Transcript+
Thank you for joining us today. We're excited to bring you a brand new show from the On Ramp Media umbrella. Wake Up Call is a weekly show that will be streamed live on LinkedIn every Monday morning. To catch the premiere of each episode, follow On Ramps LinkedIn page and add Wake Up Call events to your calendar. After the live premiere on LinkedIn, we will distribute each episode across On Ramp Media's podcast channels and YouTube page. Wake Up Call aims to educate financial professionals on the merits of the Bitcoin investment thesis, how this asset represents both a threat to legacy financial service businesses and an opportunity to differentiate oneselves and retain and attract new clients. Hosted by Mark Connors, Onramp's Head of Global Macro Strategy, and Rich Kerr, Onramp's President of Managed Wealth, this show seeks to provide financial professionals the wake up call they need, prompt them to have an open mind with respect to Bitcoin, rethink their prior assumptions, become more educated on the topic, and learn from others who are already farther down this path. Mark and Rich bring a combined 60 plus years of experience across traditional markets and financial services and will share their unique perspectives and how their peers and colleagues can approach the realm of Bitcoin. Wake Up Call will feature guests from various backgrounds and industries will also share their own journeys to Bitcoin and how others can get up to speed. Now time for the show. Oh, we live, huh. OK, good. Well, welcome everybody. I'm Rich Kerr and I'm joined today by Chris Kiper, who is the Director of Research at Fidelity Digital Assets. And we also have Jesse Myers, Co founder and Chief Investment Officer of at Onramp. So welcome gentlemen. Good to have you guys. Yeah, so we have an interesting show today for everybody. We're going to be talking about a research for paper, excuse me, a research report that was just released by On Ramp and authored by our very own Mark Connors, who's our head of global macro. And it's called the big or it's called Bitcoin. The emerging asset class has arrived. And so we're delighted to have Chris join us from Fidelity Digital Assets. Excuse me and Jesse from on ramp and we're going to chop up this interesting research report, which basically talks about how you as an advisor can enhance both absolute and risk adjusted returns for a traditional 6040 bond portable or excuse me, allocation. So Mark, I'm going to kind of kick it over to you since you kind of, you know, spent the better part of the last several months really digging in and, and doing some interesting research around volatility in particular. That's one of the things that I'm going to be picking your brain on throughout the day and, and Chris and Jesse as well. But love to hear some of your thoughts on the research that you did and maybe a quick summary for those who don't have or haven't had the chance to read that report as of yet all. Right. Thanks, Rich. And again, this is great to have Jesse Myers here and Chris Kiper from Fidelity, who I've picked brains, both picked their brains over the over the years from their different experiences. And that's really rich when when I did this report, it is a compilation and it's an oil painting. I mean, it's not done yet. There's always more to add to it because the title of the report didn't come until after we wrote it. And you and I talked, you know, with Michael and Jesse about what we're trying to do and we're trying to show the unique qualities of Bitcoin, its returns, but also the other thing, which is its volatility, which we deem to be good and not bad. That's the headline. And if you, if people leave this call and you know, whether they're watching it live or on, on our pod, on our YouTube channel, ask the question, how can volatility be good? Keep asking it until we've answered it for you or your, your advisor or your or your clients understand it because that's the key. And I think Chris mentioned in the green room that he has seen that other advisors or professionals in the space are also maybe pulling at this thread of volatility being something that mean we may want to be seeking as a resource and not something to avoid. So, so Bitcoin, the emergent asset class has arrived is about this unique quality drawing asset managers like Fidelity and others into the space potentially. Not to put words in Chris's mouth, he has a lot to say, but I think this is what is helping people add risk adjusted returns and absolute returns. That's the second level. Good vault, bad vault. Let's answer that question. And the next one is, yeah, Bitcoin makes a lot of money for people, but boy, it's too volatile. And then we're going to say no, we're going to show you how actually the volatility is worth the ride. And that's really what people look at. And they talk about sharp ratios and then sortinos. All right, ring the bell. I went too wonky. It only took me two minutes. Jesse, you're supposed to talk me off the Cliff when I start doing that over 90 seconds. So I'm going to give it back to you. But that's it. It's a three-part series. This bitcoins got more than people know about and the institutions are coming for it. That's that's where I'll leave it back. Back to you, Rich. Yeah. To add on to that, yeah, Mark, I, I'm, I'm really excited about the, the work you've put together on this topic. I, I'm a simple, I'm a simple man. I like the charts that you put together. I think they really emphasize the point that you're talking about in less wonky details. So it's easier to understand in my opinion, how Bitcoin flips what asset allocators are used to in the sense it with regard to volatility, because in traditional assets, stocks and bonds, volatility, volatility tends to be bad more often than it is good. So on the whole, people try to avoid volatile volatile assets because volatility is bad. And then Bitcoin flips that paradigm and suddenly volatility is your friend. Volatility is good because more often than not it's to the upside than it than it is to the downside. So anyway, I love the charts that you put together to just surface this simple idea that's been hiding in the data for a long time and I think is a big part of telling the story to bridge the gap between Bitcoin and traditional finance about why Bitcoin is so important to include in portfolios. And I think before we get too into the weeds, I just want to point out how in the paper you distinguish between the true definition or that, or I shouldn't say true, but the academic definition of volatility versus how people think about it. And volatility, of course, is just a statistical measure. It's it's how much something moves around a mean. And but of course, as you say, everyone thinks it's bad. And in the paper, I like how you put think of it as uncertainty. You know, it's maybe uncertainty, but it's not necessarily bad. And I think one of the, the simple ways to think about this is when the the age-old question comes up about Bitcoin being too volatile. And, and you linked my, my Nashville speech and I reference how this is the number one barrier to Bitcoin as an investment we get from institutional investors. Five years in a row, this has been #1 and either people just don't get this concept yet, or they're, they're using it as a convenient excuse. That's a different story. We could probably talk about but but this idea of, of volatility being being bad at versus no, it's just uncertainty. Like think of I use except for example, you have an objective, an investment objective to meet. And maybe that's a certain amount of money for retirement or a certain return that you have