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 100% Bitcoin and 100% 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. SEND IT!
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Show notes:
Quantify Funds Whitepaper – Case for Bitcoin and Gold
Derivative Podcast episode – A Four Stack-Pod: Talking Stacking Assets with Return Stacked ETFs
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Check out the complete Transcript from this week’s podcast below:
Stacking Assets: Bitcoin, Gold, and the Future of Portfolio Diversification with David Dziekanski of Quantify Funds
David Dziekanski 00:07
We’re in a world where everything is kind of like a leveraged 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 rebalance between assets and use some of that leverage is the best way to use leverage.
Jeff Malec 00:28
Welcome to the derivative by our Sam alternatives, send it.
David Dziekanski 00:33
Hi. I’m David Dziekanski, founder of Quantify Funds, and we’re here to talk about gold and Bitcoin on The Derivative podcast.
Jeff Malec 00:57
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 must have been so far. It’s
David Dziekanski 01:12
it’s fine. Finally, beautiful in New York after one of the longest winters we’ve had in quite some time, I imagined is 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,
Jeff Malec 01:26
of like everyone will be Hey, plan something now. We’re not staying.
David Dziekanski 01:29
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,
Jeff Malec 01:44
ouch and that you’ve always been New Yorker.
David Dziekanski 01:48
I have I’m a 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 you know, 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.
Jeff Malec 02:18
I met with my college buddy in the city there, he’s been there three kids private schools in the city. I’m like, Man, I don’t even want to know what that costs. God
David Dziekanski 02:28
bless Yeah, the pre tax income for those private schools, including the donations they anticipate you contributing beyond tuition, is just phenomenal.
Jeff Malec 02:38
Plus, he’s like, then we need a driver to take. 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, yep. Um, so in WashU, that used to be the most speaking of cost, education cost, I think that was the most expensive school in the country for quite a while, right? It? I
David Dziekanski 03:02
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
Jeff Malec 03:19
so 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
David Dziekanski 03:31
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 so 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 and repurpose this data that you know, 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 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 going to be hard to crack.
Jeff Malec 04:30
And then how you knew, coming from New York, I always want to get back there work in finance. That was the goal.
David Dziekanski 04:36
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 at a lot of the big banks as an intern and on the AMEX Stock Exchange floor 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 in 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. You know, very impressive in this space within Bear Stearns. This is one of the offerings they gave the interns. And we were they were talking about like mortgage bonds, again, granted, this was summer of 2007 and I actually had the guts as an intern to stand up and say, Why does pulling 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 I’m not. There’s no proclamations of, like, foresight of what’s to come. Just 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. Or
Jeff Malec 06:13
they’ve been like, they have the rose colored glasses on that they’re even if their back of their brain knows better, the front of their brain is just no what could go wrong. Nothing could go
David Dziekanski 06:22
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, 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 more in traditional asset management, straight out of my master’s program. I actually worked for a company at the time that was called laden burger thalman 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, ozempic Not, not ozempic osaic. They need a reprint. They just had a rebrand. But at the time, we managed about 1.8 million billion dollars 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 Financial Group. Title is one of the largest white labeler ETF platforms in the country, in the world, something like one out of nine ETFs in the US launched the last two years has been on title trust. They have over 200 ETFs, 70 ETF brands, using the platform for a whole sort of services. And at my time there, as a portfolio manager on a number of ETFs, I worked on the new product development team for some time as well, and as 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 quantify funds and launch our own ETFs under our own brand. Being able to create and control that brand coming to market was something that I always wanted to do. So that was a very, very long build up to where we got to today for quantify funds, but we found it. I thought
Jeff Malec 09:03
you were going to mention the oh seven early oh seven bear hedge fund that blew up, right? That was like the first canary in the coal mine, yep. Or 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 bear stock and owning their house in the Hamptons and buying boats and all that. So it was like 10x leverage here, 3x leverage personal life. So when that, when that blew? That really blue. Yeah, I have a hat. He’s I have a Bear Stearns hat here somewhere, just for posterity sake.
David Dziekanski 09:47
It’s funny how much of this world is new ways to create leverage, right?
Jeff Malec 09:52
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, where you can get in. Real simple, there’s good
David Dziekanski 10:08
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 Hampton’s 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. Quantify 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 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. That was, we believe, the actual original, first stacked, 48 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 ETFs.
