Why Wall Street is about to rush into crypto: Fidelity's Christopher Kuiper

Transcript

We're still very very early. Many of these investors are still barely dipping their their toe in, but it is changing. They're they're realizing that they have to they at least have to get educated. They have to at least have an answer. Whether or not they agree or not, it's not going to be good enough to say we can't address this. It's too small or whatever else their excuse was before because now of course it's $4 trillion or more for the the total space. A whale sold 24,000 Bitcoin in one clip this past weekend, and everyone is wondering if the top is in, or if the market is so big and liquid now that we can just shrug off these things and keep chugging. Plus, we're going to get some insight into institutional adoption of digital assets today. Hello and welcome to Milk Road Macro, the podcast that

believes we should send central bankers to Jackson Hole more often. I'm your host, John Gillan. Today is Monday, August 25th, and we are joined today by Chris Kyper. Chris is the vice president of research at Fidelity Digital Assets where he leads the firm's research on digital assets as well as provides insights on this whole asset class to institutional investors. Previously, Chris built a very successful career in equities research and holds a master's degree in economics from George Mason University. If that sounds good to you, make sure you like and subscribe. Share this episode with someone who's going to enjoy it. I'm really excited for this one. Uh, one other big announcement I want to make everyone aware of. Huge week here at Milk Road. We just launched Macro Pro, our brand new website. It looks great. I want to lick my screen when I look at it. Probably not supposed

to say that, but we'll edit that out if we have to. Macro Pro gives you the hedge fund level analysis that big players pay top dollar for. You're going to get live AMAs, monthly macro reports that are really great deep dives into everything going on in macro, as well as direct access to me and our whole research analyst team via private Discord. Uh, and here's the kicker. Until Wednesday of this week at midnight, you join, you get 25% off. Or if you want to go for the full milk road experience, that's macro, crypto, and den all under one roof. For the very first time, you can grab Pro All Access, also at 25% off. Link is in the description. Today's episode is brought to you by Ken, the verified distribution protocol, changing the growth game. And without further ado, I'm very pleased

and excited to welcome to Milkroad Macro, Chris Kyper of Fidelity Digital Assets. Chris, how are you today? >> Very good. Very good. Thanks for having me. >> Great. Well, I'm very happy to have you here. I want to start with something I think a lot of people are wondering right now. Um, Bitcoin has been rangebound for a few months. It's holding its ground above 100K. Um, but Pal's dovish comments at Jackson Hole, I think, really kicked off a lot of action growth in risk assets in general, but Bitcoin hasn't really started to to follow that trend upwards yet. Uh, what are you seeing around this? Do you think Bitcoin is going to join the rally? Do you think it's going to face some continued headwinds? What is your read on the Bitcoin market right now where we are today? Yeah. So, Friday's move was uh pretty explosive for a lot of the the

digital assets here. And as you pointed out, Bitcoin did move up a bit, uh around $4,000 a coin when the comment came out from Powell. That was very dovish, of course. And uh but this was nothing compared to like Ethereum, which was up over 15% I think at one point when I looked on my screen around the comment time. Um so, that is a good question. It's why isn't Bitcoin rallying more? Uh number one is to remember, zoom out. Bitcoin was already rallying and outperforming uh Ether by quite a bit. The other thing to to note and this has been a theory of mine for a while and so have to be careful because this is just one data point but I've always said Bitcoin is not a risk on asset and what I mean by that is when we

say risk on we usually mean like when things are are getting dovish uh easier money more liquidity uh people can tend to get more spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe spe speculative they want to take on more risk and that's when they've typically turned to bitcoin and other digital assets they they put them in a risk on bucket but if you think about bitcoin from a fundamental level. To me, it's the opposite of risk on it. It's it's less speculative because you know everything you need to know about it. Every 10 minutes there's going to be another block on average. Uh you know exactly how many new Bitcoin are going to be released. You know how many

Bitcoin will be in the future. There's a set monetary schedule. You know the cap of 21 million. All of those things are known. Uh versus other things like even traditional financial instruments like like stocks, you don't know what their cash flows are going to be like. You don't know what their dividends are going to be like. So there's a lot of unknowns there um with those assets and and Bitcoin to me is the exact opposite. So maybe just maybe this was just one data point where we've seen people recognizing that uh Bitcoin isn't the risk on trade anymore, but maybe it's these other things. Maybe it is the other digital assets that that are the risk on trade. So we'll see. We'll see how that plays out. But um again, two things, you know, zooming out, Bitcoin already had a rally. I think you're seeing a classic rotation into the the

