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The way that power growth manifests itself is, in the case of Bitcoin, is it has started

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out higher in the early years.

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It was, you know, a thousand percent a year, right, on a curve, on a trend.

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Now it's down to about 40 percent per year on a trend.

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I think that it's totally plausible that the trend could change.

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I also think it's plausible that Bitcoin could change other trends in the world.

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Common sense tells us constant growth is faster than proportional growth.

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It's going to be good.

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It's going to be good for Bitcoin holders.

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On the one hand, the number go up. But on the other hand, this is where you get into the idea of, you know, what does that actually mean? Is TradFi co-opting the system? Can anyone claim any Bitcoins on an ETF? Can you withdraw Bitcoins from exchanges after 10 years? There are a lot of things that could play into this. And by the way, if some of those play out, perhaps as some entrenched players in Bitcoin want, then I think, yeah, Bitcoin could go exponential. It could match. It could mirror the exponential growth rate of the rest of the financial system.

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Matthew, welcome to the show, man. One of my favorite quarterly interviews that I do.

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You know what? Last time we were on the show, we were talking about the power law,

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and we were pretty much at the bottom of the trend. And I think we were kind of calling it

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the bottom, if not close to the bottom. And then since then, Bitcoin price has gone below

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the power law trend. And I don't know, does that mean it's broken? Is the power law broken?

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Yeah, great question, Danny. You know, I come on your show every quarter or so and talk about this stuff a lot. And for old listeners, maybe it's a little bit repetitive, but just very, very briefly.

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when we're doing trends like this and i've been doing it for a long time you know a little bit

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less than than giovanni he's kind of got his name to the power law uh he first posted it on reddit

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in 2018 fall something like that on the price i did it in around december of that year but

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it's important to remember that we're not trying to model like channels or elliott wave stuff

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these lines on charts, ABC corrections. If this level of support breaks, then it's over for this

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amount of months. All of that stuff can be done. I mean, people can definitely do that and they do.

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And there's no shortage of articles of that on TradingView or YouTube thumbnails. But

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with the general idea of what I'm trying to do when I look at the price or the money supply

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is I'm just trying to gauge a relative level of change or the relative growth and see how the

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asset is sitting, you know, relative to the range of observations in the past. So just looking at

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the statistical probabilities, it can always be that it sort of goes lower. And we can look at

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some good charts today to talk about that. But it's not anything where you say, okay, if it goes

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past this level of support, it's definitely broken or it's over. So another way to look at that

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is you just have to see if Bitcoin is following this power law. And again, just quick, quick,

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quick refresher is a power law is not constant growth. Constant growth, like we talk about with

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our broker, or if you're looking at the stock market or the bond market, you're looking at bond

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yields, yield to maturity, IRRs, or just returns, right? Those are constant returns that you expect

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to get every year. So 10% a year, 12% a year. And it's actually getting a little bit faster,

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which we can talk about on the show as well. But in general, it's constant growth, right,

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is what we try to achieve in our stock portfolios. With Bitcoin, it's interesting.

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If you look at the price over a long time, you have a sort of very slightly decelerating rate

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of growth. So it's not constant. But there is still a relationship here and it's a power

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relationship. So it's actually the rate of growth is proportional to many things. It's actually

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proportional to addresses, to hash rate, and it's also proportional to time, to actual existence of

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time in the system. How long the system has been around. Bitcoin has a proportional relationship,

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say, till the next doubling, that in this particular case, that proportionality does

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stay constant. And the number is about 13% a year. So again, I just try to put that broad,

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broad overview and talk about like the power law breaking. I think it gets people that are even in

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the space like looking at this from an analytical view of the power law, that kind of wonder, okay,

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did the Bitcoin gold power law break because that thing looks really skewed? And still the answer is

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No, because relative to all the other trends that we can judge Bitcoin on, that's an exponential

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trend, logarithmic, linear. Bitcoin is totally, totally on par with a power curve or a power

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trend. I know a lot of people get triggered when you say power law, but that's the scientific name

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for it. But in any event, it's a sustainable growth rate and we can look at it. It's certainly

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relative to the probabilities, the range of observations in the past, the probability is

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very, very, it's showing not a lot of likelihood that it breaks too much lower. But again, it can

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always surprise us to the downside of the upside. So basically, that's my overall disclaimer. No,

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it's not at all broken. And I can try to show that with some just simple, simple charts here.

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Okay. But before we do get into the charts, one of the reasons that people have sort of PTSD

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around a lot of these things like the power law is because of what happened with stock to flow and

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how people became very dogmatic and never admitted that that whole model broke. What would have to

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happen for you to say the power law is broken? Is there something that can happen that breaks it,

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in your opinion? Yep. Good question. Great question. And again, even though I've been

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tracking this one for a long time, I've also been tracking Bitcoin as base money for a long time,

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looking at these major sort of macro trends, money supply versus Bitcoin UTXOs, the values of those

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things. There's going to have to be a lot that would happen to say that it's not a power law

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anymore. And again, it's totally possible. I'm not at all married to the idea that it needs to

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stay a power law or a power curve, power regression, however you want to say it.

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The challenge with throwing a lot of different models out here, and you'll see it, by the way,

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anytime you see like a straight line, people trying to take a straight line to Bitcoin's trend

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and the chart is only log linear, all right, that means log scale on the Y, linear, just normal time

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on the X axis, they're trying to shoehorn it into exponential growth. And it just doesn't do that.

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So again, I would say that. But if you would look at other types of models like stock to flow,

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they were also trying to shoehorn in some exponential growth factors into the price

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when Bitcoin doesn't do that.

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So it's a bit more confusing with stock-to-flow

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because in fact, it is a power law.

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He used the power equation to run through it,

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but he was running it over the stock-to-flow value over time,

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which in itself is about a 16% per year negative kegger.

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If you wanted to average it out,

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the supply of bitcoins decreases 16% per year.

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And it's not even average, right?

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It's not a constant 60%.

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We know that it halves every four years.

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So he's trying to shoehorn in a power law

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over some features of Bitcoin, which are exponential.

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And that's why it didn't work.

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Again, it might be a little bit technical there,

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but I've talked about it a lot as well.

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It's just, you know, he was trying to compare,

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say the Bitcoin, like back when he was doing these early models, 2019, 2020, he was trying to compare,

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say, the growth of gold or the growth of silver to the growth of Bitcoin.

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That is actually the units that came out of the ground in gold and silver's case or the UTXOs

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that would come onto the scene every 10 minutes. Everybody knows intuitively that Bitcoin's rate

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of growth declines, right? It declines there. It actually, again, that might even sound like

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power law when I said that, but it's an actual exponential rate of growth. The halving every

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four years, basically, it's a negative 16% per year on average. And he was trying to compare that

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to something like gold and silver, which when those ounces come out of the ground, 1.8% in

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gold's case, and actually 1.5% in silver's case, even less, those are exponential factors. They

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come out every year, about 1.5% for silver, 1.8% for gold. So they're just by nature simply

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incompatible with what Bitcoin does. And so there was a lot of confusion around that model. And it

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just, like I said before, you're trying to shoehorn in. He was actually using a power equation,

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But he was using it with this, a lot of features of Bitcoin that were exponential and it just wouldn't work. Whereas the power law, which we talk about with Bitcoin, we're just taking it purely on the signal that Bitcoin produces, whether it be addresses, whether it be hash rate, whether it be price.

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we're not even taking into account the having. We're just looking at the way that price grows

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over time or the way that addresses grow over time. It's like a pure signal, single variable,

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single unknown variable and running it. And the regression, the relationship is holding up very,

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very well. So this is kind of, these are some of the answers that I would get there

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to that question. I don't know if that fully answers it, if you have any more

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I'm happy to follow up on.

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If you hold Bitcoin long enough,

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there's going to come a time when you need some dollars.

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It might be a tax bill, a business expense,

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life getting in the way,

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but whatever it is, it might come at a time

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when you don't want to sell your Bitcoin.

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That's where Ledin comes in.

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Ledin lets you borrow against your Bitcoin instead

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with tiered rates that go as low as 9.25%.

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So you don't have to sell your stack if you don't want to.

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Ledin have operated through every market cycle since 2018

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and have originated over $11 billion in loans.

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But the important part for me

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is the way Ledin handles these loans.

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Your collateral is held in custody and never lent out to generate interest.

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And Ledin's more than just loans.

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Tether Gold is now live alongside your Bitcoin with instant trading across 10 pairs.

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And later this year, you'll be able to borrow against gold in the same way that you do with Bitcoin.

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Ledin really is an awesome company.

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I've used them multiple times.

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The applications have taken me less than 15 minutes and you have the dollars in your account within hours.

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If you want to check out Ledin, go to ledn.io and use the code WBD for 0.25% off your first loan.

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That's leden.io and use the code WBD

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You wouldn't reuse a Bitcoin address

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So why does your phone broadcast the same identifier for life?

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Every SIM has a static ID

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And carriers, ad networks and bad actors all use it to track you

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The big carriers have been caught selling that data over and over again

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CAPE is America's privacy first mobile carrier

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Their identifier rotation feature changes your ID every 24 hours

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So you look like a different subscriber every single day

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And SIM swaps are off the table

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Your number can't move without a 24-word phrase that only you hold.

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There's also no name at sign up, no social security number, and there's no profile to

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build on you.

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If you're a Bitcoiner in America, I honestly don't know why you'd use any other network.

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You can head over to cape.co forward slash WBD and use the code WBD for 33% off your

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first six months.

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That's C-A-P-E dot co forward slash WBD.

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If you own a Bitcoin ETF, especially if it's GBTC, you need to listen up.

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spot bitcoin etfs provide price exposure to bitcoin not direct ownership you can't withdraw

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it you can't self-custody it and they charge you a management fee every year to hold it

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well swan recently announced swan real bitcoin exchange and it's ready to use right now rbx is a

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structured in-kind exchange that converts your spot bitcoin etf shares into real on-chain bitcoin

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it does that without selling on the open market and it's designed to support a tax efficient

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outcome. So for example, if you hold GBTC, you're paying 1.5% a year in management fees for Bitcoin

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price exposure. But by swapping GBTC for real Bitcoin with RBX, you can drop that figure as

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low as 0% by just holding it in self-custody. This is designed in a way that maintains your

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cost basis and in a manner that supports the deferral of capital gains tax. So if you own a

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Bitcoin ETF, especially if it's GBTC, you need to talk to Swan Private about RBX today. Head over

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to swan forward slash WBD and booking a call with one of their team That swan forward slash WBD So the question that I would have around that is I guess two things Let start on what would

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actually have to happen for you to say, yes, this is broken. Yeah. It's going to break or not be a

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model that is applicable if another traditional basic scientific regression fits the price

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the address growth the hash rate better um now there is a grand theory that i have around a lot

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of this stuff uh it primarily resolves around uh revolves around exponential growth and power

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growth mostly because those are the two types of growth that uh well really it's just exponential

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growth that is most prevalent in the financial world. And that's primarily driven by the interest

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rate. So your bank loan, your mortgage, whatever you are paying on capital that you borrow to

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acquire assets, whether it be a house, car, something for your business, that's exponential

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growth. So when you have bank loan, that's 5%, that's fixed constant growth that you got to pay

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per year. That's your cost. That's the bank's income. And of course, there are spreads on that.

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And yes, the rates can go up and down. That's true. They do change with the market. But as time goes on, whether it's a little bit up, a little bit down, you're still paying this sort of constant fixed rate of capital. And so it is hard to imagine. And I don't want to go too far off on this tangent with the answer, but it is hard to imagine if Bitcoin's growth right now.

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So basically, the way that power growth manifests itself is, in the case of Bitcoin, is it has started out higher in the early years.

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It was, you know, 1,000% a year, right, on a curve, on a trend.

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Now it's down to about 40% per year on a trend.

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There will come a point, and this plays into something that, you know, Michael Saylor talks about, is we all know basically Saylor's cost of capital.

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We've seen that the market's trying to liquidate Saylor in the last couple weeks, right?

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With Stretch really being stretched as far as keeping the buck.

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And his cost of capital is 10%, 11%, whatever it is, right?

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But that's a fixed cost of capital.

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And as long as Bitcoin on a trend grows more than that,

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Saylor is fine.

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His shareholders are fine.

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Strategy is fine.

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But if Bitcoin ever started to grow less than 10%,

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Saylor's going to have to shrink the cost of his capital.

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or he would start to have to shed some coins and he would have some liquidity problems.

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He's a long way from that. And I cannot just, just to back of the envelope, even though Bitcoin

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on a trend is growing about 40% per year and declining, that means it's doubling every two

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years, 40% per year is doubling every two years. But that, that growth is declining in a, in a,

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in a compound fashion, like the rate is shrinking and the doubling time is increasing, right?

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But it takes a long time to get to that 10% as we're all modeling it in the power curve space at the moment.

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It's going to take to about 2070 to get there.

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The fireworks are going to happen much sooner.

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I think probably in the 2030s up to 2040 for a variety of reasons.

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We could talk about this.

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When you say fireworks, what do you mean?

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Yeah, so I'm already getting ahead of myself sort of in the grand theory.

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And, you know, we can look at some charts to illustrate this.

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Should we come back to that then?

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Because I have some other questions that are maybe a bit more of the groundwork before we get to that.

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Yeah, yeah, we can do that.

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But again, just to let me make sure I answer your question, though, because about breaking or not, whatever.

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If it stops being a power law visually on the chart, if the R squared starts to shrink,

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if something like an exponential trend looks better over the curve, over the price action of Bitcoin or the address growth or anything,

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then Bitcoin would stop to be a power law.

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But we're nowhere near that right now.

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nowhere near that right now. So the one thing that I want to try and get to the bottom of,

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because we've spoken about this before, but I don't know if I fully understand the reasoning,

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is you say that Bitcoin can't follow an exponential trend, whereas traditional financial

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assets do follow an exponential trend. Why is that? Yeah. Well, I haven't said it can't. I just

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said that it is not. And that's the interesting thing. So again, Giovanni's been following this

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since about fall of 2018, myself, at the end of the year, 2018.

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And at the time, that was the best looking trend that would fit.

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And it wasn't even hard to really find that.

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You just, you know, you can plot it on Excel and look at the trend automatically on the

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curve, right?

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Or Google Sheets.

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In the early days, like 2014, 2013 on Bitcoin Talk, there was this kind of relatively well-known

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account called Tro Lolo Lo. And he was doing the same thing. I was trying to sort of update the

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work that he was doing. But he was actually finding a logarithmic trend, which is actually

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more explosive at the beginning and usually gradual, more gradual growth at the later

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periods of the observations. It's a little bit different than power law. But brass taxes,

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Bitcoin at the early, early days kind of did look like that with the explosive growth.

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And then from about 2016, 2017, it started to settle into this trend, which is very sustainable,

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sort of gradually decelerating growth every year, but still very high growth for anybody.

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And by the way, if you catch the bottoms and then it gets back to trend, you can get well

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over that, which we can look at just for fun, some scenarios.

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that's an example already right there where Bitcoin seemed to be following one trend and

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it actually turned out it was following another which is power trend and I'm totally open by the

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way that it could follow an exponential trend in the future and by the way that is a very plausible

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scenario in my view considering the rest of the financial world follows exponential trends we have

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all of our interest rates on our credit which are exponential trends and it really it does come you

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You know, Saylor has this 10% cost of capital that everybody knows about.

