The Derivative - Stacking Assets: Bitcoin, Gold, and the Future of Portfolio Diversification with David Dziekanski of Quantify Funds

Episode Date: May 8, 2025

This week on The Derivative: In this compelling episode, David Dziekanski, founder of Quantify Funds, joins host Jeff Malec to unpack the fascinating world of Bitcoin and gold. Dive deep into the innovative BTGD ETF, which stacks 50/50 Bitcoin and gold, and explore the cutting-edge concept of portable alpha. Dziekanski shares insights on why these assets matter, how rebalancing can create portfolio alpha, and why institutional investors are increasingly looking at alternative stores of value. From the future of cryptocurrency to gold's enduring role in protecting wealth, this episode offers a nuanced look at navigating today's complex financial landscape. Whether you're an investor, trader, or financial enthusiast, listen in and gain valuable perspectives on managing risk and seeking opportunities in an increasingly uncertain economic environment.Chapters:00:00-00:56=Intro00:57-11:29= From Washington University to Wall Street: Exploring David Dziekanski's Journey in Quantitative Finance11:30-19:36= The Art of Rebalancing: Mastering the Magic of Stacking Bitcoin and Gold19:37-31:50= Bitcoin's Evolution: From Crypto Hype to Institutional-Grade Asset31:51-44:04= Gold in the Modern Portfolio: Hedging Against Currency Devaluation44:05-55:00=Beyond Bitcoin and Gold: Discovering Innovative ETF Investment Strategies55:01-58:16= Surfing, Scaling, and Balance: A Personal Journey of InnovationShow notes:Quantify Funds Whitepaper - Case for Bitcoin and GoldDerivative Podcast episode - A Four Stack-Pod: Talking Stacking Assets with Return Stacked ETFs Follow along with David on LinkedIn, X.com @DavidDziekanski, and check out their website at quantifyfunds,com!Don't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and our host Jeff at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@AttainCap2⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, or⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ , and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠

We're in a world where everything is kind of like a leverage casino, so finding things that have slower replacement increases is just the name of the game. Adding leverage in a portfolio and finding an ability to balance between assets and use some of that leverage is the best way to use leverage. Welcome to The Derivative by RCM Alternatives. Send it. Hi, I'm David Chkinski, founder of Quantify Funds, and we're here to talk about gold and Bitcoin on The Derivative podcast. Where are we talking to you from again? Jersey?

Brooklyn, New York. Brooklyn. All right. I was actually in New York yesterday. Quick, quick dinner, breakfast meeting and back out to catch my son's baseball game. It was like the nicest day of the year. It must have been so far. It's fine. Finally beautiful in New York. After one of the longest winters we've had in quite some time, I imagine there's just going to be a complete exodus out of New York for next winter.

That's the yin to the yang of the punishment New York received this winter. Really? I'm like everyone will be hey, plan something now we're not staying. Anyone who can work remote will work remote from New York City next winter after what they just endured this winter for sure. It was the some of the coldest days we've had in 10 years and also just the duration of the winter in general was punishing. And you've always been New Yorker?

I have. I'm one of the few born and raised New Yorkers. I actually grew up in Manhattan, in Chelsea. I went to college in the middle of the country at Washington University in St. Louis. But came back and New York's in my blood. I tried to spend one to two months a year outside of New York, particularly in the winter, because who can withstand that seasonal depression every single year? But outside of that, New York is in my blood. I met with my college buddy in the city there. He's been there three kids, private schools in the city. And like, man, I don't even want to know what that costs. God bless. Yeah. The pre-tax income for those private schools,

including the donations they anticipate you contributing beyond tuition is just astronomical. Plus he's like, then we need a driver to take there. There are three different schools, of course. So this kid has to go to that school. This kid takes the train. Then I ride the bus with the other kid to the the youngest kid God bless you seems like a lot yeah so and watch you that used to be the most speaking of costs education costs I think that was

the most expensive school in the country for quite a while right it I think it had that title for quite some time. It certainly wasn't a cheap college. I did my undergraduate and master's program there as well. I was a triple major in math, finance and economics and a master's in quantitative finance. I graduated my MSF in 2007. So that's a lot of math. That's a lot of math. Yeah.

Are people still doing those major? Do you think it's getting AI replaced or no? We need them more than ever to feed the AI and do the... I think they are. I think the good programs are incorporating as much programming as possible because it just, any math skills you have, if you can't be a pseudo data scientist, and quant at the same time, I think you will be replaced, right. But if you can, you know, AI is really good for things that can be right, like 85% of the time. And AI services and agents will be sold in industries that need better

accuracy than that. But I just feel like the quant space with so much data out there and the ability to capture this data, repurpose this data, that if you have that programming background alongside that financial, quantitative financial brain as well, I think then there is a place for you in this market. But without the ability to be a pseudo data scientist at the same time, I think it's is a place for you in this in this market. But without the ability to, you know, be a pseudo data scientist at the same time, I think it's, it's gonna be hard to crack. And then how you knew coming from New York, I always want to

get back there work in finance. That was the goal. The goal was to do that in a very independent way. So if you want me, I can kind of talk about my journey a little bit. But I worked out a lot of the big banks as an intern and on the AIMX stock to change for way back in even in my high school days. And I saw a lot of the fallacy of the ivory towers of these big banks, actually between my undergraduate and my master's program, I interned at Bear Stearns sales and trading in the summer of 2007. And there were like two things that happened that summer that were forged into my brain and