to get and you want to match up the investments. That's, that is going to have the best chance of meeting that objective. And so if your objective is way off into the future 10/20/50 years and if you hold just cash, all of us know with almost certainty, very high probability, holding just cash is not going to meet that future cash flow need that objective, but it's not going to be volatile along the way, along the way. And so people say, of course you have to add something like equities or bonds or something like that to meet that objective. And you said, but it's going to, it's going to add volatility. And they say, So what you're, you're going to hold it for 50 years? Is your objective to have 0 volatility or is your objective to meet this, this cash flow need in the future? Well, of course, it's to meet this thing in the future. So who cares what happens along the way? But of course, people conflate these two things. They think it's the volatility along the way that's the problem. And that's not, that's not the objective and that's not what we're trying to do here. Well, Zed, so that that perspective when you've been speaking to in investors, Chris, and that was the the title or the theme of your Nashville, if I remember correctly. Does that perspective help and what type of people or topics have unlocked the opportunity or even getting the audience to do that? You know, so we're I'd I'd love to stay with that before we go into anything else on on the report or volatility like Jesse was talking about. So because that perspective you gave, I haven't thought about, even though I probably danced around it about, you know, what, what do they call it liability driven investing or you know, the target dates, funds and all that type of thing. How would that, how would you, how would you position Bitcoin in that conversation, you know, using this topic of volatility with other traverses, what they use today like high yield or equities or EM? Yeah, I think it gets back to the point of what is risk to you. And for some people and strategies, volatility is risk depending on what they're doing, especially if they're using leverage because there's there's chances that they blow up. And this is something you talk about in the fund. But if you're talking about it's just a simple RAA advisor, someone who's saving for retirement, risk is not volatility. Risk is ultimate loss of capital, risk is not meeting your investment objective. And I think that's what you have to keep, keep the, the, the, your eye on the ball with this. And of course, this gets to the marketing problem. It's, it's and, and the emotional problem. So I think there's two things we could go with this. And you actually bring both up in, in the report too. I think there's the number side, the, the pure academic side. And then there's how do we educate people around this to embrace volatility, Stick with this. And this is something too that I, I mentioned in the green room, we can talk about as well the fastness of AQR huge quant shot talks about this in a recent report in praise of high volatile alternatives. The one of the components is just getting people to stick with it. And so when they see that draw drawdown, they see that loss, they have to fight their emotions. So there's kind of two things. There's get their head around the numbers, the academics, and then get their their heart and emotions around embracing this as well. Yeah, the behavioral finance component is such an interesting one and and I have a lot of conversations with advisors in particular around the volatility and and in an advisor mind I think you know, and it makes sense, right? They don't want clients to feel bumps, right? Like they're, they're constantly looking to smooth things out for clients because any bumpiness means that they have to come in and, and, and work on those behavioral finance instincts that an individual investor might have where they start getting really nervous. And, and their, and their, and their time horizon, while it might be 10-15 years, all of a sudden shrinks down to that very moment and they struggle with that. And I think it's, it's a difficult conversation to have, but I think, you know, the successful firms do a very good job of educating clients to extend their time horizons and, and recognize that volatility can actually be our friend if we manage it effectively. Not just the emotion that the individual investor has, but but the but the tactical execution of rebalancing a portfolio and and cost averaging into positions. All of these things kind of help capture that volatility and and smooth it out a little bit along the way. But they all it, it's extra work And it in any time that you make an an end client nervous, you know, an advisor gets uncomfortable themselves, right, because they didn't, they never want to lose clients for any reason and they want to continue to do the good work that they do. And so I think education is a big piece of the the puzzle, but also recognizing, you know, the human behavior and the things that cause disruption in terms of successful investment planning. Yeah, Chris, you mentioned that this has been the top topic. And by the way, Rich, your mic is blaring a bit. You might want to turn down your sensitivity or volume if you can. And, and yeah, mute was good for getting rid of the background background noise. So Chris, you mentioned the five years in a row volatility is the number one concern for. And I, I, I take it that was a survey you guys did of potential adopters. I'd love to hear more about like what are the anecdotal objections or concerns or did did survey respondents include like we're waiting for X to be met in terms of volatility before we consider this asset class? Any other color around around how folks that you've talked to or you know through the survey are thinking about bitcoins volatility? Yes, it's a survey. We've done five years in a row. We survey over 1000 people or institutional investors. These are not our clients, but worldwide and institutional investors are very broad bucket for us. So it's anywhere from high net worth individuals, Rias, family offices, multifamily offices, hedge funds and then on the other side, pensions, endowments, foundations. And volatility is the number one that's been cited five years in a row. A lot of the other barriers to entry that they mentioned have changed over the years. And I think they, they kind of change with the excuse du jour. I want to say things like, oh, dark markets and illicit goods that used to be 1 early days. Now that's dropped much, much lower. But volatility stayed number one. And unfortunately the survey doesn't have more information on that. Maybe we could extend it or something like that, but I think there's a good group of people who are just saying that because it's an easy one word answer. And this is my personal opinion. Of course. The the I'm not going to read into the survey, but it it's just a, a hand waving thing where they, they either haven't done the work, they haven't had the time, they view it as too small, or they just have a personal bias against it. And instead of saying that it's easier to say something more sophisticated sounding like volatility, but I'm increasingly getting frustrated with it and coming back and saying you're institutional investors, this is your job deal with volatility, this is your opportunity, exactly what we're talking about. You should not shy away from it. The other side of volatility is, is opportunity. And so you should understand this and then manage it either through simple position sizing or something else. But unfortunately that's that's about all we