Why Bitcoin adoption is becoming inevitable, with Ric Edelman

Transcript

I mean, just think about this. The firm manages $7 trillion. They've just told their $16,000 advisors to allocate two or 3% of their portfolios to crypto. Well, 3% of $7 trillion is going to cause Bitcoin's price to rise massively. And when that happens, it's going to create a flywheel effect. >> The Clarity Act is scheduled to be marked up in the Senate this week for the first time. It seems like this bill might have a serious chance of passing.

But how should investors think about this and what do you need to know before adding crypto to your portfolio? Hello and welcome to Milk Road Macro, the podcast that knows that Congress is never the place you want to go for clarity. I'm your host, John Gillan. Today is Monday, May 11th, and today we are joined by Rick Edelman. Rick is the founder of Edelman Financial Engines, the nation's largest independent financial planning and investment management firm, which manages more than 300 billion in assets for over 1.4 million households. He is a number one New York Times bestselling author of over 14 books on personal finance and one of the most sought-after commentators on markets and personal finance in the world. Rick is a legend of investing. He's going to share a lot of wisdom and insight with us all today.

So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who needs to hear it. Today's episode is brought to you by Nexo. Earn interest, borrow, and trade crypto. And without further ado, welcome to Milk Road Macro. Rick, how are you, sir? >> Great to be with you, John. Thanks for the invitation. >> I'm really excited to talk to you today. Hey Rick, I wanted to just start with your outlook on the markets here. Uh the S&P 500 has touched 7,400. Many of the major indices just keep making new all-time highs. How are you reacting to this major bullish reversal we've seen uh in recent markets here? >> I it it's it's exciting, of course, but it's also a little nerve-wracking. I mean, the markets are rising so rapidly that I I'm in the camp of believing that

it's an unsustainable pace. I mean, let's just keep in mind that historically, you know, going back a h 100red years to 1926, the S&P has risen on average 12% per year. That's 1% per month. We're experiencing many days of 1%, not months. Uh, in fact, since this year alone, just since January 1, the market has traded 91% of the time above its historical daily movement. half the time has been 2x or higher gains, meaning twice as high as normal. 41% of the time, twice as much uh or uh uh going down lower. But just look, since the end

of March, it's insane. Of the last 26 27 trading days, we've had eight of them with gains of 1% or more. 31% of the time, th this is just nuts. Look what's happening just in today's market. I mean it the market can't sustain this because if you have 1% per day that's a tripling of the market in a year. I don't think anybody's expecting that to happen. So it's not that I'm negative or bearish or predicting that there's going to be a market crash or even necessarily a correction. I just don't think that the pace of increase is sustainable at least not by historical trend.

>> Right. Yeah. Yeah. And so I want to ask another question around this is that we've seen a lot of concentration during this huge unsustainable as you say rally. Um a lot of this has been focused on semiconductors and a resurgence in the MAG 7 and I'm curious your thoughts on what you think happens here. Do you think that this bull run starts to broaden out behi beyond just what it's been concentrated in so far or do you think that concentration continues as we go forward here? >> Yeah, there's nothing new to that story either, John. That's the weird part. If you look at the performance of the Magnificent 7 over the last uh five, six, seven years, you've seen something similar where the performance of the S&P has become so lopsided where the the seven big tech stocks now represent virtually all of the profits. The

majority of stocks in the S&P 500 have been losing money for years. Uh and so this has been a tale of two cities and that trend is continuing. So here's the real question everybody's got to ask. We know why these tech stocks are rising dramatically. It's all because of AI. It's because we're seeing that not only they're selling their product more and more uh and that's going to continue growing more and more with data centers and AI systems and and and so on. That's allowing them to reduce their HR headcount which allows them to increase their profits exponentially.

Everyone's pretty much confident that that will continue for Meta and Google and Amazon and Apple etc. and by extension Nvidia and and others. But the real question is will the rank and file of the S&P 500, meaning manufacturing stocks, for example, retail stocks, the uh tourism, hospitality industry stocks, will they also be able to enjoy similar increases in profitability by their ability to reduce HR expenses? Because for most companies, HR is the number one cost. you eliminate the humans, your profits skyrocket if you can continue to deliver your product and service. So that's the question everybody's asking.

