1 00:00:00,000 --> 00:00:05,720 I think Bitcoin is going to a million dollars in the 2030s simply by the passage of time. 2 00:00:05,980 --> 00:00:11,460 Besides something more extreme like a 6102 attack, what are the other risks at play for something like this? 3 00:00:12,480 --> 00:00:20,680 It's not a coincidence that Fidelity and BlackRock have 1 to 3% target allocations for Bitcoin in multi-asset portfolios. 4 00:00:20,880 --> 00:00:25,120 And now suddenly it's not 8 billion people who need access to better money. 5 00:00:25,240 --> 00:00:29,240 It's 8 billion people plus humanoid bots or whatever it ends up looking like. 6 00:00:29,240 --> 00:00:33,820 Things don't grow linearly. They grow in this power law relationship. 7 00:00:34,160 --> 00:00:37,620 What the mathematicians have observed about Bitcoin is that... 8 00:00:46,680 --> 00:00:52,180 Today on the show, I have Nick Bhatia. Nick is an awesome guy and a wealth of knowledge. 9 00:00:52,180 --> 00:00:57,500 We talk about MicroStrategy, Strategy, Sailor, all of the stacking, the capital raising that 10 00:00:57,500 --> 00:01:02,160 they're doing, what it means for Bitcoin. We dive into some macroeconomic trends he's watching. 11 00:01:02,680 --> 00:01:07,220 And of course, we have to touch on AI. He has a very interesting thesis on how AI is going to 12 00:01:07,220 --> 00:01:12,020 impact Bitcoin. And he's got some good unpopular opinions at the end. So stick around for that. 13 00:01:12,320 --> 00:01:15,920 You're going to really enjoy the show. Hey, everyone. Like I said in the intro, 14 00:01:15,920 --> 00:01:18,940 I have Nick here. Nick, welcome to the Bitcoin Way podcast. 15 00:01:19,200 --> 00:01:20,460 Hey, Michael. Great to be here. 16 00:01:20,620 --> 00:01:23,780 Let's talk about strategy. Everyone's talking about it at this moment, 17 00:01:23,780 --> 00:01:29,640 the capital accumulation, the Bitcoin that they're buying, their stretch product in particular 18 00:01:29,640 --> 00:01:36,560 is sort of the hot topic. Would you share your assessment of what is going on? How does this 19 00:01:36,560 --> 00:01:43,400 work? And the thing I'm particularly curious about is, do you view this as people waking up 20 00:01:43,400 --> 00:01:49,920 to the power of Bitcoin versus things like government bonds as a means of fixed income? 21 00:01:49,920 --> 00:01:54,740 Is this like the new retirement vehicle, the new fixed income vehicle that people are going to start flocking to? 22 00:01:55,360 --> 00:01:56,600 It's a great question, Michael. 23 00:01:56,720 --> 00:02:05,140 And actually, it was the number one question that I got last summer on my book tour when I went to D.C., New York, Chicago and San Francisco. 24 00:02:06,000 --> 00:02:16,160 The number one thing people wanted to know was, is STRC specifically the new government bond, the new risk free rate? 25 00:02:17,380 --> 00:02:19,460 So I'll give you my answer then. 26 00:02:19,920 --> 00:02:30,420 And now. My answer then was definitely not yet, because if it was, you would see these yields 27 00:02:30,420 --> 00:02:36,100 start to converge. That's what arbitrage does, is you sell one thing and you buy the other 28 00:02:36,100 --> 00:02:40,800 because you believe that they're of equal value. So you try to capture that spread. 29 00:02:42,020 --> 00:02:49,580 And that arbitrage trade drives yields together. It compresses them. We haven't seen that for the 30 00:02:49,580 --> 00:02:55,000 last year or since the summer, last summer when I was telling people that. So from that perspective, 31 00:02:55,000 --> 00:03:03,000 I feel comfortable in that answer. It's not really behaviorally driving that shift from 32 00:03:03,000 --> 00:03:10,600 government bonds to STRC. With that being said, there's something really special about strategy 33 00:03:10,600 --> 00:03:17,840 and STRC and what's happening there. And I think that there is a marginal awareness 34 00:03:17,840 --> 00:03:27,220 of what people can achieve with STRC versus government bonds and the risk that they perceive 35 00:03:27,220 --> 00:03:32,840 that they are taking. That's really the key because the world views government bonds or 36 00:03:32,840 --> 00:03:38,760 US treasuries as risk-free. You can put it in air quotes or not. It doesn't really matter. 37 00:03:39,260 --> 00:03:44,080 It is the risk-free instrument of the dollar world, nominally speaking, which means you're 38 00:03:44,080 --> 00:03:50,260 always going to get your money back that is stated on the security that you're buying. 39 00:03:50,920 --> 00:04:00,100 Now, the certainty in STRC is definitely less. People don't buy STRC thinking 100%, 40 00:04:00,100 --> 00:04:06,760 I'm going to get this coupon and par back. They know that they're taking a risk beyond government 41 00:04:06,760 --> 00:04:15,340 bonds. That risk, though, that they're taking is awarding them a compensation that is outsized 42 00:04:15,340 --> 00:04:22,660 right now. Outsized meaning that it's more than really any yield that you can get in any safe 43 00:04:22,660 --> 00:04:29,820 bond. And that is what is driving the capital toward STRC. The volume numbers, the accumulation 44 00:04:29,820 --> 00:04:37,420 numbers, they're monstrous. So there is awareness there that the risk that they're taking 45 00:04:37,420 --> 00:04:41,980 is being more than compensated for with that huge yield. 46 00:04:42,420 --> 00:04:47,020 Could you describe what the risks are? Obviously, strategy doesn't, technically speaking, 47 00:04:47,140 --> 00:04:52,420 at least have a money printer. And so they cannot guarantee the nominal returns that 48 00:04:52,420 --> 00:04:58,200 government bonds can. Besides something more extreme like a 6102 attack and the government 49 00:04:58,200 --> 00:05:04,080 says, we're taking all your Bitcoin strategy, which, by the way, nothing would surprise me 50 00:05:04,080 --> 00:05:08,020 from the federal government at this point. But aside from something like that, what are the other 51 00:05:08,020 --> 00:05:13,220 risks at play for something like this? And why might people not be driven to something like 52 00:05:13,220 --> 00:05:20,440 Stretch? It does come down to the Bitcoin price and the math around its maturity schedule on its 53 00:05:20,440 --> 00:05:25,820 securities. So when a company takes in money, they're either issuing equity or they're issuing 54 00:05:25,820 --> 00:05:32,160 debt, the equity or preferred equity. So I think that that's an important asterisk. But the equity 55 00:05:32,160 --> 00:05:37,140 doesn't have a maturity. The preferred equity doesn't have a maturity. It means you don't have 56 00:05:37,140 --> 00:05:42,520 to pay the money back. The debt side of things, those all have a maturity. So when they borrow 57 00:05:42,520 --> 00:05:47,940 money in the debt market, there is a maturity date and they're going to have to pay back US dollars. 58 00:05:47,940 --> 00:06:03,180 So the risk in owning parts of the strategy capital stack are if you buy the equity, it's not whether you'll be paid back, it's whether that equity is worth anything in the future. 59 00:06:03,580 --> 00:06:06,020 And that's going to be tied to the Bitcoin price. 60 00:06:06,160 --> 00:06:14,160 If you buy the debt, your risk is that the US dollars are not there to pay you back when that instrument matures. 61 00:06:14,160 --> 00:06:20,380 That is also going to be a function of the Bitcoin price. 62 00:06:20,780 --> 00:06:30,140 So their ability to either issue at the money equity to buy Bitcoin or any cash flow dynamics 63 00:06:30,140 --> 00:06:30,780 that they have. 64 00:06:30,900 --> 00:06:32,280 So there is a risk. 65 00:06:32,400 --> 00:06:35,920 There's always a risk for the investors in the equity or the debt. 66 00:06:36,300 --> 00:06:38,260 Is the company going to pay me back? 67 00:06:38,560 --> 00:06:44,020 And if I own equity, is that equity worth anything after all the debt is paid back? 68 00:06:44,160 --> 00:07:05,240 And with strategy specifically, that is all based off of the value of their Bitcoin. And not just the value, but the energy around the Bitcoin asset class, because their ability to issue equity to buy Bitcoin in the spot market is dependent on the market. 69 00:07:05,240 --> 00:07:31,860 So energy, bullish energy, interest in the market, and all of that. So the risk is that Bitcoin goes down, stays down, and loses investor interest. In that case, it's likely that owners up and down the stack of strategy will get taken out at a loss that's maybe more than if Bitcoin went down, let's say, 75% and stayed there for five years. 