixon shock, but shortly after that, it was also finally legal for US citizens to own gold. They couldn't even own gold as an investment. And so gold went through a price discovery process. Its volatility spiked, went from $35 an ounce to over 800 back in 1970s dollars. Brian Cubellis (17:58.829) And then we saw another kind of rediscovery and price discovery process with gold in 2008 and people coming around to it. So, but of course now it's a $15 trillion asset class. It's in many portfolios for various reasons. People do and can still speculate it with, with futures and other derivatives, but overall it's, it's much more stable. And so while obviously Bitcoin is very different than gold, if you look at just the financialization track of it, I see a lot of. a lot of similarities where it's got to go through this process and it's going to follow some of the same track. We haven't even talked about what happens when people learn that they don't have to rebalance. I'm pretty confident everybody on this call, I can speak for at least three people don't rebalance their Bitcoin positions when they get to waiting their targets are. So you mentioned there's automated stuff, but once people get to a certain track, like, wait, what am I rebalancing to? Yeah, that will be very interesting. I still think for the average person, if you just think of like a financial advisor, it's just so ingrained to rebalance, diversify, hold a portfolio. The interesting thing about Bitcoin though is it has a very unique characteristic where rebalancing can actually be very good. Obviously not if you're just kind of the crazies like us that might just want to let it run. But if you're in that vein of of the regular kind of academic research and what financial advisors are trained to do, because Bitcoin's returns, and we have this in our latest piece as well, are asymmetric, they're skewed to the right. So if you look at a histogram of monthly returns for Bitcoin versus the S &P 500, the S &P 500 has monthly returns that look very normal, the normal distribution, it's got a mean of like 1 .1, 1 .2 % per month, so it's positive, but it's very normally distributed. And Bitcoin, doesn't have much in the middle. There's very few months where it does nothing. It's either going up a lot or going down a lot, which of course scares people. But if you look really closely, there's more occurrences that the tail is fatter on the right, the positive side. So if you're constantly rebalancing, you're in effect harvesting that volatility. And as long as that remains, that relationship remains a positive skew to the right, you're gonna do better rebalancing Bitcoin. Brian Cubellis (20:24.269) regularly and harvesting that volatility compared to any other asset class. So even if people do do this and they don't, and they do follow the general practice of rebalancing, they're going to be much better off than doing the regular rebalancing and a lot of the other asset classes. Brian Cubellis (20:41.965) Which is an awesome thing to see as we think about nominal versus real returns and being able to impact your portfolio as you think about long -term savings. I do think that'll become part of the winning strategy around RIAs in particular, why you would want to incorporate Bitcoin into all of your clients' portfolios is because you get this sort of free yield if you're following that methodology of like... trimming your position when it had a really good year, which happens three years out of four, and then adding to your position on that on the down year, whenever when there's blood in the streets, if RAA is actually managed to do what most humans can't do. And so that's a big of actually lean into that methodology when it feels like Bitcoin is dying when you know, the next FTX blows up or whatever happens. then it's possible for that to be the winning strategy for how RIAs can get a little extra juice for their clients and differentiate themselves versus their peers by having Bitcoin in a portfolio and adding to it when blood's in the streets. Well, luckily for these RIAs, they have people like the research team at Fidelity diving into the data so they're better equipped. to actually make these decisions. So I think this is a good time to jump into the recent report you guys did on Bitcoin's volatility and sort of walk through the mechanics of how this has worked historically and what you guys are seeing in the data. So Logan, do you wanna talk about that? Yeah, absolutely. So this report was written by one of the researchers on my team, Zach Wainwright, and he has two parts to this, this report. The first part is kind of just the facts of volatility. you know, is what you've heard actually true if we run the numbers. And from a research perspective, I'll be honest when I kind of thought of this, I was like, well, maybe we'll look into it, but we probably won't use it because that's just really basic table stakes of research. It's not very interesting or groundbreaking. But even I was surprised when I ran the numbers as to where we are now, to be fair, we're we're maybe in a anomalous low for Bitcoin's volatility right now. Overall, if you take an average, it's still Brian Cubellis (23:05.293) there you can see it 73 % annualized vol. So multiple, multiple is higher than the riskiest thing in most people's portfolio, which is equities, right? Or surprisingly, even commodities might be a little more volatile. So on average, it's still very volatile. But if you zoom out, you have to remember we actually went from a 200 vol asset in Bitcoin down to an average of 73. And more recently, We're actually at around 40, 45. We even hit a low on the 90 day vol of 33. And so Bitcoin's actually currently less volatile than almost half of the magnificent seven stocks that you can see there, Meta, Nvidia, Tesla. And these are just examples to name a few. This is what the stat's saying. We're not saying anything about these stocks as investments, obviously, but many people own these stocks because these are the absolute mega cap stocks. And they have no qualms about owning them because it comes down to, again, your risk management. And usually your position size is the best way to handle that. And so that's why I'm increasingly running out of patients when people say it's too volatile. I don't know if it's ignorance, which is what we're trying to combat with research like this, or if it's just a convenience excuse because they don't want to deal with it. And that resonates with people like, yeah, I don't want to own anything that's volatile. The other thing we show in the paper is, well, make one point quick on where it ranks. Currently 33 S &P 500 stocks are more volatile than Bitcoin, or at least when we wrote this paper a few weeks ago. Back in October, there were over 90 S &P 500 stocks more volatile than Bitcoin when Bitcoin was at a real low. So almost 20 % or a fifth of the entire S &P 500. And again, those are the largest companies. So again, this gives you an idea that there's fewer and fewer excuses for this. And I don't think people realize how far this asset class has matured. And