have right now on it. Yeah, I, I, I was sort of poking to see if if you felt that it was an excuse because it sort of sounds like a very convenient, exactly as you said, a sophisticated excuse. And ironic too because like, like so many things with Bitcoin, the surface level objection is completely opposite of the reality for her. This is actually good volatility as Mark has now has now spotlighted. And so that objection of of oh, Bitcoin's too volatile. I don't I want to stay away from it is actually the complete opposite of what you want to be doing. You want to lean into that positive volatility. And you know, the don't trust verify ethos of Bitcoin yet again gets people who think they are have a sophisticated reason for objecting to Bitcoin, but in fact they're mistaken. Yeah. And and to another point of this is some of them might just be working on old data. And so this is one things I addressed in in the speech and what you're addressing in this report as well. Volatility has been declining for many years on a long term horizon. So they're still thinking of Bitcoin 2014, 150 close to 200 Vol asset at times. They're not thinking of today's Vol averaging 6070 and currently, you know, it got as low as 3040. And we would put up against some of the magnificent 7 stocks. It's right in the middle. There's, there's larger market cap companies that are more volatile than Bitcoin right now. There are many S&P 500 companies more volatile. So some of it's bad data that we have to help people, get them, get them educated on this. They're still operating on this old notion. And then to, to Rich's point too, there's, there's the emotional part of it. Even if people's, even if you construct a portfolio where as you show in your report, you're not actually increasing volatility because it's a diversifier, people are still going to see that line item. And they're, or they're going to get a chart that says like your top ten and top worst performing. And they're going to see a big fat, you know -70% or something for one item on there. And they might freak out. And then as you know, especially in the advisor space, there's some poor incentive structures where people are worried about career risk, about getting fired as an advisor, people moving on. So there's, it's tough, it's a tough, tough problem to deal with it. But that's of course why we're here and why your your report is so great. Yeah, the, the, that was kind of the original thread that Mark wanted to pull on was this excellent report from 2 Ocean, 2 Ocean Trust where they, they pointed out within the numbers that a small percentage allocation to Bitcoin actually reduces overall portfolio volatility while increasing performance, which is the Holy Grail of asset allocation. That's, that's everything that anybody should be looking for. And yet, as you, as you rightly point out, Chris, that you know, that the volatility in that small bucket can be a problem. You know, it can stick out. It'd be a sore thumb. And so people are scared of that, even though that uncorrelated volatility reduces overall portfolio volatility. That's everything you want, Mark. Maybe it'd be a good a good time to to toss up a couple of your charts, perhaps starting with volatility in traditional assets versus the the histogram of volatility in Bitcoin, just to see what you know how different they are. OK, cool. This is like asking a parent to show pictures of their children. Don't ask me twice. So. Well, yeah, I'll. I'll look at the, you know, when Chris was talking about. Yeah, not seeing anything on screen. Oh, there we go. Perfect. So this is everyone says, you know, let's be safe and go to treasuries, Treasuries, you know the I look at the 20 year ETF out there on our scorecard we posted on to promote this. Live session, it's down in the last five years, it's down in the month, down year to date. And the volatility of the of the Treasury curve is is increasing. It's actually at 125 right now. This is it's a measure, this is a move index, it's a popular measure to look at implied volatility of Treasuries. So the Treasury volatility, talk about uncertainty back to what you know Chris mentioned from our report, uncertainty is higher in Treasuries. There are fewer buyers, there's more coming. It's a problem, they don't know where to put them and it's they're bouncing around in price. So the the trend line is there. In fact it hasn't come down since they first rose rates. So that's treasuries. NASDAQ its volatility is trending higher as it gets more concentrated. You know, we all know five to seven names account for anywhere between 50 to 80% of returns on any you know, one year rolling one year basis in the last few years. So the few are carrying the rest and that that can create some volatility as as market breath decreases. Then you got this guy up here a little Bitcoin pops up. Bitcoins volatility has been trending lower and still back to that uncertainty. You know, it's it's gotten to be bigger. The basing impact is kicking in no longer 120 Vols as Chris mentioned. And Jesse, I think you were talking more about the histograms, but I think this is just overall bitcoins volatility is not increasing. It's becoming more certain. And I didn't know if you had another chart that you want to mention, because I have more kids that I can. Show you too. Yeah, No, this is a perfect spot to start. It'd be cool to see the the histograms of I I think it's equities. I don't know if it's equities and bonds and and show that the skew to one side versus then Bitcoin with the skew to the other side. Yeah. So here is Bloomberg, there we go. Yeah, US large cap equity index, which is effectively the S&P. Bloomberg just did it because they want to, you know, put their own name on it and they do some other things for their indices. It's effectively the S&P. So this is the rolling quarterly returns over the past five years give us a lot of metrics. You know, it's daily data looking over the last rolling effectively 3 months and it looks kind of like a normal distribution. But when you look at the kind of the tails, you got a lot of zeros, ones and threes on the on the gains. And then here you have some more chunky on the lost side punching through and this 3.7 mean now we're going to get a little wonky is less than the median, which is about 5 1/2. And so that's a classic negatively skewed distribution when the average is not equal to the most frequent return or the median return or the middle of return rather, which is about 5 because you have a lot of negative returns. And, and in case there are any traders on the phone or, or people who back to parenting who realize things are good until they're not when you have kids, when you get that call, I have teenagers or used to. So trading is in traditional assets is like taking the escalator in the way up, Bang, bang, bang. You're accruing interest on a bond until one day it's a default and you take that elevator shaft the way down. Not fun. That's what this chart shows you. It's the elevator shaft. Those losses appear. And that's what a negatively skewed distribution does. Yeah. And, and, and so that's why traditional asset allocators are so afraid of volatility because they've hundreds of years, well, generations, let's say, of learning that the elevator shaft is what you want to avoid because it's not fun and it goes down and, and then, and now you can tee up the, the inverse here, Mark. All right, so now this is my star child here. Not gold used to be gold, but it's Bitcoin. So look at this distribution. You you didn't even you don't need to know math to just ask the question. This is different and then say why. And you have