riskier altcoin space and then on top of that uh maybe now at over 100,000 staying there solidly $2 trillion asset class people are looking and understanding Bitcoin more as not uh just a risk-on asset. >> That's really helpful and I think a really useful perspective. I uh worked at Black Rockck for six years and our head of digital assets there also made the same point. I think he wrote an entire white paper on it about how the institutional investor landscape is changing their view of Bitcoin from a risk asset to a riskoff asset. Um, so I think that's a really helpful perspective. I want to get some more context on that. Um, but first I want to just like kind of have frame for us where you see Fidelity as a participant

in this market in the digital asset space because we've seen you know there's a lot of cryptonative companies. There's a lot of Wall Street players getting involved now and sort of like a hybridization that's happening differentiate for us Fidelity Digital Assets. Where do you guys see yourselves fitting into this marketplace and and what niche are you trying to to to fill? >> It's a story I love to tell. Uh obviously it predates me, but I love to tell the story of how Fidelity Digital Assets started. And it really goes back to uh the late '9s before Bitcoin was even invented when Fidelity created a a pure R&D center, research and development center to just look out at things in the in the universe in the industry that could enhance their business, maybe disrupt their business.

And this research center of course found Bitcoin as early as 2012 or even before that. And what's interesting about this group at Fidelity is they don't they don't just read about it. They don't just read white papers or academic things. Uh they get their hands dirty. They play with it. They seek to really understand it. So they started uh playing with Bitcoin. There's a famous story of Fidelity trying to use Bitcoin in one of the cafeterias way back when. This was before Lightning Network was invented. So you can imagine it did not go well waiting 10 minutes for at least one confirmation. Um but but that's the stuff they do. And then of course they started mining Bitcoin. They started mining it on their desktops. Uh there's even a story where they then ordered

these miners from China. As you know, most of the AS6 come from there still today. And that was the only place you could get it. And and that didn't go well uh uh from a requisition standpoint. The finance committee and others said there's no way we're we're buying these whatever they are Bitcoin miners from China. And to her credit, our CEO Abby Johnson uh said, "No, we're going to do this." And so they started mining Bitcoin and then they realized they wanted a a place to store it. And there was no enterprisegrade, institutional grade custody solution out there yet. So they built their own. And this is also the goal of this research group. They want to look out what's out there, try new things, and then see if they can scale something new into an actual product. And so 2018, early 2019

is when Philly Digital Assets officially launched. And custody is still our main product today. Uh, and so that is where we differentiate ourselves from a lot of other people out there. We built our own custody from scratch. We still own and control that today. Uh we custody our own coins for all the products you see out there from Fidelity from the exchange traded products to um our retail offerings to everything else. Uh that's all custodied with Fidelity Digital Assets. So um you know maybe we're not far as far along as some of the digital native counterparts, but if you look at a traditional finance landscape, uh we're leaps and bounds ahead of of where all these other people are today. And so that's where we really fit in. We we really believe in the space. Uh I remember I started about four years ago. Bitcoin hit a new

all-time high. A few months later it crashed 70 80% and I wondered, oh boy, what's going to happen? And I was delighted to see Fidelity step on the gas and use that bare market to actually hire more people and build more. So we're we're very committed to the space. We have been for over 10 years. Uh and that's where we are today. >> Gotcha. Yeah, I appreciate that that context because I think everybody has had a different journey of adoption and education and sort of this learning curve. Um, and I think Fidelity has been a unique uh a unique participant and had a unique story there. So, I wanted to kind of share some of that context with people so that they know where you're coming from. Um, you're also now uh one of the the leaders on institutional research in the whole digital asset

landscape. Um, I read your Q2 2025 signals report with great interest, a lot of insights in there. you talk a lot about rising global liquidity, declining volatility in Bitcoin. Um, just situate for us for our audience sort of your larger macro framework in which the the context that we're in and how you're evaluating this. Um, and then situate Bitcoin in that framework for us. Where does Bitcoin fit into the current macro landscape from your perspective? >> Yeah, I wrote a piece on Bitcoin as a potential macro asset. And what I mean by that is when we say macro asset, this is one of these finance terms that's everyone kind of knows what it is, but there's really no good definition. So to me, it's any asset that is traded globally, recognized by almost all

financial institutions and participants. And and it's traded on macro factors, things like liquidity and interest rates and inflation. And so we did, you know, some pretty simple statistical analysis to say what macro factors does Bitcoin particularly uh correlate to, not necessarily causation, but at least respond to and correlate to. And the two biggest ones are global liquidity or even US liquidity. So just take M2 money supply as a as a good proxy for that. Statistically significant, very high R squared. So depending on the time frame you're looking at, R squared of anywhere between8 to 0.9 or above. What that means in practice is 80 to 90% of the change in Bitcoin's price can be

explained by the change in the money supply. Now, you have to be a little careful like this is looking at a long time horizon, not dayto-day, week to week, month to month, quarter to quarter even. And and also what some of these people are doing on on social media and stuff where they're matching up, you know, M2 with different lagged effects with Bitcoin. That may or may not play out. That's not what I'm saying here. here. I'm just saying as a general broad time frame, if you increase the money supply, you probably will see an increase in Bitcoin. At least that's what we've seen in terms of the the stats. Right now, I happen to think there is good causation for that, not just correlation. So, global equity is number one in our framework. The second one is inflation expectations.