then to your second point of RIAs using this to get a little more yield, you are more than compensated or a little more returns, I should say, you're more than compensated for taking on that volatility. And you can see this in the Sharpe ratio, which is of course your unit of, or how much return are you getting for each unit of risk? But in finance, as you know, risk is just standard deviation. Well, standard deviation is just a statistical measure of how far something Brian Cubellis (25:27.533) moves across from its mean, how far away it is from its mean. So you can actually have good volatility or you can have bad volatility. Nobody cares that Bitcoin's volatile when it's going up. Again, that right tail, that distribution. So you can do something like the Sortino ratio, which only looks at downside volatility, bad volatility. And here Bitcoin blows everything else out of the water when you compare it to the S &P 500 or basically any other asset class. So again, you're... As someone who's looking to increase their risk adjusted returns, you shouldn't be looking at just the risk. The pertinent question is, well, I'm taking on risk, but how much am I getting in return? And you're getting way more in return for taking on that risk than any other asset class out there, or at least historically. Of course, this is not predictive, but just saying historically, this is what's been true. And so that's half of the paper of what we wanted to get through. And the second half, I won't get all into it. right now just because it's a lot, but we can get into it later if you want. Zach proposes a model of looking at historical periods when volatility is very low, but looking at on -chain indicators, like the percentage of addresses in profit is high. It's a very rare time, and we're in a time right now. We've only been in this period two other times. When you have low volatility, but the price is moving up and a lot of addresses in profits. So it's that time right before historically a big bull run has occurred. Because if you think of market psychology, it's when everyone's kind of thrown in the towel, but then the price is going up kind of more subtly. And so volatility gets compressed, compressed, compressed, kind of like a spring. And then all of a sudden it explodes as the price explodes to the upside. So again, that's not a prediction, but just an environment that we currently could be in if the past is any at all the prelude to the future here. Fascinating. And, and to add to that, I think it's notable that, you know, while it feels like we've been going sideways or down forever, it has only been what, like seven, eight weeks. And in 2016, it took us 15 weeks once we bumped up against the prior all -time high before we decisively blew through that. And then in 2020, it took five weeks. So, you know, we're. Brian Cubellis (27:49.677) We're par for the course right now. and, and yet, as you point out, Chris, it feels like people have thrown in the towel. Yeah, there's another chart in there that gets at that of, or a table, I should say, where it shows when we hit the last all time high and then broke through it, how far in percentage terms were we up only one year later? And then also, I think we look at, how quickly it doubles, after these events as well. And so again, things happen. in Bitcoin world very, very much at the extremes and very much lopsidedly, right? You can just be sitting grind around for a long time. And then all of a sudden, within a few weeks, it's like years have passed by in terms of price action and appreciation. Yeah. This, this report has a ton of great data. while we're on it, Chris, where can everybody find this data so they can look through the report themselves? Fidelity digital assets .com. And then you can either do forward slash research or just click on the research tab at the top. Yeah, there's a few other reports, the Q1 2024 signals and then the Bitcoin halving will link to those two. And then this one in the show notes for folks to view as well. Great. Since you mentioned it, Michael, too, I think that's another important topic to bring up for where we stand today. We just had to having a few weeks ago here. And again, I wonder if it is that we're in this not anomalous period that you described, Chris, because we have the halving and typically you have a bunch of hashrate come off the price either dumps before or goes sideways after. But we have had this catalyst of the ETFs leading up to the halving, which is a massive catalyst before this massive quadrennial event within Bitcoin, which is a having of the block reward subsidy, which certainly has an effect on the supply of Bitcoin on the market, an effect on the mining industry specifically in their economics. Brian Cubellis (29:59.565) Yes. One thing that's we we've been following closely because it only happens every four years. On one hand, it's like, well, it happened just as we predict or the code predicted, not any, any of us obviously, but as the code stated in TikTok next block, we go on and kind of a shrug. But on the other hand, it only happens every four years. So there's always something new or a little more interesting wrinkle each time. And so we've, since we've only had a few of these so far, the big wrinkle this time, as you mentioned was the exchange traded products. I think that clearly helped propel us to new highs before the halving. So this time was clearly different in that regard. But of course, the big question we get from everyone is, well, if we're hitting a new all time high before the halving this time, is the halving getting priced in? Are more people aware of it? And there's a little bit of that. One area I've noticed some reflexivity, like we talked about before, was if you look at Google search trends, the past halvings were, nothing, nothing, nothing, searching for the term, Bitcoin having, and then a huge spike on the week of, and then down and then nothing again. This time we actually had a lot of movement weeks and even a couple of months prior to it. And then of course it moved up during the having as well. And we got way more search volume. So as more people become aware of Bitcoin because of the all time high in price, I think they were Googling Bitcoin and then the having came up as something that was going to happen soon. And then they would maybe research the halving and that might give them more confidence in Bitcoin and its fixed supply and why supply is actually going down and lending to that investment case. And then, so you get that reflexivity over and over that pushes up price again. So I think that was different this time. And of course, whether or not it can be priced in, I'm still in the camp that it, it wasn't and isn't still fully priced in just because. basic economics, you've got supply and demand, if you're cutting your incoming supply in half, that has to have an effect. Now, of course, the question is how much, but I don't think anyone can say that there's no effect there. And one of the charts I've been seeing circulating around in favor of this isn't really going to affect it is the