The Last Trade E017: Tipping Points of Institutional Adoption with Fidelity's Chris Kuiper

What you're telling me is that music is about to stop, and we're going to be left holding the biggest bag of bodarous extras ever assembled in the history. Of doubtless 1974198792972000. Whatever we want to call this, it's all just the same thing over and over. We can't. Help ourselves. I say when we sell, hey, I say when we sell, welcome back to the last trade, exciting week, Bitcoins pushing towards 27,000. Again, we've got a lot of news. We were mentioning Deutsche Bank just announced today that they're going to begin custody and crypto assets for their clients. So I think that's the first big bank mover into the Custody game, and we're joined by Chris Kiper, the director of research at Fidelity Digital Assets. I paused there cuz Chris, I asked how to pronounce your name before and he said it's Kuiper like diaper. And I almost said Chris diaper. I'm sorry. You got it. My pneumatic almost failed. It's supposed to put it in your brain how to say it, but you almost said the wrong thing. That's the right thing. Well, thank you for joining us today. Thank you. It's my pleasure to be here. Well, we had a great intro call yesterday. And I think the big theme that we pulled from that was I think just the admiration that Michael, myself and Jesse have for the work that Fidelity has done in the space for some time now, coming up on a decade, I believe. So your annual research pieces are incredible. Obviously, you're the Director of research, so you have a lot of say over what goes into those pieces. So before we jump into the broader discussion, I think just an introduction to yourself, how you got into the position of Director of Research at Fidelity Digital Assets and yeah, I guess we can start there. Yeah, sure. Well, thanks again for having me. Chris Kiper, Director of Research at Fidelity Digital Assets. For those who don't know, Fidelity Digital Assets is a subsidiary of Fidelity Investments. So it is a separate fidelity entity dedicated to the digital asset space. We'll talk more about it, I'm sure, but our core products that we started with and we continue to use today is our custody services. So we offer cold storage custody for digital assets for our institutional clients as well as a platform and execution to help them buy, sell and hold digital assets. My journey or kind of origin story, I did the traditional. Financial tradfi world kind of stuff. I I got out of College in 2009. I want to go to capital markets. Worst time ever, of course. So I started in banking as a credit analyst for a couple years. Then I got to make the jump to a money manager in Chicago. We had about 30 billion under management there and I was analyzing tech stocks. I I love technology. I'm not a computer programmer or anything like that or developer, but I've always built my own computers and just wanted to experiment with stuff. So. It was actually through the tech side, believe it or not. Not the finance side that I first heard about Bitcoin. I heard about it in some tech magazine or blog and I was interested like what is this from a technological perspective? I read about it, researched it. I made my first Bitcoin purchase in 2012 or early 2013. I think it was whenever it was trading at around $4045. I just bought a couple and said I got a. Experiment with this. I got to trade it, sell it, moved around, and of course I did all the stupid stuff. You know, I bought stuff with it. I lost it. I, I, I, you know, basically traded and gambled with it. So lest anyone thinks I'm a Bitcoin billionaire sitting on $40 Bitcoin, I did all the things that everyone does with it. It wasn't until later where I did this deep dive into it, especially the economic side of it. My other passion is economics, and I was just talking to Marty, you know, recognizing a lot of the books behind him on the bookshelf there. Studied that in grad school and was this nerd that loved monetary theory and history. I went to George Mason University for my master's, and there's a professor there that I said I have to take a class with him. Doctor Larry White, he's the foremost expert on free banking, so he he knows a lot about private currencies and competing currencies and all of that. So that's when it really started to to click with me on the Econ side of what Bitcoin is as an asset and this, this aspiring money. And so I kept working in the finance world after that. And then eventually, these two paths kind of merged and I had the opportunity to come over to Fidelity, and I've been absolutely loving it ever since. Yeah, I'm jealous you got the study under Larry White. I saw him do a Soho forum debate with I forget his name, but he was one of the biggest proponents of nerp, essentially. It's bugging me that I can't think of his name, but it was an incredible debate. Larry Professor White won won the debate pretty handedly, but the whole I know we have a whole list of topics to to go on, but the whole idea of free banking on Bitcoin has always fascinated me because of the infamous Hal Finny post to bitcointalk.org. I believe it was in December of 2011 where he essentially said that we may be able to create like a free banking system on Bitcoin, having a bunch of private banks use Bitcoin as a reserve currency and then issue money's on top of that. And it's not the most popular idea of Bitcoin, but it's one that has always stuck with me and sat in the back of my mind like it seems like it could be possible. Well, are we, are we kind of already in the Bitcoin free ranking where, you know, you mentioned Fidelity's been around for a while They're they seem to be doing OK and there's some others that aren't, aren't, aren't around. And the market has decided who who stays around and who kind of maybe goes a little further on the risk curve than they should. Ken Rogoff was the man he he debated. Oh, sure. Yep, he buried the famous Rogoff and Reinhart paper and book. Sure, yeah. Do you think free banking is possible with Bitcoin? Personally, I I'm not sure. I mean, I think it is, but I haven't studied it enough yet to say. But I guess I don't see why not. You know, studying under Dr. White, he's. Basically documented all the places throughout history where free banking was in existence and where it was actually very successful. I think it was like Ireland and and Scotland, if I'm remembering correctly, you know, when one of those periods was well over 100 years. So if it can work back then with, you know, their relative rudimentary accounting and paper, how much more so could it work today? I guess it's kind of my theory, yeah. And from like a scaling Bitcoin perspective, when you think about the limitations of the protocol level and the fact that not every human on earth is going to be able to actually own a UTXO, the concept of free banking is an interesting way to attempt to scale Bitcoin to billions of people in the future. Yeah, there's some practical realities about Bitcoin that are, I suppose, some of the like, uncomfortable topics where it's a source of FUD. For a lot of people, you know, especially alt coiners, about how there's only 7 transactions per second. And so how could the world possibly, you know, adopt Bitcoin as a as a practical medium of exchange currency. And well, the the answer to that is it's not going to happen on on the base layer, it's not going to happen on on chain. The seven transactions per second limitation is only at the base layer. But of course it's going to, you know, we're scaling on the second layer with Lightning and other solutions. And the reality with those implementations is that you kind of end up with, you know, a third party that you're using as a service to use their infrastructure to, you know, lightning channels to transact. You know your value on the lightning network and then you're you know you have, you don't have total. About autonomy and control of your payment infrastructure at that point, because you're sort of piggybacking, you're paying as a service for somebody else to provide part of the the, the infrastructure that you need in order to transact. And now you're starting to approach banking in in that sense. And so you know that there's a path for that to continue to develop and. So long as you have a honest and true measuring stick that nobody controls, I don't see why not, you know, why free banking can't continue to naturally organically develop in the free market. And and I think the Lightning Network is sort of an indication of the early stages of that process playing out. Yeah. And then on top of that, things like Fetty Mints, these Charmian mints, which can act like individual private banks, Federated banks on top of the protocol level that are interoperable with Lightning. It seems like the experiment is being played out in real time. But we're not here to talk about free banking, even though it is an interesting concept. We're here to talk about what you're doing at Fidelity. And again, like going back to what we said earlier, Fidelity has been a staunch supporter of Bitcoin for, for almost a decade now. And I think Abby really sticking her neck out there in 2014 and saying, hey, we're going to begin transacting a Bitcoin in our in our cafeteria. We're going to really dig into mining. We're going to support people like Bob Mcilrath and others to really dive into what's going on here and try to figure out the custody side of of this Bitcoin thing. They did it early, A prestigious 75 year old institution handling over a trillion dollars of assets. What in your mind Chris really sets Fidelity up to, to make a move like that pretty early on a bitcoins life cycle? Yeah, sure. So this was one of the things that attracted me to Fidelity and I did not know. So I love telling the story to people because I think they should know about it. But they always say how did fella to get into to Bitcoin and digital assets did you just jump in when and the last bull run and. And it's like, no, absolutely not. They were very methodical. They thought about this. And then, as you said, they invested a lot of time and and resources. So really the story goes back all the way to 1999, you know, a decade before Bitcoin even existed, with the creation of this internal group of business in Fidelity called the Fidelity Center for Applied Technology. And of course, we love acronyms. We're big company, so we call it F Cat, but this group. Mandate was to say, hey, Fidelity's been around for now over 75 years, Let's make sure we don't get disrupted or that we're looking out for the next big thing so we don't miss it, right. So they started this in 1999 and their whole model is scan, try and scale. And so they're scanning the horizon for these potential disruptors or things that might help us or or. Created efficiencies in the company, so of course they they found Bitcoin. I'm not exactly sure which which year they it popped up on their radar. Obviously this happened long before I was there, but a lot of this has been well documented and and passed down so hopefully I'm getting all the details right. But 2014, I know they had a pretty good group set up already. Researching it trying to find out as much as they could and remember back and forth. 