four people on the on the call here will tell you well, it's because it has good volatility. It punches to the right and will surprise to the upside much more than a surprise to the downside. So I'm going to push it back to you guys to riff on this distribution. How you think it's best shared with the audience or investors? Or should we pivot to something else? For, for me, this is, this is my favorite chart. And, and Mark, we talked about this before, so I'll, I'll sort of bring up the highlights of that conversation of for Bitcoin's entire history, there's been this vague awareness that if you miss the 10 best days of the year, you're flat. So, you know, if you try to time the market and you happen to miss the 10 best days of the year, you're not seeing any of Bitcoins gains. So you got to stay in the market. But you know, what that's really saying is that there are 10 days a year where it jumps upwards and you want that positive volatility. So you better hold on, you know, through the boring times in order to get those those big days. There's also Mark, we also talked about how the closest analog to this is probably gold in the 70s. And we talked about how that was because gold in the 70s was going from prohibition to suddenly now you're allowed to invest in it. And there had been price suppression and now suddenly a decade of price discovery, you know, allowing gold's value to go upwards through market forces. And so, you know, gold had been suppressed down from where its natural price equilibrium should have been. And it it took took a decade to float up to that and overextend beyond that. And Bitcoin is not going from prohibition, but it's going from not existing to now existing. And there's this price discovery that's been playing out for 15 years of how do you, how do you value something that had no value day one and, and how much value should it accrue in the global asset landscape? And we're, we're witnessing that price discovery play out over a couple decades. And so there's, there's similarities there of of punctuated equilibrium where it's boring for a while, but then price discovery happens to the upside because we're still trending towards where this asset should be quote, UN quote in the global asset landscape in the same way that gold had to go through that price discovery in the 70s. Get on. Yeah. I think that's a great point that I often use that chart as well showing the volatility spiking for gold. And it's exactly what you said, Jesse kind of said it better. It's, it's going through a monetization process, a price discovery process, and the keyword is a process people don't know from one day gold is fixed $35.00 an ounce. You couldn't even own it as a private citizen. Next day you can now own it. It's freely traded. Everyone just knows the price. They don't it, it has to be an emergent process where the information is generated through the market itself, which is a, a nuanced point, but I think very, very interesting for people to really think about like you, you can't, you can't get the information without it being volatile, without it going through this process and and expressing all the opinions of billions of people and investors around the world. But one question I I had on this is, is one I've gotten from people, especially from my trad FI colleagues and friends, where they say, OK, but why? Why should this persist? It seems like Bitcoins well known. What's what's my edge is what I often get. And and of course, in their minds as a traditional investor, to beat the, the market, to improve your portfolio, you have to have a competitive edge. You have to have a variant perception. You have to have information that someone else has. So I'm curious what you say to that question like why should this persist and why should it continue that it will still have this long right tail continue to be non correlated and add diversification and and risk adjusted returns? I'll, I'll take a quick stab at it and then it's not anyone else. The I, I started to get involved in Bitcoin only in 2020 when I was a Credit Suisse. I was on a desk that provided data to hedge funds, sentiment data to help them provide get alpha for their systems in order to look at positioning changes. And I noticed that our client list kept rolling over the ability to generate alpha and hedge funds is very difficult. And then it was like, why is it why these big firms are so well resourced? Why can't they, you know, beat the S&P and then I looked over my shoulder at at the bigger animal which was the Fed as far as accumulating and driving flows and liquidity. So they would the markets would go sideways, say there was a energy shock like 2016 or Chinese devaluation in August of 15 markets. What goes would go break hedge funds make money for about 8 minutes and then the Fed would come in, step in, provide tremendous amount of liquidity and all volatility compression would come down. So I guess I saw that as why hedge funds didn't make money. But then I saw that there was a negative residual and growing problem of our debt load, whether it be the Fed monetizing all the treasury debt. So now we're getting into something like Lynn Alden would call not financial repression, but of fiscal dominance, which is where. So why do I think this is going to persist? Because I look at market data and I saw that bonds were slowly losing their ability to act as a as a safety net. Chris, they were wonderful in 2008. I think the 10 year made like 22%. It was a great offset. It's a parachute, man. It worked. 6040 thumbs up. It hasn't since then, and I think it's because it's been captured by the Fed. They're the one the only buyers. Other folks aren't buying it. And we all know a healthy system needs to have breath. Like the convert market back to where I grew up. It was a great market because it was a wide, a lot of different buyers, a healthy ecosystem. But then over time it became one buyer like a ball buyer. So I say that for the small audience of convert folks listening, you need to get involved here because this is this is exactly what's happening in treasuries. It's getting an attenuation of buyers and it's not acting as a parachute. So I think it's going to persist because we our deficit will continue to grow. And I think that real stalwart of treasury support that you got in a downturn, that parachute that's not going to come unpacked anymore and it hasn't for five years and I don't think it's going to. So that is a fundamental question or answer, which is going to be part three of our series, which is the problem in Tratify and why it's terminal. And then so the the other one is everything that's been going up is because every business has been shifted to a technology and software layer. NVIDIA was a hardware company. They figured out how to integrate software onto the chip and voila, they're one of the largest, fastest growing companies in the world. They took the analog hardware world and they turned it or morphed it into a software solution, Chris, and that's what this is. This is a monetary software solution in or a monetary taken software and converting our traditional monetary system to a decentralized secure software solution. Yeah, that I think that's a big part of it right there, Mark, the, you know, the, the context of, I guess for me, Chris, it's all about context and the context of fiscal fiscal dominance and national debt and all that is a huge part of it, probably the single biggest part of it. And then the other side of that same context that Mark was alluding to is like what is a bond really doing in your portfolio? Like what, what, what's it really providing? It's OK. It's, it's