I think the amount that you need to retire depends obviously on a few factors. This year,
it would need to be something like what are some of the unique factors that you took into account
into this calculation? What my guide attempts to do is to break those down into some simple
assumptions. And I see us possibly breaking 200k. I think it's still realistic. The nice thing about
it is it's still being adopted. So people can actually get some alpha on this and still take
advantage of some pretty extreme gains. A lot of people compare it to the adoption of the internet.
Bitcoin is being adopted much faster than the internet was. The health of the dollar is probably
in worse shape than most people are really realizing. What's up guys? 70,000 of you guys
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All right, now let's get back into this great interview.
Bing bong, I am back with another edition of the State of Bitcoin podcast where I've got the man,
the myth, the legend, Smitty in the house. He's the legend behind one of the coolest
retire on Bitcoin calculators that I've seen. And so I had to bring him on. As you guys know,
I love this topic and I want to dive in. So Smitty, I'll start it off the jump, man.
How much Bitcoin do you need to retire?
And what are some of the unique factors that you took into account into this calculation that you think a lot of these are not taking in?
Oh, man.
Well, yeah, great to have a conversation with you, Brandon.
Thanks for having me.
I think the amount that you need to retire depends, obviously, on a few factors.
and a lot of people are, you know, different stages of life, different places on the globe,
have different situations in terms of income and savings. But what my guide attempts to do is to
break those down into some simple assumptions and uses the power law math to project out,
you know, what that amount would need to be in a given year in the future
that you want to retire in based on your age and based on your annual expenses in the future.
So roughly speaking, and I just, you know, I say roughly speaking,
starting this year, it would need to be something like around 10 Bitcoin.
You know, and that varies a little bit depending on some other factors. But that's,
I think that's a good starting point for people this year.
so 10 bitcoin to retire this year but say five to 10 years um from now uh i'd like to dive in and
just see like you know how dramatically that changes because i think the power law is pretty
unique in the way that it is broken down and you know kind of calculating the overall bitcoin price
obviously it projects out the bitcoin price with all of this but you know i think uh you know i i
One, I have some qualms with it.
I don't think it's necessarily a bad tool, but I do think that over time, all models will be broken.
I think that the way that you look at Bitcoin right now, there really hasn't been an asset like that.
So one, I think power law is probably a little conservative, which would be better for the model here.
but why did you choose the power law to use
and break it all down for us,
for the kids at home here?
Yeah, that's great.
So yeah, I agree.
I think the power law is gonna be on the conservative side.
My philosophy, I don't know what everybody else's philosophy
is with retirement plan,
but I think it's probably a good thing
to be somewhat conservative when you're doing,
it's a pretty important thing to plan for.
So I think to plan for more conservative cases is just generally a responsible approach to doing one's own retirement planning.
There are a number of reasons why I think my approach is conservative in addition to the power law approach.
One is that it's not the average price of the power law going forward.
It's actually the latest version is the fifth percentile.
It's called the fifth percentile, meaning that you're taking the upside volatility sort of out of the equation.
Everybody's very concerned in the future about these 80 percent crashes and things like that.
But what this does is it tracks.
If you've seen that plot of the power law line that you can't unsee, there's a support line that basically tracks with all the accumulation phases or call them bear markets.
But it's a straight line.
So the fifth percentile essentially traces that support line, and it's not going through these bubbles that you see every year.
So in that sense, it's allowing you to plan around that support line and takes that volatility out of the equation.
The other reason is that this assumes, Brandon, a 7% average exponential growth of the money supply, a.k.a. monetary inflation.
And so that never goes away in this model, in this planner at all.
It starts from today.
It goes through to the year that you're planning to retire in, and it goes all the way to the end of your retirement.
And the reason that's useful is that mostly people don't experience a 7% inflation in their life.
Usually what they actually experience on the ground is something a little bit less than that.
So it's a 7% average.
And, you know, this has been pretty accurate. It's like 96, 97% are squared for the last 100 years, basically monetary inflation.
That's going to continue forward. And so this accounts for that, right?
So if you're going to retire in 2035 and you're expecting to spend down $100,000 a year for life expenses, that's $100,000 equivalent in 2035, not today's, not, yeah.
So today, so twenty twenty five hundred thousand dollars, not twenty thirty, not twenty thirty five hundred thousand dollars.
So there's a number of factors in here. I think it's a it's a it's a frugal and conservative planner.
But yeah, of course, you could always go down the weeds and tune a bunch of other knobs.