70 00:07:31,860 --> 00:07:59,680 If you own Bitcoin, you'll be down 75%. If you own parts of strategy stack, you'll probably be wiped out 90% or taken out. So the risk is obvious in that it's tied to Bitcoin. And it doesn't have the same risk as Bitcoin because you're owning a company that owns Bitcoin or is promising coupons based off of Bitcoin performance one way or the other. 71 00:07:59,680 --> 00:08:14,020 So I hate to put you on the spot like this, but if you were to pull out a crystal ball and look five years into the future and you're looking at U.S. national debt is probably at that point well into the 40 trillions. 72 00:08:14,020 --> 00:08:26,720 I have to imagine that this risk-free rate that we take for granted today, or that many investors take for granted today, is – I think at some point, the can is no longer kicked forever. 73 00:08:27,140 --> 00:08:31,340 And people do begin to be wary of, I need real returns, not nominal returns. 74 00:08:32,100 --> 00:08:36,700 Do you think the landscape of what we're discussing right now changes immensely? 75 00:08:36,700 --> 00:08:48,980 Do you think strategy does become, or maybe their STRC product or whatever else they've engineered at that point becomes maybe more influential and you do see those yields converge? 76 00:08:49,760 --> 00:08:53,020 How do you anticipate this playing out over just the coming years? 77 00:08:53,300 --> 00:09:00,560 Well, I do see STRC's yield coming down nominally because I think the perceived risk will decline over time. 78 00:09:00,960 --> 00:09:03,580 So I do see the yield going down. 79 00:09:03,580 --> 00:09:20,540 But on the Treasury front, the U.S. Treasury front, I really do have a different view on the absolute value of Treasuries in today's world and even over the next 5 to 10 years as debt goes to $40 and even $50 trillion and beyond. 80 00:09:21,020 --> 00:09:28,540 It really does come down to, Michael, the delta between the size of the Treasury market and the size of global debt. 81 00:09:28,720 --> 00:09:32,140 Right now, the size of global debt, $350 trillion. 82 00:09:32,140 --> 00:09:49,280 The size of US Treasury debt, $39 trillion. And a lot of it isn't even marketable debt. So let's call it less than 10% of global debt is Treasury debt. That means 90% of global debt is not US Treasuries. 83 00:09:49,280 --> 00:10:04,940 So that balance of 10 to 1 or 10% or 90% in less than treasury quality fixed income assets, because every debt is also somebody else's asset. 84 00:10:04,940 --> 00:10:18,840 It does start to make sense why treasuries are so valued, why they're not 5%, 6%, 7% yield, why they're not close to the yields of emerging market government bonds. 85 00:10:19,280 --> 00:10:30,700 And they do keep interest rates on the US dollar borrowing universe low because if you 86 00:10:30,700 --> 00:10:36,820 didn't have all that risky debt available, you would flood into treasuries. 87 00:10:37,600 --> 00:10:46,900 And so there's always an embedded bid in the market for treasuries because the things 88 00:10:46,900 --> 00:10:54,540 that can go wrong in the 90% are infinite compared to things that can go wrong for the treasury, 89 00:10:54,820 --> 00:10:59,880 which can print its own money. Like you said, yes, people need real yield. I understand that. 90 00:10:59,880 --> 00:11:07,340 But that doesn't mean that the nominal yield of treasuries will rise necessarily to give people 91 00:11:07,340 --> 00:11:14,760 that real yield. In fact, what we have seen during the 2010s was negative real yields. 92 00:11:14,760 --> 00:11:21,680 and what you might continue to see or what you might see again are negative real yields. 93 00:11:21,820 --> 00:11:25,460 So let's say inflation goes back to 3.5%, 4%. 94 00:11:25,460 --> 00:11:30,480 The front end of the curve is at 3.5% right now, more or less. 95 00:11:30,480 --> 00:11:36,240 So you're going to be getting possibly negative real yields again 96 00:11:36,240 --> 00:11:40,420 here in the United States sometime in the next couple of years, possibly. 97 00:11:40,940 --> 00:11:44,740 As an American and someone who's not analyzing the macro picture at large, 98 00:11:44,760 --> 00:11:53,000 I tend to just see these numbers of $37, $38, $39 trillion and think, why does anyone have any 99 00:11:53,000 --> 00:11:58,300 faith in any of this? And that question for me still remains. I mean, that's how I found Bitcoin 100 00:11:58,300 --> 00:12:04,580 is beginning to understand some of how this works. But I can see why US debt still looks attractive 101 00:12:04,580 --> 00:12:10,160 to many people who do not have the conviction in Bitcoin. They don't even know that Bitcoin is 102 00:12:10,160 --> 00:12:16,920 something that might fix a problem that they have. And so maybe until then, until the Bitcoin 103 00:12:16,920 --> 00:12:22,420 conversation at least becomes ubiquitous, that people are analyzing it as a form of money, 104 00:12:22,480 --> 00:12:28,780 as an alternative, as an opt-out, as whatever you perceive it to be. Will there come a day then, 105 00:12:28,780 --> 00:12:36,320 in some near future perhaps, where then it's not even strategy versus US debt. 106 00:12:36,320 --> 00:12:42,660 But it's I can have the real risk free rate is just the appreciation of Bitcoin, because 107 00:12:42,660 --> 00:12:47,880 there is no there's no I can't be printed. 108 00:12:48,440 --> 00:12:49,620 I can't be seized. 109 00:12:49,700 --> 00:12:49,840 Right. 110 00:12:49,840 --> 00:12:53,040 We've seen the weaponization of U.S. debt, all of these things. 111 00:12:53,040 --> 00:12:58,280 Is that a conversation that you think is going to start becoming more mainstream, where at 112 00:12:58,280 --> 00:13:02,340 the moment it feels like we're talking about this on Bitcoin podcasts and on Bitcoin Twitter? 113 00:13:02,340 --> 00:13:10,740 Yes. And I would answer your question by asking you, you referenced $39 trillion and who would 114 00:13:10,740 --> 00:13:16,600 own it. So let me ask you a question. You have three options. You have to buy something and hold 115 00:13:16,600 --> 00:13:22,880 it for 30 years. You can't sell it. You have a 30-year US treasury, you have the S&P 500, 116 00:13:23,200 --> 00:13:28,700 and you have Bitcoin. So let's start with the S&P 500 versus the 30-year treasury. 117 00:13:28,700 --> 00:13:31,360 and you step into the shoes of a life insurer. 118 00:13:31,780 --> 00:13:34,300 So they have death benefits 30 years from now. 119 00:13:35,820 --> 00:13:38,900 They can either buy stocks or they can buy treasuries. 120 00:13:39,980 --> 00:13:46,820 As a risk manager, you cannot put 100% of your money in stocks. 121 00:13:48,180 --> 00:13:54,900 You can't because there's too much risk to do that. 122 00:13:54,900 --> 00:13:58,780 So you have to balance with some stocks and some treasuries. 123 00:13:59,080 --> 00:14:01,800 You're forced into that decision because of risk. 124 00:14:02,860 --> 00:14:10,600 And part of the risk of owning the treasuries is that the real return is negative or zero, 125 00:14:11,140 --> 00:14:14,800 that you don't actually get any return beyond inflation. 126 00:14:15,460 --> 00:14:19,700 That is a real risk, and that's why you have to buy some stocks. 127 00:14:19,800 --> 00:14:21,680 You can't put 100% in treasuries. 128 00:14:21,680 --> 00:14:24,440 That shows you that there is a balance there. 129 00:14:24,900 --> 00:14:28,780 And both are needed for long-term capital allocators. 130 00:14:28,940 --> 00:14:33,900 This is called Asset Liability Management, ALM, or Liability Driven Investing, LDI. 131 00:14:34,340 --> 00:14:36,500 These are insurance players and pensions. 132 00:14:36,920 --> 00:14:39,800 They buy a ton of treasuries, long-term treasuries. 133 00:14:40,540 --> 00:14:43,940 They are the natural buyer, and they are not going anywhere. 134 00:14:44,880 --> 00:14:50,940 So now you fold in Bitcoin and you ask mom and pop or life insurer, 135 00:14:51,660 --> 00:14:53,640 hey, you ask them the same question. 136 00:14:53,640 --> 00:15:11,564 Would you own 30 treasury stocks or would you own Bitcoin And that where Bitcoin becomes more and more obvious is that if you not a life insurer with a guaranteed liability in 30 to 40 years 137 00:15:11,564 --> 00:15:16,964 that reduces your need to balance your portfolio with treasuries. 