delivering 3-4 percent, 5% and stated inflation is 3%. But is, are those numbers real? Is real inflation more like 7%? That's actually what Michael Saylor has included in his recent model that, you know, that's, that's real inflation. So if you're holding a bond, you're actually, you're losing, you're destroying value If, if real inflation is higher than stated inflation. And then there's that bigger context. Of course, I'm going to go back to my little baby of the global asset landscape chart where I show the, you know, $900 trillion of global asset value by my estimation. And Bitcoin is 1 trillion. So one one thousandth of the world's value is, is digital gold. And it that's obviously been, that's the current state after 15 years of monetization. And then the question becomes, where does that stop? Does it stop right there at, at one one thousandth of the world's value is digital value? I don't think so, especially in the context of, of fiscal dominance, in the, in the context of bonds not serving their, their purpose as well as Bitcoin does. So, you know, if I'm an investor, I and I learn about Bitcoin, I, I think this is a better form of bonds that delivers way higher returns with actually lower risk, which is mind bending. And I'm going to put more capital in it. And yeah. So where does that stop? It sort of becomes a question of if gold monetized until it reached its equilibrium in the 70s, Bitcoin is monetizing until it reaches its equilibrium place in the global asset landscape. Now, does it stop at one one thousandth of the world's value? Does it go to gold? Does it match gold, which would be A10 to 15X from here? Or does it exceed gold and become something better than gold because it has properties that are more attractive than gold? That's my view. It's is that gold is the, the, the minimum of what Bitcoin will achieve. And so if that's, if you believe that, then this process of monetization will continue until that point or whatever is the right equilibrium for Bitcoin. So that's how I view it. I guess at Onramp, we believe that Bitcoin is the most important asset of the 21st century. The hard part is securing it right. There are shortcomings with keeping your coins on an exchange, but also with setting up your own self custody arrangement. Onramp solves for these concerns. Our multi institution custody solution maximizes security and minimizes counterparty risk, ensuring that your Bitcoin remains securely in your possession and provides built in inheritance planning to ensure your family is protected as well. On Ramp provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it as a compliment to your existing self custody set up. For more information, check us out at on rampbitcoin.com. Yeah, that makes sense. And that that is the multi trillion dollar question of course. But I've seen charts where before, you know, we're in such a small portion of history where gold is not the financial foundation to the global monetary system as it was for hundreds or even thousands of years before. So it's a very small portion, but before when it was, it was double digits, right? It wasn't the whole thing, but it was double digits of what people built on top of it. So you start to think of that as the potential scenario as parity. But then to to Mark's point, it's more than that. It's, it's a software system. So it could be embedded and built on even more than the gold of the past, but don't have a good answer to that. Just just some of the ways to think about that, that multi trillion dollar question of what does Bitcoin, what could Bitcoin potentially monetize to in relation to all these other assets? One other thing I wanted to not so much a question, but just a comment that I definitely want to get to is your repeated use in this paper of harvesting volatility. And Mark, you know, you brought this to myself and our team years ago at Fidelity, this idea, and it was the first time I had heard it that way and presented that way and it really unlocked something from me and it's something I've used. So I'd love to hear more, hear you tell people more about this idea of harvesting volatility. How does that work? What do you mean by that? And what are we talking about there? OK. On harvesting volatility, Bitcoin jigs when other assets Jag. So when we were when, when I was in the in the markets and we dealt with high yield bonds, it's like are you wearing the volatility meaning like you're just riding and it's ripping you or are you harvesting it? If you if you are riding the volatility, it means that you are holding on to the asset. Think of it like a wild horse. You're thrown, but you're still attached to the saddle. You being dragged all over God's creation. You may get to dinner, but you're not going to feel too good. So, so that's, that's really kind of like, you know, riding the ball harvesting means that you're sort of stepping back and you're able to when it comes up, you clip it off and then you pull it in and you put in your sack and you know, you are, you know, think of it like like a geyser. You know, where you're taking the, the water comes up, you're able to, you know, use it and, and grab it and then go down and then not, not beyond the geyser. That's, that's my mix of, of analogies. Please give me it's, it's early here and, and let me just go through some numbers and then I want you guys to direct me because I found that working with Jesse, he's better pulling it out of me than I am by delivering it. So here numbers, this is a 5 year study and we do a six and a quarter year study. We do rolling 10 years which are coming out in an addendum. So don't even consider saying that we're cherry picking because this is a persistent pattern we took. A regular 6040 portfolio. We took 1 1/2% out of equities, 1 1/2% out of bonds. Again, don't ask us about cherry picking. We do it for one year, five year, 10 year, 25 year. I mean, 25% allocations of Bitcoin also coming out in a week or two. In an addendum, it's just 3%. So we put 3% in. Here's a regular 6040 portfolio, probably keeping up with monetary debasement, 5.9% return over five years when Bitcoin only returned about 18%. But when we put 3% in that portfolio and rebalance it quarterly, we don't leave it there over time, but we say every quarter, let's rebalance it. If Bitcoin goes up, we're going to take some out, put into bonds and equities, harvest it, it goes up, pull some out like the geyser just put in our back pocket. And then if Bitcoin goes down, we take some from equities and bonds and we throw it into Bitcoin. And over this period of time and as we show in most any four year period, Bitcoin doesn't hasn't has gone back up. And we're able to then harvest that volatility by pulling from lower Vol assets into Bitcoin when it falls and then it rises. And when it rises, we grab it back out, put it into bonds and equities, and then when Bitcoin comes down, yes, rinse and repeat. So that gave us 200 and 190 basis points more annualized return by just allocating a 3%. It's almost like renting Bitcoin. So that's good. Thumbs up. You made more money. Everyone's like, yeah, but it's more volatile. Let's go to the right chart here. This is volatility down volatility. What's the volatility of all the losses? It's 8.2% in your regular bond and equity portfolio. It's less here's the home run. You have less uncertainty on the downside when you have Bitcoin in your portfolio. And then for allocators, back to what Jesse or Chris, I forget which one said, when you have that down 70% quarter or or drawdown, well, a 3% drawdown when you rent it, when you rebalance it quarterly, you kind of don't accumulate those losses, but