I'll never forget it. And they kind of shaped some of my choices that I made in life after that. First one was a lunch meeting with some speakers of people who knew, who are very impressive in their space with Embarrassed Turns. This is one of the offerings they gave the interns. And they were talking about mortgage bonds. And again, granted, this was summer of 2007. And I actually had the guts as an intern to stand up and say, why does pooling mortgages together make them less volatile? And I got laughed at, like, literally, the entire room laughed at me. And I'm like, you know, I'm not there's no proclamations of like foresight of what's to come to

so that I was just asking a question. But like, you know, that question took down that entire bank within 12 months. And so that was just eye opening for me. And they're like, Oh, they don't know more than anyone else. They might actually know less as a whole. Or they've been like, they have the rose colored glasses on that they're even if their back of their brain knows better that one of their brain is just no what could go wrong, nothing to go brain is just no, what could go wrong? Nothing could go wrong. Each each firm, each employee in those firm has to drink the juice so much for those firms that it's just like a herd mentality. So where the herd leads, and there's a lot, there's, you know, a number of these big herds out there, and

they're all like, considering what the other people are doing. And I think that's how we got into 2008. And the other thing that occurred was, there were there was a new HR manager there. And basically every intern that got brought in from the new HR manager got an offer and everyone who got brought in from the old HR manager didn't get an offer. It was a coup within like the HR group in Bear Stearns summer 2007. And that showed me very much that like you're just a number if you're working at one

of these huge firms. And so I've always had an eye more on the entrepreneurial side. I had more I was a more in traditional asset management straight out of my master's program. I actually worked for a company at the time that was called Latinburg Thalmann that has been rolled up and acquired a couple times by a firm that now goes by the name Osaic. But we grew at the time. Not Osaic. They need a re-brand. They just had a re-brand. At the time we managed about $1.8 billion

of model portfolios for about a couple 1000 advisors, independent advisors in that network. So we had one of the larger ETF model portfolios at the time. And I left to join title what is now title financial group in the fall of 2013. At the time we were called Toroso Investments and what is now title title, Tidal Financial Group. Tidal is one of the largest white label or ETF platforms in the country in the world. Something like one out of nine ETFs in the US launched in the last two years has been on a Tidal Trust. They have over 200

ETFs, 70 ETF brands using the platform for a whole sort of services. And at my time there as portfolio manager on a number of ETFs, I worked on the new product development team for some time as well. And I was a partner at the firm. It was definitely a whole lot of fun, but it felt like it was time to take the ideas we had and partner with my partners here at Quantifi Funds and launch our own ETFs on their own brand, being able to create and control that brand coming to market was something that I always wanted to do. So there was a very,

very long build up to where we got to today for Quantifi Funds. But we founded... But we founded one of those. I thought you were going to mention the early 2007 bear hedge fund that blew up, right? That was like the first canary in the coal mine. Yeah. For the whole thing. Yeah. And then I have another bear anecdote of my friend in New York, which I never knew at

the time. It's like the real problem there, they weren't only using leverage at the bank. All the execs were using leverage in their lives. So they were taking their bare stock and owning their house in the Hamptons and buying boats and all that. So it was like 10X leverage here, three X leverage personal life.

So when that, when that blew, that really blew. Yeah. I have a hat. I have a Bear Stearns hat here somewhere just for posterity sake. It's funny how much of this world is new ways to create leverage. Right? Yeah. But you like, I think leverage in and of itself isn't dangerous, right? It's like if you have those rose colored glasses on, you don't see the pitfalls and see the downside is where you can get in real trouble.

There's good leverage, there's bad leverage. And then like everything else, it's not necessarily good or bad. It's not black and white. It's like how much are you using? And how are you using it? Right? I think that's the important part. When you're leveraging a leverage asset to buy your Hamptons house. to buy your Hamptons house. I don't know if that is such a sound way to generate additional leverage. But you know that's one of the things we're focused here on Quantifi Funds is creating an institutional process to create leverage and wrap it into an ETF and offer it to retail so they can have a leverage offering in their portfolio that does some of the work a leveraged offering in their portfolio that does some of the work that they previously had to do themselves on traditional leverage ETFs. And that process of what we're doing here, stacking two assets, it's called Portable Alpha. It's not new. It's been around for decades. A lot of people might be familiar with the PIMCO Stock Plus funds that have been around for decades. And that was, we believe the actual original first stacked 4D act product. And the concept is really, really simple. Take two assets that may have correlation benefits between them.

Leverage a basket that offers exposure to both. And that gives you something to rebalance within your leverage basket to create some diversification and less path dependency compared to leverage ETS. Talk real quick. We've had the return stack guys on here. We did a stacked pod. That was fun. And you're on that website, but you're separate, you're quantified funds, you're not returned stack. So what's what's that relationship built with? Yep, I've known Corey for about 15 years now. And obviously, this is a very similar concept of stacking assets as he has at the return stacked ETFs in partnership with the resolve

guys. And so last summer, I approached them about potentially partnering with them. So legally we have a licensing agreement and we're available for sale also, or available to find more information on their website as well. But we have a licensing agreement with them as well on the stacked concept and brand. And I'm very happy to partner with all of them. We think what they're building is phenomenal and we think that also extends to both the alternative space which this Bitcoin and Gold ETF that we'll discuss later on fits within and also more high-frequency trading vehicles as some

of our newer products. So you mentioned it there Bitcoin and Gold, what's the symbol? BTGD? So you mentioned it there. Bitcoin and gold. What's the symbol? BTGD? Yep. BTGD. BT for Bitcoin, GD for gold. It's the SDKD, 100% Bitcoin and 100% gold ETF. We try to be as literal as possible in our name there. Some people like to think of it as a 2x basket of 50% Bitcoin and 50% gold. I think a lot of people are realizing in today's world that Bitcoin is very much becoming the risk on asset of choice with less downside versus the cues than we've seen in the past. And gold is the ultimate risk off asset. The stability when there's volatility, geopolitical uncertainty and risks and trade wars, etc. And how we try to phrase it is, look, you understood the value of stocks plus bonds equals one thing, stocks plus bonds plus repounce equals another.