138 00:15:16,964 --> 00:15:25,724 Right. And so what is Bitcoin competing with? Over a 30-year time horizon, is it competing with 139 00:15:25,724 --> 00:15:31,904 a 30-year treasury or is it competing with the S&P 500? And that's where the question starts to get 140 00:15:31,904 --> 00:15:38,264 interesting. And I think that it's a little bit of both, but it's definitely the 30-year treasury, 141 00:15:38,404 --> 00:15:45,344 which I think is what you were originally thinking about is that how could I buy a 30-year treasury? 142 00:15:45,344 --> 00:15:53,904 me as a 30-year-old person. That doesn't make any sense for me. And I think that question is 143 00:15:53,904 --> 00:16:01,524 being answered in a similar way. All around the world, the ETF inflows are evidence of this, 144 00:16:01,624 --> 00:16:10,664 that long-term capital is ready to come in, buy Bitcoin, park it there, and understand why it's 145 00:16:10,664 --> 00:16:17,904 part of, it's not a coincidence that Fidelity and BlackRock have 1% to 3% target allocations for 146 00:16:17,904 --> 00:16:25,504 Bitcoin in multi-asset portfolios. That's insane versus where we were five to 10 years ago before 147 00:16:25,504 --> 00:16:30,384 ETFs. Now it's like, yeah, if you have a global portfolio, up to 3% should be in Bitcoin. 148 00:16:30,784 --> 00:16:37,164 That's an enormous amount. And River just did a study where they actually compared that target 149 00:16:37,164 --> 00:16:44,524 allocation to how much is actually invested. And I can't remember the number, but there's like 400x 150 00:16:44,524 --> 00:16:49,804 capital that needs to come into Bitcoin to get it there. Like an insane amount of money that needs 151 00:16:49,804 --> 00:16:56,684 to flow into Bitcoin to just get the target allocation to a place where a balanced portfolio 152 00:16:57,244 --> 00:17:05,084 is weighing the pros and cons of 30-year treasury stocks and Bitcoin appropriately. 153 00:17:05,084 --> 00:17:31,924 That process, they've identified the target allocation, I think, well, like zero is not the right answer. 1% is probably too low. So you don't need them to come out and say 5% to 10%. That will happen naturally over time. But just getting them to say 3% gets people off of zero and gets them above one. They're not at one yet. They're really not at 1%. The world is not at 1% yet, Bitcoin. 154 00:17:31,924 --> 00:17:46,944 If you look at global balance sheet studies and wealth studies, the numbers are somewhere between $600 and $1,200 trillion in global wealth. 155 00:17:47,964 --> 00:17:52,984 So that's maybe up to $1 quadrillion in global wealth. 156 00:17:53,384 --> 00:17:56,744 Bitcoin is $1.7 trillion, right? 157 00:17:56,744 --> 00:17:59,564 So less than 1,500th. 158 00:17:59,564 --> 00:18:06,944 Going from 1 500th to 1 100th, it's five times the capital that's already in there. 159 00:18:08,064 --> 00:18:15,684 And Bitcoin really has an enormous room to grow in terms of the capital that's in other 160 00:18:15,684 --> 00:18:17,384 asset classes finding its way. 161 00:18:17,824 --> 00:18:26,024 What is going to be required then to take us from 1 500th of global wealth to 1 100th? 162 00:18:26,024 --> 00:18:29,764 Is it just people tuning into our podcast, reading your newsletter? 163 00:18:30,344 --> 00:18:33,764 Is there a, and this is maybe where I get into sort of our next topic. 164 00:18:34,004 --> 00:18:42,744 Is it a macro event that unfolds where people recognize the necessity for sound money, for 165 00:18:42,744 --> 00:18:45,204 something that's censorship resistant? 166 00:18:45,444 --> 00:18:46,644 They don't need permission to use. 167 00:18:46,724 --> 00:18:48,384 Like, what do you think the catalyst is? 168 00:18:48,844 --> 00:18:49,824 It's a great question. 169 00:18:49,824 --> 00:18:58,124 I would actually argue that a macro event is low on my probability in terms of what will drive it. 170 00:18:58,904 --> 00:19:06,604 So I think that things happen naturally and slowly and not triggered by a macro event. 171 00:19:06,784 --> 00:19:09,384 So my answer to your question is time. 172 00:19:10,004 --> 00:19:14,464 And I'll fold in the fact that we're doing this podcast together in a second. 173 00:19:14,464 --> 00:19:22,544 Because that's part of it, but it's actually downstream from the time and the answer that I'm about to give you. 174 00:19:23,104 --> 00:19:28,104 So maybe people have heard of the idea of Bitcoin following a power law. 175 00:19:28,604 --> 00:19:32,224 So let me explain to people what this means. 176 00:19:32,224 --> 00:19:45,944 When something grows, whether it's an organism or a city, when it grows, it's going to follow a growth path. 177 00:19:46,304 --> 00:19:47,404 So the pace of growth. 178 00:19:48,104 --> 00:19:54,624 And when things grow on this planet, they don't grow linearly. 179 00:19:55,304 --> 00:19:57,504 And here's one way to think of that. 180 00:19:57,504 --> 00:20:21,204 If a mouse requires 100 calories a day and an elephant is a thousand times the size of the mouse and it was a linear relationship, that would mean that the elephant requires 1,000 the amount of calories that the mouse does. 181 00:20:21,484 --> 00:20:22,824 But it doesn't. 182 00:20:22,964 --> 00:20:23,884 It's only 100. 183 00:20:25,104 --> 00:20:26,624 The numbers are an approximate. 184 00:20:26,624 --> 00:20:31,424 I mean, not even approximation, I'm using arbitrary numbers, but the point stands here. 185 00:20:32,424 --> 00:20:34,764 And I do actually believe it's 10,000. 186 00:20:35,164 --> 00:20:41,964 The elephant is 10,000 times the mass of the mouse, but it only needs 1,000 times the amount of calories. 187 00:20:42,184 --> 00:20:44,724 So it's nonlinear. 188 00:20:45,384 --> 00:20:53,064 And if you actually, I'm citing a book called Scale by Jeffrey West, if people want to get into the science of this. 189 00:20:53,064 --> 00:21:10,424 But if you plot mammals on this curve, this metabolic curve of mass versus calories required, you can see that it follows a power law relationship where the determinant, it's somewhere in an exponent. 190 00:21:10,664 --> 00:21:11,244 It's nonlinear. 191 00:21:11,804 --> 00:21:19,984 And that exponent can be above one or below one, basically sublinear or above linear scaling. 192 00:21:19,984 --> 00:21:30,124 So the amount of calories, it's sublinear in that you need less the quantity as the animal gets bigger. 193 00:21:30,664 --> 00:21:32,304 The mammals are efficient. 194 00:21:32,584 --> 00:21:34,344 They get more efficient as they grow. 195 00:21:34,884 --> 00:21:39,324 Now, let me give you another example, which is cities. 196 00:21:39,324 --> 00:22:00,204 So in cities, when the population grows by 10 times, the amount of university graduates, for example, grows by more than 10 times non-linearly, with an exponent above one. 197 00:22:00,204 --> 00:22:18,284 So why is it that when cities grow in size, they graduate even more people per hundred people or per thousand people? It's because knowledge collects and compounds in a city. 198 00:22:18,284 --> 00:22:26,384 where smart people come together and it makes everyone smarter and it grows at more than a 199 00:22:26,384 --> 00:22:31,724 one-to-one relationship in terms of the benefit to society. Now, homelessness also grows at 200 00:22:31,724 --> 00:22:41,104 more than one on the exponent there. So it's pros and cons, of course. So more college graduates, 201 00:22:41,104 --> 00:22:49,044 but more homelessness in bigger cities. So things don't grow linearly. They grow in this power law 202 00:22:49,044 --> 00:22:56,344 relationship naturally on earth. It's just something that we can observe. Now, what about 203 00:22:56,344 --> 00:23:04,904 Bitcoin? What the mathematicians have observed about Bitcoin is that as time passes, the number 204 00:23:04,904 --> 00:23:13,524 of addresses grows with a power law relationship and an exponent above one. So as time goes, 205 00:23:13,964 --> 00:23:22,044 the network grows, but even faster than the time that has passed. Because people love Bitcoin, 206 00:23:22,224 --> 00:23:28,244 they love to use it. They love to come to it. And so the network is growing. Not only is the 207 00:23:28,244 --> 00:23:38,884 network growing, but as the network grows, the price grows once again non-linearly in a power 208 00:23:38,884 --> 00:23:45,704 law relationship with an exponent above one. So what you have in Bitcoin is two power law 209 00:23:45,704 --> 00:23:51,404 relationships. As time passes, the network grows, and as the network grows, the value grows. 