Lance Glinn:

Phil, thanks as always for joining me. Happy to have you here.

Phil Rosen:

Thank you for having me.

Lance Glinn:

So we've touched, over the course of our conversations for the last 6, 7, 8 months, however long it's been, we've touched on Bitcoin quite a few times and I feel like it's appropriate to really start there. You're someone who watches markets every single day. When you zoom out and look at Bitcoin historically, volatility has really always been a part of its DNA. There have been swings up and down throughout its history, not just since 2016, 2017 when we first saw that really big jump, right? It's been sort of throughout Bitcoins journey that there's been these ups and downs, these swings.

But how would you describe what's been happening with Bitcoin as of late? We've seen it lose what? Almost half its value since its all-time highs. Is this normal turbulence or does it feel a little bit different to you?

Phil Rosen:

What's amazing about Bitcoin right now is that everyone who's in Bitcoin feels optimistic still. That's the sense I'm getting. And I have been in Bitcoin for a while, I'm so optimistic that this is a lull. This is a very regular drawdown because in the last decade, Bitcoin has drawn down 80, 90% multiple times, has drawn down 50% probably a dozen times. So right now, we're right around the 50% mark, and it's pretty normal, if you ask someone who's been in Bitcoin or crypto for a while.

And the interesting thing now, the institutional demand in Bitcoin is still there. Institutions continue to buy and it's actually retail that's been selling more. So you could say that individuals are feeling a bit shaken out from the market and they're spooked and scared from the price drop and yet institutions continue to buy. So to me that's a very good long-term signal for the asset and the asset class.

And look, you have ETF demand is still pretty robust. IBIT is still the greatest best-selling product on Wall Street ever. That's BlackRock's Bitcoin product. So all these tailwinds are still in place and they've been in place for a couple of years now.

I think the story got a little complacent. So we didn't have any new catalysts that weren't in place at the start of 2025 when you had Wall Street coming in, you had the pro-crypto White House, you had pro-crypto legislation. All those things kind of came and went and they're still in the background and yet the story needs a refresher I think.

So somehow the institutions, they're not fatigued at all, but individuals I think are fatigued. And maybe if we get some type of new catalyst, whether that's something on the policy side or we get some sort of new development from the Treasury side in the Bitcoin Treasury companies, who knows? I'm not worried, and so I spent last week at Bitcoin Investor Week and everyone I spoke to, again, very optimistic. Didn't see one bear in the room. And the vibes were not the vibes you would expect in a 50% drawdown.

Lance Glinn:

Sure. So you talk, right, there's sort of been nothing new, right? Like 2025, you said came. You got this more pro-crypto white House. There was immediately all those talks of the crypto reserves, like the Bitcoin reserves, but you really haven't seen anything since then. So I understand the complacency side of what's driving all this.

But besides that, if you had to really break down the main catalyst, I know there are no new catalysts potentially, potentially driving up the price back, but if you were to sort of break down the main catalyst behind this latest round of volatility that has seen Bitcoin lose a lot, what would you say are really those driving forces? Is it just the complacency or is there a little bit more to it too?

Phil Rosen:

I think complacency is part of it, but I think if you look at the charts of Bitcoin and software stocks, they've actually been very closely correlated. So we've seen software sell off dramatically from pretty much fears of AI. Everyone thinks AI is going to come in, displace all these legacy software companies. So the stocks have fallen in the last few weeks. And the Mag Seven have done very poorly to start the year, I think they're down about six, 7% as of this morning.

So Bitcoin has become sort of a proxy for those trades as well. That could be part of the sell-off. Bitcoin has a, let's say, a more dramatic swing. When tech sells off, Bitcoin will sell off more.

And I think also the strength of gold has been one reason that Bitcoin has not done as well as people expected. I was much more bullish than most people last year. I'm still bullish this year, but that's been proven wrong by the price action. So gold's strength, I think it pretty much sucked all the capital out of Bitcoin because it became a momentum trade.

Lance Glinn:

Sure.

Phil Rosen:

Instead of its traditional, "Hey, let's buy gold because it's a store of value, protect against inflation." It became, "Holy moly, this asset won't stop going up."

Lance Glinn:

Let's get it now so that we can cash out.