It's the same concept there that we're taking to Bitcoin and gold, like stocks and bonds lost their correlation benefits. Gold and Bitcoin still have their correlation benefits. So if this is something you want to allocate between the two of them in your portfolio, this is a very good way to add a little bit of overall portfolio level margin through this institutional process called Portable Alpha. And talk, I want to go deep on gold and Bitcoin and your kind of thesis on each and questions on that. But just let's stick on this for a second of this, which I call rebalancing premium, right? So you have these two assets if you just put them together and don't do any rebalancing over time, versus if you rebalance monthly or Corey's done a lot of work on the timing luck of rebalancing.

So ignoring that for a second, if you just have a standard monthly rebalance or you use bands, I believe, like what, what is the math show or what have you seen in your experience and in your thing of like what that premium actually looks like it's real. Like a lot of times when I read stuff, I got, I'm like, Oh, this is a mathematical concept, but it's not real alpha for investors. Yeah. What I would say I would like to focus on, you know, real actual live data since we've been live, not the back test, but we launched on October 16. We actually have a paper that we just launched on our website that you can find at quantififunds.com. We'll puts.com Show notes here as well. Yep. It's called the case for Bitcoin and gold and what we show is a risk reward chart of a

Bitcoin ETF a gold ETF two times Bitcoin ETF a two times gold ETF and BTGD, which is the stacked Bitcoin and gold ETF And you can see it has the highest return of all including the leverage Bitcoin leverage leverage gold ETFs, and just a hair more risk than just Bitcoin alone. So you're really getting that gold allocation on top of Bitcoin without a significant increase in risk from just owning Bitcoin alone, which shows the rebalancing efforts and benefits of this product. For the first couple months of the life of this fund, Bitcoin was

roaring from 70,000 to about 108,000. Gold at that time was trending sideways, even downwards during that period. We actually underperformed Bitcoin a little bit in that leg up and then everything switched. Gold started roaring. Everyone was looking for a true defensive asset, worried about the solvency of the US debt markets and the viability of the US dollar as a reserve currency over the next couple of years with everything going on in the tariffs world. below 80,000 at one point. And so again, this regular rebalancing mechanism between the two allowed us to systematically trim Bitcoin on the way up to gold, trim gold on the way up this year to Bitcoin. And in the last couple of weeks, we've actually seen both assets do well.

So you can almost think about it in these portable alpha products that any day that the assets go in opposite directions with each other and enough so that you have reason to rebalance is a win for the portfolio. And oftentimes these are bounces that we see that people are not doing on their own. Ask people, were you trimming your gold for Bitcoin during the crypto winter? Maybe somewhere, but on a whole, there's a lot of people we found that believe in both those assets,

but weren't really doing that hard trade. And so, you know, for a portion of your Bitcoin and gold allocation, this is a really good way to find more risk reward than just owning them individually outright. But have you done work on like Shannon's Demon and those kind of educational, right? Like you could put two losing assets together and the rebalancing premium alone will overcome the negative expectancy and give you a positive return. I've challenged some people I know to be like, show, find me two actual losing assets and do the math and show me a return.

I think it mainly works just because of the model they use. But outside of that, like if so with that math and outside of your actual returns, like what do you think that rebalancing premium is? 5% a year, 10, 20%? We don't have numbers we can quote on that, but I can get back to you on that. All right. But it's something, right? It's something you can eat it. Absolutely.

It's not just, and then you said if they're moving opposite direction, that's when you're winning. Yeah. By contrast, if they're moving in the same direction, you're losing or not necessarily if they're no, it's just you don't get any real benefit. You don't get as much of a benefit from a rebalance or you're unlikely, you're less likely to bounce on those days. Obviously, if they're both going up, that's a win. But it's really the days when one goes up and one goes down versus the down days that you win because you have the

potential to rebalance between the two. And especially if you looked at the period we've had in April, BTGD was up 19 and change in April. And both assets did well in an uncorrelated fashion, And both assets did well in an uncorrelated fashion, and both turned it upwards. So like, when you get periods like that, like this can really, really benefit because, you know, Bitcoin and gold have been teeter tottering back and forth, turning upwards for the last couple weeks. And so it's not a rebalance every single day. But when it does rebalance, it's just capturing these small little potentials for alpha or outperformance. And it would bear to say last bit on rebounds, like the more volatile the asset, the more beneficial that can be. Right. Like Bitcoin almost seems like the perfect asset for doing

rebalancing because you get these sharp drawdowns and sharp rebounds. Yeah. The also like stability of correlation over time is definitely helpful. Right. No correlation is one for one, but you need volatility and you need correlation benefits. So the more volatility, the more correlation benefits you get. It's a trade off between volatility and correlation really. Bitcoin and gold, I'll let you choose your own adventure here. I want to dig into each asset class and what you see as the benefits of each. What, where do you want to go?

Which one first, Bitcoin or gold? Yeah, I would like to start with the commonalities between the two actually. So these are two Cheating. Yeah, but I'll allow it. Well then we'll talk, we can dive into the differences after, but these are two assets that for whatever reason the world has deemed a potential store of value. One has been around for a lot longer than the other.