And frankly, there's a lot of assumption that the answer to that is yes, which is why we're seeing what's going on. I'm not so sure we'll see that prove to be true. We're going to have to wait and see. >> If you're not seeing this, you're trading blind right now. There are real moves happening behind the scenes that most people don't see until it's way too late. Inside Milkroad Pro, you can track exactly what our analysts are buying, selling, and what's on their watch lists before it moves. Martin recently unloaded 40% of his cash off of one signal. And Melvin is up multiple calls by like 50% and we're already up 30% this month on some alts. This is all happening every week. You can try it out for just a dollar for 7 days. The link is in the description.

>> Okay. Yeah. So, uh let's let's take this a little bit further here. A lot of investors are looking at this giant bullish rally. Some of them are sidelined, out of position, and they're wondering how or when to find an entry into all of this. How are you thinking about that? You know, in this context or just in any context when the market is running up on you like this, how do you think about finding an entry? Do you think there will be a correction to wait for or do you not like, you know, risk missing out and just get an allocation? How do you think about that? >> Well, there's always going to be a correction. There's always going to be a bare market. 20% losses or more. There's no question about it. the the the real question is when will that occur and how

much higher will the market go before that occurs. In other words, let's say that that the market's at a th00and just to make it up and you think a correction is coming but and that would cause the market to fall 20%. Uh well that you might be right about the 20% loss but if the market at a th00and doubles to 2,000 and then drops to 1600 you'll wish you got in at a,000. So, this is the classic dilemma of market timers, which is why it's a foolish game. What you should be really looking at is not when is the market going to correct or go into a bear. The real question is when are you going to need to use the money that you're planning to invest? If you're not going to use the money for 10 or 20 or 30 years, which is the truth for most

investors. They're saving for long-term goals like college and homes and retirement, then what's happening right now is utterly irrelevant. Because by the time you need to use the money in 10 or 20 or 30 years, the markets will be far higher than today, just like today's prices are far higher than they were 10 or 20 or 30 years ago. So quit focusing on the market, focusing on you and your goals. And that means for most people, you should be investing today and stay invested regardless of the nonsense that is occurring at the moment. And if that worries you, if you're afraid to do that, then dollar cost average. slowly dribble your way in over the next couple of years and then stay invested after that.

>> Rick, this is one of the reasons why I was so excited to have you on the program today is I think a lot of people need to hear this sort of like stay patient long-term investor mindset as opposed to this momentary trader mindset. Um, but there is a lot of things there are a lot of things in the news right now that traders and and investors alike are paying attention to. One of them that's happening this week is Trump is heading to China to meet with President Xi. He's taking many of the executives of some of the largest firms in the United States with him for this meeting. How are you expecting markets to react to this meeting? What are you watching for out of this this conference between Trump and Gi? >> Well, the markets are going to uh react um based on what they hear and see. So,

if it appears that Trump is going to secure uh benefits and concessions and agreements with the Chinese, the markets will jump. uh if it looks like there's obstinence, that there's disagreement that we're going to end up in a war over Taiwan next week, the markets will crater. So the the market timers and the day traders are going to be looking that at this with great interest. The rest of us mere mortals probably need to ignore it. And then let me just take this to extremes because that's what a lot of people do. They engage in something we call catastrophicizing. They think that if it's raining today, it will flood tomorrow. That if the market is falling today, it'll crash and never recover.

What you need to recognize is two one of two things. One, you're probably wrong. Meaning, you don't have to worry about a catastrophic event occurring. Number two, if you're right, it won't make any difference. So, you might as well stay invested because if the if the world comes to an end due to nuclear war tomorrow, is it really going to matter what you do with your money? And since nuclear war isn't likely, you'll probably be better off that you were invested after all. So again, let's put this into product proper context and recognize that the Trump trip to China is really fodder for the news cycle and not really of value to anybody else.

