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around the world there's a bunch of conversations being had in boardrooms there's a bunch of

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conversations being had at federal agencies there's conversations that are being had at

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you know summits amongst different you know institutions and different government organizations

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everybody's trying to come up with what are we doing with bitcoin bitcoin is a reserve asset

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by governments is something that is like completely untapped right now.

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And there's so much money that sits behind all of this.

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If we just have small percentages of sovereign wealth around the globe start to flow into it,

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then that would drastically impact the marginal demand for it.

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Bitcoin is always and everywhere some major headline announcement away from this happening

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and a massive run up in price.

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I don't think it's over.

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I think that it's going to resume.

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I'm expecting Bitcoin to hit all time highs in the first half of next year.

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We're happy.

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Vibes are good.

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This is Epoch.

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That's the start of the podcast.

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Okay.

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Eric Yakes.

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Okay.

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This is my show now for everybody listening.

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A year in.

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Danny and I recorded already and he didn't turn the camera on.

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No, the cameras were great.

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Okay.

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He didn't turn the audio on.

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The audio was great.

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Now we're re-recording the podcast.

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Honestly, the show just wasn't quite good enough,

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so I had to get you back.

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He keeps saying that to put me down.

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It's a toxic character trait.

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You know I have plenty of toxic character traits.

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How you doing, man?

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Good, good.

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Vibing in Abu Dhabi?

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Yeah, man, I am vibing.

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I was just on the boat, and the boat was a nice boat.

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I saw the boat. I've not been on it.

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Yeah, you're leaving after this, right?

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Yep.

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No boats.

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No boat bikes for me.

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I don't want to lose any keys.

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Yeah, I mean, it's been cool.

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It's been a, it's a very different vibe.

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We've been from basically hanging out

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with the poorest communities in Africa last week

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to hanging out with ultra wealthy,

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Dubai vibe, chic vibes.

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And I'm loving it.

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And we were at a party last night

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and you overheard a chic who's going to buy $100 billion.

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That's right.

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I did tweet it.

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It was a picture of me with the sheiks.

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And I didn't think they understood anything I said, but.

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We're having fun.

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There you go.

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So you're about to do a panel straight after this show on why this time is different.

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Yes.

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Is this time actually different, Eric?

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Okay.

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So I think like, yeah, so like the question is like, what's going to happen with price?

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And I think when people think about cycles, I think about all these models.

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I think about where it's going in the near term.

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It's kind of like a macro piece.

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there's a sector specific piece, like how people are perceiving tech or digital assets or Bitcoin.

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And I think like the best way to frame this is to like, take a step back and just say like,

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how do prices work? And it's pretty simple. A price is where marginal supply meets marginal

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demand. And then there's all these different factors that come into play that determine what

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the marginal supply and marginal demand is. Now for Bitcoin, it's nice because marginal supply is

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fixed. So we don't even have to worry about that side. We know that it's going to be something like

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this, um, or sorry, like the supply issuance is fixed. So then like marginal supply is really

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just like based on how seller perception is coming into the market. Um, marginal demand is where a

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lot of people are, you know, speculating on things, but there's so many different variables that can

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like impact how many new, you know, buyers are coming to this market and how many new

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sellers are coming to this market. And like, I think the reality is just that when people in

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Bitcoin cling to these models to try to like produce some sort of certainty of where that's

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going in the future. And we have these four year cycles, we have, you know, these power law models,

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or we had the stock to flow model. And we try to come up with all these different correlations

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that could have existed in the past and to basically say, here's how it might be working

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in the future. The reality to me is just that price is determined by these underlying fundamentals

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that make these outcomes happen. The BlackRock announcing the ETF years ago,

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that was something that happened because of boots on the ground, people advocating for Bitcoin,

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companies building things that enable this all to happen, people talking to regulators.

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You know, there's all these things happening in the background that make this one big announcement

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that totally changes the market in the way that people perceive the asset.

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So like when I think about price, all I'm thinking about is what are the fundamental things happening behind the scene

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and how could that impact the price in the near term?

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And what we know is that when we look at the price of Bitcoin historically, there's only a few days,

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you know, very small subset of days where you get the vast majority of the run ups in price.

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And that comes from all of like, it's like, you know, it's like an iceberg that's under the water.

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There's all these things that are accumulating and eventually like the top comes out and you can

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see just the top and like, that's when there's public knowledge of everything happening in the

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background. So that's how I'm thinking about all of this, right? Like I'm thinking about what are

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the fundamentals that are driving this? And that's something that makes me be very bullish on Bitcoin.

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And we can get into a lot of those reasons later on. And that's kind of all related to like different types of Bitcoin adoption and discussions that are being had in the background.

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I think when it comes to this model question, the reason that we're like crashing over the past few months is one, there's the macro environment, you know, like a really high level.

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It's just that we have this perception right now where inflation has been rising over the past few months.

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And the market's being perceived as saying like, OK, so Federal Reserve was, you know, people wanted it to shift towards easing.

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And we have had a few things happen that's like putting it like right in the middle between easing and tightening.

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And but if inflation continues to rise, then we may not live in this world of easing that everybody's expecting.

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We're close to like 3% right now. It could spike up a little bit more. And that's kind of the primary concern, I think, that sparked the catalyst in the market. So everybody's like, OK, well, AI demand is causing energy prices to spike. And it's creating an outsized demand for energy assets. And over the next six months, we could see there being a shortage of enough capital deployment to fulfill those energy needs. And then that could spike the cost of energy.

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And then that would spike inflation and that that could put central banks in a precarious position.

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So that is like that.

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I think like things like that are kind of the core drivers of how the market's perceiving it.

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And then I think there was a crash with that.

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And then I think there's, you know, obviously like leverage coming out of the system.

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And then I think that there's just this people have a hard time with the actual perception of what's going on.

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Because there's all these people that are like, well, we always, you know, they expected four year cycles.

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They expected this to just like continue for some reason.

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And now they're like, uh-oh, well, if we've broken this pattern,

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does that mean it goes down?

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And there's kind of like this existential crisis,

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I think some of the buyers in the market are having right now

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of like what the true reality is.

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And then a year from now, it's going to be very obvious

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to everybody in hindsight what was actually happening.

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With fiat money constantly debasing,

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coverage. Visit anchorwatch.com today. That is anchorwatch.com. The thing that's interesting

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00:09:52,040 --> 00:09:56,200
there is like Luke Groman, who I have like a ton of respect for, I think he's amazing,

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but he in his recent newsletter was basically telling people to sell Bitcoin. And he, I'm pretty

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sure, I did read it, but I can't exactly remember, but I'm pretty sure he mentioned the cycles.

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and then it becomes like a self-fulfilling prophecy

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and like if people are selling

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because they expect a four-year cycle

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can they create a four-year cycle?

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But I would even go one step further

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being like did the cycles even ever really exist?

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Because I guess really have to go from like 2013 onwards.

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So there's the 2013 peak, 2017 peak, 2020 peak

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or 2021 peak.

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Like they also line up with business models

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and liquidity flows.

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Like do you think liquidity is the bigger driver here

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rather than the halving cycle.

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Yeah, yeah.

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Like liquidity in the market is like, you know,

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the most correlated aspect that we can look at over time.

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What I'm expecting is that there's going to be an environment

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in the not too distant future

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where liquidity is not on Bitcoin's side

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and we're still getting a run up in price.

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What would cause that?

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All these fundamental drivers

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that I'm kind of talking about in the background.

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Like I think that right now around the world,

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there's a bunch of conversations being had in boardrooms.

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There's a bunch of conversations being had at federal agencies.

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There's conversations that are being had at summits amongst different institutions and different government organizations.

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Everybody's trying to come up with, what are we doing with Bitcoin?

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And just like how this happened with institutions like BlackRock coming in, that's happening with a bunch of other people behind the scenes.

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So Bitcoin is always and everywhere some major headline announcement away from this happening.

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and a massive run-up in price.

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And that's the question I have in my mind is,

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who's the next major organization

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that's going to make an announcement

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that they're supporting it, right?

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We had Czech Central Bank is buying Bitcoin.

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That's happening.

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And we'll have other governments

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that continue to come into this.

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And there could be a future where we have

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some major announcement of the usage

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under the BRICS nations,

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or it just actually comes up to the surface

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that there is some sort of usage happening by them.

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Bitcoin as a reserve asset by governments

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is something that is completely untapped right now.

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And there's so much money that sits behind all of this.

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If we just have small percentages of sovereign wealth

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around the globe start to flow into it,

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then that would drastically impact the marginal demand for it.

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Do you believe in this idea of a nation-state arms race for Bitcoin?

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in the sense of like, I imagine China

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are stacking some Bitcoin somehow.

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Like I think mining is still happening in China.

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I think that's pretty obvious.

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Like is that nation state mining?

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Are they stacking Bitcoin?

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Like is Russia stacking Bitcoin?

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We don't like, I don't know the answer to that question,

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but as soon as that came out, if it was happening,

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do you believe that that would cause like the US

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to be like, holy shit,

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well, we can't have less Bitcoin than China?