chart showing or data showing that 450 coins per day, that's our new level rather than 900, that's less than 1 % of the global trading volume. Brian Cubellis (32:24.173) And I'd be curious to your thoughts on this as well, because I haven't fully fleshed this out, but I'm just thinking, well, that's true. We have to acknowledge that that's a very small percent. So it's not like we're having a major supply shock like we did in the past, but that's also just trading volume. People just trading back and forth some of the same coins. To me, and I'm not exactly sure how you measure this, to me, what's more important is you've got less supply coming in and you've got more and more people taking supply off the market, off of the exchanges. That's just fewer and fewer coins to go around and be put into cold storage. So eventually that has to trickle into the markets as well. The other reason I don't think it's fully priced in is you now have a very large and robust publicly traded miner industry now. And so as a thought experiment, if the price of Bitcoin were to price in the halving and it would go from 50k to 200k or whatever people's number is, that would blow out the margins of these miners. They would have such incredible margins that if you're a capital allocator, you're going to say, why would I buy spot Bitcoin when I can take advantage of these miners that are doing amazing work here with really, really good margins here? And so the capital would naturally flow and find an equilibrium between people allocating to spot versus allocating to the miners. But those are just some of the reasons I'm still a little more in the camp of. It can't fully be priced in. And then you just have the whole demand side on top of it. And these cycles have followed the liquidity cycles. We seem to be taking up on liquidity as well. So it's really hard to say. It's hard to disentangle these two things. Yeah. I think, I think everybody on this call doesn't, you know, fully buy in either to efficient market hypothesis or specifically for Bitcoin. And the easiest example is like, you can't price in reflexivity. Like when the market starts running, like you can't price in where it goes in the demand and all the things that are associated with that supply constraint and the price skyrocketing with it. Like how that further propels the price and then the demand. You can't predict that. No, I'm of the school of thought that none of this is priced in. We don't even have to focus solely on the having. You just zoom out. People don't understand Bitcoin. People don't understand money. Most people don't understand the systemic nature of the incumbent. Brian Cubellis (34:41.357) the systemic fragility within the incumbent system. And most people still think whether we like it or not, that Bitcoin is just some Ponzi scheme tool of bubble and they don't really understand what it is. And so that fundamentally cannot be priced in. I feel like MicroStrategy is a great example of this. Like I think people forget in 2020 where that like weird little, it was like eight to 12 for months at a time. And we know that there's been this constant bit. It's like, How do you price in micro strategies, demand in the market? Like single entity. Yeah. Yeah. That was actually an example I've seen some people give as well. We kind of had a having, you had a buyer of X amount of Bitcoin, a large public trade company buying kind of indiscriminate of price. So again, they didn't move the market in a massive way, at least as we can tell, but of course nobody knows these things. The market is a complex, almost like organism that nobody knows. what all of these things have an effect on. But all the same, basic economics 101 says, well, that has to have an effect. It's just how much an effect or what were some of the other competing factors against it. And so with this having, we're only a few weeks in, so we don't know exactly. But one of the data points we're seeing of this diminished supply entering the market, it's being filled by these long -term holders. So the one stat we were watching very closely because, this time was different once again, was things like the number or percentage of coins not moved in over a year. That hit an all time high of 70 % at the beginning of this year or late last year and going into the exchange trade products and approval and then also into the halving. As we rallied this year, that finally started to move down. So these, these holders held all through 2023, 155 % rally didn't cause them to budget all. And now we're finally seeing. Brian Cubellis (36:41.165) that start to tick down. It's still high, I think around 64%. But that's natural and that's natural of the cycle. And you mentioned our signals report, we did move our midterm rating to neutral because we are kind of in the middle in terms of these cyclical indicators. But I think that's where some of the supply is coming in to fill the reduced supply and the halving side. It's these long -term holders that are now finally unlocking that and giving the new demand the supply that they want. Yeah, that's right. That's the only way that the supply demand price equilibrium can be reestablished when you cut supply creation is for the price to drift upwards to a point where holders bring their coins to market, you know, they become sellers and then that supply fills that gap. But back to your earlier point of I feel passionately about this. I think that the trading volume is one of the great red herrings. about understanding the halving and its impacts on the price of Bitcoin. And everybody always does that. They look at the traded volume and see there's billions and billions of like $10 billion worth of Bitcoin traded every day. So what does it matter if we decrease the amount of Bitcoin being created every day from 30 to 15 million or whatever, whatever tiny amount it is relative to that? But... I think that's the wrong way to look at it because that trading counts buying and selling. Right. So you can it can be a game of musical chairs really of traders moving through supply and handing it over again and again. You could trade you could trade a hundred billion dollars of Bitcoin and half of its buying and half of its selling and the net. impact, the net demand for all of that activity is zero. And I think that's what people forget about when they look at trading volume is that by and large, it's a lot of traders coming in and out of positions that net out to not much net activity. And then, and then when you when if you're able to wipe away all of the hot potato musical chairs activity and just get the net activity. Brian Cubellis (39:09.965) the impact of the halving relative to the net activity is significant. And especially if you layer in the important additional element that you're talking about here, like 70 % of supply is being held by long -term holders. And so what is the actual amount of supply that's available for sale? And how does the impact of the halving reduction, halvings reduction of new supply creation interplay with the amount of supply? that's available for sale. And when you