>> Rick, my father does uh wealth management at UBS and he likes to say that the world can only end once. Um and it's not a good thing to invest around. So I I appreciate that context and that perspective. I think that's healthy at this time. Uh something else that I want to get your thoughts on here that a lot of people are paying attention to is the Clarity Act. This is coming up for markup. As you know, I said in the introduction on Thursday in the Senate Banking Committee, there seems to be still a lot of tension around this. The American Banking Association CEO, it just released on Twitter today, is still trying to drum up opposition to this bill. Just, you know, from your point of view where you're sitting on this, what do you think of this compromise on stable coin yield of this bill? How

important is this in your view? What are you watching for here? >> Well, at the moment, the banking lobby hates the compromise. They've rejected it. Uh, which is the saga that we've been experiencing for the last 6 months. Um, just to make sure everybody is under up to speed on what we're talking about here, the Clarity Act is the second most important uh major piece of legislation uh in the world of crypto facing Congress. Congress passed the Genius Act last year which provided rules of the road regarding stable coins. Easy for Congress to pass that bill because everybody's in full agreement of the need for legislation regarding the regulation of stable coins. Both parties support it. majorities in both chambers in Congress, both the House and Senate, and the president signed it into law

really quickly. Now, we come to the harder task of the Clarity Act, which governs the rest of crypto. This is much more important because it's everything in the world of crypto. This has been long awaited by everybody in the crypto community as well as on Wall Street because it provides the rules of the road. Wall Street banks, brokerage firms, credit card companies, insurance companies, pension funds, endowments, everybody has been waiting for this legislation, which tells everybody how you're allowed to engage in crypto, crypto custody, crypto trading, crypto product, crypto service, all of it. And it was a slam dunk 9 months ago that we were going to see this bill passed by Congress. Why hasn't it been passed yet?

It's because a fight has emerged, the first fight we've seen between banks and crypto regarding stable coins offering yield. And um this has been led by Brian Armstrong at uh Coinbase who has been championing the argument that stable coins must be allowed to offer yield. The banks hate this because it is a direct threat on their business. They're fearful that if stable coins can offer a yield, the money that is being held on deposit in banks will leave and go to stable coins, causing either banks to go out of business or severely erode their profit and reduce their ability to lend.

And it's been this big political fight. My view has been that Brian has been staking this fight on the wrong issue that the yield on stable coin is not that important to crypto. There are other ways crypto can deal with it. there are more important fundamental issues facing crypto and this is not the hill for crypto to die on. So I have not been supportive of Brian's position. I mean he's right but I'm not supportive of it because his failure to support the bill as written has caused a delay to the point where we're not sure the bill will get passed. The president is now targeting July 4th for passage. We're not really sure we're going to see that happen. It's supposed to be marked up,

as you noted, uh, this week in the Senate, but the banking lobby still hates it. So, I don't know if it's going to pass. And if it does, I don't know what it's going to say. So, we're still on pins and needles. Uh, I'm hopeful it will pass. I don't really care what it says because the only major sticking point is this stable coin yield issue, which is a minor issue in crypto. If it passes, this is going to be regarded as fabulous news for crypto. You can expect to see a rapid increase in price. You can expect to see new announcements of engagement by banks and brokerage firms uh uh regarding crypto. If it fails, well, it's going to be annoying. Prices will probably fall for the short term.

It'll slow down the growth of crypto, but it won't stop it any more than Gensler and Joe Biden weren't able to stop crypto, but they were successful in slowing it down. So, I'm hopeful it passes, but I'm not yet sure how confident I am about it. >> Rick, I really appreciate you giving sort of that detailed comprehensive analysis on the context around all of this. Um, to to kind of give some more detail on the the the compromise that was agreed to um between some of the senators on the banking committee was to allow rewards on stable coins that are actively used for some kind of activity in crypto, but not allow it for stable coins that are just held in deposit and just sort of idle. Um, and that compromise seemed to be accepted by Coinbase and everybody else. And now the banks are still pumping their brakes,

saying they still have concerns about this. Just to steal man the other side on this, do you think that there are legitimate concerns that the banks are raising here about capital flight from the banking system or is this really more about them protecting their bottom lines here? >> There's no legitimacy by the banks in their argument. This is strictly turf control. The banks simply are sitting on trillions of dollars of deposits. They earn a huge amount of money on those deposits and they don't want to lose it. Uh and they're fearful that this young upstart with a better technology that is faster, safer, cheaper, and easier for consumers to use is going to intrude on the bank's dominion. So, they're doing everything they can to protect themselves by circling the wagons. They have a massive lobbying activity.