210 00:23:51,404 --> 00:24:05,164 And what we observe looking at 16 years of Bitcoin data is that this relationship, even though the price varies enormously, it is following a path. 211 00:24:05,164 --> 00:24:33,644 Now, some people will call this voodoo, modeling, pure theory, and that's fine. And it is backwards looking and projecting into the future. But I've been sold on this for at least a year. I've interviewed Dr. Stephen Perrineau and Dr. Giovanni Santastasi, two astrophysicists that have written extensively about the power law, the Bitcoin power law. 212 00:24:33,644 --> 00:24:37,484 I read Jeffrey West's book, Scale, because of them. 213 00:24:38,064 --> 00:24:39,024 And I'm sold. 214 00:24:39,564 --> 00:24:42,064 So now I'll answer your question. 215 00:24:42,324 --> 00:24:43,704 How does Bitcoin get there? 216 00:24:44,104 --> 00:24:45,904 It's simply the passage of time. 217 00:24:46,304 --> 00:24:51,524 And the fact that you and I are doing this pod is a result of that network growing and 218 00:24:51,524 --> 00:24:53,724 strengthening and value accruing to it. 219 00:24:53,964 --> 00:24:58,704 We are here because of that growth path, that it will continue to scale. 220 00:24:59,664 --> 00:25:07,984 The number of people that listen to this pod will be according to this moment in history 221 00:25:07,984 --> 00:25:16,124 relative to six months, 12 months ago, three years ago, five years ago, 10 years ago. 222 00:25:16,564 --> 00:25:21,944 So it might be less than six months ago because six months ago we were in a bull market and 223 00:25:21,944 --> 00:25:28,264 today we're not, but it's definitely more than three years ago when the ETFs were introduced 224 00:25:28,264 --> 00:25:30,824 And that's because more people have joined the network. 225 00:25:30,944 --> 00:25:32,184 There's ups and downs. 226 00:25:32,484 --> 00:25:34,524 There's overshoots and undershoots. 227 00:25:34,844 --> 00:25:38,684 The model isn't the fair value. 228 00:25:39,004 --> 00:25:41,684 It's a way to understand the growth path. 229 00:25:43,044 --> 00:25:43,084 Okay. 230 00:25:43,764 --> 00:25:52,124 So I think Bitcoin is going to a million dollars in the 2030s simply by the passage of time. 231 00:25:52,124 --> 00:25:56,224 and I'll just say one last thing, 232 00:25:56,324 --> 00:25:58,804 which is that the 16 years of data 233 00:25:58,804 --> 00:26:01,104 that make people conclude 234 00:26:01,104 --> 00:26:03,744 that Bitcoin is following a power law relationship, 235 00:26:04,244 --> 00:26:07,804 it's basically assuming that human beings 236 00:26:07,804 --> 00:26:10,524 have adopted this technology and it's here to stay. 237 00:26:11,004 --> 00:26:14,004 So that's why it's not a macro event per se, 238 00:26:14,264 --> 00:26:16,944 but just the macro environment that we're in 239 00:26:16,944 --> 00:26:21,604 has made Bitcoin be awarded this... 240 00:26:22,124 --> 00:26:29,744 new great asset class and growth path into the future that is highly unlikely to change 241 00:26:29,744 --> 00:26:34,584 through a massive change in human behavior all around the world. 242 00:26:35,204 --> 00:26:40,704 Governments getting disciplined, central banks not going on, you know, getting off fiat or, 243 00:26:40,704 --> 00:26:49,064 you know, everyone going on to a Bitcoin standard. In fact, not being on a Bitcoin standard for the 244 00:26:49,064 --> 00:26:56,644 world locks in the path of Bitcoin to keep growing in dollar terms versus the rest of the world. 245 00:26:56,644 --> 00:27:04,244 I think if Bitcoin became the standard today, government stopped using fiat or the credit 246 00:27:04,244 --> 00:27:12,324 system, that would abruptly change maybe the Bitcoin path. But I see the opposite. I see more 247 00:27:12,324 --> 00:27:18,444 of a steady growth path that's locked in because of the way that the world works. 248 00:27:19,004 --> 00:27:22,704 And it's not going to pivot suddenly to something different. 249 00:27:23,744 --> 00:27:30,084 So is there anything with the exception of an obvious and apparent break from that path 250 00:27:30,084 --> 00:27:32,504 that would make you reconsider that thesis? 251 00:27:32,664 --> 00:27:35,024 Because I'll be honest, I haven't studied the power law deeply. 252 00:27:35,444 --> 00:27:39,824 I've heard more and more folks like yourself who I respect and have learned a lot from 253 00:27:39,824 --> 00:27:42,204 who have been sold on this. 254 00:27:42,324 --> 00:27:44,884 And it does seem reasonable. 255 00:27:44,884 --> 00:27:51,444 I mean, sort of the crazy bull in me wants to imagine, no, we're going to 10 million by 2030 or whatever. 256 00:27:51,644 --> 00:27:54,784 But, you know, I'm open minded on what it could be. 257 00:27:54,944 --> 00:28:02,004 So I guess back to the question, is there anything besides like an obvious break from the path that you'd say, oh, you know what, maybe this model will be broken? 258 00:28:02,744 --> 00:28:05,744 I mean, of course, anything, anything can happen. 259 00:28:05,744 --> 00:28:21,564 And I think understanding what your expectation is, is important so that if it starts to go to, let's say, Bitcoin is at $400,000 next year. 260 00:28:22,984 --> 00:28:30,384 Then at that point, you have to wonder, okay, is this just another overshoot or have the fundamentals changed? 261 00:28:30,384 --> 00:28:52,044 You do the same thing when Bitcoin goes from $120,000 down to $60,000 earlier this year. You think, okay, is this just another overshoot? Or is Bitcoin broken? Is the quantum fund right? Is Claude going to break Bitcoin? Or something like that. 262 00:28:52,044 --> 00:29:18,584 And you ask yourself and that's part of investing, that you always do have to challenge your thesis. But I'm going to keep my thesis simple. I'm going to continue to watch Bitcoin oscillate between what I think is this fair value based on this power law scaling path. 263 00:29:18,584 --> 00:29:23,504 and you just never know, right? 264 00:29:24,004 --> 00:29:27,824 Bitcoin is, you know, technology, it uses cryptography. 265 00:29:28,204 --> 00:29:29,824 So there are dynamics around that 266 00:29:29,824 --> 00:29:32,084 that we probably just have to watch. 267 00:29:32,684 --> 00:29:34,864 And I think that the market always speaks the truth. 268 00:29:35,264 --> 00:29:40,024 So, you know, watching how Bitcoin behaves at 60 269 00:29:40,024 --> 00:29:42,384 when it gets really cheap is important. 270 00:29:42,724 --> 00:29:45,024 Like if it breaks 60 and then goes to 30, 271 00:29:45,424 --> 00:29:47,564 you have to think about, 272 00:29:47,564 --> 00:29:49,224 hey, why did that happen? 273 00:29:49,664 --> 00:29:52,004 Versus, okay, Bitcoin reached 60, 274 00:29:52,124 --> 00:30:04,368 but it been trading at or above 70 for two months now What does that say about Bitcoin And really and that like a lot of what I do too is I look at the short price short price action 275 00:30:04,828 --> 00:30:11,708 medium-term price action. Hey, what has Bitcoin done since it crashed 50%? And half the mainstream 276 00:30:11,708 --> 00:30:18,088 media was like, Bitcoin is dead again. Quantum is going to break it in three years. It's over. 277 00:30:18,088 --> 00:30:25,148 gold is, you know, gold won the whole time. And that's what everyone was saying two months ago. 278 00:30:25,148 --> 00:30:33,048 So what did the price do from that point? It went sideways, leaked a little higher, 279 00:30:33,368 --> 00:30:38,528 has performed pretty well over the last two months, despite the fact that we're in 280 00:30:39,188 --> 00:30:46,488 quite a large war, relatively speaking. There's so much information in that, Michael. 281 00:30:46,488 --> 00:30:51,408 like the 20% bounce we've had since first week of February. 282 00:30:51,608 --> 00:30:53,548 There's so much information in there. 283 00:30:54,088 --> 00:30:55,928 And so is Bitcoin dead? 284 00:30:56,248 --> 00:30:56,688 No. 285 00:30:56,928 --> 00:30:59,768 Like I'm using the last couple months of evidence. 286 00:30:59,868 --> 00:31:01,708 The market is telling you, no, it's not. 287 00:31:02,008 --> 00:31:03,048 It's not dead. 288 00:31:03,848 --> 00:31:06,308 And so you want to do that on both sides. 