Transcript
Charlie Morris, founder of ByteTree, which is an investment research firm covering both traditional finance and crypto. In this weeks episode, Charlie will discuss gold, Bitcoin, and the next big investment shift he sees coming.
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Transcript
Benjamin Nadelstein
Welcome back to the Gold Exchange podcast. My name is Benjamin Nadelstein. I’m joined by Charlie Morris, founder of Bite Tree, an investment research firm covering both traditional finance and crypto. I’d even say Charlie is one of the loneliest investors in the world—he appreciates gold, Bitcoin, and even the paper system—offering a truly unique perspective in today’s modern world. Charlie, welcome to the show.
Charlie Morris
Nice to be here, Ben. Thank you for the invitation.
Benjamin Nadelstein
I can make you a little less lonely today. Let’s start with one of our main topics: gold. On the Gold Exchange podcast, you wrote about the Super Bull Market you think could be happening in gold. Let’s talk about the Silent Super Bull Market in gold—what’s the main difference?
Charlie Morris
Great question to kick things off. I’ve been covering gold in a publication called Atlas Passage—I’ve been writing since 2012 and, in fact, was a fund manager trading gold for 13 years before that. I’ve been a friend of gold for 35 years. Last month, I published an article on the Super Bull Market. I was trying to differentiate this gold bull market from the previous one—in particular, the 2000 to 2011 bull market. It’s very different. For much of the 21st century, gold behaved somewhat like a bond proxy, especially with real interest rates low. You could look at 20-year TIPS, but that model broke down a couple of years ago.
I’m sure you’ve heard this argument before: when bond markets collapse and gold continues to perform strongly—even recalling the 1970s when bonds were in trouble and inflation was rising—gold becomes the antidote. It’s not just about the metal; it’s about gold’s role as a financial asset, which has shifted over time. Since 1971, gold has undergone a huge transition. What we’re seeing now is a repeat of the 1970s: gold acts as the antidote to a weak bond market. For fixed-income investors with few alternatives, gold becomes one of the key options.
I also published today—Thursday—that it isn’t just a bull market, but a Silent Super Bull Market. During this silent phase, hardly anyone in the mainstream is talking about it. I show this by pointing out that the silver price remains very low compared to gold, gold mining stocks are undervalued relative to gold, and there have been significant outflows from gold ETFs—up to 25% over the last five years. In contrast, gold ETFs have just started to see inflows, while the gold mining ETF (GDX) has experienced a decade of outflows. When you put it all together, you wonder: where is everyone?
Remember the 2011 gold bull market? Many of the crypto-type investors we see today were then talking about gold and silver. Now their attention is focused on Bitcoin and Ethereum. Bottom line: it’s a quiet, almost secret bull market—and that low sentiment is actually very bullish, because a bull market ends when everyone is on board.
Benjamin Nadelstein
Let me play devil’s advocate here. You might be underestimating today’s investors—they’re not as interested in gold or silver. They’re chasing the latest crypto craze, whether it’s a Trump coin, meme coin, or some other digital asset. Younger investors are putting money into their 401(k)s and seeking exposure via MicroStrategy and Bitcoin ETFs. Is there a risk that this silent bull run won’t ever capture the mainstream?
Charlie Morris
That’s exactly the opportunity. The longer it stays under the radar, the longer it can run. Quiet bull markets tend to be the best because when everyone eventually shouts about it, it’s often too late. Look at AI—two years ago hardly anyone knew about it, then it surged, and suddenly everyone claimed expertise. The fact that no one is talking about the gold bull market underscores its strength. I’d also say there are more pseudo-experts in crypto today than in precious metals. That’s bullish—where are the silver bugs or the silver stackers? They’ve all gone underground. For example, I showed a chart on the gross margins of the GDX index. With high gold prices and low oil prices—the latter being a major input for mining—margins should be much higher. I expect massive upgrades in the gold mining sector this year and into 2025. And while Bite Tree covers crypto extensively, the key takeaway is: Bitcoin is the only truly credible crypto asset; everything else is just sky-high volatility.
