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No other asset has a mass movement or a revolution backing it.

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The largest economy in the world realized, oh, this voting class we need to appeal to.

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There's no politically viable solution other than to support this.

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Bitcoin is like this exogenous variable.

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There isn't a playbook, right?

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The big shift is that it's changed culturally.

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It's becoming this thing where everybody's like, oh, I should probably have a little bit

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of money in Bitcoin.

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And that's how it becomes something everybody has.

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And then it will come to a point when it's going to be a lot easier for people to say, oh, well, I'll just pay you in Bitcoin.

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Bitcoin is going to be at $10 million in probably like seven years.

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I think it's going to happen relatively rapidly.

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Bitcoin is always in everywhere, like one major press release away from a huge change in the perception of it.

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Cheers, man, to with the Bintang.

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With the Bintang.

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To Bali.

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This is the kind of beer that's not nice anywhere apart from Bali.

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I love this beer

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I think this beer is great

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it's funny too

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because when we were at dinner

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the other night

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and there was a bunch

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of other light lagers

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after drinking this

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the whole trip

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I'm just like

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everything else is gross

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I like this

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I'm struggling with the heat here man

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I can feel myself sweating right now

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the first interviews

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I've done outside

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and Bali's not the place for that

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yeah for everyone listening

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Danny's been grinding

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he's been 5am surfing

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every single day

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surfing with some

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pretty heavy hitters

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everybody's saying

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Danny's a top notch surfer

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I don't know about that.

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But it's been pretty fun.

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Today was big.

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Oh, yeah.

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We didn't even talk about it.

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Yeah.

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Well, we're going to go down and have beers.

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Yeah.

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Watch some waves after this.

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But the whole trip, you've been, I wouldn't say shilling me, but we've been talking a lot

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about the idea of where Bitcoin goes from here.

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People like to throw out numbers like Bitcoin's going to a million, Bitcoin's going to 10

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million, infinity.

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And you've kind of been laying out the process for me of how we actually get from where we

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are today to Bitcoin at $10 million. So where do you want to start? Do you start with where we are

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today? Actually, you know what? Before we do that, tell me why you think Bitcoin will go to $10

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million. The number one fundamental reason Bitcoin is going to go to $10 million is because

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no other asset has a mass movement or a revolution backing it. And we can get into the details of a

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lot of that kind of later on. But I think that's the primary thing that makes us distinct because,

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you know, with any asset, there's all these quantitative characteristics that people want

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to apply to an investment. And those are insightful and those are valuable. But certain

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qualitative characteristics are much harder to assess. And that's really important. Like the

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qualitative characteristics are the fundamental drivers behind all these quantitative measures.

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A lot of investors will go and they'll look at the public financials of a stock and they'll say, OK, based on these numbers, we are going to determine this to be a buy, a sell, or a hold, or some sort of classification of it.

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The reality is that everything driving those numbers on paper comes from these qualitative characteristics.

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And when you look at that, the key thing is assessing a management team and what are their core competencies and what are their expertise within.

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And is this the right market for them?

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Do they have integrity?

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and like all these other different behaviors

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that are backing that.

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And you can't just like measure these things, you know?

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And that's the qualitative characteristic,

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I think, of Bitcoin that makes it fundamentally distinct

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from any other investment is just the fact that

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because there's a revolutionary movement backing it,

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there's this perennial bid for demand.

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And really the only other thing that I think exists

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in the world that has that right now is the Federal Reserve.

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When people say, don't fight the Fed,

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There's the Fed put.

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Don't bet against the Fed.

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That is something that's changing now because I think with Bitcoin, we have our own Fed put.

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We have our own, when things go down, we have a mass movement that's buying this.

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And that's something that you can't really stop over time.

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There was this book written by Eric Hoffer called The True Believer.

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Eric Hoffer was a social philosopher, spent his career studying mass movements, revolutions,

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and like what are kind of the commonalities across all of it.

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And, you know, I read that a few years ago

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and it was actually around,

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it was just a friend gave me that book

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when I was getting into Bitcoin.

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And that was one of the most interesting things

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to me about Bitcoin is that like the parallels

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that you kind of have with some of this.

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I could go into this.

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I could kind of like pull up some of the details

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on AI or something.

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Okay, so it's like,

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of these common characteristics within revolutions,

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like the first one's, you know,

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there's a desire for some sort of change.

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And, you know, it says like,

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revolution stem from this deep-seated frustration

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and with the present

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and a yearning for radically different future.

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And Hoffer kind of argues that this desire

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often arises among those who feel their lives

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like meaning or purpose,

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pushing them toward collective action

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or overthrow the status quo.

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Well, we definitely have that.

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And we certainly have that.

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And that's kind of like, you know, ending fiat.

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But really that stems in the public mind

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more from these issues today

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where it's impossible to live.

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It's too expensive to live.

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The wealth inequality is at the worst point since the Great Depression.

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And all these other characteristics that are driving, like, effectively a populist movement within society.

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Yeah.

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Do you think Bitcoin benefits from the idea of, like, the marginalization and then the populist movement on top of that?

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Because Bitcoin is a cure for all the symptoms that we're seeing.

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Certainly, yeah.

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And it's that, you know, let's say that didn't happen.

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If we weren't in this position, then money would probably be much more sound.

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Yeah.

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And that's the tragedy is that people think that today, I would say, like, within the psychology of the population, most people think, or at least people that are aware of these issues, most people just aren't aware of these issues.

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They're just like, why is life expensive?

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But I think most people, of the people that are aware of these issues, they don't, they think it's capitalism's fault.

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Yeah.

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And they're kind of misassociating a lot of these monetary issues with fiscal issues or policy issues.

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So that's one of the key conflations, I think, happening around the world.

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And that's what Bitcoin's changing.

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When we think about what's happened over the past, I would say, seven years when I first started getting involved in this industry, nobody knew the word fiat money.

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I had to explain that.

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I didn't know what that was when I got into Bitcoin.

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Everybody knows that.

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Everybody knows what that means now.

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It's actually kind of like popular, I think, in broader Gen Z circles to talk about like money isn't real.

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And like people are becoming aware of this issue, particularly those most affected by it.

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I think for people in my like age bracket as well, you could probably argue they didn't really know what inflation was.

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Like I think anyone who lived through sort of the 70s and that period of inflation certainly knew what inflation was.

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But like me growing up in the like 90s and 2000s, like it's never something that was like a common topic amongst the like amongst my friendship group anyway.

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I think it's changed certainly like the idea of what fiat is,

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the idea of inflation.

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But then when you talk about like the other people,

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like the people who are blaming this on capitalism,

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I kind of have some sympathy for them.

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Like there's a growing communist Marxist like rhetoric

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going on all over the world.

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And like you see it everywhere,

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like posters up on the wall being like,

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come on our Marxist walk,

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we'll tell you about Marxism, all this kind of stuff.

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And I think they're diagnosing the issue,

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but misdiagnosing the solution.

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Yeah, completely. Because the problem is that with all of these alternatives, the alternatives are take power from one powerful group of people and give it to another powerful group of people, as if that's going to create any sort of change.

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Particularly when the powerful group of people you're giving the power to has a monopoly on violence.

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Can we actually do a bit of a tangent here?

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Yeah.

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Can you explain, like, to anyone listening that might not understand the idea of, we're saying that, I actually think the current system we live in, I mean, Alan Farrington will say it's not capitalist.

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but whatever you want to call it, like crony capitalism,

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isn't real capitalism and why it's not real capitalism

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and why we do actually need real free market capitalism.

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Yeah, it's interesting because just like with a lot of terms,

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they become these, they mean a lot of things to different people, right?

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Like the true definition of capitalism in people's minds,

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it's kind of hard to say at this point what that actually means to a lot of people.

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Fundamentally, it's just like a prioritization of property rights within a society.

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And the argument for that is that it created the wealthiest economy in the world in the shortest period of time from a group of migrants that came to a new country and overthrew a world power from all of that.

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Protecting property rights is the most fundamental aspect to creating wealth because it provides all the necessary incentives for people to pursue wealth in the first place at the highest level.

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So today, it's just that when we argue, so I guess there's two things.

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there's like the fiscal side of it and there's the policy side of it.

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And it's like, okay, so if we are protecting property rights,

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then what isn't protecting a property right?

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And that's like the state's infringement upon them over time.

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And when that happens, whether it's at a federal level,

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whether it's at a state level or whether it's at a localized level,

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there's just been, you know, a continuous reach for more and more influence

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over what we can and cannot do with the things that we own.

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So that has changed very significantly, you know,

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since the inception of our country to where we are today. And, you know, the most popular arguments

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would be, you know, guns, you know, things like that, these fundamental rights that are

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constitutional and attempts at undermining that ultimately, and then creating more and more

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policy that's restrictive upon those behaviors. I think that's one side of it. But that, I think

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that that is a minority of influence compared to what's happening on the monetary side. Because

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with the way that our monetary system works today, we have a board of seven people who make decisions

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about what happens with money or interest rates. And an interest rate is simply just the value of

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time. It's the value of moving value throughout time. And that affects everything. That affects

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every other price of every other asset that you're dealing with. So when you have this board

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that's elected and it's basically elected by like regional organizations, as well as you have

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chairman appointees by the executive branch. It's elected outside of the voting process.

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It's outside of our democracy. And that's why people refer to it as like a quasi government

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institution because it's partially private and partially public. So because of that,

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there's no democracy that goes into this. And because they can impact the value of all property,

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They can effectively undermine your right to that property by influencing it indirectly.

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So that's one of the second order effects, the indirect effects of all policy.

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That's probably one of the major distinctions, I think, between the way conservatives and liberals typically think is liberals often have very direct policy arguments, whereas conservatives try to look at the second order effects that those policies will have at a systemic level.

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And that's kind of the implication here is that when you have centralized monetary policy outside of a democratic system, and it's impacting the asset prices of everything that exists in the US as well as outside of the US, because we're the cog at the center of the wheel of the economy.

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I was going to say that the economic power of the Fed basically is just everyone else is downstream of that.

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So whatever decision they make in the US affects people in Europe, the UK, Australia, the rest of the world, wherever you might be.

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Right. We have ripple effects across the entire world.

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So when we're doing this, we are, it's the most arrogant thing in the world to think that we could have people making these types of decisions.

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And I think that's one of the problems with academics today with a lot of people who have this like centric view that highly complex systems that one, you know, we don't fully understand.

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And two, even if we do understand them, it's very hard to measure them.

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Like actually measuring something at the time when you need to make a policy decision in an economy, it's practically impossible.

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So we're working with bad information.

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We likely don't even understand all the cause and effect relationships that we're playing with.

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And we have a board of seven people that are making these decisions impacting the entire world.

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And like this impacts people's lives in a very, very significant way.

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You know, people have died and starved because of their policy decisions.

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And that's not obviously what's talked about.

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what's talked about is like quantitative models and, you know, hindsight bias and thinking that

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they did decrease the volatility, or at least that's a political pandering that happens to

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justify their existence. But I would say that that's why we don't live in a capitalist society

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is because of the way that the money works. If we had protection of property rights and,

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you know, free markets were open for the vast majority of markets that exist,

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and at least fundamentally for the most important market that exists,

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the cog at the center of the wheel, and that's interest rates.

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on a little bit of a tangent there let's get back to the points that you were making from this book

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Yeah.

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So what was the next one?

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Oh, yeah.

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My man, Eric.

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I love a good Eric.

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There's a lot of good Eric's in Bitcoin, too, by the way.

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Shout out to the Eric's.

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Yeah, so the first one that we were talking about was desire for change.

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And then, like, the second is, like, a presence of frustrated individuals.

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And, like, it attracts people who feel alienated, marginalized, unfulfilled.

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And that's very prevalent today.

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I mean, we have a significant uprise in populism and riots that are occurring.

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So Bitcoin is a very specific group with those people.

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But I think that those are just, you know, kind of the early movers within Bitcoin.

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And there's a lot more people that are unsatisfied and they just haven't realized why yet.

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So that's that's one of the that's another parallel.

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And if we look at, you know, a unifying cause or doctrine like, you know, fuck fiat, fuck banks like fiat money or, you know, in the broader society, like money isn't real.

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Like there's kind of a unifying cause here around all of it where we can see that it provides this vision of like a better world.

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And then the next one's like fanaticism and absolute faith.

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And that's 100% true.

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And this is probably the most interesting thing that he calls out in this book, I think, as it relates to Bitcoin, because it provides me a lot of context.

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I think when we look at like division within Bitcoin, this specific point provides me context where I'm not particularly whether or not I agree with a particular group.

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I know why they exist.

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And that's what it says, like, revolutions are fueled by fanatical believers who exhibit unwavering commitment to the cause, often at the expense of reason or personal ties.

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This blind faith offer explains creates a momentum needed to sustain the movement.

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He's making the point that that will sustain the movement, not sort of unravel the movement.

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Because you can imagine like internal conflict being,

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which we're definitely seeing in Bitcoin at the moment,

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actually being a negative.

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So this is how we kind of categorize this,

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how it grows and sustains over time.

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Because the next one is leadership by men of words,

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fanatics, and then men of practical action,

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men of action in general.

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So it says,

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revolutions progress through stages

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led by articulate intellectuals

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who critique the old order,

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fanatics who push for radical action,

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and pragmatic organizers who consolidate power.

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Hoffer describes how each plays a critical role in sparking, driving, and institutionalizing the revolution.

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So, like, think about that for Bitcoin, right?

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Cypherpunks. These were the people that were writing and critiquing the old order.

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These were the intellectuals that were very, you know, precise with how they thought about things and were highly educated and put together incredibly complex views as to, you know, effectively forecast what a new money on the Internet should look like and do and what the theory supporting that would be.

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So the men of words is almost like what a lot of the cypherpunks were, you know, cypherpunks write code. And then we had the fanatics. And that's like, you know, the people that were just ardent, you know, like Kaiser screaming into the void in the early years. Guys like HODL, like, you know, pushing people along.

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that group is what I think was a, it's a fundamentally necessarily necessary group of

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people to have to spark a catalyst with an organization. You have to drive through emotions

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within people and they have their role. And without them, I don't think Bitcoin would have

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gotten to where it gotten today. I think we're moving into this like men of action phase,

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like the people who are very good at consolidating power and movements together.

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And, um, and that's more like your, you know, CEO leadership type people are the people that

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tend to be much more pragmatic and actionable. I would probably say that I fall most in like that

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type of a category. I'm very meta with how I'll view things. And I definitely have my fanaticism

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on me. But in effect, like I think it's those three groups of people all kind of need each other

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for different roles, whether or not they disagree with each other. So like when I'm looking at

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things in this industry, it's kind of from that framework, like you guys exist for a reason.

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Bitcoin has a cult for a reason.

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And while I'm not like part of necessarily the cult

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of like every ideology that exists within Bitcoin,

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I'm glad that it exists

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because that's what's driving this mass movement.

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So do you think that that,

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because when you look at what's happening today,

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as opposed to like the previous bull market

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or like 2017, we had tons of retail coming in

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and like there was a serious like buzz,

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you could feel it around Bitcoin.

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Like, I don't think that's there at the moment.

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Like, I don't feel that.

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Why do you think like adoption,

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especially like retail level adoption seems to be stalling?

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I don't know how to think about retail adoption as much this cycle.

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Does it still matter?

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Yeah, 100%.

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All adoption matters.

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It's just that I think we have a lot more scale coming in from new forms of adoption.

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When it comes to companies, when it comes to governments,

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when it comes to institutional asset managers,

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I think the most interesting critique basically of what's shifting

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is that there's a trade-off between different types of adoption.

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So more of the fanatic hot alert types of adoption,

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that gives us our Fed put effectively within the Bitcoin price over time.

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And that's important and that'll continue to expand.

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That, in effect, can be volatile at times, I think, within some of those groups.

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And then I think within the new form of adopters coming in,

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while in the beginning they might be much less volatile because they're more systematic with how

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they buy bitcoin they do it consistently they do it over time they do it in an institutionalized

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process they don't just sell it the first you know sign of you know some sort of breakage and

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you know hodlers aren't doing that but a lot of like the 2b hodlers start doing that in the

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beginning and then they become hodlers later the institutions they might be holding it through

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some of the peaks and troughs in the beginning, but they're probably going to be selling more

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later. So they're kind of an inverse form of behavior. And that's an organization that isn't

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really providing that revolutionary mass movement type buying power. So I think that the institutions,

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they're good because they're creating a passive bid and that's decreasing volatility. And that's

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fundamentally changing the way that people are going to perceive the asset of Bitcoin. I think

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one of the things that we look at through our firm is just correlation of Bitcoin with other

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asset prices. I mean, the second we do really get gold-like characteristics in the correlation,

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it's starting to shift that direction over time. That's when we're really rapidly going to take

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the market for gold. And the world's watching that statistic right now. When you say that,

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who do you mean? Who's watching that? Everybody, institutional type guys. I mean, the second that,

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so like right now, I think you see institutions that are thinking through like one to two percent

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type allocations. And BlackRock had their recommendation from two years ago of like,

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or they're not recommendation. They had their statistical study of like an optimized backtested

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portfolio would have had an 82% allocation to Bitcoin. And that's what spawned the whole ETF

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argument. And that's where they're like, we're going to lean into this. And here we are today.

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And I haven't looked at these numbers most recently, but as of a few weeks ago, it was the

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fifth most profitable investment product

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that BlackRock sells.

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That happened within like,

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you know, a little over a year.

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And it's the most rapidly growing financial product launch

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that anybody's had on Wall Street ever.

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So it's worked well.

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They've leaned into it for that reason.

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And, you know, there were like rumors

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that in private client sessions,

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they're recommending like a 30% portfolio allocation

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to like private client groups that they're dealing with.

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So that's kind of the argument is that, you know, maybe the world is shifting from 60, 40 portfolio to like a 33, 33, 33 type portfolio.

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But I think where we're at today is more in the like 1, 2% range.

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A lot of people are kind of dipping their toes in.

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And I think the second, if we were to start to see a negative correlation of Bitcoin with equity markets, that's when that 1 to 2% turns to 30% pretty quickly.

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And I think that's when we take the gold market pretty quickly.

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So what you're talking about there is Bitcoin going from being this risk on asset

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to being a risk off asset like gold.

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Yeah.

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And it's funny because like, I may have this wrong.

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I'm not a financial guy.

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But like when you look at Bitcoin and Bitcoin's properties in,

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let's say like an environment where they're cutting rates,

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the economy is flying like you expect Bitcoin to do well But at the same time if things are going to shit where else do you go Does Bitcoin in its full maturity act as both risk on and risk off

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I think when it's not in its full maturity,

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it acts as a risk on and risk off asset over time.

385
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It's just going up.

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It's just going up rapidly.

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I think it's too hard to view it through the lens of risk on, risk off right now.

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All that's happening right now is it's water flowing through cracks,

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and it's just spreading and spreading,

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and people are adopting it.

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There's a bunch of different ways

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we can look at drivers

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for how people are adopting it.

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I think at maturity

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is when the narratives

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that people understand about it

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start to mature.

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So the buyer behavior with it

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starts to mature at that point.

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And I think like,

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I think, you know,

402
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Bitcoin is a store of value

403
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will be the savings account.

404
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It will be the thing that moves

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when people are selling their,

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you know, investments

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is when they're moving it into Bitcoin.

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And that's when it's more of like

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a negative or neutral type correlation.

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and what kind of scale are you talking about there what will bitcoin be at at that point

411
00:24:22,319 --> 00:24:28,739
yeah that's like so the reason i ask is the thing that i find interesting is like when bitcoin when

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people are viewing bitcoin in that way like the way probably you and i like view bitcoin today is

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that what are you selling bitcoin for like what you're selling bitcoin for becomes like a really

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big question to ask yourself like if i'm going to go out and buy a house to improve my life and like

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you need somewhere to live i understand selling bitcoin but like selling bitcoin to go and be

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frivolous and like do consumer shit. Like I don't really understand. So like if the entire world

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views Bitcoin that way, like what happens to society? There is a tweet I was just reading and

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I'm going to look it up quick because I want to give him credit. This guy, Tim Coatsman, I don't

419
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know who he is, but with a K, but he put this really well. Bitcoin will rotate ownership over

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time because time is more scarce than Bitcoin. And I think that that's the reality is that

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the relationship, like people spending it versus time

422
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is the key consideration.

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And that's kind of what I'm saying.

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It's like, if you need stuff,

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like if all your money's in Bitcoin and you need stuff,

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you sell Bitcoin to buy the stuff you need.

427
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But I wonder what it does to sort of the consumerist world

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that we live in.

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Because when you actually value your money,

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then you're not going to be willing to sell it

431
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to just buy shit off Timo or whatever.

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Right, right.