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It does play into sort of my grand theory about how it could all work out, which, again, we can table towards the end of the episode once we look at some charts.

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I think that it's totally plausible that the trend could change.

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I also think it's plausible that Bitcoin could change other trends in the world, which would probably be the more cypherpunk interesting view.

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But bottom line of all this is I'm just trying to look at this through the lens of more statistics and math rather than kind of, you know, one off blog posts or whatever YouTube thumbnails, because I've been I've been charting this stuff for a long time.

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And trust me, I'll tell you if I notice that it's it's breaking.

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I like the idea of Bitcoin pulling the financial world like that.

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I guess that is Bitcoin eating the financial system is it pulling everything into its time time preference.

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Yeah.

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And I can explain that via the math.

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So I think that would be...

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Let's get into the chart.

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Can you pull up and we'll go through it?

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Yeah, absolutely.

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So here's a simple one.

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I've shown this in a variety of ways before.

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This is just even simpler

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because I've also shown this with stock to flow,

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but I'm sort of redoing my system

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so I don't have it at the moment.

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So here I'm showing you the price of Bitcoin

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up until today as we speak.

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Everybody knows this chart, log linear. This is log linear, right? And as you can see, it looks

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kind of like a rainbow, right? It doesn't look like a straight line, but I'm showing you, I'm

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shoehorning in an exponential trend. So the exponential trend, for those that remember,

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right? It's a straight line on log linear. So here's the exponential. When I put it on,

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straight line. But this curved line is the power curve. And yes, we are well below it. We are well

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below it, all right? In the past, we've also been well below it. We've also been well above it.

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But if you just look, just use your eyes, you don't even have to look at the map.

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You can see the nice rainbow power trend looks much better on Bitcoin's price.

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And when we say Bitcoin's price, it doesn't just mean price.

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It means supply, demand, the interaction of actors in the market.

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You know, it can be a proxy for adoption itself.

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So it's a lot.

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There's a lot going on when we look at price versus if I put on exponential and let's just

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even take the power curve off. Do you think that looks better or worse? Definitely worse.

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And you can see it. You really can't, like you can just use the eye test for a lot of this stuff.

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So we can shoehorn in exponential trends. The key is to not get too married, I would say,

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to any of them. But yeah, if we just look at the exponential trend here, Bitcoin hasn't hit it

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since 2022. I mean, it just clearly doesn't work. Yeah, exactly four years ago. And by the way,

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stock to flow gives a very similar effect, which again, I was trying to sort of verbosely go through

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that earlier. But there are aspects of Bitcoin's system that are exponential, which by the way,

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the 50 Bitcoins having every four years, that is, it's a negative 16% per year. That is what

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happens. It just happens in a weird way. Regardless, if you try to model that in and then stick a power

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law on it, which is what he did, it's shoehorning and it's not fully scale invariant. What a power

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law is, it's scale invariant. Anywhere on the curve that you pick it, the growth will be proportional

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relative to where it is at that point in time. So you can just see it doesn't work.

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And now let's look at the overall CAGR here. All right. I'm going to show you down here.

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It's a great CAGR if we were still on it. It's 108% per year. See it? 108% per year. Okay.

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And what this is saying is any point on the exponential curve that we would pick,

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it doesn't matter where, you would grow at 108%. If you do that present value,

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future value calculation that finance people know how to do, it will be 108. It just doesn't do that.

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So a much better model is a very simple power curve. All right. So if we take off exponential now, we can see it tracks it and we'll go into the details here. But if I go down to my very simple calculations here. Now, CAGR of power is actually higher, but that's irrelevant. It's just taking the first point on the power curve. And I go back to Bitcoin P today, May 2022 till today, which the power curve is about 140,000 at the moment, $140,000.

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So you can see how far under we are, right, at 62.

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It doesn't make sense, right?

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Because it's not a constant growth rate.

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What it is is scale invariant, which we just have to look at the trailing 12 month in the power.

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You see 40.2% right there, 40.2%.

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That's the power laws growth rate at the moment.

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But that declines every year.

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And just to see as well, what does power growth look like in log log?

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which means we took take all the dates which are numbers not dates you have to take the actual

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numbers and starts with genesis block of one back in january 2009 you see it starts to become

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almost self-evident that it's growing according to powell you see it fits very well yes we're under

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but we've also been under there in the past it fits really well but you would have to say probably

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the last 18 months two years is the least well it's fit in its history by the looks of it right

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because it has not exploded above.

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But this is where, again,

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you know,

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not to toot my own horn, Danny,

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but I mean, you just,

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people got to be,

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people got to be modest here.

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They got to, you know,

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I was,

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all right, let's just go in.

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Let's go into the,

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to the, to the detail.

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Here's, here's one

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I do all the time on my stream.

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This is quantile regression.

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Okay, so we're moving to just showing

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the one curve, the OLS,

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which is the main,

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think of it as the mean regression it's basically just yeah it's it's it's analogous to the mean

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now we're looking at something that uh is analogous actually to the median but it's trying to find

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all different levels of of uh a certain level of price like what would be a 10th percentile zero

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percentile 20th percentile uh and the 50th percentile is actually the median so that they

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are slightly different it's a slightly different analysis it's called quantile regression or a

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percentile quantile regression. There's two. Now I'm showing you the mean and the median.

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There's just two different ways to do it. They're both power. They're well statistically significant

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within each other. I mean, statistically, well, the relationship is actually statistically

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insignificant. They're so close together that you could say one or the other is the best way to do

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it Basically the same thing Yeah Right So can I ask you a question on this Because Like the reason I said the last 18 months two years or whatever looks the worst it looked is because if you go back to that 2017 one sure there loads of time that it well above that median line

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But there's also plenty of time that it's below. And it cuts through just by eyeballing it what you would imagine to be roughly the middle.

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Whereas this time, it's like at our highs, we just got above it. It looks like that line needs to be pulled down in the last two years.

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Right. So this is where, again, I would say people need to be sort of modest when you're talking about YouTube thumbnails or whoever's predicting a million dollar Bitcoin, which by the way, Plan B predicted in the fall of 2025.

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He predicted that the price would be that way in the fall of 2025. He did it like two years prior.

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people gotta sort of not think about the clicks and think about the statistics and sort of just

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at the time adaptively adjusting your view to what you see so this is what i was doing i was

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looking at exactly the analysis that you said look at let's look at the q80 q90 so this what

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these quantiles will do they kind of they try to find their own median kind of they they try to

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take a range which would give us to the point where the median is precisely 50 50 all right so

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50% observations will be below the line, 50% above.

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And what they're doing is trying to find their own,

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I'm using the word median,

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but it's basically their own baseline

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to the percentage you tell it.

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So I say to the software,

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again, I'm an applied statistics guy,

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so I don't try to,

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I used to do a lot of this stuff by hand,

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actually, the power law,

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but anyway, AI makes it too easy now.

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So I say, give me the Q80.

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Give me the quantile approximately

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where I can look at this, all right?

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And I'm just going to show you the Q80

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versus let's say the median, all right?

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So I only have the median, I only have the Q80.

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So that red line slices through the data according to a power law, and it is showing you that basically 20% of the observations are above the line, 80% below.

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That's Q80.

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The Q50, median, 50-50.

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And the OLS, by the way, you think of it more like the mean, it's slightly different.

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Like I said, it's statistically almost the same thing as the Q50 over the long term.

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But anyway, so here we go.

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this is what I mean by people need to have some modesty. I was fully expecting on my stream. I

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was talking to people. My streams are there for everybody to see. I was saying, all right,

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we know about the four-year cycle, which by the way, we haven't talked about. We can get into that

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because that's another triggering point for people. But we know about the four-year cycle.

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We know about the power law. We know about Bitcoin's adoption. I'm looking forward to on

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my stream counting the days. You can find all these episodes I did. Let's count the days

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that Bitcoin was above the Q80, right? Back in 2021, 2017, 2013. Let's imagine that there's a way

363
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to sort of, you know, get ahead of the market and do that because I fully expect it to be similar

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like that. Things like hyper-Bitcoinization, all that stuff, it's nice to talk about,

365
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but the data suggests differently. It suggests a more gradual approach.

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When that did not happen, when that did not happen in the fall, right? We barely got to Q80,

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you see here, and Q90, Q100 is like, just forget about. But when we were in October,

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so here's August, by the way, and here's October, when we started to not hit those levels,

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and really fall down. And then Giovanni had a very interesting cycle analysis, which he has

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pointed, and I can, we can talk about this as well briefly. But it's basically trying to look

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at, so the power law here, this is looking at the main wiggle, the main trend, right,

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putting it in these straight lines on log-log.

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Of course, we can also look at the cycles,

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the wiggle within the main wiggle.

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Giovanni, in the spring,

376
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he made me want to try to do this analysis myself.

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He did sort of a cycle analysis

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where you look at the returns in log space,

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which you can't see them unless you look at log space,

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and you try to extract some cycles.

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Still using a power law underlying math,

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he found that there was a cycle about 4.2 years apart.

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All right. And to me, that even further validated it. But again, he did that in like March or

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February of this year. Let's still put ourselves in the mind of fall of 2020. He still had that

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analysis. He was talking about it. He said there'd be a drop in November. He was right. I was

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listening to him. And so I was very cautious to people. First of all, because the power law

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is strong the way that it shows its bans about relative risk. Second of all, because the cycles

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are a strong signal as well.

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And people were very, very quick

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to dismiss both of those things.

391
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How many times did we hear

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the four-year cycle was over

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in the fall of 2025, right?

394
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I think I said that a thousand times.

395
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Right, because we had this stable,

396
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nice growth and everything.

397
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When really, I think in reality,

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what happened,

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if you just look at this is,

400
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notice how quickly we got back

401
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to the median here.

402
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This was already in 2024, all right?

403
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Early 2024.

404
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What I think was really happening was

405
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ETFs. ETFs were onto the scene, right? It came out in January, 2024. And I think Wall Street

406
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started to front run this idea. Of course, Wall Street knows about the parallel. They know about

407
00:31:08,516 --> 00:31:13,036
every other model that they do with their quants. So they started to think, all right, well,

408
00:31:13,156 --> 00:31:19,156
this has obviously been a powder keg of 10 years, you know, politically suppressed idea,

409
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Bitcoin ETFs. We got to front run it. You saw that there's a lot of growth and it cooled off.

410
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And then again, a lot of growth at the end of 2024.

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All right.

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Both of which, by the way, are above the median.

413
00:31:30,076 --> 00:31:36,276
Let's just take just only show the median, which was really elevated growth compared to, say, the last four year cycles.

414
00:31:36,276 --> 00:31:37,696
Just keeping it simple, keeping it simple.

415
00:31:37,916 --> 00:31:42,076
In 2017, right, we didn't get to the median until 2017.

416
00:31:42,996 --> 00:31:43,436
Right.

417
00:31:43,896 --> 00:31:47,636
In 2021, we didn't get to the median until December of 2020.

418
00:31:47,976 --> 00:31:53,476
As I remember those days, well, COVID, everybody's locked down and all of a sudden Bitcoin prices exploding and meme stocks and everything.

419
00:31:53,476 --> 00:31:57,256
But notice how the explosion comes very quickly above the median.

420
00:31:57,736 --> 00:31:57,876
All right.

421
00:31:57,896 --> 00:32:01,256
In 2013 as well as the year of 2013, we got back to the median.

422
00:32:02,076 --> 00:32:07,916
So usually, and particularly that crypto winter, as it's called, the, you know, from 2013 top

423
00:32:07,916 --> 00:32:12,096
to 2017 top, spent a long time under the median, under the power law.

424
00:32:12,916 --> 00:32:14,576
And here we went deep.

425
00:32:14,896 --> 00:32:18,536
And when I say here, for those that are, maybe it's harder to listen to this podcast unless

426
00:32:18,536 --> 00:32:18,936
you're not watching.

427
00:32:18,936 --> 00:32:30,636
But for those in that, remember the 2022, you know, SBF gift to us all of, you know, puking really, really bad in in November 2022.

428
00:32:31,136 --> 00:32:36,256
Peter Zion is saying, you know, it's seventeen thousand dollars overvalued on Joe Rogan with price of sixteen thousand.

429
00:32:36,696 --> 00:32:40,296
Very, very deep, deep deaths of depths of depression.

430
00:32:40,296 --> 00:32:48,596
And it only took, you know, a year, basically a year, basically 2023.

431
00:32:49,096 --> 00:32:53,056
And all of a sudden, 2024 is kicking off and we're back to the median.

432
00:32:53,476 --> 00:32:54,836
That was a different trend.

433
00:32:54,876 --> 00:32:57,396
That was a different sort of cycle within the cycle.

434
00:32:57,596 --> 00:32:58,936
So you need to adapt a little bit.

435
00:32:58,936 --> 00:33:08,316
And what I saw was, and Giovanni also solidified this further for me, was with it's still the overall scheme seems to be a four-year trend, which we can get to.

436
00:33:08,316 --> 00:33:16,356
but we were just we couldn't stay above that that very strong ols or the median however you want to

437
00:33:16,356 --> 00:33:21,596
look at it you know the ols was even breaking down further and so i was just cautious you can

438
00:33:21,596 --> 00:33:26,296
find it on my streams i was saying guys like look i was hoping by this time october and november we

439
00:33:26,296 --> 00:33:30,976
were going to be counting the days above these q90 bands and just you know just having fun with this

440
00:33:30,976 --> 00:33:37,576
seeing okay how repeatable is this trend how strong is this trend um you know is this something

441
00:33:37,576 --> 00:33:44,676
that we can sort of really, really find some signaling. And the point was, we didn't. And

442
00:33:44,676 --> 00:33:48,416
there was a lot of people that were super bullish October, November saying the four-year cycle was

443
00:33:48,416 --> 00:33:52,436
over. It's just completely ignoring reality. And then all of a sudden, you know, November,

444
00:33:53,016 --> 00:33:59,696
we broke down below the trend itself. And then the start of the year, you know, metals are on

445
00:33:59,696 --> 00:34:07,156
tear as well. We broke down very, very fast. So yeah, it's not, no four-year cycle is repeatable

446
00:34:07,156 --> 00:34:13,516
in Bitcoin, but there is a four-year cycle. And if the thing is not doing exactly as you think it

447
00:34:13,516 --> 00:34:19,536
will, just be cautious. That's all I could say is be cautious. So look, that's my view. And it turned

448
00:34:19,536 --> 00:34:24,816
out to be the right way to look at this in the fall. The thing that keeps me up at night with

449
00:34:24,816 --> 00:34:29,436
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457
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479
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The thing that I can't get my head around

480
00:36:42,336 --> 00:36:45,496
on the four-year cycle is why it would exist.

481
00:36:45,736 --> 00:36:48,216
Like, I mean, you can observe it and it clearly does.

482
00:36:48,276 --> 00:36:49,556
Like I thought it was going to be broken,

483
00:36:49,996 --> 00:36:52,396
but I just don't understand what's driving it

484
00:36:52,396 --> 00:36:53,916
because you can't really say

485
00:36:53,916 --> 00:36:58,456
that the cut-in subsidy is really a leading driver of the four-year cycle anymore. Like,

486
00:36:58,476 --> 00:37:03,956
I don't know what the sort of driver of that is anymore. I think you can. I think you can, Danny.

487
00:37:04,776 --> 00:37:07,956
Why? It's such like a small amount of supply coming onto the market.