You know, there's tax considerations. There's can you leverage your Bitcoin?
Can you, you know, can you take out Bitcoin backed loans and can you kind of do that approach?
but this is meant to be an approachable guide that can be used by people of all ages you can
have everything captured kind of on a single page and and give you a nice target now with this i
think it's interesting too you broke it down by different countries which i think is really cool
so obviously there's a bunch of different uh i guess aspects obviously living conditions all of
these things, but Bitcoin is global money at the end of the day. So you could essentially,
you know, theoretically take it anywhere. But, you know, when you were coming across some of these,
you know, I know you assumed 7% annual M2 money supply growth. Was there anything else that you,
I guess, took into account for maybe some of these different jurisdictions when you're looking at,
retirement as of location and other aspects of it that might change that? Or is there anything
that you would think that could potentially be outside maybe this model that could cause it to
break? Yeah, across the different countries, kind of an interesting thing. There's going to be a lot
of exceptions depending. So if you live in like Bolivia, right? This is not to say that because
you live in Bolivia, you are going to be able to retire in 10 years on 0.1 BTC.
You know, your lifestyle could be very different and you might need one BTC
or you could live in a specific jurisdiction where you need less.
So what this is actually showing is averages. This is all averages. And particularly it's based on
the average income for these different countries. And so again, it's sort of a simplified starting
point. And it's meant to really compare between different countries. So it's going to require a
lot more Bitcoin to retire in France than it's going to require to retire in Bolivia, for example.
And so it's supposed to give you a cent. But the encouraging thing about it is that
if you find yourself in sort of the average case and you live and you're age between 5 and 75,
you know you this might actually encourage you to look uh you know your target stack is 0.1 btc
okay well on average where's this kind of you know uh maybe change some of your future retirement
goals in terms of uh where you want to retire you know so um that's sort of what it's really
meant to do and it's the same sort of assumptions it's the seven percent inflation adjusted
that could change because some of these are not actually USD based, although a lot of these operate using USD.
But it's the same fifth percentile power regression model as well.
Now, it is interesting that we are kind of doing this at the eve of a big sell off here this past weekend.
We're recording this on October 14th.
Obviously, historically, we've got the Bitcoin meme uptober with the last quarter of the year here really being solid.
but you've printed out some good research about October and the price action.
Now, with this, I already told you a little bit.
I gave you a little bit of my thoughts on maybe I'm considered a moon boy,
but I do definitely think that the price action here is,
although the power law says it's slowing down, I see governments adopting,
I see institutional adoption rapidly increasing.
And I think that there's obviously a bunch of Bitcoin being taken off exchanges, OTC desks, you name it, the buying pressure is there from the big players and big money.
But on the flip side of things, traditional finance looks at Bitcoin as just kind of similar to any other type of asset, especially with this power law.
As it gets bigger, the volatility goes down.
In my opinion, I think that we still have a lot of the upside potential, but we're going to build a stronger floor base from where we are right now.
And I think that this could be kind of something that we see with the potential of a supply shock.
Now, I'll put you on the spot here.
Do you see that as a possibility here in the future where, you know, the power law, it has these bands, but we do have the potential to really break out of it here in the near term just with all this buying pressure we have?
Well, okay, there's a lot there.
So I'll kind of separate a couple things out.
One is I've been tracking this October and historical October trends lately.
this is not really related to the power law analysis that I do, which is more of a long-term
trend analysis. And we can talk about that in a sec. The October thing, you never know exactly
what Bitcoin is going to do. It's never exactly the same from year to year. But if you look at
the historical trends, October has been a very bullish year. And so it's been either the first
or second highest return month historically. But some years there's exceptions, but it does
particularly well when you start getting around the years that are supposed to be, you know, up years.
And so the median return by the end of the month in October is supposed to be 15.6, and the average
is about 27.7. And so you can take, you can look at it through different lenses, but in both of
those cases, you're talking about the top one or two months in terms of, and the other thing is that,
and I think a couple other analysts have pointed this out, is that most of those, most of the upside
in October and happens in the latter half. And so really we're crossing the Rubicon right now to see
what the latter half of October is really going to look like. And so I think people are quick to
assume that October is going to be a dud this year. But I just, if you look at the time series
plots that I put together, you really don't know until you start to get past the 15th
into the first few days. And then really you might not see a heck of a lot of upside action
until after the 22nd. So I'm still bullish on this month. My target this month, and again,
this is not power law analysis. It's more of like kind of data-driven estimates, right?