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And this is like one of the fundamental arguments

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within Bitcoin is the time preference type argument. But like putting all the jargon aside,

435
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it's pretty simple to understand. With the way things work today, if you try to assume as little

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risk as possible with your money, you're losing. You're losing value through inflation. So that

437
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forces people having inflation, having a central bank that's constantly printing the value of the

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money that forces people to spend money on things that they otherwise wouldn't and invest in things

439
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that they otherwise wouldn't. Yeah. Because they have to get a return on capital or they want to

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spend it today because they're not going to be able to spend as much tomorrow. So that's fundamentally

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what happening is that that causes this misallocation of capital within society. And we look at these

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things and we say like, why do people buy all this cheap shit that breaks out of nowhere? And like,

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why aren't we thinking very long-term with how we're building? Because people are thinking short

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term because the structure of interest rates forces us to think in that type of behavior.

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So if we can shift that, if we can make it so that you really don't need to spend your money,

446
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unless it's something you really want, and you really don't need to invest in anything,

447
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unless it's something you really like,

448
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then that's what's going to structurally shift society

449
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in a way that we don't quite understand yet.

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But it should change everybody's behavior

451
00:26:50,599 --> 00:26:51,899
and how they think very fun.

452
00:26:52,079 --> 00:26:53,399
Everybody's going to think more long-term.

453
00:26:54,099 --> 00:26:56,799
And this gets into the Bitcoin urbanism kind of stuff,

454
00:26:56,899 --> 00:26:57,799
where it's like, you go,

455
00:26:58,139 --> 00:27:00,159
places like London are a perfect example of this.

456
00:27:00,439 --> 00:27:01,099
You walk through London,

457
00:27:01,219 --> 00:27:02,939
you see the most beautiful cathedrals,

458
00:27:03,099 --> 00:27:04,379
things from the 15th century,

459
00:27:04,619 --> 00:27:06,639
and then there's just gross glass buildings everywhere.

460
00:27:07,259 --> 00:27:09,499
I think, obviously, actually knowing

461
00:27:09,499 --> 00:27:11,599
what the world looks like in the future is impossible.

462
00:27:11,919 --> 00:27:13,759
And anyone that says they do is a liar.

463
00:27:13,899 --> 00:27:16,059
But there's going to be a radical shift, I think.

464
00:27:16,139 --> 00:27:17,679
If Bitcoin does what we all think it's going to do,

465
00:27:17,739 --> 00:27:19,159
there's going to be a radical, radical shift.

466
00:27:19,339 --> 00:27:19,539
Yeah.

467
00:27:19,919 --> 00:27:22,239
People don't know what it's going to be.

468
00:27:22,419 --> 00:27:23,559
And it's funny because we're trying to,

469
00:27:23,799 --> 00:27:25,859
like a lot of people in Bitcoin that make the arguments of like,

470
00:27:25,919 --> 00:27:27,359
we're going to go into a new renaissance.

471
00:27:27,759 --> 00:27:30,499
And we'll have beautiful, beautiful buildings again.

472
00:27:30,879 --> 00:27:33,479
And I was trying to think of what the argument against that is.

473
00:27:33,859 --> 00:27:36,419
And I think it's really that like,

474
00:27:36,459 --> 00:27:40,319
when we think about how leisure existed today versus back then,

475
00:27:40,319 --> 00:27:48,539
And in terms of like, how do I spend my extra time on different things when they had some degree of wealth and abundance at certain points?

476
00:27:48,759 --> 00:27:50,599
It was just systematically different.

477
00:27:51,159 --> 00:27:56,039
Like in the same way that, you know, we will start upset.

478
00:27:56,179 --> 00:27:59,099
Like we're spending so much time and leisure on like social media and all these other things.

479
00:27:59,099 --> 00:28:00,359
Maybe that does change.

480
00:28:00,679 --> 00:28:04,019
But I think during the Renaissance, it was like, okay, so we have a lot of wealth now.

481
00:28:04,079 --> 00:28:04,759
What are we going to do?

482
00:28:04,879 --> 00:28:05,799
Well, arts.

483
00:28:05,899 --> 00:28:07,639
We're going to do a lot of things in the arts.

484
00:28:07,639 --> 00:28:11,139
And I think that that was heavily influential on what happened with architecture.

485
00:28:11,299 --> 00:28:12,579
Not think, but like we know that.

486
00:28:13,459 --> 00:28:15,799
So the arts was kind of how people spent their free time.

487
00:28:15,879 --> 00:28:17,199
And maybe we go back to that.

488
00:28:17,239 --> 00:28:17,699
I think we do.

489
00:28:18,179 --> 00:28:18,419
Yeah.

490
00:28:18,599 --> 00:28:22,359
Because if you no longer have to worry about your money being worth the same as it is today,

491
00:28:22,879 --> 00:28:24,579
like money is a proxy for time.

492
00:28:24,579 --> 00:28:26,899
And like, if you have more time, what do you do with that time?

493
00:28:27,059 --> 00:28:27,239
Right.

494
00:28:27,259 --> 00:28:30,099
And maybe that is creative endeavors that make the world more interesting.

495
00:28:30,339 --> 00:28:30,679
Right.

496
00:28:30,739 --> 00:28:33,859
But it might be very fundamentally different in nature than the architecture we'd expect.

497
00:28:33,859 --> 00:28:38,899
like you know we could just exist in like a brutalism type architecture for a period of time

498
00:28:38,899 --> 00:28:43,439
which one of my good buddies really likes and i kind of hate that architecture except for that hotel

499
00:28:43,439 --> 00:28:47,819
that we were at out here like like the blade runner looking stuff i can kind of get on board

500
00:28:47,819 --> 00:28:54,799
with it's not beautiful uh but it's a but why do you say we'd go to bruceism um probably because

501
00:28:54,799 --> 00:29:01,179
it's more efficient we've realized and in the way that we search for aesthetic is uh is just

502
00:29:01,179 --> 00:29:06,379
distinct because technology provides us alternative avenues. Like that was the avenue. That was our

503
00:29:06,379 --> 00:29:10,439
technology, right? Like that was a very significant form of technology was the shelters that we were

504
00:29:10,439 --> 00:29:15,479
building. So that was our way of like implementing our aesthetic at that point in time. Who knows

505
00:29:15,479 --> 00:29:19,039
what that'll be in the future? Maybe it'll be a space station. Maybe we're going to have the most

506
00:29:19,039 --> 00:29:22,799
beautiful space stations in the world, you know, and that'll be like the new architecture. But,

507
00:29:23,219 --> 00:29:26,959
you know, I don't know, but I'm guessing it's going to be fundamentally different and we're

508
00:29:26,959 --> 00:29:29,759
not, it's not just going to be the Renaissance and everybody's going to go to church and we're

509
00:29:29,759 --> 00:29:32,079
going to have stained glass on everything all of a sudden.

510
00:29:32,179 --> 00:29:32,999
No, I agree with that.

511
00:29:33,059 --> 00:29:36,539
But what it might change is this idea of just throwing up a building as quickly as possible,

512
00:29:36,719 --> 00:29:39,699
knowing you can rip it down in 20 years and just throw another one up.

513
00:29:39,799 --> 00:29:40,419
Right, right.

514
00:29:41,019 --> 00:29:43,079
Again, it all comes down to time preference.

515
00:29:43,319 --> 00:29:43,579
Totally.

516
00:29:43,879 --> 00:29:48,399
We took a bit of a tangent there, but getting back to where we are now and how we get to

517
00:29:48,399 --> 00:29:50,659
Bitcoin at 10 million or whatever you want to do.

518
00:29:51,199 --> 00:29:54,739
The adoption now is coming from a very different place to past cycles.

519
00:29:54,839 --> 00:29:56,279
We talked about the lack of retail.

520
00:29:56,279 --> 00:30:03,239
This is a naive, somewhat like, I love the idea of retail adoption because I want Bitcoin in the

521
00:30:03,239 --> 00:30:07,579
hands of as many normal people as possible. This cycle doesn't seem to have that. It is

522
00:30:07,579 --> 00:30:13,059
the treasury companies, it's ETFs, it's BlackRock. Is any adoption good adoption?

523
00:30:16,039 --> 00:30:19,559
There's some forms of adoption are better than other forms of adoption.

524
00:30:19,559 --> 00:30:27,019
I think we can look at a completely like, we can take a Puritan view of, not Puritan,

525
00:30:27,139 --> 00:30:32,059
but we can take a very specific view of what would be the ideal form of adoption.

526
00:30:33,099 --> 00:30:36,939
And we can look at everything in hindsight and say, well, this isn't that.

527
00:30:37,679 --> 00:30:44,079
And the reality is that none of us know how this is going to go.

528
00:30:44,379 --> 00:30:46,939
Nobody truly knows the specific path that we're going to follow.

529
00:30:46,939 --> 00:30:51,919
of, you know, when the cypherpunks, you know, when Satoshi created this and it was all set

530
00:30:51,919 --> 00:30:55,699
out and it started with this email list and people are just like, hey, let's start like

531
00:30:55,699 --> 00:30:56,899
trying to spend a little bit of Bitcoin.

532
00:30:56,899 --> 00:31:01,519
And then, you know, the first like form of product market fit that it found was in drug

533
00:31:01,519 --> 00:31:06,539
trade on a peer to peer, you know, freedom libertarian type platform.

534
00:31:08,059 --> 00:31:13,419
And then it was being traded on an exchange for magic, the gathering cards that went, got

535
00:31:13,419 --> 00:31:14,399
hacked and went bankrupt.

536
00:31:14,399 --> 00:31:40,539
And then, you know, it went through a huge bear market. And then the fanatics ultimately kind of drove this store of value narrative around it in a significant way. It wasn't just a drug trade thing anymore for, you know, illicit activities or whatever it is. But it was actually getting more of an investment narrative behind it. And these fanatics were people that probably nobody would have guessed. You know, if you were to think in hindsight, who are the influential people that could drive this? You probably had people in your head. These people weren't them.

537
00:31:40,539 --> 00:31:48,999
And then all of a sudden, we have the economy with one of the worst, if not, I think the

538
00:31:48,999 --> 00:31:52,779
worst crime rate in the world adopted as legal tender.

539
00:31:52,779 --> 00:31:56,639
And that sparked a whole international discussion of its monetary properties and whether or

540
00:31:56,639 --> 00:32:00,119
not it's valuable in debates and put into the mainstream academia around a lot of those

541
00:32:00,119 --> 00:32:02,959
questions.

542
00:32:02,959 --> 00:32:08,619
And then we have, most recently, the largest economy in the world, pushing narratives that

543
00:32:08,619 --> 00:32:11,479
They're going to adopt it as a strategic reserve.

544
00:32:11,799 --> 00:32:17,699
But really, it was just the largest economy in the world realized, oh, this voting class, we need to appeal to.

545
00:32:17,939 --> 00:32:19,719
And this is a win-win.

546
00:32:19,959 --> 00:32:22,999
Because if you go against something like Bitcoin, it's just a lose-lose.

547
00:32:23,119 --> 00:32:25,879
There's no politically viable solution other than to support this.

548
00:32:26,539 --> 00:32:28,079
And that was a super powerful thing.

549
00:32:28,199 --> 00:32:30,179
And I don't think anybody really knew that.

550
00:32:30,179 --> 00:32:35,219
Everybody assumed that it was going to come more bottom-up through emerging market economies because how much could have been lost?

551
00:32:35,599 --> 00:32:36,859
But politicians were a little bit smarter.

552
00:32:36,859 --> 00:32:39,239
and I think they view it from the perspective like,

553
00:32:39,339 --> 00:32:43,179
no, this asset is something that has massive global support

554
00:32:43,179 --> 00:32:46,019
and it's pretty challenging to quantify exactly what that is.

555
00:32:46,659 --> 00:32:48,439
But we know it's significant enough

556
00:32:48,439 --> 00:32:50,139
to have the president of the United States

557
00:32:50,139 --> 00:32:53,819
going to our conferences and adopting this publicly.

558
00:32:54,799 --> 00:32:57,099
I struggle with this

559
00:32:57,099 --> 00:32:58,599
because you're saying adopting it publicly,

560
00:32:58,759 --> 00:32:59,519
but what has he done?

561
00:32:59,519 --> 00:33:02,279
All he has done since he actually came into office

562
00:33:02,279 --> 00:33:05,239
is announced strategic reserve,

563
00:33:05,419 --> 00:33:06,779
but nothing's really happened there.

564
00:33:06,859 --> 00:33:11,259
Yep. He's launched his shitcoin. Has he even done anything for Bitcoin at this point?

565
00:33:11,919 --> 00:33:19,939
When I first started studying finance, for those who don't know my background, I studied finance in

566
00:33:19,939 --> 00:33:24,379
college. I worked in private equity. I have a CFA. I got very deep into financial theory,

567
00:33:24,479 --> 00:33:27,959
all of that. And when I first started studying finance, when I was graduating college,

568
00:33:28,439 --> 00:33:35,359
I believed in value investing. And I believed that if you look at certain metrics and you have

569
00:33:35,359 --> 00:33:41,619
a contrarian thesis and you have a long-term perspective and you stick to your guns on a

570
00:33:41,619 --> 00:33:45,659
methodology, that that's the best form of investing. I think what I've learned over time

571
00:33:45,659 --> 00:33:51,479
is that the best form of investing really just exists within private markets because there's

572
00:33:51,479 --> 00:33:57,519
the most inefficiency found there. And most forms of investing, they're not driven as much by

573
00:33:57,519 --> 00:34:01,579
fundamentals as much as they're driven by narrative. And that was the key thing I learned

574
00:34:01,579 --> 00:34:03,319
is that markets are really just driven by narratives.

575
00:34:03,699 --> 00:34:05,579
And there's a lot of powerful people

576
00:34:05,579 --> 00:34:08,579
that want to influence narrative to their benefit

577
00:34:08,579 --> 00:34:09,919
in some way, shape, or form.

578
00:34:11,859 --> 00:34:14,059
So I think from that perspective,

579
00:34:14,459 --> 00:34:17,619
it's what's the most powerful thing that he's done?

580
00:34:17,679 --> 00:34:19,399
It's just simply the signaling of,

581
00:34:19,699 --> 00:34:22,219
oh, wow, the largest government institution,

582
00:34:22,319 --> 00:34:23,839
the most powerful organization in the world

583
00:34:23,839 --> 00:34:25,939
is now supporting this asset.

584
00:34:26,039 --> 00:34:27,699
Whether or not he tangibly buys, I don't give a shit.

585
00:34:27,759 --> 00:34:28,779
I actually hope he doesn't.

586
00:34:29,279 --> 00:34:31,159
I would prefer other people to have it.

587
00:34:31,579 --> 00:34:36,479
But, you know, I would prefer they honestly sell it if we're talking purely from like an ownership standpoint.

588
00:34:37,119 --> 00:34:44,839
But the signaling that that's created to the market, the legitimacy that is put into the eyes, like it's legitimate now with the Conservative Party.

589
00:34:45,959 --> 00:34:56,079
And the Democratic Party, like in our annual report, you know, we show the statistics of how much like CNN was giving attention to Bitcoin until Trump supported it.

590
00:34:56,199 --> 00:34:58,379
And now their attention to Bitcoin is completely dropped off.

591
00:34:58,379 --> 00:35:03,299
And all of the mainstream media attention is coming through more conservative channels on Bitcoin now.

592
00:35:03,339 --> 00:35:07,339
So it's shifted a bit towards this conservative asset because of their support.

593
00:35:08,499 --> 00:35:10,379
And that's a big deal.

594
00:35:11,019 --> 00:35:12,619
That's changed everybody's perception.

595
00:35:12,919 --> 00:35:14,699
And I see that every day when I talk to investors.

596
00:35:14,979 --> 00:35:15,419
Yeah, exactly.

597
00:35:15,479 --> 00:35:18,539
Because people now just think of Bitcoin as being sort of Trump coin.

598
00:35:18,859 --> 00:35:19,059
Yeah.

599
00:35:19,619 --> 00:35:22,059
While you can say everyone gets Bitcoin at the price they deserve,

600
00:35:22,059 --> 00:35:27,239
is that actually going to be a good thing that Bitcoin is so closely associated with the right wing?

601
00:35:27,239 --> 00:35:34,919
the question to me is more just like what else do you want you know it's just like it has to go

602
00:35:34,919 --> 00:35:38,599
somewhere it has to come through some form of adoption here's kind of the direction it went

603
00:35:38,599 --> 00:35:42,239
we could look back we could say yeah i would like it to perfectly be balanced politically with how

604
00:35:42,239 --> 00:35:47,079
the adoption comes but how does it work when a president supports it well he's got to have a

605
00:35:47,079 --> 00:35:52,759
party so which party was it was a conservative party you know like um so like like these i think

606
00:35:52,759 --> 00:35:55,679
a lot of people that are kind of like we want everything to be perfectly balanced and we want

607
00:35:55,679 --> 00:36:00,639
everything to happen like this, it's kind of, I feel like it's a bit of a luxury to have that

608
00:36:00,639 --> 00:36:05,359
perspective. And usually people with perspectives like that aren't in the trenches, like building

609
00:36:05,359 --> 00:36:08,299
things, because when you're in the trenches building things, you're usually just like,

610
00:36:08,679 --> 00:36:13,799
we want wins because that's good. And so like going back to the original question on this,

611
00:36:15,379 --> 00:36:19,139
is adoption, you know, what forms of adoption are good or bad? And I said, some are, you know,

612
00:36:19,179 --> 00:36:22,799
better than others, of course. Like, of course I want, you know, the utopian vision of everybody

613
00:36:22,799 --> 00:36:26,559
gets onboarded through self-custody, I don't think with technical infrastructure that's feasible

614
00:36:26,559 --> 00:36:33,719
today. But even if that was, assume that hypothetically, of course, I would want that.

615
00:36:33,799 --> 00:36:41,459
The reality is just simply that Bitcoin is this, Bitcoin is just like this virus that's spread too

616
00:36:41,459 --> 00:36:46,199
far. Or a better analogy would just be like, Bitcoin is just water and it's moving and it's

617
00:36:46,199 --> 00:36:50,499
finding the path of least resistance. So like one of the things that I put into our primary

618
00:36:50,499 --> 00:36:55,139
investment philosophy for EPOC, for those listening to our venture capital firm, is

619
00:36:59,139 --> 00:36:59,779
there's this...

620
00:37:02,899 --> 00:37:09,299
I'm forgetting... Adrian Bijan, who is a physicist from MIT, who kind of came up with this theory

621
00:37:10,019 --> 00:37:13,699
that he called the Constructo Law. And the Constructo Law is just basically, how does

622
00:37:13,699 --> 00:37:20,099
everything grow? How does growth happen in general? And his law was that if you look at, you know,

623
00:37:20,099 --> 00:37:22,979
trees and how they grow from a trunk branch structure.

624
00:37:24,279 --> 00:37:27,299
And if you look at veins in your body, or you look at river networks,

625
00:37:27,299 --> 00:37:31,179
or you look at all, you see this very consistent pattern through how things grow.

626
00:37:32,119 --> 00:37:35,539
And that's what we're seeing with Bitcoin.

627
00:37:35,899 --> 00:37:39,579
We just see things following the path of least resistance.

628
00:37:39,699 --> 00:37:41,759
That's what happens when trees, branches are growing off a tree.

629
00:37:41,839 --> 00:37:42,539
They're finding sunlight.

630
00:37:42,659 --> 00:37:44,699
They're finding the most accessible resource near them.

631
00:37:45,219 --> 00:37:47,659
And that's just logically what's happened with adoption over time.

632
00:37:47,659 --> 00:37:50,139
It's moving like water through cracks.

633
00:37:50,399 --> 00:37:56,179
And we're just seeing the most accepted next step for adoption that happens over time.

634
00:37:56,639 --> 00:38:00,679
So it looked like we have this populist movement that got Trump back into office.

635
00:38:00,959 --> 00:38:02,679
Trump realized this voting party is significant.

636
00:38:02,879 --> 00:38:03,999
I'm going to support this asset.

637
00:38:04,139 --> 00:38:07,079
And I'm going to try to monetize a bunch of shit coins for my family off of this.

638
00:38:07,419 --> 00:38:09,239
I don't really care whether or not he understands it.

639
00:38:09,419 --> 00:38:11,479
I just care that it's just water flowing through cracks.