They're one of the largest lobbyist organizations in Capitol Hill with hundreds of millions of dollars at their disposal to spend in the November elections. So, they're making it very difficult for members of Congress to uh side with the crypto community. Crypto community on their hand have the right argument. They do have accuracy on their side and they also have hundreds of millions of dollars in money to spend uh of pack money in the elections. In the 2024 elections, the banks and the crypto lobbyists were on the same side, which is why we saw so many pro- crypto candidates elected to Congress in 24.

This time around, the banking lobby and the crypto lobby are at loggerheads, and we need to get them to reach agreement. And that means, in my view, the crypto lobby ought to concede and give up much more of this argument to the banks than they are. Not because they'll lose, but because it doesn't matter to the crypto community as much as it matters to the banking community. Fight this issue another day in another way and let's pass this law which is more important, frankly, to crypto than it is to the bankers.

>> I appreciate the thoughts there. Uh Rick, I want to ask you about something else around this. The SEC and the CFTC, to their credit, have been very collaborative and forthcoming in this administration as opposed to the prior one about trying to offer Wall Street and crypto rules of the road and sort of like, you know, give some semblance of market structure here. Do you think that they've done enough to kind of give Wall Street the the confidence they need to continue to move into this space and to have this industry grow even if this bill doesn't pass? >> Uh, I I will say they're doing enough. They haven't done it all yet. They keep issuing new rules. issued some new rules late last week. Uh, and they're getting there. They are committed to doing this.

Uh, and they're working feverishly and uh, very effectively. And I'm very proud of the work that we're seeing coming out of the SEC and CFTC and we're going to see more of it. This kind of clarity to borrow from the bill uh, is essential. Wall Street needs beyond all else clarification on the regulation. In other words, Wall Street really doesn't care what the rules are. We just need to know that there are rules. It's kind of like setting a speed limit. Uh in the Gensler SEC era under the Biden administration, they refused to issue any rules. Gary Gensler infamously went before Congress many times insisting no new rules were needed, that the rules that were written in the 1930s were

sufficient, beyond ridiculous. And in the absence of rules, banks and brokerages were forced to sit on the sidelines. their compliance departments, their legal and risk management teams had no idea what they were allowed to do and how they were allowed to do it, forcing them to do nothing. The Trump administration has reversed all of the Biden era prohibitions, allowing Department of Labor, uh the Department of Treasury, the IRS, the SEC, the CFTC, the SBC, everybody has been rapidly issuing new rules that are saying to Wall Street, here's how you can proceed.

basically saying, "We're going to post speed limits." What Gensler used to do was say, "We're not going to tell you the speed limit, but we are going to arrest you for speeding," which is ridiculous. That that regulation by enforcement environment that is going away, and this is what's going to allow the financial services industry to engage in unprecedented ways. They're all anticipating further clarification, including passage of the Clarity Act. And in anticipation of that, they're issuing new products. They're creating new programs, new platforms, new services. Every Wall Street firm, every bank, every brokerage, every custodian is rapidly engaging in this. This cannot be reversed. It cannot be stopped. The

only thing that might happen is a slowdown if clarity doesn't pass, but they're not going to stop moving forward. And this is why we're seeing the mainstreaming of crypto in an unprecedented fashion. It's very exciting and frankly long overdue. Kudos to the Trump administration for making all this happen. Rick, I appreciate the passion you have about this and I think this is another reason why I wanted to have you on my macro channel, which is that you are one of the most trusted and respected voices in financial advising in the country and a lot of investors are still hesitant about this asset class. U so I wanted to have you kind of come on and and communicate about some of these things and as you say these changes that are coming. Uh let's talk a little bit about digital assets specifically and we'll start with

Bitcoin here. It's no secret you've been very bullish. I think you've target of uh $500,000 of Bitcoin by 2030. still hasn't moved. But how do you go about communicating this to to Wall Street or just you know traditional investors who are maybe seeing this this lagging price performance from Bitcoin and all this uncertainty in the markets and and maybe feeling hesitant about Bitcoin right now. >> Well, the lagging price performance is very recent. It's only the past several months. We've seen this kind of draw down in Bitcoin prices many many times. This is the eighth time in Bitcoin's history that it has fallen 50% or more.