you can compound the gains. It doesn't have a materially different drawdown that keeps the allocator that has permanent capital in the job because his job's not permanent. The capital is his isn't or hers isn't. And so that's, this is the really the trifecta of graphs. And now I'll show you one more where it goes into some of the math. Harvesting volatility means you have to actively have a plan with an advisor, whoever it is to say, I'm going to regularly rebalance your portfolio. Mr. Client misses client because this is a, this is a Bronco. It has higher volatility. It is trending lower, but we can use it to our advantage. Bitcoin made 17.8% in that five year period where I just showed you the graphs. So if you put 3% in and just held it hold your held your nose and rode that volatility, which probably wasn't pleasant, you made like 50 basis points right here. That's it. Static five years, 17.8 * 3%. It's math 50 basis points. But if you took that 3% and rebalanced that whole portfolio among the three assets, nothing fancy. Every quarter Q created 880 basis points of value to your portfolio and that's why a 3% allocation gave you 2120.7% of your whole value. We gold levered. No asset we've seen can do that. This is the home run. This is the sequencing of charts about good volatility being harvested for your client where drawdown doesn't really 'cause you too much heartache and the volatility actually decreases. So that was my 3 1/2 minute run and hang it up. And please, you guys have seen this as much as I have. Let me know when I minister what you want to focus on that. The, the first time I heard you say this, this, this floored me. I, I was so surprised at these results and this idea because you think that by rebalancing in the tradition, because in the traditional sense, we all have this intuitive feeling and the data will show it. You rebalance your, you're staying conservative, right? You're, you're lowering your wrist. You're not letting anything get too crazy, but somehow when you add Bitcoin and you rebalance, you do better than just holding it. It shouldn't make sense, but yeah, it does. And it's it does for those reasons that you're talking about. And what I love about this is that this is such an easy sell and A and a great tool, especially for the advisor space, because you're strengthening and playing into people's emotions. What we just talked about, right? They know that if Bitcoin runs like crazy, it's not going to take over their portfolio and give them bigger swings. They know every quarter it's going to get paired back and it it seems like an active strategy because someone has to to pare it back. But it's not active in that you're trying to bet or time or anything. It's purely it's purely passive, right? It's purely just re simple rebalancing and it's something that's as old as as time. But then once you look at it with with Bitcoin in it, it, the results are incredible. And we were just talking about this earlier. I mentioned earlier AQR big quant shop, they released a perspective piece September 4 of this year called in praise of high volatility alternatives. And so I've got in front of me here, if you'll you'll indulge me, you'll see how this exactly connects. But first of all, Cliff talks about you shouldn't. Everyone knows that volatility is a is a drag over time at the portfolio level. If something goes up 50%, down 50%, you're down 25%. But the key is you got to look at the individual components of it, right? And so he gives a hypothetical what if, what if you have an investment and a superior hypothetical investment? There's a 2/3 chance that you double your money and one third chance you lose it all and then assume this investment is uncorrelated to anything else. So he says two things are obvious. So they seem very obvious. The multi period compound return is clearly going to hit -100%. You're going to lose it at some point and then it's going to stay there. So obviously you want to put your whole portfolio into this, but anyone should put or should consider putting part of their portfolio in this investment because it has a positive expected return and only -100% on a very small part, part of the overall portfolio. It's imminently survivable. So when you lose or win, and this is his quote, you just reload and do it again. And that's the key. That's the volatility harvesting you're talking about. You have the ability to to reload when it goes down. And when it goes up, you take some chips off the table, right? And then he goes through with an actual example of stocks and bonds and then adding an alt and the alt he adds as a, as a quote, high Volt alt of only 25, which Bitcoin has couple multiples of that. But what's interesting is he shows as, as you add a higher volatility alt, if you're, if you're targeting a portfolio that has a total volatility and he uses only 10%. So you're optimizing the portfolio for a certain amount of volatility, the higher Volt alt is going to become a smaller and smaller part. And that's what allows you to, to do this because at any time you're only losing a small portion and you reload it again. And anytime it goes and outperforms you harvest that and take it off the table. So thanks for indulging me. I just came across this paper I read a couple weeks ago and, and a big light bulb moment went off where it's like, this is exactly what Mark is talking about. And he doesn't mention Bitcoin at all on this. Just to be clear, this is purely just a, a alts, purely quantitative way of thinking about this. So I, I, I think you're in solid quant foundational territory here with this idea. Yeah, it's support and there is when I was presenting once to someone up in Canada at one of the bigger banks, they said don't use the word Bitcoin in your chart, call it Vega Strategy 4. It's your option based with a little bit of bond and overwrites show that it's a construction using traditional assets that generates these types of returns. You'll get an audience. If you say add 3% Bitcoin, you're losing to 80% of people all. Right. It goes back to the knee jerk reaction against it, right? The personal bias that some people might have. Exactly. It's interesting how Chris, your example takes it to the extreme and if you, if you can accept the logic there, the the pure math of it in this extreme scenario of like of double or nothing, then and and you can wrap your head around, OK, yeah, if you get the small enough portfolio size or allocation size for that, then it's mathematically starts to make sense. You can convince yourself of, of the logic of it before you've even, you know, in the, in the abstract, in the theoretical realm without having to consider what asset you're even talking about. It's sort of a, a funny way to to math pill Bitcoin skeptics. And then and then the solution is, Oh, by the way, this is actually just Bitcoin. Yeah, it's like the old Pepsi Coke challenge, right? You, you drink it and they say who one you like better and then they reveal which one it was. You should, you should do that. Give them the the math, give them the stats, give them the chart and then reveal what it what it actually is. I love that. What do you think Rich? Would that would that work with the folks you're speaking with? You know, interestingly enough, I, I, I do think that, you know, over the course of the past 12 to 18 months, the sentiment towards Bitcoin is evolved in a healthy way. And as it should. Frankly, I think, you know, there's been a lot of dispelling of, you know, fear and misunderstanding in the marketplace. And, and kudos to Fidelity digital assets and, and BlackRock and, and other companies that have really kind