640
00:38:11,819 --> 00:38:16,779
And that puts us in a better position now because we've spread even further to actually

641
00:38:16,779 --> 00:38:22,019
have the good forms of adoption in the future. Because the more people that support this, the

642
00:38:22,019 --> 00:38:25,399
more people that have skin in the game with Bitcoin, that's another thing that makes Bitcoin

643
00:38:25,399 --> 00:38:31,139
unique is, you know, we have millions and millions of people all over the world who all have some

644
00:38:31,139 --> 00:38:35,799
sort of skin in the game to use the asset. You don't get that with stocks. You don't get that

645
00:38:35,799 --> 00:38:40,419
with bonds. You don't get that with any form of investment, really, other than Bitcoin. And that's

646
00:38:40,419 --> 00:38:45,139
the mass movement potential behind it. It's like, what's a mass movement where everybody has a skin

647
00:38:45,139 --> 00:38:52,679
in the game and everybody gets rich off of that. Like, you know, that's basically like property

648
00:38:52,679 --> 00:38:58,739
rights, right? Like that's what spawned the US, you know, that is significant. That incentive is

649
00:38:58,739 --> 00:39:05,199
unstoppable. And that's kind of what I see within adoption. I think getting lost in like the

650
00:39:05,199 --> 00:39:12,459
specifics and granularities, while I agree that there's, you know, plenty of forms of adoption

651
00:39:12,459 --> 00:39:17,519
that aren't ideal. We don't want centralization within certain custodians over time. I think

652
00:39:17,519 --> 00:39:22,259
what's much better than saying like, you know, education is good, but I think what's much better

653
00:39:22,259 --> 00:39:27,539
is building technical solutions that are just as competitive with centralized solutions so that

654
00:39:27,539 --> 00:39:34,979
people can use self-custodial, you know, self-custodial Bitcoin, the asset in a way that's

655
00:39:34,979 --> 00:39:40,199
just as easy to do and just as cheap to do as using a centralized service provider. And we're

656
00:39:40,199 --> 00:39:45,039
not there yet. And that's one of the reasons that we have EPOC. Like, that's what we want to do is

657
00:39:45,039 --> 00:39:48,779
we want to try to build all these things. We want to build adoption in general. We just want it to

658
00:39:48,779 --> 00:39:54,219
grow because the number one advantage I see us getting is more people have Bitcoin. And it's just

659
00:39:54,219 --> 00:39:58,899
totally politically wrong for people to try to stop it at that point. And that's the incentive

660
00:39:58,899 --> 00:40:04,319
we want. We want it to be political suicide for any government to attempt to attack this thing.

661
00:40:04,439 --> 00:40:08,279
And I think that comes from adoption. So like that, that's my take. I don't know how to like,

662
00:40:08,279 --> 00:40:15,479
you know define it clearly in terms of parameters but um i i think it's a luxury to look at certain

663
00:40:15,479 --> 00:40:19,539
forms of adoption in hindsight and say like this was good or bad it's like it's good to think about

664
00:40:19,539 --> 00:40:25,599
these things um but it's going to be more valuable to just build things that allow the good forms of

665
00:40:25,599 --> 00:40:30,319
adoption to exist which plenty of people are doing one of the things that keeps me up at night is the

666
00:40:30,319 --> 00:40:35,119
idea of a critical error with my bitcoin cold storage this is where anchor watch comes in with

667
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669
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670
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671
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673
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674
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675
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676
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677
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678
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679
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680
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681
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682
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684
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685
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686
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687
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688
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689
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690
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691
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Bitcoin is absolutely ripping and in every bull market there's always a new wave of investors

692
00:42:07,999 --> 00:42:11,239
and with it a flood of new companies, new products and new promises.

693
00:42:11,799 --> 00:42:14,739
But if you've been around long enough you've seen how this story ends for a lot of them.

694
00:42:15,139 --> 00:42:18,019
Some cut corners, take risks with your money or just disappear.

695
00:42:18,479 --> 00:42:21,879
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696
00:42:22,319 --> 00:42:24,779
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697
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698
00:42:27,859 --> 00:42:32,259
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699
00:42:32,259 --> 00:42:37,499
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700
00:42:37,499 --> 00:42:42,519
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701
00:42:42,519 --> 00:42:47,959
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702
00:42:47,959 --> 00:42:53,759
i think the democrats prove that it's like don't get me wrong i think in bitcoin we overstate how

703
00:42:53,759 --> 00:42:57,919
important Bitcoin was in the last US election. I think it certainly played a part, but it wasn't

704
00:42:57,919 --> 00:43:04,539
the only reason. But I think the Democrats showed that bashing and ignoring Bitcoin is clearly not

705
00:43:04,539 --> 00:43:08,799
the way to go. And it'll be super interesting to see what happens next time. But if you'd have

706
00:43:08,799 --> 00:43:13,859
told me when I got into Bitcoin in 2016, 2017, that in how long, like eight, nine years time,

707
00:43:14,019 --> 00:43:20,079
seven, eight years time, that BlackRock, ETFs, Trump, all these things were now supporting

708
00:43:20,079 --> 00:43:24,239
Bitcoin, I'd have thought that was a huge fucking win. Like I did not think this was going to happen

709
00:43:24,239 --> 00:43:29,359
as quickly as it has. And I'm curious why you think that that has happened. Is it just that

710
00:43:29,359 --> 00:43:33,659
the facts are on our side? It's impossible to ignore now. Yeah, exactly. So like when I am

711
00:43:33,659 --> 00:43:41,839
talking to, um, I tweeted about this like a couple of weeks ago, but like when, when I'm talking to

712
00:43:41,839 --> 00:43:46,439
like TradFi guys, like finance bro types, and, and there's a lot of Bitcoiners out there like,

713
00:43:46,499 --> 00:43:49,979
okay, we need to orange pill people. We need to tell them here's what money is. And you need

714
00:43:49,979 --> 00:43:54,199
need to like relearn all these historical things and have this context. Like I don't touch that.

715
00:43:54,539 --> 00:43:58,419
Most of these people that I'm dealing with are strong pragmatists who are self-interested.

716
00:43:58,759 --> 00:44:02,499
And by the way, if you assume people aren't self-interested, you're going to get let down

717
00:44:02,499 --> 00:44:06,139
quite a bit. So like people are self-interested. So what are their interests and what are they

718
00:44:06,139 --> 00:44:09,659
going after? And it's the best way to persuade them and motivate them to support whatever it

719
00:44:09,659 --> 00:44:17,559
is you're doing. So when I'm talking to these investor types, the way that they're thinking

720
00:44:17,559 --> 00:44:21,299
about this. I don't touch anything about what is money. What I do is I start with saying

721
00:44:21,299 --> 00:44:28,399
Bitcoin at this point in time is the best performing asset in measurable history over this,

722
00:44:28,499 --> 00:44:32,399
you know, 16 year period that it's been alive. Like you could think about that from the perspective

723
00:44:32,399 --> 00:44:36,559
of the compound growth rate from its start to finish is much more rapid than when you think

724
00:44:36,559 --> 00:44:41,899
about like the most valuable stocks in the world, because it took them about 40 years to do.

725
00:44:42,199 --> 00:44:47,519
We're not quite at that size yet. We'll probably be there soon. But it took them like 40 years to

726
00:44:47,519 --> 00:44:50,939
accomplish that. So their growth rates don't even compare. Like our trajectory is insane. It's on

727
00:44:50,939 --> 00:44:56,199
pace with the internet. So when we look at these forms of adoption, like we have an asset that's

728
00:44:56,199 --> 00:45:00,099
growing on pace with a technology like the internet. It's the best performing asset in

729
00:45:00,099 --> 00:45:05,519
measurable history. It's risk adjusted performance is outperforming all asset classes. You know,

730
00:45:05,559 --> 00:45:12,139
it does vary over time, but nonetheless, like very significantly. You know, it's like the

731
00:45:12,139 --> 00:45:16,699
largest computing network in the world now, outside of the internet itself. We have the

732
00:45:16,699 --> 00:45:21,079
largest financial institution in the world, BlackRock, basically becoming our podcast or

733
00:45:21,079 --> 00:45:27,819
business development arm. CNBC is kind of our podcast. And we have governments around the world

734
00:45:27,819 --> 00:45:31,379
that have adopted as legal tender. We have the largest government in the world that's supporting

735
00:45:31,379 --> 00:45:35,459
it as a strategic reserve and pumping our narrative and helping people understand it.

736
00:45:37,059 --> 00:45:42,139
What other investment has that? Nothing. Nothing has that. And if you're an investor,

737
00:45:42,139 --> 00:45:49,199
Your number one job is to find superior risk adjusted returns for your clients, given the constraints that they're under.

738
00:45:49,699 --> 00:45:57,899
And if you don't understand Bitcoin, the best asset that you could be doing that with for your clients, then you're dead wrong and you're not doing your job.

739
00:45:58,039 --> 00:45:59,159
And that's the first thing.

740
00:45:59,279 --> 00:46:04,839
Like, oh, I show up to like, you know, these trad five organizations and there's a bunch of guys kind of like, oh, you know, how's it going?

741
00:46:04,899 --> 00:46:05,539
What's your portfolio?

742
00:46:05,619 --> 00:46:06,699
And I just like jump in.

743
00:46:06,739 --> 00:46:08,819
I'm just like, you aren't doing your job.

744
00:46:08,939 --> 00:46:11,219
And like, and then they're on their back heels.

745
00:46:11,219 --> 00:46:12,559
and then for like the first time,

746
00:46:12,639 --> 00:46:13,439
they're fucking listening.

747
00:46:13,679 --> 00:46:13,919
Yeah.

748
00:46:14,119 --> 00:46:14,319
Yeah.

749
00:46:14,539 --> 00:46:15,159
And does that actually,

750
00:46:15,279 --> 00:46:16,599
so like this is just number go up

751
00:46:16,599 --> 00:46:17,899
being the most positive narrative.

752
00:46:18,259 --> 00:46:19,539
And it clearly is.

753
00:46:19,579 --> 00:46:20,719
Like that's why I got into Bitcoin.

754
00:46:20,959 --> 00:46:22,199
And don't get me wrong,

755
00:46:22,279 --> 00:46:22,739
like from that,

756
00:46:22,779 --> 00:46:23,519
my thinking's evolved.

757
00:46:24,199 --> 00:46:26,459
But number go up works.

758
00:46:26,619 --> 00:46:28,159
So when you say that to someone,

759
00:46:29,159 --> 00:46:30,919
are they not like pissed off?

760
00:46:31,099 --> 00:46:31,859
Like are they not thinking

761
00:46:31,859 --> 00:46:32,719
you can't tell me everything

762
00:46:32,719 --> 00:46:34,439
I've been doing my entire career is wrong?

763
00:46:34,519 --> 00:46:34,719
Yeah.

764
00:46:35,119 --> 00:46:35,879
Statistically speaking,

765
00:46:35,879 --> 00:46:36,959
if they're 55 and older

766
00:46:36,959 --> 00:46:37,739
and they're a white male,

767
00:46:37,819 --> 00:46:38,859
then they're probably pissed off

768
00:46:38,859 --> 00:46:39,599
that I just said that.

769
00:46:39,679 --> 00:46:40,999
Because no guy who's like,

770
00:46:40,999 --> 00:46:46,619
one of these TradFi guys who were like, they've been, you know, working in the industry since like

771
00:46:46,619 --> 00:46:57,598
the 80s and it always worked this way And you know they had the QE push and you know everything kind of benefited them from what basically Markowitz theory They all been doing the same thing their whole careers

772
00:46:57,698 --> 00:46:59,018
It's worked out very well for them.

773
00:46:59,177 --> 00:47:03,118
And then like this group of kids, which like our industry is very young and there's, you

774
00:47:03,118 --> 00:47:05,638
know, a lot of kids running around telling them, they're like, oh, all your financial

775
00:47:05,638 --> 00:47:06,358
theory is wrong.

776
00:47:06,918 --> 00:47:08,558
There's no efficient market hypothesis.

777
00:47:09,378 --> 00:47:13,957
And, you know, Markowitz portfolio theory is just a statistical model that worked under

778
00:47:13,957 --> 00:47:14,498
one regime.

779
00:47:14,498 --> 00:47:16,498
And that's all about to change once we change money.

780
00:47:16,498 --> 00:47:20,358
they don't even know what any of that means for the most part they just kind of like learn the

781
00:47:20,358 --> 00:47:23,758
sound bites they always have they've operated on the heuristics they've always had and when some

782
00:47:23,758 --> 00:47:26,498
young kid comes along and tells them that like they're not going to listen and they don't really

783
00:47:26,498 --> 00:47:32,078
have that much of an incentive to um other than if they care about their kids and you know they

784
00:47:32,078 --> 00:47:37,618
it's uh it makes sense to me why they wouldn't but a lot of people are waking up and um and just

785
00:47:37,618 --> 00:47:41,618
like with any significant change there's always going to be the late movers and those people are

786
00:47:41,618 --> 00:47:47,398
going to feel foolish at a certain point. Because surely the people who are the top performers in

787
00:47:47,398 --> 00:47:51,957
that world, like bonds had the heyday, equities have the heyday, and like Bitcoin is now like

788
00:47:51,957 --> 00:47:57,957
the thing. Surely there's people that have gone through that realize that one sort of playbook

789
00:47:57,957 --> 00:48:01,878
is no longer working, move on to the next one. Like are people thinking of it in a similar way

790
00:48:01,878 --> 00:48:06,298
where it's like, this is just the next evolution? They've never had to shift playbooks. It's always

791
00:48:06,298 --> 00:48:10,718
been like, they've looked at different asset classes in different ways, given the constraints

792
00:48:10,718 --> 00:48:16,798
around it, but Bitcoin is like this exogenous variable. It's like, um, you know, it's like,

793
00:48:16,798 --> 00:48:19,957
you're playing a sport and it's just like, you have a playbook for offense and you have a playbook

794
00:48:19,957 --> 00:48:24,078
for defense. And it's just like, okay, well now the field is ice. Like what, you know, like,

795
00:48:24,157 --> 00:48:29,518
that's kind of what it's like. It just like, there isn't a playbook. Right. And, um, so that,

796
00:48:29,638 --> 00:48:32,238
I think that's what's shifting them up. So they don't want to believe that the field's going to

797
00:48:32,238 --> 00:48:35,378
be ice one day. You know, they want to believe that it's going to stay the same way. And it

798
00:48:35,378 --> 00:48:42,058
seems absurd that the field could turn to ice. And that's when I think to answer your question,

799
00:48:42,058 --> 00:48:47,818
like the perspective change that's happening is significant. Like when I talk to a lot of

800
00:48:47,818 --> 00:48:55,298
portfolio managers and financial advisors, there's a shift towards them being more open-minded to it

801
00:48:55,298 --> 00:49:00,798
now. Now it's not like, oh, Bitcoin. Yeah. All right. You know, it's not that anymore. It's a,

802
00:49:00,798 --> 00:49:05,438
I'm interested, you know, I want to hear more or it's, yeah, I get the digital gold narrative.

803
00:49:05,598 --> 00:49:10,158
You know, we're looking into 1%, 2% allocation. I think the problem right now is that a lot of

804
00:49:10,158 --> 00:49:15,878
them now think they understand it because they understand the very simple digital gold narrative

805
00:49:15,878 --> 00:49:20,218
and they're just scratching the surface. I don't exactly know where that leads,

806
00:49:20,298 --> 00:49:25,358
but I think it's better than not understanding it at all. And that's kind of like the primary

807
00:49:25,358 --> 00:49:29,558
shift. So like you got your like older guys who, you know, are going off into retirement and

808
00:49:29,558 --> 00:49:33,138
they want to move down to Florida and just not think about any of this shit. And then you have

809
00:49:33,138 --> 00:49:37,498
pretty much everybody else, and they're all shifting to more of a neutral to positive stance

810
00:49:37,498 --> 00:49:41,718
on it, because it's just impossible to argue against at this point. They don't know

811
00:49:41,718 --> 00:49:48,698
all the arguments that I laid out earlier, but they do know that the president's supporting it,

812
00:49:49,238 --> 00:49:57,118
BlackRock is supporting it, and it's probably not a joke if that's the case. And that's very

813
00:49:57,118 --> 00:50:01,598
important for if you look at like, and the statistics a bit dated, but I think it's like,

814
00:50:02,638 --> 00:50:08,398
you know, wealth management, like the size of the capital in that industry is around like 17

815
00:50:08,398 --> 00:50:13,918
trillion, probably closer to 20 at this point, maybe more. So if you think about that, you think

816
00:50:13,918 --> 00:50:17,758
about a lot of these like just general like, you know, financial advisor types, and if they start

817
00:50:17,758 --> 00:50:23,838
recommending like a one to 10% allocation, that's a significant amount of capital, you know, that

818
00:50:23,838 --> 00:50:32,158
that could range between the ETF AUM to 10 times ETF AUM right now, just within that specific group

819
00:50:32,158 --> 00:50:40,578
of wealth management. So that's, and just within the US as well. So yeah, I think that shift

820
00:50:40,578 --> 00:50:47,438
is critical. And now the next question is how we can get them to understand that

821
00:50:47,438 --> 00:50:54,438
the permissionless nature of Bitcoin is a form of insurance. So with the way that they think about

822
00:50:54,438 --> 00:50:59,698
risk within a portfolio, they think about risk from the perspective of the volatility of the

823
00:50:59,698 --> 00:51:07,018
asset. And that's obviously not a comprehensive view of risk. Being able to permissionlessly own

824
00:51:07,018 --> 00:51:12,418
something for a client of yours, if you want to be a fiduciary for them, or if you are a fiduciary

825
00:51:12,418 --> 00:51:15,977
for them, being able to permissionlessly own something is going to be one of the best forms

826
00:51:15,977 --> 00:51:18,078
of asset protection that they could possibly have.

827
00:51:18,378 --> 00:51:20,998
And Bitcoin is the avenue with its technology

828
00:51:20,998 --> 00:51:22,738
to do that better than any other asset.

829
00:51:23,258 --> 00:51:24,457
So once they understand that,

830
00:51:24,518 --> 00:51:25,818
now we're talking about real risk.

831
00:51:25,818 --> 00:51:28,558
Now we're talking about protecting your clients

832
00:51:28,558 --> 00:51:29,598
against black swans

833
00:51:29,598 --> 00:51:32,338
and everything that you could think of related to that.

834
00:51:32,598 --> 00:51:35,138
And that's going to drive very significant investment

835
00:51:35,138 --> 00:51:36,498
in Bitcoin in the next leg up.

836
00:51:37,018 --> 00:51:40,177
So you said something there that I want to dig into.

837
00:51:40,378 --> 00:51:41,957
You said that these people aren't ready

838
00:51:41,957 --> 00:51:43,018
for the field to turn to ice.

839
00:51:44,158 --> 00:51:45,598
What does that mean?

840
00:51:45,598 --> 00:51:47,318
What is the field turning into ice?

841
00:51:47,378 --> 00:51:48,058
What's changing?

842
00:51:48,818 --> 00:51:51,118
The water that we've been swimming in,

843
00:51:51,278 --> 00:51:53,177
that's probably a better analogy for it, right?

844
00:51:54,298 --> 00:51:56,578
The water that we've been swimming in

845
00:51:56,578 --> 00:52:01,818
is a water of a controlled interest rate environment

846
00:52:01,818 --> 00:52:05,477
that you haven't really been able to escape.

847
00:52:06,798 --> 00:52:08,118
And that's how we've ended up

848
00:52:08,118 --> 00:52:09,818
in the system that we're in right now,

849
00:52:10,118 --> 00:52:13,738
where for the first time in history,

850
00:52:13,738 --> 00:52:23,957
we've had a globally coordinated group of central banks all operating together to suppress interest

851
00:52:23,957 --> 00:52:31,758
rates and persistently increase and expand credit within the global economy beyond the amount that

852
00:52:31,758 --> 00:52:38,977
is natural. And all that means is debt to GDP is the highest it's ever been in history

853
00:52:38,977 --> 00:52:43,398
across the globe, global debt to GDP in total.

854
00:52:44,138 --> 00:52:46,998
And that's completely uncharted waters.

855
00:52:47,558 --> 00:52:50,677
And that's the water that's surrounding us right now

856
00:52:50,677 --> 00:52:52,918
is that we've affected, when you think about credit,

857
00:52:53,738 --> 00:52:57,438
there's the difference between money and credit

858
00:52:57,438 --> 00:52:59,858
is both of them serve a similar function.

859
00:52:59,957 --> 00:53:01,598
They move value throughout time.

860
00:53:02,098 --> 00:53:05,078
But money allows us to take value from the past

861
00:53:05,078 --> 00:53:07,338
and carry it with us into the present.

862
00:53:08,977 --> 00:53:12,977
And credit allows us to take value from the future and carry it into the present.

863
00:53:13,457 --> 00:53:17,858
So it's two different functions for money of where the source of the value really comes from.

864
00:53:18,138 --> 00:53:26,238
And that's what we've done is there's always a market around that balance between those two forms of monetary transaction, basically.

865
00:53:26,457 --> 00:53:30,718
Before commodity monies existed that allowed us to carry it through the past is pretty much just credit.

866
00:53:30,858 --> 00:53:34,598
Like primates use credit in some ways.

867
00:53:34,598 --> 00:53:35,438
and

868
00:53:35,438 --> 00:53:39,738
maybe you should explain that because I think maybe people will

869
00:53:39,738 --> 00:53:41,578
not understand what you mean by that

870
00:53:41,578 --> 00:53:43,758
and I assume what you're saying is like

871
00:53:43,758 --> 00:53:45,598
you do a favor for someone

872
00:53:45,598 --> 00:53:47,898
that favor is the credit and then you're owed

873
00:53:47,898 --> 00:53:48,578
something in return

874
00:53:48,578 --> 00:53:50,438
you scratch my back I'll scratch yours

875
00:53:50,438 --> 00:53:53,498
and it was Nick Szabo in his paper

876
00:53:53,498 --> 00:53:55,358
shelling out where he drew on

877
00:53:55,358 --> 00:53:57,418
which kind of make me

878
00:53:57,418 --> 00:53:59,477
like Szabo but he drew on Dawkins' writing

879
00:53:59,477 --> 00:54:01,358
in the Blind Watchmaker I believe

880
00:54:01,358 --> 00:54:03,378
when Dawkins would describe

881
00:54:03,378 --> 00:54:13,698
who was a zoologist, atheist, primary proponent, but he did a lot of research into the behavior of animals to be one of the primary people arguing on behalf of evolutionary biology.