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Like I think so, but I think at a certain point,

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like Bitcoin needs to be. So before we can get to that type of an arms race,

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Bitcoin needs to get to a certain level of maturity. So if we were to like, think about

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I'm a nation state, I want to buy reserve assets. You know, what am I looking for and why?

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And there's all these, there's different characteristics, right? There is like,

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you want an asset that is something that is like highly liquid, something that has some stability

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and value, still retaining some value. And then ideally something that you have more control over

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and something that might even be like counter cyclical during town times.

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There's these different characteristics that they're looking for. And like the main shift

233
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over the past decade has been nation states are shifting towards a commodity in the reserve

234
00:13:44,600 --> 00:13:49,500
because trust is eroding amongst the world. We're starting to fracture into this multipolar

235
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geopolitical system, and we're having this shift towards commodities.

236
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So that's one good thing, is that marginal demand from nation state allocation towards

237
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commodities, that's good for Bitcoin.

238
00:14:00,900 --> 00:14:05,080
As that increases, Bitcoin's going to be classified in that bucket because it has a lot of properties

239
00:14:05,080 --> 00:14:18,702
that fall into that bucket I think that what holds Bitcoin back right now is if we were to like directly compare it with gold if we were to say like okay if I own gold like gold done

240
00:14:18,702 --> 00:14:23,423
incredibly well, having a nation state reserve in gold has done very well for you this year.

241
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And, and that's something that's, you know, reasonably retained value over time. And then

242
00:14:29,862 --> 00:14:36,722
what gold has as a major advantage over Bitcoin is that the depth of liquidity in its capital

243
00:14:36,722 --> 00:14:42,303
markets is much larger. So if you're a country and you want to have, you know, 500 billion dollars

244
00:14:42,303 --> 00:14:47,882
of exposure to a particular commodity and you need to go liquidate some amount of that, you know,

245
00:14:47,882 --> 00:14:53,102
say you need to go liquidate 200 billion dollars at some point, doing that in Bitcoin, that's 10%

246
00:14:53,102 --> 00:14:57,702
of the market today. And that's going to move the price very significantly. So it doesn't have that

247
00:14:57,702 --> 00:15:03,923
depth of liquidity just yet. Now, as Bitcoin grows and it becomes larger, then it's going to get to

248
00:15:03,923 --> 00:15:09,242
that point. And that's a major inflection point for Bitcoin. And that's one of the most bullish

249
00:15:09,242 --> 00:15:14,642
things about Bitcoin is that it gets better as it gets larger. And that's why some people kind

250
00:15:14,642 --> 00:15:19,122
of confuse it with a Ponzi scheme because of a network effect is really what they're talking

251
00:15:19,122 --> 00:15:24,602
about. But that's what's holding Bitcoin back in all these considerations. And then so let's say

252
00:15:24,602 --> 00:15:30,303
Bitcoin gets to like, you know, a $10 trillion market cap. Now we're talking about a very

253
00:15:30,303 --> 00:15:34,642
significant, it already is a significant global asset, but now we're talking about something

254
00:15:34,642 --> 00:15:39,543
that's like close to the top of the leaderboard. And, um, and that's something that you can move

255
00:15:39,543 --> 00:15:44,962
a lot of money around with. Then Bitcoin has the advantage of being the only asset that you can

256
00:15:44,962 --> 00:15:51,423
send permissionlessly in the world, um, and have like final physical settlement of the asset,

257
00:15:51,423 --> 00:15:54,882
That's something you can guarantee another nation that we can do that within minutes for you.

258
00:15:55,303 --> 00:16:03,882
I mean, that advantage, that's something that just like nothing else compares for anything where you can get some sort of like relatively seamless settlement with.

259
00:16:04,242 --> 00:16:06,482
That's something where you're trusting another nation state.

260
00:16:06,902 --> 00:16:13,283
So to not trust another nation state, which ideally you want to do with your reserves, which is why people are shifting to commodities.

261
00:16:14,423 --> 00:16:15,862
Bitcoin's the epitome of that.

262
00:16:15,862 --> 00:16:20,962
And then being able to store it yourself, being able to own it yourself.

263
00:16:20,962 --> 00:16:24,082
It's like, where's all these gold reserves that these countries own?

264
00:16:24,142 --> 00:16:28,482
There's a lot of different versions of it, but a lot of them own an interest in a reserve held by another country.

265
00:16:28,803 --> 00:16:34,022
So you might have the economic exposure, but push comes to shove and you end up getting some enemies.

266
00:16:34,142 --> 00:16:34,982
Things can go wrong.

267
00:16:35,102 --> 00:16:38,283
I mean, that happened to Venezuela like, I don't know, seven, eight years ago.

268
00:16:38,442 --> 00:16:40,502
They asked for their gold back from England and they just said no.

269
00:16:40,942 --> 00:16:41,722
Right, right.

270
00:16:41,722 --> 00:16:42,722
Yeah.

271
00:16:42,722 --> 00:16:46,043
But like Bitcoin has become insanely liquid.

272
00:16:46,043 --> 00:16:47,482
Like it's really impressive.

273
00:16:47,482 --> 00:16:48,482
Yeah.

274
00:16:48,482 --> 00:16:52,722
But even when the guy a few months ago tried to sell 80,000 Bitcoin, which was like $9

275
00:16:52,722 --> 00:16:57,722
billion or whatever at the time, it still dropped like 10% or something.

276
00:16:57,722 --> 00:16:58,722
Right.

277
00:16:58,722 --> 00:17:03,482
Which is far improved from where it was a few years ago.

278
00:17:03,482 --> 00:17:07,602
But like if you're talking about settling $500 billion, then we're just not in the ballpark

279
00:17:07,602 --> 00:17:08,602
yet.

280
00:17:08,602 --> 00:17:12,763
So that's just literally a factor of price.

281
00:17:12,763 --> 00:17:14,523
We just need price to go up.

282
00:17:14,523 --> 00:17:19,523
Yeah, I mean, we need broader liquidity of the asset.

283
00:17:19,523 --> 00:17:23,963
So price goes up, it's like the calculus goes,

284
00:17:23,963 --> 00:17:25,242
it's a bigger market.

285
00:17:25,242 --> 00:17:28,322
But that comes down to a lot of practical realities.

286
00:17:28,322 --> 00:17:30,283
It's like, OK, so I'm a country, I'm Russia,

287
00:17:30,283 --> 00:17:32,242
and I actually do want to exchange it for dollars.

288
00:17:32,242 --> 00:17:34,283
Like, who am I going to exchange it with?

289
00:17:34,283 --> 00:17:42,283
More distribution of the actual liquidity on-ramps and off-ramps into Bitcoin, that's a practical reality.

290
00:17:42,703 --> 00:17:50,463
They need to know that there is some form of exchange with either another country or another partner that can provide them liquidity or whatever other asset they're looking for.

291
00:17:51,382 --> 00:17:55,982
There's a lot of ways you need to actually be able to execute that effectively that should grow as well, too.

292
00:17:56,402 --> 00:18:00,842
But yeah, growing in price and not being able to just move the market, that's important as well.

293
00:18:00,842 --> 00:18:04,242
So we need price to go up to increase liquidity.

294
00:18:04,242 --> 00:18:07,602
I was talking to Safedine before, and he was saying price is the only thing that matters.

295
00:18:07,602 --> 00:18:09,602
He's like, that's the scoreboard of us winning.

296
00:18:09,602 --> 00:18:13,122
But where does the demand come from to move Bitcoin?

297
00:18:13,122 --> 00:18:14,602
Because it's such a big asset now.

298
00:18:14,602 --> 00:18:18,162
And I know the demand is marginal, but where do you think the big money is going to come from?

299
00:18:18,162 --> 00:18:25,682
Yeah, I think that the largest market that's really untapped right now is just that I see

300
00:18:25,682 --> 00:18:31,842
you know relatively near-term demand from is the commodity allocation with the nation state

301
00:18:31,842 --> 00:18:36,882
sovereign wealth like i think that if we just look like we put this in our annual report last

302
00:18:36,882 --> 00:18:41,842
year if you just look at the gold market and the size of that um we put together a market sizing

303
00:18:41,842 --> 00:18:49,362
around it's just like you know percentage points of that is you know multiples of what would what

304
00:18:49,362 --> 00:18:55,043
came from like the bitcoin uh etf demand and and like when you think about those types of

305
00:18:55,043 --> 00:18:57,462
of allocations, that could move the market drastically.

306
00:18:57,622 --> 00:19:03,142
And not even on top of that, to your point about what safety was saying, that's the scoreboard.

307
00:19:03,682 --> 00:19:08,962
So that does start moving other countries into this prisoner's dilemma of Bitcoin adoption

308
00:19:08,962 --> 00:19:10,162
that we've been talking about.

309
00:19:10,642 --> 00:19:15,222
Are we even past the point of retail making any real difference to the price of Bitcoin?

310
00:19:15,502 --> 00:19:19,082
Is it getting to the point where it's too big an asset for normal people like you and

311
00:19:19,082 --> 00:19:19,902
I to change anything?

312
00:19:20,382 --> 00:19:23,063
I think it's just like, what is an institution, right?