289 00:31:07,688 --> 00:31:12,248 And, you know, some of my readers are coasting to a million 290 00:31:12,248 --> 00:31:15,788 and others just really want to get involved every day. 291 00:31:15,788 --> 00:31:22,508 like, well, what's it going to do now? What's it going to do now? And I have fun with both 292 00:31:22,508 --> 00:31:27,448 readers, both types of readers, for sure. I can imagine the questions you must get. 293 00:31:28,128 --> 00:31:32,688 So Nick, what are some of the other, what are some macro trends, maybe just one or two that 294 00:31:32,688 --> 00:31:37,568 you're following closely? And what are you observing? What does it mean for anyone listening? 295 00:31:38,208 --> 00:31:44,548 Yes. The move index and the dollar index, those are two things that I'm watching pretty closely. 296 00:31:45,368 --> 00:31:48,528 So at the Bitcoin layer, we have a proprietary index. 297 00:31:48,528 --> 00:31:49,848 It's called TBL liquidity. 298 00:31:50,488 --> 00:31:56,888 And we've manipulated that index and its rate of change to give us a beat on risk markets. 299 00:31:57,848 --> 00:32:03,388 We basically designed a quant for your pocket, a model that will tell you a macro is supportive 300 00:32:03,388 --> 00:32:04,308 or it's not. 301 00:32:04,708 --> 00:32:10,628 And then we have a Bitcoin native metric called our state quadrant saying Bitcoin is either 302 00:32:10,628 --> 00:32:13,948 cheap or not or trending or not. 303 00:32:13,948 --> 00:32:41,428 And right now, Bitcoin isn't trending up yet. So that indicator is still on the red side of things. But our macro indicators switch green at the beginning of April. And by the way, today, stocks reached an all-time high on the S&P 500, if you can believe it. One of the most legendary bounces I've ever seen in the stock market. And trust me, I've seen a bunch. 304 00:32:41,428 --> 00:32:45,048 but the way that the stock market has come back. 305 00:32:45,848 --> 00:32:50,828 And what we have done is we've designed a framework and a metric 306 00:32:50,828 --> 00:32:54,808 that makes it very understandable why these things are happening. 307 00:32:55,548 --> 00:33:00,928 Well, you can actually trace the day that bond volatility topped out 308 00:33:00,928 --> 00:33:07,868 the last week of March and line it up exactly with the bounce in Bitcoin and stocks. 309 00:33:08,628 --> 00:33:15,608 So volatility and the dollar index are two financial conditions on risk markets. 310 00:33:15,928 --> 00:33:22,988 As vol goes up and as the dollar goes up, the ability of the system to take leverage, 311 00:33:23,308 --> 00:33:27,628 to trade, and to pay back debt, it gets damaged. 312 00:33:28,428 --> 00:33:29,708 And the opposite is true. 313 00:33:29,708 --> 00:33:34,188 When vol comes down and the dollar comes down, everything gets easier. 314 00:33:34,808 --> 00:33:37,028 Market makers get more active. 315 00:33:37,688 --> 00:33:39,268 Investors can take more leverage. 316 00:33:39,708 --> 00:33:40,768 Investors can buy. 317 00:33:41,288 --> 00:33:42,508 The fear goes away. 318 00:33:42,868 --> 00:33:44,968 The desire to buy insurance goes away. 319 00:33:45,688 --> 00:33:47,648 The price of insurance goes down. 320 00:33:48,028 --> 00:33:49,348 That's volatility coming down. 321 00:33:49,988 --> 00:33:52,628 Option prices come down and everything is good again. 322 00:33:53,188 --> 00:33:58,488 So we've tried to make it really simple for our readers, but for us too. 323 00:33:59,488 --> 00:34:01,548 I designed this for myself. 324 00:34:02,128 --> 00:34:06,328 I've actually designed everything that we've done quantitatively for myself. 325 00:34:07,508 --> 00:34:10,028 And I'm giving that to the readers. 326 00:34:10,568 --> 00:34:12,968 You guys can see how I analyze it. 327 00:34:13,028 --> 00:34:19,788 Well, instead of looking at bond vol rates, dollar, everything, you know, and then trying 328 00:34:19,788 --> 00:34:21,648 to calculate it, I have one metric. 329 00:34:21,968 --> 00:34:28,928 And then I've taken that metric and I've swung it on an indicator to tell you green or red. 330 00:34:28,928 --> 00:34:36,468 and try to make it really easy for me and the readers. 331 00:34:37,448 --> 00:34:39,988 And what am I watching? 332 00:34:40,428 --> 00:34:43,108 I'm watching vol and I'm watching the dollar. 333 00:34:43,628 --> 00:34:46,268 And if they're calm, all is good. 334 00:34:46,908 --> 00:34:48,148 Okay, interesting, interesting. 335 00:34:48,468 --> 00:34:49,988 Let's transition to a topic 336 00:34:49,988 --> 00:34:52,268 that seems unavoidable for me these days, 337 00:34:52,348 --> 00:34:53,148 and that is AI. 338 00:34:53,968 --> 00:34:55,668 I've had a handful of people on. 339 00:34:55,668 --> 00:34:59,648 No one so far has been bearish on AI. 340 00:35:00,028 --> 00:35:03,988 I think there's more enthusiasm for what is to come. 341 00:35:04,208 --> 00:35:07,128 We had, I guess, a number of ways we could take this. 342 00:35:07,608 --> 00:35:12,248 First of all, you wrote in one of your articles recently a bit on AI. 343 00:35:13,188 --> 00:35:23,768 And I would love to know, so part of the way I read it is this, maybe this, correct me if this is a misframing or if it's just something you don't agree with. 344 00:35:23,768 --> 00:35:36,668 But maybe Bitcoin is migrating from like this hedge or this opt out to the obvious de facto base layer of money as we move into a world maybe more and more dominated by AI. 345 00:35:37,068 --> 00:35:41,128 Is that a way of framing sort of the way that you might see things? 346 00:35:41,268 --> 00:35:44,248 And could you share your comments on that or perhaps elaborate? 347 00:35:44,828 --> 00:35:47,308 Yes, I do think that that's a good way to frame it. 348 00:35:47,308 --> 00:35:55,768 Bitcoin has always been a counter free money akin to gold, a base layer type of money. It's always 349 00:35:55,768 --> 00:36:07,168 been that. However, it has almost always traded like a beta on the stock market. And because of 350 00:36:07,168 --> 00:36:14,828 the volatility of Bitcoin, the risk is associated with things that move with high volatility, 351 00:36:14,828 --> 00:36:23,568 like tech stocks. And so it's been grouped in. So that break, that proverbial decoupling that 352 00:36:23,568 --> 00:36:31,628 every Bitcoiner has prayed for, recognized when it happens briefly, then pretends like they never 353 00:36:31,628 --> 00:36:38,408 celebrated the fact that it had decoupled when it recouples with the stock market. I mean, we all 354 00:36:38,408 --> 00:36:46,848 do this. So when is it going to trade? Not like a tech stock? When is it going to be recognized 355 00:36:46,848 --> 00:36:57,388 more of a base layer money? This is why AI matters is it shakes up everything in terms of 356 00:36:57,388 --> 00:37:03,968 what matters, what people should put their money in, what can be profitable, and what might be, 357 00:37:03,968 --> 00:37:13,228 literally killed by AI. And in that chaos, Bitcoin starts to emerge with more of its properties, 358 00:37:13,728 --> 00:37:20,228 counter free money, scarce, not a company, not a debt structure, no funding required. 359 00:37:20,348 --> 00:37:28,548 If you buy shares in a leveraged hedge fund that buys mortgages, let's say super safe 360 00:37:28,548 --> 00:37:34,388 assets. This is actually the first shop I worked at, mortgage hedge fund. They bought a bunch of 361 00:37:34,388 --> 00:37:41,128 safe-ish mortgages, but levered it two to three to one by funding it in the repo market. 362 00:37:41,708 --> 00:37:47,588 So if Barclays, Merrill Lynch, Goldman Sachs, and Deutsche Bank, when you call them next month, 363 00:37:47,588 --> 00:37:55,328 and they say, sorry, I need to return your bonds to you, and I can't lend you the money next month. 364 00:37:55,328 --> 00:37:59,648 I mean, the hedge fund has to liquidate half of its holdings. 365 00:38:00,348 --> 00:38:02,208 It can't pay for it. 366 00:38:02,348 --> 00:38:03,388 It funded the purchases. 367 00:38:04,008 --> 00:38:06,368 So if the funding stops, you have to sell the bonds. 368 00:38:07,808 --> 00:38:10,268 So Bitcoin isn't any of that. 369 00:38:11,048 --> 00:38:12,628 It's not a leveraged mortgage fund. 370 00:38:12,708 --> 00:38:13,828 It's not a tech stock. 371 00:38:14,628 --> 00:38:16,408 It's not a government bond. 372 00:38:16,708 --> 00:38:19,068 It's not a perishable commodity. 373 00:38:19,968 --> 00:38:21,768 It's not an energy commodity. 374 00:38:21,768 --> 00:38:25,108 It really is only closest to gold. 375 00:38:25,328 --> 00:38:28,868 but is never traded with a strong correlation to gold. 376 00:38:29,128 --> 00:38:32,768 If it did, the gold, the Bitcoin gold chart would look like this, 377 00:38:32,988 --> 00:38:34,408 but instead it looks like this. 378 00:38:35,108 --> 00:38:35,228 Right? 