882
00:54:14,457 --> 00:54:23,018
And so he was the one making the argument for delayed reciprocal altruism is the term that he used.

883
00:54:23,778 --> 00:54:29,138
And Szabo kind of drew on that for this is basically how credit worked with species prior to humanity.

884
00:54:29,138 --> 00:54:40,858
And then Zabo, I believe, was the first to kind of draw the conclusion that one of the primary distinctions between Neanderthals and Homo sapiens, Neanderthals are bigger and stronger than them.

885
00:54:40,898 --> 00:54:44,198
But it's just like, what made them genetically eclipse Homo sapiens?

886
00:54:44,378 --> 00:54:50,078
And Zabo is making the point that there's very strong evidence that Homo sapiens had money.

887
00:54:50,078 --> 00:54:56,957
and they and there is very strong evidence that they organized in statistically much larger groups

888
00:54:56,957 --> 00:55:02,638
than their neanderthal predecessors and and that's ultimately what allowed them to genetically

889
00:55:02,638 --> 00:55:06,618
eclipse the neanderthals was that they were they're smarter in that regard they had more

890
00:55:06,618 --> 00:55:10,578
complex forms of organization which allowed them to increase their wealth and have more sophisticated

891
00:55:10,578 --> 00:55:17,518
means of living um and that came from you know very primitive forms of commodity monies being

892
00:55:17,518 --> 00:55:24,338
used and surpassing the use of just credit. So that form of money is very valuable. And there's

893
00:55:24,338 --> 00:55:29,398
a balance in the market that none of us have an answer to between the amount of effectively scarce

894
00:55:29,398 --> 00:55:33,398
commodity type money that should exist and the amount of credit that should exist. We've

895
00:55:33,398 --> 00:55:38,658
artificially changed that to be all credit. That's what our modern economy is, is the government can

896
00:55:38,658 --> 00:55:44,198
issue credit. They can't print money that's commodity money because that requires true value

897
00:55:44,198 --> 00:55:48,938
and resources. So they want it all to be credit. So what they did is they took their credit,

898
00:55:49,038 --> 00:55:53,158
they took their debt, and they forced it into the economy as money. And they did that with

899
00:55:53,158 --> 00:56:00,738
a strong military over time. And now we're at the most persistently expanded form of credit

900
00:56:00,738 --> 00:56:05,998
in the world. And it's all around us. And it's everywhere. And it's well beyond expanded part,

901
00:56:06,178 --> 00:56:10,678
like across the natural rate of market balance between the two variables. So

902
00:56:10,678 --> 00:56:18,558
that's the water that we're swimming in today. And Bitcoin is something that can turn all of

903
00:56:18,558 --> 00:56:22,957
that to ice because it, for the first time, provides us a bit of an escape valve. Everybody

904
00:56:22,957 --> 00:56:26,758
in society has just been between a rock and a hard place because there hasn't been really a good

905
00:56:26,758 --> 00:56:32,818
permissionless way of doing this. When I had these views on central banking before I was aware of

906
00:56:32,818 --> 00:56:37,238
Bitcoin, it was just like, well, what's your alternative? Like buy gold. And I own some gold,

907
00:56:37,238 --> 00:56:42,658
But it wasn't an alternative. It's not an alternative form of money, not to the fullest

908
00:56:42,658 --> 00:56:47,838
extent. But as a store of value, that's one thing. But permissionless money is what turns all that

909
00:56:47,838 --> 00:56:52,658
water into ice within the system. And that's what shatters the entire system. And then we build into

910
00:56:52,658 --> 00:56:56,798
a new system that's required to structure its incentives around a scarce form of money,

911
00:56:56,858 --> 00:57:01,398
or at least in a natural market economy. That's the huge vision that we're looking at.

912
00:57:01,778 --> 00:57:05,377
And that really just, it doesn't mean a money that's swinging back to the other extreme.

913
00:57:05,377 --> 00:57:30,298
It means a form of money that's perfectly neutral. And like, that's the vision of Bitcoin is to have the first neutral form of money that's been global. We live in a global economy today. Any form of neutral money before commodity based money has existed in like more primitive or early developing societies. And those were in localized areas. And there were various commodities around the world people were using became more standardized with precious metals.

914
00:57:30,298 --> 00:57:35,457
but we've always had different constraints on money that have had a high degree of them but

915
00:57:35,457 --> 00:57:39,518
now that we have so much open access to the internet it makes sense that we could have you

916
00:57:39,518 --> 00:57:43,778
know for the first time a global standard and the only reason we never would want a global standard

917
00:57:43,778 --> 00:57:48,398
before is because it was just it's impossible to actually do when we try to create you know

918
00:57:48,398 --> 00:57:53,558
post breton woods when we try to create the imf and these organizations and like things like sdr

919
00:57:53,558 --> 00:57:57,538
receipts and we try to create these you know neutral forms of money it's just like it's it's

920
00:57:57,538 --> 00:58:03,118
not neutral. Whoever has a guns wants what they want. And, um, and unless there's just no way to

921
00:58:03,118 --> 00:58:07,438
stop the form of neutral money, then whoever has the biggest guns is always going to be influencing

922
00:58:07,438 --> 00:58:11,838
what happens with the money. And, uh, and that's just been the cycle of history. So it took

923
00:58:11,838 --> 00:58:16,877
technology to really create the first neutral form of money. And then that allows us to stop,

924
00:58:16,877 --> 00:58:20,578
you know, fucking thinking about all these stupid things that governments are doing. Like, that's

925
00:58:20,578 --> 00:58:25,538
the goal. It's like all this time that we waste on dealing with this. Like when I got my college

926
00:58:25,538 --> 00:58:30,578
education. When I learned about financial theory, I double majored in finance and economics. And

927
00:58:30,578 --> 00:58:33,798
when I got my, you know, economic theory, I got my financial theory. I learned, you know,

928
00:58:33,798 --> 00:58:38,278
all the practices and everything. And we have a little bit in my economics classes around

929
00:58:38,278 --> 00:58:43,098
central banking. It's like the modern financial education should be how to interpret the Fed.

930
00:58:43,238 --> 00:58:47,838
Like that should be your education because that's how markets work for a lot of it today.

931
00:58:48,118 --> 00:58:51,718
Because you mean whatever Jerome Powell says, markets react. It's not, it's not even the action,

932
00:58:51,718 --> 00:58:56,658
is what he says. Exactly. And they're, they're doing like narrative management basically. And,

933
00:58:56,738 --> 00:59:01,278
um, so like, that's how markets work today. All the financial that you could learn how to,

934
00:59:01,278 --> 00:59:06,138
you know, build a DCF as long as, you know, till the sunsets or whatever it is. And like,

935
00:59:06,658 --> 00:59:10,318
uh, and it doesn't matter if the interest rate environment changes drastically overnight.

936
00:59:10,398 --> 00:59:16,798
So like all of these, not like the focus is really just on policy. Our markets are run by policy.

937
00:59:16,798 --> 00:59:23,938
and um and bitcoin is what changes all of that too all the time and energy wasted of all these

938
00:59:23,938 --> 00:59:29,238
portfolio managers and all these investors and all these people that are paying these investors fees

939
00:59:29,238 --> 00:59:33,198
so that they can be like oh we're going to do a 60 40 cookie cutter blah blah blah blah blah

940
00:59:33,198 --> 00:59:37,138
we're going to shift our allocation because they think basis points are going to shift this much

941
00:59:37,138 --> 00:59:40,758
because we think the new guy who stepped in as the fed chair is going to have this type of behavior

942
00:59:40,758 --> 00:59:46,098
and because the guy on bloomberg told me this um and like that's how people are operating today

943
00:59:46,098 --> 00:59:48,398
and it's just wasted time and energy.

944
00:59:48,578 --> 00:59:50,957
Like these people should be, you know, building things

945
00:59:50,957 --> 00:59:52,998
or trying to cure cancer or, you know,

946
00:59:53,038 --> 00:59:54,298
doing things that are valuable.

947
00:59:54,418 --> 00:59:56,018
And if we have neutral money,

948
00:59:56,138 --> 00:59:57,838
people can actually spend their time,

949
00:59:57,938 --> 00:59:59,998
not waste their time on this bullshit.

950
01:00:00,118 --> 01:00:01,898
And they're actually gonna have price mechanisms

951
01:00:01,898 --> 01:00:04,877
that guide them towards doing things

952
01:00:04,877 --> 01:00:06,258
that are valuable for people.

953
01:00:06,498 --> 01:00:10,538
Instead of, you know, when we look at like SoftBank

954
01:00:10,538 --> 01:00:13,038
and Mashiyoshi Sun getting all this financing

955
01:00:13,038 --> 01:00:14,058
to raise like, you know,

956
01:00:14,098 --> 01:00:16,038
effectively the largest private equity fund in history

957
01:00:16,038 --> 01:00:18,338
and just like cram money down Silicon Valley

958
01:00:18,338 --> 01:00:21,098
because we're in a persistently low interest rate environment.

959
01:00:21,258 --> 01:00:22,778
Everybody's expanding down the risk curve

960
01:00:22,778 --> 01:00:24,658
and venture capital is getting blown up for that reason

961
01:00:24,658 --> 01:00:26,098
because it's like the riskiest form of investing

962
01:00:26,098 --> 01:00:27,338
you can do in private markets.

963
01:00:28,018 --> 01:00:29,438
And then you have these guys raising all this money

964
01:00:29,438 --> 01:00:30,977
and just like shoving money into like apps

965
01:00:30,977 --> 01:00:32,098
that allow you to like, you know,

966
01:00:32,738 --> 01:00:34,638
figure out your dog's astrology sign

967
01:00:34,638 --> 01:00:35,278
or something like that.

968
01:00:35,318 --> 01:00:36,158
It's just a waste, you know,

969
01:00:36,158 --> 01:00:37,618
like people are dying in the world.

970
01:00:37,838 --> 01:00:39,238
Like it's absolutely insane.

971
01:00:39,858 --> 01:00:42,418
And so like we can actually spend time

972
01:00:42,418 --> 01:00:44,038
like thinking about things that matter a lot more.

973
01:00:44,098 --> 01:00:44,578
And that's, you know,

974
01:00:44,578 --> 01:00:46,858
obviously me being hyperbolic around some of this stuff,

975
01:00:46,918 --> 01:00:48,398
but it's true. There's truth to it.

976
01:00:48,418 --> 01:00:49,718
And I think it gets a point across.

977
01:00:50,318 --> 01:00:52,018
So when we started the conversation with,

978
01:00:52,318 --> 01:00:54,498
what is the path that Bitcoin has to take

979
01:00:54,498 --> 01:00:56,818
to go from where we are today to $10 million?

980
01:00:57,398 --> 01:00:58,538
I want to talk about two things.

981
01:00:58,578 --> 01:01:01,178
I want to talk about both what it means to the world

982
01:01:01,178 --> 01:01:02,098
when Bitcoin's at $10 million.

983
01:01:02,418 --> 01:01:04,358
But before that, what is the path that it takes?

984
01:01:04,398 --> 01:01:06,658
How does it go from where we are today to there?

985
01:01:06,898 --> 01:01:07,578
Yeah, yeah.

986
01:01:07,998 --> 01:01:08,918
So to my point earlier,

987
01:01:09,018 --> 01:01:10,158
I'm going to be dead wrong about all this,

988
01:01:10,158 --> 01:01:11,377
but the way that I view it,

989
01:01:11,377 --> 01:01:21,838
right now, if we kind of look at the potential for adoption within Bitcoin and, you know,

990
01:01:22,898 --> 01:01:28,858
we talk about like Bitcoin treasury companies. So in the annual report that EPOC put out at the

991
01:01:28,858 --> 01:01:32,518
beginning of the year, and these numbers have changed, but, you know, we looked at,

992
01:01:33,018 --> 01:01:38,778
if you didn't look at just like the top 10 stocks in equities, the U.S. equity market,

993
01:01:38,778 --> 01:01:52,418
And you looked at just the cash on their balance sheet. If you put 15% of that into Bitcoin, then that's already greater than the AUM of the ETFs that we've seen.

994
01:01:52,418 --> 01:02:04,578
So that's a big point because what moves price is a change in marginal demand versus the marginal supply of the asset.

995
01:02:04,877 --> 01:02:09,778
And what makes Bitcoin a completely unique asset, I'm going to say this this whole podcast, there's all these things that make it completely unique.

996
01:02:10,018 --> 01:02:15,758
What makes Bitcoin completely unique is that it's the only asset in the world with a supply that doesn't respond to demand.

997
01:02:15,858 --> 01:02:17,338
It's a fixed supply no matter what.

998
01:02:18,618 --> 01:02:21,898
And so we think about marginal demand, how much that shifts.

999
01:02:22,418 --> 01:02:30,318
markets are dynamic and people say, okay, well, you know, if there's, you know, $200 billion or

1000
01:02:30,318 --> 01:02:35,678
whatever in cash on the balance sheets, then that'll increase the market capitalization by

1001
01:02:35,678 --> 01:02:39,158
like $200 billion or something. It's just like, it's not really how it works. How it works is it

1002
01:02:39,158 --> 01:02:43,377
depends on how many marginal sellers there are at Bitcoin over time. What determines that?

1003
01:02:43,898 --> 01:02:47,698
Narrative. Narrative determines that very significantly and that's Bitcoin's competitive

1004
01:02:47,698 --> 01:02:55,738
advantage. And so with all that money flowing in, when we think about the inelasticity of sellers

1005
01:02:55,738 --> 01:03:00,798
on the other side, we don't know how much that could actually move the market. But we know that

1006
01:03:00,798 --> 01:03:04,977
it could potentially move it to the degree that the ETFs have moved it, if not significantly more.

1007
01:03:05,477 --> 01:03:11,977
A lot of that comes down to people's perception. And then, so that's just for like corporate

1008
01:03:11,977 --> 01:03:16,798
balance sheets. And then we can think about like governments. And this is one of the big shifts to

1009
01:03:16,798 --> 01:03:25,457
like zoom in on this a lot more. Government adoption around the world for Bitcoin is this,

1010
01:03:26,218 --> 01:03:31,038
it's a highly debated topic, but I think some of the areas that are, you know, pretty clear at this

1011
01:03:31,038 --> 01:03:37,338
point. I wrote this paper back in 2022, kind of around when these narratives are emerging.

1012
01:03:38,898 --> 01:03:44,977
And there was this analyst at Credit Suisse named Zoltan Bozar. And, you know, he was writing

1013
01:03:44,977 --> 01:03:51,198
these reports talking about this shift towards reserves of governments moving towards commodities

1014
01:03:51,198 --> 01:03:56,318
over time, away from debt of other governments. And that's kind of one of the views is that we're

1015
01:03:56,318 --> 01:04:03,038
having this shift away from trusting other governments and their liabilities to assets

1016
01:04:03,038 --> 01:04:07,398
within the system. Well, this is really clear. I think gold is at an all-time high in terms of

1017
01:04:07,398 --> 01:04:12,118
held on government balance sheets. Yep. Yep. And this narrative really started to,

1018
01:04:12,118 --> 01:04:18,278
was spreading abound in 2022. And it was because the Biden administration was choking off Russia

1019
01:04:18,278 --> 01:04:23,038
from the SWIFT system. And everyone's like, oh no, like they're just proved to the world that

1020
01:04:23,038 --> 01:04:27,038
you can't access the U.S. payment system. And now everybody's going to try to get on something

1021
01:04:27,038 --> 01:04:30,798
that they can't access. And people aren't going to trust, you know, the U.S. behavior that has an

1022
01:04:30,798 --> 01:04:36,538
impact on our debt. And the reason it has an impact on our debt is that that increases the

1023
01:04:36,538 --> 01:04:41,957
likelihood that we shift from this current unipolar system that we're in to a multipolar

1024
01:04:41,957 --> 01:04:47,258
system. And that's kind of the prevailing view within like geopolitics and has been the prevailing

1025
01:04:47,258 --> 01:04:52,778
view for some time that we're shifting to this form of the unipolar system being the U.S.

1026
01:04:52,857 --> 01:04:57,918
government's control. We're dominating the world with a global hegemon and our policy,

1027
01:04:58,038 --> 01:05:02,078
our decisions are what impact. And the reality is we're starting to lose control over that.

1028
01:05:02,078 --> 01:05:06,278
I think within more conservative circles, people tend to view that it wouldn't be a shift

1029
01:05:06,278 --> 01:05:09,418
it would be a shift in the unipolarity of the world. It'd be a shift from the US

1030
01:05:09,418 --> 01:05:13,718
or Western strength to Eastern. And that, you know, might be China is the next world power

1031
01:05:13,718 --> 01:05:19,078
and the BRICS nations. But the reality that we're witnessing is more that, no, it's not really a

1032
01:05:19,078 --> 01:05:25,138
shift. It's a fracturing. And when we fracture, that changes demand for US debt very significantly.

1033
01:05:25,138 --> 01:05:30,018
And that's kind of starting to show up and has been showing up in the foreign reserves and the

1034
01:05:30,018 --> 01:05:35,998
decline of US denominated liabilities in foreign reserves and, you know, Federal Reserve auction

1035
01:05:35,998 --> 01:05:42,218
data as well. So when we think about this shift towards the system's kind of fracturing a bit,

1036
01:05:42,258 --> 01:05:46,578
and people are just trusting a lot less. We're not trusting government debts. We're trying to,

1037
01:05:46,578 --> 01:05:53,118
you know, stick to our own. We're rethinking how we want to do trade. And perhaps we're going to

1038
01:05:53,118 --> 01:05:56,718
be shifting more towards commodities and exchanging commodities. Like that's kind of the view is that

1039
01:05:56,718 --> 01:05:59,798
commodities don't require trust in things. And that's what Bitcoin is, is like kind of like the

1040
01:05:59,798 --> 01:06:05,158
synthetic commodity to a lot of governments, the way that they'll view it. So that's kind of,

1041
01:06:05,158 --> 01:06:20,977
It's an interesting perspective because, so like in geopolitics, and I'll recommend right now where I understood some of these things is this guy, Marco Papich, who was a geopolitical strategist who worked for Stratfor.

1042
01:06:20,977 --> 01:06:27,938
And he wrote this book, Geopolitical Alpha, which is a great way for investors to kind of like get just like, you know, a 101 on geopolitical views.

1043
01:06:27,938 --> 01:06:32,098
And in this, he kind of described to the readers, there's kind of like two prevailing.

1044
01:06:32,438 --> 01:06:38,857
There are two like primary geopolitical thinkers who like coined these two basically like world domination strategies.

1045
01:06:38,857 --> 01:06:40,918
How do you actually become a global hegemon?

1046
01:06:41,377 --> 01:06:43,398
And one is to control Eurasia.

1047
01:06:43,558 --> 01:06:50,298
If you control all of Eurasia, then you control a landmass that's abundant with commodities and has so many different points for trade access.

1048
01:06:50,418 --> 01:06:53,518
And it's kind of like the perfect fortress basically for the world.

1049
01:06:54,258 --> 01:06:55,918
Or you control the seas.

1050
01:06:55,918 --> 01:06:59,138
and controlling the seas allows you to control all trade routes.

1051
01:06:59,138 --> 01:07:04,038
That allows you to force other countries to deal with your interests in their own policy.

1052
01:07:04,558 --> 01:07:07,278
That's how the U.S. dominated, so that we controlled the seas.

1053
01:07:07,457 --> 01:07:09,918
And that's kind of the world order that we're existing under now.

1054
01:07:11,838 --> 01:07:14,477
So we still have very strong control over that.

1055
01:07:14,538 --> 01:07:18,038
That's not going away anytime soon, but I'm not an expert on these things.

1056
01:07:18,138 --> 01:07:21,258
But there are people discussing how this has been weakening over time.

1057
01:07:21,258 --> 01:07:32,758
And if that's the case, and what we are seeing when it comes to the fracturing of reserves around all of this, this new multipolar world is shifting towards commodities.

1058
01:07:33,618 --> 01:07:39,318
So, I mean, the market sizes of these things, they're so large, it's not even worth talking about them.

1059
01:07:40,377 --> 01:07:43,618
Because markets, to my point earlier, they're dynamic.

1060
01:07:43,618 --> 01:07:51,658
So the simplest way to understand this point is that gold, by the time we consume, like gold's like 24 trillion in market cap.

1061
01:07:51,738 --> 01:07:57,538
By the time Bitcoin consumes the market for like financial gold, aside from like jewelry and stuff like that, that people will probably still wear.

1062
01:07:57,618 --> 01:07:59,038
Maybe you could argue that it consumes some of that.

1063
01:07:59,098 --> 01:07:59,598
I don't really care.

1064
01:07:59,658 --> 01:08:00,438
It's going to be a big number.

1065
01:08:00,957 --> 01:08:03,558
But let's assume it just consumes the whole market.