313
00:19:23,063 --> 00:19:26,382
Like an institution is somewhat just like an aggregation of like retail.

314
00:19:26,642 --> 00:19:33,722
And like, um, so like the way that I kind of look at it is that, you know, a lot of these

315
00:19:33,722 --> 00:19:38,543
organizations are like, so often they're like, uh, indirect paths of retail.

316
00:19:39,002 --> 00:19:43,023
And so that means like the decision makers are different because the decision making authority

317
00:19:43,023 --> 00:19:44,842
over the capital has been delegated to them.

318
00:19:44,842 --> 00:19:53,203
but the uh like functionally it is still like often driven by perceptions of retail

319
00:19:53,203 --> 00:19:58,002
i think what like people really mean when they're talking about retail investors now

320
00:19:58,002 --> 00:20:04,642
is i think we have plenty of retail investors in the market i think that we are obviously getting

321
00:20:04,642 --> 00:20:10,222
more flows driven by institutions but of the retail investors in the market i think that like

322
00:20:10,222 --> 00:20:15,382
the mix of them is shifting. I think that a ton of the retail, like when people talk about retail,

323
00:20:15,462 --> 00:20:19,002
what do they mean? They mean like the people from 2017 cycle that were like bidding up and gambling

324
00:20:19,002 --> 00:20:23,943
shit. And like, and that's, that's a very different investor profile. Cause what have

325
00:20:23,943 --> 00:20:28,122
they done? They've done what they want to do. Bitcoin's not nearly as much of a gambling asset.

326
00:20:28,122 --> 00:20:32,602
Like it's still a very high return asset, but it's not being perceived like that by them anymore.

327
00:20:32,722 --> 00:20:38,002
They're not thinking like I can forex my Bitcoin this year, you know, and like that is causing them

328
00:20:38,002 --> 00:20:41,002
to shift into other things that they want to go through.

329
00:20:41,082 --> 00:20:42,222
Well, we've seen that this year.

330
00:20:42,742 --> 00:20:45,982
This is one of the strangest things that I would never have predicted would have happened

331
00:20:45,982 --> 00:20:50,642
so early, is that it's almost as if Bitcoin's now not volatile enough for some people.

332
00:20:51,002 --> 00:20:55,763
And instead, they're chasing AI stocks or treasury companies or even gold, which is

333
00:20:55,763 --> 00:20:56,322
the weirdest one.

334
00:20:56,422 --> 00:20:59,862
I would never have thought gold would have more retail FOMO than Bitcoin in 2025.

335
00:21:00,242 --> 00:21:00,642
Yeah, yeah.

336
00:21:00,742 --> 00:21:05,203
There's friends that I have who are that classification person, and they're talking about trading

337
00:21:05,203 --> 00:21:06,303
leverage futures on gold.

338
00:21:06,602 --> 00:21:06,722
Yeah.

339
00:21:06,722 --> 00:21:08,063
Which is a great top signal.

340
00:21:08,543 --> 00:21:11,662
But do you think like, so gold has had an insane run this year.

341
00:21:11,783 --> 00:21:11,982
Yeah.

342
00:21:12,822 --> 00:21:16,882
Do you think we will see that spill over into Bitcoin as that cools off?

343
00:21:17,142 --> 00:21:21,162
Or do you think gold is just going to keep ripping because like China, central bank are buying a ton of it?

344
00:21:21,922 --> 00:21:23,803
Yeah, like spilling over into Bitcoin.

345
00:21:24,242 --> 00:21:28,242
I, you know, I think that that buyer behavior is generally speaking more long term.

346
00:21:28,283 --> 00:21:29,402
But some of those people, yes.

347
00:21:29,402 --> 00:21:33,142
Like to the point that we're talking about, like, I don't know how much of the flows that ultimately is.

348
00:21:33,182 --> 00:21:34,362
It could be a pretty large percentage.

349
00:21:34,362 --> 00:21:48,082
But I like I think that what we're going to see, you know, shifting over to Bitcoin is it's less like I think Bitcoin some like leading or lagging indicator.

350
00:21:48,922 --> 00:21:55,882
It's more that I think that there's just like this existential crisis in the market that's happened amongst some of the Bitcoin buyers were.

351
00:21:56,322 --> 00:21:58,982
And then that's that's like we're at the worst of that.

352
00:21:59,063 --> 00:22:00,043
Like that's shifting out.

353
00:22:00,043 --> 00:22:07,443
I think the retail investors who are like here for like very quick number go up like that investor profile has shifted a lot.

354
00:22:07,742 --> 00:22:17,303
And now we have a lot more people that are just coming in to Bitcoin because they think over the next three to four years they can, you know, triple or quadruple their money.

355
00:22:17,763 --> 00:22:20,563
You know, there's a lot more investors like that that are entering the market.

356
00:22:21,982 --> 00:22:25,222
I think that we had a lot of leverage flushed out.

357
00:22:25,222 --> 00:22:27,162
and even before this decline,

358
00:22:27,322 --> 00:22:31,402
leverage I think was like relatively low to prior cycles.

359
00:22:31,902 --> 00:22:34,063
We put out this banking report through EPOC

360
00:22:34,063 --> 00:22:37,063
and I put a chart in there just kind of like comparing

361
00:22:37,063 --> 00:22:40,023
proportions of leverage to market capitalizations

362
00:22:40,023 --> 00:22:41,242
of assets in the system.

363
00:22:41,442 --> 00:22:43,642
And like if you look at what happened in like broader crypto

364
00:22:43,642 --> 00:22:46,702
during the prior cycles for leverage expansion

365
00:22:46,702 --> 00:22:48,623
and like where we're at with Bitcoin today,

366
00:22:49,102 --> 00:22:51,082
it's significantly lower, like less than,

367
00:22:51,342 --> 00:22:54,023
I think it was close to like 40% of that amount.

368
00:22:54,023 --> 00:22:56,543
And I was kind of expecting more of that to come in.

369
00:22:56,582 --> 00:22:59,182
But I think with this crash, like even more of that got flushed out.

370
00:22:59,342 --> 00:23:03,242
And we're like below general like leverage of like, you know, broader securities markets.

371
00:23:03,623 --> 00:23:10,822
So I think a lot more of that could start stepping back in, particularly when banks start lending a lot more, which I expect to happen over the next year.

372
00:23:10,942 --> 00:23:15,142
So it's like leverage can be expanding a lot more of that could be retail driven.

373
00:23:15,142 --> 00:23:27,222
And I think that, you know, yeah, with like a lot of those factors combined, it's healthy is kind of how I'm looking at this.

374
00:23:27,222 --> 00:23:30,123
There's a lot of just like very healthy characteristics that have come in.

375
00:23:30,523 --> 00:23:36,023
And the funniest part is like nobody knows why we're having this crash.

376
00:23:36,642 --> 00:23:38,422
That's like the funniest part of this.

377
00:23:38,702 --> 00:23:43,162
So it's like you literally can't even come up with a good reason for why it's happening.

378
00:23:43,162 --> 00:23:45,123
So buy the shit out of it.

379
00:23:45,123 --> 00:23:46,543
Like, what are you doing?

380
00:23:46,962 --> 00:23:48,102
It's that easy.

381
00:23:49,263 --> 00:23:51,283
So one of the reasons why I don't think,

382
00:23:52,263 --> 00:23:53,283
maybe cycles never existed,

383
00:23:53,422 --> 00:23:55,783
but I don't think we're at the peak of this cycle

384
00:23:55,783 --> 00:23:58,502
is one thing that Checkmate always says is

385
00:23:58,502 --> 00:24:00,902
the bull market author is the bear that follows.

386
00:24:01,303 --> 00:24:03,783
And we've not really had, we've had no euphoria.

387
00:24:04,023 --> 00:24:05,662
It's like only just a bull market.

388
00:24:05,902 --> 00:24:07,882
We've not really had a crazy run up at all.

389
00:24:08,182 --> 00:24:11,202
So to think we then get a drop down to like 50K Bitcoin,

390
00:24:11,322 --> 00:24:12,862
I just can't see how that happens.

391
00:24:12,862 --> 00:24:16,962
And if that doesn't happen, I can see we have a period of sideways,

392
00:24:17,263 --> 00:24:18,922
but I don't think this is over, man.

393
00:24:19,362 --> 00:24:21,002
Yeah, I don't think it's over.

394
00:24:21,142 --> 00:24:22,303
I think that it's going to resume.

395
00:24:22,543 --> 00:24:25,563
I'm expecting Bitcoin to hit all-time highs in the first half of next year.

396
00:24:25,803 --> 00:24:26,362
Should we have a bet?

397
00:24:26,922 --> 00:24:29,283
Yeah, well, okay, we already had a bet.

398
00:24:29,582 --> 00:24:30,942
Okay, we'll tell the bet.

399
00:24:30,942 --> 00:24:33,523
But it doesn't count, because if it's not recorded on a podcast,

400
00:24:33,783 --> 00:24:34,742
then a bet doesn't count.

401
00:24:34,862 --> 00:24:35,263
Correct.

402
00:24:36,882 --> 00:24:38,922
I'm offering worse terms now.