488
00:37:08,096 --> 00:37:14,456
That's the reason that people give on the why not, right? I've interviewed these people,

489
00:37:14,456 --> 00:37:17,856
I know you have, and there's plenty of people that have talked about it. Again, it's not a big

490
00:37:17,856 --> 00:37:19,616
Everybody has their opinion on Bitcoin.

491
00:37:19,916 --> 00:37:25,296
But look, the gold market, let me put some of my applied statistics.

492
00:37:25,536 --> 00:37:27,716
And I'm interested in financial history and stuff as well.

493
00:37:28,656 --> 00:37:36,236
Mining in general is a huge game for the monetary system of any society.

494
00:37:36,236 --> 00:37:44,636
We have the famous case of Spaniards, Cortez and such, just stealing a lot of Aztec gold

495
00:37:44,636 --> 00:37:51,676
and other gold in the new world in like, you know, Bolivia, Peru.

496
00:37:51,676 --> 00:37:57,976
Now today, there was this silver mountain that when that got back to Europe, that can

497
00:37:57,976 --> 00:37:59,536
cause great carnage, right?

498
00:37:59,556 --> 00:38:01,696
If you overmind, if you flood the supply.

499
00:38:02,156 --> 00:38:08,436
But generally speaking, if you are running a mine or close to the state, the polity,

500
00:38:08,576 --> 00:38:13,936
whoever is running the system, it's a pretty good business and it's pretty good for the

501
00:38:13,936 --> 00:38:14,316
state.

502
00:38:14,636 --> 00:38:18,156
Again, we don't have to judge on if the state is good or bad or what becomes good of the state.

503
00:38:18,216 --> 00:38:22,636
I'm just saying mining is a strong business in the history of monetary...

504
00:38:22,636 --> 00:38:34,636
The civilizations that arise around money usually have to be very close to a mine.

505
00:38:35,396 --> 00:38:36,476
Of course, they can overmine it.

506
00:38:36,536 --> 00:38:37,136
They can have problems.

507
00:38:37,136 --> 00:38:42,236
But this is the origins of the Cantillon effect, by the way, the Cantillon effect.

508
00:38:42,236 --> 00:38:47,476
or you want to say it, is that those that are closest to the mine, you know, have the most power.

509
00:38:48,816 --> 00:38:57,636
It's important. Now, gold. Before this huge surge in gold to $5,000 at the start of this year,

510
00:38:57,636 --> 00:39:11,024
plus right in February January February of this year and say two years ago the gold mining market in totality in the whole world was about billion

511
00:39:12,184 --> 00:39:14,004
And again, gold is different from Bitcoin.

512
00:39:14,164 --> 00:39:15,944
Sailors made this observation many people have.

513
00:39:16,044 --> 00:39:16,504
I have as well.

514
00:39:17,104 --> 00:39:19,924
Gold mining is not like it used to be.

515
00:39:20,244 --> 00:39:21,824
People don't try to save some of the gold.

516
00:39:21,904 --> 00:39:22,924
They just want to shed the gold.

517
00:39:24,504 --> 00:39:27,084
It's a revenue profit center, but it's also a cost.

518
00:39:27,584 --> 00:39:28,424
So they shed the gold.

519
00:39:28,744 --> 00:39:32,584
uh to cover their costs and that's it that's just how the gold market is bitcoin is totally

520
00:39:32,584 --> 00:39:39,144
different a lot of miners hodl bitcoin uh it's much easier to do it's it's uh not easier to do

521
00:39:39,144 --> 00:39:43,064
in the fact of mining but i mean it's easier to obviously to transfer around bitcoin is changing

522
00:39:43,704 --> 00:39:48,264
the economics of mining in general just because mining is a general concept so this is also

523
00:39:48,264 --> 00:39:57,384
interesting but still still to this day uh mining can always be disrupted by price and when the gold

524
00:39:57,384 --> 00:40:01,884
price and the silver price went up to four or $5,000 an ounce on a trailing 12 month basis,

525
00:40:02,264 --> 00:40:06,604
the gold mining industry went from being a hundred billion dollar industry to over the last couple

526
00:40:06,604 --> 00:40:10,844
of years being a $400 billion industry. And still at the moment, it's over, you know,

527
00:40:10,844 --> 00:40:19,624
on a trailing 12 month basis, if that $5,000 would hold, it'd get up to a $500 billion industry.

528
00:40:19,764 --> 00:40:25,564
Like the oil, just for people's, another way to understand the comparison, the oil markets are

529
00:40:25,564 --> 00:40:29,244
trillion dollar industry a year. Trillion dollars in revenue, sometimes it'd be a trillion five,

530
00:40:29,404 --> 00:40:33,944
super volatile, super political. These are huge industries, right? And all of a sudden,

531
00:40:34,204 --> 00:40:41,044
because of a 20-year spike in the gold price, gold is now a $400 billion industry, $500 billion

532
00:40:41,044 --> 00:40:47,644
industry. That's going to matter. It affects everybody politically, economically, geopolitically.

533
00:40:47,644 --> 00:40:53,724
Now, with all that little background, imagine applying that 20 years from now

534
00:40:53,724 --> 00:40:55,364
into the Bitcoin mining space.

535
00:40:55,944 --> 00:40:58,944
Imagine that we have, whatever,

536
00:40:59,264 --> 00:41:02,084
400, 500 billion dollars of Bitcoin mining revenue

537
00:41:02,084 --> 00:41:04,104
and then it gets halved in a day.

538
00:41:04,684 --> 00:41:05,804
It's going to matter.

539
00:41:06,124 --> 00:41:06,824
It's going to matter.

540
00:41:06,944 --> 00:41:08,384
It's not going to not matter.

541
00:41:08,944 --> 00:41:13,584
This is just a feature of the Bitcoin system

542
00:41:13,584 --> 00:41:16,824
that everybody, I think, kind of wants to forget.

543
00:41:17,464 --> 00:41:19,584
But Satoshi built it in and it's what we have.

544
00:41:20,304 --> 00:41:21,684
It won't necessarily halve, though.

545
00:41:21,904 --> 00:41:23,384
Like, if we're talking that far out,

546
00:41:23,384 --> 00:41:36,984
The percentage of the minor revenue coming from fees will be much higher than the percentage of revenue coming from fees today. Today, it's largely subsidy. At some point in the future, that fee percentage has to be much higher.

547
00:41:36,984 --> 00:42:01,184
The fee percentage can and will be higher for sure. But the inflation or whatever you want to call it, the issuance, the subsidy, the block reward, it's still going to be a meaningful. It's still going to be a meaningful number when we're talking about Bitcoin being, you know, 5 million, 10 million a coin.

548
00:42:01,184 --> 00:42:11,904
so i get all the arguments against it i get the fact that you know many more times uh a volume

549
00:42:11,904 --> 00:42:20,544
and dollar amount of bitcoins flow between minor wallets and uh or etf wallets or exchange wallets

550
00:42:20,544 --> 00:42:27,224
right i get the the whole premise of the idea the bottom line is mining is an important topic

551
00:42:27,224 --> 00:42:31,204
in the realm of monetary finance, monetary history.

552
00:42:31,924 --> 00:42:35,144
Satoshi specifically designed mining for that reason.

553
00:42:35,824 --> 00:42:38,364
And he decided to have it every four years.

554
00:42:38,444 --> 00:42:39,104
It's a shelling point.

555
00:42:39,204 --> 00:42:39,684
It's a shock.

556
00:42:40,864 --> 00:42:43,824
So I am, again, I'm just trying to be modest about this.

557
00:42:43,924 --> 00:42:46,764
I would not discount mining as quickly

558
00:42:46,764 --> 00:42:49,664
as many people are apt to do in the space

559
00:42:49,664 --> 00:42:53,444
just because nominally right now, right,

560
00:42:53,484 --> 00:42:56,204
it's much smaller than say 50 Bitcoins a block,

561
00:42:56,204 --> 00:43:03,044
which it used to be right it still can be a huge amount of money in the future and i expect it will

562
00:43:03,044 --> 00:43:09,424
be and i expect that it will also provide a lot of fireworks and shocks to uh the system but that's

563
00:43:09,424 --> 00:43:14,264
how it is that's how it's designed so if if we go back to the power law if you think the four-year

564
00:43:14,264 --> 00:43:20,864
cycle is still real um and we're are we about as low as we've ever been compared to the median on

565
00:43:20,864 --> 00:43:26,984
the power law. Like how far from a bottom do you think we are? Right. So I'll just show you very

566
00:43:26,984 --> 00:43:31,864
quickly the worst and the best. And then I'll also show you another way I'm looking at this now.

567
00:43:32,084 --> 00:43:36,244
So this is all time data, right? And the reason I'm getting these nice smooth lines is I'm

568
00:43:36,244 --> 00:43:39,904
extending, I'm taking the all time data, how I find the coefficients, don't worry about it,

569
00:43:39,904 --> 00:43:45,024
running the math, and then extending the line back and extending forward. All we can do in the future

570
00:43:45,024 --> 00:43:50,344
is extend it forward. But in the past, I'm sort of creating lines that actually didn't exist at

571
00:43:50,344 --> 00:43:55,124
the time. This is a small caveat here. So I'm, uh, there's another way to look at this, which I

572
00:43:55,124 --> 00:43:59,344
think will be more helpful. But basically, if you can imagine, if you look here, you see how we had

573
00:43:59,344 --> 00:44:06,504
this big drop here, uh, at the start of June. And now we're basically setting our own new bottom

574
00:44:06,504 --> 00:44:11,564
here. Okay. And we're off it, but I, this is way too early for me to predict, like, you know,

575
00:44:11,564 --> 00:44:15,884
we're going up from here. I'm sure a YouTube thumbnail will do that for you, but I would just

576
00:44:15,884 --> 00:44:20,304
be cautious about the levels that we're at. But as you notice, if we paint this line backward,

577
00:44:20,964 --> 00:44:26,464
we go back to the SPF levels, there's a huge amount of gap here. At the time, the zero was

578
00:44:26,464 --> 00:44:31,704
actually here. So another way I'm looking at this chart now is I'm showing the evolving trend.

579
00:44:32,024 --> 00:44:35,984
All right. I also have the shades of the bears here. If these charts are constantly evolving,

580
00:44:36,744 --> 00:44:40,284
does that actually mean that they're useful going forward? I'd be really interested to see what this

581
00:44:40,284 --> 00:44:45,564
chart looked like as the sort of statistics were back in, say, the SPF crash, like how this cycle

582
00:44:45,564 --> 00:44:50,144
would have looked since then. Right, right. So that's something I'm trying to show more on my

583
00:44:50,144 --> 00:44:56,504
streams now, because precisely to your question, you get the nice smooth lines when you just draw

584
00:44:56,504 --> 00:45:00,524
the math based on the all-time data, right? But the question would be, what did the data show,

585
00:45:00,664 --> 00:45:07,644
say, in 2013 or 2017 or 2021? So that's why I'm now, when we look forward, okay, we have the same

586
00:45:07,644 --> 00:45:13,404
projection of the lines, right? The percentile, quantile bands, basically. For simple language,

587
00:45:13,404 --> 00:45:17,384
I'm just calling them lines, but here's how it would actually look over time.

588
00:45:18,344 --> 00:45:22,484
And I think this is even more helpful to show people how, you know, trends can change, they

589
00:45:22,484 --> 00:45:26,164
can evolve, but still overall, we're still in a power function.

590
00:45:27,644 --> 00:45:32,264
So here's every band, but actually how it would look at the time.

591
00:45:32,424 --> 00:45:35,864
And every new day's worth of data, we change the band.

592
00:45:35,984 --> 00:45:40,324
So I'm not projecting backward, which I'm actually doing here to get the nice smooth

593
00:45:40,324 --> 00:45:40,564
lines.

594
00:45:40,584 --> 00:45:41,944
I'm just showing you how they would look at the time.

595
00:45:41,944 --> 00:45:44,944
So this goes back to what I was talking about with Trollolo.

596
00:45:45,264 --> 00:45:49,664
If you look at the early days here, this 2011 pop,

597
00:45:49,924 --> 00:45:52,124
and again, I start my pricing about Bitcoin P today.

598
00:45:53,144 --> 00:45:53,744
Sub penny.

599
00:45:55,884 --> 00:45:59,884
I think I used 35 pounds for those 10,000 Bitcoins.

600
00:46:00,604 --> 00:46:03,704
Because remember, it was a sterling to dollar transaction.

601
00:46:04,604 --> 00:46:09,584
But in any event, notice how these gaps are larger,

602
00:46:09,584 --> 00:46:15,944
kind of wild. The lines are trying to figure themselves out. And no one in the world was

603
00:46:15,944 --> 00:46:20,464
thinking that Bitcoin was running like a power trend at this time, right? Not even here.

604
00:46:20,964 --> 00:46:26,524
And you would see this thing, which is the Q100, which is like the realm of possibilities of

605
00:46:26,524 --> 00:46:30,764
Bitcoin's price. It's fantastic, right? Like, let's just look at what the number says. Q100,

606
00:46:30,764 --> 00:46:39,364
when we were at December 2013, that $1,000, $1,200 top, right? November, December.

607
00:46:39,584 --> 00:46:44,164
is saying $350,000 for Bitcoin at the time is theoretically possible.

608
00:46:44,784 --> 00:46:48,484
Obviously, we needed some more time to work out,

609
00:46:48,564 --> 00:46:49,824
and the price never got close to that.

610
00:46:49,904 --> 00:46:51,984
But because of the action that occurred in 2011,

611
00:46:52,544 --> 00:46:54,184
that's what the math said.

612
00:46:55,004 --> 00:46:57,104
So let's even take off Q100 just because, again,

613
00:46:57,524 --> 00:47:01,584
it sort of distracts, I'd say.

614
00:47:01,704 --> 00:47:04,364
But I'll come back to it because you can find some interesting things here.

615
00:47:04,364 --> 00:47:08,964
Anyway, particularly as we get into 2016, 2017,

616
00:47:09,584 --> 00:47:12,244
and this is where Giovanni and myself,

617
00:47:12,344 --> 00:47:16,144
we started into 2018 looking at how this was forming.

618
00:47:17,284 --> 00:47:20,944
Notice how the lines get A, closer together,

619
00:47:21,104 --> 00:47:23,484
and B, straighter on log log.

620
00:47:23,564 --> 00:47:24,424
They're not perfectly straight,

621
00:47:24,584 --> 00:47:27,324
but they get pretty good.

622
00:47:27,584 --> 00:47:29,704
You can clearly see from 2017 top,

623
00:47:30,264 --> 00:47:32,784
they get, you know, there's a pattern.

624
00:47:33,744 --> 00:47:35,784
And so this is another way to see the power log.

625
00:47:35,784 --> 00:47:38,804
Now, look, let's look at the worst examples,

626
00:47:38,804 --> 00:47:46,864
the worst offenders where we form new bottoms in this. We were at, say, a Q0 of $281 in

627
00:47:46,864 --> 00:47:52,764
December 2014. But as that crypto winter, as it's called, I'm not using that word to trigger anybody,

628
00:47:53,424 --> 00:48:02,344
went down to $200 at the lows in 2015, that Q0 turned into, well, this is log-log,

629
00:48:02,424 --> 00:48:06,604
so it actually kind of stayed the same. But at the worst case, it got to $190. And you can just

630
00:48:06,604 --> 00:48:14,144
see for those watching the video, you can see it's obviously dropping quite consistently.