Phil Rosen:

Yes, exactly. So I think that was a sort of hindrance to Bitcoin's strength in the last year. But again, if you go back to the month before the election, we're right at that point right now. It's about 69, 68,000 per Bitcoin. So a lot of people point to that and say, "This is a failed store of value."

I don't think that's correct because it's still up thousands and thousands of percent over the last decade. It's pretty much still outperforming every single asset class. And if you expand the timeline, you can say, "Look, this asset's gone up and down. It's very volatile. But over a, let's say multi-year span, it's still outperforming almost everything else."

So the headlines right now will be very bearish. They're going to continue to be very bearish. But you could say the same thing in a bear market for stocks, right? All the headlines will say, "New great depression, end of the world, worst crash in history," whatever. But the people that hold through those periods tends to do better than the people that sell. So I think it's a similar story with Bitcoin right now.

Lance Glinn:

So last question on Bitcoin, and you may have answered it in one of your previous questions, but if you are someone who has Bitcoin, just holds it, doesn't really focus on, right? It's just in your wallet long term. And you see all these headlines which are obviously going to be more negative than they are going to be positive, should you be worried? There are obviously people like yourself who really focus in on it, really dissect the markets, but for those who don't, what would you say to them? Should they be worried or should they again sort of just ride this out? Because like we've been talking about, throughout Bitcoin's history, there have been ups and downs and there will continue to be even after this ups and downs throughout.

Phil Rosen:

So a few years ago, Fidelity did a study that measured the best performing portfolios in their system or their network. The ones that did best were the dead people, the people that could no longer access their accounts. And I think this is the same in crypto and Bitcoin. If you just buy it and never look at it again, you're going to outperform the people that try to go in and out and try to time the market. That's the same in Bitcoin, same in the stock market. Even with the S&P 500, if you try to time the top or the bottom, you're pretty much going to lose money every time.

So this is the people who have been in it for longer than a year or two know that this is pretty typical. This is regular. We get a great financial crisis level crash in Bitcoin every couple years. That's just par for the course. And when you get a 15% drawdown in the stock market, that's like historic sell-off. You got to figure something out. It's a big shakeout. In Bitcoin, it's so typical that it's not surprising why everyone I speak with who's a Bitcoin holder, who's at the Bitcoin Conference, no one seems bothered by this.

Lance Glinn:

So away from crypto markets now, let's talk equities markets. And as you put it in a recent newsletter on Opening Bell Daily, the Magnificent Seven have lost their halo since the calendar turned. Everyone of course anticipating right now Nvidia earnings on February 25th. But why do you think so far in 2026 we've seen such a struggle from the Mag Seven?

Phil Rosen:

I think AI fears are part of that. Generally, we've seen a broadening out. This is a rotation trade that is happening in real time. So the S&P 493 is actually up a couple percent to start the year. And the Mag Seven, as I said, are down about six, 7%. And if you look at that alone, that's the complete opposite of what we've seen for the past three years. The Mag Seven have really outperformed and it was a really top-heavy narrow market. But now you have this broadening out and breadth is increasing and generally that actually signals a healthier bull market than what we've seen in the past with a really narrow bull market.

So you can also look at the Equal Weight S&P 500, which is beating the market cap weighted index. So I think it's up maybe 5%, market caps about flat for the year. So that also shows you that the average stock in the index is going up. And that's a really good sign, that's what you want in a mature and developing bull market.

When you take all that into consideration, it's actually not that surprising that the leaders of the last three years are sort of normalizing. And the laggards, which has been the rest of the market, are picking up. And I think earnings reflect that too. Earnings are going to be about 10% growth for I think the Mag Seven and the 493. So that's also an interesting signal that the broadening is going to continue. Analysts expect it to continue. Look, lagging Mag Seven, if you zoom out and, say, instead of calling it a tech sell off, you just see a rest of market uptick, that's how I'm looking at it and I think that's a very good sign.

Lance Glinn:

So when you look at that rotation into the rest of the S&P 493, where do you see the real pockets of opportunities [inaudible 00:10:09]? Is this that broad base lift across multiple sectors? Or are there specific sectors that are seeing more than others with the Mag Seven not leading the pack like they've done over the last couple of years?

