Chris Kuiper of Fidelity Digital Assets on tariffs and Bitcoin

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show where we bring clarity to a market that's treating every data point like it's the final clue in a murder mystery. I'm your host, Jay Hamilton. It's Friday, April the 4th, and everyone wants to know what the heck is happening right now. We had Trump's liberation day this week. Markets nuked and responded as you would expect. More uncertainty, everybody. Where are we headed? What does the rest of the year look like? Are we going to go into a period of stake inflation? What does that mean? Also, we're going to take a look at what's going on with Bitcoin. Bitcoin obviously entered a period of price discovery when it hit new all-time highs of 109 back at the end of last year. What's next? What

happens when Bitcoin enters these periods of price discovery? If we look at historicals, what does that mean? Today to break this all down, we are joined by Chris Kyper, director of research at Fidelity Digital Assets, an institutional grade investment and services for digital assets. Now, before we jump in guys, we launched a really cool new feature over at Milkro Pro, and that is token snapshots. Our first token snapshot is on Aerrome. So, if you're interested in learning more about aerodorm or diving deep into the bull and the bear case, you might want to click the link in the show notes. Go pro today to get that. Today's episode is brought to you by Moonay. Trade crypto fee free fast and on your terms. It's also brought to you by Coin Shift

powering top crypto treasuries with their yield bearing stable coin CSUSDL. Chris, welcome to the Milk Road Show. Yeah, thanks for having me. What a day, huh? What a day. Should we take a a deep breath and maybe meditate with everybody? You know, how do you how do you get through days like today? Uh, okay. Let's let's start with uh with the obvious. Um, what's your thoughts on how the market has responded to tariffs and another uh week of new news coming out of uh the current uh office?

Yeah, days like this, you're always reminded of of what's priced in and what wasn't priced in. and it becomes obvious after the fact. So, I used to be an equity analyst. So, whenever you have these big jumps, uh that's a market signal saying it was not expecting something. If if news comes out and it was exactly as expected, the markets wouldn't move, right? So, obviously, all of these tariffs were were not expected or they're much larger than the market expected. Uh I was just looking at a chart of historical tariff rates in the United States. uh depending on how many of these go into effect and at what level if we get up to 20 to 25% on an average or looking at all goods that would be the highest rate that we've seen in the US uh for overall tariffs in about a hundred years a century. So this

is certainly significant. It's certainly not was what was expected. Uh and so that's why you're seeing uh such a major reaction selloff in the equity markets today. Yikes. Yeah, it's you nailed it when you said it clearly was everyone expected that this was going to happen, but not to the degree that it happened. What's your what's your macro framework right now for the rest of this year? Because what let me tell you what uh what I'm hearing a lot on the show and the various guests that we've had is there seems to be still a bullish belief and that is coming from a there's there's there's all the tailwinds on the fundamental side and maybe less on the

macro side that have set us up for regulation coming uh the strategic Bitcoin reserve government's buying all these the de-risking of Bitcoin like there's all these tailwinds that are everybody feels really good about. But then macro is obviously causing all markets to struggle right now because of the a massive amount of uncertainty. We haven't seen uncertainty like this in like 15 20 years. Uh when you when you step back and and look at the current economy and the current macro setup, how are you thinking it through? Yeah, you mentioned at the top of the show that word stagflation and in our 2025 look ahead report. We put this out every year comes out of the very beginning of

January. Uh one of the sections I wrote, I said, "Why is nobody talking about stagflation?" And uh yeah, you've got my tweet up here where I revisited this where it seems like people are finally talking about it. You just said it. Uh I did a Google search trends where it looks like it's it's picking up again. And we had a Bank of America survey of institutional fund managers with 71% saying they expect stagflation in the global economy over the next 12 months. So the contrarian me says like well now if everybody is saying it thinking of it maybe maybe it won't come true or it's already passed or something. Um but if you break that down you know stagflation of course being stagnation so a period of lower growth or perhaps even negative GDP growth and then the flation part is referring of course to inflation. Now, I