take the relevant view into mind, the amount of trading volume doesn't really matter. And the small size of the halving relative to the total circulating supply doesn't really matter. What matters is the available for sale supply. What matters is net inflows. And then looking at it from the opposite, from a different point of view of On the day of the halving for the 30 days prior, we had seen $1 .8 billion of Bitcoin created from mining. And the price had gone, well, it had been going up sideways, going up into the right, but let's assume it had been going sideways. That means $1 .8 billion of demand, all else equal, ton of noise in there, but fine. And then of course, the 30 days post halving, you have... half as much new supply being created. So $900 million of supply, ostensibly $1 .8 billion of net inflowing demand still. So that $900 million of missing supply becomes what's relevant as it goes out into the market to find some willing supply, some sellers from the available for sale contingent. And yeah, basically all that to say that... When people talk about trading volume with the halving, I think that they are focused on a metric that seems important, but isn't important when you peel back the inflows and outflows and how they have to be reduced to a net amount of flows. That's all that really matters in the trading numbers each day is, is there net demand inflowing or a net outflow of demand? And... Brian Cubellis (41:34.445) Yeah. And when you look at it from that point of view, a reduction from $1 .8 billion of supply being created every month, having to go out into the market and being met by demand in order for the price to go sideways, that dropping from $1 .8 billion every month to $900 million every month, that's huge. And anyway, so I think that's, it frustrates me that in Bitcoin, we get caught up on some of the the top level numbers when it's the net numbers, the net flows that really matter. Now, I think that's really well said. Like I said, I had an inkling as to why this didn't quite work or make sense, even though to a lot of people that it does, they say, you're talking about a drop in the bucket. Look at all this liquidity, all this trading. But you, you obviously have thought about this a lot more. And so I appreciate the nuance there of what we actually have to look at. And so that makes a lot of sense to me as well. And then, I'll just add to layer on that. You've got a narrative shift now with a 0 .83 % inflation rate. We're well below the inflation rate of gold now. Yep. So of course people are looking at gold again as making all time highs. And now you've got something out there that's less than half the inflation rate of gold and it's not going to change. Unlike gold with gold shoots up, you're going to get a lot more supply of gold coming online and that's just basic commodities. Right? So that's, I think that's another interesting thing that people are. aware of, but under appreciating. Yeah, totally. And on that point, Andy Edstrom has been talking about a narrative that he's seeing develop in the RIA space, the Bitcoin IRA space, really, of of gold is the new bonds and Bitcoin is the new gold, which is an interesting sort of turn of like. We talk about how Bitcoin is better than gold, and it is now. And we talk about how gold is better than bonds and Bitcoin sure as hell is better than bonds. But it's sort of an interesting shift of like we could see a behavioral shift of gold starting to fulfill the role of a relatively stable store of value that bonds historically has been if we're entering an era where inflation will be greater than the nominal. Brian Cubellis (44:00.941) yield of holding bonds and therefore they're in real terms, wealth destroying. That's based on a few assumptions and we'll see if that does play out. But I think that's the world we're likely heading towards. But it's an interesting sort of thing that he's starting to see in the framing of how do you view these different asset classes from a portfolio creation point of view as an RA. It makes complete sense outside of. RAA, like Jesse and I have had conversations and I think with Marty and others, behind closed doors of what is the natural progression of adoption of Bitcoin? And I think we would like it to be, and most would assume that it's looked at this asset class that somebody goes from their traditional portfolio mix to Bitcoin, and Bitcoin's the end all, the all, or how they get there. But the reality is gold's been around for 5 ,000 plus years. It has all the different attributes that somebody that was older and has the capital knows and is trusted. And so that would be the natural, like, and also the volatility would be the natural, like, I don't want to call it a stop gap, but transition point. And to figure out what is that distribution of 90, 10, so 90 % gold, 10 % Bitcoin or whatever it looks like, seemed logical for a lot of different cohorts, not just on the managed wealth, but it makes sense. Like that is that segment that he's speaking about. so I think, I think it's an interesting thing just to follow and. and probably talk with other folks, the incrementum guys we've been chatting with and they're an interesting cohort in Austria, I believe that I think they're most known for that Zoltan after he left Credit Suisse that wrote a piece about outside money and the growth of it. And they have an interesting product where I think they can't remember if it's segregated. So they have gold and Bitcoin funds or it's like a mix. But I've always thought that's very fascinating because you're generally going to a certain segment of the market. and that may not want to deal with volatility for a number of reasons, but gold can help dampen that. And it's also something they're more familiar with. Brian Cubellis (46:01.613) I think there's another demand driver that's becoming more prevalent in the market that we should probably talk about because the ETF flows have obviously been material and we think that slow burn will continue. And we mentioned MicroStrategy earlier really led the way in terms of adding Bitcoin under corporate treasury as a treasury asset. But we've seen in the last few months alone that Block has come out and open sourced their playbook. They've decided that they're not going to do lump sum buys every once in a while. Bitcoin to put on their balance sheet. They're now gonna dollar cost average every month Taking 10 % of the profits from their Bitcoin focused products and allocating that to Bitcoin We had a coal miner come out last month Alliance resources and they basically said yeah, we've been mining Bitcoin for the last four years and We're adding it to our balance sheet. I believe they have over 420 Bitcoin on their balance sheet now at this point obviously that we have tether and which has really began to normalize their quarterly buys of Bitcoin, which are in the multi thousands, I believe above 8 ,000 was last quarter. And so I do think you could have to your point, Michael, of do individual investors decide to invest in gold or Bitcoin? What does that mix? I think we're seeing something