So, not inflation like CPI, PPI, which are backward looking, but in inflation expectations. So if people think inflation is going to go up, that's when you see uh Bitcoin move. And the reason you have such a high correlation in R squared to this is uh really in that past moment where we saw inflation expectations absolutely explode with uh co that's when Bitcoin ran as well. Then of course they came down but the backward-looking CPI was still very high at 8 9% highest it had been in 40 years and Bitcoin was already going down. And of course, that's why you get some confusion where people say, "Wait a minute. Thought Bitcoin was supposed to be a hedge against inflation. Got inflation at 40-year highs. Bitcoin's down. What gives?" And that's the the

way to square that circle. It's like you have to look back at the expectations. Bitcoin is a forward-looking market just like anything else. Uh and that's where it really shines. So those two things it are my big macro frameworks when I look at Bitcoin specifically. >> Gotcha. That's a helpful perspective. And I think that a lot of people in the digital asset space have kind of like latched on to those things. Um I I want to kind of like translate this into what we've been seeing in terms of like the the recent pivot in dovish tone from from the Fed. A lot of analysts are saying that it doesn't really matter if the Fed cuts rates or not because eventually they're going to have to print, right? Like you know Larry Leopard with his big print thesis like the government's just going to have to

keep adding liquidity. China, for example, has already added, I think, a trillion and a half dollars of liquidity so far this year and are on pace to do at least that much or around that much the rest of this year, too. So, if if if global liquidity is just going to keep rising and that explains much of the the movement in Bitcoin's price, how much should investors pay attention to things like, you know, Jackson Hole speeches and Fed rate cuts or does this like ultimately not matter and the direction is going to keep going in the direction it's going? Yeah, it depends on your time horizon as an investor and and this is where something like you mentioned our signals report something we do um any any metric you look at you have to ask well what time horizon am I looking at because it

might say one thing for one time horizon something else for another one or you have to use the right metric for the right time horizon so I'm completely with you or whoever these uh other analysts are saying and I I know a bunch of them as well where um yes on a zoomed out long time horizon. If you look at the chart of M2, it's it's just up and to the right. There was only a minor period recently where we actually had uh global liquidity, global money supply go down and actually have a negative year-over-year rate. Otherwise, global liquidity has always been going up, especially at least after we uh officially severed from the gold standard in 1971. And that's what underpins a lot of our our economy and

our system, right? that you have to have these ever increasing inflating asset values to to support the debt. At least that's my opinion. So yes, if you are a long-term investor and it's like I'm going to hold this for at least 5 years or more and the investment thesis of Bitcoin is something like a hedge or to pro protect yourself from currency debasement, inflation, I would agree that a lot of it is just noise. A that's all just things you can tune out. Make sure that chart is still going up and to the right and that's and that's what you're going to see. um if you're someone who's, you know, has to move or get in and out for whatever reason or you need some liquidity or something, maybe that's when you start to pay attention more to these other uh narrower time frame stuff. So, you know,

rate cutting is one thing. But I think again bringing it back to that framework, uh our research shows rate cuts in things like the 10-year Treasury, they're actually not statistically significant uh when compared to the price of Bitcoin. And I think that's because you have to think of the second order effect. So are rates if if the Fed cuts rates the question is are they either going to add liquidity add more or increase the rate of the money supply and the rate really matters not just the amount or andor are they going to change people's inflation expectations. So again, rate cutting is one step. Think one step beyond that.

Second order of operations here is is is what does that mean for these two things? And what's really interesting I think about Powell's pivot to get into this now is he leaned into the labor market as the reason why and I and I suspect that because uh a lot of the inflation metrics are ticking up again. And so I think he could only lean into the labor market. And so at the very beginning of the year, we wrote a a look ahead piece where I brought up the question of why isn't anyone talking about stagflation. And it wasn't my base case. It was it was just something I think people should at least raise the question with. And now, you know, it looked like that was not going to happen at all. But now we've got a Fed cutting rates into a potential increase in