presented this this thesis or idea early in the year when I interviewed Tom Lee of uh Fundstrat and he disagreed with me on the inflation part. He said inflation's coming down. Uh the way it's calculated, especially with rents, it's going to continue to tick down and and he's right. True inflation, this measure of real-time inflation is is very low right now, like 1.35 it's showing. Even the official CPI has come down to 2.8. But I think there's a couple things to look at. Number one, of course, wasn't forecasting or or expecting tariffs, but tariffs, in my opinion, are inflationary. They are a tax, right? So, you are going to have to uh pay more for goods, and that usually some of it usually does get passed on to consumers, but of course, it it can always depend on how it's it's implemented. Um, but

the other thing to think about too is is CPI to me is just uh a form of inflation or really the the the subsequent action of inflationary monetary and fiscal policies. So it's it's the result of policies further up the line. So when you uh add liquidity to the market, you have things like QE or money printing as as people call it or you have a lot of fiscal spending like we saw uh during co the result is than the inflation you see in consumer prices. And so that's a bigger bigger way that I look at it in terms of my macro framework that you looked that you mentioned. So to me really you're you what you want to look at is is there inflation at that higher

level and sometimes that trickles down to consumer goods sometimes it doesn't if we get lower spending lower growth I would expect CPI the inflation everyday consumers to see to actually go down so in agreement with someone like Tom Lee but if you look at what the response is going to be at the fiscal and monetary level we've just got headlines crossing of of whether or not the Fed will cut rates again that sort of thing. If you look at inflation at that level, that is where I I see where we could see more inflation. And then you're going to see that either in consumer prices or asset prices. And so what I'm watching very very closely right now is gold. And it seems like if people are talking about stagflation right now, why aren't they talking about gold? It's very odd that

gold has been outperforming all kinds of things yearto date. It keeps going up to new all-time highs. And and at least to me, I don't know about you, but it feels like hardly anyone's talking about this. And yeah, you have this this chart up of historical this historical period from the 70s and 80s. Everyone thinks of this time as like, oh, it's a time of high inflation. There's actually two waves of it, right? There's the first wave and a second wave. And here you see the wave of CPI going up uh and gold moving before it and then the second wave the same thing happened. So I think people really need to be watching gold now as well. And then how do you think about Bitcoin in correlation to gold?

Yeah. So, this is really interesting to me right now because up until this point at least, Bitcoin has act as this this risk-on asset. And and you see why something with high volatility, traders and investors just lump it in with other high-risisk assets. And so, when they're they're in a speculative move, they want it mood, they want to take on more risk. Uh they're going to go out to things like Bitcoin and and even further out on the risk curve, other digital assets or crypto, right? And so that's why you'd say people people were saying um is Bitcoin and other digital assets is it just a tech stock on steroids? And I'd have to agree with them. That's how it traded. And I would say it's not the same thing. Fundamentally, these are two very different things. And I can pound my fist on the table all day and say

that. But if traders are going to treat it like a tech stock, that's how it's going to trade. But now, uh I've been in the camp of saying someday hopefully we will see a decoupling when investors realize Bitcoin is not a tech stock. and it's fundamentally different and therefore you should treat it and trade it differently. And so now just these past few days, it's still much too early to tell. So I'm not willing to say anything definitively, but we now have a few data points where NASDAQ has sold off. The high growth, high beta, high-risisk tech stocks are selling off big and Bitcoin's being flat. So is this that decoupling that we've we've been waiting for? Or at least I've been waiting for? Uh maybe. Again, too early to tell. But this is also why I bring up

gold because I think if you look at the the macro environment once again, what was really interesting yesterday was that the dollar sold off on all these tariff announcements. And you would think in traditional macro world, if you have a lot of tariffs, you're going to import less. That would actually strengthen your currency. So, the fact that it sold off uh was quite telling. And again, it's just one data point, but this could be for two reasons, I think. one, the market is looking further down the line and saying this is this could be could hurt us uh and our competitiveness, so the dollar should be weaker. Uh and or number two, the the the world is trying to ddollarize and this was just another data point for them to reinforce that thesis. We've

seen of course the US is the global reserve currency of the world, but we've seen countries continually take few steps to to ddollarize and move away from that. And is this just another data point to confirm that? And if it is, what are they going to instead? So, usually, you know, we run a trade deficit. That means um we import more than we export. So, these other countries that run a surplus, they've got all this capital. What have they traditionally done? They've recycled it back into the US economy by buying our our stocks and mostly our treasuries. Now, they're increasingly buying gold. Why? Because they they potentially want to exit this system of just recycling back into the US. And they want something that's outside of the geopolitical system. They want something that's neutral. And for thousands of