1066
01:08:03,558 --> 01:08:20,417
By the time Bitcoin consumes that gold market cap at that point, when Bitcoin's that big, when that much trust has dissolved within the world around gold as being a store of value, or at least supporting the financial insurance against the system as a negative correlated asset.

1067
01:08:21,718 --> 01:08:26,518
By the time we get to that point, the market capitalization of gold would have theoretically probably been double or something.

1068
01:08:26,777 --> 01:08:30,498
So it's like we can talk about all this stuff, but it's all going to just be dynamic and changing, right?

1069
01:08:30,498 --> 01:08:59,658
The point is, is that it's really massive. And if you own Bitcoin, you're going to be happy. And so, yeah, when we think about the size of like this market, it's pretty much too big to quantify in a lot of ways. And but we could just look at like where gold reserves are today. And if you were to take like 15% of global gold reserves that governments own, and you were to say, okay, so they're shifting towards commodities. So the size of that market's growing, not just within gold, but within oil, within other types of commodities.

1070
01:08:59,658 --> 01:09:02,558
They're shifting these to be a greater proportion of their reserves.

1071
01:09:03,058 --> 01:09:12,477
And then we have Bitcoin that's the only permissionless, most efficient means of storing and most permissionless way of doing that type asset.

1072
01:09:14,558 --> 01:09:19,417
That's probably going to get a material percentage of the commodity market in government reserves.

1073
01:09:19,417 --> 01:09:24,038
And then that market as a whole is going to be growing pretty significantly due to this multipolar shift.

1074
01:09:24,038 --> 01:09:36,458
So if we just look at it today and we look at like 15% of just the gold reserves, you know, that is multiple multiples of the current size of like Bitcoin ETF demand, just 15% of just the gold reserves.

1075
01:09:36,458 --> 01:09:59,377
So like, it's big. It's really, really big. And that's something that I think is going to be very significant in the future. Because pretty much where Bitcoin loses, the reason it's not just going to happen overnight, is because what makes a lot of these other government reserve assets valuable as reserves is that the depth of liquidity in the capital markets is so significant.

1076
01:09:59,377 --> 01:10:11,998
So if you're Saudi Arabia and you want to go liquidate $250 billion of an asset tomorrow and put into something else, there's not many markets in the world you can do that in without getting very significant slippage on the assets price, basically losing a lot on that trade.

1077
01:10:12,158 --> 01:10:23,377
So the more liquid the asset you in the less you move the market from selling it And Bitcoin is too small for these types of guys to you know own a significant amount and not move the market very significantly

1078
01:10:23,537 --> 01:10:28,617
So the bigger Bitcoin gets, the more likely these types of buyers are

1079
01:10:28,617 --> 01:10:30,917
are going to participate in that market.

1080
01:10:31,816 --> 01:10:35,457
And that's the best thing is pretty much Bitcoin's disadvantages

1081
01:10:35,457 --> 01:10:36,796
are disadvantages of scale.

1082
01:10:36,896 --> 01:10:38,196
The similar argument with its volatility,

1083
01:10:38,336 --> 01:10:39,977
that's just a disadvantage of its scale.

1084
01:10:40,216 --> 01:10:41,796
These are all things that can solve.

1085
01:10:41,796 --> 01:10:51,396
It's like being LeBron James when he's young and saying his only disadvantage is that he's like 13 years old. By the time he's 18, probably earlier than that, it's like you're going to be one of the best guys in the NBA.

1086
01:10:51,997 --> 01:10:55,557
And that's what it's kind of like. It's like our disadvantages are we're just in adolescence right now.

1087
01:10:56,776 --> 01:11:05,137
So when we think about it from that perspective, the liquidity in the capital markets around Bitcoin needs to increase and then it's more likely to be adopted.

1088
01:11:05,137 --> 01:11:09,256
but the efficiency of storing it and the permissionless ability to send it,

1089
01:11:09,436 --> 01:11:11,796
that's what makes it unique from like any other reserve asset.

1090
01:11:12,276 --> 01:11:14,657
So in the kind of step-by-step playbook here,

1091
01:11:14,856 --> 01:11:16,936
that's why we need corporate treasuries first.

1092
01:11:18,157 --> 01:11:21,756
Do you like what Saylor and everyone who's copying Saylor is doing?

1093
01:11:21,957 --> 01:11:24,216
I love when people buy Bitcoin. It's awesome.

1094
01:11:24,417 --> 01:11:26,477
I think it's a badass move. Everybody needs to buy more Bitcoin.

1095
01:11:28,517 --> 01:11:32,256
The question I think of, this goes back to the question of what's good adoption and bad adoption.

1096
01:11:32,256 --> 01:11:38,877
the question really what i think how people define that is that there are forms of adoption

1097
01:11:38,877 --> 01:11:44,917
that are more sustainable than other forms of adoption yes and um and unsustainable forms of

1098
01:11:44,917 --> 01:11:49,377
adoption are things that can lead to declines in the price later on so people don't like that

1099
01:11:49,377 --> 01:11:54,896
when we think about the last cycle and the best example of this would be like the 2017 cycle

1100
01:11:54,896 --> 01:12:00,537
when we had a huge structural shift and uh shift towards like retail buyers on binance

1101
01:12:00,537 --> 01:12:07,957
using 100x leverage and these unsustainable forms of buyer behavior. And then it causes a huge crash

1102
01:12:07,957 --> 01:12:14,196
subsequent to that. Institutional buyers, to the point I was making earlier, where they're

1103
01:12:14,196 --> 01:12:18,037
beneficial upfront, they may not be as beneficial later on, but institutional buyers aren't having

1104
01:12:18,037 --> 01:12:24,517
that type of behavior. They're creating this passive bid on Bitcoin. And that passive perennial

1105
01:12:24,517 --> 01:12:28,676
bid that they're creating is a very good thing. Now, are they going to be the hodlers of last

1106
01:12:28,676 --> 01:12:33,097
resort if governments start going after it or some sort of, you know, terrible situation emerges

1107
01:12:33,097 --> 01:12:37,957
within markets now. And that's where we have, you know, the hodler community and that's our own fed

1108
01:12:37,957 --> 01:12:47,236
put. But regardless, today, they are structurally changing the types of demand within the market

1109
01:12:47,236 --> 01:12:51,617
to kind of resolve some of these issues. I'm sorry, I'm forgetting the original question.

1110
01:12:51,617 --> 01:12:55,117
But I think that's interesting, though, because then sort of the knock on consequence of like,

1111
01:12:55,117 --> 01:12:57,457
say that as an example, buying Bitcoin every week,

1112
01:12:57,497 --> 01:12:58,877
every two weeks or whatever it is,

1113
01:12:59,077 --> 01:13:00,557
is that that does dampen volatility.

1114
01:13:00,557 --> 01:13:02,057
And who does that bring in next?

1115
01:13:02,377 --> 01:13:04,997
And if you went through this sort of step-by-step,

1116
01:13:05,316 --> 01:13:07,077
do you think the likely next buyer

1117
01:13:07,077 --> 01:13:12,796
is a sort of Zuckerberg or an Apple?

1118
01:13:13,117 --> 01:13:13,377
Yeah.

1119
01:13:13,657 --> 01:13:15,577
Like, is that what the next step needs to be?

1120
01:13:16,017 --> 01:13:18,216
I don't think it needs to be anything, you know?

1121
01:13:19,157 --> 01:13:22,457
I think it seems like that will be a logical next step

1122
01:13:22,457 --> 01:13:23,436
for a lot of people.

1123
01:13:23,436 --> 01:13:26,597
what I like about the treasury companies

1124
01:13:26,597 --> 01:13:28,957
is that going back to my point on narrative

1125
01:13:28,957 --> 01:13:31,436
the way that that's impacting narrative

1126
01:13:31,436 --> 01:13:32,637
what other asset

1127
01:13:32,637 --> 01:13:34,537
what other asset has this

1128
01:13:34,537 --> 01:13:34,917
you know

1129
01:13:34,917 --> 01:13:36,077
no other asset

1130
01:13:36,077 --> 01:13:37,077
there's not just a bunch of people

1131
01:13:37,077 --> 01:13:38,557
buying zombie shell companies

1132
01:13:38,557 --> 01:13:40,637
like IPOing

1133
01:13:40,637 --> 01:13:41,936
and doing degen shit

1134
01:13:41,936 --> 01:13:43,097
at like a corporate level

1135
01:13:43,097 --> 01:13:44,716
to like put this out

1136
01:13:44,716 --> 01:13:45,617
nothing else has this

1137
01:13:45,617 --> 01:13:46,836
but if narrative is important

1138
01:13:46,836 --> 01:13:47,836
is that a good narrative

1139
01:13:47,836 --> 01:13:48,997
like what are the people on Wall Street

1140
01:13:48,997 --> 01:13:49,836
like the serious people

1141
01:13:49,836 --> 01:13:50,796
thinking about this

1142
01:13:50,796 --> 01:13:51,417
are they looking at it

1143
01:13:51,417 --> 01:13:52,657
be like look at these idiots

1144
01:13:52,657 --> 01:13:53,316
they're looking at it

1145
01:13:53,316 --> 01:13:58,597
they're saying, look at these idiots. But at the same time, I think what it's, what it's implicitly

1146
01:13:58,597 --> 01:14:04,196
stating is that like, this is so unique and it's so valuable. And there's a bunch of CEOs who now

1147
01:14:04,196 --> 01:14:09,396
have to have board conversations about why they're not doing this when we look at the price performance.

1148
01:14:09,617 --> 01:14:13,856
And there's a, you know, there's a bunch of morons out there and it's, it's pretty hilarious. Like,

1149
01:14:13,856 --> 01:14:18,336
I like to talk shit about them on Twitter. I also like to support like the good things that some of

1150
01:14:18,336 --> 01:14:24,137
them are doing. But it's really funny. And I think that there is a legitimate, like, you know,

1151
01:14:24,196 --> 01:14:28,396
I won't use the word arbitrage because I think that term's abused within Bitcoin, but there's

1152
01:14:28,396 --> 01:14:32,716
inefficiencies that exist that some are legitimately capturing and what Saylor's doing.

1153
01:14:34,557 --> 01:14:39,836
And I hope more companies buy Bitcoin. Most of them, I kind of view it as something that's really

1154
01:14:39,836 --> 01:14:44,177
not going to be as big of a shift as what most people think it is. I think it's going to create

1155
01:14:44,177 --> 01:14:50,356
more companies that own Bitcoin. It's going to attract more fixed income products that are backed

1156
01:14:50,356 --> 01:14:55,517
in Bitcoin within capital markets because it's proving out that theory. All of that is very good

1157
01:14:55,517 --> 01:15:02,796
for introducing people that work in capital origination into this market. So that's a really

1158
01:15:02,796 --> 01:15:08,537
good thing. And I enjoy all of that. And just because there's a bunch of morons who don't have

1159
01:15:08,537 --> 01:15:12,236
a valuable company, and this is kind of like they're viewing as a lifeboat and they're maybe

1160
01:15:12,236 --> 01:15:17,517
nine months too late to the market. And maybe they're not. And I hope they're not. I hope it

1161
01:15:17,517 --> 01:15:22,457
works. But what we put in our annual report is basically like, yeah, there's going to be a long

1162
01:15:22,457 --> 01:15:28,436
tail of people who do this. There's going to be a bunch of cowboy CFOs who are trying to get rich

1163
01:15:28,436 --> 01:15:32,816
off of it. They'll probably take on too much leverage, yada, yada, yada. I think the bigger

1164
01:15:32,816 --> 01:15:37,436
risks that we put in our most recent report on banking when we touched on this subject is

1165
01:15:37,436 --> 01:15:43,316
I presume that over the years, if this were to sustain, there's going to be a consolidation

1166
01:15:43,316 --> 01:15:50,156
of these companies into asset managers. In the same way that people are concerned about Coinbase

1167
01:15:50,156 --> 01:15:55,236
custing all the ETF AUM and having significant influence over the market, if Bitcoin treasuries

1168
01:15:55,236 --> 01:15:59,377
become very significant in that regard, how are they going to differentiate from one another?

1169
01:15:59,377 --> 01:16:02,957
There's kind of like two ways. They're going to do it through their capital structure,

1170
01:16:03,216 --> 01:16:06,977
and that's kind of the big boy game. That's what Saylor's doing. Maybe a handful of other companies

1171
01:16:06,977 --> 01:16:08,216
are going to be able to compete in that regard.

1172
01:16:08,896 --> 01:16:11,436
Or you're going to do it based on kind of like an operating model.

1173
01:16:13,097 --> 01:16:16,997
And then everybody's going to need an asset management function

1174
01:16:16,997 --> 01:16:20,557
to even like stay within a competitive position

1175
01:16:20,557 --> 01:16:22,216
because the asset management side means

1176
01:16:22,216 --> 01:16:23,597
you're sitting on a bunch of Bitcoin

1177
01:16:23,597 --> 01:16:26,796
and how are you going to be earning some rate of interest on it?

1178
01:16:26,796 --> 01:16:28,936
Because the other company is doing it and they're doing it well.

1179
01:16:29,057 --> 01:16:30,756
And there are real like Bitcoin native ways

1180
01:16:30,756 --> 01:16:33,177
that you can actually earn yield interest.

1181
01:16:34,017 --> 01:16:36,936
And like this is the, where does the yield come from?

1182
01:16:36,977 --> 01:16:38,917
but there is places the yield comes from.

1183
01:16:38,977 --> 01:16:41,276
You can run a Lightning node.

1184
01:16:41,356 --> 01:16:42,977
Who knows what you really get?

1185
01:16:43,057 --> 01:16:45,177
And I'd be interested to know your perspective on this

1186
01:16:45,256 --> 01:16:48,017
because I think Block came out and said

1187
01:16:48,097 --> 01:16:50,557
they get 9% on their Lightning node.

1188
01:16:51,256 --> 01:16:53,997
I think that's most likely because it's basically in a silo

1189
01:16:54,057 --> 01:16:55,936
and they charge Cash App users whatever they want

1190
01:16:55,997 --> 01:16:57,736
to send a transaction across Lightning.

1191
01:16:58,396 --> 01:17:00,196
River came out, they have a large node,

1192
01:17:00,256 --> 01:17:01,336
said to get like 1.5%.

1193
01:17:01,396 --> 01:17:03,377
What do you think the market matures at in terms of,

1194
01:17:03,436 --> 01:17:05,537
is that the only way you can get Bitcoin yield

1195
01:17:05,537 --> 01:17:11,936
and what is the mark, like where does the market mature? Yeah. So the ways that, you know, asset

1196
01:17:11,936 --> 01:17:17,177
managers are going to be able to effectively earn yield on Bitcoin that, you know, arguably will or

1197
01:17:17,177 --> 01:17:24,057
will not be sustainable over time. But, you know, I certainly believe will. There's kind of like

1198
01:17:24,057 --> 01:17:28,097
this term structure of interest rates emerging natively in Bitcoin that Nick Bhatia coined in

1199
01:17:28,097 --> 01:17:33,617
like 2018 and referring to it as that in the same way that in the US we view US debt or like, you

1200
01:17:33,617 --> 01:17:38,356
know, in a traditional finance view, US debt is like the risk-free interest rate, quote unquote.

1201
01:17:39,436 --> 01:17:42,336
You know, we kind of have something similar emerging and lightning is one of the protocols

1202
01:17:42,336 --> 01:17:46,736
in which you can basically take Bitcoin, you can use it to provide liquidity within the protocol,

1203
01:17:46,936 --> 01:17:51,677
protocol, or you can actually provide just the technical function of routing and you can earn

1204
01:17:51,677 --> 01:17:56,037
some degree of yield on your Bitcoin. And like routing fees is like a very low risk method of

1205
01:17:56,037 --> 01:18:01,577
doing it. Leasing liquidity is like the next step up, still very low risk. It allows you to get even

1206
01:18:01,577 --> 01:18:05,756
more than just routing fees in terms of interest. And there's going to be a variety of other ways

1207
01:18:05,756 --> 01:18:10,196
that people can also earn interest. There's going to be like asset-based lending on like Taro.

1208
01:18:11,177 --> 01:18:17,517
There's going to be, or sorry, a tap-ass or whatever it's being called now. And there's

1209
01:18:17,517 --> 01:18:22,917
going to be like staking. And then there's just going to also be like traditional forms of lending

1210
01:18:22,917 --> 01:18:27,917
when there is that. So like there's this whole risk curve basically that's being built out for

1211
01:18:27,917 --> 01:18:33,977
Bitcoin capital markets. And it requires today a lot of technical knowledge and wherewithal to be

1212
01:18:33,977 --> 01:18:39,637
able to actually earn yield on your Bitcoin through that. So I think we're going to have a

1213
01:18:39,637 --> 01:18:43,497
class of like asset managers emerge that are going to help people who have a treasury function

1214
01:18:43,497 --> 01:18:47,696
actually earn a rate of return. And the reason isn't going to be because that's needed. I think

1215
01:18:47,696 --> 01:18:51,936
a lot of Bitcoiners will listen to this and be like, well, Bitcoin's going up, you know, that's

1216
01:18:51,936 --> 01:18:57,796
greed or whatever it is. And that may be the case. And if it's too risky and everybody deems it that

1217
01:18:57,796 --> 01:19:01,557
way, then it'll eventually wash out in the market. But that's not really how markets work. Markets

1218
01:19:01,557 --> 01:19:07,177
work because of what's demanded. And it'll certainly be demanded when a lot of these like

1219
01:19:07,177 --> 01:19:11,137
treasury companies are, if your sole function is to own Bitcoin, then you're going to have to

1220
01:19:11,137 --> 01:19:16,177
differentiate yourself to get people to sell another company's stock and buy yours. And this

1221
01:19:16,177 --> 01:19:19,336
will be one of the primary ways that I think that happens. So if I were to say long-term,

1222
01:19:19,417 --> 01:19:22,816
where I'd view like a concentration risk happening, it's actually probably not going to be in the

1223
01:19:22,816 --> 01:19:26,517
treasury company itself. It's probably going to be in the asset managers that they're using. And

1224
01:19:26,517 --> 01:19:28,296
there would probably be a bunch using the same ones.

1225
01:19:28,617 --> 01:19:29,457
That's interesting.

1226
01:19:30,997 --> 01:19:32,356
So when we get to,

1227
01:19:32,736 --> 01:19:34,417
like when we talk about Bitcoin getting to $10 million,

1228
01:19:34,977 --> 01:19:37,656
like how long do you see that process taking?

1229
01:19:37,796 --> 01:19:39,577
And like, what are the milestones along the way?

1230
01:19:39,656 --> 01:19:42,776
So the obvious one being overtaking the gold market cap.

1231
01:19:42,997 --> 01:19:44,236
Yeah, I mean, the big one.

1232
01:19:44,236 --> 01:19:46,216
So like, yeah, going back to all this,

1233
01:19:46,256 --> 01:19:47,796
it's like we touched on treasury companies

1234
01:19:47,796 --> 01:19:49,097
and we touched on like, you know,

1235
01:19:49,117 --> 01:19:51,156
I went into the whole thesis around government adoption.

1236
01:19:52,057 --> 01:19:54,477
We've talked about like asset managers coming in.

1237
01:19:54,477 --> 01:19:59,196
the reality of changes in price is that it's where marginal demand meets marginal supply.

1238
01:19:59,417 --> 01:20:06,156
Markets are dynamic. When people make these arguments of like, oh, there's nobody selling

1239
01:20:06,156 --> 01:20:12,057
or something like that. It's like, well, nobody's selling at this price. If it goes up 100%,

1240
01:20:12,057 --> 01:20:17,097
selling market might change. You don't know what it is because behind every price,

1241
01:20:17,457 --> 01:20:20,756
there's a market of buyers and sellers. There's two big order books effectively.

1242
01:20:20,756 --> 01:20:23,597
and you don't know what prices they're all stacked at.

1243
01:20:23,696 --> 01:20:25,656
Nobody knows until the orders are actually executed.

1244
01:20:26,097 --> 01:20:27,077
That's how prices function.

1245
01:20:28,736 --> 01:20:29,936
So you don't really know,

1246
01:20:29,997 --> 01:20:31,997
but you can look at really like fundamental drivers

1247
01:20:31,997 --> 01:20:34,417
and say like, on a relative basis,

1248
01:20:34,417 --> 01:20:35,877
this is what makes Bitcoin unique.

1249
01:20:36,236 --> 01:20:37,776
And it's certainly conceivable

1250
01:20:37,776 --> 01:20:40,177
that because of all of the unique characteristics

1251
01:20:40,177 --> 01:20:42,077
I've described in Bitcoin up until this point,

1252
01:20:42,656 --> 01:20:46,796
Bitcoin is something that could get to $10 million

1253
01:20:46,796 --> 01:20:48,816
easily within the next 10 years.

1254
01:20:48,816 --> 01:20:53,896
If I were to put my money on it, I'd say Bitcoin is going to be at $10 million in probably like seven years.

1255
01:20:54,296 --> 01:20:57,037
I think it's going to happen relatively rapidly.