on the corporate side begin to develop and I can see a FOMO like a follow on effect. in the corporate world happen where people look at block, they look at this coal miner, they look at tether micro strategy and they say, hey, maybe we should be putting some Bitcoin on our balance sheet as well. And what kind of demand does that put on the network and the supply of Bitcoin? What kind of demand does that drive for Bitcoin? And then how are these companies getting exposure? Because I think that's another thing that people are looking at. as well right now as the K1 filings of who's actually buying these ETFs. Like are people gonna buy spot Bitcoin, like MicroStrategy, Square and Tether or are some companies simply just gonna allocate some of their treasury to these ETFs? Yeah, it's incredible because... Brian Cubellis (48:14.349) When you really break it down, it's like, what is the point where this becomes not speculative and just math and what we've seen the past 15 years and then this dynamic or angle of like, you wouldn't build a business without using software. You wouldn't build a business without using some of the new tools that can help you leverage to do more with less. Why would you build a business using an analog dollar that loses X percent per year? You just use this other asset. And then it's just baked into your capital raising efforts. You're bill, you're, you're forecasting that you're going to have this thing that preserves wealth. Like, It didn't have to be about money, right? It doesn't have to be about all these things. It's just a different form of technology that you go and put on. And so it's like, I think we're there. We see it with like, you know, MicroStrategy, River put out the report. We need to get Alex back on and see it was square. And it's just as it becomes more and more, I think it's less ingrained because I think there's like the, a lot of people know this. I think there's the overhead from an investor perspective. Are investors going to crush you? Is the market going to crush you? But once like that gets derisked from, the just risk of like the idea of nobody ever got fired for buying X. Like once that's there, then it just becomes a lot easier for people to allocate. I was just at the MicroStrategy conference, the big event they have every year, which is for their company. But then as you know, they tack on their have this separate track for Bitcoin for corporations. So there was a lot of talk of this that I just came out of thinking about this. And I think it's absolutely fascinating. Number one, just thinking of what you just said, the playbook of If you're a corporate treasurer, what's your mandate? And that's to have capital ready to deploy for your company and you have to preserve that capital. So getting back to my point of all these excuses are slowly getting dismantled. And if people just put aside all their preconceived notions of Bitcoin and just purely look at it as an asset or a technology, like you're saying, It's very hard for them to say, wait, why aren't we putting at least X percent to defend ourselves? They don't even have to believe it, but it gets down to the game theory that you're talking about here. Whereas if their competitors are doing it, they've got to do X percent to match it just in case it does work or catches on or grows more or preserves their power. They're not left behind. You know, someone said, well, but are these companies going to be. Brian Cubellis (50:32.205) concerned that they're never gonna catch up to something like a micro strategy. I said, it's like the old adage, you don't have to run faster than the bear, you just have to run faster than the next person. And so you're gonna see this reflexivity and game theory play out, at least in my opinion. And we did hear from one person on the panel saying, there's another company that's gonna announce that they're putting on their balance sheet. They of course didn't say who, so I'm very keen to see who that is or what that announcement is. But one of the things I ended my panel on was the question was, where are we at, and I brought up the old TED Talk video. It's like only a three minute video many years ago. And I'm sure I'm not the first person to think of this, but I did come up with it organically. My wife and I were talking about this video. It's called How to Start a Movement. And the light bulb just clicked. We were talking about something completely unrelated. And then I said, wait a minute, this directly applies to what's going on here. And the video is, the guy that's doing the TED Talk. Dissects another video just a couple minute video of a young man dancing wildly on a grassy hill. I think they're at a music concert or something and he's the only person dancing and You think he's starting the movement because he's the one that's doing it first and and and obviously going out there But as he dissects the video he says no watch how this plays out The most important person is the second person that joins them because that person now validates the first one The first guy is not crazy. And then he motions over his friends. So he gets everyone else involved. And then within seconds, you've got this whole raging crowd of people dancing and wildly and, and on this grassy hill. And so I think that's the point we're at. We've got a couple of first movers that a lot of people are thinking are crazy and look silly. And we've got companies, we've got one country. And I think we're getting close to the point where we're going to have the second person and that's the validator of it. And so again, if you just play this out, the game theory, you've, you've got to at least take a defensive position, where like you said, the career risk risk is now gone. You're not going to be fired for doing this. You were just playing it safe and being prudent, with, with the options that are out there. You know what you just made me think of, when you say game theory and removing money, but more of just like technology is, AdWords. Brian Cubellis (52:52.141) You think about like Google and AdWords coming out and this reality of like it comes out and the first person uses it and they like juice the shit out of their returns. I can't remember what some of the first companies that their whole like businesses were baked on the back of being first to leveraging Google AdWords, but the reality of it being new and a little weird and then every net new person coming in their business incrementally grows from it. So then it's just an absolute standard if you want to survive on the internet, right? Or like having some kind of like formal exposure like that. It reminds me of that like in this, respect is obviously not apples to apples, but it's this idea that this will become ubiquitous and the only way you actually can stay alive is to play. Yeah, another talking about being in an anomalous period, I mean outside of 2020 and right after 2008 when Bitcoin launched, like who knows what's going to happen in the macro world, but there's a lot going on behind the scenes. We had, I believe the treasury or the fed yesterday opened up a