inflation. It didn't even get that low. And you've got talk of them moving their goalpost yet again. So it used to be 0% inflation, 0 to2 a range, then a 2% average. Now they might move that up again. Uh so they're obviously getting more comfortable with having higher inflation. And then if they're worried about the labor market, to me that seem sounds like they're worried about the economy. Uh so again, that increases the odds of a stackflationary environment, at least in my opinion. And the reason I brought it up too is the only time we've had that in the 70s and 80s was when you had some of the same things. And also we pointed out the reason why I said this could happen is if you look back then inflation wasn't just one one big massive inflationary decade of double digit inflation. It actually came in

three separate waves. And so if you looked at what we had, we had it go up to 9%. Come down to 3% or a little bit below for CPI. What if we have another wave? What if the Fed thinks inflation's under control? They start cutting. It's not in control. we have another wave of inflation again just like like before you know and again past is not uh indicative of future but we do look at some things that that may rhyme most web3 projects launch a token first and revenue maybe later maybe never but Ken flipped the script $30.6 6 million in ARR before a token ever existed, thanks to verify. Cash flow positive, growing month after month, and powering 31

million verified users across AI, gaming, and consumer apps. In a market full of hype and empty metrics, Kinjun is proving that web3 can be built on real revenue, real users, and sustainable growth. Want your protocol to scale with results that last? Grow with Kinjun today at milkroad.com/kjun. Yeah. Yeah. No, I think there's a lot of great analysis in there and this is one of the reasons why I think it's so helpful to have you on is that understanding the history of these things of of how the the market and the economy has behaved in the past can help us understand what might happen in the future. Um, but I'm with you. I think there's a lot of things that are not my base case, but uh we're still watching out for because we can't rule these things out. Uh, I want to come now towards something you you mentioned in

this framework of like, you know, inflation expectations. A lot of that gets to what investors think or what their sentiment is or or how they're treating or thinking about these assets. And I'm interested in hearing your perspective on how particularly institutional investors have changed their thinking on digital assets. I I want to just start with one one thing I saw recently. Uh Eric Peters, who's the CIO of Coinbase Asset Management, said in a recent interview that we haven't even scratched the surface of institutional adoption yet for digital assets, but he thinks that that's coming. Do you agree with that assessment that we haven't even scratched the surface? And what in your mind is going to bring that scratching through the surface like to to get more institutional interest in digital assets?

>> I agree with that. Uh from all of my anecdotal evidence of people I talk to, conferences I go to, institutional investors I have conversations with, we're still very very early. Uh many of these uh investors are still barely dipping their their toe in. But it is changing. They're they're realizing that they have to they at least have to get educated. They have to at least have an answer whether or not they agree or not. It's not going to be good enough to say we can't address this. It's too small or whatever else their excuse was before because now of course it's uh $4 trillion or more for the the total space. It's a political issue. It's it's been around it long enough that people are realizing it's here to stay. So I agree with that. Um to give you a few

anecdotal stories, you know, one is I was at a conference for pensions and pensions are like the the most uh conservative group. They're the ones with the lowest amount of adoption. And a few of them started getting a little more interested, asking at least more pointed questions to show that they were thinking about it. But there's still a big group. one in particular uh he ran a pension for a number of large cities their their fire and police I believe and he he was in he said he was in his 60s and he said you know I'm going to retire in a few years and um this is all interesting and great but it's something for someone else to pick up the mantle on and so I think one of the things is just that's going to happen is just time and a shift of of generations from some

of the current managers to uh younger people who are more comfortable with digital assets and everything being digital. And the other thing that will have to happen is uh the career risk will have to be gone. We talk about this a lot. If you're the only one out there doing this and it doesn't work out or the just the timing is bad, uh you can lose your job or your career. And why would you do that when you can just stay with the herd? Uh and if you miss it, well, so what? So did everybody else. So the career risk has to go away. There has to be time and a generational shift. And then I think just um if if they can start seeing it's in their best interest and incentives as well. Uh if they can outperform their benchmarks, outperform their peers uh on an institutional

basis, that's going to get people excited about it too. Uh you know, at the end of the day, people are are going to be motivated by their uh metrics and what they're judged on and so that will have to be another part of it as well. >> Yeah, definitely makes sense. I think price has always been the best advertisement for Bitcoin. So, um, yeah, but I appreciate that that the changing of the guard and like, you know, bringing in a newer generation that's more comfortable with the space and this asset class. That'll make sense, too. Um, something that I thought that was really interesting, you put out some analysis recently just commenting on the 5-year draw down that we've seen in the US bond market. And, you know, historically, this was a major place for institutional investors to to put capital to to make investments and

trades. And, you know, like you said, like returns matter. Five years in a row, we've had a draw down in returns there. How has this started to change their perspective of like, hey, we need to look somewhere else for yield. And does this make them more open-minded to something like Bitcoin or digital assets? >> It hasn't yet, uh, at least from what I've seen, which I think is surprising because I I think there's still this idea of, well, bonds go through draw downs just like everything else, so we'll just continue to ride this out. And and they're they're right. Like let's be fair, we we haven't had a lot of data yet, but um we had the recent show with Yurian Timmer who's a big macro guy here at Fidelity. He's all over the social media. It's really great stuff. And I had a conversation with him