2014 There weren't near as many resources around, so they were already. Putting in the legwork to try to understand this, a year or so later, 20 by 2015, this gets to that try part. They get their hands dirty. This group F cat, they don't just sit in their ivory tower, read about it and and talk about it, they actually do it. So they said, well if we're going to understand this, we need to mine some Bitcoin ourselves. So they actually set up a unit to start mining Bitcoin and of course they said we got to purchase a miner from from China at the time. And so they put in an order for $200,000 worth of mining equipment. And this is kind of a famous story. Now that order was rejected by a procurement team. Whether it was on the cost basis or maybe some legal or risk issues, I don't know. But Abby Johnson, our CEO and Chairman, she, as you said she believed in this. She was a strong supporter. And she's told the story many times where she had to kind of walk down to people's office and say look. It's 200 grand. We're doing this. And for those who don't know, a big company like Fidelity, obviously 200 grand is not nothing, but in the in the relative basis of a company like this, that's not the biggest expense ever, right? And so she said, come on, just approve it, right? And so they got to work. They got mining Bitcoin. Marty, you mentioned also they experimented with using it as a payment mechanism. So they rolled out a little pilot where some employees were given a wallet and some Bitcoin and they paid for their lunch down at the cafeteria in Bitcoin. This was 2017, I think, So you can imagine how that went when you didn't have lightning where it is today. There was at least waiting of 10 minutes or more when people wanted to return something that caused a ton of issues. So that didn't go as well. And there's still a lot of people at Fidelity today that you can see them calculating like how much that salad would be worth today if they still held that Bitcoin in 2017. But back to the mining they're they're mining Bitcoin and then the next thing they encountered was, well, we've got this mined Bitcoin, we want to hold it, but there's no institutional grade, enterprise grade. Custody solution out there, well of course Fidelity custody's and record keeps a lot of financial assets. So they said why don't we just build our own and that gets to the scale part of F Cats mission, right. If there is a possibility to turn this into a product or just scale it out over Fidelity then they're going to look to do that. And so in 2018, Fidelity Digital Assets was born and our first product and still our main core product today is custody, so cold storage of digital assets. And then we've added services on top of that since then. So again, like you said, the whole point of the story is we're not just, you know, joining the bandwagon. We've been here a long, long time. I joined this role two years ago. I think Philly Digital Assets was around 100 employees, maybe maybe getting close to 150 at the most. Now today, two years later, we've got over 600 associates here. So there's been a lot of investment. There there's so many different ways to to take this but I think one of the thoughts or questions as you navigated that story and journey is and my understanding was it was the greatest sense of like or example of innovators dilemma of sitting in a room. And at least the story is I understand it like what can disrupt us or how can we disrupt ourselves. And it was this technology and it would love to hear kind of like how you think about it right now. As far as integrating into the traditional financial system, because I would imagine we're still very early and understanding how this, you know could potentially disrupt financial services. But there's this world where you're starting to see it. You're seeing the interest and you have an existing, you know whole book of business across you know equities bonds across the board. But how Bitcoin starting to like seep into that and then if you can you know. How you see it potentially disrupting some of that. If you have any theory or any like stance on the side of fidelity, of like where Bitcoin starts to insert itself in the fidelity stack and then other, you know, large institutions. Yeah, great question. I mean, I know back when they were researching it, they made a list of all the ways. This could potentially either integrate with the business, whether it's record keeping or stock transfers, all that kind of stuff, or whether it could disrupt it. So they they've made that list and I'm glad to see now at this stage the the focus, or at least what they've ended up doing by our actions you can tell, is to 1st focus on Bitcoin, the asset right of getting. People exposure to it and of course it started with Fidelity Digital assets. The the institutional side, now you've seen us expand on the retail side with Fidelity Crypto. So any retail person, any of our millions of retail users who have a Fidelity account can can get access as well. We custody the Bitcoin for them and other digital assets. Now where it goes in the future, you know, who knows, who's to say. Obviously we're still looking at a lot of potential things, but at this point. I think it was the right call to 1st get the custody thing figured out because that is just so core. It's like a a primitive to the whole financial system. And then from there, that's where you can build all these other things, you know, even just like adding a service that we've added, that we added later, like lending, lending capabilities, like all that stuff has to come after these these really core fundamental things you're touching on. An idea that I feel very strongly about and it seems like Fidelity really grok this early on is that there's an order of operations to how Bitcoin will succeed and ultimately be integrated into our financial system. Like starting out with mining first, like I actually think that is the 1st order of operation, like mining in full nodes, making sure that that's sufficiently geographically distributed as the first thing. And then it's like, OK, we've plugged our miners in. We've received our Bitcoin for participating in global consensus. Now what do we do? We have to custody it. And then you just mentioned lending. I think that's the the logical next step after that is this order of operations. And now sitting in 2023, there's robust mining, there's robust full node distribution, there's robust custody products. Lending products are becoming more popular. We discussed lightning and fediments. They're further down the order of operations, but that's one thing that I believe strongly is that there's this order of operations, the thing and it seems like at fidelity you guys have honed in on that and really prioritize like focusing on the first set of order of operations, perfecting that and moving from there. Yeah, absolutely. I'd agree. And from a research perspective, we try to do the same thing. It's like when I first came on, it's it's here's what we have so far in our research library. Where are the holes for someone going on this journey of? Understanding what it is. Understanding the basic technical things, at least up to a level that an investor needs to. Understanding the value proposition. Understanding how it might fit to your portfolio. Understanding how to manage the risk. That has an order of operations too. So we try to mirror that as well on the investment and education side. And so I just can't help but think about how it's it's the fidelity is the only example that I can think of of an institution that has gotten this far down the learning curve already with regard to Bitcoin and and building products around it. You know as Michael mentioned like with the innovators dilemma in mind here of of some of these products are are changes for how traditional finance does things. Some of them might disrupt existing products and I I would love to hear it, you know, if you can share a little bit about what you see as like the the institutional learning process. And I know that you've been, you know, only been a part of it for a couple years here. But clearly there's success because if you go from 150 on the team to to 600 over the two years that you've been there, that's. 4X growth and and Fidelity must see this as a a major growth area and would love to hear like what has that institutional learning process looked like specifically in in terms of how, you know what's ahead for other institutions, institutions that are only right now, you know, maybe they're a couple years into their learning process with regard to how they incorporate Bitcoin into their business models. And So what has that like institutional learning and then processes and teaming. And you know, you talked about the experimental model, but what do you think have been some of the major lessons that Fidelity has has gleaned and and with respect to like what's coming for other major financial institutions as they learn? Yeah, I mean a lot of things there. So even just. In the two years I've been here, I've noticed with client conversations or prospective client conversations, their questions are getting a lot more sophisticated. So whether from our material or other material material out there like that you and others have put out, they're getting, they're getting the message, they're they're getting up the learning curve. And so it used to be a lot of what we'd call Bitcoin 101 stuff. You know, what's Bitcoin? What's the difference between Bitcoin the Network, Bitcoin the asset? Why is it, you know, most people didn't even know there was I love to cap 21 million, certainly didn't know about things like difficulty adjustment, all that kind of one-on-one stuff. And now it's become a lot more sophisticated. So the challenge is still people are all over the place and even if you do like a group call or or or interview with someone, it's if you have more than one person, they're all on different levels. So that's always a challenge to try to speak to everyone in the audience. But overall I think. There is progress there, right. And so that's that's encouraging to see. And so people are taking a lot more seriously and we can talk about this as well, one of my theories, but the the excuses are the roadblocks for people not doing it are also getting a little more sophisticated as well for for better or worse, right. And then for what's coming, I I think a lot of institutions are realizing that. This is different and you can't just jump in here. It takes years and years of preparation and work. And that's why Fidelity recognized this early and why they've grown the team so much is because they obviously believe in the space. They obviously believe it's going to grow and we want to be ready if or when it does right. And so you can't, you can't turn on all this stuff in the next bull market when people are asking for exposure. You've got to have it all your ducks in a row ready to go once that happens just to to round that out like I was thinking about how Fidelity stands in in a in a small small group in my mind of like kind of innovators first through the door sort of idea here of like it's it's fidelity it's it's Paul Tudor Jones for for big name investors micro strategy and El Salvador You know like those are those are the the people who were like clearly ahead and and 1st through the door through the door and are their experience is modeling for others whether or not it was a good idea first of all and and then secondly how others can can follow that path. And I think it's notable that for each of those four categories they they've all had a good experience. You know, like every, you know, big name investors. El Salvador is doing great because in large part because of their adoption of Bitcoin, MicroStrategy is outperformed everybody on the stock market and Fidelity is investing heavily in this, in this new product area. And I think that, you know, that's part of connecting the dots for everyone else as they're evaluating is it a good idea to touch Bitcoin, to get involved in Bitcoin And it's proof positive when these leaders have a good experience and and double down on on their involvement in Bitcoin. So yeah, Michael, you go ahead now. Yeah, I was thinking it would be good maybe to take a step back because I think it'll help in two parts because it's fascinating. You walk through Chris like the the not trajectory, but like starting from mining or even before mining and thinking about, you know, how do we disrupt ourselves before we're disrupted. And thinking through that and having that like from a cultural lens and then the mining and then using it in the lunch room and where you're at now and and all the things that are planned for as Bitcoin grows. You guys manage close to $12 trillion in assets like to have that culture and go through that is is insanely impressive. I've the only company I've I've been at that has had some of that embodied is is Google 100,000 plus person company and you can get up and pick up and do things and and you expect. I don't know if it's still like that but I think it's important to understand the ethos of fidelity and how like that was even possible because to Jesse's point I think. That there's probably and there's different different areas of the market whether it's the Michael Michael Sailors, the El Salvadors, they all have their own overlap with