I think when Bitcoin was mining at 15% a year way back when, it was a totally different vehicle but post-having last year, Bitcoin mines at 0.86% a year and gold mines at approximately 1.75% a year. These assets are assets that are just not going to... Sorry. Sorry, for my friend George, I like to say, which is a riff off the Smart List podcast for his sister Tracy. But for my friend George, what do you mean by that? That's if you're mining it mining it that's your expected return that's like your IRR of buying a condo building or whatever no no no that's how much new supply that's how

much new supply is there's there's 1.75 percent new supply of gold each year through gold mining and there's 86 basis points of new supply of Bitcoin each year god versus 15 five years ago. Versus like 15% when the supply was increasing at a drastic pace. You just at some point you have to look at obviously the pace at which developed currencies are going to be printed but also the pace at which institutions are going to slowly adopt an asset like Bitcoin especially in the presidential picture we have this year. And the SEC seems to be, you know, a lot kinder to crypto related products now than

they had in the past. And so that drip of adoption from the institutional world, and the lack of new supply, you know, if you want to relate it to another asset class, I would relate it to residential real estate. We're seeing commercial real estate decimated, obviously. Certain parts are doing well. Why is residential real estate doing so well? Well, it's supply, right? We never really rebounded from the housing crisis in terms of new starts, new creation, new builds. And so we've just continuously had this supply constraint. And actually, ironically, the parts of the residential real estate market today in 2025 that are not doing well are the few pockets

in the country that have lax building codes that didn't have a supply issue, right? Texas and Florida, obviously, there's also insurance issues to consider there too, but supply is a very powerful thing in some of these alternative asset classes. So the states that have no supply constraints or difficulty coming to market with new products. They're flooded with assets. New York and places like that, where it's difficult to build, asset prices are as high as they've ever been. Similar concept with Bitcoin gold.

Like over time, the dollar is intended to lose value, right? So finding assets that do not grow and supply at a greater rate. Is that a bit of a hot take, or you think everyone knows and believes that? Everyone knows and believes that. Like you can look at a you can. I don't think the average Joe on the street knows that.

There was I don't have the source of this chart at hand, but there's a chart that showed how much like a suit costs 100 years ago versus today and how much a car costs 100 years ago versus today and obviously the price in dollars has gone up. Yeah and the price of gold is the same. But the price in gold is the exact same right? So gold is a store of your value for the things in your life right much more than than just holding a currency. So supply, I was gonna ask this later, but I'll get into an hour. So we're talking supply,

like I have a problem with that concept that there's limited supply in Bitcoin. Cause it's like infinitely divisible, right? Or in theory it's out to whatever, how many digits? Yeah, just cause you divide a pie, you don't increase the supply of it, right? You just make it more easily purchased in smaller quantities, right? That doesn't actually change the supply by dividing it.

Yeah, we could argue that at one time. I feel like it does because you could just, yeah, it's like in the old days with the currency and they'd melt it down and now I have two coins. But you're saying they say it's like in the old days with the currency and they'd melt it down and now I have two coins. But you're saying they still it's going to have whatever if Bitcoin's at 100,000 and I have half of a Bitcoin, each of us have 50,000 and the supply is the same. Yeah, they're not going to create new Bitcoin in that process, right? It's not like micro strategy or people holding the BlackRock ETFs, etc.

Like it's not like they all of a sudden are going to get diluted and there's going to be new shares of Bitcoin. They're just going to own 10 times as much, right? Whatever, however they are. Right. But it's like you won't have the same like real estate constraint supply, right? It's like a different type of supply. Like anyone who wants to get some can get some because they'll just get some, right? Some piece of it at the current price. So to me, it doesn't necessarily drive up price because there's this quote unquote limited supply. Same with gold, there's actually physical limited supply. there, I still just feel that, you know, you could say the same thing about currencies. And if currencies like lose a lot of value, that's, you know, it goes the other way, right? Yeah.

But, all right. So you had, what were the other common, common core? Honestly, that's where they that's where the commonality kind of ends. And that's kind of the concept of this product is that they both can offer a hedge towards inflation, a hedge towards currency debasement and devaluation. We view this as a nice alternative in your portfolio, but outside of that, it's completely different, right? Like gold, as we stated, is the same cost for car and gold

100 years ago as it is today. And that can't be said for Bitcoin at all. So their future might be a lot more similar. And I think if that is the case, that is because the supply numbers are starting to look a lot more similar. And you can also see the change in correlation of Bitcoin will fluctuate between essentially the cues and gold based on geopolitical risks and uncertainty around the US markets. It kind of teeter totters between which one it's more correlated to. So I think in the past, there's nothing but differences, but in the future,

the concept of this product really is that they are going to look a lot more alike. And people always ask, so when is Bitcoin going to look like a defensive asset? And my response is when the price is a whole lot higher. By the time that adoption comes and we can say, okay, this is now a defensive asset, Bitcoin will probably be a lot higher than it is today. And that doesn't mean that there can't be a significant drawdown in Bitcoin. Actually, a really smart economist wrote something saying, this is an asset that went from one cent to $100,000 in the matter of like under 20 years.