years, that has been gold. But could it be Bitcoin? Uh, of course, if you read our research, we do think Bitcoin has all the great characteristics of a credibly neutral monetary good and then some. It improves upon a lot of these characteristics that's needed. But what it doesn't have is the track record. And so that's the big question for me. Will people try to exit this system through Bitcoin? I think some will. The question of how much or or how many uh will depend on how comfortable they are with it at this point. It's still pretty early. It's still a nent technology and gold has been around there for thousands of years. There's all this infrastructure in the in the international finance world built up around gold uh with gold markets and everything. So, we'll continue to watch.

But that's that's the biggest thing that's got me the most interested with all these latest moves. So much to to unpack here. Uh first comment I want to make is um I I also agree with your take that Bitcoin is treated like a risk tech stock even though it is fundamentally digital gold and trying to be digital gold. But it does as you said it seems like we might be seeing this decoupling happening right now and that would make sense because we do have different investors buying Bitcoin that we never had before.

I mean Abu Dhabi bought what 500 million approximately of Bitcoin in Q1 of this year. They're not buying that as a high-risk test tech stock to trade it. They're buying it as digital gold. And so it would make sense and other governments as well probably. I think there's some governments that are silently buying Bitcoin that we don't know about. Michael Sailor obviously buying it for these like there is a growing portion of the Bitcoin buyers that are buying it in that fundamental thesis that's very different than the past crypto natives or the traders that as you said have been buying in the past. So that's one reason why I think this shift is happening. The other thing that I want to mention is I I I want to

go back to macro for a second because I'm trying to to figure out like how this how does this all what are the scenarios and the probabilities of how this might play out. So the the one that is being presented most to me and I'm trying to get more broad in terms of the the uh the different ideas and different cases that we can present on the show because I quite frankly I'm hearing a lot of one case right now which is this bull case that believes that no matter what if so from the Fed side if growth slows J Pal has said hey I'm comfortable I see tariffs as transitory inflation I'm comfortable lowering rates if I need

to. And as you said, we're getting indication that rates might lower. And there's people are saying, well, we're at 4.25% right now. Technically, we could go to zero, right? Not saying we will, but technically we could. And so, we got a long way to go if growth slows. We can deal with that. Basically, the Fed can deal with that. So, that that's the one case. The other case that I'm hearing is everybody saying well the with the US debt crisis they have to figure out a way to deal with the debt in the short term and therefore they have to print more money add more liquidity and therefore risk assets will go up eventually. So, it kind of all leads to this like short-term nobody

knows, you know, how long does the trade war last? How how does this all get resolved? Don't know. Nobody can get inside Trump's head. Good luck even trying. But it feels like in the medium term, there is this just this bull take that we're asset prices, particularly Bitcoin, ends the year higher. What's Please challenge me. Tell me I'm wrong. Like ch if you disagree with me. I would love to hear it. Yeah, I agree with you on the overall macro setup that um or the overall thesis that you you have to create more uh liquidity, global money supply. If you look at a chart of global money supply, I had one up on on Twitter the other day or X, excuse me. Uh it always goes up overall. I mean, there's little periods where it dips a little bit. Yes,

this one here, you always see it going up and you see Bitcoin following it. Now, of course, co correlation doesn't equal causation, but we have done some some pretty simple statistical analysis on this like is this statistically significant? Yes. Is it um does it have a high R squared meaning uh does the change in global money supply uh predict or or uh explain I should say is a better word the movement in the price of Bitcoin? Yes, it's got a R squared of like 775 even at times. So that means 80% of the move can be explained by the change in the global money supply. And and I'm a simple person. It's like if if you're looking at this a very long-term time horizon, uh that makes sense. If you're measuring Bitcoin in dollars and

the growth of dollars is is go growing faster than the growth in Bitcoin, which we know it is. We can measure both of these on the supply side. Um then all else equal, of course, demand has to be the same. All else equal, the price of Bitcoin must rise. And that's what we've seen. So that's very simply the very long-term view. I completely agree with you there. And if you're if you don't believe that, then you have to say, well, the global money supply is going to go down. Well, why would it ever go down? Like every tool in the policy makers toolbox, whether it's on the monetary side with central banks or on the fiscal side with governments, it is always to print or spend more. There's all different ways and and means and names for these things, but at the end of the day, that's what they all