So nothing new here. Uh Bitcoin is a volatile asset. We know that and it's volatile because it's new. Uh, you want to have some fun, play this game. Go Google the price performance history of Bitcoin since its inception in 2009. That's roughly 16 years. And we all know what that chart looks like. Incredible volatility, major ups, major downs. Then Google the price performance history of the first 16 years of Amazon. You'll discover that those two charts are almost identical. When Jeff Bezos launched Amazon, everybody thought he was out of his mind. An online internet site to sell books.

Nobody thought that made any sense. And it almost went bankrupt many times. It had exact price volatility. But as the company matured, as people began to understand it and be willing to use it and more and more mainstream activity occurred, the price became more stable, the volatility reduced, the increases persisted, and look where we are today with Amazon. Whereas nobody was willing to buy it when it was new, it's in every stock portfolio today. Virtually every stock ETF and stock mutual fund have an exposure to Amazon. And understandably so. Bitcoin is following the same trajectory and no surprise there. All new technology stocks that are

innovative, unprecedented, doing things no one had ever done before are not understood in the beginning. They are rejected, disdained, opposed. Eventually there's placation. Eventually there is a dismissal of the worry and eventually there's slow buyin to the point where it becomes ubiquitous. Look at Black Rockck's introduction of its ETF over two years ago. Look at the incredible broadening of exposure today. Morgan Stanley just a couple of weeks ago establishing its own ETF in Bitcoin and telling its 16,000 advisers that they are establishing a 2 to 3% baseline allocation for the first time in its

history, which is forcing all the other wirehouses to follow suit. So, in another 2 or 3 years, nobody's going to ask, "Why are you buying Bitcoin?" They're all going to be asking, "Why aren't you buying it?" So, you can either buy it now at 80,000, a dramatic reduction from its high of 126,000, or you can wait another 5 years when it's 500,000, wondering why you missed out. >> The way we build wealth is changing. Stocks, savings accounts, real estate, that playbook is getting rewritten in real time. Nexo [music] is the platform built for what's next. It's an all-in-one digital wealth platform where you can earn interest on your crypto, borrow against it without selling, and trade [music] a wide range of assets all in one place with 24/7 support and institutional grade security. Oh, and by

the way, [music] Nexo is back in the US with new US clients getting 30 days of Wealth Club premier [music] access. That means elevated interest rates, lower borrowing costs, and crypto cash back on trades. Benefits usually reserved for [music] loyalty program members. Get started at milkroad.com/nexo. Rick, how do you tell investors to think about this in terms of what role it plays in their portfolio? Does this go in the alt sleeve? Is it a commodity? Is it like a risk equity? Like how do you tell investors to think about this as they're thinking about constructing a portfolio that includes Bitcoin and digital assets?

>> Well, I don't really care what you call it. Uh different advisers call it different things. Some regard it as an equity really. That's what it is. There are only two different kinds of assets, borrowed and owned, right? So bonds, debt, you're borrowing uh in that case earning interest or there's equity meaning ownership. So Bitcoin is an asset you own and therefore it's technically an equity. But many advisers categorize equities in greater detail. Um in the world of stocks, large cap, midcap, small cap, growth, value, US, foreign, they add an alternatives category for the weird stuff like real estate, oil, gold, Bitcoin. So, I don't really care what you call it. Uh, but I

will say this, the argument for owning Bitcoin is simply the argument that every adviser has used for their portfolio construction for their entire career. And the word there isn't alt or equity or debt. The word there is diversification. We understand modern portfolio theory. We follow Harry Marowitz's strategy for investment. We know that adding as many asset classes as you can reduces the risk that any one asset class will fall. It allows you to zigg when others are zagging because not all assets perform the same at the same time in the same way. So we want to add as many different kinds of assets as we possibly can. And