Benjamin Nadelstein
You? I guess you don’t—sounds like you’re not an expert in Trump coin. Let’s talk about investor sentiment. When investors decide it’s time to buy gold—often driven by market fears like geopolitical tensions or inflation—what do you think is driving people toward crypto? After all, gold and crypto often move in opposite directions. Is there real competition between the two?
Charlie Morris
I believe they’re separate markets. They aren’t negatively correlated, but they have a low correlation—which in portfolio management is almost as valuable as perfect negative correlation. Essentially, gold acts as a bond market asset, while Bitcoin serves as an alternative to equities. Bitcoin behaves much more like an internet stock, aligning with the tech sector more than with utilities or traditional finance. In effect, Bitcoin and gold together can form a kind of bond-equity portfolio for an alternative investor. Gold is the king of commodities, while Bitcoin is the king of crypto. Other assets like classic cars or art aren’t liquid—Bitcoin and gold are both highly liquid, though Bitcoin is digital and gold is physical.
Benjamin Nadelstein
Speaking of liquidity, the Bitcoin ETF has seen incredible inflows, though some critics argue that this centralizes an asset that was meant to be decentralized. Gold has similarly been transformed by ETFs. Do you see ETFs as beneficial for both assets?
Charlie Morris
Absolutely—they’re beneficial. You don’t want to limit capital in your asset class if you want it to grow. Institutional investors, like Fidelity and other large asset allocators, won’t invest in a wallet in cyberspace—they need an intermediary like an ETF for legal and custodial reasons. ETFs provide an identification number that allows custodians to value portfolios daily. Gold was the pioneer here—the first major gold ETF launched in Australia in 2003 solved the issue of incorporating gold into portfolios. Today, approximately 1% of all gold is held in ETF vaults, and about 6% of Bitcoin is similarly held.
Benjamin Nadelstein
Now let’s move on to what many consider a groundbreaking idea: a Swiss ETF vault that combines Bitcoin and gold in a risk-weighted structure. Can you explain what that is and how it works?
Charlie Morris
I’ve been a portfolio manager for many years, and I actually came up with the idea of mixing Bitcoin and gold. Originally, I thought about combining momentum or tech stocks with gold on a risk-adjusted basis. But eventually I realized the real opportunity was in using Bitcoin—since it’s more correlated with the tech sector and offers a higher Sharpe ratio over time. The idea is to invest in two highly liquid alternative assets. However, because Bitcoin is riskier than gold, you can’t simply split your allocation 50/50. Instead, we use an inverse volatility weighting. After running the numbers—with a 360-day volatility measure to smooth out short-term fluctuations—the optimal mix comes out to roughly 75% gold and 25% Bitcoin. In other words, for every $75 in gold, you allocate $25 in Bitcoin, balancing the risk so that a $10 move in either asset has a similar impact. This method yields a risk-adjusted return superior to holding either asset on its own.
Benjamin Nadelstein
Charlie, if this idea works, I don’t even want credit. You can just send me a gold coin or some Bitcoin in the mail—I’m not even sure how you send crypto these days. But what about a similar model for gold miners and Bitcoin miners? How should investors analyze the companies that create gold versus those that mine Bitcoin? Is it fundamentally different, or just a matter of added volatility and leverage?
Charlie Morris
They can’t really be combined in the same way. With gold miners, you’re typically looking at established metrics—say, 40% EBITDA margins for an index—while Bitcoin miners often have much higher, even over 100%, margins. Bitcoin mining can be wildly unpredictable. As a Bitcoin owner, that unpredictability might be acceptable, but as a miner you invest heavily in equipment, facilities, and electricity only to get a fixed amount of Bitcoin production. That doesn’t sound appealing. Gold mining, on the other hand, is straightforward: you find gold, extract it, and your revenue is tied directly to the gold price, even if costs like oil prices, taxes, and labor affect your margins. Gold mining is an old, time-tested model—even if it isn’t as glamorous as high-margin tech stocks. I believe there are good opportunities when miners are undervalued, and I think we’re in that phase now. Meanwhile, Bitcoin miners face significant challenges in generating profits.