something that exists at Fidelity. And then they also have their own like particular instance that we're going to start seeing with other countries, with other financial institutions, with other Fortune 500 companies. And so I think my understanding more just because it's fascinating what made Fidelity do this, but then also we can start to look at who will be the incumbents that also adopt this. And then who will be the ones that don't because we've seen this the past couple of years in the cycles is like people touch it and then the cycle the market falls and it's like all I'm done with it like they're you know you keep you keep hearing. I think the latest was I don't know if it was TD but there there was one firm that was like God, we're going to scrap our digital asset strategy and then if they didn't really have that confidence and conviction of understanding what's happening here. So I would love to just hear about the culture of fidelity and like how you know you see it from coming in of like it was in the ethos to look at this. If you don't mind sharing. Yeah, no, that's a great question. One that attracted me again to fidelity in this position, which it was very clear that people truly believed in it. And on the research side, I like to tell my my team, it's a little cliche of course, but we have a missionary mindset, not a mercenary mindset, right? So our research is stuff we truly believe in and not to say we we get it all right or anything like that, but we're not here to to try to to make a quick sale or something like that and. Our business model is aligned with that right as as a custodian you make money off of the fees of custodying the assets. So our goal is for people to understand the core value propositions of Bitcoin and digital assets and to have an allocation and an exposure to it and have a very long term allocation and time horizon. So that aligns everything right. It aligns, it aligns what we think is the best way to play this, and and. And to get exposure to it, we it aligns what we think is the highest chance of probability of access the longer you you hold this a longterm view. And then it aligns with our business model of how we make money, right? So we we don't make money off of tons of trades like other companies out there. And we're not only crypto, we're we're Fidelity. So even if people come in through the digital assets side, then they might, you know, access or want other services from Fidelity. In terms of the culture, I mean I'm not I'm not sure exactly where that came from other than you know some certain people that really believed it and carried the torch. But to your point of of of such a large company being able to do this, I I credit that with the structure that they set up with us as being a a subsidiary. So people have likened it to more of a startup feel or or late startup feel, yet we have kind of the. The guard rails or the safety net of the Fidelity parent company above us, which is a really unique and nice structure to have, quite frankly. Yep. Yeah. There's this term I didn't necessarily had heard before, but I kind of recognized it over the years and being this space is like an educated client is a great client because we're still so early in this whole. Period of understanding Bitcoin and custody and it's like if they understand fundamentally what's happening, they can think about it from a long term time horizon. You can provide the right products and they can be long term clients. But we've seen you know again over the cycles coming in it's it's there's only so many people available to educate to really break things down to first principles and embody these like or be able to facilitate that. You mentioned Jesse's content and the and for the research. It's like over these years the the signal is getting tighter and tighter and the education information becomes quicker and quicker to go from well, what is this to oh maybe this is something that I want long term exposure to. But we've just gone through these phases year after year of there are some entities or or people that come into the space that don't aren't able to pick all that up. And so that's where we see a lot of the, you know, I think the past 24 months have been very volatile and they've been you know, great for certain aspects. I imagine they've been great for fidelity because they anchor back to fundamentals and to the type of clients you're looking at track. But on the other side of that, a lot of people, I think the past few years have gotten burned because they weren't educated properly and the businesses that didn't educate them as well weren't able to really kind of reap the rewards long term because the client didn't fundamentally have an anchor into what's happening. And and ultimately this is, you know. I don't know if you agree, but we kind of joke around. It's like alien technology. This stuff is not easy, especially when you come from a traditional finance background to look at it and understand, fix supply and something that could have value. So it really isn't easy to educate. Well, and to piggyback on that, I guess a good topic to dive into is having written these research reports over the course of many years. What have you found has connected with your clients and really help them rock? What's going on here with Bitcoin? What type of information do you find is the most high leverage and having the the light switch go off for for your clients? Yeah, great question. So in terms of the the type of content, you know, really the educational stuff and knowing that we talked to institutional investors anytime I can bridge. This digital asset world back to the traditional finance world is usually helpful or a win. You know, I was in that world, got my CFA, all that kind of stuff. So I can speak their language, right. And so if you can put things, even though they're not always great analogies or ways of putting it, sometimes if you put things in their terms like what this is kind of like APE ratio or whatever the example might be, then you might see them pick that up, right. The other thing I found is whenever we talked to. Client or prospective client especially is I try to feel where they are on the macro thesis, right, because that kind of then determines which path to go with them. And what I mean by that is are they already on board with some of the big macro themes that we've identified in our research And and you obviously talk lots about just the the basic idea of currency to basement. You know, I, MF and others have papers out there saying this is the playbook, like this is how you take care of high debt loads. The fact that our our debt to GDP is very high, we've got huge structural deficits right now. If they're on board with that macro thesis and they already hold that, then it's a lot easier in many ways as you can imagine. Then it's more talking about the intricacies of the technicalities of Bitcoin and and some of the unique investment characteristics. But they're on board with the big picture. If they're not on board with that, if they they just see it as you're a gold bug or something like that and they're. You know, just vehemently against gold for whatever reason, good or bad. Then it's a different approach. Then you got to try to say okay. Is there a chance you could could be wrong here or wouldn't you even just want to hold kind of a market neutral position of Bitcoin as a percent of the total global investment universe? Or maybe you can do the technology, play with them like kind of. Owning the next piece of the the infrastructure of the Internet. Sometimes that narrative or thesis works as well but that's what that's a different conversation if that makes sense. Yeah you're you're hitting on how it, you know in our conversations with folks and and on the podcast last week, this was a major theme is it's hard to put this asset in any particular bucket. It it doesn't fit in portfolios the way that portfolios have traditionally been constructed. And so I think you're sort of speaking to that but but I I guess where do you tend to to see folks fitting Bitcoin into their portfolios? Do they in your experience, do they tend to carve it out as like part of a hard asset bucket sitting alongside gold or is it like a technology play in order to hold a part of the Internet of value? How do you see that playing out? Yeah, great question because this is actually a question we ask on our annual survey every year. So we are now in our fifth survey in process institutional investor survey of digital assets. So this is one of the largest surveys done out there over 1000 participants and everyone's always looking forward to to next year's results. So stay tuned for for that one. We're almost done. Or finishing up this year's. But one of the question is what what do you consider it? Do you do you consider it as part of your real asset sleeve or your your equity kind of risk one or do you take it out of bonds? And I don't have the numbers in front of me right now, but I I think if I'm remembering correctly, most people carve it out out as separate or as part of their real assets, right, which makes sense because it's it's commodity like it's scarce. I think that that resonates the most with them and so we've also done. A lot of studies showing if you had just say a 6040 portfolio and you took it out of your risk bucket or you're not off off risk bucket, your say your bonds, it's what you would expect, right? You're going to, you're going to lower your volatility and returns if you or you won't lower your returns, but you're going to lower your volatility if you take it out of your your risk bucket and then you're going to increase if you take it out of your bond bucket. So it doesn't really matter or people could just go halfandhalf if they wanted to. But it really depends on kind of their mandate and how they they view risk to begin with, if that makes sense. And it's part of that. It doesn't really matter which bucket you take it from ultimately, because Bitcoin dwarfs either of those buckets. And so whichever bucket it's coming from is a good bucket to be taken from. Yeah, exactly. I mean, if you're purely looking at historical numbers, which have of course have been through the roof on almost every time frame, then yeah, it trounces everything. So I mean theoretically if you if you have no risk limit, then it's like you would just allocate everything to it. Purely on a backwards looking historical basis but but yes you're I'm sure you I'm sure you found that that Black Rock report rather eyebrow raising when they what was it they they concluded the optimum allocation was 87% or something. Yeah, I wanted to say 90%. I read that paper as well. It's funny because I actually got dinner with somebody on Monday night who's in the space and is. Working on a credit credit related Bitcoin product and their team has ran the numbers on the worst four year Kagger return of Bitcoin. It just so happened to be April 2019 to April 2023. So recently in the Kagger in that time period was 23.4% or something that which is unheard of and any other. Is US. Right to do a shameless plug for one of our pieces. This is the exact problem we tried to tackle in one of them. It's something called Bitcoin using machine learning to to model Bitcoin in a portfolio. And so here we tapped another team at Fidelity that works with these machine learning a I driven models and they looked at this problem just from a quant perspective, saying the history of Bitcoin is short, especially if you only go back to like when you have some, you know. Pretty solid trading data, not it's very early days and furthermore not only is the history short, but it's, it's crazy good, right. So if you don't think it's going to repeat that, how can we, how can we really model that forward. And so they they use some sophisticated techniques which I'll be honest some of them are over my head to try to create some synthetic returns or or data looking forward. But basically they they model it like a very high. Growth, high tech stock, high beta stock where it has, you know, huge skews in terms of their return distributions, it's and it's highly skewed to the right. And so they say if we can do this with some stocks, why don't we just say Bitcoin is going to be similar to that and then work off of that. And