swap line. With the Bank of Japan and the tea leafs that people are reading, they're basically coming to the conclusion that the US government and the Federal Reserve did not want the Bank of Japan selling US treasuries to defend the yen as they try to do yield curve control, which they've completely lost control of. And I think if the macro headwinds become so strong that they lead to a f - Decline in the stock market and a decline in overall markets will be really interesting to see If you have that period where you have the second person joining the party with Bitcoin does it actually? Act as a risk off asset this time around I mean, I think the probability if we're looking historically is probably low But there there may be that chance there where people finally wake up like holy crap Look at all this debt that the world is a wash in look at The inability of these central banks to actually control the yield curves that they're trying to control Maybe we should allocate the Bitcoin obviously we have tech stocks that are Screaming still I think I believe I saw Stan Druckenmiller sold 20 % of his Nvidia stake Earlier today and announced it thinks AI is overhyped and we're gonna have a dot -com Bubble like crash at some point in the near future. So I think it will be Brian Cubellis (55:16.493) Really interesting to see what happens to Bitcoin in that environment because historically when these risk off events do happen, people typically sell their Bitcoin to get liquidity and shore up their dollar balances. Our research shows Bitcoin is highly correlated to monetary conditions. And you all know this M2 central bank balance sheet changes, however you want to measure it. One of our favorite charges is looking at real interest rates. And if you invert one of them, so it tracks closely, you find that Bitcoin tracked the inverse real rate very closely for a long time. And this of course made sense to us. And we might've talked about this last time, but when real rates are going down, Bitcoin looks more attractive because Even though you don't have a yield, it's like, well, I'd rather get take my chances with Bitcoin than lock in a negative real yield with these bonds. And then of course it went up when the Fed raised rates at the fastest rate in 40 years and inflation came down a little bit, but then it completely decoupled. And so everyone was saying, okay, is Bitcoin just doing its own thing? It was anticipating the approval of the ETP products. Maybe I was in the camp of it's sniffing something else out on the macro front. And that's because gold was doing the same thing. And so whether it's sniffing out having to do rate cuts in the future, it's staring down these structural fiscal deficits, I think is a big part of it. Or some of the things you're talking about. Bitcoin is very much a macro asset. It's one of the best macro assets in my opinion, because it's homogenous. It's traded globally 24 seven people and it can express all kinds of opinions at any hour of the day with Bitcoin. And we've seen this with geopolitical events happening over the weekend and everything like that. And so. I agree with you that I think this could be its moment as more people realize it's not just a tech stock on steroids or a lever tech stock. It's something fundamentally different. But in the very short term, I still think it's going to have that knee jerk reaction of the old Wall Street adage in crises, all correlations go to one. Meaning, as you said, people will sell their Bitcoin for cash. There's just always a knee jerk reaction to the safest, most liquid thing, which has historically been cash. And so we could see that again, but I think that will Brian Cubellis (57:29.869) just be the short term and then we'll start to see how people realize, wait a minute, there is this pristine collateral, something that no one else controls and I can verify and there's absolutely no counterparty risk. We don't have anything else out there in the financial world like this. And there could be some massive reflexivity implications to that as well when people start to realize that. Brian Cubellis (57:58.125) Yeah, there's a natural also like corporate sizing that requires because it's assets so volatile that we can say to size it appropriately. But then once animal spirits get, you know, that's, that's a different story. And people will like, think we'll naturally still see this for cycles where people size it disproportion or not appropriately. And then they get burned. Cause we've seen that since Bicklin's, you know, history. And I don't think like corporates would change that and know how to appropriately manage. their treasury, like ideally you should as a fiduciary and to be prudent, but I don't know if that just like absolved itself because we're in an ETF era. They're still humans. I've worked with many institutions. They're still humans. Yeah, they are. There's not some magic door you go through where you leave all of your psychological biases behind. Brian Cubellis (58:50.829) And in fact, if anything, committees are more prone to human psychology than humans themselves, because you can always have the maverick individuals to understand you should buy blood when there's blood in the streets. But committees are inherently slow and always like, you know, are going to exacerbate trends rather than counter trade and so on. So, yeah, the institutions tend to be at least as human. at least as prone to human psychology as individuals. Brian Cubellis (59:26.637) The one thing that's been really compelling, Chris, you brought up and we've had other individuals and it's always great to hear how you position in the market certain aspects. You talk about, I think it was the Munger or Buffett, how to invert things. And you brought up a few examples on the last podcast we did that I thought were really compelling on how we personally, and then the market when they think about educating individuals on Bitcoin. And those sometimes change, but then they often stay similar to like the themes are similar, but the way they're positioned are different based on like the market, you know, ETF being here. it would be curious, you know, any of your recent favorites or things that you've seen land. And, I asked that because I just thought of we've been discussing with an individual that's pretty, it was pretty senior in the managed wealth space, and going to RAAs and how do you position Bitcoin and talk about it? Because. you know, RAs are generally, or a lot of them are going to be managed, segregated from like a traditional wire house where they can, you know, they have a more, I don't know if the correct term is, affinity for their client, but like they're more looking at it from a decentralized view of governance and how they think about product services and protecting and preserving someone's wealth. And one of the angles was how do you go and speak to them? And the kicker, the, where he ended was basically, telling them at what price do your clients deserve Bitcoin. And that was like the, that was like the thing. And it was just like, it just landed so beautifully. It's