fundamentally are. Now, you can debate whether that's good or it's bad or whether it's needed to soften economic things. Those are political choices and questions. Um, but economically at its root. Um, that's what it is and that's the the main thesis for Bitcoin as you know. So, fundamentally, yes, that's where this is all going in my opinion. But in the medium term, I guess to to give you a bare case on it, it would be swinging back to Bitcoin and these other digital assets being viewed as very risky assets. And so if there's a contraction in risk, if there's a contraction in liquidity, there's a lot of debt in the system. If that gets unwound or repaid, which is a contraction to liquidity, that is what could bring Bitcoin and other digital assets down in the medium term. Um,

people are going to sell off what they they they can, right? It's it's the old adage of Wall Street. You you don't sell what you want, you sell what you can. And Bitcoin is the most liquid uh market out there. It's recognized now all over the globe. It trades 24/7. So, if you're getting margin calls, if you need to make debt repayments and you've got Bitcoin, that's what you're going to sell. So, that would be the bare case against all of this in the medium term. Let's be honest, everything in crypto comes with fees. But here's a nice surprise. Moon Balance doesn't take a cut. You heard that right. No Moonay fees when you buy or sell crypto with your Moonay balance. Top up with dollars, pounds, or euros. Then, you're ready to trade instantly whenever the market moves. And if you change your mind, withdraw your cash. No moonay fee

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Gitcoin and hundreds of leading institutions. See why CSUSDL is gaining traction at milkroad.com/coinshift. And the the one thing that seems uncertain is how much this trade war is going to impact GDP. Like what is going to be the impact on on growth and on the the economy in it is clearly had an impact already. You know, you can see it in the data. But there seems to be again if we I guess it really comes back to if we can decouple from those tech that tech stock uh case and be seen as digital

gold then we should be fine regardless of of what happens on the growth side because gold would continue to go up most likely and so would Bitcoin therefore. Am I am I getting that right? Yeah, I think you're correct in that they'll likely hurt hurt growth not only from just like it's a pure tax, right, which is which is a drag and can lower demand. Um, but it also can hurt growth because of the the knock-on effects. And the biggest one in my opinion is the uncertainty it brings. So, you're going to start to see CEOs and and people who have to plan for their their company's future and whether they're going to expand or grow and they're going to say, "This is all too uncertain. They're just going to wait it out." So, that's that's another knock on effect there. So if

growth slows again it's probably um bad for digital assets in the short term if people are still viewing them as like a risk on growth type of asset. Um but again think of the second order effects. How will that recession or slower growth be combed? It's probably going to be combed with the same old tools that we've always done of fiscal and monetary uh policies trying to juice the economy back up. And in the long term we've shown that's good for especially Bitcoin, right? Uh but in the short term, anything can happen and that's why you you could see people retreat away from it. Uh but one thing I do want to highlight with all of this, this is all all uncertainty, right? We we said that word so many times. It brings so much uncertainty. Uh I I hope people come to see Bitcoin in particular and some other

digital assets as well as something that they can have certainty about because it's transparent, it's audible, you know the rules, the protocol rules, you know the issuance schedule, you know, uh all of these things. And so in a world of uncertainty, this is something that potentially stands out as something quite certain in my opinion. Well, and and you mentioned before the the direct differences between gold and Bitcoin. Like there's one right there, right? Bitcoin provides much more transparent certainty of supply than than gold does. We don't even know how much gold is in Fort Knox, right? Like when was the last time Fort Knox was audited? 50 years ago. So there is there's a there's a check mark for for the Bitcoin versus gold uh argument as

well. Um okay, I want to shift it to to Bitcoin and your thoughts on uh Bitcoin price and Bitcoin price discovery. Where are we now and what do you see coming? You guys have written some great reports about this recently. Yeah, we've had a number of great reports from an analyst on our team, uh Zach Wayright, and he's actually got the latest one on our website. that you can see all of our research at fidelityassets.com. So he he's come up with this model. It's it's quite simple but powerful of just two variables. It's uh what percentage of addresses are in profit uh on on the network as a whole.