about this. And uh what was really interesting to me is he brought this up now. So his words, not mine, although I I tend to agree, which is if we're in a an environment, a regime where there is, let's just look at at government bonds, treasuries. If there are fiscal deficits as far as the eye can see, like there's just the math is just really hard to square if you start doing the numbers of how this is going to get under control. Um, you have to start to ask the question of are bonds an impaired asset class? are they going to be in an environment where they they cannot uh outperform especially on a real inflationadjusted basis and if that is so you know again this is hypothetical but if that is so um where do you turn

to and so he was making the case for a lot of alternatives and we've seen a lot of institutional investors go here especially pensions endowments foundations they've they've actually been leaders surprisingly in the alt space uh they have no problem going into alternatives and So, what if everyone always thinks of Bitcoin and other digital assets as like this, again, like we talked about before, this risk-on asset, and everyone would always think, well, it's the riskiest thing, so I'm going to take some of my riskiest stuff out of equities and stocks, put it in there. Um, he was saying like, well, what if people actually take portions out of their bond sleeve, their bond portion, and put it into alternatives, which may include something like Bitcoin as well. Um, so I think that's actually

a really a really interesting thing. And then just one other point on the the bond draw down that I want to bring people's attention to. Everyone looks at bonds as like the portfolio stabilizer, but we always have to look at real returns and everyone likes bonds because they have very shallow draw downs, right? Because they're the safest. They're the highest in the the capital stack. You get paid out first. Um but on a real basis because their interest rates are fixed long duration bonds are at at a very high risk of providing you a negative real return. So if inflation comes back you are going to be underwater on a real a real basis right and again going back to the 70s and 80s bonds had a 50% draw

down on a real basis. Nobody talks about this and nobody really knows this. I don't even think. Meaning um if you were invested in these long duration bonds during that time, sure it looked like you were doing okay, but in terms of the actual money you could take home as for example retiree to use to eat, uh you were down 50%. And moreover, uh you were not just in that draw down for a year or two, you were in that draw down for decades. And that's the big thing too I want to emphasize. You know, Bitcoin for all intents and purposes gets a lot of uh heat it deserves because it has these these massive draw downs of at least historically 60 70 80%. But historically, they've been very very short, right? Bonds, sure it's it's low,

but you could be sitting in that for a very long time. And if you take something like the classic 6040 portfolio, 40% is a big chunk of your portfolio to be underwater for decades or more. >> Yeah. And I think a lot of capital is starting to realize that we've seen the the crowding into the short end of the yield curve to try to escape this. You know, nobody wants to hold a a bond that's over 10 years anymore because just like you said, the math doesn't math once you get that far out. Yeah. So, I think that there's a lot of capital there that's become aware of this and is trying to find another home.

I think gold is telling that story. Bitcoin is as well. And so I'm I'm interested to see how that continues to develop and and how that landscape shifts because there's there's a lot of capital that's you know like you said deep in the red and it's it's the the advertisement for it is always that oh it's stable but you're right it's it's stably losing you money um in terms of real performance. Um I want to turn now a little bit more towards your your research reports on on Bitcoin itself as an asset. Um you said in this signals report we've referenced there's a unique mix of headwinds and tailwinds around Bitcoin right now, right? things that are are, you know, telling a story that's constructive and some things that are holding it back. Give us some more detail around this. What is this mix of

headwinds and tailwinds and and how is is Bitcoin situated right now based on your your recent report? >> Yeah, the tailwinds are are huge on the demand side of at least what we've been seeing. Uh obviously corporate treasury adoption, companies buying Bitcoin, we can't even keep up. We're trying to track this stuff and there's, you know, seemingly a new one announced every day. uh the number keep of companies keeps going up. Uh the companies that already hold are buying more and more and more. So obviously we can see that and measure that as a huge source of demand. The other thing we have visibility on is the exchangeraded products or people like to say ETFs but technically ETSs for us um they are seeing huge amounts of flows.