I think it's going to be, will be between somewhere between 130 and 150 by the end of the month,
but I could be wrong. This is probabilities, right? It's not, there's nothing certain about
this. This is a matter of probabilities, but that would be very, that'd be very bullish in my
opinion to get into that price range but and i think it's very realistic still uh and then to
the power law thing um you can actually tie this in with the power law because we've seen this
correction the last few days which is really uh especially for some of the newbies has given them
a heart attack uh but we've had a few since we started this accumulation market in 2022
uh this uptrend this very steady kind of stair uh stair stepping action that we've happened for the
us we've happened to have have had for the last couple years we tend to see um kind of two steps
up and then one step down two steps up one step down and what this ends up doing is we're now
right at the power law median meaning that we're at roughly the 50th percentile I don't think it's
exactly 50th percentile but it's just right about what the power law model would predict we would be
right now in terms of the median, which is pretty interesting, you know, as a power law analyst.
And then if you want to go even further, I haven't shared a chart on this in a while,
but you will find that over time, the strength of the power law correlation
has been increasing over time for like the last like eight years or more. And so meaning the R
squared in that regression fit is going from like 96 to 97%. And so, yeah, you know, so for the
skeptics out there, power law, just keep that in mind. I think that that's just adding a little
bit more credibility to the model all the time, in my opinion. All right. Yeah, that's interesting.
So, all right. Well, I mean, we're recording here at 112, just under 113. So if we get to 130 to
150, I definitely think that'll be super bullish here going forward. So, hey, man, I hope so.
And by the time we get to this podcast out here, it'll be like in a week or so.
So who knows?
Maybe we'll be there by the time this thing comes out and you look like a genius or, you know, as a giant sell off.
Or everybody unfollows me at the end of the month.
That's fine.
Yeah, exactly.
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offer for your Bitcoin collateralized loan can get cash for your Bitcoin today Salt Lending secure trusted proven It always is tough with these price predictions and everything like that but I do think it
very interesting the way that Bitcoin acts. Now, you described two different analyses
with the short-term and your long-term view. I want you to dive into that a little bit more.
How do you view it in the short term and then the long term correlation with the power law?
Why do you kind of view those two?
And do you see some maybe volatility here still in the short term to stick around?
Or are you almost of the believer that maybe the four year cycles are kind of gone here?
Oh, boy, that's a good question.
I'm not totally sold that the cycles are gone.
I am very open to the idea that we are going through what I call a phase change, which is within the power law, within the framework of the power law, we might be seeing a change in frequency.
Because I think a lot of people have been married to this exact precise four-year cyclical timeline to hitting the price peaks for each cycle.
And yeah, that has been pretty interesting.
And it's certainly caught my eye how it's been exactly 1,000, whatever, 64 days from peak to peak, whatever.
But the other fact of the matter is that we have three data points on that, really kind of two data points if you take the two cycles together.
And it's like peak to peak to peak.
That's interesting.
But I can't think of anything as an analyst that fundamentally puts Bitcoin in a clock in the way that people are describing.
Sometimes you see these Bitcoin clocks.
If that keeps going, I'll be very interested.
I have a variant model of the power law where I try to capture what I project to be the tops, the price tops.
But I don't put dates on it.
So I, the way I do it is it's called the decay channel model and people can check that out on my page, but I, I, I put a top model, right?
So there's a lower bound and then there's an upper bound.
The upper bound is the top model.
And what that says is that if, if we reach a cycle top in on X date, we expect to be in the ballpark of say 200 K.
and so for my model for example that that would say so if we actually hit the price peak for this
cycle at the end of this year like December you know later half of December for example
should be peaking just over 200k if that's indeed the top of the cycle and that's been amazingly
consistent over every single cycle since the beginning of Bitcoin which is pretty compelling
to me. But I'm not even totally married to that, to be honest, because I think there's, like you
said, there's so much changing with the institutions. I think that the business cycle, you know,
it is cyclical, but I mean, we're kind of going through a change in the monetary order right now,
it seems like. So kind of if I boil everything down, my long-term analysis is that I think the
the power lot is going to hold in fiat terms,
like in US dollars terms until it's, until it doesn't.
And I think we're going to start seeing signals that it's falling apart.
And that R squared that I'm talking about, the correlation coefficient,
that's going to start to drop.
And likely what will happen in my opinion is the dollar amount will start to
get closer and closer to the tops.
And it'll start to sort of break to the upside, as they say.