Jeff Malec 11:34
Talk real quick. You’re on the 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 return stack. Yeah, so what’s, what’s that relationship? Real quick,
David Dziekanski 11:48
Yep, I’ve known Corey for about 15 years now, and obviously this is a very similar concept of of stacking assets as he has at the return stacked ETFs in partnership with the resolve guys, and so last summer, I approached him about potentially partnering with him. So legally, we have a licensing agreement, and we’re available for sale also, or available to 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, you know, 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, you know, 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 love
Jeff Malec 12:39
- So you mentioned it there Bitcoin and gold. What’s the symbol? Btgd, yep.
David Dziekanski 12:45
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. You know, 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 queues 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, 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 rebalance 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
Jeff Malec 14:00
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 for 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 has 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 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 like that. I’m like, Oh, this is a mathematical concept, but it’s not real alpha for investors. Yeah,
David Dziekanski 14:45
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. Um. That you can find at quantify funds.com. Put it on the 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 a, 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 leveraged Bitcoin leveraged 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 you know that shows the rebalancing efforts and benefits of this product. For the first couple months of of the life of this fund, Bitcoin was roaring from 70,000 to about 108,000 Bitcoin 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 years, with everything going on, the tariffs world and Bitcoin started to falter and fell below 80,000 at one point. And so again, this, this regular rebalancing mechanism between the two allowed us to systematically trim Bitcoin on the way up, add to gold. Trim gold on the way up. This year, add to Bitcoin. And in the last couple 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 balances 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
Jeff Malec 17:21
you done work on like, Shannon’s demon and those kind of educational right of like, you could put two losing assets together, and the rebalancing premium alone will overcome the Yep, 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, 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%
David Dziekanski 17:55
we don’t have numbers. We can quote on that, but I can get back to you on that, all right,
Jeff Malec 17:59
but it’s something, right? It’s something you can eat. It absolutely 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 the same direction, you’re losing, or not necessarily, if they’re No, it’s
David Dziekanski 18:14
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 rebalance 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 you win, because you have the potential to a balance between the two. And especially like 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 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, I’ve been teeter tottering back and forth turning upwards for the last couple weeks. And so it’s not a balance every single day, but when it does rebalance, it’s just capturing these small little potentials for alpha or out performance.
Jeff Malec 19:05
And 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 draw downs and sharp rebounds. Yeah,
David Dziekanski 19:19
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. You know, it’s a trade off between volatility and correlation.
Jeff Malec 19:42
Really big. 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 would Where do you want to go? Which one first, Bitcoin or gold? Yeah,
David Dziekanski 19:51
I would like to start with the commonalities between the two, actually. So, so these are two cheatings, yeah, but I’ll. Yeah, well, then we’ll talk. We can, 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 sorry.
Jeff Malec 20:34
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, that’s your expected return. That’s like your IRR of buying a condo building or whatever. No,
David Dziekanski 20:49
no, that’s how much new supply. That’s how much new supply is there’s, there’s 1.75% new supply of gold each year through gold mining. And there’s 86 basis points of new supply of Bitcoin each year got five years ago, versus like 15% when you know 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, 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 wanted to relate it to another asset class, I would relate it to residential real estate like we’re seeing commercial real estate decimated. Obviously, certain plants 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 like 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 dollars is intended to lose value, right? So finding assets that do not grow in supply at a greater is that
Jeff Malec 23:03
bit of a hot take. Or you think everyone knows and believes that everyone
David Dziekanski 23:06
knows and believes that, like you can look at a you can I don’t think
Jeff Malec 23:10
the average Joe on the street knows that
David Dziekanski 23:14
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 cost 100 years ago versus today, and how much a car costs 100 years ago versus today, and obviously the price and dollars has gone up, yeah, and the goal is the same, but the price and 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 folding a currency. So
Jeff Malec 23:42
supply? I was going to ask this later, but I’m going to, 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 because it’s like, infinitely divisible, right? Or, in theory, it’s out to whatever how many digits, yeah,
David Dziekanski 23:58
just because you divide a pie, you don’t increase the supply of it, right? You just make it easily, more easily, purchased in smaller quantities, right? That doesn’t actually change the supply by dividing it.