of stepped forward with an evolving point of view that allows, you know, for the broader registered investment advisor, family office investment professional to kind of refine and, and get a little bit more comfortable or take a second look and, and start acclimating, you know, to the virtues of the, of the asset. I'll, I'll tell you, you know, four years ago when I was working at Schwab, you know, when I would talk to people about, about Bitcoin with the conviction that I had and, you know, it was, you know, a non starter, like people would literally freeze up and, and, and, you know, you would be having a lot of, I don't know what I want to say, but just kind of rudimentary kind of basic level conversations with people, you know, from, you know, what may have started as a high level and interesting conversation to something that's very basic. And so I think the world is evolving very quickly and, and rightfully so, the asset is continuing to win and and the monetary policy, you know, continues to do the monetary policy of Bitcoin. And and I think, you know, people start recognizing that it was a very unique asset class and it's work like yours. Mark, you know that you just really produced here that help bring the academic, you know, and mathematic exercise that I think a lot of people need, right. When you are skeptical of something, you need relevant proof. And that's where a report like this, I think really, you know, hits the home run. It allows people to get out of the theoretical and and start actually looking at the academics of it and and you offer relevant proof that I think becomes hard for people to deny. And so at this point in, in, in bitcoins evolution, you know, I think people are starting to really warm to it. And, and I think that that's an exciting proposition. The question now becomes, you know, how do you access it And, you know, and how quickly can infrastructures be be built that make things easy on advisors? And where is the regulatory and, and the compliance world on these things too? So I mean, there's a lot of hurdles that advisors are sorting through. So we have to be fair to them, you know, in in saying it, they may actually really like the asset and have something interesting or have an interesting point of view about it. But they're but they're struggling with what is the right way to step into the asset. And I think that that's a healthy debate today that, you know, a lot of firms are having. The the reticence is just palpable. When we go to meetings, sometimes you'll be walked out, maybe by the CIO, sometimes by, you know, a, a junior or mid level analyst and they'll whisper, I own Bitcoin, but you know, we're not ready yet. Like it's almost like it's a, it's one of those POW things like blinking messages saying like, you know, I'm in, but we're not quite there. So it is at the edges. It is being discussed in the offices and as an anecdote, when you've been in it so long and Jesse's been in Bitcoin and I think Rich, you've been in longer than I have. And Chris, I know your your firm has been doing it before anyone knew about it. So I come at it from the problem side. But even in 3 1/2, almost four years in it, when I saw Judge Rowe's decision come out on August 29th of 23 and read her language that was saying the SEC was acting in a way that was arbitrary and capricious 8 times. And she basically held her feet to the fire about allowing the spot Bitcoin ETF for reasons like it's like a future getting not getting into the details. It was clear, it was pretty clear that the law was going to allow this. Bitcoin went up for like 2 days back down. It didn't move until the SEC decided not to pursue an appeal on October 13th, October 10th, that Friday I think of 23 and said no mas and then Bitcoin went straight up for six months. I don't know. It went up almost three times what 28,000 to 73,000 through March of 24. And I think this is a total show me asset. People need to be sold Bitcoin. The ETS helped your work. Chris is obviously helping, but showing how you can do it without getting in trouble. That's why I like this rebalancing. You won't even see it folks. It'll just help you. You don't have to. You can tell your clients. I know other folks have multi assets where they have the ability to put it in and they're just putting in one to 3% because they have the ability to do it in their, you know, close end funds etcetera. So that's what we're offering. Come to us, come to obviously Chris and team have been doing this forever. We'll walk you through it as advisors, but there's a way to offer it without having it hit you in the back of the head. We believe it passes Prologue. Interesting, Mark. And something that's not displayed in the report. But you know, you did a lot of work behind the scenes with with other allocations too inside of a 6040 model. I mean, you took it, you know, 135710, you know, I think you even went up to 25% allocations. Now, I'm not, you know, suggesting that that's anything that an advisor would do, but but really quite compelling numbers regardless of where you were on a risk adjusted basis. It was quite fascinating. And, and I applaud you for all the great work that you've done and a lot of fun to to kind of see that process unfold. I know it was a labor of love on you, on your end and you, you, you certainly involved a lot of different people, you know, to get a second set and third set of lenses on it and contribute to the report. And so, you know, it's a pretty, pretty amazing report. And so if if somebody wants to get a hold of that report, Mark, maybe maybe share how, how, what's the best way for people to get that? I would e-mail, you know me, Mark, at on rampbitcoin.com. It's we'll have it on our website, it's on our LinkedIn. And yes, I don't know if you have any other suggestions, but I think those are the main ways. Cam Strom is also and Jackson Mikhailich are are two of our lead salespeople. So yeah. Just reach out to us. Just reach out to us and and you mentioned about Sharon, I want to thank there were a lot of people who went over this. I couldn't believe some of the results. I want to make sure I got the math right. Chris mentioned speaking to your firm. Part of it was just sharing it for, like, feedback, very helpful from your team when you gave it to me injured. Barden, who ran a division of equities at Merrill Lynch and then at Credit Swiss later. I went over with him three years ago when I first discovered it, and I couldn't believe it. And he helped me. And then there were a bunch of others more recently like, you know, Joel at 2 Ocean and his team. So this is collaborative. I'm not a quantified design and that's why it helps to have Cliff's Cliff's notes help me out and support that. You mentioned Chris from from AQR just to get that support. Yeah, it's, it's another one of those examples of, of Bitcoin being requiring some quant analysis, but also a certain high level ability to ask the right questions, you know, as almost an art rather than, you know, pure quantitative science. And I think that's a big part of why people have missed this to date, Mark is it's it's the right, it's the right lens, the right questions, which comes from a place of understanding the asset first. You have to have a certain level of understanding of what's going on and then identifying the pattern that you're experiencing and then wondering why that's happening. And then you get to the the right data from there. But you know, it's and I think that's why someone, Someone Like You who has a background in markets, but is maybe not necessarily a traditional quant had the right set of questions, the right experience