I think this will take years, years and years to do.
uh if not a decade or so so i think it'll be somewhat gradual process but i'm totally open
to that happening i think we'll start to notice it happening and i think you know i mean look at
weimar germany uh there were you know billionaires and trillionaires and and marks but it didn't mean
that they were you know uh the ultra wealthy in terms of purchasing power um there's also a power
law in gold there's actually a power law in a lot of different assets but the second hardest asset
out there arguably is gold right so there's also a power law of bitcoin in gold and so sort of this
concept that i'm playing around with and i plan to put more analysis out on is i i almost anticipate
a long-term power law trend in like gold something that would actually be a good anchor point to what
your purchasing power is for any individual and then you might see us dollars fall off a cliff or
you know or fall up fall up to the moon in terms of dollars uh which would be kind of like a
hyperinflation scenario so but that's sort of my but this is all long-term speculation but
this is what i could see playing out yeah for now the power law the power law is pretty solid
yeah i mean that's interesting the power law of bitcoin in gold would be something that i would
i would maybe attune to a little bit more just because of how much you know we're seeing bitcoin
our dollars get inflated away.
And I don't know how closely you're following the precious metals market,
but we just had recent acceleration in silver and gold prices.
Silver all-time high. Yeah, that's right.
So we're kind of having this new, quote-unquote, debasement trade
gain a ton of popularity right now.
What do you take into account of that?
And what's your opinion of kind of this new craze for not only just Bitcoin,
but all the precious metals and hard assets in general?
Yeah, I mean, look, I just think it means that I think that the health of the dollar is probably in worse shape than most people are really realizing.
And I think that if there's one indicator that has told us that it's an unhealthy state, it's been the price of gold and the price of precious metals in general.
and the fact that now we've been seeing all-time high after all-time high of gold
and now we're seeing silver, I think it's, you know,
to me it's the biggest alarm bell ever that people should be running into hard assets at this point in time.
Yeah, so then do you take any close looks at like the bond market
and how that is reacting comparatively as well?
I don't spend too much time looking at the bond markets.
To be honest, I probably should, but I only have so much time on my hands.
I tend to spend a lot of my time looking at the price action of Bitcoin and things like that.
Yeah, okay.
So I just wanted to, yeah, because it seems like the bond market is kind of screaming for a collapse as well,
similarly to the gold and silver markets.
But I think it's interesting the way the overall Bitcoin market has been playing out.
Now, like we said, we just saw that recent run-up in silver hitting that all-time high
and gold continuing to run up.
Gold actually, I think, has three to four times better return
than the S&P 500 so far this year as well.
But Bitcoin, we've been kind of floating around this 100 to 120 mark here
for quite some time.
So do you think that this is the quarter here,
this last like three-ish months of the year,
this is the time that we're going to really start to break out?
And, you know, where do you think we're going as far as like the cycles go?
Because, you know, you mentioned that the business cycle and I want to kind of ask you about the halving.
Do you think that that kind of plays into the four year cycle or is it more just kind of based on the business cycles here?
Yeah, I think I think the primary factor is the liquidity cycles, global liquidity, business cycle, whatever you want to call it.
I think when money is cheaper, I think that people, the investment markets are, you know, more likely to get put into all kinds of different assets.
Right. And I think that given, though, this awakening to the falling apart of the dollar of the time that people can see this trend, people are losing purchasing power.
The average person, you know, the top 1 percent holds 50 percent of the wealth.
And I think people are becoming more hip to the fact that, you know, you have to hold hard assets.
And so, yeah, I think the liquidity cycle has a lot to do with the cycles of Bitcoin.
I'll put it that way.
That's sort of a primary factor.
The halving, I mean, I've kind of looked at the halving.
I've looked at the election cycle and things like this.
There are these different correlates.
the problem is it's really hard for me to find because it hasn't really been a demand driven
thing with Bitcoin um actually some other great power analysts talk about this a lot which is that
Bitcoin's growth behavior behaves way more like a growing organ is more network like a true network
so it's more network and adoption driven than a demand driven thing which is you know sort of a
Metcalfe's law principle. So for that reason, I don't see it having a whole lot to do with the
having, although there may be some psychological factor, some Russian, some anticipation there.
Although I'm skeptical, I just don't really see a real mechanism there. I think it's a lot more to
do with the liquidity cycles. As far as do we, what are things going to look like? It's been a
bit of a so so year for bitcoin especially compared to gold this is true but again if you look at the
the nominal uh power law trend long term for bitcoin it does have these cycles that kind of
overlay onto the power law right these bubbles the bubbles come and then they burst well the the kind
of structure that they've had historically is that first of all they follow the support line
on the bottom so they might be in the fifth to tenth percentile and then what they do is they
They creep up into the sort of middle section and they spend a decent amount of time in sort of 30th to 50th, maybe 50th to 60th percentile.