Bitcoin is the first new asset class in 170 years. The last time we had the introduction of a new asset class was the discovery of oil in the 1850s. Look at the impact oil has had on the world since. Some of it bad, by the way. Look at the environmental impact. Um, but from an economic impact, it's been unprecedented. Bitcoin is the newest asset class since oil. So if you believe in diversification, you believe in owning every kind of asset class, not because you like them all, but because they're additive to the portfolio. It helps to reduce the overall risk of the portfolio. It helps with your dollar cost averaging, rebalancing, tax loss

harvesting. This is why you own Bitcoin. When you look at its performance over the past 16 years, you discover that Bitcoin doesn't move in sync with other asset classes. That's exactly what you want from a portfolio diversifier. So if you believe in diversification, you have to have an allocation to Bitcoin. Not because you like it, not because you believe in it, but simply because it's an additive to the portfolio. >> Yeah. I spent six years at Black Rockck and while we were there, they wrote a white paper on this exact idea. They called it Bitcoin a unique diversifier because it helps diversify but in unique ways. So I really appreciate that framing. Um yeah and I think just how people think about this asset is interesting to discuss because everyone

t has a different take there. I want to build on something you mentioned in a previous answer. Almost all asset managers now do recommend some kind of allocation to Bitcoin and digital assets. However, you know, you mentioned Morgan Stanley. A lot of them are in the single digits. Uh and I've heard you recommend anywhere from 10 to up to 40% of an investor's portfolio going into Bitcoin or digital assets. I'd love to hear you kind of explain where that that comes from for you and how you rationalize that recommendation for for this in a portfolio. >> Well, the answer is a little bit long, John. The full answer is in is in my white paper which you can get at dacfp.com. Uh dacfp.com. It's right there on your screen. You can download the white paper for free. Uh I released the white paper last June. Uh and it has

gotten a lot of attention because I mean how many people are recommending a 40% allocation to crypto? Uh, let me give you the the short answer here as to what I'm talking about. The reason really has nothing to do with crypto. It has to do with longevity. Let's remember, I'm a financial adviser. I'm not a crypto bro. Uh, my focus is on helping clients make sure that they don't run out of money in retirement. That's the really the the uh holy grail of investing, right? To sustain your lifestyle, enjoy financial security and comfort for as long as you might live. The traditional approach that advisers have used to help clients achieve that goal is a classic 60/40

portfolio. 60% stock, 40% bonds on what we call a glide path. Meaning, as you get older, you adjust the 6040 downward. Meaning, as you get older and you need more and more income, and you have less and less time because you're closer to death, you meaning you can take less risk. you can tolerate less risk because you don't have as much time to recover from a market crash as a 30-year-old does that you reduce the 6040 to 50/50 and then 4060 and then 3070 and eventually as you get older you hardly have any of your money in stocks. It's almost all in bonds and treasuries.

That's the 60/40 glide path. Under the 6040 glide path, by the time somebody is 70 or 75 years old, they might only have 20% of their money in equities. My argument is that that glide path is out of date. And it's because of my research and activity in the field of longevity. I've been for decades studying this issue. I've been on the advisory boards at the Stanford Center on Longevity, the Milin Institute for the Study of Aging, MIT's Age Lab, and and lots of other research. I've done a lot of work with Ken Dywald, the CEO and founder of AgeWave, world's preeminent expert on aging. And the bottom line is this, John. We are experiencing unprecedented levels of longevity. Humans are living

older far more commonly than has ever happened before. In fact, scientists studying this field pretty commonly agree that if you're alive in 2030, odds are high you'll live to age 100. And yet, most people have a financial plan. Look at the pension fund actuarial system. Look at the social security actuarial system. They're all assuming you're going to be dead at 85, maybe age 90. Now, if you run a financial plan to age 90 using a 6040 model, you'll do just fine. But if you rerun the numbers to age 100, it'll blow up. You'll run out of money before you die. And it's for this reason that I

argue the 6040 is dead. it needs to be replaced with 8020. Meaning you have to have a lot more of your money in equities and you have to hold those equities far longer than merely age 70. You need to have a lot of your money in equities all the way into your 90s if you want to make sure you don't run out of money due to the cost of living and inflation. And for that reason, I'm arguing 80% of your money in equities. And if you're going to have 80% of your money in equities, at least 10 of the 80 ought to be in crypto. And as much as half of it, if you're a growthoriented investor with 50 years to go, you can easily argue just as the MAG7 dominates the S&P 500, you can

equally argue that crypto ought to have an equal exposure as the MAG7. And that's the basis for the 10 to 40. That's a really helpful framing and I've not heard it couched in those terms before, but I I I think it makes a lot of sense. As longevity expectations change, retirement planning changes, capital allocation changes, Bitcoin comes into the picture. That that's really helpful here. Um, break down for me a little bit of of where this 10 to 40% goes. Is that for you just all Bitcoin? Do you think that you want like, you know, an index of all digital assets beyond Bitcoin as well or or how do you think about that allocation for for that?