379 00:38:36,228 --> 00:38:41,968 So it is the holy grail for Bitcoin to trade more like gold and less like stocks. 380 00:38:41,968 --> 00:38:53,388 It is the holy grail for Bitcoin to decouple and AI and the changes that AI is forcing on the world, 381 00:38:53,388 --> 00:39:00,868 which by the way includes like get all the metals get all the oil build a semiconductor plant 382 00:39:00,868 --> 00:39:08,768 and build robots and you need metals you need energy you need electricity to do all of that 383 00:39:08,768 --> 00:39:16,308 so what is the cost of things or what what are people spending money on it's stuff it's materials 384 00:39:16,308 --> 00:39:22,888 commodities and they're they need all the stuff well 10 years ago what did they need they needed 385 00:39:22,888 --> 00:39:29,888 a great software that replaced a thousand workers or that made them efficient, that made them reach 386 00:39:29,888 --> 00:39:36,348 more customers. That's like a very different world than a scramble for resources world. 387 00:39:36,868 --> 00:39:45,388 And what is the trigger? It's AI. It's the AI race. The AI race is this trigger that moves capital 388 00:39:45,388 --> 00:39:53,768 out of software equities, for example, and into oil and gas producers and rare earth 389 00:39:53,768 --> 00:40:01,868 miners and manufacturers and like steel, for example, or a lumber company. 390 00:40:02,488 --> 00:40:09,248 So if that's what's happening and AI is the trigger, does Bitcoin win or lose in that? 391 00:40:09,748 --> 00:40:14,388 And I think it wins because then people have to reassess what is Bitcoin? 392 00:40:14,388 --> 00:40:18,608 Is it like a software or is it closer to a steel plant? 393 00:40:18,808 --> 00:40:24,108 They have to make that reassessment in this new AI world. 394 00:40:24,228 --> 00:40:25,528 And that's why it's important. 395 00:40:25,648 --> 00:40:27,388 It's this trigger, Michael. 396 00:40:27,748 --> 00:40:32,868 So you're saying it becomes a reassessment from an investment perspective because where 397 00:40:32,868 --> 00:40:38,908 my head goes to, and I talked with someone recently on the podcast about this, is AI 398 00:40:38,908 --> 00:40:43,128 agents adopting Bitcoin as the form of money. 399 00:40:43,128 --> 00:40:49,168 And now suddenly it's not 8 billion people who need access to better money. 400 00:40:49,308 --> 00:40:55,768 It's, you know, 8 billion people plus, you know, humanoid bots or whatever it ends up looking like. 401 00:40:56,068 --> 00:41:01,688 So you're saying it becomes more of a re-evaluation from investors. 402 00:41:02,588 --> 00:41:08,168 And perhaps you agree that there's a play for agentic AI to use Bitcoin. 403 00:41:08,308 --> 00:41:09,528 And that's a piece of the puzzle. 404 00:41:09,528 --> 00:41:12,628 But you're saying it becomes a reassessment from investors. 405 00:41:13,508 --> 00:41:17,488 How do I, in my mind, categorize these different things and what is needed? 406 00:41:17,888 --> 00:41:24,888 Because coders and code is abundant, software companies, software in general, becomes less appealing. 407 00:41:25,628 --> 00:41:37,348 And the actual stuff that makes the world move and enables what we need in order for an AI world to exist, that becomes much more interesting, the commodities. 408 00:41:37,348 --> 00:41:56,288 And then Bitcoin is sitting there and they're saying, well, it's not software. It seems like it's more of a commodity. So that seems like an allocation. I need some. And we've kind of left this tech stock world behind where everyone's focused on Facebook and all the others. 409 00:41:56,808 --> 00:41:59,348 That's exactly what I was trying to say. 410 00:41:59,788 --> 00:42:03,028 So the couple words that you said that were perfect, one is the categorization. 411 00:42:03,228 --> 00:42:05,628 You have to figure out what category Bitcoin is in. 412 00:42:06,248 --> 00:42:10,668 And the other word you said, which I completely agree with, is only a piece of the puzzle. 413 00:42:11,108 --> 00:42:15,768 The agentic AI using Bitcoin because it's the best digital currency. 414 00:42:16,248 --> 00:42:17,788 That is incredible. 415 00:42:18,048 --> 00:42:19,848 It's incredibly fascinating. 416 00:42:20,388 --> 00:42:21,748 It is so interesting. 417 00:42:21,748 --> 00:42:28,548 but I think that it's a danger to think of it as the main event. 418 00:42:28,928 --> 00:42:29,688 It's a kicker. 419 00:42:30,648 --> 00:42:32,488 And it could be the main event. 420 00:42:33,048 --> 00:42:34,708 I don't want to dismiss that. 421 00:42:35,028 --> 00:42:38,428 I think people that think it's the main event too, God bless them. 422 00:42:38,508 --> 00:42:40,028 I think that there's something there. 423 00:42:40,708 --> 00:42:43,428 And I see a path, right? 424 00:42:43,528 --> 00:42:46,908 But I can't say that that's the path, that's the main event. 425 00:42:46,908 --> 00:42:50,748 But I can see a path that that is a big kicker in the future. 426 00:42:50,748 --> 00:42:57,308 It is, though, about investors recategorizing what Bitcoin is and how it plays. 427 00:42:57,868 --> 00:43:02,628 Would you rather own, so five years ago, would you rather own Bitcoin or the S&P 500? 428 00:43:03,208 --> 00:43:07,368 Would you rather own Bitcoin or the tech sector within the S&P 500? 429 00:43:07,808 --> 00:43:11,668 Or would you rather own Bitcoin versus banking stocks? 430 00:43:12,308 --> 00:43:17,028 All those decisions five years ago versus today, it's a new conversation. 431 00:43:17,028 --> 00:43:19,208 Just wipe the slate clean. 432 00:43:19,208 --> 00:43:28,408 Think about the effect of LLMs on each and every single company and rethink whether it's investable or not. 433 00:43:29,608 --> 00:43:33,828 Rethink whether any of these companies will do well or not over the next five to 10 years. 434 00:43:34,248 --> 00:43:37,908 Every investor is having that conversation right now. 435 00:43:38,568 --> 00:43:40,788 Forget about if they're talking about Bitcoin or not. 436 00:43:41,148 --> 00:43:44,828 They are reassessing every equity that they own. 437 00:43:44,828 --> 00:43:53,368 So the software fall, it's bounced a lot this week as we've gone through this epic bounce. 438 00:43:53,588 --> 00:43:56,368 I mean, truly an epic bounce in the stock market. 439 00:43:57,808 --> 00:44:01,008 But yes, investors are reassessing all of this. 440 00:44:01,768 --> 00:44:08,328 So Bitcoin jumps into the conversation at a great time because the ETFs are already there. 441 00:44:08,808 --> 00:44:10,288 Morgan Stanley just went live. 442 00:44:10,408 --> 00:44:12,408 Goldman Sachs is coming online with theirs. 443 00:44:13,068 --> 00:44:14,848 everyone wants to get involved. 444 00:44:15,268 --> 00:44:21,268 And everyone is aware that that target allocation of 1% to 3% is common sense, 445 00:44:21,508 --> 00:44:23,588 but they were probably off of zero. 446 00:44:24,228 --> 00:44:29,128 So if they were in 8% software, take the 8% software down to 2%. 447 00:44:29,728 --> 00:44:37,208 And with the 6%, you can put 4% in the rest of equities and put 2% in Bitcoin. 448 00:44:37,208 --> 00:44:41,748 And boom, you've gone from 0% to 2% on a reallocation strategy 449 00:44:41,748 --> 00:44:48,588 because AI has changed the way that you think about the software sector. That's the main event 450 00:44:48,588 --> 00:45:04,732 to me in terms of AI being an accelerant to Bitcoin But even with that being said I still think it going to follow a similar pace to the way that the power law has played out over the last 16 years 451 00:45:04,872 --> 00:45:11,472 because you had insane growth in the early years. You have modestly strong growth still today 452 00:45:11,472 --> 00:45:18,032 that will taper off over time. But maybe we've overshot to the downside. So now the next 453 00:45:18,032 --> 00:45:24,192 move is to overshoot, Bitcoin will trade at 400K. I just can't tell you when or how quickly, 454 00:45:24,372 --> 00:45:32,352 or if that point will be an overshoot or just par for the course, right? It's an overshoot if it 455 00:45:32,352 --> 00:45:39,272 happens next year, par for the course if it happens in three or four years. And what I love 456 00:45:39,272 --> 00:45:45,072 about my job is that I don't have to come out and predict everything. I can give you some 457 00:45:45,072 --> 00:45:52,152 medium term and some long term predictions but just tell you that you know nobody knows if i knew 458 00:45:52,152 --> 00:45:59,092 i'd be trading it not on a pod uh being interviewed and writing a newsletter so um there's a special 459 00:45:59,092 --> 00:46:05,692 type of person also that can be a fiduciary and take these bets and also being able to stomach 460 00:46:05,692 --> 00:46:10,072 downside right because even if you're right you can be wrong for a really long time you remember 461 00:46:10,072 --> 00:46:16,072 Michael Burry in his basement playing the drums and screaming when he was down 18%. 