Uh so that's another big source of demand. So then of course the the question is um well where's where's the selling coming from? Where's the supply coming from? And that's a little harder to see visibly. Um, but onchain we can see a lot of uh original or very early adopters and holders of Bitcoin selling. We're seeing very old coins move. Anecdotally, you know, we saw a public uh release of 80,000 Bitcoin that were moved and then sold from over 10 years ago. I think you mentioned at the top of the show, another 24,000 sold. So clearly uh the price getting up to this point is making some long-term holders sell. It's it's finally inducing them to sell for whatever reason. You know, one

of the press releases said for estate planning purposes. So um eventually at some marginal price somebody wants to take some and use it for something else in their life. And that's that's normal. That's good. That's healthy in my opinion. You're you're distributing the coins to different uh investor groups and bases and parties. um that's all part of adoption and what you would expect to see. So the question will just be um at what point do those early original holders finally get exhausted? They're finally sold out and then if this demand keeps continuing to go up if uh we're going to have to see price respond uh to accommodate that and we'll we'll see. The other big thing on the demand side that that I think people are under undervaluing or or under they're

they're not dis they're discounting it too much is the advisor RAIA market. And so here again it's a bit more anecdotal on my side, but there's just so many adviserss who are still on the sidelines with their clients. Their clients are uh they can't or they're prohibited from actively selling any of these products or exposure to them. And that's just going to be once that's unlocked, it's a slow process, but it's going to be a slow burn, a slow constant bid for these because they will be workers and retirees and people who use these adviserss and financial planners if or when they get into things like model portfolios, there'll be a certain amount that they just rebalance into every quarter, every year. And that's going to

be a big source of demand. That's that's still, you know, trillions of dollars out there. So, one thing to keep an eye on as well. >> Yeah, I think that there's a lot of uh a lot of people, especially who have been in Bitcoin for a long time, think of it as something that is consensus and that everybody has already gotten to, but they don't realize how much and how many different kinds of pools of capital still have not yet gotten access to this market. Um, so yeah, I think the RA thing is uh definitely going to be a game changer when that happens. Um, so I want to ask about this, like in terms of market structure, like you've situated where we are with Bitcoin right now. A lot of people are saying that we're not going to have another bare market in Bitcoin and if we do, it'll be a tiny

one. Um, David Bailey of Bitcoin Magazine and I went back and forth on X just a little bit about this. I didn't get too heated with him about it, but he's saying that Bitcoin won't see a bare market for years. And, you know, according to the the history, the four-year cycles, a lot of people are saying that, you know, we should be hitting the top sometime around now and going into a bare market. What's your view on this? Do you think that there's something to this extended cycle theory or is the cycles are the four-year cycles just completely over? Like what are your thoughts on this and how is this going to play out going forward? >> Personally, I do not think cycles in Bitcoin and other digital assets are dead. Uh they just they just can't be.

If and and number one reason for that is if traditional financial assets especially things like stocks still have cycles and regular bare markets and that's you know hundred trillion dollar asset class on a global level. We're certainly going to see bare markets and cycles here in my opinion. Now the question of whether we'll see a four-year cycle though is a little more interesting. Uh and I personally think the four-year cycle is is probably dead. You're not going to see it on that clockwork cadence. So remember, people got really excited when they noticed the pattern of the the yearly performance of Bitcoin and or the candles and it was green green green red green green green, red, green, green, green. We're

in the third green. You would expect a red, but it's like why should that be? Um I I don't think I think in the past there might have been some good reasons for it. It's very hard to tell because we don't have an experiment we can run. But in the past we had the having and this also matched liquidity cycles with Fed easings. It also matched things like election cycles. So you had all these things but you never knew exactly which one was driving it. And personally I just think you know if it were that easy that it was just this same pattern every single time. Um, I don't know. My years in the financial markets tell me like the market's going to do exactly what you least expect it, right? Or there's the old adage, the market's job is to extract the most pain

from the greatest amount or number of people possible, right? So, I I just don't think it's going to be that neat. So, I agree that uh we're going to still have cycles, probably not going to be four years. This one already is longer and is is getting elongated. So I think the data is already disproving the four years uh without us even having to to argue for it. And I think it's because you have the exchange trade products, you have more institutional buying, uh you have now like an extra turbo of the the corporate treasury uh trade right now. So all those things could elongate the cycle. Um but I just don't think you know it always scares me a little bit when you say hear people say there's not going to be a bare market because if it happens in traditional markets, it's

going to happen here as well. Yeah, that's what I keep telling myself. Every time I find myself or thinking or feeling this time is different, I go look in the mirror until I feel I say it to myself out loud till I feel dumb and then I like, you know, talk myself down. >> The four most dangerous words in finance right there. This time is different. Yeah. >> Yeah. That's it. Ladies, liquor, and leverage, the other ones. Um, okay. Uh, let's move on here. I think there are a lot of changes that we've seen to um to to the the Bitcoin market though and in terms of market participants. And I'm glad you brought in digital asset treasury companies because I want to get a couple of thoughts on this. You've highlighted in your analysis recently.