403
00:24:39,563 --> 00:24:41,162
That's fine. You gave me really good terms.

404
00:24:41,162 --> 00:24:42,803
Okay, okay, we'll do a million sats.

405
00:24:42,862 --> 00:24:47,602
that Bitcoin will be $150K by June.

406
00:24:48,523 --> 00:24:49,882
Oh, that is worse terms.

407
00:24:49,982 --> 00:24:50,563
First of June.

408
00:24:50,763 --> 00:24:52,242
You pushed that back a little bit.

409
00:24:54,242 --> 00:24:55,162
$150K by June.

410
00:24:55,222 --> 00:24:57,402
So we've got six and a half, seven months to go.

411
00:24:58,543 --> 00:25:00,362
Can I just take the under on that?

412
00:25:01,783 --> 00:25:03,002
That it's less than?

413
00:25:03,182 --> 00:25:03,442
Yeah.

414
00:25:03,602 --> 00:25:04,222
You take over.

415
00:25:04,283 --> 00:25:04,783
I'll take under.

416
00:25:07,023 --> 00:25:07,462
Okay.

417
00:25:07,942 --> 00:25:11,582
By June, Bitcoin will be above.

418
00:25:11,942 --> 00:25:12,482
Well, no.

419
00:25:12,482 --> 00:25:16,263
Okay, so if it crosses 150K before then

420
00:25:16,263 --> 00:25:17,783
and dips back down, I still want my money.

421
00:25:18,982 --> 00:25:19,342
Done.

422
00:25:19,962 --> 00:25:20,242
Okay.

423
00:25:20,462 --> 00:25:21,763
I can't reach across this table,

424
00:25:21,922 --> 00:25:22,902
but we'll shake on that.

425
00:25:24,263 --> 00:25:24,803
All right.

426
00:25:24,942 --> 00:25:27,142
This is the most silly wide table I've ever seen.

427
00:25:30,242 --> 00:25:32,602
So I want to get one of your macro takes

428
00:25:32,602 --> 00:25:34,942
because you've given me some of the best macro takes

429
00:25:34,942 --> 00:25:36,023
I've had over the last few years.

430
00:25:36,202 --> 00:25:37,922
And no one knows you as the macro guy.

431
00:25:38,002 --> 00:25:38,682
Yeah, I can macro.

432
00:25:39,523 --> 00:25:42,422
But so we're coming to this end of the QT cycle.

433
00:25:42,482 --> 00:25:47,523
going into QE. I spoke to Lynn Olden about this a couple of weeks ago. And she was saying

434
00:25:47,523 --> 00:25:53,523
what she expects to see is QE more in line with GDP growth. So if GDP is at 4%, she thinks

435
00:25:53,523 --> 00:25:57,842
it'll be like a 4% QE. Maybe not called QE, but 4% increase in the money supply.

436
00:26:00,263 --> 00:26:04,382
Then there's the other cohort of Bitcoiners who expect us to go through some kind of crisis

437
00:26:04,382 --> 00:26:09,402
period in the big print. Where do you fall between those two extreme scenarios?

438
00:26:09,402 --> 00:26:16,563
I'm probably pretty moderate with how I think about things.

439
00:26:16,563 --> 00:26:23,082
I think I would agree with Lynn that we would get easing that tries to be aligned with that type of a metric,

440
00:26:23,082 --> 00:26:30,222
because theoretically, we wouldn't expect, and this is not considering certain shocks that can happen within the system at any point in time.

441
00:26:30,623 --> 00:26:37,023
We all remember, what was the terminology we were using in 2020?

442
00:26:37,862 --> 00:26:39,283
Transitory. Transitory inflation.

443
00:26:39,402 --> 00:26:45,803
like we all remember that period and and who knows what could happen in the next year who

444
00:26:45,803 --> 00:26:53,142
knows what could happen um you know if we were to get into like a significant um contentious

445
00:26:53,142 --> 00:26:58,023
scenario with another country and there's a lot of pressures like that geopolitically around the

446
00:26:58,023 --> 00:27:04,142
world um so i i think that i i generally agree that like that's the goal and i expect that to

447
00:27:04,142 --> 00:27:09,803
happen and that like, you know, we're not going to see like the big print anytime soon, but we,

448
00:27:09,942 --> 00:27:14,063
we are getting to that point where it's like, we are between a hard place and a rock.

449
00:27:14,303 --> 00:27:19,242
I just think that the runway could last within the next five to 10 years before we see some sort

450
00:27:19,242 --> 00:27:26,102
of like major fiscal crisis emerge from, you know, just like on the run printing that gets out of

451
00:27:26,102 --> 00:27:34,263
control. Like, honestly, I, I think I, what I learned, like, so I used to spend a lot of time

452
00:27:34,263 --> 00:27:39,202
following more short-term macro. Now for the nature of the, our business as a venture capital

453
00:27:39,202 --> 00:27:45,702
fund, like, um, there was actually, there was a partner at a private equity fund that, uh, I

454
00:27:45,702 --> 00:27:50,142
remember we were in the room with when I was like, you know, just a young budding analyst. And, um,

455
00:27:50,742 --> 00:27:55,342
and I remember when one of the advisors in the room was asking them like what they expected,

456
00:27:55,342 --> 00:27:58,882
we're looking at like this telecommunications type company for an acquisition.

457
00:27:59,763 --> 00:28:03,362
And somebody asked him, they're just like, well, you know, they asked him like his macro perspective

458
00:28:03,362 --> 00:28:06,742
and how that's going to impact, you know, some of the aspects of this acquisition.

459
00:28:07,783 --> 00:28:10,842
And he like quickly responded. I remember just like, that's not the business we're in.

460
00:28:11,082 --> 00:28:14,962
And like, that's kind of how we look at it as a venture firm. Like, yeah, like Bitcoin's price

461
00:28:14,962 --> 00:28:26,225
fluctuations impact things that we do It not something we can control And we believe in the long potential of Bitcoin and the direction it going So like on five time horizons

462
00:28:26,225 --> 00:28:32,585
we feel very confident Bitcoin will be higher. And because of that, it's like, I stopped spending

463
00:28:32,585 --> 00:28:37,825
a lot of time focusing on these like short-term characteristics within macro. But what I did get

464
00:28:37,825 --> 00:28:42,285
a lot more interested in that I think is very illuminating is like the geopolitical side of

465
00:28:42,285 --> 00:28:49,585
things. And what was really helpful for me to understand geopolitics better was Marco Papic's

466
00:28:49,585 --> 00:28:54,885
book, Geopolitical Alpha, because it gives a framework for people who haven't spent a lot of

467
00:28:54,885 --> 00:29:00,725
time thinking about this, particularly for investors on how do you think about geopolitical

468
00:29:00,725 --> 00:29:06,405
impacts of things? So like, I think that that is something if like you're trying to anticipate

469
00:29:06,405 --> 00:29:12,265
what's structurally going to shift within an economic system over time, well, macros largely

470
00:29:12,265 --> 00:29:17,645
a bunch of systems that are impacted by governments. So those are the shocks. Those are the big things

471
00:29:17,645 --> 00:29:23,285
that impact this. And those shocks are basically coming from trying to anticipate geopolitical

472
00:29:23,285 --> 00:29:30,365
situations. So that book was great because like, I think what you'll see, like, I remember after I

473
00:29:30,365 --> 00:29:36,885
read that book, I started seeing it everywhere in the news with headlines where, or on podcasts,

474
00:29:36,885 --> 00:29:41,025
like you'll hear, like you'll hear people talking a little bit like, well, you know, there's always

475
00:29:41,025 --> 00:29:44,705
these like at a rudimentary level, like there's these lines of reasoning people will have and

476
00:29:44,705 --> 00:29:49,405
they'll say like, well, China wants this, therefore that this is what they will do.

477
00:29:49,845 --> 00:29:56,525
You know, China wants world power. China wants, you know, more commodity exporting. China doesn't

478
00:29:56,525 --> 00:30:04,985
want tariffs. And it's a very simplistic, myopic form of reasoning because the reality is, is he's

479
00:30:04,985 --> 00:30:09,225
like, you don't really like every, like that's obvious. Everybody knows that people want things,

480
00:30:09,225 --> 00:30:13,765
You know, there's a lot of things that I want. The question is, is asking where, what are people

481
00:30:13,765 --> 00:30:17,525
constrained by? And then if you can understand what they're constrained by, you can understand

482
00:30:17,525 --> 00:30:22,445
and predict their behavior much better. And that was like very illuminating because it kind of

483
00:30:22,445 --> 00:30:27,325
helps you sift through a lot of like the, you know, sensationalist headlines, I think that come

484
00:30:27,325 --> 00:30:31,345
out about what's happening with governments and really focus on like, okay, well, you know,

485
00:30:31,525 --> 00:30:36,205
they're constrained by their exposure to us debt. And there's all these other economic variables that

486
00:30:36,205 --> 00:30:41,465
can be impacted and that people are going to play nice for a long period of time. And it makes you

487
00:30:41,465 --> 00:30:45,965
much less like sensationalist and a lot more like, okay, there's kind of like these gradual shifts

