MEMO

TO: All Portfolio Managers
FROM: Chief Investment Strategy
DATE: August 30, 2025
RE: The Great Rotation That Wasn't

Gentlemen, ladies, and those still pretending algorithms haven't made us obsolete:

We need to discuss the elephant in the digital room. While you've been busy explaining to clients why your Q3 performance looks like a seismograph during an earthquake, the market has been writing its own rules with the subtlety of a freight train through a china shop.

Let's start with the obvious: Ether surged above $4,900 for the first time, entering price discovery with a new all-time high at $4,946. Meanwhile, Bitcoin is still down about 10% from its mid-August all-time high north of $124,000.

You read those numbers correctly. Ethereum just casually strolled past five grand while Bitcoin sits in the corner like a deflated balloon from last week's party.

This should concern you more than your expense ratios. We're witnessing a fundamental shift in crypto leadership, and half of you are still trying to explain Bitcoin to your compliance departments. Ether (ETH) was priced at $4,335.28, down by 3.2 percent over the past 24 hours as of Friday's close, but don't let that modest pullback fool you into thinking this is just another rotation.

The structural implications here demand your attention. Ether prices ripped higher after the GENIUS Act was passed. This legislation created a framework and governance for stablecoins — actual regulatory clarity, not the regulatory roulette we've grown accustomed to. While you've been waiting for Washington to figure out what Bitcoin is, Ethereum built an entire financial infrastructure underneath everyone's nose.

Now for the uncomfortable truth: your traditional asset allocation models are obsolete. The correlation breakdowns we've been tracking aren't temporary glitches; they're structural fractures. When a cryptocurrency can outperform your entire equity book while central banks sit on their hands, your risk management frameworks need fundamental revision.

Speaking of central banks, The Governing Council today decided to keep the three key ECB interest rates unchanged. Inflation is currently at the 2% medium-term target. Perfect. Christine Lagarde declares victory on inflation while digital assets rewrite the rules of monetary transmission. The ECB congratulates itself on hitting targets while missing the revolution happening in plain sight.

This brings us to the asset allocation discussion nobody wants to have. Traditional 60/40 portfolios assume correlations that existed in a world where central banks controlled money supply. That world ended when programmable money became reality. Your equity-bond correlation models don't account for assets that can appreciate 200% while your bond duration hedges work exactly as designed.

The tactical recommendation remains unchanged: stop treating crypto like a speculative sideshow. Ethereum's recent performance isn't luck; it's recognition of functional superiority. While Bitcoin gets treated like digital gold, Ethereum operates as digital infrastructure. Infrastructure wins wars.

For immediate implementation: recalibrate your risk budgets to reflect actual volatility, not historical precedent. The assumption that traditional assets provide portfolio stability while crypto provides returns needs updating. Sometimes crypto provides both.

One final note on client communication: stop apologizing for cryptocurrency exposure. Start explaining why competitors without it look increasingly inadequate. The institutional adoption curve we predicted three years ago is accelerating beyond our most optimistic projections.

The great rotation we kept promising clients? It's happening. Just not between the assets we expected.

Portfolio review meetings start Monday. Come prepared to explain your crypto allocation. Or explain why you don't have one.

Regards,

[Name Redacted]
Chief Investment Strategy