to say, hold on, something's different here. Let's see if I can put my finger on it. And Mark, I know we've talked about for me I think. I think what you've spotlighted here will be the story for traditional finance getting into Bitcoin over the next decade. That story will be one of at what point in time does each shop on Wall Street realize that this is the reality of Bitcoin, that this data is playing out and that this is good volatility that you should seek out and include in your portfolio allocations. That's, that's, that's just a exercise that every shop on Wall Street, every traditional finance firm in the world will have to go through at some point because Bitcoin is simply there, it's delivering this kind of performance. And it's, it's there to be harvested, as you point out. And you're either going to get left behind by the firms that do embrace this, or you're going to be at, you know, the tip of the spear of the leading edge and you're going to get an, an advantage on your competitors. That's going to be the story of, of traditional finance and Bitcoin over the next 10 or 20 years is when do you embrace this and include it in, in your strategy for your clients? Or do you fall behind because your competitors do? Yeah. And back to what Chris was highlighted, Jesse, when you're talking about where I come from asking the questions definitely because I wasn't not a quant, I'm like, wait a minute, how's this working? So I got even more whether it be insecure or or rigorous in my work about making sure that I hit this right. It's along the lines of what Chris, in your Nashville speech you pulled from out of those Munger or Buffett or on the invert. But why don't you talk about that? Because I did that without even knowing that that was what, you know, a process that he pulled on. Yeah, it's a phrase I've been borrowing from Munger. Who he actually hated Bitcoin, you know, the late Charlie Munger, Warren Buffett's partner. But he said he of course had a very unique perspective as as to how he analyzed investments. And he's one of the keys to his success was always inverting the question. And it actually doesn't come from him. It's just we know it more from him because of the investment side. It comes from a mathematician almost a century or more before him who was able to figure out a lot of different mathematical discoveries by inverting the question. So to make it more tangible though, the the the funny one that Munger says is he was a meteorologist in the Army or the Air Force and his job was to look at weather patterns and make sure planes were OK to fly and, and keep them safe. So rather than saying how do I keep planes safe and keep the pilot safe, he inverted the question and said if I wanted to kill as many pilots as possible, what would I do? And he came to two conclusions. He would say, I'd, I'd put them in weather where they couldn't land, sock them in fog or, or storms, so they'd run out of fuel or I, or it would be too icy. I put their, their wings in icy conditions. And so those were his two guideposts that he laser focused on. And of course, he did that with his investments as well. And so I took that idea and I said, let's stop from this perspective of here's Bitcoin, here's what it is, here's why you should consider it. Here's all the stats and invert the question to people because I think we're now at a point of maturity where we've got the the data on our side and your report adds a huge amount to that. We have the data on our side where we should be putting it to these investment advisors and asking them, why haven't you considered Bitcoin? Why aren't you, Why aren't you looking at this? Why don't you have an answer? Why is it always just a hand waving or too volatile or something like that? And, and of course, I mean that a bit facetiously. We're not going to be as rude or blunt to people, but it is getting to that point where you've been in the space a long time and you start to get frustrated with with this, this idea and this question that I think we're there. We have the infrastructure, we have some regulatory clarity. All of these barriers are falling by the wayside and that number one volatility needs to be broken down as well. And so that's where this report and and others I think are really going to help in that endeavor. Well. Thanks for that. I'll add that Bitcoin is the 10th largest asset by market cap. And guess what number 11 is? Berkshire, Right. Well, and the powerful thing about that question is it forces people to have an opinion. And to be clear, for some people, it still might not make sense for whatever reason. And that's, that's fine. But at least have an opinion. At least do the exercise, at least do the homework, do your due diligence. Take your, your, your responsibility seriously here. Your, your fiscal responsibility for this, your fiduciary responsibility. That's, that's what we want to emphasize here. At least have an opinion. And and as Pierre, I think Pierre Rashard points out, there are no well informed critics. So you you might find that as you develop your opinion through informed research, you may become you may your views may shift from what they previously were. Yeah, well, that's AI think a healthy, healthy place for us to call it a call it a wake up call. And Chris, I can't thank you enough for taking the time to join us. And, and, and also Fidelity digital assets. You know, you guys have been great champions of of Bitcoin and and certainly have been a great partner to us and giving us second set of eyes on the work that we're doing. And and so we're, we're grateful for all that you're doing in the space to advance Bitcoin and bring it forward for others. And, and Jesse, thank you also. I know you're a little bit under the weather, but it didn't show you look fantastic and only a few little coughs along the way. But thank you for taking time and sharing your perspectives with our audience. And we'd love to have you guys both back on the show at some point in the in the not too distant future. Mark, congratulations on a terrific piece. I know that segment 1 is, you know, out and and we'll be talking about, you know, the three-part series. We tried to break it down, I think partially because it is a behemoth of a report. Remind me off the top of my head, I want to say it's roughly 50 pages long. So we we tried to dissect it. Yeah, 45 pages. OK, With that being said, you can if you want to learn more about the work that has been produced in the conversations that we've had, we'll do whatever we can to support you and your firm to, you know one providing the report to you. So you can visit on rampbitcoin.com or you can reach out to Mark or or myself directly. We'll be happy to make certain that you get that report and then, you know, perhaps we'll even do a webinar or something where you can sign up and and be a participant and ask questions along the way. So stay tuned on that and we'll continue to try to bring things that help you, one, you know, be better for your clients and two, to attract new and interesting clients as well to your business. And, and hopefully this research helps solidify that and, and put you in a position of a, you know, a first mover and gives you some level of advantage with, with how you're trying to grow your business in your market. So thank you all, Chris, Jesse, Mark loved listening to you and thanks for joining us today. My pleasure. Thanks for having. Me. Thanks, Chris. Thanks everybody. Thank you, Rich. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Rat Media is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. 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