488
00:30:45,965 --> 00:30:53,405
that are happening. Like we are seeing significant shifts and, uh, Eastern Western divide. Those are

489
00:30:53,405 --> 00:31:00,505
going to probably continue. Um, we're going to see a lot more intra bricks trade occurring. And like,

490
00:31:00,525 --> 00:31:05,885
you know, we've seen that increase, I think about threefold over the past decade. And, and like,

491
00:31:05,885 --> 00:31:09,085
these are all good long-term structural trends that we can kind of anticipate. And that's what

492
00:31:09,085 --> 00:31:12,245
gets me kind of excited about like some of the sovereign wealth characteristics, because all

493
00:31:12,245 --> 00:31:17,805
of these things are blowing in favor of Bitcoin. Um, but anyways, like that, those are kind of the

494
00:31:17,805 --> 00:31:23,385
things that I get, I get more interested in as opposed to what the fed's going to do in the next

495
00:31:23,385 --> 00:31:28,525
six months. Um, we kind of know directionally over the next five to 10 years that they basically have

496
00:31:28,525 --> 00:31:33,245
to keep pushing debt into the system that can come from a monetary standpoint that can come

497
00:31:33,245 --> 00:31:38,185
from fiscal. Seems like they're getting to a hard place in Iraq and fiscal is going to continue to

498
00:31:38,185 --> 00:31:43,125
be more dominant in this system. That might be a lot more inflationary. People think they might

499
00:31:43,125 --> 00:31:49,325
have to run it hot. I see all those things unfolding over the next five years. Bitcoin's

500
00:31:49,325 --> 00:31:53,865
going to go up in price. Like, you know, spend time with your kids, go hang out with your

501
00:31:53,865 --> 00:31:59,085
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502
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531
00:34:28,985 --> 00:34:33,585
yeah for sure and the interesting thing on the sovereign wealth funds that you brought up is

532
00:34:33,585 --> 00:34:37,885
that started happening so i'm pretty sure norway has exposure to bitcoin on in their sovereign

533
00:34:37,885 --> 00:34:42,165
wealth fund i think belgium came out and said belgium came out and said they had it oh interesting

534
00:34:42,165 --> 00:34:46,825
And I see that as like nation states adopting Bitcoin is a hurdle.

535
00:34:47,205 --> 00:34:49,485
I think sovereign wealth funds will move much more quickly.

536
00:34:49,765 --> 00:34:52,245
I think, in fact, I think the, was it the Saudi sovereign wealth fund

537
00:34:52,245 --> 00:34:55,025
that also have like $400 billion in Bitcoin?

538
00:34:55,105 --> 00:34:55,445
Yeah, yeah, yeah.

539
00:34:55,765 --> 00:34:59,045
They might be buying $100 billion more if what you heard last night was true.

540
00:35:01,385 --> 00:35:03,925
But one of the other interesting things that's come out

541
00:35:03,925 --> 00:35:06,705
as Bitcoin price has been dipping is some of the FUD

542
00:35:06,705 --> 00:35:08,645
that's not been around for a long time has come back,

543
00:35:09,305 --> 00:35:10,605
specifically Tether.

544
00:35:10,965 --> 00:35:12,685
Like I remember when I was first getting into Bitcoin,

545
00:35:12,865 --> 00:35:14,505
Bitfinex was always screaming on Twitter

546
00:35:14,505 --> 00:35:15,985
that Tether was about to blow up.

547
00:35:16,305 --> 00:35:18,025
I think he even sold his Bitcoin at like,

548
00:35:18,205 --> 00:35:20,805
I don't know, $5,000 or something because of Tether.

549
00:35:22,765 --> 00:35:24,025
Should we get into the Tether FUD?

550
00:35:24,585 --> 00:35:28,505
Yeah, it's, when we wrote this banking report

551
00:35:28,505 --> 00:35:29,645
back in the fall through the epoch,

552
00:35:29,905 --> 00:35:33,365
you know, we were talking about Tether's reserves.

553
00:35:34,385 --> 00:35:38,165
And I think it's, there's two sides of it.

554
00:35:38,165 --> 00:35:42,165
One, there's just, this is new FUD, right?

555
00:35:42,165 --> 00:35:45,365
And I think the general arguments on Axis,

556
00:35:47,605 --> 00:35:49,965
Tether, to maintain a one-to-one peg,

557
00:35:50,465 --> 00:35:53,545
is not fully reserved in dollar liquidity,

558
00:35:53,785 --> 00:35:55,285
even though it's supposed to be all redeemable

559
00:35:55,285 --> 00:35:56,125
for dollar liquidity.

560
00:35:56,805 --> 00:36:00,365
Therefore, there's a risk of a run on the bank of Tether.

561
00:36:00,545 --> 00:36:02,865
And it's like, okay, let's steel man this question.

562
00:36:04,685 --> 00:36:06,445
I'm pulling up their exact reserves now.

563
00:36:06,465 --> 00:36:07,125
Yeah, yeah, pull it up.

564
00:36:07,125 --> 00:36:12,085
So like the reality is, is that Tether needs to meet redemptions.

565
00:36:12,405 --> 00:36:26,525
And if it meets redemptions from the people who are capable of redeeming dollar liquidity from the dollar liquidity system, traditional assets like a wire, then it's going to be maintaining its peg over time.

566
00:36:27,005 --> 00:36:30,285
And as long as it's doing that, things are fine.

567
00:36:30,345 --> 00:36:32,185
So the question is like, well, how does that actually happen?

568
00:36:32,185 --> 00:36:40,505
Like, you know, if you own Tether on your Coinbase account, you can't go redeem your Tether from Tether.

569
00:36:41,145 --> 00:36:42,205
Coinbase has to do that.

570
00:36:42,265 --> 00:36:43,725
And they do it in patches over time.

571
00:36:43,965 --> 00:36:50,505
If there ever was like a run, and by run to be significant, like they have 80%, I think, of their reserves.

572
00:36:50,605 --> 00:36:51,065
Is that right?

573
00:36:51,185 --> 00:36:51,825
So I've got it here.

574
00:36:51,905 --> 00:36:54,645
It's 77.23% of cash and cash equivalent.

575
00:36:54,825 --> 00:36:54,965
Right.

576
00:36:55,145 --> 00:36:55,485
Yeah, okay.

577
00:36:55,485 --> 00:36:58,505
0.01% corporate bonds.

578
00:36:59,025 --> 00:37:01,365
Seven and a bit precious metals, so gold.

579
00:37:01,365 --> 00:37:07,345
5.4 Bitcoin, 2.14 other investments, whatever the fuck that is.

580
00:37:07,365 --> 00:37:08,265
Other investments.

581
00:37:08,385 --> 00:37:10,365
And 8% secured loans.

582
00:37:11,825 --> 00:37:14,825
Tether, I want to be one of those other investments, by the way.

583
00:37:15,405 --> 00:37:16,345
Put EPOC in those.

584
00:37:17,045 --> 00:37:23,645
But yeah, I think that, so looking at that breakdown of numbers, 77% is in cash equivalents.

585
00:37:24,105 --> 00:37:29,265
So that means that assuming you can't get enough liquidity out of any other assets,

586
00:37:29,265 --> 00:37:36,805
And you can only get that from, you know, basically the government treasury bills that they have in there that are the most liquid asset you could have.

587
00:37:39,045 --> 00:37:50,385
If they had 70% of the total amount of like the 200-ish billion in Tether market value that's currently outstanding get called, then that would have to come from the exchanges.

588
00:37:50,385 --> 00:37:55,825
and if for the exchanges to want to do something to like blow up the liquidity of tether it would

589
00:37:55,825 --> 00:38:01,145
obviously be a coordinated attempt because there is no need to have that much redemption in tether

590
00:38:01,145 --> 00:38:05,305
it would have to be the exchanges want to get together and like destroy their most critical

591
00:38:05,305 --> 00:38:11,765
partner that they use for you know maintaining balance on all these exchanges so like like it

592
00:38:11,765 --> 00:38:15,925
just doesn't make any practical sense i kind of view it as akin to the idea of when people would

593
00:38:15,925 --> 00:38:24,425
talk about, oh, well, like there's some theoretical value for being able to, you know, a 51% attack

594
00:38:24,425 --> 00:38:29,205
Bitcoin as a network. And you say like, okay, there is some theoretical amount, whatever it is

595
00:38:29,205 --> 00:38:33,845
today is vastly higher than like the numbers I remember from back in 2021. But it's like so high

596
00:38:33,845 --> 00:38:37,865
that you're like, okay, to even get enough money back then it was like 80 billion. I don't know

597
00:38:37,865 --> 00:38:41,445
what hash rate is compared to that now, but it's probably it's hundreds of billions probably.

598
00:38:41,445 --> 00:38:44,905
And if we think about that, it's like, okay, well, sure.

599
00:38:45,125 --> 00:38:48,525
Like somebody theoretically has hundreds of billions of dollars, but then like they have

600
00:38:48,525 --> 00:38:50,925
to execute on that attack.

601
00:38:51,045 --> 00:38:51,745
What does that mean?

602
00:38:52,405 --> 00:38:56,025
We need to go get $100 billion worth of miners.