There are over 35 different public companies, publicly traded companies that are holding over a thousand Bitcoin, which is, you know, a substantial stake. And by all intents and purposes, they intend to hold on to that as much as they can. Um, do you see this digital asset treasury company um phenomenon, do you see this continuing to be a niche in the market or is this going to broaden out into a reality where like every company is a digital asset treasury company? like how do you see this evolving and what are your thoughts on this phenomenon and market trend in general? >> Yeah, we were doing a lot of thinking and studying on the team with this uh over the past couple weeks and hopefully we'll have some more data to to show everybody in a little bit. Um but the first thing we did was number one just

look at all these companies that have Bitcoin or other digital assets on their their balance sheet and they're not all the same. And I don't mean like same industry and sector and stuff like that, but really you can bucket them into three different things. And this is how we went about it. Um, number one, there's digitally native companies that have these assets on their balance sheet because that's that's their business. That's their job. So, Bitcoin miners, for example, they're they easily fall into that bucket. Um, exchanges or other companies that work in the space probably have some. Now, they might cross into the other bucket, which is to to put extra on their balance sheet. Um, but that's one one group. The other group is companies that are purchasing it as a way to diversify their cash

balance. And a company like like strategy started out like this. They looked at their $500 million of cash and they said, uh, we can't put this all into bonds or treasuries because it's a it's a melting ice cube. And so to your question, I think there is a world probably quite a bit in the future yet where almost every company is going to have some some Bitcoin on their balance sheet if and this is the big if, Bitcoin continues to be adopted as this store value monetary asset because they're going to look at their balance sheet and they say, "Okay, we don't need this cash for at least 5 years, whatever their their risk tolerance is. um we don't want to put it into something where we're going to lose purchasing power, so we're going to put it into Bitcoin

because we've got a long enough time horizon and then hopefully we can use it for the business later. And they're just they're just diversifying. It's the same as if a a company were in, you know, a high inflationary country like a Turkey or an Argentina or whatever, and they said, "We're going to get out of some of this local currency and put some in US dollars." Uh to me, it's the same the same trade or the same uh setup, right? What's going on now though and what's the bigger bucket is what I call like the arbitrage bucket. All of these companies who have realized, hey, we have access to capital markets. We have uh an investor base out there that cannot get exposure to Bitcoin in the traditional financial markets whether that's uh because of their mandates or compliance or regulatory or uh geographic reasons. you know, look at

like UK or Japan for example has these and they see an arbitrage opportunity and that's and that is legitimate in my opinion where you have this is true in finance all the time wherever there's an arbitrage wherever there's an inefficiency an entrepreneur will step in and seek to close that inefficiency and obviously they're doing it not for altruistic reasons but to profit from it and so that's what these these companies are doing. The big question though is how many can the market support and how long does it go on? And I think, you know, that's what we're we're still seeing play out. I think it could go on a lot longer than what a lot of people think just because there is so many pools of capital out there that want or could get some exposure yet. But we'll

see how how it plays out. >> Yeah, I think that's exactly where I'm at, too. It's like it it's clear there's an explosion here. It's clear that there's a lot of momentum to it, but it's not yet clear exactly how this is going to shake out, who's going to have legs, who's going to stay, how they're going to evolve. So, I but I thought that that perspective in your your analysis and in your research report was really helpful and just like bucketing it in that way and like thinking about it a little bit more than just a mania in the market. I want to come now uh leaving Bitcoin aside for the moment and and get some thoughts from you on Ethereum. Um, I think that a lot of people have been very surprised by the enormous rally we've seen from from Ethereum, um, from $1,400 in April to

just as of this weekend, uh, touching 4,900, I think, uh, almost 5,000, right? So, it's quite a huge move. Um, recently, the Fidelity Digital Assets research team was quoted as saying, "Ethereum's layer 1 is seeing a surge in transactions largely due to a 50% increase in the gas limit since March, which is an upgrade they had." um just you know look everybody I think has spent a lot of time when talking to institutions about digital assets focusing on Bitcoin. What has the the conversation been like around Ethereum? How have you framed that and do you expect this to to continue to have traction here? And just like give me some thoughts from you on on on ETH here.

>> Yeah, to the framing question, we're pretty adamant that Bitcoin I mean one of the first reports I wrote was called Bitcoin first. Uh, Bitcoin is in its own bucket as best understood as a monetary good because it has these properties that can make it good money. Not saying it necessarily is yet, which is why we say it's an aspiring form of money. So, you put that aside and then you look at Ethereum and I for one am actually very glad that Ethereum has continued to change and evolve uh because it has really set itself apart from Bitcoin.