Jeff Malec 24:15
Yeah, we could argue that at lunchtime, I feel like it does, because you could just, yeah, it’s, 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 sell it’s gonna have whatever bitcoins at 100,000 and I have half of a Bitcoin. Each of us have 50,000 and the supply is the same. Yeah,
David Dziekanski 24:35
they’re not going to create new Bitcoin in that process, right? It’s not like micro strategy, or people holding the Black Rock ETFs, etc. Like, it’s not like they all of a sudden are going to get diluted, and there’s going to be new shows at Bitcoin, and they’re just going to own 10 times as much, right, whatever, however they right. But
Jeff Malec 24:53
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.
David Dziekanski 25:15
Yeah. I mean, I see your perspective 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
Jeff Malec 25:33
all right, so you had, what were the other common, common cores,
David Dziekanski 25:37
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, you know, they both can offer a hedge towards inflation, a hedge towards currency debasement and devaluation. We view this as a nice alternative in your in your portfolio. But outside of that, it’s completely different, right? Like gold, as we stated, is the same cost for a 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 queues and gold based on like geopolitical risks and uncertainty around the US markets 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 you know, 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, right? 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, you know, 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,
Jeff Malec 27:25
yeah, one or two decimal points. So what, where does that? What are we talking about? Five grand? Yeah, that’s which it did in COVID, right? That was the low end somewhere, somewhere
David Dziekanski 27:35
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, I’m not saying it, it will occur. People always ask me that, like, what is your price target on Bitcoin? I always like to give them to 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 it’s 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, good luck. 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.
Jeff Malec 28:26
Have you felt over the like, how long have you been personally involved in Bitcoin? Like, were you buying it way back when? Yeah.
David Dziekanski 28:33
2018 nice December. 2018 at 3500 was my first purchase of Bitcoin and Ethereum, obviously, at title, we had launched the block ETF on amplifies trust to be lok 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 client assets as well, and you can do interesting things and not be withheld to this crazy like do not trade list from the ivory towers,
Jeff Malec 29:13
exactly which goes way 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
David Dziekanski 29:27
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 sofa at the time through 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 easing in the future. There absolutely will, and that will be a very big bulk case and bull moment for btgd in both Bitcoin and gold, 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 can that that next bullet of QE can actually be fired. And you know, I’m a big fan of Lynn aldens work, and she has a fantastic quote of nothing stops this train, talking about the fistful situation we find ourselves in the US with our deficits and debts. And
Jeff Malec 31:12
you know, Jason buck of mutiny finds 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’d pay down.
David Dziekanski 31:34
We lowered tax rates on on those with assets, and increased tax rates on actual earned income, right? So it just made it a lot easier to compound assets, and less and more difficult to compound future assets based on earned income.
Jeff Malec 31:58
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 in the old days, like, yeah, there’s going to be the central bank’s not going to have enough bullets, and the dollar is going to fail, blah, blah, blah, you’re going to 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 11, not even
David Dziekanski 32:23
it used to be like 3x NASDAQ, and in April, on the downside, it looked more like one to 1.25x NASDAQ, right? And that’s where we’re saying the correlation seemed to come from both the queues, 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 queues run. It starts moving with the queues and people, kind of and the correlation benefits trend closer to the queues, but the beta to the queues has also been dropping at the same time. But
Jeff Malec 33:02
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, yeah, 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.
David Dziekanski 33:19
Imagine the process gold took to initially be considered a store 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 value, right? That there was a process where gold became more valuable across the world, etc. And obviously there were other coins that are considered as well, especially back Yeah, they
Jeff Malec 33:42
were using shells and different things. Yeah, gold just became the thing. Yeah. But, and, could you agree that the whole premise of like, right? 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
David Dziekanski 34:03
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 been confirmed on transaction, to triple ledger accounting, where everyone has a 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. So. More is just a hedge, but we, 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 was much less scarce, but it was still the promise of future scarcity, with the future new supply diminishing over time, with the having,
Jeff Malec 35:25
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
David Dziekanski 35:38
every, 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 and 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 anymore, almost two different things, right? Things evolve, and this became
Jeff Malec 36:06
good, and we 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
David Dziekanski 36:14
everything. Probably a theorems, 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, low it was lower, lower highs, lower highs, lowers, 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, yeah, aren’t necessarily the same.
Jeff Malec 36:51
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 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 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, it started to take off again.
David Dziekanski 37:30
I’ll put it this way, if you’re if you remember in the 2010s there the the old wall street saying for why the US kept outperforming, right? Was best house in a bad neighborhood, right? Everyone’s dead, cleanest dirty shirt, exactly, cleanest dirty shirt. Our debt situation isn’t great, but look how bad their demographics and situations, 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, right? So what else is out there? There’s land, there’s gold, there’s Bitcoin, right? We could figure out a way how to leverage all three into an ETF. We probably would next, yeah, yeah. So there’s just not that many options for scarcity assets in this world.