Benjamin Nadelstein
Charlie, you’re a hoot. It sounds like I should be keeping my day job. Now, on to MicroStrategy—recently rebranded as just “Strategy.” They’re using Bitcoin to drive both their stock and narrative. How should investors separate the signal from the noise when evaluating Bitcoin-related companies or gold stories about the Treasury? In other words, how do you separate the art from the artist?
Charlie Morris
A lot of people disagree with me. MicroStrategy, for example, has a huge bullish fan club—almost cult-like, much like GameStop—and everyone seems to love it. Personally, I can’t stand it. It’s a case of financial alchemy that, in the long run, can only fail. The company’s strategy is driven by regulatory arbitrage. For instance, when you see MicroStrategy trading at $100 per share compared to Bitcoin’s $40, some say it’s leveraged exposure to Bitcoin—but in reality, you’re paying more than Bitcoin’s value. Compare that to GBTC from Grayscale a few years back, which traded at a significant discount to NAV, thereby providing real leverage. Over time, MicroStrategy shareholders are likely to underperform Bitcoin because the stock trades at a premium to its net asset value—a premium that erodes when more stock is issued. They’ve also tapped into the convertible bond market, where high volatility is prized for arbitrage. However, that volatility won’t last forever. The perpetual issuance of stock and constant leverage will eventually dampen the premium. Essentially, it’s a perpetual motion machine that, without true alpha, is unsustainable.
Benjamin Nadelstein
Let’s discuss another idea: a strategic Bitcoin reserve. The US is now considering the creation of a sovereign wealth fund. Do you see a role for gold or crypto in such a fund? And is this something investors should consider when allocating their own assets?
Charlie Morris
It’s a strange scenario. The US is a great country, but it carries a lot of debt. Sovereign wealth funds are typically run by countries with little or no debt—think Saudi Arabia, Qatar, Norway, or Singapore. The UK even has a tiny one focused on renewable energy, which is frankly pathetic. The US is likely to do something, especially with Trump in the mix, but I hope he doesn’t use it to buy Bitcoin. I’m a Bitcoin bull, but governments dabbling in speculative assets is risky. Central banks should stick with gold as a core reserve asset, while sovereign wealth funds can be more experimental—but they should focus on long-term infrastructure, not short-term hype.
Benjamin Nadelstein
So, do you agree with the saying, “the US innovates, China imitates, and the EU regulates”?
Charlie Morris
Well, 100 years ago, it was said that the UK innovates, the US imitates, and someone else does the rest. But the world evolves. The only issue with that statement now is that China is very much in innovation mode. They’re more sophisticated than many give them credit for. It’s normal for an emerging power to imitate at first, but since Deng Xiaoping’s reforms in the late ’80s, they haven’t invented everything from scratch. Still, they’ve copied a lot—and they’re rapidly catching up. Meanwhile, Europe appears to be in a state of soul-searching, wondering why it regulates so much when it once helped build the modern world. With America on one side and China on the other, Europe’s position is becoming more uncertain.
Benjamin Nadelstein
Do you think there will be a turnaround in investment opportunities in the EU and the UK, or will the main action remain in markets like China and the US for now?
Charlie Morris
I think the US has had it too good for too long. The dollar is overvalued and US stocks are expensive. The rest of the world offers cheaper valuations and might see a catch-up trade. Historically, it isn’t normal for the US to outperform for decades as it did after 2008, and when you factor in the strength of the dollar, other markets look more attractive. It’s really about cyclical valuations.
Benjamin Nadelstein
Let’s talk about Trump’s policies—tariffs and inflation are all over the news. Are these tariffs just a negotiating tool for him, or should investors start positioning for more tariffs and inflation?