1256
01:20:58,477 --> 01:21:04,097
And I think everybody's thinking about, well, market structure is changing.

1257
01:21:04,396 --> 01:21:05,597
We're seeing diminishing returns.

1258
01:21:05,756 --> 01:21:06,677
All of this is true.

1259
01:21:07,196 --> 01:21:14,936
But Bitcoin is always in everywhere, like one major press release away from a huge change in the perception of it.

1260
01:21:15,196 --> 01:21:16,436
That's how it's kind of always been.

1261
01:21:16,436 --> 01:21:21,776
some large new dynamic comes out and everybody's like oh my god black rock just stepped in the

1262
01:21:21,776 --> 01:21:27,557
mark oh my god the u.s government you know these things are only becoming increasingly more likely

1263
01:21:27,557 --> 01:21:32,577
to happen because the narrative around bitcoin has changed it has changed within the culture

1264
01:21:32,577 --> 01:21:37,477
it's changed within the global zeitgeist it's being taken seriously as an asset now

1265
01:21:37,477 --> 01:21:43,836
it's not some sort of huge reputational risk for you to adopt it anymore so with all of these

1266
01:21:43,836 --> 01:21:47,417
dynamics floating around in the market, right now there's a bunch of people having conversations

1267
01:21:47,417 --> 01:21:50,816
everywhere around the world about how they're going to adopt Bitcoin in some way, shape, or form.

1268
01:21:50,917 --> 01:21:54,457
And everybody's witnessing what's happening in the market, where it's like literally you're

1269
01:21:54,457 --> 01:21:59,377
creating some of the best performing stocks in the world from just buying Bitcoin and not doing

1270
01:21:59,377 --> 01:22:05,696
anything. And it's absolutely insane. So all of that means that there's a lot of powerful

1271
01:22:05,696 --> 01:22:13,097
companies, governments, institutional asset managers, and a lot of people all around the

1272
01:22:13,097 --> 01:22:17,137
world that are just realizing right now, oh, there's not that much risk for me doing this

1273
01:22:17,137 --> 01:22:21,177
anymore. This is something that's accepted. I need to start looking into this. So I think the

1274
01:22:21,177 --> 01:22:26,196
headlines are going to change. I think it's going to be pretty rapidly once we have some sort of next

1275
01:22:26,196 --> 01:22:32,477
major headline of some next major country institution. If Bitcoin starts to become another

1276
01:22:32,477 --> 01:22:37,557
geopolitical asset within the next like five years, that could significantly change how demand

1277
01:22:37,557 --> 01:22:41,896
looks for it. Once you can kind of see the potential of like, oh, these markets are like,

1278
01:22:41,896 --> 01:22:47,276
That's the point. These markets are massive. Everything's in our favor and nothing's going to

1279
01:22:47,276 --> 01:22:51,776
be able to stop this. I'm not too worried about it getting to this price. We can think about it.

1280
01:22:51,836 --> 01:22:57,156
I just know that everything, this is the best form of risk you could possibly be taking

1281
01:22:57,156 --> 01:23:03,137
because all the unique characteristics that exist with this asset and nothing else has.

1282
01:23:03,957 --> 01:23:07,137
Impossible question to answer, but what do you think that headline might be?

1283
01:23:07,137 --> 01:23:09,756
because when I think about

1284
01:23:09,756 --> 01:23:12,196
what are the things that could really change the game here,

1285
01:23:12,336 --> 01:23:14,577
I think the obvious one is,

1286
01:23:14,677 --> 01:23:15,856
let's say China come out

1287
01:23:15,856 --> 01:23:17,077
and say they're buying a fuckload of Bitcoin.

1288
01:23:17,336 --> 01:23:18,816
How do America react to that?

1289
01:23:18,977 --> 01:23:22,497
And if they understand the true value of Bitcoin,

1290
01:23:22,637 --> 01:23:23,356
which I don't think they do,

1291
01:23:23,436 --> 01:23:25,316
but I'm sure there's people in the team that do,

1292
01:23:25,776 --> 01:23:27,617
then they have to stack more Bitcoin than China.

1293
01:23:28,517 --> 01:23:30,336
What do you think the story will be

1294
01:23:30,336 --> 01:23:31,236
that drives Bitcoin there?

1295
01:23:34,017 --> 01:23:36,896
I think that if we do start to see it

1296
01:23:36,896 --> 01:23:42,137
become more of a geopolitical asset, it'll exist. It'll exist behind the scenes for a period of time.

1297
01:23:42,316 --> 01:23:45,256
So like- It probably already does. Yeah, exactly. And that's what everybody's speculating on right

1298
01:23:45,256 --> 01:23:51,057
now. And like we do know to some degree that some of these countries are buying it. So that's kind

1299
01:23:51,057 --> 01:23:54,336
of what's happening. I think we're witnessing that happen. At some point, there's going to be proof.

1300
01:23:54,336 --> 01:24:01,716
And at some point, it's going to just become public. Once, just like when you are an activist

1301
01:24:01,716 --> 01:24:07,356
investor, you get your position first, you make your announcement later. And then that benefits

1302
01:24:07,356 --> 01:24:10,336
you in terms of the price. And I think that'll start happening. Like right now, everybody's

1303
01:24:10,336 --> 01:24:14,977
getting their position. And do you think the idea of the sort of four-year cycle in Bitcoin is

1304
01:24:14,977 --> 01:24:22,417
probably over because of all these dynamics? I think so. I don't think the four-year cycle

1305
01:24:22,417 --> 01:24:29,156
is something that is going to, I think it's still going to be cyclical, of course. But yeah, I think

1306
01:24:29,156 --> 01:24:32,716
with the way the behavior is changing and the perception of the asset now, it's going to

1307
01:24:32,716 --> 01:24:38,356
fundamentally change the price dynamics of it over time. If this happens, how does Bitcoin remain

1308
01:24:38,356 --> 01:24:44,677
a neutral asset and doesn't get captured at some point along the way? Yeah. So that's like

1309
01:24:44,677 --> 01:24:51,477
the trillion dollar question. And I think that there's a lot of debate about it. Right now,

1310
01:24:51,537 --> 01:24:56,236
I just view, to the point I was making earlier, I view things as adoption, adoption, adoption.

1311
01:24:56,236 --> 01:24:57,077
We need a lot of adoption.

1312
01:24:59,856 --> 01:25:02,137
Centralization risks are real, right?

1313
01:25:03,336 --> 01:25:12,917
Coinbase having the majority of ETF custodial ownership and that being 5%, 6% of the total supply, that's a real thing to look at and monitor.

1314
01:25:13,597 --> 01:25:16,396
I don't think it has outsized influence on the network today.

1315
01:25:16,997 --> 01:25:17,917
It could tomorrow.

1316
01:25:18,736 --> 01:25:22,997
And I wrote significantly about this before the BlackRock announcement happened.

1317
01:25:23,057 --> 01:25:24,497
I put out some thread a few years ago.

1318
01:25:24,497 --> 01:25:29,356
So going into the, you know, these people are going to be able to influence the network pretty significantly.

1319
01:25:29,776 --> 01:25:38,436
But we also are witnessing it get more, because of how it's growing, the distributed dynamics within it are also changing.

1320
01:25:39,097 --> 01:25:42,537
I think it's not just like plebs versus institutions now.

1321
01:25:42,716 --> 01:25:46,077
It's like institutions versus institutions versus plebs.

1322
01:25:46,377 --> 01:25:48,677
Like there's a lot of conspiracy theories, I believe.

1323
01:25:48,677 --> 01:26:06,216
I think when a lot of conspiracy theories fall short with me is because often the solutions that are provided to the question or the answers provided to the question usually have this assumption that powerful people are very good at organizing with one another when they have competing interests.

1324
01:26:06,537 --> 01:26:07,557
And I don't really believe that.

1325
01:26:07,917 --> 01:26:14,457
I think that it's very hard to get powerful organizations to actually organize with one another because there's so many people that are put in a prisoner's dilemma.

1326
01:26:14,457 --> 01:26:19,497
and the prisoner's dilemma, game theory tells us that when there's a conflict of interest,

1327
01:26:19,557 --> 01:26:23,677
they're going to defect against their interests with one another and their commonality.

1328
01:26:24,336 --> 01:26:28,377
And I think that's the fundamental thing that gives me a lot of confidence in Bitcoin. It's

1329
01:26:28,377 --> 01:26:34,756
that incentive is that, and this is what, you know, Satoshi put into the white paper, right? Like

1330
01:26:34,756 --> 01:26:40,497
when they were talking about a 51% attack, it's very parallel to this reasoning where people are

1331
01:26:40,497 --> 01:26:45,816
like, okay, so if somebody were to even accumulate the amount of resources to 51% attack the network,

1332
01:26:46,356 --> 01:26:53,236
he ought to find it more rational to just mine those Bitcoins himself and take the economic

1333
01:26:53,236 --> 01:26:59,077
value from it. Because Bitcoin is money, because it's something that it can be universally valuable,

1334
01:26:59,077 --> 01:27:04,097
can be traded everywhere else, it's the most saleable asset in the world. Fundamentally,

1335
01:27:04,177 --> 01:27:09,457
this is how the Austrians define money is its saleability. So what I wrote about in my book

1336
01:27:09,457 --> 01:27:13,117
is how saleability has created,

1337
01:27:13,377 --> 01:27:15,097
the most saleable asset is something

1338
01:27:15,097 --> 01:27:17,196
that has the greatest conflict of interest

1339
01:27:17,196 --> 01:27:18,597
with society over time

1340
01:27:18,597 --> 01:27:21,196
because it's in everybody's self-interest

1341
01:27:21,196 --> 01:27:23,116
to get the most of it that they can.

1342
01:27:24,517 --> 01:27:26,877
And that's what has led to all these issues with banking.

1343
01:27:27,057 --> 01:27:28,877
That's what's led to all this moral hazard

1344
01:27:28,877 --> 01:27:30,717
that's existed from central banks.

1345
01:27:30,896 --> 01:27:34,336
Because if you, an analogy is,

1346
01:27:34,436 --> 01:27:35,736
if you were to hire a courier

1347
01:27:35,736 --> 01:27:38,217
to deliver some legal papers for you,

1348
01:27:38,217 --> 01:27:42,457
an asset to you, but it's not saleable. These things are only relevant to you. You say, I'm

1349
01:27:42,457 --> 01:27:46,137
going to pay you a hundred bucks, go deliver these things for me. They don't really have a conflict

1350
01:27:46,137 --> 01:27:49,917
of interest with that because there's nothing they can use that for. Money is something where

1351
01:27:49,917 --> 01:27:53,736
everybody has a conflict of interest with you. And if you say, go deliver a million dollars for

1352
01:27:53,736 --> 01:27:58,156
me, I'm going to pay you $100 to do it. What are they going to do? And it's that conflict of

1353
01:27:58,156 --> 01:28:02,816
interest that always exists with people that have control over money over time that has led to moral

1354
01:28:02,816 --> 01:28:07,677
hazard within the system. So everybody wins by acting out of their self-interest with money.

1355
01:28:07,677 --> 01:28:23,616
And I think that's the fundamental incentive that's going to make it very hard for large institutions to start cooperating with one another over the long term, is that there's always going to be this prisoner's dilemma where they say, OK, if we all organize to do this, then we all need to be on the same page and we all need to implement the same benefit.

1356
01:28:23,856 --> 01:28:32,557
And maybe they do have a bit of common interest, but then one institution is going to say, well, no, actually, by defecting, I can get approval from another part of the market.

1357
01:28:32,557 --> 01:28:34,597
that's going to benefit my business significantly more.

1358
01:28:34,677 --> 01:28:36,816
Oh my God, like if I get the support of, you know,

1359
01:28:36,836 --> 01:28:38,977
the majority of the node runners on the network,

1360
01:28:39,137 --> 01:28:40,836
that'll actually be a differentiator for me.

1361
01:28:41,116 --> 01:28:42,856
And a lot of institutions, I think,

1362
01:28:42,877 --> 01:28:44,217
are going to have that incentive over time.

1363
01:28:44,296 --> 01:28:45,877
And they're also going to understand

1364
01:28:45,877 --> 01:28:47,936
that by trying to do this in the first place

1365
01:28:47,936 --> 01:28:50,217
is going to undermine the integrity of the network,

1366
01:28:50,276 --> 01:28:51,377
if it were even possible.

1367
01:28:51,917 --> 01:28:53,736
And I think those incentives are powerful.

1368
01:28:55,196 --> 01:28:57,256
I don't know if I 100% agree.

1369
01:28:59,836 --> 01:29:01,736
Because I think this comes back to narratives.

1370
01:29:01,736 --> 01:29:06,436
What is Bitcoin to you and I is different to the way that Larry Fink looks at Bitcoin.

1371
01:29:06,756 --> 01:29:09,997
And what drives Bitcoin's value is probably different.

1372
01:29:11,316 --> 01:29:15,417
And if Larry Fink, as an example, anyone like him,

1373
01:29:16,377 --> 01:29:22,417
sees the sort of private use of Bitcoin as something that actually undermines its economic value,

1374
01:29:22,577 --> 01:29:23,917
then what does he do in response?

1375
01:29:23,917 --> 01:29:28,316
So I see this, like, I see a potential trajectory

1376
01:29:28,316 --> 01:29:33,616
that is KYC-only exchanges, no privacy tech,

1377
01:29:33,816 --> 01:29:36,097
and Bitcoin goes from being freedom money

1378
01:29:36,097 --> 01:29:38,677
to being store of value asset

1379
01:29:38,677 --> 01:29:41,936
that is, at that point, not that interesting to me.

1380
01:29:42,156 --> 01:29:43,977
Like, and it gets back to the thing

1381
01:29:43,977 --> 01:29:45,177
I've said a million times on the podcast,

1382
01:29:45,517 --> 01:29:46,856
Thomas Pacquiao at Pokey said,

1383
01:29:46,997 --> 01:29:48,256
we're all going to be rich and depressed

1384
01:29:48,256 --> 01:29:49,236
because the project failed.

1385
01:29:49,417 --> 01:29:53,356
And I think that is a reasonable chance of happening.

1386
01:29:53,356 --> 01:29:53,796
Yep.

1387
01:29:53,917 --> 01:30:02,137
I think that those arguments are an argument against Bitcoin's value as money.

1388
01:30:02,917 --> 01:30:04,116
I think you're right.

1389
01:30:04,477 --> 01:30:07,236
But does everyone see Bitcoin as money is the question?

1390
01:30:07,296 --> 01:30:07,816
I think they will.

1391
01:30:08,217 --> 01:30:09,377
I think it's going to take a long time.

1392
01:30:09,497 --> 01:30:15,957
I think by the time we're actually debating a lot of these questions, it's going to be a very different world that we live in.

1393
01:30:15,957 --> 01:30:22,677
when these are actually like real threats that are, you know, some sort of pernicious threat

1394
01:30:22,677 --> 01:30:28,037
spreading throughout the market. I think by that time, the understanding of Bitcoin is going to be

1395
01:30:28,037 --> 01:30:35,537
a lot more sophisticated around people. The way that I view this is that if we believe that

1396
01:30:35,537 --> 01:30:40,957
Bitcoin's most valuable use case is as permissionless global money, is as this new

1397
01:30:40,957 --> 01:30:48,616
neutral financial system. If that is true, then people seeking to capture value from that are

1398
01:30:48,616 --> 01:30:55,256
going to understand that certain action they're taking, they're going to have much more value by

1399
01:30:55,256 --> 01:31:00,756
abiding by policy and behavior that increases that reality. We're going to be one of the first

1400
01:31:00,756 --> 01:31:06,637
institutions that's benefiting and profitable from that reality emerging. And I think that the digital

1401
01:31:06,637 --> 01:31:11,396
gold narrative is going to be, you know, that's going to get a lot of institutions on board,

1402
01:31:11,396 --> 01:31:15,756
but it's going to be vastly smaller in terms of its potential. Now, not everybody's going to see

1403
01:31:15,756 --> 01:31:21,656
that. Larry thinks probably not going to see that. I've been surprised with the way politicians

1404
01:31:21,656 --> 01:31:25,896
have adopted. You know, I didn't expect the US to be a first mover on this. I thought it'd be

1405
01:31:25,896 --> 01:31:30,356
emerging markets. I've been consistently surprised with how people adopt it and what their

1406
01:31:30,356 --> 01:31:34,097
understandings are. I think in five to 10 years, that could be drastically different.

1407
01:31:34,097 --> 01:31:45,156
But the thing with like the US is a perfect example of what I'm saying. Like they are supposedly adopting Bitcoin. We'll see what happens. But at the same time, they are putting privacy developers in jail. And that's not Bitcoin winning to me.

1408
01:31:45,156 --> 01:32:08,256
Yep. Yep. And I don't disagree with that today. What I'm saying is more from the perspective of, will the incentive exist? So the point that you're basically making is that people who are custodians or asset managers, they're going to benefit more from having custodial ownership of Bitcoin. And as that increases, there's going to be a strong profit model. They're going to want to be supporting that.

1409
01:32:08,256 --> 01:32:22,396
Now, if Bitcoin is permissionless money is going to be the most valuable use case for it, then that means that some of the largest profit models that are going to exist in the long term are going to emerge from that use case over the long term.

1410
01:32:22,717 --> 01:32:28,377
So that means that there's going to be competing institutions that emerge and say, this is a much more value.

1411
01:32:28,417 --> 01:32:30,196
You guys are throwing the baby out with the bathwater.

1412
01:32:30,417 --> 01:32:33,477
We're going to support the alternative as long as that exists.

1413
01:32:33,477 --> 01:32:39,497
It's the same argument when people say, okay, if you're a government and you try to shut Bitcoin down, it's just going to move somewhere else.

1414
01:32:39,717 --> 01:32:42,156
And then you're going to have to compete against it later on.

1415
01:32:42,236 --> 01:32:47,276
And you're going to be the government that missed out on this huge expansion and structural change in global wealth.

1416
01:32:47,396 --> 01:32:49,477
And that incentive exists always and everywhere.

1417
01:32:49,637 --> 01:32:56,177
If the truth is that permissionless global money is a reality, if that's the truth, then I think that incentive will exist.

1418
01:32:56,517 --> 01:32:58,597
And the market will respond accordingly over time.

1419
01:32:58,597 --> 01:33:00,057
Because I do believe that that's the case.

1420
01:33:00,057 --> 01:33:10,776
One of the maybe unpopular opinions I have is that when you look at the normal path that an emerging money takes, people talk about store of value, medium of exchange, unit of account.

1421
01:33:12,017 --> 01:33:15,417
The medium of exchange seems like the hardest reach for me at the moment.

1422
01:33:15,776 --> 01:33:20,377
Like Bitcoin as a store of value clearly played out.

1423
01:33:20,796 --> 01:33:24,236
Bitcoin as a unit of account, like for me, it's already my unit of account.

1424
01:33:24,417 --> 01:33:25,436
You're probably in the same boat.

1425
01:33:25,836 --> 01:33:28,776
But like, and again, like I use Bitcoin as money.

1426
01:33:28,776 --> 01:33:29,957
I buy things with Bitcoin.

1427
01:33:30,057 --> 01:33:32,816
at Bitcoin events and in Bitcoin places.

1428
01:33:32,816 --> 01:33:34,356
You can't do it elsewhere.

1429
01:33:34,356 --> 01:33:35,856
And I know Square are doing their thing.

1430
01:33:35,856 --> 01:33:38,097
It'll be interesting to see how much actual adoption

1431
01:33:38,097 --> 01:33:41,477
of Bitcoin in those sort of transactions occurs.

1432
01:33:41,477 --> 01:33:44,517
But how do we get people using Bitcoin?

1433
01:33:44,555 --> 01:33:48,635
I think it's that perspective, and I hear it so frequently.

1434
01:33:48,795 --> 01:33:52,415
It's that perspective that how do we get people using Bitcoin?

1435
01:33:52,735 --> 01:33:54,495
I don't think it's the right way of approaching that.

1436
01:33:54,755 --> 01:33:56,435
I don't think it's the right way of approaching the question.

1437
01:33:58,415 --> 01:34:02,235
When gold emerged, people didn't say, how do we get people to use gold as money?

1438
01:34:02,915 --> 01:34:05,735
When gold emerged, people said, this is a scarce commodity.

1439
01:34:06,515 --> 01:34:09,715
And that's what caused a convergence upon gold and silver over time.

1440
01:34:09,775 --> 01:34:10,955
These are scarce commodities.

1441
01:34:11,955 --> 01:34:14,235
And eventually you get to a point where everybody owns it.

1442
01:34:14,555 --> 01:34:17,735
And then eventually you get to a point because everybody owns it, they start trading in it.

1443
01:34:17,795 --> 01:34:18,495
What else do you spend?

1444
01:34:18,635 --> 01:34:19,295
What else do you spend?

1445
01:34:19,335 --> 01:34:20,675
This is this thing that we all have.

1446
01:34:20,675 --> 01:34:24,535
And you can look at different forms of money that they had in societies, like in agricultural societies.

1447
01:34:24,735 --> 01:34:30,395
Like monies were just these things that were, you know, somewhat universal to their trade.