Jeff Malec 38:24
I love that way you think about it, of right? Not just scarcity, but what is that 1% thinking about, what are they going to buy? Because they’re you, your thesis is there on the front lines of thinking about that scarcity, just because they’re the devaluation
David Dziekanski 38:39
of currencies being the biggest risk to their pool of assets, right? So is
Jeff Malec 38:43
it that? Why? Or because they have that much money? They need to find other places to put it.
David Dziekanski 38:48
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.
Jeff Malec 39:04
I lied when I said last but let’s talk real quick sailor and micro strategy 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 and different for for price and as a whole.
David Dziekanski 39:22
I think he’s a brilliant man, and I think what he’s done is amazing. I don’t 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 eight, so even 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 pace at which he buys over two. 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, you know, multiple aside, he should be able to continue to acquire Bitcoin, but I don’t think he you can necessarily consider him an ultimate floor. I you know that that Bitcoin case where we talked about it moving one and a half decimals back probably would coincide with something going really wrong at micro strategy, right? Yeah, that’s the most likely. I wouldn’t say caught. I would never say cause of it, but like symptom along the way towards that. And
Jeff Malec 40:41
when you’re 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
David Dziekanski 40:51
point that doesn’t make sense. And doing capital events to raise ash, to buy more Bitcoin when he’s at a discount becomes a little bit harder. Yeah, and
Jeff Malec 41:02
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.
David Dziekanski 41:12
They’re essentially creating warrants out of it, and they get some options on on it through the process. And, you know where.
Jeff Malec 41:22
So the implied rate, the all in rate, is not what’s advertised as the 70 bips or whatever. Yeah,
David Dziekanski 41:28
I I think that the end to the end of quantitative easing is that everyone has to essentially gamble a whole lot more. And the stock market resembles a casino and economies resemble like a casino a lot more. We laugh, but honestly, it’s 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 between.
Jeff Malec 42:17
Love it any more? Bitcoin. Thoughts, institutional adoption, energy usage, any of that good stuff?
David Dziekanski 42:25
No, it’s gonna be out there. It’s gonna be a really repetitive, boring message over the next 10 years, because it’s gonna have lots of volatility, and the thesis is not going to change and and if you know, people always ask me, what’s the what’s the bull and bear case for Bitcoin? What’s the bold bear case for gold? What’s the bull and bear case for btgd, the stack Bitcoin and gold? ETF, because, you know, you can make a case. In an inflationary environment, both Bitcoin and gold would be good. In a deflationary environment, both Bitcoin and gold to be good. In an exclamationary environment, both Bitcoin and gold can be good. Now, I’ll preface that with saying maybe not always the first leg of it, right? 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, yeah, their leader just failed. So yeah, and
Jeff Malec 43:37
I don’t even think Doge was really, like, massive, across, across everything, right? Like, not just governmentally, but businesses. Everyone who’s leveraging up and 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,
David Dziekanski 43:57
I don’t, I don’t see how we get from here to there in any easy path at all, whatsoever. So,
Jeff Malec 44:10
so gold. I love the Warren Buffet quote, right of like if aliens looked down on us saw us digging up this thing out of the ground, cleaning it up, selling it to another person who pays to put have it put back in the ground and have guards guard it. They think we’re insane, right? So I’ve 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.
David Dziekanski 44:38
Um, are you the counter trend. Should I be selling gold right now?
Jeff Malec 44:41
Yeah, exactly. I probably am. 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 1000s of years. Dollars. 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.
David Dziekanski 45:13
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 a balance. 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 happened 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 downside volatility. The dollar had downside volatility on 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 leveraged 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, that’s the future. So
Jeff Malec 47:07
what did you see those? What was the stat like the feds? GDP number went bonkers because there was so much gold imported in the first week of Yeah. So it wasn’t just peep money fleeing us. It was us saying I want gold,
David Dziekanski 47:24
us saying they want gold, China saying they want gold. The rest of the world saying they want gold. I think the US, TVL, as a risk free asset, is theoretically being put into question. Yeah.