Charlie Morris
I was surprised that China only received a 10% tariff. In the UK, there’s a joke that the US said the UK wouldn’t face tariffs because Trump was on good terms with the Prime Minister—even though they actually dislike each other. The US couldn’t even pinpoint a product the UK makes, so no tariffs were applied. It’s a sad truth. Tariffs remain a key policy tool for Trump—he loves throwing them around. For example, he once joked about transforming the Gaza situation by replacing conflict with a Trump golf course, hotel, and casino. Only Trump could say something like that, and while it gets people thinking outside the box, it’s hard to tell when he’s serious. Essentially, his view is very US-centric—focusing on America, Greenland, Canada, and Mexico—while sidelining the rest of the world.
Benjamin Nadelstein
Now for a lightning round. First question: For gold and Bitcoin in 2025, what do you see as the biggest risk over the next year?
Charlie Morris
A huge dollar rally.
Benjamin Nadelstein
Next, what, if anything, could send gold to zero? And what about Bitcoin?
Charlie Morris
Bitcoin could theoretically drop to nearly zero if there were some fundamental issue with computer systems—but even then, I’d expect it to bottom out at a tiny fraction of a cent. Gold, on the other hand, I can’t see ever going to zero.
Benjamin Nadelstein
Love it. “Bitcoin is not crypto”—do you agree with that statement?
Charlie Morris
I agree with the sentiment, though technically, Bitcoin is part of crypto.
Benjamin Nadelstein
Next, when will other cryptocurrencies stop moving in lockstep with Bitcoin? Gold and silver have distinct dynamics compared to copper and steel. Will cryptocurrencies eventually move separately from Bitcoin?
Charlie Morris
That would be a sign of maturity in the sector. I already see exchange tokens behaving differently from meme coins. It’s only a matter of time.
Benjamin Nadelstein
You’ve mentioned that large-cap dominance is both rare and dangerous. Can you explain why and what that means for stock market investors?
Charlie Morris
We’ve seen extreme concentration before—in 1929, 1972, and during the 1999–2000 period. Today, half of the S&P 500’s market cap is concentrated in just 26 stocks, which is an anomaly. This happens because market momentum pours wealth into a few stocks. It’s like a fat guy on a waterbed—if he suddenly goes down, the “kids” (smaller stocks) bounce up dramatically. It’s a cyclical risk.
Benjamin Nadelstein
Let’s talk about volatility. It’s bad for economic coordination, but how can investors prepare for what looks like a volatile next four years?
Charlie Morris
If you want less volatility, invest in less volatile assets. Allocate more to gold and other low-volatility investments, and less to high-volatility ones. It’s all about splitting assets by quality. High-quality assets—like one-year Treasuries—have very low volatility, whereas riskier stocks, like MicroStrategy, have much higher volatility. Know which assets are predictable and plan accordingly.
Benjamin Nadelstein
How should investors allocate based on age? The old rule is that young people lean towards stocks and older people towards bonds. What’s your take in today’s environment?
Charlie Morris
I’d suggest thinking in terms of volatility rather than just stocks versus bonds. Younger investors might embrace higher-volatility assets, while older investors should focus on more stable, low-volatility assets. And these stable assets don’t necessarily have to be bonds—they could be less volatile equities.
Benjamin Nadelstein
Next, do you think central banks will ever replace some of their gold holdings with crypto, or will they just add to their gold reserves?
Charlie Morris
El Salvador has already made moves in that direction, and possibly another country has too. But I don’t foresee major central banks venturing into crypto soon. Central banks hold bonds and gold for a reason—they’re low-risk. Crypto is a risk asset, more suited for institutional or retail investors. Gold remains the core reserve asset for central banks.
Benjamin Nadelstein
Will Bitcoin’s market cap ever reach gold’s market cap?