like these individuals are supposed to care about their clients and generally most do. And their apprehension exists and rightly or wrongly so because of volatility and drug trafficking and all the crazy things that have happened the past 15 years. And then it's like, well, and they can say all of that, but then they haven't actually done it, the diligence, right? And so it's like, At what point or at what price do your clients deserve Bitcoin? And I just thought that I like landed so beautifully with that segment. I'm curious, like your thoughts on that and then other like cohorts and what you've seen kind of really be positioned and be successful in your in your team's kind of like approach. Brian Cubellis (01:01:35.661) That's a great way to put it. I hadn't heard it quite that bluntly, but it does make you think, right? And put the question back on them, just like we were talking about with inverting it. I've heard it all, I think broadly speaking, the excuses get a little more sophisticated, if you will. It's clearly gone past the only used on the dark web, illegal, nefarious purposes, and even it's not real to today. regulatory concerns, volatility, like those are more the excuses or barriers, du jour, if you will, that people kind of latch onto. Although you still hear it. I was at a conference and there was a large wealth manager and he was saying, I can't feel it. I can't touch it. It's not real. And you try to get to them and say, well, is Microsoft real? It's software. That's just code on a screen. Is that real to you? It's a trillion dollar company. But then he proceeded to say he owned a lot of art and was active in the art market. And I thought, sure, you can see and touch your art, but the value there to me is even less real because it's very subjective, of course, and can change and it's not a homogenous market. So it's just interesting, as you said, how it hits with different people in different ways. I've been trying the more, the invert approach like that. I think that's a good one. And I think for the RIA market or other people, dealing with more of the middle -class mass affluent. The biggest thing hitting people right now, and this shows up in all the polls, is inflation. And even though we've obviously come way down from inflation on a CPI basis, it's still high. It's only slowing, so it's growing less rapidly, but it's still going up. And people have lost at least a quarter of their purchasing power over the last few years. We're now seeing companies like Starbucks, McDonald's, just to name a few. in their quarterly earnings report, confirm this, their same store sales are down. They've had to hike prices. They're losing customers. That's the, the mass affluent out there that is really struggling. And so somehow we got to get across a better narrative of you can store your hard earned work and wealth in this asset and still get them over the hump of, yeah, but it's so volatile. I can see it go up and then I can see. Brian Cubellis (01:03:54.381) it lose everything in a few weeks or months. That's the hard part to get them to see that, no, this is, we're talking about the long -term, this is what you need to survive or you're going to keep going backwards in this current inflationary regime. And we could be set up for another one. You touched on this a little bit, but I always talk about the inflation of the seventies. And we talked about how gold kind of discovered itself. People think, the seventies, one homogenous 10 year period, like high inflation during the entire seventies period. Like it was just double digits for a decade. And of course not. It was two major waves and even a first little wave, but then the second wave was big. It came down, looked like they had inflation whipped. And then we got a major second wave. And we have to be honest that maybe we're facing a similar thing. History doesn't repeat, but it does rhyme. what if we're facing another wave? We've, we've had at least three hot. higher than expected CPI reports now. So I think maybe that's more of the angle or pivot that I think could be useful, but I'm along with you. I'm always interested to hear more ways to get the message across. Yeah. Don't look now, but M2 is officially going up again, Logan, if you can pull the chart up after a little bit of a year and a half of M2 falling, we've officially gone above the X -axis again. above zero. And that's year over year. But I agree with you, Chris, that it feels like inflation is human psychology. It's how we it's how policy reacts to to inflation. That is, I think, what rhymes. And, you know, the bullwhip effect of inflation is what we saw in the 70s. And, you know, I think as we're, you know, as we're adding like a trillion dollars of national debt every hundred days or so right now. And deficits are expanding to two trillion. We're normalizing two trillion dollar deficits and interest expense on the national debt is now over a trillion dollars. Lynn Alden, I think, has been has been spot on about kind of sounding the alarm here that it's going to blow people's minds that this kind of high Brian Cubellis (01:06:17.581) high interest rates with our national debt scenario will be stimulative to inflation. And that's because of all the debt that has to be printed in order to pay interest expense and other deficit spending that has to happen and how that could drive another wave of inflation in the coming years. It does seem like it's setting up that way. You know, it could be a, this reminds me of a, This could be a good report. Maybe it's more on brand for honor, but just throwing it out there is if you guys saw on Twitter a couple of weeks ago where the person's family member passed away, because I think we talk about trillions and deficits goes from an ephemeral thing to more of like visceral feeling of just somebody's like personal wealth being stolen. And if you remember somebody passed away and on Twitter they showed the like shoe box that their grandmother, I can't remember if it was a grandmother or grandfather had like saved. It wasn't a wealthy person. They had saved that money away for their family or to pass it on or for a rainy day. And you just kind of like broke down, you know, what let's call it $20 ,000 or whatever the number was and how much and how hard it was to save that and what that like buys you today. And that kind of hit me. And then, but then recently on my wife's side, one of her grandparents had passed and that they found a shoe box. He kind of in his mind wasn't, wasn't working at the, at the very end properly and they found money that he didn't even know he hid. And it was kind of like this sweet gesture and it wasn't a lot of money and they gave it to all the grandchildren, but it's just like so heartbreaking when you think about, well, what was that amount and how hard was it to store it there? Then what does it mean in 2024? And I think like writing a report, like showing maybe year, year after year, decade after decade, and like just the jointly purchasing power, what buys from let's call it the seventies to now 50 year timeframe, I think land