So the likelihood that it could actually jump back one to one and a half decimal points should be considered, even if it is an asset that's on its way to like one or 2 million. I truly believe that like that's on its way to like one or two million. I truly believe that like that's fully within two decimal points. So what does that mean? What are we talking about? Which it did in COVID, right? That was the low end somewhere. Somewhere around there. But, you know, that'd be a much bigger fall from where we currently stand today. And, you know, as the whole concept of this product is, well,

then you better make sure you're still rebalancing it. And obviously it'll have a lot of people who like lose belief at that point. If that ever were to occur and not saying it will occur. People always ask me, they're like, what is your price target on Bitcoin? I always like to give them two. And it's one that's like below where Bitcoin is and one that's above. And I just tell them, I can't tell you which one is going to hit first. I think it's an upward trending asset. The upside over time will be larger

than downside. But it's too hard to predict on a day to day basis. And quite frankly, I think anyone who's trying to make market predictions in this world. Yeah, it's just like every you have to hang on every tweet, you know, 10 hours can be six months in this world in this economy. Have you felt over the year like, how long have you been personally involved in Bitcoin? Like, were you buying it way back when? Yeah, 2018. December 2018 at 3500 was my first purchase of Bitcoin and Ethereum. Obviously a title we had launched the block ETF on amplifies trust to could be located time. I was not a PM on and Ethereum. Obviously a title we had launched the Block ETF on Amplified Trust tickered

DLOK at the time. I was not a PM on that, but I assisted Dan and Mike on that. And our interest in crypto related things peaked at that time. And that's one of the beauties at that point of being a small RA, where I have a small book of client assets as well. And you can do interesting things and not be withheld to this crazy like do not trade lists from the ivory towers. Exactly. Which goes back at that time when you were buying, what was your thesis? Did you have a thesis? You're just like this

people are moving into here. My whole question is kind of around like the thesis back then is way different than it is now. My whole thesis for the last 15 years has been like think like a one percenter and what assets they will want and you know we bought some land in upstate real estate in 2018-2019. I was running a gig economy ETF for SoFi at the time threw title. And so just the idea of finding unique scarcity assets has been a search that I've personally been on for 15 years, whether it's Bitcoin, gold, land, you know, the dollar, the debt situation we were in, and really the QE that we saw over the last 15

years was an equation that at some point had to break. And I think many people lost a lot of money betting early that it was going to break. But we're technically potentially seeing some of that break right now. Right. I think the world would respond to QE from the US much differently today than it would in 2020. It's not viewed as a savior for all. It's viewed as a savior for those with assets. Yeah. And that's a very, very big distinction. And that doesn't mean there won't be quantitative using in the future. They're absolutely well. And that'll be a very big bulk case and bull moment for BTGD in both Bitcoin and gold. But it's just that the market

But it's just that the market and Main Street will take it in a very, very different fashion. So I almost think you're going to need to see more pain before that next bullet of QE can actually be fired. And I'm a big fan of Lynn Alden's work. And she has a fantastic quote of Nothing St this train talking about the fiscal situation we find ourselves in the US with our deficits and debts and Jason buck of mutiny funds. He talks about like all those all that easing all that deficit is just the other side of the balance sheet from the boomers savings. Yeah, right. And that's like instead of them taking a 50% hit in the stock market, we just basically gave them that money to prop it up,

and took it on on the government side. So eventually, we paid down, we lower tax rates on on those with assets and increase tax rates on actual earned income, right. So it just made it a lot easier to compound assets and more difficult to compound future assets based on earned income. We were having a bit of a US crisis here in early April and Bitcoin was selling off. So, right, it doesn't, in the old days like yeah, there's gonna be

The central bank's not gonna have enough bullets and the dollar is gonna fail. Bah bah bah You're gonna need to own crypto, but that right to me that's gone away Now it's more of like what you're kind of saying before it's like 2x Nasdaq right? It's like a lever not even and it used to be like 2x NASDAQ, right? It's like a lever. Not even it used to be like 3x NASDAQ. And in April, on the downside, it looked more like one to 1.25 x NASDAQ, right? And that's what we're saying the correlation seemed to come from both the Q's obviously, but also gold, right? When you saw Silicon Valley bank fall, you really saw Bitcoin for the first time, have like, a little, a little

light of movement as a store of value, right? And then the Q's run, it starts moving with the Q's and people kind of, and the correlation benefits trend closer to the Q's. But the beta to the Q's has also been dropping at the same time. But so that's kind of, I guess you're saying it has, it's got all these properties, right? Like people wanted to say back in the day, this is just a central bank hedge basically. And for the end of the world, blah, blah, blah. But now it's like, well, it's also can be your penny stock, levered NASDAQ, whatever you want to call it for upside.

Imagine the process gold took to initially be considered a store of value and what that looked like in the world, right? Right. We need a time machine. We need a time machine. Obviously, there's no way to know. But it's not like one day, everyone was like agreed that this was a store of value, right? That there was a process where gold became more valuable across the world, etc. And obviously, there are other coins that are considered as well, especially back then. They were using shells and different things and gold just became the thing. Yeah. Yeah. But, and could you agree that the whole premise of like, it seems like no one's talking about

the blockchain is going to change the world anymore for the purpose for Bitcoin and the value of Bitcoin. Like that was for five years of like, you have to get into blockchain and buy Bitcoin when blockchain takes over. I think blockchain will change the world and is beginning to change the world. I just don't know if it necessarily has to be fully associated with actual crypto coins, right? You know, you can see stock exchange adopting a blockchain for trading, right? Really, all it is, is triple ledger accounting. We went from single ledger accounting, where there's a king

who said, this is how much money you have in my bank, and he can just cross it out and say, actually, you have half of that because I don't like what you just did. And you can't do anything about it. To dual ledger accounting, where both sides keep their own records, and it's then confirmed on transaction to triple ledger accounting, where everyone has the ledger of all the transactions and things can move much quicker because of that. And, you know, while we've been in Bitcoin for quite some time, we also

don't, I haven't really pushed too far beyond Bitcoin. My personal crypto exposure probably has about 10% outside of Bitcoin. More is just a hedge, but we we thankfully successfully avoided a lot of the alt season and NFT hype cycles that we saw in the past couple years. Yeah. And really, for me, Bitcoin has always been scarcity asset. And again, at that point, its mining rate was much higher. So it's much less scarce, but it was still the promise of future scarcity with the future new supply diminishing over time with the having. Yeah, but I want you to admit that you don't have to but I'm