And we can see this on chain. And then um what percentile is volatility in? Is it in the top 5% or is it below? And so you've got two factors. You've got four different permutations of that. high volatility, low volatility, high number of addresses in profit, or a low number of addresses in profit. Is this the chart that I've got up here that you're talking about right now? Yeah. Yeah. So, there's there's a few other ones on here, but it it creates a four-phase cycle, and Bitcoin goes through these four phases uh with pretty regularity. Um, which is which is very interesting. Uh there you go. That's a great one there. So you see the reversal phase when things are coming down bottoms out starts to exh to appreciate and then uh he's notably said we are definitely in the acceleration phase and that's when

you've got high volatility we certainly have that and you have a high percentage of addresses in profit. Now we have dipped a little bit below that. So uh even in these phases you can have certain days that that uh go into another one. But the point is you zoom out and you look at where these big transitions are these phase shifts. And again, this is a backwards looking model. It's not necessarily predictive. Um, but it is important to know because Bitcoin has gone through these cycles. And so, if we're in this acceleration phase and we're already well into it, at least historically, uh, we would have been moving up a lot higher, um, we're at a key point here because either we're going to get this acceleration blowoff top like we did in the past or we're not obviously. And if we don't, this will be

the first cycle that doesn't have one like that. So it would be quite different. The other thing that could be going on is is these cycles are just getting longer. He looks at all four cycles in in the recent uh research report and you can see they they've all taken more and more days to get to that blowoff top cycle. So that could be the other possibility here is that yes, it's still in that phase, but it's just taking longer than the past. And that's why I think a lot of people are feeling so despondent right now on the Bitcoin side because if you look at the four-year compound annual growth rate, it's still high like somewhere around 15 to 17 18% I think if I remember right.

Whereas just a few days ago before this recent crash, the 4-year compound annual growth rate for the S&P was around 13. So you didn't get that much more return for taking on multiple times the amount of risk or volatility. And that's why I think some people are are getting a little uh getting a little tired because they would have expected a little bit more this time around. But I think that could just be once again because you're only looking at the past four years. It could just be the effect of this this cycle this time taking a little longer. But again, we'll we'll see how this plays out. Yeah. All that that's exactly all that's what that says to me. What that says to me is macro is caused this delay. It's just changed this cycle.

It's come in at a point where nobody expected uh tariffs in this way and this this current uh shift in in regime at the scale and the speed that Trump and his office have done. Nobody nobody expected that. I mean maybe somebody did, but I certainly didn't. And and as a result, we're we're just it's kind of like we're delayed. Like we're in we're in pause and wait now. Obviously, if this if this delay, if this trade war drags on and there's no end and then then I I also don't know growth will slow and we might enter a recession and you know that'll that'll play out the way it plays out and I but as you said

even if that does happen the the fiscal policy is going to be what they've done since 2008. We had Matt Hogan on the show from Bitwise earlier and he puts it the best. He says they're just going to hit the easy button. No politician or central banker in the world has shown that they're not going to hit the easy button in 20 years. So why would I don't I don't see them changing tune now. Um, so yeah, it's just to me all this says is like when when macro does get stability and we do get certainty and we flip from uncertainty to certainty and I wish there was a I feel like it's like the we say you said it we say that word so much and I wish there was like a chart or something I could show everybody to show when this is going to

change but it's not doesn't work that way at all. But when it happens, it feels like we're actually we and look, not financial advice. Do your own research and all of that. But it feels like there could be a big pump to come because all of this data has shown us that in the past that is what has occurred and the tailwinds would say, hey, there's a lot of people interested in getting into this game. Yeah, I tend to agree with you overall because Bitcoin is so scarce and if more and more people are, as you said earlier in this show, becoming the the holders, like they're holding it for the long term, they're not trading it, um that's going to lower the supply and and increase the scarcity as well. So, if you get a big demand shock, uh that's

really going to pump the price. But to play devil's advocate against that, there's been a lot of talk in the space ever since I've been in here of do the cycles continue? Do the cycles ever end? do we just get to a point where we don't have these cycles anymore? So there is a third possibility where uh you don't you don't rocket to the moon, you don't crash to the ground. You you at one point just become a large enough asset class that as adoption grows you just constantly kind of grind higher and move higher and you don't get these big swings anymore. Um or you stay flat for for a long time as well. So uh investors you know you you talked about probabilities. A good investor I agree should always think in terms of probabilities. So I think that needs to be uh considered as well and you have to