And they'll spend years kind of dancing around in that regime, even though the price is still growing.
It's sort of trudging along or crab crawling, as I say.
And then what happens with Bitcoin is you really kind of have like in the final hour, a big spike where you jump into the, you know, oh, now you're in the 80th, 90th, 99th.
percentile price range. And it doesn't last there for a heck of a long time. And then the air is
sort of let out of the balloon over the following year or two to get you back to the support line.
So I don't think anything is too unusual in that regard this year. So I'm not like,
I don't really see Bitcoin as having like a down year in that respect, because I just think that
we're following the typical structure, somewhat typical structure. The unusual thing about the
structure this year is actually that we're following an unusually steady and low volatility
path that's actually following an exponential. So I don't really know how it's going to play.
I don't know if we're going to keep, like in other words, we could either keep marching through
the 60th percentile, 70th percentile, 80th percentile, and then boom, in a couple of years,
we hit a million dollars, you know, or is it going to be more like the previous years where
we trudge along and then next year, 2026, we kind of blow off, you know, early 2026, we blow off,
scrape the 200 to 300 range and then come back down. I think both scenarios are plausible. But
yeah, I mean, I have low time preference as a Bitcoiner, so it doesn't, either way, I'm bullish,
you know but uh yeah yeah 100 i mean either way i think we all are bullish but i think it's it's
kind of fun to play around and and scope everything out because there's so many just unknown factors
with this right like i mean lawrence lapard has his book the big print uh where you know there
could be excess liquidity just being dumped into the market and i mean it seems like that's i mean
at least from the interest rate perspective where we are going to cut interest rates here in the
next couple of weeks and then presumably cut in December. And then by the time May comes around,
when Powell is getting the boot here, Trump wants extremely low interest rates. So with the amount
of potential liquidity coming in, you know, obviously it's hard to kind of project that
in models because it is human behavior at the end of the day. But, you know, how much weight do you,
do you, I guess, put into that? And do you think that, I guess, the three rate cuts for this year,
like one previously, and the two potentially upcoming is already priced in at this point?
That's a great question. I've done some analysis where I look at both rate cut
values historically, and then asset values. But also, importantly, the rate cut announcements,
I think are a big factor, right? Because people front run things and people anticipate what the
market's going to do. So unfortunately, the answer is I don't know. But if I were to guess,
I would say it's a little bit of both. I think that rate cut announcements themselves,
not the rate cuts, but the rate cut announcements, historically have had some correlation to
asset appreciation in the coming months. I don't remember the exact lags, but
But yeah, I think there will be some front running.
I do anticipate more liquidity later on, in part because of these rate cut announcements.
But I think that overall right now, the state of the market and the investment environment is still not great.
And so I think that we still need a lot of that to come back in real terms to start pushing the asset prices up.
I don't know if that's going to be later this year, if it's going to be beginning of next year.
but my expectation is that it's going to be somewhere in that range.
But it would take a lot of inflow now to push the price up to, say, $200,000 by the end of this year at this point.
I mean, now that we're mid-October, and I did some analysis on this,
if you look at the historical trends, it's more likely that we get maybe up into the $150,000 range by the end of the year.
on average of course bitcoin bounces all around all over the place there's a lot of volatility but
sort of nominally maybe 50 150k range and then we're looking at more of the 200 plus k range if
it happens um first quarter or first half of next year this bull run i think everybody should focus
on getting their bitcoin in self-custody and off exchanges we all saw what happened last time with
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to the show. That's sort of my baseline. Now, where do you think that this, I guess,
the potential top would be? Do you think so? I'm guessing then you think this
cycle leads into 26 and kind of continues that way?
I do. I, I, um, again, I just want to clarify,
I don't know for sure. Not claiming that people say,
what your price prediction I like I don don don take anything You know this is all take it all with a grain of salt Right I in terms in terms of predicting the price in any
given year, especially within the, over the course of months or years, I put not too much
weight into that. I almost do it for fun. The power law long-term is what I'm really, really
put a lot of weight into and I think is speak to the reliability of the asset.
But aside from that, if we're just talking about short term price, yeah, I see us still
possibly breaking 200K. I think it's still realistic. I just don't think it's going to
necessarily happen by December in December this year, which I think that's, again, going back to
some analysts going, you know, what happened to our Bitcoin clock where, you know, every
of exactly four years we hit to this month,
you know, November, December, we hit a price peak.