like, come on, a lot of the a lot of the hype was just hype, right? And you weren't doing it, like everyone was doing it. And they were talking their own books and you need this because of XYZ. And library, every innovation cycle comes with hype cycle. There's a lot of charts on this. Like if it's happening, you could argue just happened in artificial intelligence. Yeah. There's a there's a hype in an adoption cycle, right. And I think some people assume that you need the crypto blockchain

adoption to make Bitcoin a viable product. But it's almost like, not anyone, almost two different things, right? Things evolve. And this became good. It's not a good if it's almost like not any more. Almost two different things. Right. Things evolve. And this became because it's not a good if it's just about blockchain. Bitcoin is probably not the answer. Right. No. Yeah. It's too slow. It's too everything. Probably Ethereum is probably the answer. And one of the most interesting data points you can look at or theory more

competitor is if you look at the price of Ethereum every time that Bitcoin retouched 100,000 over the last four months, it was lower highs, lower highs, lower highs, every time Bitcoin crossed 100. So whether it's another platform that does it or it's just an adoption by firms such as NASDAQ that do it as an exchange, it will make the world more efficient. And Bitcoin still has value, but the two aren't necessarily the same. And my last Bitcoin slam, these aren't really slams, but point would be the, like to me it was always annoying, hey, once we get institutional adoption, then this is really going to take off.

But it's really like you're basically saying once this decentralized thing becomes centralized, then this is really gonna take off. But it's really like, you're basically saying, once this decentralized thing becomes centralized, then we'll really have something. So that would always sat with me a little bit weird of like, wait, you want it on an exchange and have all these normal pieces to it that the whole point of it was to be outside of all that. But now, and it seems like they've, that was right.

Like once it got into some ETF forms and groups could buy it in a more easily purchase it more easily, it started to take off again. I'll put it this way. If you remember in the 2010s, the old Wall Street saying for why the US kept outperforming, right was best house in a bad neighborhood. Right? Everyone's that's a dirty shirt. Exactly. Cleanest dirty shirt. Our debt situation isn't great. But look how bad their

demographics and situation is right. If you are a 1% investor, and you have billions of dollars, your biggest risk to your capital pool is the devaluation of your own currency. So what else is out there? There's land, there's gold, there's big money. We could figure out a way how to leverage all three into an ETF. We probably would. Next.

Next, yeah. So there's just not that many options for scarcity assets in this world. I love that way you think about it. Right. Not just scarcity, but what is that 1% thinking about? What are they going to buy? Because your thesis is there on the front lines of thinking about that scarcity. Just because they're...

The devaluation of currency is being the biggest risk to their pool of assets, right? Is it that why or because they have that much money, they need to find other places to put it. They need to find places to put it, but also, you know, they need that's their biggest risk, they need to they need to protect against again, the biggest risk is that like the currency that they are most highly weighted in loses its value. Got it. I lied when I said last bit. Let's talk real quick, Sailor and MicroStrategy and everything going on there.

Do you think that's, like, is there a Sailor floor to Bitcoin price? Because he'll just keep borrowing and buying more and more. What do you think? Is that good, bad, indifferent for price and for the industry as a whole? I think he's a brilliant man and I think what he's a brilliant man.

And I think what he's done is amazing. I think the stock trading at a multiple is something that's hard to overcome. I think it can be used as a very good short-term trading vehicle. We have an ETF that actually stacks MicroStrategy on top of Coinbase, ticker 8. So you get 100% exposure to both MicroStrategy and Coinbase within the same ETF. But it'll really be a buying engine that's available as long as he's able to continue to get financing. So it's really the case at which he buys over time. You could argue that at some point a floor could disappear on him if he gets too aggressive in the short run.

But as long as he's conservative over time, multiple aside, he should be able to continue to acquire Bitcoin. But I don't think you can necessarily consider him an ultimate floor. That Bitcoin case where we talked about it moving one and a half decimals back probably would coincide with something going really wrong at MicroStrategy right? Yeah that's the most likely I wouldn't say cause I would never say cause of it but like a symptom along the way towards that. And we were saying them at a premium, they're trading higher at a premium to their actual Bitcoin holdings. Yeah.

So you're like, at some point that doesn't make sense. You're saying at some point that doesn't make sense and and doing capital events to raise hash to buy more Bitcoin when he's at a discount becomes a little bit harder. Yeah. And why did why did they give them these cheap loans? I've seen some YouTube and read about

that. I don't quite understand it because they're trading like the options on it or something. They're essentially creating warrants out of it and they get some options on it through the process. And, you know, we're.

The implied rate, the all in rate is not what's advertised as the 70 bits or whatever. Yeah, I think that the end of the end of quantitative easing is that everyone has to essentially gamble a lot more. The stock market resembles a casino and economies resemble like a casino a lot more. We laugh but honestly it's not funny

we're in a world where it's really hard for the average participant in the economy to have any substantial disposable income at all whatsoever. And so I think the result of that is more and more you're seeing straight, whether it's a replacement of sports betting, you're seeing some gambling from both the institutional and retail space.