make sure you're you're equipped to handle that uh that play out as well of just no cycles or a long grind sideways as this gets adopted and and it takes time and I think that's that is exactly too many too many investors too many crypto investors in particular um don't think in probabilities they only think in uh like very simple I'm here for 100x mindset which is like a it not a wellthoughtout mindset and what it leads to is the state we're in now which is a very interesting position where you have retail sentiment at all-time lows and fear is so high and then last last week

we had uh was last week or the week before um we had uh D in New York digital assets summit by Blockworks and you had incred incredible bullishness coming out of that and incredible um enthusiasm for the future of digital assets in America, not to mention uh the stable coin bills that are going through right now and the market structure bill that's going to come. Like if you had said to us that we would have these things six months ago, possibly like people are saying it might come the midyear, not even end of year, which I can't wrap my head around that they would move that fast. We'll see. But like it's just it feels the sentiment is so far and I think it is because so many

people are not thinking in probabilities and they're only thinking up only and their expectation is up only and then when it doesn't go up and we have these you know sideways action like we see right now they get very fearful and and they want to leave and you know they they rage quit or they hit the exit button um which is you know is is a dangerous thing to do. Uh you can comment on anything there if you'd like to. Yeah. Yeah. I just want to say I couldn't agree with you more on on that first part of of the sentiment versus the actual actions that we've been seeing, shall we say. Uh it's just this is such a big theme that I can't believe we're here. Um you you nailed it when you said you six months ago if someone would have

told you uh we're going to get these executive orders, we're going to get movement on stable coin bills, we're going to get more companies than ever holding at least a thousand Bitcoin on their balance sheet than before. Corporate adoption accelerating all these things. And you said, "What do you think the price of Bitcoin will be?" Someone would probably say multiple times higher. Right? And this is just a great example of how markets keep you humble. uh you cannot know even if you knew the future events you still wouldn't be able to correctly predict the price magnitude or even the direction right so let just let that sink in for a second like even if someone gave you a crystal ball and said I will tell you everything that's going to go on in Washington and corporate adoption all these these really bullish things for Bitcoin uh you wouldn't have

been right and so uh it keeps you humble but again to to get back to your point I'm also in this camp where I just can't believe the sentiment especially on the retail side and largely the rest of of crypto let's outside of Bitcoin let's say is so incredibly negative and then I turn to the institutional side which is where we do most of our work and all of these points are just so incredibly positive there's just such a such a divergence there it's hard to believe but where you do see the data showing this a bit more is with the Bitcoin dominance index so I think we're well above 60 going higher if you take out stable coins it's even higher yet which I think is a a better measure um And that shows you that this cycle or at

least this cycle has morphed into one that's really focused on Bitcoin this time around. And I'm not saying that's necessarily good or bad, but just an observation of uh this is where the capital is is allocating their their time and their resources and obviously their their money. So it' be really interesting to see how this plays out and and why this cycle is probably a little bit different as well. I'm I'm super happy that you brought up Bitcoin dominance because um that leads into the question that I think is on our listeners mind. Uh because of a lot of our listeners have have probably missed the Bitcoin trade this cycle with with a big part of their portfolio. Maybe they were holding Bitcoin with part of their portfolio, but they certainly were

probably more in Ethereum or more in Salana or more in the other assets that have not. I mean, Salana's done great. Uh although it's down right now, but it, you know, if you were buying it back at $8 post FTX, wow, what a trade. You've done amazing over the past two years. Um, but if we if we look at other L1s, other fundamental digital assets, I don't we don't need to talk about meme coins. Um what's what's your thought on those? So I listened to your one of your recent podcasts uh the other day and I think you were saying it to your guests. You said like oh you you finally figured out this idea of of Bitcoin and then everything else and that has been um one

of the key things that we've really taken a stance on. So when I started uh going on over almost four years ago now, the very first piece I wrote with with the analyst uh that was on our team at the time, Jack, was called Bitcoin first, why investors need to consider Bitcoin separate from everything else. And we've we've really kept to that. To be very clear, this is not to say things other than Bitcoin don't have value or can't succeed or investors shouldn't consider them. We were just saying you need to put Bitcoin in its own bucket. is competing in our opinion as an aspiring store of value, a potential monetary good. So things that matter here are decentralization and security foremost. Uh and then the network effects of of a monetary good. That's that's what it it boils down to that