I just don't think it works that way.
I don't think it has to work that way.
But I'm almost glad because if my theory is correct
that the decay channel holds up,
that actually puts us into the mid 200 Ks
if we end up peaking next year.
You know, so yeah, I'm still expecting,
hoping for north of 200 K.
I don't think that's going to happen by the end of this year.
Okay, now let's get back to retirement here, because I think the Bitcoin as a retirement vehicle is very interesting.
Because, you know, if you just look around at the average retirement accounts, you know, I think if you have like a million dollars or your goal is to have a million dollars and retire in 30 to 40 years at this point, it would, you know, the dollars decaying so much, it would be around like worth 50k worth of 50 purchasing power right now.
just because of how much they're inflating away the dollar,
where on the flip side, Bitcoin is obviously, I guess, a deflationary asset.
And it gets more valuable over time.
So with this, obviously, you need to do some price projections,
which we kind of just went through here.
But what do you think of Bitcoin just in general as revolutionizing the retirement
and all of these different assets, right?
I mean, we're getting, you know, the bond market, fixed income market, potentially real estate.
All of these other markets seem to be getting swallowed up of Bitcoin.
So in a general sense, how do you see Bitcoin just kind of, I guess, Bitcoinizing all of these different areas?
Yeah, I think it's going to be a lot of people's off ramp to being able to ensure some kind of retirement.
I don't know that there's a lot of, you know, reliable options out there for a lot of people, especially because they have a hard time keeping their melting ice cube from melting, you know, their savings.
In this country, it's a serious problem.
I would almost call retirement a crisis.
People, a fewer number of people than ever are expected to have any kind of retirement.
And so the trend there is very concerning.
I think Bitcoin offers hope in that.
And I think a lot of it goes back to its fundamentals, its value proposition as a sort of immaculate ledger, so to speak.
It's a way to preserve energy and time so that you always know what your essentially what your purchasing power is going to be.
And the nice thing about it is it's still being adopted.
So people can actually get some alpha on this.
And still there's a good, you know, I would say 10 plus year window here to take advantage of some pretty extreme gains.
I mean, right now it's doing an average CAGR of 40, what is it? 42, 45%, something like that.
So it's well above of what you'd be achieving with a standard S&P, 401k, which I'm thinking more
and more all the time is a bit of a scam. It's like, how did we all buy into the idea that we
could be sold a product, which is essentially helping you keep afloat with the rate of inflation
over time, but you're not allowed to ever spend it without huge tax penalties.
So I think Bitcoin doesn't have any of that going against it.
So I think, yeah, I think it's an amazing life raft that people ought to start researching
if they have to go already.
Yeah, I think it's interesting because if you look at the S&P 500 just in general, since
the year 2000, I kind of love pointing this out that if you look at it compared to the
M2 money supply, it's just about even and maybe even under value, depending on when you look at
it, depending on the day. So it's actually not even really technically keeping up with inflation.
It's just, you know, kind of breaking even with all that where we're being sold that it's, oh,
it's helping your purchasing power, but then we're being sold these metrics and, you know,
this data that it's just, it's basically one big fat lie where, you know, the, the CPI numbers,
all of the inflationary numbers that they're giving us, it's all just incorrect. And everybody
on main street seems to be feeling it, but, uh, the, the elites on wall street, uh, don't seem to
care. Uh, so I think Bitcoin has been this kind of revolutionary aspect, but, you know, as it stands
right now, you know, Bitcoin is kind of looked at as digital gold, uh, when it comes to the United
States. There's a lot of borrowing products where you can borrow against Bitcoin being used as
collateral. I just interviewed another guest who went into a little bit of the borrowing aspect
and potentially the depreciating APRs with Bitcoin. Now, you took a different approach and
just looked at it as different jurisdictions. So I'm kind of curious, one, do you see Bitcoin going
to potentially a medium of exchange or is Bitcoin kind of one of those assets for you where,
you know, it is that digital gold?
Great, great question.
And yeah, I agree about the S&P stuff.
But the, okay, so something I have thought a lot about, maybe not so mathematically,
but more conceptually, philosophically, is this value, store of value versus medium
exchange narratives around bitcoin and you know people say oh you know it's not it's not peer-to-peer
cash it's not being used that way the way it was designed by satoshi um i start to find when i talk
to a lot of people out there there's more people than i realize that agree with me on this sort of
base case which is bitcoin needs to be adopted first right so what's the more efficient way for
for a financial asset to be adopted?