Phil Rosen:

Yeah, I think the, let's see, if I had to pick some sectors that I would be more optimistic on this year, I'd probably go energy. That's probably one that I like a lot. It's been a laggard for the last couple years and AI is going to need more energy than we've ever been able to produce in history, something like that. So energy will probably do very well.

I think industrials can probably pick up as well. Healthcare can probably pick up, it's been lagging so badly in the last couple of years.

I don't really know as far as what AI will come for next. I think that's the big question in markets right now, because AI has taken out software, financial services, they hit trucking stocks. Pretty much everything that people think AI can disrupt has been selling off. So whenever a startup or some obscure company comes out with a new technology that can disrupt one little thing in a sector, the entire sector will sell off. So this is increasingly becoming a stock picker's market, but also it's getting very hard to pick winning and losing stocks. So that'll be the struggle this year. And that also means that just buying the S&P 500 may not be as fruitful of a strategy as years past.

Lance Glinn:

You mentioned those AI fears. And in your February 13th newsletter, you wrote, "AI has become the new grim reaper for stock market sectors." We've seen this pattern lately where AI suddenly, as you just mentioned, impact stocks of other industries, these smaller industries. Or like you said, you'll have an announcement from a small company or a startup in one industry and then you'll see the entire industry and the big and small caps in those industries start to fall. What do you make of this broader phenomenon that even just a small AI-related announcement could really spark billions of dollars in sell-offs? We've seen it over the last few weeks.

Phil Rosen:

I think it's correct to expect AI to disrupt every industry. I think there's going to be a lot of job displacement and I think things will get much more productive and much more efficient over time. That said, I don't know if something like Microsoft is really at risk right now, but Microsoft has wiped out billions of dollars in market cap to start the year because of AI fears. That's been part of it.

Microsoft still makes so much money that it doesn't make any sense why you should be selling Microsoft because you're worried about AI disrupting their software or their products. And there's a bunch of cases like that. These are legacy companies that have been in business for decades. And I'm not sure that even if they might lose some of their moat as a business due to AI, they're still going to make so much money in other arms and verticals of their business, they're going to be just fine. The stocks will probably be just fine. This is definitely a knee-jerk reaction is how I see it.

And eventually, if anyone's going to figure it out, it's going to be these big companies, on how to navigate and optimize for AI and implement AI. And look, you've seen layoffs happening across all these big companies too. So they're already sort of positioning for a more productive, more efficient business

Lance Glinn:

And look, tech, understandable, financial services, understandable that they get this AI disruption. But sectors like trucking, which you mentioned before, logistics, those were more of the unexpected, I think, to be influenced. As we finish up this month's conversation. When you see markets punish these stocks, what does it really say to you that, again, these industries and sectors that you wouldn't necessarily think would have such great AI disruption are being disrupted a lot?

Phil Rosen:

I think we're going to see more of this because our brains don't work in exponential terms. We can only think linearly, but the technology is moving exponentially, so it's improving at a rate faster than most of our brains can even understand. So the market is trying to price that into these different sectors and these different companies. And because the market is just humans, right? Buying and selling, it's going to be very difficult for us to judge in real time what companies will be able to weather the storm of AI and what companies are actually positioned well for it.

So the volatility's going to increase probably this year. I don't think that we're going to see any calm trading as we have in the last couple years. Volatility was very low relative to history the last couple years. This year it's going to be higher because everyone is so nervous and jittery about what company is going to evaporate overnight because something in AI has figured out a way to displace it or make it obsolete?

It's hard to predict what the next sector will be that gets hit. I've had people tell me it's going to be insurance. I think that's an interesting one, and that's kind of tied to healthcare. So if AI comes to those sectors, we could see billions more of market cap wiped out. I anticipate there's going to be a handful of sectors that happens to from here on out.

But again, the incumbents that are making gobs of cash anyway, they're probably going to be fine. I know a lot of people talk about how legacy companies will go by the wayside just because they're not moving quick enough, maybe in some cases, but also these are run by very smart people. These are very competent companies in many cases. AI's going to disrupt at the edges, but I don't think it's going to delete entire companies that are worth billions of dollars.

Lance Glinn:

Well, what AI won't delete are our conversations each and every month, Phil. I always enjoy them. Thank you so much as always for joining us Inside the ICE House.

Phil Rosen:

Thank you, Lance, for having me.