AI Summary
5 min readIn 2020, the ten-year bond yield sat at 65 basis points. Andy Constan, a former Bridgewater macro strategist, calls that a bubble. Six years later, bonds have been a disaster for the classic 60/40 portfolio. But Constan argues that bonds are now much better positioned to protect against a growth slowdown—and that this shift in the macro environment is precisely why he still doesn’t own Bitcoin.
Constan has spent 40 years in markets, starting at Salomon Brothers, running a hedge fund, and then learning macro at Bridgewater Associates and Brevan Howard. Today he runs Damp Spring, a macro research firm serving the world’s biggest hedge funds. On this episode of What Bitcoin Did, he walks through the framework he uses to decide whether to include an asset in a long-term portfolio—and explains why Bitcoin, despite improving on volatility and correlation, still doesn’t make the cut.
The four ways institutions look at Bitcoin
Constan distinguishes four institutional approaches to any asset. First, there are intermediaries like BlackRock that simply pass exposure through to end investors—they don’t need a directional view. Second, there are long-only allocators who manage savings and need to build the best possible portfolio. Third, there are market timers who try to buy cheap and sell rich. Fourth, there are arbitragers who trade relative value without a directional bet.
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What you'll learn
- 1 (00:02) **Opening Thesis: Why Falling Volatility Makes Bitcoin More Attractive** - Andy Constan states that Bitcoin's declining volatility across all timeframes makes him more likely to own it, and argues that inevitable inflation from fiscal choices is a bull case for Bitcoin.
- 2 (00:52) **Guest Introduction & Background** - Peter introduces Andy Constan, a macro strategist with a 40-year career, and Andy recounts his career from Salomon Brothers to Bridgewater and Brevan Howard.
- 3 (06:30) **Framework: The Four Types of Institutional Investors** - Andy breaks down how institutions approach Bitcoin, starting with the four distinct investment strategies they might use.
- 4 (09:50) **The Long-Term Investor's Framework: Risk Premium & Diversification** - Andy explains his Bridgewater-inspired framework for evaluating assets, focusing on risk premium and diversification across economic scenarios.
- 5 (21:32) **The 60/40 Portfolio is Back** - Andy defends the 60/40 stock/bond portfolio, arguing that bonds are no longer in a bubble and now offer real protection against a growth slowdown.
- 6 (28:59) **Why Andy Doesn't Own Bitcoin (Yet): Volatility & Correlation** - Andy explains his current reluctance to replace gold with Bitcoin in his portfolio, citing three specific reasons.
- 7 (31:08) **The Good News: Volatility is Falling, Correlation is Breaking** - Peter and Andy agree that Bitcoin's declining volatility and decoupling from the NASDAQ are positive developments.
+ Full timestamped outline available in the app
Show Notes
“The things they need to do to bring inflation down are just too painful for them.”
Andy Constan returns to discuss why he thinks politicians will keep running large deficits, how inflation can shift the cost of America’s debt onto savers and future generations, and why that creates a bull case for Bitcoin.
We also get into how institutions decide whether to own Bitcoin, why its volatility and weak correlation with gold keep Andy on the sidelines, and whether a US debt collapse is inevitable. Andy explains why bonds look more attractive to him today, what it would take to bring inflation down, and whether AI could change America’s debt outlook.
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FOLLOW:
Danny Knowles: https://x.com/_DannyKnowles
Andy Constan: https://x.com/dampedspring
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