603
00:38:56,405 --> 00:38:57,685
Okay, where are those going to come from?

604
00:38:57,785 --> 00:39:01,445
Okay, so people who are selling you these miners, whose business is dependent upon the

605
00:39:01,445 --> 00:39:04,845
price of Bitcoin, are going to sell you a bunch of miners all at the same time to some

606
00:39:04,845 --> 00:39:08,765
like, you know, gray organization that they would obviously be aware of something is happening

607
00:39:08,765 --> 00:39:13,185
in a coordinated fashion and would destroy their underlying business model if they were to do that.

608
00:39:13,665 --> 00:39:17,585
So, you know, they're probably just going to say, fuck you, or at least they're going to catch on to

609
00:39:17,585 --> 00:39:23,025
it and the network can react. And to actually like go get the miners, find the energy assets

610
00:39:23,025 --> 00:39:27,765
to deploy these things all on, get them up and running and do it in a time to where not everybody

611
00:39:27,765 --> 00:39:33,105
would be aware in the entire supply chain that you just had to walk through. Like that's just

612
00:39:33,105 --> 00:39:37,685
not a reasonable scenario. This isn't something that would actually happen and you can't execute

613
00:39:37,685 --> 00:39:42,005
it. So like, that's kind of how I look at some of this with tether too. It's like, you know,

614
00:39:42,665 --> 00:39:47,505
you can say these things theoretically, if there was some sort of massive bank run like that,

615
00:39:47,505 --> 00:39:54,265
and then they're still in a very good fiscal position. Um, but the actual execution on some

616
00:39:54,265 --> 00:40:00,025
sort of like tether run like that is just not even like a feasible concept to me. Um, and, and,

617
00:40:00,025 --> 00:40:03,245
and that's kind of like the main thing. And I think that people would be like, you know,

618
00:40:03,245 --> 00:40:06,425
their arguments like, well, you know, we're much better capitalized than any of the banks.

619
00:40:06,425 --> 00:40:10,845
and uh and that's true but the banks have a central bank backing them that can always print

620
00:40:10,845 --> 00:40:15,485
liquidity for them so it is different but nonetheless they're uh they're an incredibly

621
00:40:15,485 --> 00:40:24,005
sound financial institution so for like a really good example of this is when silvergate during the

622
00:40:24,005 --> 00:40:30,945
last crisis back in 2022 with the fall of ftx and everything um silvergate bank survived like a

623
00:40:30,945 --> 00:40:35,025
massive run i think it was you know i'm not sure but i think it was like the 70s ish percent of

624
00:40:35,025 --> 00:40:40,145
capital or something like that. And, and they survived it. And the bank was like reserved

625
00:40:40,145 --> 00:40:45,445
because that bank was aware, like we're serving this industry super volatile and it's volatile.

626
00:40:45,605 --> 00:40:50,745
So that was like probably the best reserved bank in the world. You could have been at the point in

627
00:40:50,745 --> 00:40:55,245
time, like no bank is capable of surviving runs like that. And they actually did survive that

628
00:40:55,245 --> 00:40:59,825
bank run. And then they were just left with saying like, okay, well size of our bank is shrunk now

629
00:40:59,825 --> 00:41:04,685
and we have to lay off some employees, but like all of the customers got their deposits back on a

630
00:41:04,685 --> 00:41:08,605
bank run like that. And not because the government stepped in and gave them the deposit back. They

631
00:41:08,605 --> 00:41:13,785
got them back from the bank, right from the bank. Exactly. Yeah. Like they, they did things right.

632
00:41:14,185 --> 00:41:20,025
And, um, I think a really good comparison for this is like, so, so like that's silver gate,

633
00:41:20,025 --> 00:41:24,845
they survived that. And like tether has a very similar, like reserve balance is what they were

634
00:41:24,845 --> 00:41:30,925
doing. Um, and, and then I think if you look at like, if we think about how free banking systems

635
00:41:30,925 --> 00:41:36,665
existed in private markets, you know, like in Scotland during the, you know, 18th and 19th

636
00:41:36,665 --> 00:41:42,165
centuries, when they actually had like this free fractional reserve banking system that was, you

637
00:41:42,165 --> 00:41:49,325
know, naturally emergent by market demand. Those banks had certain reserve ratios that we know the

638
00:41:49,325 --> 00:41:55,225
numbers on. And like, generally speaking at the market's maturity, functioning fractional reserve

639
00:41:55,225 --> 00:42:00,545
banks were reserving somewhere in like the 20 to 30% reserve. And that was like good for the

640
00:42:00,545 --> 00:42:05,225
market. And every now and then you would have some sort of bankrupt bank and bankruptcy doesn't mean

641
00:42:05,225 --> 00:42:08,565
the customers lose their deposits. Bankruptcy means you get bought by a competitor and the

642
00:42:08,565 --> 00:42:14,545
customers keep their deposits. Um, but you know, there were scenarios like that, that were happening

643
00:42:14,545 --> 00:42:19,805
in this system. And, um, and I think that that's a good benchmark to think about with tether. It's

644
00:42:19,805 --> 00:42:37,607
just like okay so if like that was the reserve range and then we sitting here with 80 cash equivalents Oh and they have gold 7 gold which is super liquid 7 gold which is a very liquid asset which goes up in value Oh and they have Bitcoin which is also something that does

645
00:42:37,607 --> 00:42:42,107
well. Oh, and they're over reserved by a certain percentage. I think it's about the amount of

646
00:42:42,107 --> 00:42:47,488
Bitcoin that they have. Like there's a million risks in the world to be concerned about. And

647
00:42:47,488 --> 00:42:52,988
like, this isn't one of them. Yeah. You know, and they've also like, since the 2016, 2017 days,

648
00:42:52,988 --> 00:42:55,387
they've massively changed the way they handle their reserves.

649
00:42:55,587 --> 00:42:58,788
Like corporate bonds were a much larger part of it a few years ago.

650
00:42:59,067 --> 00:43:03,188
And they've obviously gone almost entirely to cash, cash equivalent treacheries.

651
00:43:03,727 --> 00:43:06,028
What I don't necessarily understand is like,

652
00:43:06,367 --> 00:43:08,148
they're one of the most profitable companies in the world,

653
00:43:08,288 --> 00:43:10,288
probably the most profitable like per headcount.

654
00:43:11,768 --> 00:43:16,347
Why would you not just go 100% cash and cash equivalents

655
00:43:16,347 --> 00:43:18,387
and then sweep profits into Bitcoin?

656
00:43:18,607 --> 00:43:22,047
Like just to dispel this kind of like idea that this is a problem,

657
00:43:22,047 --> 00:43:31,188
even if it's not? Because they're thinking long term. What happens if we do run into a crisis and

658
00:43:31,188 --> 00:43:37,127
80% of your reserves are in a debt that people don't want? Like, I think that that's something

659
00:43:37,127 --> 00:43:41,627
they're trying to hedge against. I think it's I think it's hedging risk on both sides. And like

660
00:43:41,627 --> 00:43:45,468
having a balance and something like this gives you gives you that type of a benefit for the reason

661
00:43:45,468 --> 00:43:50,488
we're buying Bitcoin for the reason gold investors are buying gold. So like, it makes sense to have

662
00:43:50,488 --> 00:43:54,707
some of this. Like we don't know what could happen in the next five years. And we're going to have

663
00:43:54,707 --> 00:43:58,887
like, that's their concentration risk is the treasury debt. The other thing that I think is

664
00:43:58,887 --> 00:44:02,707
quite funny about this is people talk about the tether flood as like something that could crash

665
00:44:02,707 --> 00:44:06,988
the price of Bitcoin. Like, first of all, I don't think there's an issue there, but let's just say

666
00:44:06,988 --> 00:44:11,387
hypothetically there was, if you're sat and you've got a load of tether and you think tether's going

667
00:44:11,387 --> 00:44:15,748
down, what are you going to do? You're going to buy Bitcoin. Right. Like, cause that's your

668
00:44:15,748 --> 00:44:18,748
So like, weirdly if Tether did go down,

669
00:44:18,748 --> 00:44:20,748
which I don't think it's going to,

670
00:44:20,748 --> 00:44:21,748
I think Bitcoin pumps.

671
00:44:21,748 --> 00:44:23,748
Totally. I couldn't agree more with that.

672
00:44:23,748 --> 00:44:25,748
Yeah. That's exactly what it is.

673
00:44:25,748 --> 00:44:28,748
But maybe that's a very short term pump. I don't know.

674
00:44:28,748 --> 00:44:32,748
All right, let's move on to our next piece of FUD. Quantum.

675
00:44:32,748 --> 00:44:33,748
Ooh, okay.

676
00:44:33,748 --> 00:44:35,748
You've been doing a bit of a deep dive on this.

677
00:44:35,748 --> 00:44:37,748
Like kind of, not really.