not surprisingly, it all depends on your inputs. But if you think bitcoin's going to return more than your current asset class buckets. Then it makes sense to put a little bit in your portfolio and how much you put in is of course just dependent then on on how much you're willing to lose. And kind of the unique thing they did with this is instead of the efficient frontier, which the nerds listening will will know what I'm talking about, the efficient portfolio, efficient frontier, they did something called an efficient loss frontier or something like that. Basically saying how much are you willing to stomach and as a drawdown. And then from there, you can decide your allocation of Bitcoin, right? Because that's the true measure. A lot of people care about how much can I, how much loss can I get, Not necessarily how much gain can I get. So yeah, we can put a link to that in the show notes or whatever, but that that was one of the ways we tried to tackle this. But it's it's a sticky problem for sure. Does that come up in the in the conversation like the fundamentals because I think that like you're kind of alluding to I think. You know, for certain people interested, they've kind of jumped the gap that there might be some value here. But for others and I think the majority, it's like there's a lot of error between zero and $26,000 or wherever you're at and obviously on on this call and folks listening know about, you know, hash rate addresses, all the things that are the fundamental under underpinnings of what's happening. But does that come up? And have you guys constructed anything around that to show like there's fundamental growth across every, almost every metric in the ecosystem when it comes to Bitcoin? Yeah, that's a big one. We like to hit in our, our recaps and roundups and updates. We like to say, look, if you removed price and you didn't know what the price was and we just gave you the network fundamentals, you'd be surprised. We're in a sixty 7080% bear market or whatever it is because all of these metrics keep going up. Another research product we did this year is something called the Signals Report, where there's all these signals out there, there's your traditional price signals, and then there's all these. Specific on chain signals to Bitcoin as you know and institutional investors, they they might know about it but they don't know how to correctly interpret it or place it. And So what we did with this report is we we put them in buckets. We said identify whether you're a short term, medium term or long term investor and then depending on that here's the signals you should be watching. And so for the long term, the investor persona for that one we say is I'm a long term investor, 10 plus years maybe I'm DCA ING every month or quarter, whatever it is. All I care is about the absolute fundamental thesis. And the absolute fundamental thesis is, is this thing going to survive or is it going to die or or people going to become apathetic about it. And so really the only signals you should care about are these longterm things like hash rate, address growth, transactions, all that stuff that you guys know. So that's one way we've tried to also approach this this problem with people. That's such incredible framing and positioning of like, let's just put the price aside and let's look at this over the course of X number of time frames and say like you wouldn't know what the price, you wouldn't know that we're sitting at $27,000 right now. And and ultimately, you're right, it's a binary, it's a binary question and outcome. This thing either works and becomes digital gold and more or it doesn't work and it goes to 0 so. You know digital gold would be 500,000 per Bitcoin and so a 20X from where we're at. Everyone's very happy if that happens over the over 2 decades even that that's a fantastic outcome or it goes to zero and and you know we are all wrong for some reason that after years of digging into it and and lots and lots of brain cycles spent looking at this thing we are missing something. And and so you're right, they're like on the long time scale, that's all that matters is, is, is adoption increasing because adoption increasing interacts with the finite supply of this thing to cause each unit of supply to become more valued over time because more people are competing for it. It really is that binary in the end, isn't it? And what you've hit on here is, is another approach we use within investors, institutional investors which is they understand things with asymmetric payoffs, right. And so that's one we we hit just like you said I I'm in, I'm in your camp personally I I think this is pretty binary especially over the long term. It's either going way up or it's going to to basically nothing or staying kind of nowhere, right. And so if you believe that, then why not have exposure to something so asymmetric like that is the big, the big Holy Grail in finance finding asymmetric bets like that is how alpha is created. And so that really resonates with institutional clients as well. Yeah. And on this note too, I think the topic we should bring into this, bringing the price back into it, I think that's one thing that the Bitcoin price volatility has really proven out over the 1st 15 years of Bitcoins existence is that time in the market is way more important than timing the market. And trying to articulate that to new investors is kind of hard because when we go through these bull cycles, it's typically like two to three months where we run up pretty crazy and then it crashes back down and that's all they say. They're like how this is way too volatile for me. But you can run the numbers historically if you spend a lot of time in this market, your portfolio is going to benefit massively and just trying to articulate to that to people gets a bit muddied with. The high volatility rate that's existed historically, yeah, the volatility keeps coming up. If if you look at our survey, it's usually the number one reason listed why people don't invest. And frankly I don't quite understand that from institutional investors because these investors should know volatility is never a reason to just not invest at all. It's a reason to make sure you're appropriately sizing your position, right. That's, that's the key. And and they should really know that I'm so I always push back and say, oh, it's too volatile. So do you own any Netflix in your accounts? Because Netflix has had drawdowns of 80% or more three or four Times Now as well in its history. And I'm not picking on Netflix, it's just an example. But that's that's what you can experience with other assets you already invest in. So are those completely off the table? No, you just make sure you're appropriately sizing your position and your risk. Yeah. And it goes back to framing like volatility is opportunity. And you you alluded to earlier how there are increasingly sophisticated objections to to Bitcoin because change is difficult I think is really what it comes comes back to you right and and for Trad 5 to have to reckon with like why is this thing that on, you know based on my mental model of how the world works and how finance works. This thing shouldn't exist or or shouldn't go anywhere. It should be a bubble. Why is it continuing to to have little mini bubbles with higher highs and higher lows every four years and not going away and in fact continuing further into an adoption curve that creates the basis for people wanting to find sophisticated reasons to to? Not have to incorporate this into their portfolios and into their models about where the world and where finances is tracking currently. And so I, I I want to go back to I can't resist asking if Fidelity has you know you when you when you went to the quant team and they modeled out you know their perspectives of of. Volatility going forward with Bitcoin does, does Fidelity subscribe to the idea that the havings matter or is it a liquidity driven price chart or you know what can you, what can you talk about there? Sure. So I just just a quick note, when we say like Fidelity, we're not talking Fidelity as a whole. We don't have a house view on these things. I'll I'll speak from Fidelity digital assets in our research team in particular. But we certainly think that having is worth watching and it has to have some effect because you're changing the two most important things in economic supply, the other one being demand, right. So my colleague on the team, Danielle Gray actually has a a piece out not too long ago, a couple months ago going into the having and and you know basics of what it is, but then also doing analysis of well if if past is prelude to the future, what could we see or how could this play out. So we're still debating internally as well though the jury's still out because we haven't test. You know we haven't had a real world example of whether the having is the primary driver or whether it's just happened to match up with these four year liquidity cycles and and Fed cycles as you know. Or maybe it's both. Maybe we'll we'll see these two things happen differently this time or maybe it'll happen together again in the world may never know which one's the the primary driver. But I think just from a first principles perspective, if you if you go through the economics of the supply and the and the demand and and what happens with having, it has to have some effect. But of course, you know, people can debate how much of an effect it has, but it's definitely something that people should not be not aware, ignorant of, and and should be should be watching carefully. Yeah, we'll be really interesting to see if the Fed is able to keep rates elevated for another year and what the Bitcoin price does in that type of environment, post having next year. Yeah, yeah, I I have the luxury of being able to fly off the handle and say I don't think it's gonna happen. I don't think that's too far off the handle, Jesse. No, that's true. But with all that in my I mean. Because there's a social aspect to it here as well, obviously at the supply and demand with the havings and then you have the liquidity of the incumbent system driven by Fed policy. That's always something that's lingered in my head, like if Fidelity is successful in convincing other institutions and doesn't have to be fidelity by themselves, but other institutions had the light switch go off. And then there's a psychological, social aspect of it. That could happen at some point in the future as well, Where, yes, the having may have somewhat of an effect, liquidity profile of the monetary system may have some effect. But is that psychological light switch going off for a bunch of institutions at the same time? Does that have like a more profound effect at some point in the future? People just, yeah, absolutely. I think, I think as much as we like to paint the finance world as quant driven, and it's obviously gotten a lot more quant driven in the past few years, I personally believe, and I've been in the space long enough to know that it's still humans and it's still people making these decisions and pulling these triggers. So don't don't underestimate that. And don't underestimate the reflexivity of something like that. Yeah. And let's let's dig deeper in that because I know Marty when you kicked off the show you you referenced Deutsche Bank, but reading like ink backwards from Deutsche Bank was I think today, a few days ago, Franklin Templeton. You know, I think a 1.2 trillion plus in a UM filing for ETF, we've had this drum beat of institutional kind of activity happening this year. And it in, in my opinion, it feels like it's the first year that institutions are trying to frontrun. The having like to your point that we had the cycle and everybody went into hibernation but they were working on stuff. It wasn't like they were like, oh, this isn't coming back and now we have, there's a lot of stuff happening in the quote UN quote digital asset space, but I think preparing for but. Staying on Bitcoin, how are you kind of seeing the market as far as just like institutions building infrastructure, thinking about this next wave of adoption? Because I think it's probably for anybody that's paying attention in the space, it's not going away and there's probably another happening. And so now they're again from again