631
00:48:14,844 --> 00:48:19,644
2018, interestingly, that dropped to 3,000. Nominally, we know that 3,000 was well over

632
00:48:19,644 --> 00:48:23,804
the 1,200 top of the prior cycle. That's also an interesting thing to look at. We didn't really

633
00:48:23,804 --> 00:48:31,124
puncture there, right? That was kind of a nice support. And then 2020, we did. And notice here

634
00:48:31,124 --> 00:48:33,624
in 2020, the pandemic briefly.

635
00:48:33,884 --> 00:48:35,064
We punctured below.

636
00:48:35,204 --> 00:48:36,644
And then let's actually look at what happened.

637
00:48:36,644 --> 00:48:40,524
So the Q0 line is coming down

638
00:48:40,524 --> 00:48:46,464
and it's setting a new bottom of,

639
00:48:46,984 --> 00:48:48,824
you know, and if we look at the way

640
00:48:48,824 --> 00:48:49,844
that that came down,

641
00:48:50,504 --> 00:48:52,404
and by the way, this also shows you

642
00:48:52,404 --> 00:48:54,324
that this has nothing to do with

643
00:48:54,324 --> 00:48:55,444
are they parallel to each other?

644
00:48:55,484 --> 00:48:58,984
You see the Q0 is actually slightly above the Q10,

645
00:48:58,984 --> 00:49:01,264
which is interesting at the time in 2020.

646
00:49:02,264 --> 00:49:07,704
But it comes down to fully, you know, be in the current position that is today.

647
00:49:07,784 --> 00:49:17,124
And it took about from 2020 February to, you know, to 2020 late March, obviously during

648
00:49:17,124 --> 00:49:22,364
the just extreme craziness of the pandemic and scared a lot of people.

649
00:49:22,504 --> 00:49:27,444
And then so that's sort of the new bottom relative to this, like I said, for lack of

650
00:49:27,444 --> 00:49:28,824
a better word, like setting these.

651
00:49:28,984 --> 00:49:37,164
bands, these individual sort of thresholds of where the price can possibly be. And we just,

652
00:49:37,264 --> 00:49:41,324
we set a new low and that's it. And so you just have to imagine that that's going to be,

653
00:49:41,424 --> 00:49:46,644
not imagine, like just understand this is the probability of reaching this level is lower.

654
00:49:46,644 --> 00:49:52,124
And then look, we set a new low as well with a scam bank and frauds gift to us all after,

655
00:49:52,264 --> 00:49:57,724
of course, the just defy summer of madness in 2022, all that stuff, Terra, Celsius.

656
00:49:57,724 --> 00:50:14,084
And so it took us, again, a couple months. We set a new low. But as Peter Zion was, again, saying Bitcoin was $17,000 overvalued at $16,000, we were already sort of forming that bottom. And then it took until January of 2021 to get out.

657
00:50:14,084 --> 00:50:23,384
And once you see, just notice here, once you see the price start to rise off of the Q0 level, and when I say Q0, it's actually Q0.0001.

658
00:50:23,964 --> 00:50:31,224
It's finding the least probable event relative to the power law.

659
00:50:31,924 --> 00:50:36,864
And once it starts to move away from that, usually that bottom holds through the next cycle.

660
00:50:37,384 --> 00:50:38,704
It doesn't always go lower.

661
00:50:39,024 --> 00:50:42,224
Notice in 2018, it didn't go lower, but it did briefly in 2020.

662
00:50:42,224 --> 00:50:43,844
It did briefly in 2022.

663
00:50:44,084 --> 00:50:46,304
and now we're setting a new low.

664
00:50:46,824 --> 00:50:48,184
So from this June fall,

665
00:50:48,624 --> 00:50:51,604
we went to a low of Q0 of 67,000.

666
00:50:51,704 --> 00:50:54,564
Now our Q0 is 59,000.

667
00:50:54,904 --> 00:50:57,384
So here you can see it actually as it evolves.

668
00:50:59,684 --> 00:51:01,864
And brass tacks, bottom line,

669
00:51:02,584 --> 00:51:03,664
when you do this type of analysis,

670
00:51:03,804 --> 00:51:05,244
which is not lines on charts,

671
00:51:05,324 --> 00:51:06,424
I'm not just connecting dots.

672
00:51:06,684 --> 00:51:10,184
These are actual scientific functions here.

673
00:51:10,484 --> 00:51:12,684
And when you see there more white space

674
00:51:12,684 --> 00:51:14,024
between each band,

675
00:51:14,084 --> 00:51:19,964
it just means the range of probabilities is expanding. It means our range of uncertainties

676
00:51:19,964 --> 00:51:24,664
based on prior observations is unfortunately a little bit wider. Risk is possibly a little bit

677
00:51:24,664 --> 00:51:34,284
more. But if past is prologue, it doesn't last that long. And generally, these are screaming

678
00:51:34,284 --> 00:51:38,844
by opportunities. And frankly, statistically, relative to the power law or the power curve,

679
00:51:39,144 --> 00:51:43,864
this is as cheap as Bitcoin has ever been. In fact. Yeah. So who knows when the bottom will be,

680
00:51:43,864 --> 00:51:46,064
but statistically this is deep, deep value.

681
00:51:46,064 --> 00:51:47,164
As good value as you get.

682
00:51:47,164 --> 00:51:49,064
Yeah, deep value, as good as you can get

683
00:51:49,064 --> 00:51:51,064
for the brass tacks listener here.

684
00:51:51,064 --> 00:51:53,004
But also, like you said, you don't know the bottom.

685
00:51:53,004 --> 00:51:54,804
I'm not saying this is the bottom.

686
00:51:54,804 --> 00:51:59,104
There's nothing here that tells me, you know, in August,

687
00:51:59,104 --> 00:52:04,944
we're not gonna dip lower or whatever US legislation

688
00:52:04,992 --> 00:52:11,192
fails miserably, this Clarity Act, and then, you know, people try to, you know, Trump gets impeached

689
00:52:11,192 --> 00:52:16,152
or whatever. And his crypto businesses, he becomes the next SPF, which I've, by the way,

690
00:52:16,152 --> 00:52:21,292
said that could even happen like two years ago, just thinking about the four-year cycle. I'm not

691
00:52:21,292 --> 00:52:28,932
at all saying that. I have no idea what will happen. But, you know, these are interesting

692
00:52:28,932 --> 00:52:37,212
little nuggets that line up with the four-year cycle. And as far as I can tell here, the four-year

693
00:52:37,212 --> 00:52:42,752
cycle is perfectly intact. It's shallower than prior cycles. We've only been through nine months

694
00:52:42,752 --> 00:52:53,112
of this. It's 53% drop. All right. 2020, we got to a 77% drop. Sorry, 2022. 2018, we got to an 84%

695
00:52:53,112 --> 00:53:01,192
drop. 2014, we got to an 85% drop. So each drop is less than before, but I have no idea if it's

696
00:53:01,192 --> 00:53:06,712
going to be 53% this time, 60%. But what we do see so far is actually relative to the drops,

697
00:53:06,712 --> 00:53:15,572
relative to the trends, the cycle is, you know, the deviations from regression are shallower,

698
00:53:15,832 --> 00:53:21,212
the shallower this time. It's interesting that it's the smallest drop in any of these bear

699
00:53:21,212 --> 00:53:25,512
markets, but probably the worst sentiment we've had. You know, the next question I'm going to ask

700
00:53:25,512 --> 00:53:31,492
though. So let's just assume that the four-year cycle is real. What would the median line be

701
00:53:31,492 --> 00:53:38,332
for the top of the next cycle right now? So if we assume that the four-year cycle is real,

702
00:53:38,332 --> 00:53:47,792
that means it's going to be 2029, right? And let's just say somewhere 2029,

703
00:53:47,792 --> 00:54:00,592
uh november all right the ols there you can see 386 000 median 365 000 uh on a low case

704
00:54:00,592 --> 00:54:09,052
q0 184 000 and on a really fun case which is put that q100 back which is really looking uh

705
00:54:09,052 --> 00:54:12,972
like you know by the way those things are technically possible but

706
00:54:12,972 --> 00:54:17,432
we got a million dollar bitcoin million dollar bitcoin but let's look at the q90 there

707
00:54:17,432 --> 00:54:23,112
$500,000 Bitcoin. Another interesting thing is to look at the multiple over under the

708
00:54:23,112 --> 00:54:26,592
curve itself. That's what you see in the parentheses there in StoolTip. So

709
00:54:26,592 --> 00:54:32,912
a 3x multiple used to be more popular. It used to happen, let's say, it was more prevalent. Now,

710
00:54:33,192 --> 00:54:39,312
I think that's less rare, but getting to a 1.4x, 1.5x, totally possible. And by the way,

711
00:54:39,312 --> 00:54:49,172
notice how those deviations uh i'm talking about the multiples over under the trend so so my ols

712
00:54:49,172 --> 00:54:53,892
let me put this chart back in just so you can see it clear what i'm talking about the ols is

713
00:54:53,892 --> 00:55:02,572
is is one right q0 q100 here notice how back in the day right when we're when we're establishing

714
00:55:02,572 --> 00:55:11,052
this trend, trying to work out the math, the Q100 could be 20x, right? The trend, 10x, the trend.

715
00:55:12,092 --> 00:55:25,412
Q0 could be 0.16, 0.09, the trend, right? Q0, wherever it was painted. Today, Q100 is 3.3x,

716
00:55:26,092 --> 00:55:31,872
Q0 is 0.42. And as we go in the future, these actually converge. So you actually get less

717
00:55:31,872 --> 00:55:40,152
extremes to the upside, less extremes to the downside, which is in itself a very nice visual

718
00:55:40,152 --> 00:55:50,492
of that scale, scale invariant sort of power law nature where it's a sustainable growth with,

719
00:55:51,612 --> 00:55:55,552
yes, not as much upside, but also not as much downside. And in general,

720
00:55:56,132 --> 00:56:00,092
a more stable type of a growth is actually what power growth represents.

721
00:56:00,092 --> 00:56:06,572
yeah i'm here for that that sounds good um is there like uh if you're trying to take into account

722
00:56:06,572 --> 00:56:11,312
like efficient market hypothesis is there an argument that as this sort of model ingests more

723
00:56:11,312 --> 00:56:16,472
data it will stop breaking to the downside every couple years like it is doing now because it will

724
00:56:16,472 --> 00:56:21,472
have seen enough previous market moves that it can sort of price in the future or is that is that too

725
00:56:21,472 --> 00:56:26,912
far out there probably no i mean uh and again this gets back to the grand theory which we can talk

726
00:56:26,912 --> 00:56:34,192
about. I'm trying to think if we need more charts to show you in response to what you're talking

727
00:56:34,192 --> 00:56:42,472
about here. But I would say, you know, I said the power law is projected to slow to a 10% growth

728
00:56:42,472 --> 00:56:48,032
rate in 2070. That's still, that's nice to project out that far. And I do it for fun. And I show

729
00:56:48,032 --> 00:56:53,352
people what the price would be and, you know, what the growth rate is on my streams all the

730
00:56:53,352 --> 00:56:58,332
time with this, but I think that that's more just trying to give us a flavor of how the thing will

731
00:56:58,332 --> 00:57:04,672
grow. And I do think, I don't want to say there comes a time when, like, I'm using this term a lot

732
00:57:04,672 --> 00:57:13,932
like fireworks, right? Often in financial markets, we try to say there comes a point when this stuff

733
00:57:13,932 --> 00:57:20,772
breaks or whatever. That so far hasn't happened. I could be wrong though. Like we could be

734
00:57:20,772 --> 00:57:27,012
geopolitically worldwide, we don't have to get into it, right? We're in sort of a realignment now,

735
00:57:27,552 --> 00:57:32,232
whether it's NATO, whether it's China, whether it's Russia, whatever, we're in a realignment of

736
00:57:32,232 --> 00:57:38,152
sort of the world order. It's possible that the dollar loses status and Bitcoin ascends rapidly

737
00:57:38,152 --> 00:57:43,152
there. And that's why I use this term sort of fireworks. I do see something like that happening

738
00:57:43,152 --> 00:57:48,772
in the 2030s, simply because of the way a lot of numbers are lining up, right? So the parallel

739
00:57:48,772 --> 00:57:57,532
is going to be about, it's going to fall to 25%, 20% by 2040. That's going to happen to match,

740
00:57:57,712 --> 00:58:05,072
I think, what the stock market is probably doing around then. And also the market cap of Bitcoin,

741
00:58:05,492 --> 00:58:09,752
you will be around 5 million per coin at that time. So that's going to be about $100 trillion

742
00:58:09,752 --> 00:58:15,012
market cap. The monetary base is also going to be about $100 trillion. Again, I don't want to be

743
00:58:15,012 --> 00:58:21,192
drawn in by these round numbers. Because even when Bitcoin's $100 trillion in the monetary base is

744
00:58:21,192 --> 00:58:25,052
$100 trillion, that's still that 50-50 market share. And it probably will be the case that

745
00:58:25,052 --> 00:58:28,932
maybe some central banks are backing, major central banks are backing their balance sheets

746
00:58:28,932 --> 00:58:37,092
with Bitcoin at the time. So it's hard to predict, I would say, exactly how this plays out. But what

747
00:58:37,092 --> 00:58:45,432
I do think is a we're on a collision course is Bitcoin's value is going to grow to a number and

748
00:58:45,432 --> 00:58:50,092
also the growth rate of the asset itself is going to shrink to another that's comparable to the rest

749
00:58:50,092 --> 00:58:56,632
of sort of the world trad fi and then at that point and again that point could be many many

750
00:58:56,632 --> 00:59:05,072
years it could be a decade um the world's gonna have to see do they want to like lend out Bitcoin

751
00:59:05,072 --> 00:59:08,072
or let's say they lend out fiat units,

752
00:59:08,712 --> 00:59:10,372
maybe some of them are backed by Bitcoin

753
00:59:10,372 --> 00:59:12,712
to try to get a good return

754
00:59:12,712 --> 00:59:15,332
where we're still using like dollars, euros, yen

755
00:59:15,332 --> 00:59:17,712
as the base underlying currency.

756
00:59:17,712 --> 00:59:19,732
Or do we move to the sort of numeraire

757
00:59:19,732 --> 00:59:20,692
where it's Satoshis?