462 00:46:16,632 --> 00:46:23,792 And his wife calls down, are you okay? He's like, I'm great. I'm great, honey. He's like yelling 463 00:46:23,792 --> 00:46:29,192 with his drum set. So that's not for everyone. It's not for me. 464 00:46:29,692 --> 00:46:35,592 Yeah, I hear you. So one other thing that came to mind, I do not know much about the energy 465 00:46:35,592 --> 00:46:41,332 markets, but my understanding is we need a lot more energy to fuel our AI ambitions. 466 00:46:42,412 --> 00:46:50,112 And I can imagine too, a place where the actual utility providers need to beef up their 467 00:46:50,112 --> 00:46:50,772 infrastructure. 468 00:46:51,432 --> 00:46:55,072 And the reason, as I understand it, the reason why they haven't historically done that is 469 00:46:55,072 --> 00:46:56,732 because there's only so much demand. 470 00:46:56,732 --> 00:47:03,072 They can meet peak demand almost all the time, except for in rare cases or perhaps in just 471 00:47:03,072 --> 00:47:11,912 poor infrastructure environments. But do you see Bitcoin mining as a load balancing tool 472 00:47:11,912 --> 00:47:20,332 to help incentivize that expansion that sort of along with agentic AI adopting Bitcoin, 473 00:47:20,592 --> 00:47:27,872 along with investors reassessing Bitcoin in what category it falls into, also the energy producers 474 00:47:27,872 --> 00:47:35,112 or the utility companies by necessity, because of the demand for AI, building out infrastructure 475 00:47:35,112 --> 00:47:40,012 that they say, we can't have this just sit in idle. It can't just be charging electric cars 476 00:47:40,012 --> 00:47:47,112 overnight. We need to be utilizing all of the energy that are a much higher percentage of the 477 00:47:47,112 --> 00:47:53,932 energy that we're producing. Do you think that could be another catalyst for, I don't know, 478 00:47:53,932 --> 00:47:58,792 I guess, Bitcoin adoption. And again, I know you think it's going to continue to follow the power 479 00:47:58,792 --> 00:48:02,252 law, but do you think that's going to be one of the potential effects? And could it be a 480 00:48:02,252 --> 00:48:09,212 significant one of the adoption of more AI? I think that the load balancing is an important 481 00:48:09,212 --> 00:48:18,392 concept and utility providers are recognizing that. So they like Bitcoin miners being involved. 482 00:48:18,392 --> 00:48:23,832 I think that's an important part of adoption that will continue. But the electrification that we 483 00:48:23,832 --> 00:48:30,472 need that you mentioned. Well, do you think that Google and Facebook are going to wait for 484 00:48:30,472 --> 00:48:35,192 some random city to build a power plant or they're going to build it themselves? 485 00:48:35,672 --> 00:48:40,632 They've already told us they're going to build it themselves. I think NVIDIA said that they're 486 00:48:40,632 --> 00:48:46,252 going to have their own mini nuclear reactors in the next seven years for some of their chip 487 00:48:46,252 --> 00:48:52,072 making facilities that they're going to build in the United States. That's a big deal because 488 00:48:52,072 --> 00:49:03,352 if they need energy for their own compute, they will realize that Bitcoin mining can fit in to 489 00:49:03,352 --> 00:49:15,292 their risk mitigation strategies on excess cost or capturing stranded energy and being able to 490 00:49:15,292 --> 00:49:21,592 turn stranded energy into revenue or balancing the compute demand. Right now, they're balancing 491 00:49:21,592 --> 00:49:31,692 their own compute in terms of the LLMs, they have to either buy compute to process or buy 492 00:49:31,692 --> 00:49:32,692 compute to train. 493 00:49:33,332 --> 00:49:38,552 So they have to make that decision right now, not between Bitcoin and compute, but between 494 00:49:38,552 --> 00:49:45,112 compute for revenue or compute for growth in the future just to train your models to 495 00:49:45,112 --> 00:49:45,472 get better. 496 00:49:45,472 --> 00:50:15,452 But my answer is that if the tech companies like ExxonMobil and like Royal Dutch Shell have recognized already that they can use Bitcoin to capture some stranded energy, to balance their, to mitigate risks, if tech companies do the same thing with their own power plants, then that takes the adoption curve of Bitcoin another step forward in terms of retail, then the hedge funds, then traditional 497 00:50:15,472 --> 00:50:27,212 investors, 401ks, Royal Dutch Shell, ExxonMobil, NVIDIA, Apple, right? Those types of big steps 498 00:50:27,212 --> 00:50:35,252 are, yes, I expect them. But just because I believe in the power law doesn't mean you don't 499 00:50:35,252 --> 00:50:40,592 want to see the steps happen. And those are the types of things that will confirm. So when I see 500 00:50:40,592 --> 00:50:46,492 the Morgan Stanley headline, Morgan Stanley coming in with a Bitcoin ETF, I say, yes, checkmark. 501 00:50:48,772 --> 00:50:56,432 That's right on time. And so when I see NVIDIA in three years saying, yeah, we're mining Bitcoin 502 00:50:56,432 --> 00:51:02,872 too, it's going to be like, wow. But it'd also be like, yes, this is the path that Bitcoin needs to 503 00:51:02,872 --> 00:51:08,632 be on. And this shows me that we're heading for that adoption. And by the way, you're waiting for 504 00:51:08,632 --> 00:51:15,672 10 million, a million becomes 10 million quickly. And it's just another zero at that point, right? 505 00:51:15,872 --> 00:51:22,992 10,000 to 100,000, 100,000 to a million, million to 10 million, they'll happen quickly, but you do 506 00:51:22,992 --> 00:51:29,032 have to get to the next order of magnitude before you get to the next one. So we'll get to 10. 507 00:51:29,472 --> 00:51:35,932 On what path? I don't know. But right now, I'm focused on getting to a million, right? 508 00:51:35,932 --> 00:51:43,832 five to six years. Yeah. I'm patient, man. Bitcoin has brought me a lot and it's not been 509 00:51:43,832 --> 00:51:48,472 purchasing power. I've only been in for four years, but it's opened my eyes to a lot of things. 510 00:51:48,892 --> 00:51:51,912 And I get to have fantastic conversations with people like you because of it. So, 511 00:51:52,352 --> 00:51:56,792 Nick, I appreciate your time. I got one more question for you and you know it's coming. What 512 00:51:56,792 --> 00:52:01,332 is an unpopular opinion that you have? You get some bonus points if you offend Bitcoiners with it. 513 00:52:01,332 --> 00:52:08,532 Well, I have never believed in or liked the word hyper-Bitcoinization. 514 00:52:09,032 --> 00:52:16,672 I believe in Bitcoinization, the slow adoption process that happens naturally instead of the 515 00:52:16,672 --> 00:52:22,012 world going into panic and Bitcoin forcing itself on the world. 516 00:52:22,472 --> 00:52:28,332 The world is stable enough that hyper-Bitcoinization is not my base case scenario. 517 00:52:28,332 --> 00:52:47,892 If the world was completely unstable, then perhaps. But I am privileged in that I live in the United States, a very stable society, you know, with everything that's going on today, still a very stable society. 518 00:52:47,892 --> 00:52:55,812 I also am privileged that I get to travel around the world to Europe and non-European countries as 519 00:52:55,812 --> 00:53:01,252 well. I've spent time in India. I've spent time in the Middle East recently. I've spent time in 520 00:53:01,252 --> 00:53:06,292 other parts of Asia. I've spent time in Western Europe. I've spent time in Eastern Europe. I've 521 00:53:06,292 --> 00:53:12,612 spent time in different parts of the United States as well. The world is stable. And I know a lot of 522 00:53:12,612 --> 00:53:20,092 Bitcoiners think that the world is so chaotic and so crazy that hyper-Bitcoinization is inevitable. 