from this vantage point like preparing to absorb that flow. And I don't know if we've seen that in previous cycles ahead of having thinking back even just like 2019. Hey. I mean, I think people initially still thought that like having didn't matter. I think most people would would come in. I think the reasons why they having matters is still up for debate and there's efficient market hypothesis and a bunch of other things that people will discuss. But yeah, just curious, Chris, like how you're seeing it and how you guys are preparing. I know there's some products you guys are working on the fact it whatever you can share. But then also just from the external market and what you're hearing and seeing feels like a lot of institutions are getting suited or prepared for whatever's to come the next couple years. Yeah, absolutely. I mean, I don't know if institutions are internalizing the having as that much. I guess I just haven't heard it anecdotally. But whether or not they are doing that or just subconsciously or through other means and and signals and data, I do agree with you that they are now fully on board of thinking this is not going away. And so that's why you see all these announcements of institutions with coming out with this product or or or preparing with this or ramping up that. And so they're coming along and they're they're incentivized to do it right if if there's potential for money to be made and to serve their customers, they're going to do it. And so they don't even have to necessarily fully believe in the having or Bitcoin itself. And not to take take this on a different note, but it just because it reminded me right now I was listening to your previous episode with I think it was Lauren and he was saying something like, well that the institutions are coming but it's just slow and gradual and I would agree it's currently slow and gradual. But he seemed to say not to put words in his mouth that it's it might just keep going slowly and gradually. And my experience in the industry, I personally think there's going to be a gradually then suddenly kind of event, a turning point. And the reason I I think that is because of two things. One, in the institutional money space, you're if you're a money manager, whether it's of a family office or or hedge fund or big endowment or pension, whatever it is, almost all of these people have a benchmark that they're measured against, right. And so Bitcoin, just Bitcoin itself today, if you, I mean, Jesse, you've run the numbers probably more recently than me on this and and I saw one of your articles, but out of the global investable universe, it's we've come up with like .2 to .5%, right? So it's hardly enough to warrant being in one of these benchmarks. But if or when it gets big enough or when it's just added because it's a different asset class and these index providers add it, that gets added to all these money managers scorecards. And so I used to be at a money manager in Chicago. It was a $10 billion growth fund. I worked on a team and I would have to. I was the the low man on the totem pole early in my career. And one of the things I had to do was prepare these attribution reports. So every month and every quarter I'd give my manager this attribution report and it said here's how much you outperformed your your benchmark and here's why you under or outperformed it. And it would go by sector and by even industry and specific stock. So you were underweight this stock or this sector compared to the benchmark and it did really well. So that hurt you. So what happens when all these managers start getting their attribution reports saying you underperformed your benchmark by 200 basis points, 2%, which in the in finance world is a lot for people who don't know because you were underweight Bitcoin. And the other thing this reminds me of too is early in my career we're on the growth fund and there was some stock. It doesn't matter the actual name. If it was Apple or something, it was doing really well and it got to be a big position like 5% of the benchmark and some of these managers are like well, 5%. That's that's a big position for a fund like that's where our our upper risk limits are. So we have to own 5% just to be neutral. And it's like, yeah, if you, if you own anything less than 5%, you don't even have to have an opinion on it. But if you own 0% of something and the benchmarks at 5, you're effectively underweight that thing by 5% and if it does well, it's going to hurt you. So if you have no, no opinion whatsoever, if you're completely neutral on Bitcoin and let's say it's in your benchmark at 2%, then you have to own 2% of it. Otherwise you're taking an active bet for or against it. And then of course all the passive managers out there will just have to own it as well, right? So that's one of my personal reasons why I think you could see a flip it like a a a big turning point. And the other big thing is just the whole idea of career risk. So in the finance world, career risk is everything. If you underperform due to something, but all your peers underperform because they were also getting it wrong, it doesn't hurt you as much as if you stick your neck out on something and it turns out to be wrong, right? It's career suicide. So as soon as that career risk goes away and everybody is kind of owning it and doing it, then that's also where when you'll see a big acceleration. Yeah, I think it's so interesting how a big element of the adoption curve is. Human psychology and and that manifests in a variety of layers and and career risk is a big part of it particularly with regard to institutional capital allocators or or or money managers. And you're right that like bitcoin's entire history to date has been as an asset that doesn't move the needle. It doesn't matter in terms of. The global asset landscape, it it is by my estimations half a percent as you said so 1-2 thousandth of the world's value is in Bitcoin. So you can you can ignore that and that bucket that tiny little thimble and and you're fine in terms of like tracking the overall asset landscape and and you know on a on a weighted basis that you're going to be fine if you ignore that but there's some threshold where. That's no longer true. And then that introduces this this issue of of career risk, which is really a kind of like pressurized version of of social proofing. You know that Paul Tudor Jones says it's a good idea. Bill Miller's on board Strand, Stan Druckenmiller, now Larry Fink, Ray Dalio is sort of opening up to it. So why aren't you hedge fund manager? Participating in this thing, are you going to, are you going to miss out on another year of Bitcoin being the top performing asset in the global asset landscape which is happened like 10 times at or 11 times out of the last 14 years and and we're due for another three-year run in my opinion. And so that that element of human psychology is really what drives. The adoption curve, because the next incremental slice of adopters is motivated by all of the inputs that they're gathering and how their psychology processes, whether or not it's time to make the jump. And that's a that's a push and a pull system, right, where you're you're pulled in because you find the the potential upside very attractive or you're compelled by the fact that, you know, bonds are probably going to lose. Are going to be a losing proposition on a on a real real return basis over the coming decade or or two. You know, you might be pulled into Bitcoin, but you can also be pushed into Bitcoin because you have to. You have to include it in your portfolio because you might fall behind versus your, you know, your cohort that you're being compared to if you're managing money. Or you might fall behind your neighbor or your friend who has a little bit of Bitcoin and you're sick of them outperforming you. And so, like the adoption curve is really this, this manifestation of human psychology. And that's why ultimately it's a bell curve, because that's how human psychology plays out in the in a smooth distribution of of how each of us with our individual circumstances and faculties process reality and change our behavior in a distribution manner. And yet we are still at the very early stages of that. And we're going into an increasing towards the middle of the bell curve where all of the crazy action happens. Chris, that topic you went to is insanely fascinating on the benchmarks and underperforming. Can you talk about how you see and it isn't to be relative and it can be if you guys if you feel comfortable discussing plans on the wealth management side, but I feel like. Is there something very similar with RIAS and financial advisors? And I think I was listening to one of the, I think it was a webinar podcast that Jack on your team did with Tyrone Ross and a few other folks about. I I forget the number but I think it's like anywhere between 70 to 80% of like Bitcoin crypto sits outside of FAA wealth managers platforms because of. A number of things whether it's like you know career risk the tooling and all the things associated. But how do you see that playing out? Because it feels like a very similar dynamic of there's going to be certain benchmarks that are going to become more and more visible and that individual, as you know, we know inflation runs and and Justice point about bonds that it's getting harder and harder to keep pace on that store storing value long term in a in a world where the cost of goods is increasing. How you see that playing cuz there's trillions and trillions sitting in those accounts as well outside of traditional kind of, you know, pensions, hedge funds, endowments. Yeah, absolutely. Yeah. On the wealth side, the Rea that sort of side it's, it gets to Jesse's point about the the push versus the pull. And in that segment, it's the end clients who are doing this and trying to usually push the advisor. To either accept it or help them custody it or manage it. It's not the advisor pushing them saying you should own a certain percentage. So that hasn't that hasn't flipped yet and maybe it will in the future. I could see that as a possibility. Of course, when they. When advisors all kind of get on board and get the message and become believers. But so far it's still the individual torchbearers who's who have their coins somewhere off of their advisors platform. They've done it on their own and that's why you have that big number that you just mentioned. And so you know that's one thing Fidelity's focused on with you've seen some news around our wealth Escape offering for example this is a a platform for RIA's and and similar broker dealers or. Or you know, family institutions allowing them to get exposure through this workflow in this platform that they already have, right. So that allows the the advisor to to handle it directly. And then of course the services are done on our end on the fidelity digital assets side of the actual execution and custoding of the of the assets. And then of course it's all built into the workflow with tax reporting and performance reporting and all that. So it's coming. It's very. You know this is very small at first, just just a few people and then we'll see where it goes from here. But I I think that's a big a, a big deal in terms of of normalizing it, right It's or maybe normalizing this is the right word but like building the the normal infrastructure around it like the infrastructure that people are already comfortable in the traditional finance world then it comes here rather than a client saying hey I've got. Bitcoin and cold storage. I have the private key. What should I do? Should I give my advisor one key of a multi cig or or you know that it gets a little. You can do that, of course, as you know, but it gets a little more complicated and beyond what a lot of people are comfortable with, especially advisors, if they're not trained or or well versed in the technical aspects of all of this, it can be really scary. So yeah, it's definitely coming, but it's still, it's still being pushed from the other end, not from the advisor end. But in the future, you know maybe if that becomes kind of the standard recommended, you know how advisors already kind of have these these broad guidelines that a lot of them agree on whether they come from their own companies or from CFA Institute or