network effects and adoption. Right now everything else makes a trade-off on those things. Security or decentralization. Not necessarily a good or a bad thing. I always use the analogy of tell me what the best vehicle is. Well, nobody can answer that unless they tell you what they're going to use the vehicle for. Are they going to drive back and forth to work and need something good for gas or do they need something like a four-wheel drive pickup to do their job out in the the wilderness, right? Um, so these other projects, they all have different characteristics. So, as an investor, you need to put on a different lens when evaluating them and you really need to put on more like a venture capital lens.

So the classic in venture capital is like out of a 100 VC projects you know half of them will maybe break even most of them will fail and only a few of them will will become 10x or even 100x. So to your point of these people expecting 100x they need to know they need to know the data and the math behind this and the actual probabilities of that and they need to properly size their positions accordingly and and have that mindset when looking at that and be cognizant of those risks. So, um, that's been our stance from day one, and I think that's still going to hold true.

Um, but obviously in this cycle, I think Bitcoin is obviously the most proven. It's never been hacked. The network's uh, you know, really never been down. Um, it's the longest lasting, the most secure, decentralized. All these other things are going to have to prove themselves in other in other ways, and they're going to have to find the right product market fit. So, take Ethereum for example. The ETH price to BTC ratio continues to just fall off a cliff. I think it's down over 50% year-to date here. Our analyst Max has a lot of great work on this where maybe they're playing the long game here where they're they're willing to sacrifice some of this market share and um not compete with some of the things out there in order to remain true to what they want to do, which is

be the most decentralized um uh smart contract platform. Um, but again, we'll have to see if that plays out. I think it definitely could and it could be very very beneficial for them, but it does come with more risk and it does come with more uh a longer time frame that they have to that they have to work through. And again, they're going to have another upgrade here soon. So, we'll we'll see if that moves them closer to that or not. Um, but those are just some of the things and questions we think about. We're always putting in that investor lens and and making sure investors are aware of what they need to consider. Well, and right now if you look at the onchain data, uh you know, the story the story on Ethereum is stable coins, which

it has strong dominance in and stable coins obviously if if if you don't know about stable coins and the future of stable coins and the belief and the enthusiasm for stable coins, I I I don't think I you're living under a rock. I mean, I can give you 20 past episodes that we've done on this about adoption and all of that. So, I think the the use case of stable coins feels proven and the the future feels proven. I mean, one of the most bullish lines I saw recently there was um Scott Bessant saying, "Okay, we have the the US debt problem.

Who's going to buy our our future debt?" Right? We have all this debt that we need to refinance by the by the end of June. Who's going to buy that? A lot of that debt was on short-term from the past few years and we need buyers for that and there's not as many as you said at the beginning there's not as many global buyers as US debt as there has been in the past because they want to move away from a US dollar dominated global currency. They want something that's apolitical. Well, Bitcoin could be that. So, point for Bitcoin. But point being Scott Besson said, "Hey, you know who's a big buyer of US debt?

Stable coins. Stable coins. USDT tether is one of the whole biggest holders of US treasuries now in the world. I can't remember exactly where it is on the list. I think it's like top 20 or something like that. But so so there's there's so much belief in stable coins which okay then you say okay where is stable coins happening? A lot of it's happening on Ethereum. Okay great point for Ethereum. But I agree. I really do find that where where I'm struggling right now with my thesis on on Ethereum and Salana is I'm still a big big believer in them. It's the timeline that I'm very unsure about right now because I do see this decoupling happening. I think Bitcoin is on out on its own now.