758
00:59:21,332 --> 00:59:23,512
And then in that case,

759
00:59:23,972 --> 00:59:27,912
do you want to lend out those precious Satoshis

760
00:59:27,912 --> 00:59:29,552
at a rate that is actually

761
00:59:29,552 --> 00:59:37,132
probably either too hard to pay back for the borrower

762
00:59:37,132 --> 00:59:39,672
because the Satoshis continue to get stronger,

763
00:59:40,752 --> 00:59:46,272
or do we go to something totally different,

764
00:59:46,372 --> 00:59:47,932
like an equity-based system

765
00:59:47,932 --> 00:59:54,532
or a system where there's just maybe some very short, short-term debt,

766
00:59:54,532 --> 01:00:02,012
but if a bitcoin world where people are investing in projects and trying to you know just develop the

767
01:00:02,012 --> 01:00:06,652
world maybe there's some sort of a different model obviously with technology and everything

768
01:00:06,652 --> 01:00:11,732
where it can be on more of like an equity-based system but that's that's part and parcel of the

769
01:00:11,732 --> 01:00:16,012
grand theory that i'm thinking about because i think in 10 years you're gonna a lot of these

770
01:00:16,012 --> 01:00:20,652
numbers are gonna collide the the financial system and the bitcoin system and i'm not exactly sure

771
01:00:20,652 --> 01:00:26,352
plays out. But I do, for anyone listening to this show or watching the show in the back of their

772
01:00:26,352 --> 01:00:31,772
mind wondering, okay, well, how does this work if Bitcoin's growth rate declines, but the stock

773
01:00:31,772 --> 01:00:36,452
market stays at like 15, 20% per year, what happens? I agree. There's going to have to be a

774
01:00:36,452 --> 01:00:43,992
decision that's made there by people of all kinds and all sorts of governments. Are you just going

775
01:00:43,992 --> 01:00:50,232
to have Bitcoin sort of locked in some component of the economy like gold? Withdrawals are almost

776
01:00:50,232 --> 01:00:55,572
impossible in the TradFi world and just exponentially more fiat units are lent out at interest,

777
01:00:55,672 --> 01:01:00,032
just like the system we have? Or do we move into this system where Bitcoin actually as a

778
01:01:01,172 --> 01:01:07,412
stable, scalable asset that grows at a power regression

779
01:01:07,412 --> 01:01:14,052
will actually pull the rest of the world into their system and then maybe the system will start

780
01:01:14,052 --> 01:01:20,072
growing power. But the key here is, if it's not clear, if you grow in power, an interest rate

781
01:01:20,072 --> 01:01:29,132
won't work there. A fixed interest rate won't work. At some point, Bitcoin's enviable UTXOs,

782
01:01:29,432 --> 01:01:35,992
they're going to accrete in value, but relative to, I don't know, the dollar or Apple stock,

783
01:01:36,252 --> 01:01:41,312
they actually might fall below that. So then what happens at that point?

784
01:01:42,192 --> 01:01:46,132
See, I think that's really interesting. It's one of the things that I've always really

785
01:01:46,132 --> 01:01:50,492
struggled with because clearly if we went to a bitcoin standard you're not going to get rid of

786
01:01:50,492 --> 01:01:55,132
credit like credit is always going to exist in some capacity and if if there's like a business

787
01:01:55,132 --> 01:01:59,552
opportunity or an investment that looks tempting enough people will part with satoshis to invest

788
01:01:59,552 --> 01:02:04,632
in that and and some people will be able to make enough money on those business decisions or

789
01:02:04,632 --> 01:02:09,792
whatever to pay back those loans but not everyone and i get that in this fiat world we have tons of

790
01:02:09,792 --> 01:02:16,592
malinvestment because it's very easy to get your hands on on credit but if you do you have the

791
01:02:16,592 --> 01:02:21,432
opposite where people are unwilling to lend unless you have an absolute killer idea and there's

792
01:02:21,432 --> 01:02:27,372
actually lack of investment yeah that's the that's the old like it's almost keynesian central banker

793
01:02:27,372 --> 01:02:34,612
like right i mean fear of the deflation and um look i i don't have a full answer i'm more thinking

794
01:02:34,612 --> 01:02:42,412
about it mathematically and um i would say it would depend on the system it would depend on the

795
01:02:42,412 --> 01:02:46,752
monopoly of the system who's in control of the system and if we're on a decentralized system

796
01:02:46,752 --> 01:02:52,992
where everybody's individual demand is stronger than the government's uh actions to compel them

797
01:02:52,992 --> 01:02:57,272
and they're just going to want satoshis they're going to want it in their wallet or they're going

798
01:02:57,272 --> 01:03:08,172
want to use lightning, then I think such a system could work just fine. But actually,

799
01:03:08,512 --> 01:03:13,272
due to the nature of Bitcoin's power growth in this case, and just the nature of, you know,

800
01:03:13,292 --> 01:03:16,712
we know that the supply is extremely limited here, unlike gold, unlike silver, where,

801
01:03:17,152 --> 01:03:23,072
again, it exponentially produces 1.8% a year more gold, 1.5% a year more silver.

802
01:03:23,072 --> 01:03:30,692
the system could change we could have like sort of the best way i could describe it is is uh

803
01:03:30,692 --> 01:03:39,892
you know either very short-term factoring type debt or people people are just going to have to

804
01:03:39,892 --> 01:03:48,072
take uh more equity contracts in their endeavors and everyone becomes a vc yeah yeah exactly and

805
01:03:48,072 --> 01:03:53,412
you might not be sure the exact, you'll have a range of your return. Maybe there's like some

806
01:03:53,412 --> 01:03:57,452
preferred return that you try to get, but if you don't get it and you split the profits or whatever,

807
01:03:57,932 --> 01:04:02,172
technically nothing is impossible to do here, but it's just, it's not exponential

808
01:04:02,172 --> 01:04:08,752
growth. So we're, we're already going into my sort of the grand theory and I have so many

809
01:04:08,752 --> 01:04:23,560
different charts but I don know where you might want to take this but I can show you I think the most interesting and most relevant right now is probably talking about the treasury companies because obviously sailors had a rough couple of weeks ever since they sold that first 32 bitcoin i don know what was that a

810
01:04:23,560 --> 01:04:29,140
month a month or so ago um they've kind of been in a mess it looks like they've recovered it now

811
01:04:29,140 --> 01:04:32,480
they've sold bitcoin to pay dividends which makes total sense to me i think that's what they should

812
01:04:32,480 --> 01:04:38,860
do i think that's good um but like you said earlier in the show their cost of capital right

813
01:04:38,860 --> 01:04:45,840
now is 12 13 whatever it is that's fine as long as the caga stays at around 40 but as you said

814
01:04:45,840 --> 01:04:50,940
that's not going to continue forever and just as like a complete vibe gut check it's clearly not

815
01:04:50,940 --> 01:04:55,400
going to exist forever like bitcoin is not going to go up at 40 forever yeah the question is when

816
01:04:55,400 --> 01:05:00,720
does that date come and what do they do in that situation because it's funny that they've gone

817
01:05:00,720 --> 01:05:04,520
from basically a zero percent cost of capital when they were doing converts at zero percent

818
01:05:04,520 --> 01:05:06,460
to now paying 13%.

819
01:05:06,460 --> 01:05:08,460
I don't know what the market is,

820
01:05:08,920 --> 01:05:10,620
like why the market's forced him to do that.

821
01:05:10,860 --> 01:05:13,620
But I mean, 13% is pretty high.

822
01:05:13,700 --> 01:05:16,060
The trade-off is probably the preferred aspect of it.

823
01:05:16,260 --> 01:05:18,120
So it's very, very difficult for him to get liquidated

824
01:05:18,120 --> 01:05:21,160
because it's a perpetual instrument,

825
01:05:21,540 --> 01:05:22,880
which is smart on his part.

826
01:05:22,920 --> 01:05:24,080
It's very smart to do it that way.

827
01:05:24,160 --> 01:05:27,720
But yeah, there is a higher hurdle rate there

828
01:05:27,720 --> 01:05:28,580
that he has to make.

829
01:05:30,100 --> 01:05:30,960
Let me show you this.

830
01:05:30,960 --> 01:05:33,280
This is the S&P.

831
01:05:33,280 --> 01:05:37,120
I don't know if I showed you this last time, but this is the S&P over a couple hundred years.

832
01:05:37,240 --> 01:05:41,760
I showed this actually at the cheat code conference, a variant of this chart.

833
01:05:43,600 --> 01:05:50,000
So exponential growth, again, I'm not going to go through all this, but this is S&P 500 back calculated.

834
01:05:50,340 --> 01:05:52,400
There's people that do this back to like the 1800s.

835
01:05:53,060 --> 01:05:55,760
Bottom line is it's very slow growth in the 1800s.

836
01:05:55,800 --> 01:05:57,020
The 1900s got a little bit faster.

837
01:05:57,620 --> 01:05:59,880
I do these little monetary epochs.

838
01:05:59,880 --> 01:06:27,440
So when the Federal Reserve was founded, then when we went off of gold, Bretton Woods ended and we went to 1971, ended the Bretton Woods standard. And then from 2008, when basically banks got bailed out all the time by central banks and we have this monetary easing sort of pattern, notice that the treadmills get faster and faster.

839
01:06:27,440 --> 01:06:29,940
and the treadmills are actually the growth rate.

840
01:06:30,000 --> 01:06:31,160
I'm going to take the growth rates off.

841
01:06:32,220 --> 01:06:35,860
But here's the, this is log linear, exponential growth.

842
01:06:36,480 --> 01:06:39,460
But what is actually here is Jeffrey West,

843
01:06:39,680 --> 01:06:41,580
the physicist, he's got a great book called Scale,

844
01:06:41,760 --> 01:06:42,700
talks about this as well.

845
01:06:42,820 --> 01:06:44,420
There's others that talk about this.

846
01:06:44,940 --> 01:06:46,200
He calls it super exponential.

847
01:06:46,540 --> 01:06:48,380
So it is constant growth,

848
01:06:48,620 --> 01:06:52,180
but it actually grows even faster over time, right?

849
01:06:52,240 --> 01:06:54,360
If you just take these sort of long enough horizons.

850
01:06:54,360 --> 01:07:01,840
and that's my question about actually how the Bitcoin system marries with this idea and I do

851
01:07:01,840 --> 01:07:06,900
think it's going to be a part of it so when Jeffrey Ress wrote his book and just to summarize

852
01:07:06,900 --> 01:07:13,140
try to summarize the physics book in you know 30 seconds here he was talking about this very

853
01:07:13,140 --> 01:07:18,100
interesting idea of the singularity but he wasn't using like the Ray Kurzweil he was just using a

854
01:07:18,100 --> 01:07:25,200
mathematical singularity. But if we can see that with our world, our fast growing world of technology,

855
01:07:25,200 --> 01:07:30,660
and we know that we grow faster and faster and faster over these epochs, but notice that the

856
01:07:30,660 --> 01:07:35,620
time periods are shorter and shorter and shorter. We still have some time. We have some time,

857
01:07:36,000 --> 01:07:40,120
but presumably there'll be another crash, probably a deep crash, more monetary inflation.

858
01:07:40,640 --> 01:07:46,600
But also, also there is technological development, which causes the stock market to grow faster. AI is

859
01:07:46,600 --> 01:07:51,840
a prime example right now. Okay. There will come a point where we reach what this mathematical

860
01:07:51,840 --> 01:07:55,820
singularity, which basically there's one point and, you know, we can't grow any faster. What

861
01:07:55,820 --> 01:08:01,200
happens there? That's the question he poses in his book. He leaves it open. And he wrote this book,

862
01:08:01,280 --> 01:08:07,800
I think the first draft was 2014 or maybe 2017. I'm not even sure. He was not mentioning Bitcoin.

863
01:08:07,800 --> 01:08:13,720
He did not think about Bitcoin here. So I've sort of overlaid Bitcoin as an idea of what could take

864
01:08:13,720 --> 01:08:20,100
over the mathematical singularity. It's just another data point. And I think by the mid-2030s,

865
01:08:20,220 --> 01:08:26,540
you'll see these fireworks. So again, exponential growth, let's take off these trends. Let's show

866
01:08:26,540 --> 01:08:31,380
you in percentage term what these mean. So now you have these, this is the treadmills, right?

867
01:08:32,000 --> 01:08:35,360
While you're pulling that up, can I ask you a quick question on this? Does it have to stay

868
01:08:35,360 --> 01:08:43,520
exponential? Yes. All financial markets have always been exponential, primarily in my opinion.

869
01:08:43,520 --> 01:08:54,200
I don't have like vast amounts of underlying research here, but it's as ancient as, you know, the oldest contracts that we have is basically the interest rate.

870
01:08:55,760 --> 01:09:04,480
It's an ancient thing and interest by definition, applying an interest rate to an asset, to a debt, to a mortgage, whatever, to a company, cost of capital.

871
01:09:04,740 --> 01:09:05,780
That's an exponential function.

872
01:09:05,980 --> 01:09:07,660
So it will always be exponential.

873
01:09:07,660 --> 01:09:13,560
and what's even let's say even scarier or wilder for our times is we have massive amounts of

874
01:09:13,560 --> 01:09:21,680
technology and faster and faster growth rates so this is the super exponential so again just

875
01:09:21,680 --> 01:09:25,180
i'm sorry i'm being an idiot but i want to know why why does putting an interest rate on

876
01:09:25,180 --> 01:09:32,560
on it make it exponential is it because of compounding yeah yeah yeah so that is uh compound

877
01:09:32,560 --> 01:09:35,000
Compound interest is the same thing as exponential growth.

878
01:09:36,460 --> 01:09:42,740
Geometric growth, continuous compounding, exponential growth, they're all essentially the same function.

879
01:09:43,360 --> 01:09:46,620
And that is, by the way, a straight line on log scale.

880
01:09:46,820 --> 01:09:52,540
So when you grow, you get a trend that looks, let's just say I'll grow from 2008.

881
01:09:52,620 --> 01:09:56,900
I split up the trends here, but from 2008, I have a line going through this.

882
01:09:56,960 --> 01:09:58,360
You can clearly see this is exponential.

883
01:09:59,620 --> 01:10:00,400
Log linear.

884
01:10:00,400 --> 01:10:03,540
and in my opinion, the reason for this is credit.

885
01:10:04,380 --> 01:10:04,800
It's credit.

886
01:10:05,020 --> 01:10:06,040
It's the interest rate.

887
01:10:07,020 --> 01:10:08,880
Yes, the money supply is a part of it and everything,

888
01:10:09,100 --> 01:10:11,420
but the stock market is way more valuable

889
01:10:11,420 --> 01:10:12,520
than the money supply.

890
01:10:12,720 --> 01:10:15,140
So it's credit actually that does it.

891
01:10:16,020 --> 01:10:18,340
And notice, by the way,

892
01:10:18,440 --> 01:10:19,700
this is another small tangent.

893
01:10:20,320 --> 01:10:22,180
The markets are negatively skewed.

894
01:10:22,180 --> 01:10:25,480
You see that how we have like huge dips to the downside

895
01:10:25,480 --> 01:10:26,980
and then we sort of slowly go up,

896
01:10:27,040 --> 01:10:29,100
but then we always have these stairs up, elevator down.

897
01:10:29,660 --> 01:10:30,260
Right, right.

898
01:10:30,400 --> 01:10:33,040
that is different than Bitcoin.

899
01:10:33,480 --> 01:10:34,400
If we go back to Bitcoin,

900
01:10:35,220 --> 01:10:36,220
this is sort of a different topic.

901
01:10:36,340 --> 01:10:38,960
Notice how the crazy spikes are the opposite.

902
01:10:39,440 --> 01:10:40,760
We surprise ourselves to the upside,

903
01:10:40,840 --> 01:10:41,620
which is why, by the way,

904
01:10:41,640 --> 01:10:42,580
I still think we can do that.

905
01:10:43,360 --> 01:10:44,960
You know, it might not be hyper-Bitcoinization

906
01:10:44,960 --> 01:10:45,880
all in one day,

907
01:10:46,240 --> 01:10:48,240
but I think we can easily go to,

908
01:10:48,240 --> 01:10:51,260
you know, 250 or 300,000, whatever.

909
01:10:51,360 --> 01:10:52,700
I saw one, you probably saw this as well.