Before it was a lot more similar to Bitcoin. It was proof of work. people were talking about uh ETH as ultrasound money, all this sort of things and and I never at least personally held that view. Um I think Ethereum has a completely different investment thesis and framing for it. So the way we we talk about it on the research team is um Ethereum is the number one smart contract network. You know, it's number two market cap, but it's clearly number one in terms of all the metrics of of transactions and size and everything else that make make up a good smart contract layer 1 network. Um, and to us it's it's first and foremost an open-source platform to host all of these decentralized applications. Uh, and then out of its competitors, to us,

it is also the most decentralized and the most globally neutral one. Um, and then it has the these properties that enable trustless execution of programmable logic. And that's really its core value prop to me. Um, and that extends Ethereum's utility beyond simple just just value transfer. like we could send ETH back and forth to each other to pay for things, but to me that's not not the real value prop for for Ethereum. It's it's it's as this uh smart contract platform. Um so that's how we position it to our clients. In terms of uh what you were saying before with like the transactions being up and everything, yeah, we're seeing this in the data, 25% increase in transactions. Um whether or

not that's sustainable, I think we'll see. Right now it looks like it is because fees are staying low and you're seeing a lot of demand from its bread and butter, DeFi. And then also stable coins. Stable coins are like the hot thing right now and are, you know, rightfully so. I think they're they're the killer app use case. I think 50% of value transacted on Ethereum, it comes from uh stable coins. And so that's what you see as well. You see people gravitating to Ethereum to do the highest uh value transactions. something like Salana maybe has higher volumes uh but more of the value is being done on Ethereum and I think that's because it is positioned as more of a decentralized uh censorship resistant network um so that's what we're seeing we'll see

though you know caveat here is fees can spike they can go exponential that of course curbs the appetite for the the amount of activity you want to do on the network but we'll we'll continue to watch it closely >> yeah I appreciate that I think that hearing it's always interesting to me to hear how institutional researchers or digital asset teams at larger firms are positioning the value proposition and like differentiating Ethereum from Bitcoin because I think the you know Bitcoin is digital gold narrative is pretty easy to digest but explaining well what is a smart contract platform what what is the value here is always different so I just wanted to kind of hear your thoughts on that and that is very helpful so thank you for that um we're coming up on time so I'm going to bundle six questions into one and let

you chew on it however you want but um I'm really interested in this question of like the institutional adoption curve and and what changes need to happen in order to sort of like break down that wall and bring that in. Something that I've heard from a lot of people is the regulatory landscape. Um, which this administration has been hard at work changing. You know, not to go through everything, but like the SEC has project crypto exploring tokenization. The CFTC has a crypto sprint that they're doing as well and the Genius Bill passed Congress. There's also the Clarity Act that's it's currently being discussed in Congress. From your perspective, in your conversations with your clients, how big of a deal is the regulatory environment here? Do you think this is a major barrier or is it something that they're like not really that keyed into? Like

how big a deal is the regulatory changes that we're seeing happening right now? >> It it used to be a bigger deal. Now it's not. And I would say the biggest watershed moment was uh the approval of the exchange trade products. and then even more so now right where we're seeing uh full isolated bills fully uh devoted to crypto and digital assets not lumped into another bill or something like that. So um it is a factor but I don't I don't think it was actually again from my perspective and maybe more anecdotal I don't think it was actually a very big factor in terms of allocating because uh I think most people were pretty pretty comfortable uh with the regulatory environment of just holding or investing or buying or selling these

things. I think where it's going to help is now the next stage of things like the DeFi stuff, the staking, the infrastructure, all of that. But from an investor's perspective, um I really don't think it was that that big of a barrier. Um at least not not more recently over the last couple years. >> Well, thank you Chris. I look I really appreciate the insight here. I I do hope that as that regulatory environment changes that you'll you'll keep us posted with what what the impact that has is. Yeah, really appreciate you coming on to share your thoughts with us today. Um thanks for being on Milk Road Macro. Uh, where can we find send people to find more of you and your work online?

>> Yes, you can go to fidelitydigitalassets.com and all of our research is there for free. Uh, click on the research tab, read or download whatever you want there. And then for me personally, I'm chrisjkyper onx as well as LinkedIn. >> Awesome. Well, thanks so much for being here. I really enjoyed having you on. I hope you'll come back again soon. >> Absolutely. My pleasure. Thank you. >> Thank you. And thank you everyone for joining us. As a quick reminder, everything that we said today is for entertainment and educational purposes only. This is not financial, legal, tax, or any other kind of advice. Uh views and opinions expressed here are our own and do not represent professional advice or the opinions or views of any of the programs or businesses we are affiliated with. We are not financial adviserss.

Please consult a qualified professional if you are making investment decisions, especially when it comes to crypto as it carries significant risks, including the potential for losses. Uh thank you all for joining us on Milk Road Macro. This was a great episode, a lot of fun, and I hope you'll join us on the next one. Stay safe, stay bullish, and we'll see you soon on Milk Road Macro. Thanks. 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.