Even though the data might not quite show it yet, I've just my spidey sense is telling me we're going that way. I think you and I would agree. And I think that what that means is yeah, I feel I feel good about Bitcoin for the rest of the year. Ethereum and Salana and the other L1's and we could talk about DeFi DeFi tokens as well, some of the apps. Um, I feel good long term about them. I'm just not sure on the timeline right now. I don't know if they it all it depends on how the macro side goes and how big this growth scare is. If if growth does go down a lot, then as you said, you kind of got to treat these more like like they are like they're they're tech stocks which they they would be impacted by slower growth. We

would see slower activity on on chain if growth slows, which would say, hey, less is happening on Salana, less is happening on Ethereum. Those fundamentals go down, then their price action might might I don't know if we're going to go down further from here. I mean, Ethereum seems to found quite a nice floor recently, which is kind of surprising to me. I I I half expected it to to to nose dive further. Um, so needless to say, I don't know if you have any thoughts to add there, but I I remain long-term bullish for sure on the fundamental L1s and fundamental DeFi tokens, but short medium short medium-term, I'm I'm a little less certain right now. Yeah, and this gets I don't want to get over my skis. That's why I hire people smarter than me to cover some of the DeFi stuff. But the uh

I agree on the the the major thesis here of um Ethereum's got the stable coin market. Stable coins are I totally agree with you. Absolutely killer use case, perfect product market fit. Um absolutely exploding. I think in our look ahead we we said we expected to to go a lot higher. We expect tokenization to to be multiple times higher than it was at the end of last year at the end of this year. We're already seeing that. Most of that tokenization is happening on Ethereum as well. And Ethereum still has a lot of the DeFi apps. And to me, that that signals that investors and developers really do value more of the security robustness and decentralization of Ethereum because they're doing their more higher value, high-risisk stuff on there. Like if you're going to do DeFi

involving actual money and loans and and all these products on there, you want the more secure one. Uh whereas if you're going to trade memecoins, um that's more of your play money or fun money perhaps to to put it lightly. Uh, and so you're you don't care if you're going to go to something like Salana. At least that's the current setup. Now, of course, that can can change and these things can improve or or deteriorate. Um, but I agree with you that this is this technology is not going away. Um, you're not going to stop stable coins. You're not going to stop tokenization of things. Um, so fundamentally this is a new technology, a new paradigm just like the internet was. And so, but the question of course is are these first movers, Ethereum Salana, going to be the winners? And that's where I fall back a little bit on

my equity analyst background of of yeah, you had a lot of uh companies during the dotcom boom uh start out of the gate, but then it was other ones that some of them didn't even exist in the early booms actually become the winners. And that's what investors need to be to be aware of. they need to uh correctly see and find where the value acrruel is actually happening and where um some of these other projects are going to be you know completely priced out or their their margins are going to go go to nothing and and and be pushed out of the competition that way. I got to use this as a plug for tomorrow's episode. In tomorrow's episode, we actually break down Ethereum versus Salana looking at their economic value that they are generating. a lot of FUD on Ethereum

right now because in March they hit uh the lowest um lowest revenue that they've hit in I think five years since 2020 that they've been this low in a month. Um so that brought a lot of fear and we break down what's going on in compared to SA. So if you guys want to learn more about that, listen uh to tomorrow's episode. Chris, been an absolute pleasure to have you on the show today. Any any final thoughts to share with us before we uh we let you go? No, I think just u in all this volatility like you said, take a deep breath, zoom out. Uh I always tell people go over your your original checklist for your investment thesis for something like Bitcoin or whatever it is. Have any of those fundamentals changed with the recent news? Uh hash rates at all-time highs. Network

activity is still high. It's still secure. Um all of the fundamentals for something like Bitcoin, in my opinion, remain intact. All of this other stuff is therefore just just noise, right? Um, but of course it can differ for everything else, but that would be my my parting words there. I couldn't agree with you more. Chris, thank you so much for your time today. Truly appreciate it. Shout out to you and your whole team at Fidelity Research. Really appreciate you guys. Yeah, this has been a lot of fun. Thanks for having me. I've said it before and I'll say it again. Truly, truly appreciate each and every one of you for showing up and listening to the show. Thank you for your trust and thank you for your time. I know the world is crazy busy and you guys have limited time, but that being said, I would love

to spend some time with you guys in person, hanging out, having a beer, and I'm going to be at Consensus in Toronto in May doing podcast live on stage. We've got tickets at discount from a partnership with the team over at Consensus. Hit the link in the show notes, get your discount, come to Toronto, my hometown, one of my favorite cities in the world. would love to hang and have some beers. Hopefully, we'll see you there. Have a wicked awesome weekend, everybody. Thanks for listening in. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5minute daily newsletter where we simplify

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