>> I I I I am agnostic on that question uh publicly. I have my own portfolio of course, but uh I'll tell you that um the reason I'm agnostic is that everybody in the crypto community has a very strong opinion on that question and I'm not about going to change anybody's mind. I'm not going to convince Michael Sailor to start buying Ethereum. Uh so I'm not even going to bother trying. Uh I love Michael to death. He's a Bitcoin maximalist. He makes extremely good case for buying only Bitcoin. So if you want to do that, perfectly fine. 100% Bitcoin. If you want, you could go the other direction and go 100% Ethereum and Salana, which is more of the commercial application uh of blockchain. Or you can do what most people are doing, which is

buying a combination Bitcoin and solarium or Bitcoin uh Bitcoin and Salana, Bitcoin, Ethereum. And they're doing it market cap weighted. So for every $3 you put into Bitcoin, $1 goes into Athereum. Some will also argue the picks and shovels route. Don't just buy the coins, but invest in the companies that are building all of this. Coinbase, Gemini, Circle, um, soon to be Tether when Robin Hood, you know, invest in the infrastructure. So, I'll leave it up to you. Do your due diligence, get advice and information and input from the experts and you'll come up with an allocation that that makes sense for your portfolio.

>> Right? And that that's going to look different for every investor. helpful framing on all of that. Um Rick, I want to ask you about this, you know, we just talked at the beginning about this sort of frenzied rally we've seen in equities driven by AI. Do you think we're ever going to see that kind of euphoric mania kind of rotate back into crypto and digital assets? Are you kind of agnostic about that as well or do you anticipate that happening at some point? What do you think about that? >> I believe that we will see another uh level of excitement in the field of crypto. I think the Clarity Act can spur that. I think if the clarity gets passed, we will view its passage in the future.

We'll look back and say that was the market bottom. Although we're kind of already having seen the market bottom with Bitcoin now already over 80,000 from its low of 63. Uh I think that'll be a key point because that's going to be remembered as the day that Wall Street got the green light to go forward in its engagement in crypto. And when that happens and you begin to see more and more Wall Street firms engaging the way Morgan Stanley has already done, I mean, just think about this. The firm manages 7 trillion. They've just told their 16,000 adviserss to allocate 2 or 3% of their portfolios to crypto. Well, 3% of $7 trillion

is going to cause Bitcoin's price to rise massively. And when that happens, it's going to create a flywheel effect, which is what we've seen happen in Bitcoin prices historically when their bull markets have engaged. So, I would not at all be surprised to see Bitcoin end the year above 150,000. I wouldn't at all be surprised to see it end uh in a a couple of years uh in well into six figures. As you noted earlier on, I still believe we'll see 500,000 Bitcoin by the end of the decade. That's only three and a half years away. So, I wouldn't at all be surprised to see this. Will that be better or worse than AI's investment opportunities? I don't know. And I don't care because it

shouldn't be an eitheror question. You should be doing a little bit of everything. Again, that's what diversification is all about. We will continue to see AI and crypto merging to some degree. We're seeing Bitcoin miners becoming AI data centers. We're already seeing that. We already see the opportunity and the benefit of these two technologies working together just like we're seeing AI benefit so many industries. So, it's not going to be either or. It's going to be a rising tide that's going to be very exciting for the overall marketplace and you just don't want to be the folks sitting on the sidelines looking at it. You ought to be engaging in it.

>> Yeah. Well, so that was my next question was, you know, there's been a lot of speculation in the market and people in the market are trying to figure this out right now of what does this intersection of artificial intelligence and crypto look like? Where does value acrew in that situation? And really, I think investors are wondering how they prepare for that. And I wonder if you could kind of speak to that specifically of this intersection that's happening and how you're thinking about navigating this for your own portfolio or just as an investor watching this all play out. >> Well, in a word, it's tokenization. Uh this is the most practical application for this to be occurring supported by stable coins and we already know how strong stable coins are today and how much bigger they're going to get. The Treasury Department projects it's going