you know all these other kind of things. I could see that happening in the future for sure. Well and that's what it's like just one thing to on that grounding as you mentioned the gradual and suddenly and Jesse was referencing the human psychology and that is where I would double down on the gradual and suddenly on the advisor side when they start because we know this whole system is all about aligning incentives and I don't know the exact numbers but it's you know let's call it roughly 50% of advisors are tied to percentage based fees to the a UM and what better asset to to juice AUM than Bitcoin once you catch it. And so now that you go in from, oh, I need to be, you know pull it's like pulling teeth to let my advisor hold this to like, Oh no, you should have a 2% allocation because I know this thing, what this thing actually does. And that's another gradual and suddenly of like one that flips because that's money directly in the pocketbook of the the advisor wealth manager RA firm. Yeah, and before we get too far ahead of ourselves here, because I agree with all this, these these switches are gonna go off. We're gonna have to gradually. Soon suddenly moment. But I think to have a sober conversation about the state of the literal onboarding, the on ramping infrastructure that exists today. We've seen that historically particularly during the peak of bull runs where many people are trying to get in the Bitcoin but the literal infrastructure that is getting people access to Bitcoin begins to break down. Coinbase most notably just breaks during during these bull markets when the prices. Is running. And Chris, you mentioned you guys have grown your team on the research side 4 fold over the last two years. But just looking at the landscape of literal onboarding infrastructure, whether it be custody, OTC desk, liquidity providers like, what is the state of that part of the industry and can it actually handle a massive inflow like the one that we're describing here? Yeah, I mean, I can't speak for the rest of the industry. I mean, I can say from what I see at Fidelity. Would certainly think so and hope so. And this is where, you know, the benefit of a fidelity comes into play. A lot of times we get asked, well, why should we go with fidelity? Or what's your competitive advantage when you're this firm that's over 75 years old and there's other crypto native firms who know the space inside and out because that's all they do. And there's some truth to that, of course. But the flip side is, yeah, we've been in the financial space for over 75 years. So we've got down pat things like risk onboarding. Operational controls site, we've got a whole cybersecurity team. So this is where the big parent Fidelity company can leverage a lot of the stuff that we've honed and perfected over the years and just apply it to the space. So some things are the same, you know bitcoins very different as an asset in many ways, but as a financial asset and something to custody and on board people, there's a lot of similarities. And so that's where things get leveraged across the entire organization. Yeah. And I'd go as far as to say as we'll we'll never really get that one down pat until we get we reach a stabilization just being you know building like infrastructure in the middle of these bull runs it's they're so reflexive that I remember like on the hardware device manufacturer is one example. They just like run out right because the the capacity and we talked about like Coinbase being able to support on the onboarding you know managing consultations setups like there's just all it's it's a lot because you basically it's just so reflexive that you then you expand and then it contracts. So I think we're we're probably a cycle or two and you know some kind of volatility being muted where you can have a better baseline or model for the growth trajectory. But yes, I think just to your direct question, Mark, I think we particularly end up in this push pool for the next like decade as an adoption. And I I think that continues until we've. You know, I think this is an S curve and and it continues until we've gotten to the the middle of the bell curve which would be the mid inflection point there in the middle of the S curve, which is to say it's on the way there, it's gradually, but it's exponentially. So you know, rather than gradually, then suddenly or gradually overall, as as Lauren last week sort of advocated, I think it's gradually but in exponentially, you know, in an exponential fashion. So. And and I think that the way that this manifests is, you know, I've I've used the analogy before of like Bitcoin, the infrastructure for the Bitcoin network grows the way that a tree grows where you know in the summertime when things are good in the bull markets it, you know the the tree ring expands and then in the bear market it, it hardens, right. You go through that hardening process and. And on to the next cycle, but through that that cyclical process of expansion and then hardening and expansion again it's not a smooth process, but it's it's an incremental layered process of of becoming a more robust infrastructure and the network can on board an increasing amount of capital and people because of the investments that happen. During the bear markets, frankly the hardening that happens then in order to support the expansion cycle that's coming in the next bull market and it's to get meta like I don't think it. Needs to get meta, yeah, so maybe we both get meta. It's like it's not really anything unique. We're just seeing those accelerated, right. You think Bitcoin is just a micro calls and we talk about the asset being the Canary in the coal mine with global markets and with Lakota get sucked. It's the first thing down. We we chatted last week, you know the railroads fiber probably like Internet server infrastructure like you just always over expand but it's just over a longer period. So you don't feel it And then you kind of build in that contraction when it's quieter and you have all this like oversupply over capital in the space and then you come back and it's ready for that next wave when it's prepared. So I feel like what we're talking about here, we're just seeing it in like real time because of the value and the prices like tracking it and all the things and the people going to 0 or happening faster. But it's probably the same we've seen over the past hundreds of years. Yeah, and I was gonna say it sort of works on a fractal. Like you see it not only with the industry, with the onboarding infrastructure. We see it at the protocol level too, like when the price runs, everybody wants Bitcoin, you have fees go up. It gets. You have to wait longer and longer for your transaction to get confirmed at the protocol level. We hit that limit and people say this doesn't work and that provides a data point like, all right, here's where the outer edges of the network are and here's what we need to fix on. That's why we get things like Segwitch nor Taproot lightning fediments like there's just. It's like bitcoins as living Organism in these adoption waves, it gets pushed to its limits. We figure out where the limits are at the protocol level and the layers above. And we're like, all right, here's where we hit the limits this time around. Let's make sure that we can go beyond those limits during the next cycle. And then you see that happening in parallel with the industry too, with the businesses that are servicing the new Bitcoin users. Yeah, this is a really great topic to discuss because I think it helps in a in a way provide you talked about the layer between 0 and 26,000. But we're actually discussing real time like for individuals looking at this well why is there that volatility and we're describing real time in the the one of the other analogies that's used in the industry is like gold monetizing. We're watching it from somebody picking up that as a like rock and dust it off and shave it and keep pull it out of the earth and put it in a coinage and stamping it and turning it into something that's used for for food or whatever it is needed. We're just seeing that play out in real time and we're somewhere in in on that curve of it being something somebody's pulling out of the earth and then it being used as a unit of account to buy a building or whatever that might be. And so that period in between is very volatile and we just happen to be watching it. Yeah, and on the research side, we actually have mapped that out before, and other people have done this too, and I'm usually not a fan of Mapping different. Time frames, axes over each other, but just as I think a illustrative example is, you can look at when we went off the gold standard and then it was legal once again for people to invest in gold. Gold had to go through its own monetization phase, right? And people had to recognize what it was, that it was an investable asset class. Now, it wasn't just fixed at $32 or $34 an ounce. It went through this massive boom up to 800, which in percentage terms was was crazy. It had a big crash down once again and now you know it's kind of going through another big, big adoption phase. So that's one proxy we've looked at. We had someone on our, not on our research team, but within Fidelity digital assets, he had a lot of experience in the commodity markets when they kind of became an investable asset class. And so there's a piece out on our website of. How that went through the financialization and the productization of people being able to invest in commodities as an investable asset class. And we we've seen the same thing with Bitcoin. There's similar markers there too. Michael, one thing you said earlier reminded me, you said how railroads or fiber optic went through these big booms and over expansions. And I don't know if any of you have read that Perez book, The Economist, Carlotta. I think it's her first name, Financial capital. And technological booms and financial capital or something like that, if I'm getting that right, do you guys know which one I'm talking about? I haven't read it, but I'm familiar with it, yes. Yeah, she has a few, right. There's another one that's like like the innovation cycles. That's I think was before it. Yeah, so she wrote this many years ago and a lot of people in the space have picked it up and and that's how I heard about it, saying, look, this is kind of like what's happening with Bitcoin, where she. Takes really broad stretches of history like the the railroad boom or microprocessors or something like that. And she shows through her academic it's an academic book that financial capital and technological capital have to go together and they they feed off of each other. At least this is what I've gained from the book. The whole our whole research team read it together and and discussed it was a lot of fun to see the similarities. But her her point was. There's definite phases of speculative financial boom where everyone piles in and and the finance side gets ahead of everything. But then that's what also funds a lot of the stuff for the real tech or the real productivity enhancing stuff like railroads or microprocessors. And so you need both of these things to feed off of each other, but they kind of move in different phases. And so we also tried to match where we might be in the current cycle and we. It's easy to say like, oh, we already had the big frenzy, the boom, like the ICO boom. Oh, and then the the recent boom to 69 and and I. My point, but from the book was these things are so large that they permeate almost everything in society. Like if you think of how railroads drop the price of so many goods, or how microprocessors affected everything to me if I read the book and I try to match it up to our current cycle. We're not anywhere near there yet because Bitcoin and digital assets have not permeated all other industries. They have not shaped and changed all other industries in in the whole capital production cycle yet. And so it's an interesting read. She's actually been on Twitter saying don't apply my book to Bitcoin, which I think is funny, but. We did amazing. So it's such a good point. Yeah, it's such a good point. I think it's also where this like pod comes in. It's because there's a lot of, you know, value and and I don't know if money to be made, but I guess money