910
01:10:52,700 --> 01:10:54,420
One of these ideas,

911
01:10:54,600 --> 01:10:56,100
maybe Trump buys strategy.

912
01:10:56,800 --> 01:11:00,160
We have a $250,000 god candle

913
01:11:00,160 --> 01:11:05,380
or something. All this stuff is possible. And Bitcoin actually surprises to the upside. So you

914
01:11:05,380 --> 01:11:10,840
never know. But that's sort of a small tangent. Back to the idea of the stair steps, which I got

915
01:11:10,840 --> 01:11:17,020
to find. There's too many charts for you here, Danny. Where did I put it? Here it is.

916
01:11:18,360 --> 01:11:24,380
The stock market over a long, long, long period. The other trend, which is wild, is it's actually

917
01:11:24,380 --> 01:11:30,740
faster exponential trends. That is also appears to happen in markets. And maybe it happened in

918
01:11:30,740 --> 01:11:35,540
old times as well. Like maybe that was why Rome collapsed. Maybe that was, you know, people blame

919
01:11:35,540 --> 01:11:41,960
it on money printing, they blame it on this, blame it on that. But it could have been a situation

920
01:11:41,960 --> 01:11:48,760
like this. Now, again, we always want to think this time is different. I hope that with technology

921
01:11:48,760 --> 01:11:54,300
and with Bitcoin and with everything else in our modern world, we're not going to go back to

922
01:11:54,300 --> 01:11:58,880
mesothamia or anything like a major crash and i also think that there are release valves primarily

923
01:11:58,880 --> 01:12:04,480
bitcoin that could get us out of such a crash yeah um but this is this is part of the the grand

924
01:12:04,480 --> 01:12:09,960
theory yeah so there's this uh physicist sornette uh there's uh jeffrey west they are posing these

925
01:12:09,960 --> 01:12:15,220
ideas that we get to this super exponential growth and it happens to be by the way late 2030s

926
01:12:15,220 --> 01:12:20,380
where they think that we could get at this faster and faster point where it's just like well what

927
01:12:20,380 --> 01:12:27,340
happens next i mean and that that does fit in with the whole ai narrative so well it does it does it

928
01:12:27,340 --> 01:12:31,860
does so mathematically what i'm trying to show you here is faster and faster growth and so now

929
01:12:31,860 --> 01:12:36,140
again i'll show you the growth rates this this is exponential growth this is what i was saying

930
01:12:36,140 --> 01:12:40,900
about the interest rate like you can think of this as the interest rate think of it as the growth

931
01:12:40,900 --> 01:12:43,720
rate of the stock market whatever it is the growth rate of the stock market but also think about

932
01:12:43,720 --> 01:12:48,440
interest rate two percent in the 1800s is how the stock market grew when the fed was founded until

933
01:12:48,440 --> 01:12:53,900
1971, 4.73%. Straight line, compound growth. Take out the noise. Yes, we had the Great Depression,

934
01:12:54,020 --> 01:13:01,700
a lot of volatility, whatever. Brass tax, 5% in the early 1900s. Late 1900s, 9.5%. This is when I

935
01:13:01,700 --> 01:13:05,840
was studying finance. We would talk, you know, getting a 10% return was extreme in the stock

936
01:13:05,840 --> 01:13:17,480
market. Now, from 2009 till today, we're at a 12% per year compounded growth rate. So basically,

937
01:13:17,480 --> 01:13:26,980
so again, I know I'm going through a lot here, Danny, but the bottom line is I'm trying to

938
01:13:26,980 --> 01:13:31,140
visualize, and Jeffrey West actually uses this phrase in the book. He says faster and faster

939
01:13:31,140 --> 01:13:36,660
treadmills of growth. You can even see it in the stock market if you go far enough back and

940
01:13:36,660 --> 01:13:45,640
look, the dollar is, there are many currencies in the currency graveyard, right? Thousands of

941
01:13:45,640 --> 01:13:51,560
currencies. I'm not saying, I'm not predicting a collapse of the dollar or whatever imminent,

942
01:13:51,700 --> 01:13:58,140
I have no idea. But what we do see with the US stock market, with the dollar, with many currencies,

943
01:13:58,460 --> 01:14:04,500
is faster and faster growth rates of debt, faster and faster growth rates of the stock market.

944
01:14:04,800 --> 01:14:10,600
And then there's a question, how does that work with Bitcoin's interestingly novel model of being

945
01:14:10,600 --> 01:14:13,980
a new digital currency that's not controlled by anybody.

946
01:14:14,340 --> 01:14:19,280
But the market is showing a sort of actually declining growth rate, still growing quite

947
01:14:19,280 --> 01:14:21,760
fast, but it's scaling in a different way.

948
01:14:21,980 --> 01:14:26,660
It's a curious, I think it's a very curious overlay to this question of what could happen

949
01:14:26,660 --> 01:14:27,480
with the singularity.

950
01:14:28,260 --> 01:14:33,880
So if I put on Bitcoin now, back to our beautiful power curve, hopefully you start to see where

951
01:14:33,880 --> 01:14:34,160
I'm going.

952
01:14:34,160 --> 01:14:35,820
I don't even know how you meant to read this.

953
01:14:36,480 --> 01:14:36,760
Right.

954
01:14:36,760 --> 01:14:42,100
So it's the same power curve, but on the right axis, I'm showing trailing 12-month growth.

955
01:14:42,540 --> 01:14:45,640
Now, the noisy one is here, right?

956
01:14:45,900 --> 01:14:47,560
Trailing 12-month growth.

957
01:14:47,660 --> 01:14:51,440
Obviously, you can get thousands of percent, hundreds of percent, whatever.

958
01:14:53,920 --> 01:14:56,060
This is, you know, and then it can go negative.

959
01:14:56,480 --> 01:14:58,440
Let's just take that off, take the noise off.

960
01:14:58,520 --> 01:15:02,940
This is actually a curve trailing 12-month.

961
01:15:02,940 --> 01:15:05,900
It's just the trailing 12-month return on the OLS, right?

962
01:15:05,900 --> 01:15:07,320
on the average power curve.

963
01:15:07,600 --> 01:15:10,040
So now we can start to see the smooth curve of Bitcoin.

964
01:15:10,160 --> 01:15:12,520
And then here's, you see, we're at that 40% right there.

965
01:15:13,160 --> 01:15:18,620
As of today, July 2026, 40% return, $62,000 Bitcoin.

966
01:15:20,940 --> 01:15:25,420
If I back this out, I used to have this go out to like 2100.

967
01:15:25,900 --> 01:15:29,480
I told you that it's 2070 when it will hit 10%,

968
01:15:29,480 --> 01:15:32,380
but let's just look at when it will hit other levels.

969
01:15:32,380 --> 01:15:38,200
So it hits 30% on a curve, Bitcoin power curve in 2031.

970
01:15:38,840 --> 01:15:42,920
In 2041, it hits 20%.

971
01:15:42,920 --> 01:15:48,520
And in 2070, it hits 10%.

972
01:15:48,520 --> 01:15:51,200
So actually that gives you a scale that it's not linear.

973
01:15:51,380 --> 01:15:53,080
It's not constant, right?

974
01:15:53,120 --> 01:15:53,880
It slows.

975
01:15:55,300 --> 01:16:02,240
And even the rate of this slowing, right, can take longer, right?

976
01:16:02,380 --> 01:16:05,400
So 2031, 30%.

977
01:16:05,400 --> 01:16:07,240
Right now, 40% per year.

978
01:16:07,500 --> 01:16:10,320
By 2031, it's projected to slow to 30% a year.

979
01:16:10,560 --> 01:16:14,300
By 2041, it's projected to be 20% per year.

980
01:16:14,900 --> 01:16:19,340
If we match that up with this idea of faster and faster treadmills,

981
01:16:20,440 --> 01:16:33,688
and who to say what going to happen in the next 10 years of the stock market But we at 12 right now By the way that without dividends So if you reinvest dividends you got another 2 on there at least So you getting close to 15 as it is in the stock market

982
01:16:34,148 --> 01:16:37,608
But say we have another crisis, then we have another round of money printing.

983
01:16:39,208 --> 01:16:46,048
It does seem like the late 2030s, 2040s, we're going to have some fireworks because

984
01:16:46,048 --> 01:16:50,408
based on the models that we have with Bitcoin versus the numeraire of the dollar,

985
01:16:50,808 --> 01:16:55,928
this is the growth rate that it's tracking. And it's going to cross with a faster and faster

986
01:16:55,928 --> 01:17:02,908
stock market probably by late 2030s, maybe early 2040s. Yeah. The idea of being able to buy like

987
01:17:02,908 --> 01:17:08,908
an S&P index and get more returns than buying Bitcoin is weird. And I don't know what it means.

988
01:17:08,908 --> 01:17:18,268
right likewise uh what it would mean is if if what it would mean is is that bitcoin has been

989
01:17:18,268 --> 01:17:23,968
co-opted into an exponential asset sailor has this other sort of way too cheeky way that he

990
01:17:23,968 --> 01:17:29,528
describes what he thinks is going to happen have you heard him say basically uh that bitcoin's

991
01:17:29,528 --> 01:17:35,748
going to settle into a 21 return i don't know if you've heard him say this what does what does he

992
01:17:35,748 --> 01:17:40,348
mean well it's it's not what he means that it's going to go exponential and by the way he's never

993
01:17:40,348 --> 01:17:45,208
uh give you a little inside baseball on this i know that he's talked to giovanni a little bit

994
01:17:45,208 --> 01:17:49,768
he said you know hey congrats on the power law uh giovanni met him at some event and then

995
01:17:49,768 --> 01:17:55,448
at these things you can't really talk uh quickly right and you know sailor's obviously an in-demand

996
01:17:55,448 --> 01:18:00,208
fella at these conferences and and he tried to get into it a little bit but sailor basically said

997
01:18:00,208 --> 01:18:04,168
you know i think it's at the end of the day bitcoin's an exponential asset it's going to

998
01:18:04,168 --> 01:18:09,788
grow exponentially. To be clear, none of us that have been studying this for a long time see it

999
01:18:09,788 --> 01:18:14,268
right now going exponentially. It could in the future. But what does that mean if it goes

1000
01:18:14,268 --> 01:18:19,468
exponential? First of all, this growth rate turns into a straight line. So by the way,

1001
01:18:19,528 --> 01:18:24,108
if you hold Bitcoin, I'm not saying this will be like a bad thing number go up wise, right?

1002
01:18:24,108 --> 01:18:30,068
It actually would portend, if we go back to this chart, right? The original chart I showed you,

1003
01:18:30,068 --> 01:18:37,368
exponential versus power, take off log, log, just look at log linear. If we get back on exponential

1004
01:18:37,368 --> 01:18:42,028
growth, which is the straight line, common sense tells us constant growth is faster than proportional

1005
01:18:42,028 --> 01:18:47,928
growth. It's going to be good, right? It's going to be good for Bitcoin holders. On the one hand,

1006
01:18:47,928 --> 01:18:52,108
the number go up. But on the other hand, this is where you get into the idea of,

1007
01:18:52,588 --> 01:18:57,628
you know, what does that actually mean? Is TradFi co-opting the system? Can anyone

1008
01:18:57,628 --> 01:19:04,288
claim any Bitcoins on an ETF? Can you withdraw Bitcoins from exchanges after 10 years?

1009
01:19:04,988 --> 01:19:10,328
There are a lot of things that could play into this. And by the way, if some of those play out,

1010
01:19:10,328 --> 01:19:14,248
perhaps as some entrenched players in Bitcoin want, then I think, yeah, Bitcoin could go

1011
01:19:14,248 --> 01:19:19,788
exponential. It could match, it could mirror the exponential growth rate of the rest of the

1012
01:19:19,788 --> 01:19:25,928
financial system. One of my favorite quotes was from Thomas Pacquiao from PubKey. He said on a

1013
01:19:25,928 --> 01:19:30,748
show we did years ago. We're all going to be rich and depressed because the project failed. And that

1014
01:19:30,748 --> 01:19:35,748
seems like the example where we're all rich and depressed. I actually remember that show. Thomas

1015
01:19:35,748 --> 01:19:40,188
is a great dude. And what he is saying is 100% what I am saying here. I'm just trying to show

1016
01:19:40,188 --> 01:19:46,988
you the math of it. I'm trying to show you the math of it. So this is my grand theory is basically

1017
01:19:46,988 --> 01:19:54,148
a lot of people that are in the system have a lot of fiat interest that they need to pay back.

1018
01:19:54,148 --> 01:19:57,048
In order to pay that back, they have to stay above the level of interest.

1019
01:19:57,168 --> 01:19:58,928
To do that, you have to be exponential.

1020
01:19:59,088 --> 01:20:02,148
To be exponential, it could require some sacrifices.

1021
01:20:02,408 --> 01:20:03,828
It could require a lot of fiat interest.

1022
01:20:03,928 --> 01:20:05,608
It could require you not holding your keys.

1023
01:20:05,728 --> 01:20:10,488
It could require an overbearing state on here.

1024
01:20:10,548 --> 01:20:12,688
There's a lot of things that could go into that factor.

1025
01:20:12,808 --> 01:20:18,928
It also might be a totally different scenario, which is Bitcoin turning the system power.

1026
01:20:19,288 --> 01:20:21,908
But again, that's a different scenario.

1027
01:20:21,908 --> 01:20:39,388
Yeah, but I want to know what that scenario is, because if Bitcoin going exponential is essentially, if we simplify it to that being Bitcoin being co-opted by the financial system as we know it today, what's the inverse of that? What is Bitcoin co-opting the financial system into power? What does that mean?

1028
01:20:39,388 --> 01:20:44,208
I think it means we started to get into a little bit, but I think it means we're free.

1029
01:20:45,208 --> 01:20:47,428
There might be some sort of money monopoly.

1030
01:20:47,568 --> 01:20:50,168
You know, I always say the dollar is the best looking horse in the glue factory, right?

1031
01:20:50,208 --> 01:20:51,068
It's around for now.

1032
01:20:51,128 --> 01:20:52,088
It's been around for a long time.

1033
01:20:52,208 --> 01:20:55,348
There's still thousands and thousands of currencies in the graveyard.

1034
01:20:55,888 --> 01:21:01,288
I'm not saying the dollar definitely avoids it or definitely doesn't.

1035
01:21:01,288 --> 01:21:17,768
But if Bitcoin persists globally, and by the way, if mining is free globally, where people can mine, people can trade, people can send, you can withdraw your keys.

1036
01:21:17,768 --> 01:21:32,108
You know, you've got things like Fetty Mints, super popular, or Chalmian Mints, or whatever, whether that's a layered system, which it's going to have to be, obviously. But the layered system is also very, very easy to sort of get back in the castle and get back to on-chain Bitcoins.

1037
01:21:32,108 --> 01:21:58,008
If all of those things persist, then I think there's a real possibility that we stay in that free cypherpunk Bitcoin world where Bitcoin keeps growing as it is. And then once we do have that crossing point, which I also think about a lot, people will start to say, look, I don't want to do it. I don't want to put my capital at risk, hope that I get 20% in the S&P or whatever. I'd just rather hold Bitcoin.

1038
01:21:58,508 --> 01:21:59,928
I'll invest in some projects.

1039
01:21:59,928 --> 01:22:02,528
I'll pay for employees or whatever.

1040
01:22:03,148 --> 01:22:05,088
But the model might look a little bit different.