such a bigger punch, no matter how much money somebody has, because it just makes it more like human versus the numbers and the amount of dollars we have to print because it just ends up on the margins versus like really hitting home. Anyway, it's something I've been thinking about. And then just as you're bringing that, you know, Chris, of like, how do you position this? It's like everybody has to deal with it at some, at some level. Brian Cubellis (01:08:26.861) And to quantify that, Michael, I just put something in the chat that we're going to throw up here, but this is a chart that's been going around on Twitter over the last couple days. But it is pretty stark when you look at it, like the pre -tax income of our grandparents, parents, and younger generations today. And you juxtapose that to the percentage of the Costs of college, our grandparents paid 14 % of their income to go to college. And today, kids are paying 42 % in the house price to income ratio for our grandparents. It's 3X and now it's 7X. That is material. Brian Cubellis (01:09:14.125) Yeah, there it is. 18 years after death. yeah, I didn't even realize it was PESA. Brian Cubellis (01:09:23.789) Yeah, I mean, this should go to credit to Fidelity and the financial institutions that are doing what they're supposed to do in the sense of like, you're supposed to write value for the end client, help them. And Fidelity took the stance, you know, close to 10 years ago, I guess, in saying, what are we going to disrupt ourselves and how do we think about it and building custody, building those products. And obviously we don't have to name them, but there's other financial service firms that have said that we don't need to adopt this. And it's like, at some point, people are going to look at you and say, like, well, what are we doing here? Like, this is how we protect ourselves. You're like, you're supposed to protect our capital, our preserving of wealth. So it's always been awesome to see Fidelity leading the way. Yeah, absolutely. Thank you. That's our mission statement that you learn when you onboard the Fidelity mission statements to increase the well -being, the financial well -being of our clients. So you have to explore all opportunities and possibilities. So definitely credit to them for exploring this very early and recognizing the potential here, which is... one of the most attractive things about working there. They truly get it and truly believe in it. And we've got a lot of great people there to help push that mission. And you guys built custody. I'd be curious your thoughts. And it can be from an external perspective, the research side or fidelity, but just like, how do you think about the market with 90 % just from a market participant, maybe however you can talk about it, like 90 % of ETFs sitting at Coinbase, this angle of like, we understand money and centralization and thinking about. the importance of Fidelity and having their own custody solution, but how we should just be looking at the market for the next 10 years as more and more capital comes in. There's not really that many different qualified solutions to like, how's this amount of Bitcoin? You're correct that we built our own custody solution. That was the very first thing that we built and it's still one of our major products today. And it's the major product for Fidelity Digital Assets where I work, but it's also the custody solution behind all the other. fidelity products you see. So the retail side and all the other things out there. So that's us on the back end. And there was a real recognition that, well, first of all, the reason they built is because no one else had it. They said, we want to store some Bitcoin in an enterprise grade, institutional level solution. Nobody else was really doing it. So they said, well, we got to build our own then. And they brought all their expertise of being a 75 plus year financial services company with knowing how to custody Brian Cubellis (01:11:48.781) regular financial assets, knowing cybersecurity, knowing the hardware, everything else about it. They brought all that expertise to create this enterprise grade solution. And they really do believe, we really do believe that's the primitive that you need to start with. You have to have custody. And as you know, obviously you have to get custody right. It might be a boring business, but you don't want it to be an exciting business because then something probably went wrong. But you want it to be the bedrock for all of these other things that you can then. build off of it. And of course, we are one of the few that have custody for our exchange traded product. And that allows us to have kind of that vertical integration. So not only does that save us on the cost side of things where we don't have to go out and pay someone else, but we have full visibility and control of that as well, which I think is one of the big differentiators. And then on the research side, you know, not to brag too much or anything, but I have heard anecdotally from people that they've chosen our product because they see our research and they say, You actually get it, you're invested in this space. You've been doing this a very long time. That gives me the comfort owning this. It's not just another financial product for you. you've obviously been here and believe in it and are committed to it. And the big thing I like to tell people is I started not even three years ago, Fidelity Digital Assets had about a hundred, 120 people or so today we have around 700. So all during this bear market we've been building, we've been hiring, we haven't let off the gas because we've seen it as an opportunity given our long -term vision in this space. Which is makes sense. And it's so consistent. Like if you're educating the market and the market gets educated from the content, it's a natural extension to leverage the products because it's a signal of understanding and investment versus stepping in and putting laser eyes on, you know, your Twitter picture. But it's just like, it is why, you know, we focus on education and research and all the things the same. respect it's like you have you go educate the market and it's just a natural next step from the journey to go and ask what do you what do you provide because you've built that trust so yeah it's awesome to see. Brian Cubellis (01:14:00.365) We're coming up on time want to be respectful of everybody's time here. I think There's a great check -in It's a it's literally a different world Today than it was and said September 15th tomorrow will be a different world too, but I think we're now better than gold That's the big difference Better than gold got a lot of flows coming in The block subsidies only three point one two five Bitcoin per block Japan is losing control of the yen and bitcoin keeps producing blocks and Fidelity keeps pushing out good research and good products so Chris I want to thank you for joining us and if we have anything we want to end it on guys now's the time to say your piece No, I appreciate you joining. Yeah, I really appreciate it. All right. We'll see you guys next week.