to be made if you're if you're right about some of the stuff and there's a lot of money that will be lost. And then I think, you know when you reference some of these technological cycles, you know somebody has to go through the door and you know that's their their capital that went out. I think it just doesn't We talk about being a microcosm, being faster. There's just a lot more money to be lost faster in this environment because it's basically you're spinning up units that are tied potentially to money and people are putting their money or investing. And so I think basically saying like there's there's a lot of information out there and finding the right anchor points to get through the fundamentals is paramount more than anything I could probably imagine because it's just so easy to put the dollars to waste in something like this. And we've seen this in the past 15 years versus kind of something that's hard infrastructure. There's still scammers out there and there's still noise. But I feel like this is the tightest version of that. These are basically taking your dollars for something that can basically go to zero and is a click of a button away. So there's no, there's no question. There is more of just like it was, it was dancing around the topic. It was just like do your diligence and do your research when you know if you're coming into space and looking at like what could be the next big boom or how can you, you know, create value. It's that it's a little bit different in that way that there's not a lot of opportunity, there's not a lot of cost, fixed cost to creating a cryptocurrency. And so it's really important to understand the under underline and why there's value around Bitcoin. Yeah, it comes back to that like for these previous. Technology waves, the railroads or or maybe it's microprocessors. There's hard assets there. There's tangible assets that you're investing in. When you're when you're providing capital for something like that, you're investing in a railroad and there's proof of work because there's either a railroad built or not. Same for like a a chip manufacturing plant. You you know what? You're what you're getting. But when it comes to money, there's this. It's ephemeral. It's it's an idea. Ultimately, it is. It is what everybody structures their decides to structure their finances around. And that is a shifting target. It's it's an intangible target. And so it's easy to be misled. And it's easy to to fall into the traps. There's always been snake oil you know in in like the American West is a great example of like that's where the term comes from because snake oil would pop up as the the hot new product that you had to invest in and you don't want to miss out on the next Cocacola or whatever. And next thing you know you've purchased a stake in a in a business that is hot air and. That's even more possible with Crypto because these things, you know, because there's no manufacturing plant to to point at or any specific sales to, to show as proof of of adoption or attraction for a product. And so people will make big mistakes in terms of how they. They engage with what is you know we are speed running the monetization that bootstrapping of gold which was a 6000 year process and we are doing it in the space of a generation in our lifetimes at least and that is unprecedented and and it's it's only possible because technology moves so much faster you know we every. Every generation really technology has. Over the last 200 years, technology has seen a market uptick in speed of adoption. You know, whether that's going from radio, how, how long it took radio to go through the S curve of adoption, how how long it took to get into half of the homes in the US took took quite a bit of time. It took decades. How long did it take smartphones to get into the pockets of half the population? Not very long. And Bitcoin is a little bit different because it is such a base layer of civilization. And you know this is it's harder to adopt than buying the latest tech gadget because it it requires a great deal of conviction or or a burning platform to to to effect change in in your portfolio. But it is happening much, much, much faster than the 6000 year process of gold monetizing. And what's tricky about that is that, you know, if this is a process that has only just begun, and I think, I think Chris is right here, that we are, we are not yet in the era of Bitcoin permeating everything. So for, for that matter, like as annoying as it was in 2021 when it felt like Bitcoin and crypto was being talked about everywhere, that's only going to get worse every bull market. I think, you know we're going to go from Katy Perry throwing off crypto logos on her nails to it being in absolutely every business that you walk into. There's going to be we accept Bitcoin or you know, set up your crypto savings account with us, etcetera. And you know, because of that, because of how fast this trend is playing out, how early it is in it, the fact that we're going to speed run the monetization of gold in the span of a lifetime, People need to be very careful that they're not making the mistake of their lifetimes by buying in on snake oil, on crypto snake oil of whatever form, and instead taking care to understand and have conviction around what is lasting here and placing their portfolio accordingly when they have the sufficient understanding to be able to withstand the volatility along the way. I think this gets. Into an interesting topic we could cover and bringing it back to Fidelity. Been around for 75 plus years and in arguably the 1st 32 years of my life. Like I remember when we got caller ID then we got a OL and then fast where we had high speed Internet at smartphone we've got Bitcoin like that was a massive step function improvement in the technology that we leverage as humans like literally the the pace of change is. People would argue so fast that it's really hard at a chemical level for us to even process it. And so Fidelity weathered that storm and provided their clients extreme value throughout all that. And so like moving from the analog world of the industrial revolution now into the the the hyper automated world of the digital revolution that we're living through right now and arguably bitcoins sort of the last piece of that revolution, you get digital money. After the Internet and all these consumer applications and it's really the charity on top that that brings everything together like navigating those hyper volatile transitions. How humans actually leverage tools and the types of tools that they're they're leveraging. Like, how have you guys weathered that storm and moving forward things get more crazy, which I think they will, particularly with Bitcoin and things like AI. Like it's it's only going to get weirder from here. Yeah, definitely. On the acceleration .1 of the things I like to reference in talks that I do or when, you know, especially if it's to a big group or on stage, but also with clients too, it kind of can resonate with them is everything you're talking about here. And Jesse was talking about the acceleration of of all of this. Jeff Booth talks about this a lot. We we we as humans are terrible extrapolating things. Exponentially in our minds, right. We're linear thinkers. And he always uses the example. If you fold the paper 4045 times, you know, provided you could do it on an atomic level or you have the strength to how high would it be. Most people guess oh a few stories maybe as tall as the Empire State Building if they're really aggressive. And the correct answer is from here to the moon 250,000 miles, right. And. The other illustration I like to give is one I've seen before, where I'll put up two pictures. I'll show one picture first, which is the Wright brothers in Kitty Hawk, NC, showing the first demonstrated flight right 1903. They flew their plane a few 100 yards or something like that. The second picture is Neil Armstrong on the moon. And guess how many years those two pictures are apart? They're only 6566 years apart. And so I say, if you were a young person on that December day in Kitty Hawk, NC, and you just witnessed this first flight ever, they proved that it could be done and they said, okay, you now know it can be done. Where do you think this goes? In 65 years? Not a single person on that field would guess we'll have someone on the moon, let alone we'll have Boeing 740 Sevens shuttling millions of people around the world every day like it's nothing, right? We're just so bad at predicting technological change like that at that exponential rate. And so I mean that's our job at Fidelity to to try to navigate this. It's it's why Fidelity built Fidelity Center for Applied Technology, which I talked about earlier. It's why they continue to experiment with things like a I and quantum computing and all this stuff to see how it could fit into our financial world. You know you're talking about the. The first caller ID and someone else said, yeah, Fidelity's history, how did they navigate it before 1 Funny thing in their history that I remember seeing when I first started was they were I think the first to implement being able to buy mutual funds over the phone. Like either first with a person and then actually like a touch tone phone. Like one of those automated things which just seems so funny and archaic now, but of course was revolutionary at the time. So it's those kinds of things where you know you just have to keep, keep innovating, keep taking advantage of what's coming out there to serve your clients. Yeah, that's like going back to the the Jeff Booth line. We're very linear thinkers. We can't think exponentially, but human history has showed that we've had these exponential step. Function improvement. So when it comes to Bitcoin, like that's the one thing I personally try to get through to people is like, hey, yeah, looks stupid. It's slow, it's really far, and there's a bunch of crazy people that are into it. But if you really dig into it and look at the fundamentals and how everything works, like there's something there. And it is undeniable that it provides utility that has never existed before. And if you can grok that, you may not be able to fathom the. The changes that will bring to the world at this current moment, but you have to at least accept that human history have shown like when something like this is dropped on humans, we we take it and run to the highest extent that we can take it. The other thing that works on institutions is drop a Charlie Munger or Warren Buffett ID on them they'll they'll usually registrate, which is invert, always invert. So to invert this is to say. Do you think that in in the, I don't know how many years it'll take, but in the future it will be normal to think that we couldn't send money to whoever we wanted with a click of the button, Like we do an e-mail that it took three to five business banking days or that international wires got stuck. Like that's just going to seem so silly that anyone ever put up with that and that we had that right. So if you flip it around and invert it, you think, Oh yeah, we are living in this kind of weird. Era that we just take all these things as normal, but we've been like fish in the water where, well, that's just how it is, right? Email's such a good parallel like e-mail when you reference public and private key cryptography and you have a public address that anybody can send. Or David Marcus yesterday I think was referring to I never heard it in that form and it's probably it's pretty simple. It's just like if I go outside. I think the studio he was recording, Squawk Box in front of New York, was like, if I went out there I could send an e-mail to anybody, but if they asked for like, money. I know I'm trying to figure out what app and if they're in a different country now I've got like intermediary banks and I've got to send a wire like just that inversion of like, should it be this hard? Can we imagine it's gonna be that hard in 10 years Is a nice framing. I think we're all coalescing around this. It's all about framing and positioning and meeting people where they're at, because ultimately everybody's coming at this from a different perspective. Yeah. And on that note, I know I think we only have 10 minutes left, but I think. Another big underlying theme with