Is it for it to be a medium of exchange
or is it for it to be a store of value first?
And can it go through different phases
where it fulfills more of one role than the other?
I think the answer is yes to those.
Like, so basically my base case is that
the way that Bitcoin's adoption mechanics are working,
people, yeah, that's why people call it a Ponzi scheme, right?
Like Peter Schiff, it's like people only buy it because they know the next guy is going to, you know, be able to, because you know you're going to be able to sell to the next guy for more.
Like, okay, well, people don't sell it typically right now.
They're holding it as a store of value, which is exactly the reason that most people hold gold or a hedge, you know, protection against debasement.
And so, of course, they're going to use it as a store of value right now, right?
And it's just a cherry on the top that it happens to be, you know, an order of magnitude higher returns than any of the traditional, you know, index funds or things like that out there.
So my theory is that it will eventually become adopted as more of a medium of exchange as it starts to normalize itself into the global economy and become a fully mature asset.
I think it then at that point makes more sense, you know, because then the virus has been the virus has spread, right?
The virus has spread everywhere. Now everybody kind of speaks Bitcoin.
It's functioning in all the different world economies.
And yeah, the early adopters have benefited greatly from from allowing it to to be adopted to that scale.
now what do you think of the uh i guess jurisdictional potential arbitrage with with
all of this i know we kind of just touched on it briefly at the beginning but it seems like
everywhere is getting more friendly towards bitcoin especially you know with uh the crypto
president i always cringe a little bit when i say that about trump but he has been very very positive
when it comes to to bitcoin in the industry but it does seem like it's getting becoming uh or it's
becoming a little bit more of the wild west i'll say uh so what do you think of uh you know these
potential factors when it comes to the adoption uh do you mean just uh like basically how do
different global jurisdictions uh setting policy around bitcoin affect its actual adoption is that
yeah exactly um good question um i guess my thought on that is that it's a bit of a game
i've always kind of like been a subscriber of the game theory uh jason lowry sort of
you know that the dominoes will fall one by one uh i think it's in every nation's best interest
to make their environment attractive to business.
And I think if they don't play along,
then they're going to see business leave.
And I think that we've seen this in certain case examples.
I think that's the direction it's going to go.
I don't necessarily, it's almost like,
again, I almost look at it through like a viral lens.
I almost see like that's Bitcoin doing its job
as you look from country to country.
Like those are the decisions
that they ultimately are going to make.
I don't know if you heard Trump's language before he joined office, and it didn't speak so kindly on Bitcoin, right?
And now we're calling him sort of a Bitcoin-friendly president.
So it's another interesting case, right, where he was all about the dollar.
It's like the idea, just his mindset was totally not mapping onto sort of the Bitcoin or mindset, which I think is really interesting.
And I, yeah, I guess I would predict, to answer your question, those sorts of shifts in global leaders thinking time and time again until the dominoes start to fall all around us.
Now, as you're looking at Bitcoin as an adoption, right?
A lot of people compare it to the adoption of the internet.
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All right, enough from me.
Let's get back to the show.
All right, a lot of people compare it
to the adoption of the internet.
Have you done a deep dive on this?
And what do you see as like parallels
or maybe some differences in the adoption?
Yes. A while back, this must have been five or six months ago. I think I just did one post on it, but basically the adoption mechanics of the Internet do share a lot of similarities with Bitcoin, which speak to the network adoption nature of it.
Internet being a network, of course, the net.
But one interesting thing is that Bitcoin is being adopted much faster than the Internet was.
Was one feature I recall.
I don't have it in front of me.
So forgive me.
I'm kind of reaching back to my memory.
The other thing was that they both exhibited strong power law behavior.
And I believe globally still, because you can look at each nation's Internet adoption and you can look at the total of the whole world's Internet adoption.
last time i checked i believe because there's so many parts of the world that are still rapidly
adopting the internet um thanks to you know there's new technologies like starlink it still is pretty
much a power law i think the difference is that you're going to start to see because it's not a
financial asset you don't have like you don't have a meta asset attached to it like a money system
so like fiat where you can just print a bunch of money you don't see the internet um
okay so for example in the developed world like in north america it sort of tapers off
so it kind of it's like a power law and then it sort of turns into this like weibull curve or like
an s curve um and that sort of makes sense if you think about it because that you can only have so
many internet users in the world right it's it's only going to have uh you know once once 90 plus
percent of uh your population is using the internet it's like how could it keep trending
as a power law that said i think bitcoin that's where i think bitcoin and the internet differ a
little bit in that there's a financial uh value add so there's a sort of a meta value to bitcoin
besides just holding the bitcoin itself so that's why i think things like whatever your measuring
stick is in terms of purchasing power a poor one fiat or gold i think it's going to have a much
longer standing uh power law behavior uh so that's one of the key differentiating
characteristics between the internet and uh bitcoin in my opinion now you posted this uh
recently about the seven day price integral z score uh where it kind of it's a nice chart and
I'll have my editors stick it in right here.
