About this episode
In this episode, Investment Research Director Kara O’Halloran sits down with resident digital asset specialist, Dan Wilk, Client Portfolio Manager for FS Investments. The two discuss the evolution of Bitcoin from a “dark web currency” to an institutional-grade store-of-value asset, how blockchain is a form of ledger-based accounting and the importance of considering crypto’s various sub-sectors. Wilk reflects on his first dip in the crypto pond back in 2014 and his excitement for the future of the asset class in the alternative investment industry.
Transcript excerpt:
Kara O’Halloran (00:07):
Welcome back to Fireside, a podcast from FS Investments. My name is Kara O’Halloran. I’m a director on our investment research team here. And today, we are talking about crypto, which is not something we’ve covered a ton on the podcast before, so I’m really excited to dive in. Just like broader risk assets, a lot of the well-known cryptocurrencies have had kind of a rocky start to the year. So we will discuss what is driving these moves, the outlook we have for the space going forward, portfolio implications, and much more. Joining me today is Dan Wilk, a client portfolio manager here at FS and a digital asset specialist. Dan, welcome to the show. Thanks for joining me.
Dan Wilk (00:46):
Big-time listener of the show, so you can say a long-time listener, first-time caller.
Kara O’Halloran (00:50):
Awesome. We’re really excited you’re here. So Dan, I really want to get right into it because I have literally so many questions, and so we have a lot to cover. But I will start out by saying I think this will be our first conversation of many. There is obviously so much to talk about in the crypto and digital asset space, but today I want to focus mainly on Bitcoin. But I guarantee we will have you back on to keep us posted on all things crypto. I think the first and really kind of obvious question is what has been going on since November? We’re recording on January 25th. When I checked Bitcoin right before coming into this room, it was at about 37,000. It started the year at about 47,000, but that’s also down from its peak of close to 70,000 in November. So walk us through this recent decline and what you think is driving it.
Dan Wilk (01:46):
Yeah, it’s a fair question. I think we’ve really seen markets all around be more challenged broadly. The entire investment landscape has been struggling here through the course of January. Roughly 40% of NASDAQ stocks are down 50% from their 52-week highs. The ratio of stocks hitting one-year lows is at the highest level since March of 2020. And while the indices themselves were supported by a handful of names, now those handful of names are kind of showing cracks, which is continuing to spark this more broad risk-off move. And in crypto, it’s really been no different. I’ve always said crypto in its current form is really just a proxy for risk sentiment, being that it is so far out there on the risk curve. And per usual, you now have a major drawdown. You’re seeing a lot of folks call for complete collapse. They’re saying, “Hey, I told you so.”
Dan Wilk (02:34):
But if you look at current positioning, blockchain and crypto assets, they’re really not going anywhere, and the metrics don’t point to that in any sense. Blockchain in itself is simply just an evolution in ledger-based accounting. It’s probably the biggest advancement in ledger-based accounting or accounting overall since the Medici family used double-entry bookkeeping to create modern banking in Italy during the 15th century. The beauty of a system that’s run on public ledgers means we have ultimate transparency at a business level. It’s pretty easy to tell when money is leaving the ecosystem or it’s just a temporary flee of different assets. And right now, it’s just the latter.