678
00:44:37,748 --> 00:44:40,748
I just, when I was writing my book,

679
00:44:40,748 --> 00:44:44,748
I, you know, I did some reading into just like,

680
00:44:44,748 --> 00:44:48,248
some reading into just like how cryptography worked. And I kind of explained some of that in

681
00:44:48,248 --> 00:44:54,347
the book. And I think that it's, it's helpful context to really get a bit of what's going on

682
00:44:54,347 --> 00:45:01,948
here to understand quantum computing. I think like the reality, like nobody knows, nobody's a quantum

683
00:45:01,948 --> 00:45:06,028
expert. There isn't like a quantum expert. There's like guys working in quantum who are like trying

684
00:45:06,028 --> 00:45:09,547
to, they're building amazing, complex things that like very few people in the world are capable of

685
00:45:09,547 --> 00:45:14,188
understanding, but they're not even sure exactly where they're going yet. You know, and like you

686
00:45:14,188 --> 00:45:16,427
You see that in any sort of early field.

687
00:45:16,427 --> 00:45:20,688
It's just like, in hindsight, once we've built all the systems and we have the historical

688
00:45:20,688 --> 00:45:24,607
track records to look at and we can understand things, it's much more obvious.

689
00:45:24,607 --> 00:45:29,688
But in the near term, really intelligent people have a hard time understanding just where

690
00:45:29,688 --> 00:45:31,648
things are going, and that's fine.

691
00:45:31,648 --> 00:45:38,288
But that's a reality we're dealing with is there is just quite a bit of uncertainty around

692
00:45:38,288 --> 00:45:40,347
what's happening with quantum.

693
00:45:40,347 --> 00:45:46,127
everybody's trying to form an opinion on what where we should go with this and and i think like

694
00:45:46,127 --> 00:45:55,008
to explain some of it that's helpful um like basically cryptography is secured by this other

695
00:45:55,008 --> 00:46:01,927
type of math and it's it's called like a modulo calculation and it's basically like the the

696
00:46:01,927 --> 00:46:05,227
current operators that you're familiar with like addition subtraction multiplication division

697
00:46:05,227 --> 00:46:11,347
those operators are done differently under these modular calculations and in the best way of

698
00:46:11,347 --> 00:46:17,307
describing it is it's similar to like a clock where you have something called an order and that order

699
00:46:17,307 --> 00:46:23,127
is the maximum number in this universe of calculation so you'll say if our order is 12

700
00:46:23,127 --> 00:46:29,227
that would be the maximum number of hours on a clock we cannot go higher than that once it hits

701
00:46:29,227 --> 00:46:35,407
that number, we start back at zero and go to one, two, three, four. So in normal arithmetic,

702
00:46:35,607 --> 00:46:41,968
if you say four times four equals 16, under this type of a calculation, it's four times four equals

703
00:46:41,968 --> 00:46:46,927
four. And that's because you go all the way around the clock to 12, resets, and then you end up at

704
00:46:46,927 --> 00:46:52,927
four o'clock. And so you end up with the remainder. And that's really important because you could have

705
00:46:52,927 --> 00:46:57,948
a bunch of other answers and different types of numbers other than four times four that you could

706
00:46:57,948 --> 00:47:03,308
multiply and can end up with the same answer of four. But you don't know, unless you have all the

707
00:47:03,308 --> 00:47:07,727
numbers, how many times it goes around that clock. And that's where you can create the uncertainty.

708
00:47:08,288 --> 00:47:14,148
So the only way that you could guess, if we were to say four times B equals four,

709
00:47:14,808 --> 00:47:23,427
in normal arithmetic, you'd be able to say four divided by, or sorry, four times four equals 16,

710
00:47:23,427 --> 00:47:28,008
sorry, then we'd say four divided by 16 equals four. We can find B. But in this, it's like,

711
00:47:28,008 --> 00:47:33,407
we can't do that division. But computers can guess, and they can guess what B is,

712
00:47:33,448 --> 00:47:38,107
and you can find a plug-in bag. Okay, so if it's four, does this work for what we're trying to

713
00:47:38,107 --> 00:47:42,968
solve for? What you're trying to solve for is to find, is to decrypt something.

714
00:47:45,008 --> 00:47:52,107
But when you get your order, that maximum number in the set, when that's a prime number,

715
00:47:52,107 --> 00:47:57,607
and it's incredibly large, computers can't do that division. There's not enough guesses they can make.

716
00:47:58,268 --> 00:48:03,547
And it's kind of like versions of this is kind of how Bitcoin mining works. We make it just easy

717
00:48:03,547 --> 00:48:07,508
enough to actually guess your way into that problem. But it takes a hell of a lot of tries.

718
00:48:07,607 --> 00:48:14,668
And it takes a lot of tries. So computers can't guess their way into these problems. And that's

719
00:48:14,668 --> 00:48:20,488
what makes cryptography so secure. And then Bitcoin addresses are the encrypted version of a private

720
00:48:20,488 --> 00:48:24,968
key through a process like this so to get your private key they would have to be able to do that

721
00:48:24,968 --> 00:48:29,527
division by looking at your public bitcoin address doing the division and then finding a private key

722
00:48:29,527 --> 00:48:33,847
so what quantum is basically doing and what people are scared of is these computers are going to be

723
00:48:33,847 --> 00:48:38,887
able to guess their way into these problems because without doing the work yeah and like the the

724
00:48:38,887 --> 00:48:44,248
theoretical concept is basically like the way that humans are able to understand everything is we put

725
00:48:44,248 --> 00:48:49,288
a layer of language over the natural world we describe things with words we describe things

726
00:48:49,288 --> 00:48:56,567
with numbers and and this layer of language is it helps us make things work it's always

727
00:48:56,567 --> 00:49:04,488
all we've ever been able to do but it also limits us because um like one of my uh one of my favorite

728
00:49:04,488 --> 00:49:11,927
quotes on like what the definition of art is is art describes the difference between what we can say

729
00:49:11,927 --> 00:49:17,768
and what we mean and like there's this there's this large gap between those two things and people

730
00:49:17,768 --> 00:49:21,788
People are just trying to describe an emotion or a thought process through some other medium

731
00:49:21,788 --> 00:49:24,127
that they can't really put into words in the right way.

732
00:49:25,448 --> 00:49:27,587
And that's kind of like that gap.

733
00:49:27,808 --> 00:49:28,907
Like, that's the difference.

734
00:49:28,968 --> 00:49:32,847
That's like a very limiting gap for us between what we can physically do.

735
00:49:33,788 --> 00:49:38,127
And quantum is like trying to take that step.

736
00:49:38,127 --> 00:49:42,727
It's trying to take that step into like, let's not apply our mathematical language to this.

737
00:49:42,727 --> 00:49:47,867
let's try to like recreate physical environments from the way that they exist rather than our own

738
00:49:47,867 --> 00:49:52,087
language for it and see if we can produce the outcomes we want through that. The complexity of

739
00:49:52,087 --> 00:49:58,227
that, I can't comprehend, but they're making enough progress now to where there are shifts.

740
00:49:58,227 --> 00:50:04,468
There are shifts in what people are, you know, thinking and expressing. And like Nick Carter put

741
00:50:04,468 --> 00:50:08,927
out this great paper, they really like summarized a lot of the major shifts that are happening where

742
00:50:08,927 --> 00:50:14,488
we're starting to see a lot more growth in qubits and logical qubits that's making these things more

743
00:50:14,488 --> 00:50:19,067
efficient. And that's the idea. It's like if the if the logical qubits get high enough, guessing

744
00:50:19,067 --> 00:50:23,808
power is better. And we have a lot more experts that are changing their forecasts and their

745
00:50:23,808 --> 00:50:28,367
opinions on its viability over time. And we're kind of hitting a bit of inflection point where

746
00:50:28,367 --> 00:50:33,827
people are kind of like, OK, like this is real. Now, the reality is, is the the time horizons that

747
00:50:33,827 --> 00:50:38,367
we're starting to see is, you know, quantum could be a problem for Bitcoin within, say,

748
00:50:38,427 --> 00:50:43,468
the next five years to the next hundred. Like it's a massive range. So that's what everybody's

749
00:50:43,468 --> 00:50:52,567
debating is we still don't know. But I think it's like when you have a risk that does have

750
00:50:52,567 --> 00:50:58,648
some sort of existential impact, then that's something you take immediate action to forego

751
00:50:58,648 --> 00:51:00,727
or insure in some sort of way.

752
00:51:01,407 --> 00:51:04,488
And we do that all the time in our day-to-day lives

753
00:51:04,488 --> 00:51:05,748
with a lot of different things.

754
00:51:05,907 --> 00:51:07,168
We want to protect ourselves.

755
00:51:07,327 --> 00:51:08,468
We have locks on our doors

756
00:51:08,468 --> 00:51:11,227
because terrible things can happen if people come inside.

757
00:51:12,168 --> 00:51:14,468
And there's a lot of things that we're doing to prevent it.

758
00:51:14,907 --> 00:51:16,748
And I think that's kind of the question today

759
00:51:16,748 --> 00:51:19,627
is everybody's like, okay, quantum was this form of FUD.

760
00:51:21,468 --> 00:51:24,907
And it was at that point in time back in like 2017.

761
00:51:25,527 --> 00:51:27,367
But are we getting to a point

762
00:51:27,367 --> 00:51:32,067
where we do need to have these conversations and we do need to be like, okay, this is on the horizon.