to have an eight-fold increase in just the next few years. uh and uh we're seeing tokenization in its early stages today. Everybody's starting to play on Wall Street. Franklin Templeton uh has uh led the way. Black Rockck is quickly following. Uh and over the next several years, by the end of the decade, tokenization will be the dominant methodology on Wall Street. It'll be replacing equities. It'll be replacing ETFs and mutual funds because it trades faster, safer, and cheaper. uh we will see 24/7 trading with zero settlement not T+1 but T plus0 and this is going to facilitate the ability to have access to not just the 10 or 20 asset classes that

exist today but 10 or 20,000 asset classes the need for advisors will never be greater. Uh therefore it's a very bullish marketplace for the financial services industry. uh it's going to represent massive wealth creation opportunities and it's all going to be because the support and supplement of AI creating the product creating the platform facilitating the trading and it'll all be done on blockchains where that trading will occur with a far higher degree of cyber security than any other platform. >> Uh Rick, I really appreciate the the passion and the enthusiasm around this.

I think a lot of people are going to need to hear this. Um, one thing I wanted to ask you to speak to as we we kind of get towards the end of time here, uh, is just the emotional aspect of navigating all of this. I in our Milk Road uh, Pro community have heard a lot of people expressing frustration, um, with, you know, crypto prices lagging in the last few months while AI is pumping and, you know, there's all this euphoria and FOMO and everything. How do you tell investors to kind of stay patient and and find conviction in the the long-term end of decade thesis on crypto that you've you've established here and and you know avoid this FOMO chasing and you know just the emotional side of all this stuff. How do you think about that and what do you advise people to do there?

Well, the problem, John, is that so many people hearing guys like me talking about the future and the bullishness and the huge prices that we're anticipating, not just in crypto, but in AI and even in the S&P 500 itself. The problem is when people hear stuff like that, they envision up and to the right and they think it's going to be a straight line going lower left to upper right. What we have to remind ourselves is that that's not how it works. It's not a straight line up and to the right with just rosecolored glasses. It's filled with volatility. It's filled with turmoil.

It's filled with unexpected ruts in the road decoys delays distractions the unexpected events, the black swans that interfere with our best plans. You need to recognize that we're going through that right now with with Bitcoin. I don't think anybody expected with Donald Trump in the White House and such incredible support among his cabinet, among the uh House and Senate, uh that we would see Bitcoin fall so dramatically from its high of 124,000. And yet here we are. And it just is evidence that in the short run, anything can happen. So rather than thinking it's going to be a cakewalk, it's going to be super simple and easy to double, triple

my money, you need to recognize these things take time. There are surprises. There are unhappy events that occur. Uh we never know what's going to happen next. Uh and as a result of that, we need to do two things. Number one, we need to have a diversified portfolio that we periodically rebalance, which takes advantage of those volatile periods. And number two, we have to maintain a long-term time horizon. Don't pay attention to what's happened over the last 6 months or what might happen over the next six months. Focus instead on the next six years, the next couple of decades, that's what really matters more than anything else. So, if you maintain the proper lens, the proper perspective, that can help you get

through what's going on at any given moment in time. >> Rick, I really appreciate you coming on Milk Road Macro. I think that this is going to do really great with our audience. people need to hear this sort of like, you know, level-headed take and this uh bullish thesis from somebody who's respected in in Wall Street um but still, you know, believes in this emerging asset class. So, thank you so much for being on Milk Road Macro. Where can we send people to find more of you and your work online? >> Uh go to dacfp.com, dacfp.com. There you'll find all of our content, including my white papers that you can download for free. You can read my Amazon number one bestseller, The Truth About Crypto. And you can also explore really becoming fluent in this subject by becoming certified in blockchain and digital assets. We offer the oldest and

largest certification program, the CBDA, which is the only professional designation in crypto that is listed in the FINRA database. So, uh, learn about this, take the time to understand it, and you'll get a much better sense of how to incorporate this into your portfolio recommendations. >> Rick Edelman, thank you so much for joining us. I really enjoyed this conversation. and thanks for being here. >> My pleasure, John. Thank you. >> Thank you all for joining us, too. I hope you all learned something today. So, as I always say, until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Macro. Thanks for joining us, everyone. Bye. Want Insights on what's really moving markets and how we're trading each event. Subscribe to our channel, then join the Milk Road Macro and Macro Pro newsletters. This

show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.