Advisors seem to be a little bit more muted in the, in the, in between. Any more Bitcoin thoughts? Institutional adoption, energy usage, any of that good stuff? No, it's going to be a really repetitive, boring message over the next 10 years, because it's going to have lots of volatility and the thesis is not going to change. And people always ask me, what's the bull and bear case for Bitcoin? What's the bull bear case for gold? What's the bold bear case for BTGD, the stack Bitcoin and gold ETF. Because you can make a case in an inflationary environment, both Bitcoin and gold can be

good. In a deflationary environment, both Bitcoin and gold can be good. In an inflationary environment, both Bitcoin and gold can be good. Now I'll preface that with saying maybe not always the first leg of it, right? And more so the response to whatever that issue is might cause the event that actually causes those assets to come up, whether it be more quantitative easing. The one thing that can stop Bitcoin Gold

is us cleaning up our balance sheets and us as a country, not being- Getting off the sauce. Getting off the sauce, not being the best house in a bad neighborhood, actually being a sound balance sheet. Right. So I like to say the only thing that can stop this train is Doge and their leader just failed. So yeah. And I don't even think Doge was really like massive across across everything.

Right. Like not just government, but businesses, everyone who's leveraging up an addicted to cheap capital, basically is what we're saying, like you'd have to have a normalized interest rate, and people take normalized risks. And yeah, I don't see I don't see how we get from here to there in any easy easy pass at all whatsoever. So. So gold, I love the Warren Buffett quote, right?

Of like, if aliens look down on us, saw us digging up this thing out of the ground, cleaning it up, selling it to another person who pays to have it put back in the ground and have guards guard it, they we're insane right so I have a complicated relationship with gold I've never thought it really deserves a spot in a portfolio although I have some now I've I've relented um you the counter trend should I be selling gold right now yeah probably yeah yeah no I relented like five years ago I was definitely the counter trend like I be selling gold right now? Yeah, probably. Yeah. No, I relented like five years ago. I was definitely the counter trend like 15 years ago like, but it's the same concept, right? Like it's you said earlier, for whatever reason, people have this as a store of value over thousands of years.

So right, that's always sat with me a little weird, but it is what it is. There was no question in there, but just give me your whole thoughts. Gold, have you always been a believer or you're like, this is what it is. People value it and I'm going to play in that space. I've always been a believer of seeking scarcity assets and gold has always been a scarcity asset. So gold is something that I personally had in portfolios for 15 years and always viewed it as a great asset to rebalance. I think right now gold is having a moment where it's almost replacing fixed income in people's portfolios. The US had this really weird thing happen in April

where we almost felt the effects of what it was like to be an emerging market economy where a volatile moment wasn't a flight to safety, it was a flight of capital out of the country, right? So when volatility spiked in equity markets, it wasn't a run to treasuries. Equity markets had downside volatility, treasuries had downside volatility, the dollar had downside volatility all in unison, which is typically only really experienced in a capital,

a flight away from capital in that country, which we've seen historically in emerging markets. And that's really what turned BTGD because both Bitcoin and gold were providing stores of value. But, you know, I think again, we're in a world where everything is kind of like a leverage casino. So finding things that have slower replacement, slower supply increases is just the name of the game. And then rebalancing that with your risk assets. These aren't the only things you

need, you need risk assets, you need equities in your portfolio, but adding leverage in a portfolio and finding an ability to rebalance between assets and use some of that leverage is the best way to use leverage, right? You shouldn't just leverage up and go 200% long equities, but if you're going to end up at a target of 110 to 125% exposure, and you have some alts in there, maybe some index-managed futures products, etc. And also assets like Bitcoin and gold that can provide some diversification from your equity. I think that's the future. Did you see those, what was the stat, like the Fed's GDP number went bonkers because there was so much gold imported in the first week of April?

So it wasn't just money fleeing the US, it was US saying, I want gold. US saying they want gold, China saying they want gold, the rest of was US saying I want gold. US saying they want gold. China saying they want gold. The rest of the world saying they want gold. I think the US Chivo as a risk free asset is

theoretically being put into question. Yeah. So what do you think that was kicked off by Russia like pre Ukrainian invasion? Right. They loaded up on gold because they knew their assets were going to get frozen. Yeah, so what do you think that was kicked off by Russia, like pre-Ukrainian invasion, right? They loaded up on gold because they knew their assets were going to get frozen. I think slowly, I think all of the central banks are like, oh, hey, we don't like why

Russia did that, but good point. We should have some diversity there in case we get into a row with US and need money. Yeah. What else we have on gold? What what percent do you think a normal portfolio has in gold like across retail across institutional? What do I think they have? Or what is that we're asking? Yeah, what they have and what they should have, I guess. I don't have exact numbers. So I my understanding is the range

is probably somewhere between like 2 and 10%. I know there's some tactical allocators out there that have only replaced their AG allocation with gold. I think doing so with a tactical overlay would potentially make more sense in that case. But I don't think you need a whole lot of this. You need, you know, 2 to 10% in Bitcoin and gold to really chart where we show what happens to S&P if you add a 10% allocation to gold, a 10% allocation to Bitcoin, or 10% allocation to Bitcoin and gold rebalance and obviously... On top or 90-10? On top. Yeah, well, 90-10 and 10, right? Got it. And obviously, that's the strongest performer of the group. You don't need a whole lot to move the needle. You just need some because the likelihood that our deficits get higher is almost a certainty.