1041
01:22:05,288 --> 01:22:07,028
The model might be more equity.

1042
01:22:07,368 --> 01:22:11,208
It might be very, very short-term debt, factoring, invoicing type debt.

1043
01:22:13,648 --> 01:22:15,368
Short-term is the best way I can say it.

1044
01:22:15,488 --> 01:22:18,168
Because imagine putting these together now.

1045
01:22:18,568 --> 01:22:21,648
Sorry, not this one, but the stair stepper, right?

1046
01:22:21,708 --> 01:22:25,228
Where we 12%, 50%, and then the declining interest rate.

1047
01:22:25,228 --> 01:22:30,708
the only way that this system holds, which is the power, this mathematical relationship holds,

1048
01:22:31,428 --> 01:22:39,268
is if people sort of say, okay, I don't feel like I need to chase Apple at 20%

1049
01:22:39,268 --> 01:22:45,328
CAGR. I'd rather hold Bitcoin. I'd rather do it a different way. And by the way,

1050
01:22:45,448 --> 01:22:53,728
I'm not sold on either. To me, it's 50-50. It's just 50-50. I see this is why I'm not married,

1051
01:22:53,728 --> 01:22:54,788
that Bitcoin stays power.

1052
01:22:54,968 --> 01:22:58,428
I think Bitcoin could lose its power function,

1053
01:22:58,768 --> 01:23:00,528
turn into an exponential like Saylor wants.

1054
01:23:00,668 --> 01:23:02,348
And so back to what he said,

1055
01:23:02,388 --> 01:23:03,848
he has said this sort of cheeky number,

1056
01:23:03,988 --> 01:23:05,708
like, oh, it just settles into 21% per year.

1057
01:23:06,128 --> 01:23:08,988
That's a total number pulled out of thin air.

1058
01:23:09,128 --> 01:23:11,548
It just obviously has the number 21

1059
01:23:11,548 --> 01:23:13,468
and it happens to be 11 percentage points

1060
01:23:13,468 --> 01:23:14,768
higher than his cost of capital.

1061
01:23:14,888 --> 01:23:15,568
So it sounds good.

1062
01:23:16,068 --> 01:23:18,488
There's no evidence in the Bitcoin power curve

1063
01:23:18,488 --> 01:23:20,128
that it's going to stop at 21% per year.

1064
01:23:20,248 --> 01:23:23,228
By the way, 20% is right out here, 2041.

1065
01:23:23,728 --> 01:23:36,868
wait where is it there it is 2040 get 2040 2041 so this is why this is this is part of my grand

1066
01:23:36,868 --> 01:23:44,128
theories basically this is why i think late 2030s early 2040s we're lining up with the

1067
01:23:44,128 --> 01:23:50,668
jeffrey west sornette singularity idea ray kurzwell by the way says the same thing uh late 2030s

1068
01:23:50,668 --> 01:24:01,168
We're lining up with probably $100 trillion valuation in Bitcoin, $100 trillion valuation in base money, and anything goes.

1069
01:24:01,628 --> 01:24:03,788
By the way, to throw one more chart at you, here's the monetary base.

1070
01:24:03,948 --> 01:24:04,928
We talk about this a lot, right?

1071
01:24:05,288 --> 01:24:06,848
I haven't updated this for the third quarter.

1072
01:24:07,528 --> 01:24:09,328
Sorry, for the first quarter yet, even.

1073
01:24:09,328 --> 01:24:12,428
I have broad money and base money as of 2020.

1074
01:24:12,568 --> 01:24:13,308
These things move slower.

1075
01:24:13,468 --> 01:24:15,348
We can look at Fed balance sheets if you want after this.

1076
01:24:15,888 --> 01:24:17,208
We can leave much more updated.

1077
01:24:17,208 --> 01:24:23,688
uh here's the monetary base over 50 years i don't want to change too many topics but basically this

1078
01:24:23,688 --> 01:24:27,048
is the money supply that's comparable with bitcoin it's world central bank money all right it's about

1079
01:24:27,048 --> 01:24:34,108
26.4 trillion dollars as of 2025 year end 26.4 if you run these same regressions notice how we're

1080
01:24:34,108 --> 01:24:38,828
you're an expert now danny on exponential versus power you see straight lines on log linear

1081
01:24:38,828 --> 01:24:43,928
base money is an x it's an exponential function notice where are we in the realm of probabilities

1082
01:24:43,928 --> 01:24:46,208
way low, way low, right?

1083
01:24:47,068 --> 01:24:47,688
We need more liquidity.

1084
01:24:48,348 --> 01:24:50,208
Right. We're at the bottom end.

1085
01:24:50,928 --> 01:24:52,848
And again, I'm not saying it's going to happen tomorrow.

1086
01:24:53,428 --> 01:24:55,468
Fed is being a little bit cagey with their minutes.

1087
01:24:55,628 --> 01:24:57,428
Warsh is, you know, the sort of hawk dove,

1088
01:24:57,668 --> 01:25:03,448
Griffin sort of, you know, amalgamation.

1089
01:25:03,568 --> 01:25:04,608
We're not quite sure where he's going to be.

1090
01:25:04,668 --> 01:25:07,208
But basically, as John Tamney,

1091
01:25:07,408 --> 01:25:10,108
who has a great book on money long ago,

1092
01:25:10,108 --> 01:25:12,488
said presidents usually get the Federal Reserve chairman they want.

1093
01:25:12,488 --> 01:25:15,268
and we know what Trump wants.

1094
01:25:15,428 --> 01:25:17,048
So lower interest rates, more money printing.

1095
01:25:17,188 --> 01:25:19,088
But anyway, we are at the lower end of the curve globally.

1096
01:25:19,808 --> 01:25:23,868
We were at the higher end of the curve at 30 trillion in 2021.

1097
01:25:24,448 --> 01:25:25,328
So here's the point.

1098
01:25:27,028 --> 01:25:29,668
This is another wrench in the scenario.

1099
01:25:29,848 --> 01:25:31,928
Sorry, that's further back data, which is not really comparable.

1100
01:25:32,828 --> 01:25:36,368
At 50-year data, you look at this CAGR.

1101
01:25:36,628 --> 01:25:39,068
This is the CAGR of the exponential OLS right there.

1102
01:25:39,128 --> 01:25:40,488
CAGR, 10.2% per year.

1103
01:25:41,068 --> 01:25:41,908
10.2% per year.

1104
01:25:41,908 --> 01:25:49,028
It's interesting there that so when you pulled up the other chart of the S&P, it was 2% way back.

1105
01:25:49,288 --> 01:25:51,868
It's essentially still 2% at 12% today.

1106
01:25:55,848 --> 01:25:57,208
No, no.

1107
01:25:57,948 --> 01:26:02,208
No, you mean it's essentially growing the way that it was in the 1800s?

1108
01:26:02,568 --> 01:26:02,808
Yeah.

1109
01:26:03,028 --> 01:26:03,868
No, it's not.

1110
01:26:04,028 --> 01:26:05,388
Here's the interesting kick.

1111
01:26:05,448 --> 01:26:06,748
It's another wrench in the formula.

1112
01:26:07,648 --> 01:26:10,588
Money supply is actually growing slower since 2008.

1113
01:26:10,588 --> 01:26:11,608
So is U.S. debt.

1114
01:26:11,908 --> 01:26:15,288
So here, you might think that it's growing faster.

1115
01:26:15,388 --> 01:26:17,488
We had all this money printing in 2008.

1116
01:26:17,488 --> 01:26:19,728
And yes, it does kind of depend on where your starting date

1117
01:26:19,728 --> 01:26:20,568
when you do these regressions.

1118
01:26:20,628 --> 01:26:23,048
But I started year-end 2008, by the way,

1119
01:26:23,128 --> 01:26:24,328
same time that Bitcoin started.

1120
01:26:24,668 --> 01:26:28,328
So this is 1971 trend.

1121
01:26:28,488 --> 01:26:30,648
So you see the trend here, 10.2% CAGR.

1122
01:26:31,048 --> 01:26:34,048
Here's another chart where I started in 2008.

1123
01:26:34,568 --> 01:26:37,528
Notice, first chart, second chart.

1124
01:26:37,788 --> 01:26:38,968
First chart, second chart.

1125
01:26:39,148 --> 01:26:41,168
When you start the regression later,

1126
01:26:41,168 --> 01:26:44,188
it's actually shallower growth.

1127
01:26:44,348 --> 01:26:46,368
And I'll show you the CAGR, 7.7.

1128
01:26:47,108 --> 01:26:51,408
So in the last 15, 20 years,

1129
01:26:51,668 --> 01:26:54,448
I believe that the powers that be,

1130
01:26:54,788 --> 01:26:56,308
the whatever, the central banks,

1131
01:26:56,368 --> 01:26:58,288
they realize how bad they screwed the pooch

1132
01:26:58,288 --> 01:27:01,528
in 2006, 7 and 8 with low interest rates

1133
01:27:01,528 --> 01:27:04,088
and everything else and the bailouts now.

1134
01:27:04,328 --> 01:27:07,628
So they're very cautious actually about extending-

1135
01:27:07,628 --> 01:27:08,308
How is that possible?

1136
01:27:08,568 --> 01:27:09,768
How is it lower?

1137
01:27:09,768 --> 01:27:10,268
Yeah.

1138
01:27:11,168 --> 01:27:13,668
When we know they're printing trillions and trillions of dollars

1139
01:27:13,668 --> 01:27:16,688
over the last, especially over the last, like, six years,

1140
01:27:16,788 --> 01:27:17,468
2020, 2021.

1141
01:27:18,128 --> 01:27:18,368
Right.

1142
01:27:18,568 --> 01:27:21,868
The bottom line is they don't always print money.

1143
01:27:22,088 --> 01:27:23,468
They print more, they print less.

1144
01:27:24,588 --> 01:27:26,588
You know, the Federal Reserve wasn't printing money

1145
01:27:26,588 --> 01:27:28,948
from 2014 until 2020.

1146
01:27:29,648 --> 01:27:29,848
Yeah.

1147
01:27:29,948 --> 01:27:31,788
A lot of people don't sort of know that.

1148
01:27:31,888 --> 01:27:33,708
Now, other currencies were.

1149
01:27:33,808 --> 01:27:34,928
You see, it was generally going up.

1150
01:27:35,608 --> 01:27:39,348
And there's a huge spike in 2020, 2021.

1151
01:27:39,348 --> 01:27:40,728
But since, you know...

1152
01:27:41,168 --> 01:27:46,288
This is a long five years now where we've taken the money supply back from 30 trillion down to 26.

1153
01:27:46,468 --> 01:27:53,508
And if you just run the math from 2008, when Bitcoin started until today, this is the actual CAGR.

1154
01:27:53,628 --> 01:27:54,748
It's only like 8%.

1155
01:27:54,748 --> 01:27:55,928
So let's just round it.

1156
01:27:56,348 --> 01:28:02,988
8%, 7.7%, 8% versus 10% over the 50 years, all in dollar terms.

1157
01:28:04,028 --> 01:28:09,068
By the way, not to throw another wrench in it, but it's actually probably, both are probably faster than that.

1158
01:28:09,068 --> 01:28:14,108
because if you measure, if you do these regressions all in their native currency and then take the

1159
01:28:14,108 --> 01:28:18,108
average, it looks different than if you do it in dollar terms. It's showing dollar supremacy

1160
01:28:18,108 --> 01:28:21,968
because they get weaker against the dollar. I don't want to throw too much wrench in that,

1161
01:28:22,008 --> 01:28:25,388
but they are printing a little bit faster than this in their native term. It's true,

1162
01:28:25,388 --> 01:28:44,896
weighted globally Let forget that for now 10 versus 8 10 50 trend 8 2008 trend in the money supply that another wrench in the curve or another wrench in the calculation where I think they are well aware of the damage that they have

1163
01:28:44,896 --> 01:28:52,736
done in intervening in the market so much. They think that they have all these tools like paying

1164
01:28:52,736 --> 01:28:58,016
interest on reserves and they're just more cautious, so on and so forth. And actually,

1165
01:28:58,016 --> 01:29:06,916
the data shows it. Like U.S. federal debt has the same trend. Until 2008, U.S. federal debt was

1166
01:29:06,916 --> 01:29:13,056
growing faster than it has been since 2008. It still grows. It's still huge, right? I mean,

1167
01:29:13,116 --> 01:29:18,296
this is the nature of compounding. But that exponential trend over the epoch is slightly

1168
01:29:18,296 --> 01:29:23,556
slower. So again, it's a little bit of a wrench in the thesis of this one, where the stock market

1169
01:29:23,556 --> 01:29:24,996
for sure is growing faster.

1170
01:29:26,176 --> 01:29:29,356
But does it matter if they're aware of the issues with that trend?

1171
01:29:29,536 --> 01:29:32,056
Because when push comes to shove, if they need to,

1172
01:29:32,136 --> 01:29:33,416
they're still going to print money.

1173
01:29:33,876 --> 01:29:34,556
Sure, they will.

1174
01:29:35,156 --> 01:29:38,336
We can be sure that that's the main thing that they know how to do,

1175
01:29:38,396 --> 01:29:40,496
and that's how they deal with crises,

1176
01:29:40,496 --> 01:29:45,756
is to add liquidity or basically add zeros to banks' accounts

1177
01:29:45,756 --> 01:29:47,896
with them at their master account.

1178
01:29:48,156 --> 01:29:51,136
So it's a digital money print that they do,

1179
01:29:51,736 --> 01:29:52,756
as opposed to a physical.

1180
01:29:52,756 --> 01:29:54,016
They also do physical money print.

1181
01:29:54,676 --> 01:29:56,316
And they have started that too, right?

1182
01:29:56,436 --> 01:30:00,556
The Fed balance sheet is growing again after a few years of doing nothing but drop, essentially.

1183
01:30:01,036 --> 01:30:01,336
Right.

1184
01:30:01,536 --> 01:30:02,756
Here's the Fed balance sheet.

1185
01:30:03,536 --> 01:30:11,056
You see, it has been growing since November of last year, ever so slightly, and maybe even

1186
01:30:11,056 --> 01:30:11,936
cresting a little bit.

1187
01:30:12,156 --> 01:30:17,096
And then we have, you know, sort of hawkish dovish mixed signals from the new Fed group.

1188
01:30:17,236 --> 01:30:21,216
They're not really, they're very, they just released their minutes this week and they're

1189
01:30:21,216 --> 01:30:21,916
very cagey.

1190
01:30:21,916 --> 01:30:29,476
but some people think they might even hike in September. We'll see. But I think I have one of

1191
01:30:29,476 --> 01:30:35,856
the ECB as well. No, this is the ECB balance sheet. Okay. So it's about 6.12 trillion euros.

1192
01:30:35,916 --> 01:30:40,776
Again, when I say balance sheet for people that are new to this, it's the monetary base. This is

1193
01:30:40,776 --> 01:30:44,576
the asset side. The liability side is mostly the monetary base. There's a little bit of other

1194
01:30:44,576 --> 01:30:50,356
things sometimes, but just keep it simple. ECB, since it's been founded in 1999, has grown its

1195
01:30:50,356 --> 01:30:58,276
balance sheet at a KG of 10.6%. So notice that's actually similar to the 50-year curve,

1196
01:30:58,496 --> 01:31:03,656
but they as well are at the bottom end, the bottom end of the analysis.

1197
01:31:07,756 --> 01:31:10,056
Time to short fiat and buy Bitcoin.