523 00:53:20,652 --> 00:53:27,452 And I completely disagree with that. Maybe it's a naivete, maybe it's just an optimism, 524 00:53:27,452 --> 00:53:34,092 but I think that the stability in this world is enough for Bitcoin to have a slow adoption process 525 00:53:34,092 --> 00:53:41,352 where it just slowly chips away as a store of value across the world doesn't really replace 526 00:53:41,352 --> 00:53:47,472 the hand-to-hand currency that people use on any grand scale anytime in the next 10 to 20 years. 527 00:53:47,932 --> 00:53:54,032 And it can get to a million absolutely just fine. So just to be clear, the distinction you're 528 00:53:54,032 --> 00:54:01,892 making, it probably has more to do with the pace and the relative amount of chaos that might ensue 529 00:54:01,892 --> 00:54:08,592 based on your scenario versus like you think that the quote unquote hyper Bitcoinized world 530 00:54:08,592 --> 00:54:15,192 is coming, but it's not going to happen in a hyper fashion? Like 50 years from now, 531 00:54:15,252 --> 00:54:21,832 do you think Bitcoin will be ubiquitous, use as money, the base layer money of the economy? 532 00:54:22,232 --> 00:54:28,492 It's just a matter of following this longer progressive arc toward that future versus, 533 00:54:29,672 --> 00:54:32,772 look kind of your point earlier, it's not a macro event where everyone says, oh, 534 00:54:32,932 --> 00:54:37,572 I have to have Bitcoin today. It goes to 10 million overnight, that kind of thing. Is that 535 00:54:37,572 --> 00:54:41,892 the distinction you're drawing or is it more than that? I think it's more than that because I think 536 00:54:41,892 --> 00:54:51,672 that governments need currencies for stability. They need to have their own currency to have 537 00:54:51,672 --> 00:54:59,972 any control and control leads to stability, right? If they're able to have a controlled environment, 538 00:55:00,392 --> 00:55:05,732 there can be stable economic activity. There can be economic activity if everyone agrees on the 539 00:55:05,732 --> 00:55:14,112 currency. And if everyone, if the government allows or basically sends its currency out into 540 00:55:14,112 --> 00:55:20,392 the world, then that is a currency that people will use. So I'll answer your question like this. 541 00:55:20,632 --> 00:55:25,232 10 years ago, when I got into Bitcoin research, I had the thought exercise because I do travel 542 00:55:25,232 --> 00:55:31,252 internationally, is that in how many years will I go through a duty free shop and the prices are in 543 00:55:31,252 --> 00:55:39,072 Bitcoin. The prices are in sats. And it's the lead price, not underneath the dollar price or the 544 00:55:39,072 --> 00:55:48,072 price, but the lead price. How many years until I see it? Not until it's every airport, every item 545 00:55:48,072 --> 00:55:53,252 for sale in every corner of the world, but how long until I actually see it for the first time 546 00:55:53,252 --> 00:55:58,392 or the second time, or I'm in an airport where everything is starting to be priced in Bitcoin. 547 00:55:58,912 --> 00:56:02,232 10 years ago, I would have thought maybe in 10 years. 548 00:56:02,832 --> 00:56:06,392 Well, I would have been wrong because I've gone through a bunch of duty-free shops this 549 00:56:06,392 --> 00:56:06,612 year. 550 00:56:07,172 --> 00:56:08,612 There is no Bitcoin pricing. 551 00:56:09,052 --> 00:56:12,392 There's Bitcoin ads like in the Istanbul airport. 552 00:56:12,612 --> 00:56:16,072 There's Bitcoin, huge Bitcoin exchange ads everywhere you go. 553 00:56:16,132 --> 00:56:17,212 I was just in Heathrow. 554 00:56:18,072 --> 00:56:23,812 There's a, you know, in the British Airways terminal, there's a big crypto ad with a Bitcoin 555 00:56:23,812 --> 00:56:24,592 logo on it. 556 00:56:25,772 --> 00:56:26,592 It's everywhere. 557 00:56:26,892 --> 00:56:27,052 Okay. 558 00:56:27,052 --> 00:56:33,252 It's not like it's not present in the airport, but it is not being used for transactions in 559 00:56:33,252 --> 00:56:38,932 international airports. I would have been somewhat wrong 10 years ago, but now I look and I say, 560 00:56:39,012 --> 00:56:43,912 okay, well, what about the next 10 years? Am I going to be walking through an international 561 00:56:43,912 --> 00:56:51,632 airport and see Bitcoin pricing in the duty-free store? I don't think it's more likely today than 562 00:56:51,632 --> 00:56:56,972 what I thought 10 years ago, 10 years into the future. If it's not in 10 years, well, 563 00:56:57,052 --> 00:57:04,472 what about in 20 years? I don't know that Bitcoin gets to that hyper-Bitcoinization role that it is 564 00:57:04,472 --> 00:57:11,332 the currency that everyone uses. Because government currencies are so useful to governments. 565 00:57:12,212 --> 00:57:17,992 And so don't discount the power of these incumbents, like the United States of America, 566 00:57:17,992 --> 00:57:27,152 the European Union, the People's Republic of China. Don't discount how long these institutions 567 00:57:27,152 --> 00:57:32,412 can last or how powerful they are or their willingness and ability to use their currency 568 00:57:32,412 --> 00:57:40,212 to accomplish their objectives. So Bitcoin, is it the store of value role for the next 20 years 569 00:57:40,212 --> 00:57:45,752 still and not the global medium of exchange role? Even though it might break into more corners of 570 00:57:45,752 --> 00:57:52,892 the internet for online commerce, it's not going to compete with the US dollar for the medium of 571 00:57:52,892 --> 00:57:59,492 exchange function, for the funding currency function, for the banking role, for deposit lending. 572 00:58:00,252 --> 00:58:07,092 It's not. Well, I'll tell you, I think your opinion will be unpopular with money, obviously. 573 00:58:07,532 --> 00:58:11,972 Nick, I think this was a fantastic conversation. Always good chatting with you. Thank you so much. 574 00:58:11,972 --> 00:58:16,872 Why don't you tell people where they can find out about you, follow you, read your sub stack, anything else you want to share? 575 00:58:17,352 --> 00:58:22,552 Yeah, thebitcoinlayer.substack.com is where we are writing all of our work. 576 00:58:22,812 --> 00:58:25,852 And thebitcoinlayer.com, you can see everything that we're doing there. 577 00:58:26,092 --> 00:58:38,112 The YouTube channel, our socials, and our new standalone terminal, which is called TVL Pulse, gives you all of our liquidity metrics without the additional writing. 578 00:58:38,112 --> 00:58:40,812 But we really want people to see the data. 579 00:58:41,432 --> 00:58:43,052 And so it's a great new product that we have. 580 00:58:43,392 --> 00:58:45,432 The BitcoinLayer.com for everything. 581 00:58:45,612 --> 00:58:48,972 And I'm on X at time value of BTC. 582 00:58:50,132 --> 00:58:50,192 Perfect. 583 00:58:50,432 --> 00:58:51,752 Nick, thank you so much for your time, man. 584 00:58:51,832 --> 00:58:52,272 Great chatting. 585 00:58:52,692 --> 00:58:53,192 Thanks, Michael. 586 00:58:53,712 --> 00:58:54,892 And that's a wrap again. 587 00:58:55,052 --> 00:58:56,892 I hope you enjoyed my conversation with Nick. 588 00:58:56,972 --> 00:58:57,692 I know I sure did. 589 00:58:57,752 --> 00:58:59,512 Always learn a lot when I listen to him. 590 00:58:59,532 --> 00:59:00,932 And it was a pleasure getting to chat with him. 591 00:59:01,072 --> 00:59:02,172 Go follow his sub stack. 592 00:59:02,232 --> 00:59:03,112 Go check out his podcast. 593 00:59:03,352 --> 00:59:04,312 Everything that he's working on. 594 00:59:04,352 --> 00:59:06,972 He puts so much time and energy behind all of it. 595 00:59:06,972 --> 00:59:36,012 And of course, do me a huge favor before you leave. Make sure you are subscribed to our channel. Give us a like, comment, share it with someone who you think might be interested. We would really, really appreciate your help feeding the algorithm and getting the pure Bitcoin signal out to the world. Of course, if you need help with proper 100% self-custody of your Bitcoin, go to thebitcoinway.com slash podcast. Schedule a free 30-minute introductory call with a member of our team. We can also help you with online privacy, setting up your privacy phone. We have a Plan B residency option in Tropical Panama. 596 00:59:36,012 --> 00:59:39,572 It's a freedom loving jurisdiction that you should consider as a plan B. 597 00:59:39,832 --> 00:59:42,812 Again, it's thebitcoinway.com slash podcast. 598 00:59:42,992 --> 00:59:45,572 Until next time, stay safe, stay sovereign. 599 00:59:45,772 --> 00:59:48,272 And remember the yield on Bitcoin is freedom.