And the percentage of our budget that just has to go to payback interest is rising. And we have a lot of debt we're rolling over over the next couple years as a country. The whole last couple years has felt weird, I think, to allocators because the debt bubble is not so much on the corporate balance sheet, it's been on the government balance sheet. And we've been able to get away with this as the best house in the bad neighborhood, however you want to call it, for a very, very long time. And there's ramifications to that. And that's what we're seeing right now. Yeah, I feel like there's a lot of room for people to add gold. Right? Most portfolios, they might have 5% in commodities. But that's maybe 5% of that 5% is

actually holding gold. Yeah. Yeah, both. Right. I think BlackRock just recommended at the beginning of the year, model allocation of like a one to two percent allocation to gold. Right. That was the end of last year coming into this to Bitcoin. That was the end of last year coming into this year. Yeah. Like, what are the odds that band of recommendation goes up next December? 1000% 1000% 1000%

So you go to take the win or two to four. So they were saying one to 2% in Bitcoin as well. Yeah. Yeah. Which has long been a lot of the people like I don't know what this is. I have a buddy who calls it schmuck insurance. He's like, I don't know. I don't know what this is. But if it becomes a thing, I don't want to be the idiot. So I'm going to put it's

worth 2%. How many times does it have to cross $100,000 before it puts an advisory practice at risk for allocating to Bitcoin? Yeah, especially an allocate an advisory book that has older clients that's trying to figure out how to connect with the next generation within their client book. What are the likelihood that that client, the millennial version of that client and that family is going to be happy with that advisor if Bitcoin goes to 150 and the phone will be missing out. Again, same thing as we talked about is like if you're a one percenter, that's your biggest risk

is like your wealth being destroyed because your currency gets destroyed. Right? So you find tons of ways to try to hedge that. And as you said, it's like, I might as well put one and a half of my assets in Bitcoin then, just in case that occurs. Yeah. And then even if it moves two decimal points, as you said, whatever, you're down a week's worth of S&P. Yeah, and recently an hour's worth but yeah. And half the people will bail and the other half will rebalance and it's our opinion that obviously Bitcoin will over time trend up but in that case, you know, that could be a buying opportunity of a lifetime.

Love it. What else we got? Got anything else to share with us? Yeah, we we recently launched four new ETFs, stacked single stock ETFs. We have three different themes. We have an AI theme where we've stacked micro strategy on top of Coinbase ticker eight. So a hundred percent exposure to strategy and a hundred percent exposure to coin. Similar concept, we get to rebalance

between the two assets. So if you're trying to invest in what we like to call like the mega cap crypto stocks, at least we do the rebalancing for you between the two. You know, we focused on it a lot this podcast, the rebalancing of almost any two assets increases the sharp ratio of that asset. I like that. So you're basically you have the little bit levered version of the asset and micro strategy plus the kind of the tables provider, right for the We have two in the artificial intelligence space We have Nvidia and AMD that ticker is lays la ys and we have in Nvidia and SMCI

ticker spicy SPC y and we also have a driverless car theme, ticker Z-I-P-P, which is Tesla and Uber. So fun ways to... These are the best symbols ever. Well, who's coming up with these? Do you sit around having a beer and thinking of these or like you have a marketing firm or what? There's a lot of effort that goes into it.

And I spent a lot of time at Tidal and Tidal is really good at what they do. And they also assist in a lot of this. And it know, I spent a lot of time at title and titles really good at what they do. And they also assist in a lot of this. And it's what I don't get lays. Chips. So we have lays chips and spicy chips. For AI chips. Got it. Lays. I should have been quicker on that. Come on. Zippy. Love it. And so will you can this become what's the next five years like like you might have 20 of these?

Time will tell we have an infinite number of ideas in the hopper. Yeah, we've I've been sitting around with the title team for over a decade thinking about like what doesn't exist in the ETF wrapper that could exist in the ETF wrapper. It's funny if you look at a lot of the firms that are doing well in the leverage space, we all kind of spent some time working together at GlobalX while I did so well, I was with Toroso at the time.

But whether it's Justin Young or Greg King, Mike Venuto and Key, we all at one point were sitting in an office together with Bruno at GlobalX back in the day. Did you know Jim Carroll at Toroso? Of course. Yeah. He's been on the pod talking vix and volatility.

Great guy. Jim, have me on your podcast. Come on. Yeah. We'll end with a little bit of fun. What rabbit hole you've been finding yourself go down recently? Either something fun, something work related. Oh, okay.

So something fun I mentioned, I worked remote for a couple weeks this winter down in Costa Rica and at the ripe age of 40 years old, I decided to try to pick up surfing. So yes, I surfed sunrise in the Sara Costa Rica at pretty much every single morning. Anyone who knows no sorrow knows it's famous for its baby waves. It has like really consistent, pleasant baby waves. There's no rocks, there's no reefs you're going to hit. There's no like 20 foot waves are going to kill you. It's still terrifying, but it was a whole lot of fun. Big believer that especially when you're very focused on whatever work efforts you're doing that

you need an avenue that is not work to also geek out on. So it's really fun to do that and expect more of New York to be doing that next year next winter. I grew up in Florida surfing, so I know how to surf and then it's been basically my whole last 20 years like trying to Find one time a year where I can get somewhere and get back in the water. Where do you surf? Like nowhere literally like over we're going in Mexico on vacation. Let me try and go for one hour Yeah, I've been done in Hawaii, California

But it's been fun getting the kids on there. Like there was this great group, Corky Carroll Surf School in California where and the guys like literally holding the back of the board so they can get up on it and then pushing them a little. Those instructors that like can help you out and like stand you up around the board. Yeah. It's amazing. Yeah. But I want, I won for the listeners. I'm doing air quotes. I won at a school auction or something a house in Costa Rica for a week so

Want to use that and get back in the water? Let me know when you're there. Yeah, i'll give you a call uh Awesome. Well dan dave not who's dan I looked at my wrong screen and Dan is our partner actually. Exactly. Shout out to Dan Lee, thank you. Yeah, thanks so much for being on. Good luck with everything.

Go gold, go big point. And we'll see you next time. Thank you for having us. All right. You've been listening to The Derivative. Links from this episode will be in the episode description of this channel. Follow us on Twitter at rcmults and visit our website to read our blog or subscribe to our newsletter at rcmults.com.

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