Jeff Malec 47:40
So my 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, oh, slowly, I think all the central banks 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, need money, yeah, what else do 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? What you’re asking, yeah, what they have and what they should have. I guess I don’t
David Dziekanski 48:20
have exact numbers, so I My understanding is the range is probably somewhere between like two and 10% I know there are some tactical allocators out there that I’ve fully replaced their ag allocation with gold. I think doing so with the 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, two to 10% in Bitcoin and gold to really move the needle on your overall portfolio, and then have those assets for balance and rebalance that with your risk asset side of the portfolio as well in equities. And I think that’s a very you know, we have, actually in our deck, we have a 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
49:14
on top, or 9010
David Dziekanski 49:16
on top. Yeah, well, 9010 and 10, right, got it. And obviously that’s the strongest performer 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 is almost a certainty, and the percentage of our budget that just has to go to pay back interest is rising. And, you know, we have a lot of debt. We’re rolling over over the next couple years as a country. And you know, 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 back. 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.
Jeff Malec 50:09
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,
David Dziekanski 50:23
yeah, both, right. I think Blackrock just recommended at the beginning of the year model allocation of like, a one to 2% 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, 1,000% 1,000% two to four.
Jeff Malec 50:50
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%
David Dziekanski 51:07
how many times does it have to cross $100,000 before it puts an advisory practice at risk for not 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 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 FOMO of 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 yeah, 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,
Jeff Malec 51:56
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 half, more recently, an hour’s worth, but yeah, and half
David Dziekanski 52:05
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
Jeff Malec 52:15
- Um, what else we got? Got anything else share with us?
David Dziekanski 52:19
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 100% exposure to strategy and 100% exposure to coin. Similar concept, we get to a balance 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 the Sharpe ratio of that asset, like that.
Jeff Malec 52:59
So you’re basically, you have the little bit levered version of the asset and micro strategy, plus the kind of the pixel shovels provider right for the
David Dziekanski 53:10
we have two in the artificial intelligence space. We have Nvidia and AMD. That ticker is lays, l, a, y, s, and we have Nvidia and smci ticker, spicy, SPC, y, and we also have a driverless car theme, ticker Zipp, which is Tesla and Uber. So fun ways to these
Jeff Malec 53:31
are the best symbols ever. Who’s coming up with these? Do you sit around having a beer and thinking of these or like a marketing firm?
David Dziekanski 53:38
There’s a lot of effort that goes into it. And you know, I spent a lot of time at title, and title is really good at what they do, and they also assist in a lot of this. And,
Jeff Malec 53:46
yeah, it’s what I don’t get lays
David Dziekanski 53:50
chips. So we have lays chips and spicy chips for AI chips.
Jeff Malec 53:56
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 you might have 20 of these.
David Dziekanski 54:11
Time will tell we have a 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 global x while I did so, while I was with taro so at the time. But whether it’s Justin young or Greg King, Mike, video and key, we we all at one point, we’re sending an office together with Bruno at global x back in the day. So did
Jeff Malec 54:47
you know Jim Carroll at torosa? Of course, yeah. He’s been on the pod talking volatility. Yeah, great guy.
David Dziekanski 54:55
Jim had me on your podcast. Come on. Yeah. So. We’ll
Jeff Malec 55:05
end a little bit of fun. What? What rabbit hole you’ve been finding yourself go down recently, either something fun, something work related.
David Dziekanski 55:14
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 I surfed sunrise in Nosara, Costa Rica at pretty much every single morning. Anyone who knows, no sorry, 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 gonna hit this no like 20 foot waves are gonna 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.
Jeff Malec 56:00
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? Um, like, nowhere. Literally, like, Oh, we’re, we’re going in Mexico on vacation. Let me try and go for one hour. Um, been done in Hawaii, California, but it’s been fun getting the kids on there. Like, there’s this great group Corky Carroll surf school in California, where the guys, like, literally holding the back of the board so they can get up on then pushing them a little those
David Dziekanski 56:34
instructors that, like, can help you out and, like, stand you up while on the board. Yeah. It’s amazing, yeah. But
Jeff Malec 56:41
I won. 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 me a call. Awesome. Well, Dan, Dave, not who’s Dan? I looked at my wrong screen. Dan is our
David Dziekanski 57:03
partner, actually, so Exactly. Shout out to Dan Lee, thank you, Yep,
Jeff Malec 57:07
yeah. Thanks so much for being on good luck with everything. Go gold, go Bitcoin, and we’ll see you next time. Thank
David Dziekanski 57:16
you for having us.
This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.