1448
01:34:30,475 --> 01:34:38,915
And like this is one of the arguments against Bitcoin originally from some economists was that because it has no utility value, it won't be widely accepted enough to become money.

1449
01:34:38,995 --> 01:34:42,055
And that wasn't really true from like a precious metal standpoint historically.

1450
01:34:42,055 --> 01:34:56,675
But like in agricultural societies, when we look at things like cattle and salt that were used as a form of money back then, and like, you know, cattle, meaning the Latin being pecus is where the word procurinary came from, meaning of money.

1451
01:34:56,875 --> 01:35:03,995
And then salt is where sal in Latin is where the word salary came from, like these very fundamental forms of money that existed during that period of time.

1452
01:35:05,175 --> 01:35:07,995
Those were things that everybody had and everybody wanted all the time.

1453
01:35:08,815 --> 01:35:11,095
So that was a natural way that they spread.

1454
01:35:11,095 --> 01:35:16,135
And then precious metals naturally spread just because their scarcity was far greater than any other commodity that existed.

1455
01:35:16,555 --> 01:35:23,095
So like that's kind of what we're witnessing today with Bitcoin is just we're watching it spread because it's the scarcest asset in the world.

1456
01:35:23,095 --> 01:35:28,875
And then once that happens, like eventually we're going to get to a point where it's something just like everybody owns.

1457
01:35:28,955 --> 01:35:30,695
And that's the big shift happening right now.

1458
01:35:30,775 --> 01:35:33,355
The big shift is that it's changed culturally.

1459
01:35:33,355 --> 01:35:37,015
It's become something that people are thinking about and listening to.

1460
01:35:37,015 --> 01:35:41,075
And it's not some sort of like, you know, illegal whatever type thing in people's minds anymore.

1461
01:35:41,095 --> 01:35:52,975
So once everybody has a little bit of Bitcoin, once it's like this normal thing, like I think the first shift in like from the investor's standpoint is a lot of people are thinking about investment today in like the normie world.

1462
01:35:53,015 --> 01:35:56,015
The people who are never going to understand like a lot of these permissionless characteristics.

1463
01:35:56,015 --> 01:35:59,275
They're just kind of own some and then they're going to have it.

1464
01:35:59,415 --> 01:36:02,115
And then by the time people are using it in money, they're going to start using it as money.

1465
01:36:02,255 --> 01:36:05,195
Like they're just never going to be looking into things in the depth that we're looking at it from.

1466
01:36:05,935 --> 01:36:10,975
Like those people, from their perspective, they are all just kind of like getting a little bit.

1467
01:36:11,095 --> 01:36:16,455
And the same way that today people are like, oh, you know, you should probably own stocks if you're an investor.

1468
01:36:16,655 --> 01:36:19,555
You should probably own bonds or you should own a home.

1469
01:36:19,555 --> 01:36:27,655
You know, it's just these are just cultural heuristics that people perceive to be true because their parents told them so or somebody that they trust told them so.

1470
01:36:27,955 --> 01:36:31,775
And that's how the vast majority of the way people's behavior spreads.

1471
01:36:32,035 --> 01:36:34,235
So that's just happening with Bitcoin right now.

1472
01:36:34,255 --> 01:36:37,815
It's becoming this thing where everybody's like, oh, I should probably have a little bit of money in Bitcoin.

1473
01:36:38,215 --> 01:36:40,355
And that's how it becomes something everybody has.

1474
01:36:40,355 --> 01:36:45,215
And then it will come to a point when it's going to be a lot easier for people to say, oh, well, I'll just pay you in Bitcoin.

1475
01:36:45,475 --> 01:36:54,935
And I think one of the key fallacies that Bitcoiners fall under with this is a lot of people say, well, no, I'm just never going to want to spend my Bitcoin.

1476
01:36:55,635 --> 01:36:56,055
And it's like-

1477
01:36:56,055 --> 01:36:57,595
But there's opportunity cost either way.

1478
01:36:57,815 --> 01:37:03,355
Well, I think the reality is you don't choose to spend any form of money because you want-

1479
01:37:03,355 --> 01:37:03,575
It's demanded.

1480
01:37:03,855 --> 01:37:04,075
Yeah.

1481
01:37:04,235 --> 01:37:05,055
It's demanded.

1482
01:37:05,515 --> 01:37:08,195
I would love to give you my underwear for something.

1483
01:37:08,195 --> 01:37:09,795
Like, I would love to give you anything.

1484
01:37:09,795 --> 01:37:10,855
like anything that's

1485
01:37:10,855 --> 01:37:11,235
People might pay for that

1486
01:37:11,235 --> 01:37:11,895
Yeah, yeah

1487
01:37:11,895 --> 01:37:13,095
there might be a few

1488
01:37:13,095 --> 01:37:13,935
but like

1489
01:37:13,935 --> 01:37:14,295
you know

1490
01:37:14,295 --> 01:37:14,855
it's just like

1491
01:37:14,855 --> 01:37:16,395
I would love to give you anything

1492
01:37:16,395 --> 01:37:16,975
other than

1493
01:37:16,975 --> 01:37:17,295
you know

1494
01:37:17,295 --> 01:37:18,535
the most valuable forms of money

1495
01:37:18,535 --> 01:37:20,495
it's because people are demanding it

1496
01:37:20,495 --> 01:37:21,355
and there's going to come a point

1497
01:37:21,355 --> 01:37:21,935
where people are going to be like

1498
01:37:21,935 --> 01:37:22,435
no I don't

1499
01:37:22,435 --> 01:37:23,475
don't pay me dollars

1500
01:37:23,475 --> 01:37:24,275
pay me some Bitcoin

1501
01:37:24,275 --> 01:37:24,935
That makes sense

1502
01:37:24,935 --> 01:37:25,595
it's almost like

1503
01:37:25,595 --> 01:37:26,955
there is a law for that

1504
01:37:26,955 --> 01:37:27,455
an economic law

1505
01:37:27,455 --> 01:37:28,375
I can't remember what it's called

1506
01:37:28,375 --> 01:37:29,335
but it's

1507
01:37:29,335 --> 01:37:30,815
so Gresham's law plays out

1508
01:37:30,815 --> 01:37:32,195
people hoard Bitcoin

1509
01:37:32,195 --> 01:37:33,115
because they don't want to spend it

1510
01:37:33,115 --> 01:37:33,935
spend the shit money

1511
01:37:33,935 --> 01:37:35,335
and then at the end of that

1512
01:37:35,335 --> 01:37:36,495
it gets to the point where

1513
01:37:36,495 --> 01:37:38,015
people who are selling

1514
01:37:38,015 --> 01:37:38,995
goods and services

1515
01:37:38,995 --> 01:37:42,815
demand Bitcoin. And that's where the actual medium exchange part comes in. That makes sense to me.

1516
01:37:42,815 --> 01:37:46,995
Totally. Totally. And we're just getting to that point. That's why I care so much about adoption

1517
01:37:46,995 --> 01:37:52,695
today, that happening rapidly. The more people that own it, the more we start to see that

1518
01:37:52,695 --> 01:37:56,935
acceptability happen. The more we start to see the potential for medium exchange at scale occurring,

1519
01:37:57,055 --> 01:38:00,055
and the more we start to see it become political suicide to ever attack it.

1520
01:38:00,195 --> 01:38:04,035
Especially if Bitcoin goes from here to 10 million. If anyone has any Bitcoin today,

1521
01:38:04,055 --> 01:38:07,175
it's going to be a vast amount of their money in the future. And at that point, what else do you

1522
01:38:07,175 --> 01:38:12,255
spend? And what else do you demand as someone selling something? That makes sense. So then

1523
01:38:12,255 --> 01:38:17,595
the other like common trope in Bitcoin is if Bitcoin's at 10 million, like what does the price

1524
01:38:17,595 --> 01:38:23,555
of bread cost you? How do you think about that? Like is a loaf of bread $10,000?

1525
01:38:26,115 --> 01:38:31,635
I don't know. I don't think too much about it. But yeah, I think that like

1526
01:38:31,635 --> 01:38:34,555
there's two things happening.

1527
01:38:35,655 --> 01:38:38,935
So that'll be the nominal price of Bitcoin, right?

1528
01:38:38,995 --> 01:38:39,675
And that's why people are like,

1529
01:38:39,715 --> 01:38:41,375
we need to denominate real goods in Bitcoin

1530
01:38:41,375 --> 01:38:42,915
to really see what our purchasing power is.

1531
01:38:43,935 --> 01:38:45,515
Because to the point I was making earlier,

1532
01:38:46,235 --> 01:38:47,675
we have this shift towards commodities.

1533
01:38:47,875 --> 01:38:49,675
By the time Bitcoin consumes the market of gold,

1534
01:38:49,855 --> 01:38:51,775
commodities are going to be so much more highly demanded

1535
01:38:51,775 --> 01:38:52,415
at that point.

1536
01:38:53,275 --> 01:38:56,735
So gold itself will just double in terms of demand

1537
01:38:56,735 --> 01:38:58,755
or that theoretical store value demand

1538
01:38:58,755 --> 01:38:59,935
that gold holds today.

1539
01:39:01,635 --> 01:39:06,815
And then further, there's going to be that much inflation that occurs within the dollar as well.

1540
01:39:06,875 --> 01:39:08,015
That's going to be changing it.

1541
01:39:09,095 --> 01:39:12,715
A lot of the long-term stuff, I just don't focus on it that much.

1542
01:39:12,715 --> 01:39:19,035
I try to focus a lot more on what's the most interesting companies and infrastructure that increase adoption for Bitcoin today.

1543
01:39:20,035 --> 01:39:21,955
And a lot of these things are more technical and boring.

1544
01:39:22,075 --> 01:39:23,355
They're not things that really get into the mainstream.

1545
01:39:23,675 --> 01:39:28,355
Yeah, but I think maybe that's a specific question about a wider thing.

1546
01:39:28,475 --> 01:39:30,955
It's like, what does society look like with Bitcoin at 10 million?

1547
01:39:30,955 --> 01:39:32,955
Oh, okay. I see what you're saying.

1548
01:39:32,955 --> 01:39:46,287
Um With Bitcoin at 10 million I think that Bitcoin is going to be like owning a home around then

1549
01:39:46,287 --> 01:39:50,567
It's going to be something where it is starting to become in the same way you have like Zoomers

1550
01:39:50,567 --> 01:39:55,847
today that are using like Cash App for a lot of their bank accounts. There's kind of like this new

1551
01:39:55,847 --> 01:39:59,727
type of buyer behavior emerging in the younger generations. And I think with Bitcoin at 10

1552
01:39:59,727 --> 01:40:02,327
million, it's going to be something kind of like that. It's going to be this new type of buyer

1553
01:40:02,327 --> 01:40:06,227
behavior from these new types of companies that have emerged where everybody kind of has a little

1554
01:40:06,227 --> 01:40:12,207
bit. You know, guys are playing fantasy football with it and paying each other out in that.

1555
01:40:13,867 --> 01:40:17,407
And it's something that's like structurally a savings account. People are kind of spending

1556
01:40:17,407 --> 01:40:23,687
it a little bit, but they're still expecting it to go much higher. And, you know, dollar inflation

1557
01:40:23,687 --> 01:40:32,007
has significantly changed. And the world is kind of viewing this as all these conceptual

1558
01:40:32,007 --> 01:40:37,807
ideas that are conceived by the minority of the Bitcoiners that are driving all this right now,

1559
01:40:38,207 --> 01:40:43,127
they're probably going to be more persistently understood at that point. Most people are going

1560
01:40:43,127 --> 01:40:46,827
to be like, I'm still using dollars because it's much more practical in my day-to-day life.

1561
01:40:49,167 --> 01:40:55,087
But I kind of use Bitcoin when I can every now and then. And they're going to be familiar with

1562
01:40:55,087 --> 01:41:01,147
the broader vision at that point. Okay. So in this future world with Bitcoin at $10 million,

1563
01:41:01,147 --> 01:41:05,647
dollars, what happens to central banking? Does it still exist at that point?

1564
01:41:07,027 --> 01:41:12,067
I think that at this point, what we're going to see, I think one of the major shifts that we're

1565
01:41:12,067 --> 01:41:18,747
going to be witnessing over the next decade, and a lot of this relates to how stablecoin demand is

1566
01:41:18,747 --> 01:41:25,267
emerging right now. For Bitcoiners listening to this, I think everybody makes the arguments like

1567
01:41:25,267 --> 01:41:29,287
stablecoins are a Trojan horse. The question is like, what does that mean? How does that actually

1568
01:41:29,287 --> 01:41:33,927
work? What's going to happen that are going to make people say, I'm selling my stable coin for

1569
01:41:33,927 --> 01:41:40,007
Bitcoin at some point in the future. And in this recent banking report that we put out a very

1570
01:41:40,007 --> 01:41:46,407
technical deep dive into how banking works from like a pretty technical perspective and making

1571
01:41:46,407 --> 01:41:51,567
the case for Bitcoin adoption by banks in the near term, we kind of lay out what this future

1572
01:41:51,567 --> 01:41:57,907
vision could look like. So what's happening right now is that we're realizing, well, a little bit of

1573
01:41:57,907 --> 01:42:05,947
background first. At a high level, the way that the current banking systems are structured,

1574
01:42:06,067 --> 01:42:09,787
particularly in the US and other major economies, is you'll hear this referred to as a two-tier

1575
01:42:09,787 --> 01:42:15,867
system. Tier one is the central banks. Tier two is the commercial banks. Now, there's actually two

1576
01:42:15,867 --> 01:42:21,707
other kind of bookends that are put onto that tier system. And basically how money is created

1577
01:42:21,707 --> 01:42:27,867
today at the highest level is US government issues debt because they need debt to pay for things.

1578
01:42:27,907 --> 01:42:32,627
So they, you know, effectively are creating money out of thin air because they issue this debt.

1579
01:42:32,987 --> 01:42:36,727
And then they're selling it to central banks indirectly through prime brokers.

1580
01:42:36,967 --> 01:42:38,747
So debt goes into central banks.

1581
01:42:38,827 --> 01:42:40,107
Central banks convert it to reserves.

1582
01:42:40,407 --> 01:42:43,427
Now, those reserves are being held by commercial banks.

1583
01:42:44,067 --> 01:42:49,167
And those commercial banks have something called a Fedmaster account that allows them to access the reserves of the Federal Reserve.

1584
01:42:49,387 --> 01:42:57,527
And then those guys can either lend that into existence or they can have other banks plug into them called correspondent banks.

1585
01:42:57,527 --> 01:43:01,787
And those correspondent banks can have an account with them, which gives them access to the Federal Reserve Master Account.

1586
01:43:02,107 --> 01:43:06,267
So it's like this really muddy system, but it's basically like debt gets created by the central bank.

1587
01:43:07,307 --> 01:43:08,687
Central banks buy it indirectly.

1588
01:43:09,647 --> 01:43:12,127
And commercial banks are lending it into the economy.

1589
01:43:12,847 --> 01:43:14,007
Debt gets created by the Treasury.

1590
01:43:14,447 --> 01:43:15,207
Or sorry, what is it?

1591
01:43:15,267 --> 01:43:17,147
Yeah, by the Treasury.

1592
01:43:17,947 --> 01:43:24,427
And then that is indirectly, you know, central banks are creating demand by effectively buying that from prime dealers.

1593
01:43:24,427 --> 01:43:29,447
and then commercial banks are ultimately the ones accessing those reserves and lending into the

1594
01:43:29,447 --> 01:43:32,627
economy. So they're just taking those reserves, putting them on the balance sheet and then lending

1595
01:43:32,627 --> 01:43:36,107
out against those reserves. Yeah. Yeah. And there's a, we don't need to get into all the

1596
01:43:36,107 --> 01:43:39,587
technical details about how like actual like M2 expansion and things actually are happening.

1597
01:43:39,587 --> 01:43:43,407
Cause there's a bunch of like, you know, not like dynamic variables and impact how that happens,

1598
01:43:43,407 --> 01:43:47,147
but like it just structurally to kind of understand the system. This is the, you know,

1599
01:43:47,167 --> 01:43:51,727
levers that exist. And, uh, and then at the bottom of that, you have like FinTechs basically,

1600
01:43:51,727 --> 01:43:58,847
which are kind of just like a makeup layer that's plugging into this banking system and making things function better and work better for everyday people with software.

1601
01:44:00,227 --> 01:44:03,147
So like that's kind of the structure of the current system today.

1602
01:44:03,227 --> 01:44:05,447
We have all these intermediaries that exist within it.

1603
01:44:06,667 --> 01:44:08,047
What happened with stable coins?

1604
01:44:08,907 --> 01:44:11,767
Stable coins are buying U.S. debt and people are trading it as money.

1605
01:44:12,507 --> 01:44:13,627
And what does that mean?

1606
01:44:14,367 --> 01:44:18,207
The first part is going all the way to the end and we're cutting out the complete middle.

1607
01:44:18,207 --> 01:44:19,747
so in the US

1608
01:44:19,747 --> 01:44:20,907
what shifted this year

1609
01:44:20,907 --> 01:44:21,407
is that we had

1610
01:44:21,407 --> 01:44:21,807
the like the

1611
01:44:21,807 --> 01:44:22,907
SAV 121 ruling

1612
01:44:22,907 --> 01:44:23,787
that was put in

1613
01:44:23,787 --> 01:44:24,347
under the Biden

1614
01:44:24,347 --> 01:44:24,887
administration

1615
01:44:24,887 --> 01:44:25,527
through Gensler

1616
01:44:25,527 --> 01:44:26,607
and I was basically

1617
01:44:26,607 --> 01:44:27,207
saying that

1618
01:44:27,207 --> 01:44:28,487
you know banks

1619
01:44:28,487 --> 01:44:29,687
aren't allowed

1620
01:44:29,687 --> 01:44:30,347
to

1621
01:44:30,347 --> 01:44:31,507
or they have to

1622
01:44:31,507 --> 01:44:32,027
if they're

1623
01:44:32,027 --> 01:44:32,547
you know holding

1624
01:44:32,547 --> 01:44:33,387
digital assets

1625
01:44:33,387 --> 01:44:34,107
on deposit

1626
01:44:34,107 --> 01:44:35,827
then they have to

1627
01:44:35,827 --> 01:44:36,367
hold those as a

1628
01:44:36,367 --> 01:44:37,007
liability on their

1629
01:44:37,007 --> 01:44:37,407
balance sheet

1630
01:44:37,407 --> 01:44:37,847
which is a big

1631
01:44:37,847 --> 01:44:38,827
problem for them

1632
01:44:38,827 --> 01:44:39,447
because any other

1633
01:44:39,447 --> 01:44:40,447
deposit they have

1634
01:44:40,447 --> 01:44:41,507
is something off

1635
01:44:41,507 --> 01:44:42,167
balance sheet

1636
01:44:42,167 --> 01:44:44,027
so to understand

1637
01:44:44,027 --> 01:44:44,407
that better

1638
01:44:44,407 --> 01:44:45,147
if they own like

1639
01:44:45,147 --> 01:44:45,887
a billion dollars

1640
01:44:45,887 --> 01:44:46,287
of Bitcoin

1641
01:44:46,287 --> 01:44:47,087
just as an example

1642
01:44:47,087 --> 01:44:47,707
they have to also

1643
01:44:47,707 --> 01:44:48,767
have a billion dollars in cash.

1644
01:44:49,507 --> 01:44:51,567
Yeah, well, they don't have to,

1645
01:44:51,647 --> 01:44:53,847
but all it means is that they now have a liability

1646
01:44:53,847 --> 01:44:54,787
on their balance sheet,

1647
01:44:54,847 --> 01:44:56,467
which impacts their risk metrics

1648
01:44:56,467 --> 01:44:57,807
and the way that those are being assessed.

1649
01:44:57,907 --> 01:44:59,687
So like when regulators come in and they say like,

1650
01:45:00,167 --> 01:45:02,467
you know, are you meeting the right levels

1651
01:45:02,467 --> 01:45:03,387
of certain thresholds?

1652
01:45:03,387 --> 01:45:04,767
So you have to allocate a billion dollars of cash

1653
01:45:04,767 --> 01:45:05,287
in that scenario.

1654
01:45:05,807 --> 01:45:06,547
Yeah, yeah.

1655
01:45:06,547 --> 01:45:07,487
And like the,

1656
01:45:08,427 --> 01:45:11,547
and it can impact what all these metrics are

1657
01:45:11,547 --> 01:45:12,167
that they're having,

1658
01:45:12,227 --> 01:45:14,287
then they may not pass like certain stress tests

1659
01:45:14,287 --> 01:45:14,987
by regulators.

1660
01:45:15,247 --> 01:45:15,387
Yeah.

1661
01:45:15,447 --> 01:45:17,307
And it basically made it so it was like a non-starter

1662
01:45:17,307 --> 01:45:19,767
for them to even adopt digital assets in the first place.

1663
01:45:19,767 --> 01:45:22,067
And like Caitlin Long was fighting this whole battle, et cetera.

1664
01:45:23,847 --> 01:45:26,987
And then that Trump administration enters, that gets repealed.