Charlie Morris
Right now, Bitcoin’s market cap is roughly half of gold’s. Last I checked, gold was around $20 trillion and Bitcoin about $10 trillion. If Bitcoin were to catch up, it would likely push gold’s valuation even higher. It’s a big challenge, and ultimately it comes down to volatility and liquidity—gold is incredibly liquid, and while Bitcoin is liquid too, it’s not quite at that level.
Benjamin Nadelstein
Next, which do you see as more than a gimmick: gold-backed stablecoins or gold-backed cryptocurrencies? Is this an actual innovation investors should consider?
Charlie Morris
There’s genuine innovation here. We first saw a gold token back in 2013, and dozens have emerged since. Tokenizing gold is progress—it’s simple to store, easy to audit, and the ETFs proved that replacing physical gold with a token can work. It’s a shame we haven’t yet seen a big, liquid gold token, but I’m confident one will come along.
Benjamin Nadelstein
Let’s talk about Tether. Is Tether a systemic risk to Bitcoin?
Charlie Morris
I don’t see Tether as a systemic risk. It was once viewed as dodgy, but now it’s huge—and arguably one of the most profitable companies in its space. That said, the stablecoin industry likely needs future regulation, similar to money market funds, to prevent systemic issues like those seen in past financial crises.
Benjamin Nadelstein
Let’s discuss Bitcoin halvings. Do you still view them as a major catalyst, or is that already priced in?
Charlie Morris
The halving is somewhat misunderstood. In the early days, it was a bullish catalyst; now, it mainly removes a price ceiling rather than acting as a rocket booster. Before the halving, Bitcoin produced around 450 new coins a day—roughly $17 billion in annual mining revenue. Miners must cover that cost, and as the halving reduces supply, mining costs adjust, setting a new price equilibrium. It’s an important dynamic, but extremely high Bitcoin prices would require enormous capital to sustain.
Benjamin Nadelstein
Next up: Central Bank Digital Currencies (CBDCs). Do you think these are a serious threat that investors should worry about, or just a central bank pipe dream?
Charlie Morris
Technically, CBDCs are just stablecoins. My main concern isn’t the technology but the privacy aspect—they can serve as a snooping device. Libertarians are particularly against them, and I tend to side with that view. I’d rather see the private sector and fintech companies handle digital currencies. An open, competitive stablecoin market is preferable to CBDCs.
Benjamin Nadelstein
Finally, you’re a contrarian investor. How should investors think about the challenges of holding a contrarian thesis and sticking with it?
Charlie Morris
The reality is that gold bugs and Bitcoin maximalists each see the other as out of touch, leaving contrarians like me caught in the middle. It’s a lonely road when few share your views, but that’s the nature of being contrarian.
Benjamin Nadelstein
Okay, one more: What’s a contrarian take that no one else sees coming?
Charlie Morris
Gold will go higher. That might sound obvious, but it’s contrarian when everyone else is dismissing it. When you start seeing a flood of silver accounts on Twitter, that’s the signal to step back—contrarian trades are often the quiet ones. I’d also keep an eye on Chinese equities or even select European stocks, though Europe isn’t as exciting as the others.
Benjamin Nadelstein
Next, do you think we’re in a new normal where interest rates remain slightly elevated, or are we heading back toward zero interest rate policy?
Charlie Morris
I believe we’re entering a new normal.
Benjamin Nadelstein
As we wrap up, what’s one question I should be asking every future guest on the Gold Exchange podcast?
Charlie Morris
How much gold have you allocated for all your clients?
Benjamin Nadelstein
Great question, Charlie. Where can people find more of you and your work?
Charlie Morris
You can find me at bytetree.com—think of it as a digital money tree. That’s where all our work is housed. You can also follow me on Twitter at AtlasPals.
Benjamin Nadelstein
Charlie, it’s been great speaking with you. I hope this conversation has made you a little less lonely. For anyone with questions, feel free to comment below—we’ll send them your way. Thanks, Charlie.