Bitcoin, it's adoption. And where it is now, particularly at the institutional level, is the the generational aspect of it. Like the the people in control of large swaths of money at the institutional level are a bit older. You have your crusty CIO who really doesn't want to make too many. Not. Crusty out there, Mr. CIO. You. You. No, but there is this generational aspect where you have. Somewhat of I don't want to call them Luddites, but there's this barrier, this mental barrier that exists at the institutional level, where there's plenty of people our age in these institutions that get it and grok it and have a lot of trouble trying to get it past the the investment committee. Because it's just something they can't rock from a generational perspective for some reason. And just insert one additional cuz I know with limited time is where that Black Rock, B&Y melon and let's call it Franklin Temple. And there there's been a few in the past 12 months. How that can potentially help or how you're thinking about it from your side like in that supporting that case for the CIO that would have naturally been a little bit less or apprehensive to this whole ecosystem and how you see that helping in their journey. Yeah, I mean, I think that gets back to the point of career risk, right? If you're the only one doing it, that's really risky for your career, especially if you're someone who's a high level see something, you know who's who's towards the end of their career. You don't really want to rock the boat at the end, right? You want to coast? Coast out maybe, but. This is something we've seen in our survey data as well, not not necessarily the age thing because we don't, we don't measure that, but more the structure, right? So the highest adopters, seventy 8085% or more are high net worth individuals and family offices and some RIA firms, right? And that makes sense because those are individuals driving the decision, so they get bitten by the Bitcoin bug or whatever it is. And they're the ones that carry the torch in their small family office. There tends to be less red tape, less bureaucracy, so they can pull people along or it's just their own individual decision. They have sole discretion, right. So that brings true. Whereas it's really this, this absolutely, extremely see family offices are kind of in the middle. I think there were 37% last year saying that they already invest in digital assets. And then on the other end of the extreme is pensions, endowments, foundations, exactly who you would think where they have large investment committee boards and a lot of bureaucracy and red tape, and for good reason. Obviously they're they're trying to preserve wealth for in perpetuity, for generations and generations. And so they have these things for a reason. But that means that it's a long, long process for them and if even if there's one person there, they have to try to get everyone else. Involved and and convinced of it. So that's why we see that change in our our results. And if if I can take this a little bit in a different direction again with the, the last podcast you had, you talked about the institutions that they're coming and maybe they're already here. Our last survey, our numbers went up again where 6 out of 10 of our institutional survey participants said they already invested in digital assets and and we said wow, that went up again, That's great, but. 6 out of 10, that's that's a pretty big chunk. Why is this still such a small asset class. So we went back to our data set and Matt on our team, Matt Hogan, he worked with our our data provider and our survey provider with this, the people who are doing it and really dug deep into the data and we had some theories and then the data confirmed it that the reason we have such high participation yet it's which says the investors are here, the institutional investors are here, but. The asset class market cap does not reflect that is because the people who are here are the ones with the relatively smaller a UM, right. So the individual investors, the family office, the high net worth and the big gorilla pools of capital, the pensions, the endowments, they're at like mid single digit adoption, right. And so it depends on who you say institutional investors are here, who you're talking about, right. And the other thing is that the people who are invested. They're almost all invested at very small amounts, which isn't a criticism. I mean Bitcoin digital assets are a small asset class. So you know, I question your risk strategy if you were 100%. But again, you have a smaller pool of capital, there may be 1 or 2% allocations. And so that's really what's driving kind of this head scratch at first, where on one hand you hear the institutions are here. On the other hand, you look at the, the price charts and it's like there's no way that's just the math doesn't check out. Yeah. And. And and that brings it back to the point you were making earlier about like when Bitcoin is 1% of the global asset landscape, then those big players need to step up to a 1% allocation in order to preserve capital. Like in order to preserve wealth, which is kind of their mandate, they have to have that slice. So then you have this reflexive structural bid for Bitcoin. And at the same time Bitcoin issuance becomes increasingly scarce, as we know every four years and and those two factors combined to create like this, this lift as institutional as Bitcoin grows that it's a positive flywheel. As Bitcoin grows in value, more institutional allocators need to bid for Bitcoin in order to have a representative slice of it in their portfolio in order to preserve wealth through time and not miss out. And and the cycle continues. You know, given that there's less and less Bitcoin being created and it all just sets up for, you know, it's it's a it's a scenario that the gold can only dream of really, because it's gold with a finite cap on on how much gold there is. Yeah, and when you put it like that, Jesse, it just made me think of. Once that becomes ingrained and really internalized at the institutional level, like the the amount of thinking that's going to go into like actually getting exposure and not moving the price too far too much higher than it is when they want to get in. And because that that creates the feedback loop too. It's like I need to get 1% allocation, which means I need this much Bitcoin. I can't signal to my competitors and I'm doing this right now because they'll be like. That whole psychological battle that that awaits us in the future is going to be fascinating to play out because once that happens and they're fighting for the 1% exposure and they find out like what they thought was 1%, it's only half a percent now. They got to get more. It's it's an interesting debacle, but. Chris, is there, is there anything that excites you? I know between half of Fidelity yourself, like Fidelity being around and looking at this. Ecosystem you, you touched on all the things that most institutions haven't even like thought of yet, let alone have tried. So you're already ahead of the curve. Is there anything that you guys are looking at that you can share that is kind of like just interesting you're exploring and even if it's not from UNBAF, fidelity digital assets on yourself, yourself being a, you know, a Bitcoin advocate and looking at this space that you're excited to see over the course of the next couple years or for this cycle? Yeah, so I'll mention one. Data point that I find interesting as a follow up to what Marty just said at the reflexivity, we keep watching the exchange balances go down in in the data and I think this is the first time we've ever had a declining exchange balance potentially going into the next cycle. If we do, obviously this is speculation, but if that were to happen, it's going to be really interesting to see how that plays out. You know, is that going to be? Kind of this this musical chairs that people realize there aren't as many coins at the ready to absorb extra demand this time around versus the other cycle. So that's one thing we're watching on the the investment team, The other data point and and we briefly mentioned this and another part of the conversation was I put together two data sets of showing M2 money supply going back to the the late 1800s and this is the first time we have a contracting M2 money supply since the Great Depression and. We talked about this in our latest video we did. And I said it's not surprising because since the Great Depression, all these central bankers said we will never forget the lessons of the Great Depression. And to them the lessons were don't ever let the money supply contract, right. And that's what they did it. They'd never let it contract until today. And so it's not surprising that we've got headwinds because we've found in our research that Bitcoin is highly, highly correlated or. Reactive to changes in the money supply, not necessarily changes in inflation, but the money supply first and foremost. And so it'll be interesting to see once once that, excuse me, once that changes or or if or when that changes in the money supply goes back up again. Might not be immediate, but that's one of the things we're looking at too. On the research side, yeah, it sure seems like there might be a convergence of timelines here of the halving is coming in seven months and we'll see when you know because of the the nature of the financial system they they have to expand the money supply and that could begin mid next year. Again that that's sort of my rough estimation of of timing and and I could very easily be be wrong there. But if those two forces were to converge it it it creates the sort of the opposite dynamic of what happened in the tail end of the of the 2021 bull market where the bull market forces were playing out. But we switched from a QE quantitative easing position to quantitative tightening right at the, you know, Q4 and 2021. And that just just blue cold air on on the party that was happening and snuffed it out entirely. And we could have the opposite effect of switching from that regime of quantitative tightening which we've had since Q 4/20/21 back to QE at the same time that Bitcoin becomes twice as scarce in terms of new issuance. Don't bet on it. Nothing's a sure thing, but this has been a fascinating discussion. Chris, I wanna thank you for taking time to do this. We were very excited for this conversation. Again, the work that Fidelity has done and that your research team has done over the years has been extremely valuable for the Bitcoin space at large. I think the annual report, like you said, is something that everybody in the industry looks out for and looks forward to because you guys are out there on the front lines interfacing with large pools of capital that are trying to understand this and you guys are actually providing them good genuine data that that is needed. You're not you're you're not selling them the snake oil you're you're explaining to them exactly what's going on here. So just want to commend you, your team in Fidelity, Abby, Shout out to Abby for really being the tip of the spear on the institutional side of things on for Bitcoin over the last decade. Yeah, absolutely. This has been my pleasure. And you can go find all of our research at fidelitydigitalassets.com. We'll have that survey coming out hopefully this year yet. And then we also have a piece coming out on understanding proof of work. So this is a piece that I think is sorely needed in the space to help investors understand why we have proof of work and. What it actually does and the implications for Bitcoin as an investment. So it it pushes aside all the environmental stuff and it just says, let's understand what this actually does, why it's a very big deal and what it actually means for your investment, yeah. That's awesome. Yeah. Just want to commend Chris again for doing this well while having a brief call. It's been great. Michael, Jesse, anything to add here? Just thanks for for coming on. We're excited to have this and it showed up. So we're looking forward to that and the research piece and then also we we guys know that you're working on a lot of stuff. So excited to see you continue to pave the way. Yeah, fully agree. All right. That's all we got today. We'll see you guys next week.