1198
01:31:11,176 --> 01:31:16,956
Yeah. Yeah. So it all looks good, I would say, if we assume that money printing is good for

1199
01:31:16,956 --> 01:31:22,756
Bitcoin, if we assume there might be some more instability in a very unstable, exponentially

1200
01:31:22,756 --> 01:31:28,496
growing system, and we assume that Bitcoin is a sort of more stable power asset that is still

1201
01:31:28,496 --> 01:31:34,976
growing tremendously at 40% per year and, by the way, discounted to its lowest percentile quantiles,

1202
01:31:35,096 --> 01:31:41,056
all that looks good. But the grand theory, as we've sort of been touching on and off in this

1203
01:31:41,056 --> 01:31:49,656
episode is. I think it's, you know, late 2030s, maybe even a little bit later, as I said,

1204
01:31:50,836 --> 01:31:54,656
they can push if they really want to, they can take off the gas. And they did that last five

1205
01:31:54,656 --> 01:32:01,436
years. So it's just the nature. All I do is measure this stuff, Danny. I try to give people

1206
01:32:01,436 --> 01:32:06,116
the best way to look at this stuff just by measuring rather than talking. But I'm giving

1207
01:32:06,116 --> 01:32:14,736
you hard facts, hard data. Stock markets growing faster, exponentially growing, sort of stair-stepper,

1208
01:32:14,856 --> 01:32:21,716
super exponential growth. Base money is actually, it's growing fast, but it's over the last 15,

1209
01:32:21,796 --> 01:32:27,276
20 years, it's actually growing at a slower rate of return. US debt as well. So there's a mix there.

1210
01:32:28,016 --> 01:32:32,936
But if we want to come back and just think about Bitcoin as this asset, we try to grow it,

1211
01:32:32,936 --> 01:32:38,436
measure it, how it's growing and everything. It's looking pretty good. Never financial advice

1212
01:32:38,436 --> 01:32:44,636
always. And one more thing just to show you here. If we take the lows, let's say you bought in the

1213
01:32:44,636 --> 01:32:50,896
low here. Let's actually even show you the evolving exponential trend, which is here,

1214
01:32:51,116 --> 01:32:58,336
right? Which we talked about this one. Let's say in 2022, when Peter Zion was saying it was

1215
01:32:58,336 --> 01:33:02,156
overvalued, you held it just until here, we got back to trend. Okay. This window is 2022.

1216
01:33:02,936 --> 01:33:03,316
uh,

1217
01:33:03,316 --> 01:33:05,376
December until we got here.

1218
01:33:05,496 --> 01:33:05,516
I,

1219
01:33:05,676 --> 01:33:06,376
the window is a lot of bit,

1220
01:33:06,476 --> 01:33:07,216
a little bit wider,

1221
01:33:07,316 --> 01:33:08,016
but what you see,

1222
01:33:08,096 --> 01:33:08,896
I'll just show you the dates.

1223
01:33:09,216 --> 01:33:09,916
It's 2020.

1224
01:33:10,056 --> 01:33:10,176
I,

1225
01:33:10,476 --> 01:33:10,576
the,

1226
01:33:10,736 --> 01:33:12,196
what I just zoomed in was 2022,

1227
01:33:12,476 --> 01:33:15,156
December 7th until holding until 2024,

1228
01:33:15,156 --> 01:33:16,256
March.

1229
01:33:16,296 --> 01:33:20,176
That's actually when the price got from it's low to trend.

1230
01:33:20,276 --> 01:33:24,396
Let's look at the actual Kager that you could have earned right there.

1231
01:33:25,696 --> 01:33:26,656
176%,

1232
01:33:26,656 --> 01:33:27,936
176%.

1233
01:33:27,936 --> 01:33:29,576
When the trend itself,

1234
01:33:29,576 --> 01:33:31,156
um,

1235
01:33:31,156 --> 01:33:31,656
um,

1236
01:33:32,936 --> 01:33:57,796
Well, this is a little bit different because it's evolving. Let me go back to this one just to show you the trend at the time. Here we go. Roughly here to there. It could have even gotten 197%, right? If you bought whatever, it's going to be slightly off. 180, 190% CAGR. The trend itself at the time was 48%. 48% was the power curve trend. Now we're down to 40.

1237
01:33:58,236 --> 01:34:02,976
So you can still, in Bitcoin, make many multiples over the trend.

1238
01:34:03,096 --> 01:34:06,376
Even though I tell you again and again and again, I tell people it's doubling every two years,

1239
01:34:06,456 --> 01:34:08,116
but that doubling time will increase.

1240
01:34:08,576 --> 01:34:09,856
The rate of growth will decrease.

1241
01:34:10,316 --> 01:34:14,716
You can still, if you pick the right moments, and by the way, now seems to be a right moment,

1242
01:34:14,896 --> 01:34:17,576
and six months from now could still be the right moment.

1243
01:34:17,676 --> 01:34:20,236
I'm not saying we're out of this bearish period.

1244
01:34:20,636 --> 01:34:24,896
But if you have the whole encompassing view, you understand statistics,

1245
01:34:24,896 --> 01:34:29,436
you understand how this stuff is working. Statistically, we're in a very good place for

1246
01:34:29,436 --> 01:34:36,276
a bullish Bitcoin hodler. Yeah, who knows if it's the bottom, but it's not an area you're

1247
01:34:36,276 --> 01:34:41,936
probably going to regret buying. The interesting thing to me is this, whatever happens mid to late

1248
01:34:41,936 --> 01:34:47,796
2030s, it's like perfectly in the first turning, two worlds, Bitcoin and the financial system

1249
01:34:47,796 --> 01:34:53,616
collide. Who knows what happens, but that's exciting. I can't wait to see it. Yeah, it really

1250
01:34:53,616 --> 01:35:01,436
is. We'll be here for it, right? Danny, I think it's, if you look for it, you will find all sorts

1251
01:35:01,436 --> 01:35:06,676
of crazy numbers, conspiracies, thoughts about, you know, if gold's coming back or whatever. But,

1252
01:35:07,236 --> 01:35:11,176
you know, if we can measure the Bitcoin system, measure the TradFi system,

1253
01:35:11,656 --> 01:35:15,956
there's a lot of interesting things happening in late 2030. So I think that's pretty cool.

1254
01:35:16,276 --> 01:35:20,416
Another thing, just one more here, or we can go longer if you want, but there's

1255
01:35:20,416 --> 01:35:28,776
another chart. There's UTXOs. I like to show against... So let's say Bitcoin's the benchmark

1256
01:35:28,776 --> 01:35:34,716
now. How strong are different currencies within that? And actually, Bitcoin is going to become

1257
01:35:34,716 --> 01:35:41,116
that true measuring stick. So here now, this is the same power curve, but I'm using it.

1258
01:35:41,116 --> 01:35:46,816
I'm starting everything at one on Bitcoin Pizza Day, May 22nd, 2010.

1259
01:35:46,816 --> 01:35:51,716
So it's the same exact curve, but the numbers aren't really going to make sense. It's just,

1260
01:35:51,956 --> 01:35:57,816
you can see the power curve. Bitcoin itself is up 15 million times. So good on the person that

1261
01:35:57,816 --> 01:36:02,156
bought them from Lazlo, right? Since Bitcoin pizza day, 15.5 million times. And the power

1262
01:36:02,156 --> 01:36:06,076
curve is up 34 million times. So you see the discount on the power curve there. We're at 45%

1263
01:36:06,076 --> 01:36:10,096
under the curve. So this is the dollar. Is there a currency that I found that is actually stronger,

1264
01:36:10,096 --> 01:36:14,016
stronger would be lower than the dollar? There is. It happens to be the Swiss franc.

1265
01:36:14,016 --> 01:36:15,736
just slightly

1266
01:36:15,736 --> 01:36:16,936
just slightly

1267
01:36:16,936 --> 01:36:18,336
alright so the Swiss franc

1268
01:36:18,336 --> 01:36:18,636
is

1269
01:36:18,636 --> 01:36:20,516
is

1270
01:36:20,516 --> 01:36:23,696
only up 10 million

1271
01:36:23,696 --> 01:36:24,136
only

1272
01:36:24,136 --> 01:36:25,876
you're only up

1273
01:36:25,876 --> 01:36:26,936
10.6 million

1274
01:36:26,936 --> 01:36:28,076
in Swiss franc terms

1275
01:36:28,076 --> 01:36:29,316
since Bitcoin pizza day

1276
01:36:29,316 --> 01:36:30,056
alright

1277
01:36:30,056 --> 01:36:31,336
but it's very similar

1278
01:36:31,336 --> 01:36:31,496
right

1279
01:36:31,496 --> 01:36:32,416
it's almost identical

1280
01:36:32,416 --> 01:36:32,956
but it's just

1281
01:36:32,956 --> 01:36:33,996
we can say that

1282
01:36:33,996 --> 01:36:35,076
relative to bitcoin

1283
01:36:35,076 --> 01:36:36,236
the Swiss franc

1284
01:36:36,236 --> 01:36:36,876
is the strongest

1285
01:36:36,876 --> 01:36:38,356
dollars next

1286
01:36:38,356 --> 01:36:39,496
but then here's

1287
01:36:39,496 --> 01:36:40,196
here's something cool

1288
01:36:40,196 --> 01:36:40,956
let's look at weaker

1289
01:36:40,956 --> 01:36:42,196
currencies like way weaker

1290
01:36:42,196 --> 01:36:43,356
let's look at turkey

1291
01:36:43,356 --> 01:36:49,956
Turkish Lira. They had the right idea of actually lowering interest rates during massive inflation.

1292
01:36:49,956 --> 01:36:57,876
That was their sort of policy a few years ago. So here you see Bitcoin is doing very well against

1293
01:36:57,876 --> 01:37:02,336
the Turkish Lira. If you are denominated in Lira, you need to save your purchasing power. You'd have

1294
01:37:02,336 --> 01:37:09,656
459 million more times Turkish Lira if you had bought those Bitcoins in 2010. Again, the number

1295
01:37:09,656 --> 01:37:16,076
is not important. It's the level of these colors, basically, or the currencies. And now look at this.

1296
01:37:16,156 --> 01:37:22,036
Let's do the power curve on that. Talk about the power curve breaking, Danny. The Turkish lira

1297
01:37:22,036 --> 01:37:30,196
hasn't even broken. It's above its power curve, its power regression, which I think is pretty

1298
01:37:30,196 --> 01:37:34,296
interesting. Now, it's probably going to go under it, and if it passes, prologue it.

1299
01:37:34,296 --> 01:37:45,576
But notice how in the last cycle, it was under its power curve much shorter than the more dominant global currencies of the dollar and the franc.

1300
01:37:45,656 --> 01:37:46,336
So that's interesting.

1301
01:37:46,976 --> 01:37:48,676
Now let's look at the Argentine peso.

1302
01:37:48,776 --> 01:37:49,356
Just one more.

1303
01:37:52,656 --> 01:37:53,816
Let me find it for you.

1304
01:37:54,616 --> 01:37:55,096
BTCRs.

1305
01:37:55,896 --> 01:37:56,796
There we go.

1306
01:37:57,316 --> 01:37:58,776
And this, by the way, is the official bank rate.

1307
01:37:58,856 --> 01:37:59,856
It's even worse in reality.

1308
01:37:59,996 --> 01:38:02,096
This is not the black market rate, but just to show you.

1309
01:38:02,096 --> 01:38:13,296
So there you'd have 5.8 billion times more Argentine pesos if you bought the Bitcoin with those pesos back in the day in 2010.

1310
01:38:13,756 --> 01:38:17,096
And then let's look at the power curve on that.

1311
01:38:17,356 --> 01:38:18,876
It's not even close to the curve.

1312
01:38:19,296 --> 01:38:20,176
It's never coming back.

1313
01:38:21,116 --> 01:38:24,996
So that shows you, by the way, this idea of breaking.

1314
01:38:25,156 --> 01:38:26,276
Is the power curve breaking?

1315
01:38:26,276 --> 01:38:28,876
Actually, in all currencies, it's a power curve.

1316
01:38:29,316 --> 01:38:30,816
There's a little bit different slopes.

1317
01:38:30,816 --> 01:38:37,316
there's different levels uh none of them have broken and in fact in two of these currencies

1318
01:38:37,316 --> 01:38:42,656
out of four that i'm showing you in this chart the price of those currencies relative to the curve

1319
01:38:42,656 --> 01:38:49,016
that they manifest themselves uh in the bitcoin market it's actually above it's above trend

1320
01:38:49,016 --> 01:38:52,556
probably going to go below soon in the case of turkey if we have a couple more months of

1321
01:38:52,556 --> 01:38:59,716
bearishness but that's how it looks man matt this has been awesome i love that we've done like an

1322
01:38:59,716 --> 01:39:03,556
hour and a half on the power curve i i initially thought this would be like 15 minutes of the

1323
01:39:03,556 --> 01:39:08,916
conversation but it's been awesome um but we'll just have to do it again at some point

1324
01:39:08,916 --> 01:39:13,476
thank you uh thank you for sticking with us i know you've got a sick kid over there

1325
01:39:13,476 --> 01:39:19,396
but um appreciate you guys for dealing again at some point with the takes and uh appreciate it

1326
01:39:19,396 --> 01:39:22,436
tell everyone where you can go check out your youtube channel

1327
01:39:22,436 --> 01:39:28,376
pop up list everything you do yeah you can find me at uh all the platforms at one base money so

1328
01:39:28,376 --> 01:39:29,776
the number one base of money.

1329
01:39:32,176 --> 01:39:33,396
Podcasts, streams, whatever.

1330
01:39:33,536 --> 01:39:35,736
You just go there on Twitter or YouTube

1331
01:39:35,736 --> 01:39:37,416
and you'll find my account.

1332
01:39:37,656 --> 01:39:40,316
And yeah, this is a lot of what I'm doing now every day

1333
01:39:40,316 --> 01:39:41,736
is just trying to dig into the numbers

1334
01:39:41,736 --> 01:39:45,656
of how these trends work in the Bitcoin world

1335
01:39:45,656 --> 01:39:46,856
and in the TradFi world,

1336
01:39:46,936 --> 01:39:47,916
trying to reconcile them.

1337
01:39:48,156 --> 01:39:49,376
And like you said,

1338
01:39:49,776 --> 01:39:52,956
it's going to be an interesting next few years.

1339
01:39:53,036 --> 01:39:55,556
I'm glad to be sharing it with you

1340
01:39:55,556 --> 01:39:56,576
and others in the space, man.

1341
01:39:56,736 --> 01:39:58,256
So happy to do it anytime.

1342
01:39:58,376 --> 01:40:03,936
when can when are you going to open this up so i can use these charts soon hopefully by the fall

1343
01:40:03,936 --> 01:40:09,876
hopefully by the fall you'll be ready to time man ready to go i know i know it's it's it's an effort

1344
01:40:09,876 --> 01:40:15,576
it's a like i said i'm more applied statistics guy so i don't want to just go only this i want

1345
01:40:15,576 --> 01:40:19,796
to get you some economic data some money supply data some other things trying to get it all

1346
01:40:19,796 --> 01:40:24,376
together here shortly i will be a subscriber when you do it um appreciate you man thank you

1347
01:40:24,376 --> 01:40:25,716
no problem danny

1348
01:40:28,376 --> 01:40:58,356
Thank you.