763
00:51:32,067 --> 00:51:38,387
How many more, you know, upgrades to the Bitcoin protocol are we really going to get? Because it's

764
00:51:38,387 --> 00:51:44,107
only getting larger and it's only getting more socially distributed. And maybe for our next

765
00:51:44,107 --> 00:51:49,168
upgrade, we really do need to think hard about putting a quantum resistant form of signature

766
00:51:49,168 --> 00:51:54,688
into the protocol. And when I was talking with like Hunter Beast one time, the way that he kind

767
00:51:54,688 --> 00:52:02,448
of explained our options to us around that is like the trade-off is basically when you have a quantum

768
00:52:02,448 --> 00:52:07,268
signature it's kind of like the old the quantum resistant signatures there's kind of like the

769
00:52:07,268 --> 00:52:13,087
older cryptography that uh it's like much more proven and more lindy but that is very data

770
00:52:13,087 --> 00:52:18,047
inefficient so yeah huge address address for so we could be filling up blocks and we could be

771
00:52:18,047 --> 00:52:25,008
expanding, we're going to be expanding the chain at a much more rapid rate. And so that has its

772
00:52:25,008 --> 00:52:31,968
second order effects that are well debated. And then we also have newer forms of quantum

773
00:52:31,968 --> 00:52:40,347
resistance signatures. And those are much more efficient, but they're not as lindy. They haven't

774
00:52:40,347 --> 00:52:46,148
been around as long. So that's where a lot of the debate really lies. It's like, okay, if we were to

775
00:52:46,148 --> 00:52:51,827
do this, then what quantum signature do we use? And then I think what really makes it complex

776
00:52:51,827 --> 00:52:57,107
is it would be like, okay, well, what might we have in the next five years? And if we were to

777
00:52:57,107 --> 00:53:00,107
put one in now, are we going to be making a huge mistake? Because we're going to get a much better

778
00:53:00,107 --> 00:53:04,688
quantum resistance signature in another five years. And if we did this preemptively, and had

779
00:53:04,688 --> 00:53:09,268
we waited the whole decade or 15 years that we actually had before it's a problem, we might have

780
00:53:09,268 --> 00:53:15,448
had, you know, a quantum resistance signature with much less impact of second order effects.

781
00:53:15,448 --> 00:53:17,927
And to my understanding, these have to be hard forks.

782
00:53:19,207 --> 00:53:22,567
So the thing, I don't think we should act now,

783
00:53:22,648 --> 00:53:23,867
but we should start talking about it now.

784
00:53:23,948 --> 00:53:26,188
I think these need to be serious conversations that are happening.

785
00:53:26,607 --> 00:53:29,027
I know Hunter Beast has BIP 360 that he's working on.

786
00:53:30,468 --> 00:53:33,627
But the solutions we have now, like huge signatures,

787
00:53:34,008 --> 00:53:35,308
doesn't sound like a great option.

788
00:53:35,427 --> 00:53:38,648
But if we have no other option, like if this thing in a year's time

789
00:53:38,648 --> 00:53:40,748
is a real thing that we need to worry about,

790
00:53:40,827 --> 00:53:41,827
then we're going to make a change.

791
00:53:41,948 --> 00:53:43,648
That's not necessarily the huge issue.

792
00:53:43,648 --> 00:53:45,087
I don't see that being contentious.

793
00:53:45,448 --> 00:53:48,748
The thing that I can see being contentious is what we do with all the coins that don't move.

794
00:53:49,968 --> 00:53:55,227
Like, if all the old address formats that are probably the most vulnerable to quantum attacks,

795
00:53:55,427 --> 00:53:58,027
like if people are dead or if they've just forgotten about their keys, whatever,

796
00:53:58,508 --> 00:54:02,288
like, there's going to be a debate of whether we should essentially freeze those funds

797
00:54:02,288 --> 00:54:05,188
or if we let those be stolen by the quantum computer.

798
00:54:05,547 --> 00:54:09,567
And, like, this is what one of the really important sort of philosophical conversations,

799
00:54:09,567 --> 00:54:14,488
I think, to have as Bitcoiners is that do we break these people's property rights

800
00:54:14,488 --> 00:54:17,008
and destroy one of the key value propositions of Bitcoin

801
00:54:17,008 --> 00:54:18,727
just to stop a bad actor taking them.

802
00:54:19,027 --> 00:54:19,988
And I don't think we do.

803
00:54:20,288 --> 00:54:21,887
Even if all those coins get dumped on the market

804
00:54:21,887 --> 00:54:24,547
and the Bitcoin price drops significantly,

805
00:54:24,847 --> 00:54:26,367
I still think that's a better outcome

806
00:54:26,367 --> 00:54:27,448
than freezing someone's funds

807
00:54:27,448 --> 00:54:28,927
and breaking the property rights of Bitcoin.

808
00:54:29,188 --> 00:54:30,047
Because long term,

809
00:54:30,168 --> 00:54:31,668
if you're looking at the value proposition of Bitcoin

810
00:54:31,668 --> 00:54:33,227
in 50, 100 years' time,

811
00:54:33,607 --> 00:54:35,727
breaking property rights I think will be more detrimental

812
00:54:35,727 --> 00:54:38,248
than a few million coins coming onto the market.

813
00:54:38,567 --> 00:54:38,867
Totally.

814
00:54:40,268 --> 00:54:41,488
It's going to be interesting, man.

815
00:54:41,707 --> 00:54:42,788
It's going to be tricky, man.

816
00:54:42,788 --> 00:54:46,168
Yeah, it's a crazy new world for Bitcoin.

817
00:54:46,508 --> 00:54:46,668
Yeah.

818
00:54:46,847 --> 00:54:49,808
So do you think this is like a three to five year problem?

819
00:54:50,107 --> 00:54:52,227
Or do you think this is more likely to be a hundred year problem?

820
00:54:54,448 --> 00:54:58,327
I'm putting my money on this being like something in the next decade.

821
00:54:59,248 --> 00:55:03,607
I think like 10 years from now, we might be running into some issues with this.

822
00:55:03,867 --> 00:55:07,707
Yeah, I think it's the kind of like, this isn't even like FUD at this point, I don't think.

823
00:55:07,808 --> 00:55:10,468
I think it's something we should be having very serious conversations.

824
00:55:10,468 --> 00:55:11,648
Yeah, something we should be talking about.

825
00:55:11,648 --> 00:55:18,607
And it's just because the primary thing is that Bitcoin would be the bounty for people to go after in a lot of ways.

826
00:55:18,887 --> 00:55:19,768
The canary in the coal mine.

827
00:55:20,008 --> 00:55:20,688
Yeah, yeah.

828
00:55:20,847 --> 00:55:26,327
So Bitcoin is definitely high on the radar for people that are discovering this.

829
00:55:26,367 --> 00:55:31,107
But I mean, all non-quantum proof encryption is broken at that point.

830
00:55:32,387 --> 00:55:36,607
Every bank account is probably broken, at least with the cryptography they use right now.

831
00:55:36,607 --> 00:55:41,847
And I think probably the signal is when everyone starts quickly upgrading to using quantum proof encryption.

832
00:55:42,107 --> 00:55:43,668
Like that's when we need to be acting quickly.

833
00:55:43,988 --> 00:55:44,927
Exactly. Yeah.

834
00:55:45,248 --> 00:55:48,288
It also depends probably on who's controlling the quantum computer.

835
00:55:48,808 --> 00:55:48,968
Right.

836
00:55:49,387 --> 00:55:54,527
Like if that's, you know, a government agency in the US, are they going to attack Bitcoin?

837
00:55:55,367 --> 00:55:56,288
I'd be skeptical.

838
00:55:56,808 --> 00:55:57,008
Yeah.

839
00:55:57,148 --> 00:56:01,688
If it's some private individual who has control of a quantum computer, that's when we're at risk.

840
00:56:01,927 --> 00:56:02,847
Right. Right.

841
00:56:03,748 --> 00:56:05,387
It's going to be interesting, man.

842
00:56:05,387 --> 00:56:06,808
It's going to be crazy, man.

843
00:56:06,867 --> 00:56:08,168
Right, you've got to go on stage.

844
00:56:08,387 --> 00:56:09,907
I've got to go hop on my panel,

845
00:56:10,168 --> 00:56:12,607
but it's been good podcasting with you, bro.

846
00:56:12,748 --> 00:56:13,508
It has been good.

847
00:56:13,567 --> 00:56:15,367
We've had nearly two weeks together.

848
00:56:15,627 --> 00:56:15,887
Yeah.

849
00:56:15,968 --> 00:56:16,847
Just bro-ing down.

850
00:56:17,087 --> 00:56:17,788
Yeah, yeah.

851
00:56:18,148 --> 00:56:20,188
It has been a bro sesh of two weeks.

852
00:56:20,668 --> 00:56:22,067
Well, I will see you soon, Eric.

853
00:56:22,148 --> 00:56:22,707
Thank you, man.

854
00:56:22,827 --> 00:56:23,367
All right, thanks, man.

855
00:56:35,387 --> 00:57:05,367
Thank you.