1665
01:45:26,987 --> 01:45:38,040
And at that point was when you know our firm was like this is really interesting This is really going to impact a lot of things because banks adopting Bitcoin is going to be the next major I think shift in the U for how things operate in the market

1666
01:45:38,660 --> 01:45:42,240
And so we started like diving a lot more into this question.

1667
01:45:42,980 --> 01:45:47,940
And basically, going back to the point of like, we have this tiered structure of system

1668
01:45:47,940 --> 01:45:51,660
where debt gets converted to money and then money gets created through banks.

1669
01:45:51,860 --> 01:45:54,200
And then fintechs make it easy for people to access that.

1670
01:45:54,200 --> 01:45:56,440
And now it's just debt goes straight to a stable coin.

1671
01:45:56,440 --> 01:45:58,640
And a stable coin makes it easier for people to access that.

1672
01:45:58,700 --> 01:46:00,220
So it's like, what are we really trading

1673
01:46:00,220 --> 01:46:01,240
when we're trading money?

1674
01:46:01,420 --> 01:46:02,620
We're trading debt.

1675
01:46:02,920 --> 01:46:03,620
And the question's like,

1676
01:46:03,660 --> 01:46:05,620
well, why don't we just like trade debt directly?

1677
01:46:05,720 --> 01:46:07,500
Why don't we trade treasuries with each other?

1678
01:46:07,740 --> 01:46:10,820
The answer is that treasuries are heterogeneous.

1679
01:46:11,120 --> 01:46:11,820
They're not homogenous.

1680
01:46:12,460 --> 01:46:14,940
So because they're not like, you know, specific,

1681
01:46:15,100 --> 01:46:16,420
every debt has different maturities,

1682
01:46:16,620 --> 01:46:18,720
different interest rates, you know, yada, yada.

1683
01:46:19,880 --> 01:46:21,720
These are kind of blended together

1684
01:46:21,720 --> 01:46:23,900
to create a form of money.

1685
01:46:24,100 --> 01:46:26,040
And that's kind of what stable coins are basically doing.

1686
01:46:26,040 --> 01:46:30,160
They're creating this blend of reserve assets that's giving us, you know, a stable coin.

1687
01:46:30,600 --> 01:46:39,220
And the reality is, is that with the way the Tether exists right now, all the interest that they earn on that debt, they're just pocketing all of it.

1688
01:46:39,580 --> 01:46:42,620
And because the market's just not that competitive against them for anything else.

1689
01:46:42,620 --> 01:46:44,780
Well, they've been told they can't issue, like offer interest.

1690
01:46:44,920 --> 01:46:52,880
And that's one of the big shifts that happened with the Genius Act last month, where we had this bill pass through Congress, pass through the House.

1691
01:46:52,880 --> 01:46:54,580
and

1692
01:46:54,580 --> 01:46:57,820
this bill, like the two primary things to consider

1693
01:46:57,820 --> 01:46:59,420
is that

1694
01:46:59,420 --> 01:47:01,940
short duration government debt is the primary

1695
01:47:01,940 --> 01:47:03,940
form of reserve, or the only form

1696
01:47:03,940 --> 01:47:05,660
of reserve that stable coins are allowed to have

1697
01:47:05,660 --> 01:47:06,600
in the US

1698
01:47:06,600 --> 01:47:09,720
and also

1699
01:47:09,720 --> 01:47:11,880
stable coins aren't allowed to pay interest

1700
01:47:11,880 --> 01:47:13,860
so it's huge regulatory ring

1701
01:47:13,860 --> 01:47:16,060
fencing carve out to protect the banks

1702
01:47:16,060 --> 01:47:17,140
because what did I just describe?

1703
01:47:17,540 --> 01:47:19,800
We're basically disintermediating the entire banking

1704
01:47:19,800 --> 01:47:21,820
system with stable coins. Well I don't know if you listened to

1705
01:47:21,820 --> 01:47:27,740
the All In podcast ever. But I was listening to that not long after the Genius Act passed. And

1706
01:47:27,740 --> 01:47:32,320
David Sachs outright said that they put that rule in because the banks weren't happy.

1707
01:47:32,480 --> 01:47:35,980
Exactly. No, I mean, there's like public letters from the Community Bank Association,

1708
01:47:36,520 --> 01:47:40,580
where they were, you know, publicly letters or public letters sent to say,

1709
01:47:41,020 --> 01:47:46,340
you cannot have, you cannot let stable coins get a Fedmaster account. Because the second thing,

1710
01:47:46,340 --> 01:47:49,960
if a stable coin, if Tether gets a banking license, and they get a Fedmaster account,

1711
01:47:49,960 --> 01:47:54,240
banks can't compete with that. And today, because they don't have those things,

1712
01:47:54,300 --> 01:47:57,800
they can't pay interest. But the second they have those things, they actually could

1713
01:47:57,800 --> 01:48:01,340
pay interest like a bank. But why are they protecting the banks in that scenario? Because

1714
01:48:01,340 --> 01:48:05,760
surely if this is like an innovative thing that could be really positive, why not just let them

1715
01:48:05,760 --> 01:48:09,1000
have it? I feel like the question is obvious, right? Like there's a huge pervasive conflict

1716
01:48:09,1000 --> 01:48:13,560
of interest between banks and society. And like, you know, Bitcoiners talk a lot about that. But

1717
01:48:13,560 --> 01:48:18,420
I think the reality is just that, you know, putting aside that banks have influence over

1718
01:48:18,420 --> 01:48:25,980
politicians. Putting that aside, we have a strong path dependency in the system. Because our money

1719
01:48:25,980 --> 01:48:30,820
creation exists around the banking system like this today, to undermine that could create

1720
01:48:30,820 --> 01:48:36,120
significant upheaval in the functioning of our financial system. I mean, even with the GFC,

1721
01:48:36,500 --> 01:48:42,360
that caused a very significant crash. But do you think this could be a temporary measure until

1722
01:48:42,360 --> 01:48:46,340
JP Morgan and all these people have their own stable coin? Then they'll be like, okay, fine,

1723
01:48:46,340 --> 01:48:49,580
you have a go. They're basically just holding it off until they can compete.

1724
01:48:49,700 --> 01:48:53,520
There's going to be a convergence. I don't know. I'm definitely not an expert on how

1725
01:48:53,520 --> 01:48:59,1000
specifically that dynamic would play out. But JP Morgan already listed their own,

1726
01:49:00,040 --> 01:49:04,800
and they call them tokenized deposits, by the way. So the tokenized deposit that they issued

1727
01:49:04,800 --> 01:49:09,600
on Coinbase's base blockchain, which is just a server that Brian Armstrong has in his basement,

1728
01:49:11,120 --> 01:49:15,940
they issued that. And that's an interest paying stable coin effectively through that. It's kind

1729
01:49:15,940 --> 01:49:20,860
like a beta or something. But that's kind of the world that we're going to or stable coins that are

1730
01:49:20,860 --> 01:49:26,620
paying interest through banks with the proper, you know, certificates to be able to do that.

1731
01:49:26,920 --> 01:49:30,720
And then stable coin providers are going to be powerful and they're going to effectively become

1732
01:49:30,720 --> 01:49:34,880
banks doing that. I think you're going to see a lot of like crypto institutions doing something

1733
01:49:34,880 --> 01:49:41,620
similar. And then even if you don't, what I think we will see is there's going to be like an onshore

1734
01:49:41,620 --> 01:49:47,180
market and offshore market, I think we'll start to see like more like offshore type

1735
01:49:47,180 --> 01:49:49,600
stable coins emerge.

1736
01:49:49,820 --> 01:49:49,940
Totally.

1737
01:49:50,060 --> 01:49:53,880
If I was Tether and I saw what happened in the Genius Act, I'd be like, okay, we'll

1738
01:49:53,880 --> 01:49:55,480
have Tether US, Tether International.

1739
01:49:55,640 --> 01:49:56,040
Exactly.

1740
01:49:56,320 --> 01:49:56,940
We'll offer interest.

1741
01:49:56,940 --> 01:49:58,160
And they have a huge decision right now.

1742
01:49:58,200 --> 01:50:01,380
I think there's going to be a ton of like, it's going to be very illuminating to see

1743
01:50:01,380 --> 01:50:01,900
what they do.

1744
01:50:02,060 --> 01:50:05,580
Because they've got to try carefully because like they are now in with the government.

1745
01:50:05,920 --> 01:50:06,240
Exactly.

1746
01:50:06,580 --> 01:50:06,740
Yeah.

1747
01:50:06,800 --> 01:50:09,720
So like onshore Tether, that's like either not paying interest or they get a banking

1748
01:50:09,720 --> 01:50:10,620
license and do it onshore.

1749
01:50:10,620 --> 01:50:12,980
And then there's going to be like offshore tether and offshore tether.

1750
01:50:12,980 --> 01:50:21,640
And I think the reason that that's created is like one, it's like, okay, even though we can pay interest, we can still only buy U.S. short duration government debt.

1751
01:50:21,900 --> 01:50:22,720
It's our collateral.

1752
01:50:23,460 --> 01:50:26,080
So what's going to make them want to issue offshore at that point?

1753
01:50:26,300 --> 01:50:27,680
I'll be like, well, how does it exist today?

1754
01:50:28,380 --> 01:50:30,580
5% of the reserves are in Bitcoin.

1755
01:50:32,220 --> 01:50:34,020
Wait, wait, I don't know if that's true.

1756
01:50:34,860 --> 01:50:36,520
5% of the reserves in Bitcoin.

1757
01:50:36,760 --> 01:50:37,920
Are you sure?

1758
01:50:38,160 --> 01:50:38,360
Yep.

1759
01:50:38,360 --> 01:50:41,740
Because I thought they were putting excess capital into Bitcoin

1760
01:50:41,740 --> 01:50:43,320
and had fully reserved by treasuries.

1761
01:50:44,820 --> 01:50:48,820
Yeah, just like their reserve composition holds Bitcoin in it as 5%.

1762
01:50:48,820 --> 01:50:49,820
Damn.

1763
01:50:49,900 --> 01:50:51,120
It could have been excess capital.

1764
01:50:51,240 --> 01:50:54,020
Like how they accumulated it over time, I'm not sure.

1765
01:50:54,680 --> 01:50:55,140
But yeah.

1766
01:50:55,180 --> 01:51:00,400
So if there's just for easy math, 100 Tether issued,

1767
01:51:00,740 --> 01:51:03,240
they have 95 US dollars.

1768
01:51:03,260 --> 01:51:04,520
Yeah, like five cents are in Bitcoin.

1769
01:51:05,340 --> 01:51:05,780
Interesting.

1770
01:51:05,840 --> 01:51:06,680
I didn't know that's how it works.

1771
01:51:06,680 --> 01:51:09,800
I thought they had excess capital in Bitcoin and they were 100% reserved by.

1772
01:51:09,800 --> 01:51:11,200
I think they probably have both.

1773
01:51:11,380 --> 01:51:15,160
But if you look up like their reserve reports, they're reporting 5% in Bitcoin.

1774
01:51:15,480 --> 01:51:15,760
Damn.

1775
01:51:16,120 --> 01:51:16,320
Yeah.

1776
01:51:16,940 --> 01:51:17,980
So that's what's really interesting.

1777
01:51:18,080 --> 01:51:19,520
Like that's how Tether exists today.

1778
01:51:19,520 --> 01:51:32,292
So what going to make them want to do something in the offshore is that and I think the best way to conceptualize this well I start here they going to want to maintain that because that going to be a very valuable form of

1779
01:51:32,292 --> 01:51:37,252
reserve over time. And why? Because the ability to pay interest, I think, is going to be superior

1780
01:51:37,252 --> 01:51:41,172
from that. What allows you to pay better interest? Having superior risk-adjusted collateral,

1781
01:51:41,672 --> 01:51:49,452
or sorry, risk-adjusted reserve assets that are backing it. So if we do envision a world where

1782
01:51:49,452 --> 01:51:52,392
there's a lot more stable coins that are competing in different jurisdictions.

1783
01:51:53,812 --> 01:51:56,672
I think within that world where they're competing over interest,

1784
01:51:57,132 --> 01:51:59,752
now we have a competitive dynamic where everybody's trying to say,

1785
01:51:59,812 --> 01:52:02,472
how do we pay the most interest and not get too risky and blow up?

1786
01:52:02,692 --> 01:52:05,192
And that's going to be more like a free banking type world.

1787
01:52:07,132 --> 01:52:11,132
I think under that type of an incentive is where we see Bitcoin start to

1788
01:52:11,132 --> 01:52:13,932
pervasively move into the reserves of assets.

1789
01:52:13,932 --> 01:52:17,912
And I think like the end run on a lot of that game is going to become

1790
01:52:17,912 --> 01:52:24,732
basically what sailor has done with his new stretch product um so a short duration it's

1791
01:52:24,732 --> 01:52:30,972
paying like i think nine percent um the stretch product is like a bitcoin fully collateralized

1792
01:52:30,972 --> 01:52:38,452
short duration asset that is um you know perceived perceivedly it's a stable coin with really high

1793
01:52:38,452 --> 01:52:42,612
interest much higher interest in government debt now the question becomes is that going to work

1794
01:52:42,612 --> 01:52:47,332
we're going to find out in the market uh but that's the end game is that if you believe bitcoin

1795
01:52:47,332 --> 01:52:49,232
is going to be superior collateral,

1796
01:52:49,492 --> 01:52:52,692
is going to be the most valuable form of money and asset,

1797
01:52:53,192 --> 01:52:56,152
then it's going to expand throughout the reserves

1798
01:52:56,152 --> 01:52:58,152
of stable coins over time, one way or another,

1799
01:52:58,232 --> 01:52:59,752
whether it's onshore or whether it's offshore.

1800
01:53:00,812 --> 01:53:05,472
And that paired with what stable coins are doing right now,

1801
01:53:05,572 --> 01:53:07,012
putting the world on a standard

1802
01:53:07,012 --> 01:53:08,872
of cryptographic signatures for payments,

1803
01:53:09,232 --> 01:53:10,692
getting everybody on those payment rails

1804
01:53:10,692 --> 01:53:11,712
is going to be really important

1805
01:53:11,712 --> 01:53:13,252
because that means it's not just like,

1806
01:53:13,792 --> 01:53:15,012
oh, I have my credit card system

1807
01:53:15,012 --> 01:53:16,212
and that needs to integrate Bitcoin.

1808
01:53:17,332 --> 01:53:21,112
it's going to be, okay, we already have these systems set up for stable coins now.

1809
01:53:21,492 --> 01:53:24,732
And it's a flip of the switch to start using Bitcoin as a form of money.

1810
01:53:25,072 --> 01:53:29,232
So those two things, changing the payment rails to be on cryptographic type rails

1811
01:53:29,232 --> 01:53:32,092
and Bitcoin penetrating the reserves of this market.

1812
01:53:33,052 --> 01:53:38,552
I think that long-term builds a market where Bitcoin starts to continue to move throughout

1813
01:53:38,552 --> 01:53:39,692
the reserves and grow and grow.

1814
01:53:39,892 --> 01:53:43,972
And then eventually it gets to the point where everybody's like, okay, so we're basically

1815
01:53:43,972 --> 01:53:49,272
just like trading these stable coins that have reserve backing in Bitcoin and they're paying us

1816
01:53:49,272 --> 01:53:53,492
interest. Why am I just not using Bitcoin directly? Because it's been going up 30% a year and I've

1817
01:53:53,492 --> 01:54:00,112
been getting 9%. Why do I let this company take that from me? And that's the mechanism that this

1818
01:54:00,112 --> 01:54:04,072
Trojan horsing through stable coins happens. And I think that's going to be a very significant form

1819
01:54:04,072 --> 01:54:08,552
of adoption for Bitcoin over the next decade. So do you really see stable coins as like an

1820
01:54:08,552 --> 01:54:13,992
intermittent step before we get to full Bitcoin usage. So fast forward sort of 20, 30 years,

1821
01:54:14,032 --> 01:54:17,752
you think it's going to be all Bitcoin, no stable coins? I think it's a vehicle that allows us to

1822
01:54:17,752 --> 01:54:23,312
use interest rates within them as a mechanism to gradually increase the exposure to Bitcoin.

1823
01:54:23,492 --> 01:54:27,492
I think for people that are like, we want this to happen gradually, as opposed to just like,

1824
01:54:27,512 --> 01:54:32,412
you have to sell all of dollars to get stable coins. It's kind of a way to like gradually

1825
01:54:32,412 --> 01:54:37,372
increase the exposure of the asset through it at a systemic level from dollars to Bitcoin.

1826
01:54:37,372 --> 01:54:41,192
So yeah, I view it as potentially a very large one.

1827
01:54:42,692 --> 01:54:46,332
Again, to fast forward, look out 20 plus years.

1828
01:54:47,432 --> 01:54:48,872
What does the world look like?

1829
01:54:48,972 --> 01:54:49,972
Do we have a central bank?

1830
01:54:50,092 --> 01:54:51,632
Is Bitcoin the only money?

1831
01:54:51,712 --> 01:54:52,952
Do we get hyper-Bitcoinization?

1832
01:54:54,092 --> 01:54:59,492
I think that hyper-Bitcoinization is not a certainty yet.

1833
01:55:01,112 --> 01:55:04,072
When I wrote my book, that was like the primary thing

1834
01:55:04,072 --> 01:55:06,012
that I concluded from it is

1835
01:55:06,012 --> 01:55:11,192
We need a whole financial system built around Bitcoin. So over the next decade, that's, I think,

1836
01:55:11,192 --> 01:55:15,052
one of the biggest problems to be solved is we need a lot more companies. We need a lot more

1837
01:55:15,052 --> 01:55:20,112
infrastructure. We need more software. We need more protocols enabling people to move Bitcoin

1838
01:55:20,112 --> 01:55:26,472
faster and do more things with it in the most permissionless way possible, as well as in more

1839
01:55:26,472 --> 01:55:31,152
efficient ways that bring in adoption more rapidly. Like it's an entire competitive market that's

1840
01:55:31,152 --> 01:55:35,372
emerging around this. And it's just like a tree that's growing. There's going to be a lot of

1841
01:55:35,372 --> 01:55:38,852
branches that are growing today that are going to be dead tomorrow while other branches are growing

1842
01:55:38,852 --> 01:55:42,952
off of it. And all of these branches, the more they expand, it grows the trunk and the trunk is

1843
01:55:42,952 --> 01:55:49,312
Bitcoin adoption. So we need more branches. They need more access to sunlight. They need more water.

1844
01:55:49,432 --> 01:55:53,932
That's why I built my firm is to be a capital provider to these types of companies that are

1845
01:55:53,932 --> 01:55:58,992
focused on Bitcoin adoption. I think that's the biggest problem to be solved right now. And I

1846
01:55:58,992 --> 01:56:04,592
think for people that are working in the industry or people interested in doing so, I think some of

1847
01:56:04,592 --> 01:56:08,892
most competitive business models in the world are going to be emerging around this new vision.

1848
01:56:09,352 --> 01:56:13,512
And we're very early to a lot of it. I think people are still shifting out of the mindset of

1849
01:56:13,512 --> 01:56:16,672
there's going to be a bunch of different cryptocurrencies to, well, there's really

1850
01:56:16,672 --> 01:56:20,092
just going to be Bitcoin and that's going to be the money. And a lot of what these cryptocurrencies

1851
01:56:20,092 --> 01:56:25,352
attempted might be infrastructure that exists and is used by Bitcoin, but Bitcoin is going to be the

1852
01:56:25,352 --> 01:56:28,332
form of money. And for a while, it's going to be like Bitcoin stable coins are used.

1853
01:56:28,332 --> 01:56:34,772
and I think that like this shift is just starting to happen with a lot of these financial institutions

1854
01:56:34,772 --> 01:56:38,452
and the key competitive advantage that they're going to have is being bitcoin native over the

1855
01:56:38,452 --> 01:56:43,612
long term that doesn't seem obvious until you really start to understand their business models

1856
01:56:43,612 --> 01:56:49,592
and you realize that like if a bank moves from how they currently work to oh we're going to get

1857
01:56:49,592 --> 01:56:54,912
into bitcoin the margins are better the interest rates are better there's a lot of things that are

1858
01:56:54,912 --> 01:56:58,132
to make them get a significantly greater return on capital.

1859
01:56:58,172 --> 01:57:00,832
That's kind of what we're looking at in our banking report we put out this year.

1860
01:57:01,752 --> 01:57:04,972
And we're just going to keep seeing this incentive move because Bitcoin's

1861
01:57:04,972 --> 01:57:09,132
just going to keep going up and more and more people are realizing that.

1862
01:57:09,432 --> 01:57:11,172
So that's what we're working on today.

1863
01:57:11,172 --> 01:57:12,812
That's what we're trying to solve.

1864
01:57:12,812 --> 01:57:14,732
I think it's the most important problem in Bitcoin.

1865
01:57:16,232 --> 01:57:18,012
This is a very historic time.

1866
01:57:18,012 --> 01:57:19,952
We're going to look back on these years fondly, Danny.