But it looks like Bitcoin has this gradual, then it kind of has a flat period, then has another gradual big adoption arrow.
And you so eloquently said, but there's no green arrow yet.
So why don't you dive into a little bit of this calculation and kind of what you mean by this and what I guess this could potentially show here going forward.
Obviously, it's not a huge prediction.
It's just usually using past, you know, analysis to try to predict the future.
So I'm curious kind of what you think of this and where it's going.
Yeah, for sure.
So this, I will admit, this is not something I spend the bulk of my time on, but this is
sort of for fun metric exploration and ways to analyze the trend.
And you can clearly see some patterns emerge here, right?
So you see, and I posted this a few times.
you tend to see the shoulder and then a peak and then it goes into a trough and then there's a
shoulder and then a peak and then you go to a trough so right now we're in this sort of yellow
uh you know uh sideways sideways action shoulder phase uh and so the question is like are we just
not going to see a green arrow or do we think we're still going to see a green arrow i still
think we're going to see a green arrow um i without going deep deep into the math and and
and boring your audience,
I will say that the metric here is based on a long time,
long moving time window,
which gives you a nice smooth curve over time,
takes a lot of the noise out.
And it the Z score of the price integral meaning instead of just looking the looking at the um the current price it actually accumulates the price over time and it looks it looks at the
shifts in the trend of the accumulated price so you just add the next day's price to the previous
days to all the accumulated price before so you know it's obviously going to the millions and
millions of dollars so to speak and you can basically see shifts in that if you were to plot
it as a trend line you'd see a bunch of changes in that trend and then what this does is it
basically shows you how many standard deviations it's moving away from that trend so this is why
i don't it's kind of hard metric to explain and i don't do a good job of that in the post but
that's what it's tracking the reason i look at it through this price integral ways i think it's
an interesting way to actually it you start to see this pattern emerge that you wouldn't see by just
just looking at the price in real time or the price history itself.
You actually accumulate that price over time and you see changes in that.
And then you can apply like trend analysis to it.
So that's kind of what this is doing.
So yeah, I think that green arrow is around the corner.
And I think we're not going to see that show up here until after it already happens.
Yeah.
And you have this, I mean, we've been talking a lot about price.
And we've touched on the retirement as well, but you always tweet out this acronym SHISH, which I like, stack early and stack hard.
And you put out another recent about how long it could take to potentially stack 0.1 Bitcoin.
And that's, you know, I do a lot of videos on 0.1 or which is 10 million sats or 1 million sats, 0.01 Bitcoin.
So why don't you take us through a little bit of the math there to kind of show just like, you know, even though we've a lot of people think that maybe we're potentially too late to Bitcoin, that it's still obtainable to get, you know, a good, a good stack here.
You just got to, yeah, hit the sheesh, man.
Just stack early and stack hard.
Correct.
So sheesh.
So stack early.
That's so funny that you said sheesh because I've never actually heard anybody else.
Maybe I don't know.
I was thinking so.
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All right.
Enough from me.
Back to the show.
I don't know.
I was thinking Sesh.
but that's yeah i like i like the sheesh though i mean i don't know okay well maybe it should be
sheesh okay maybe you take ownership over the pronunciation of that i'm totally fine with that
um yeah basically this chart it's time to stack 0.1 btc by dca so what this is looking at uh is
that a couple things one is that if that's your uh stacking target 0.1 bitcoin i think that's
very respectable, especially depending on where you live, what jurisdiction you live in and what
your expenses are expected to be. That said, the key with Bitcoin is you just need to start.
You just need to, the longer you wait to start getting in, you can see these lines start getting
further and further apart. And the kind of the X axis is showing how much you're stacking per week.
And then each of those lines is a starting year. And then the Y axis is how many years it's going
to take to reach that goal, which is 0.1 BTC. So you can see that if you want to say $400 a month,
right? That's $100 a week. You could start right now and it would still take you to hit a 10th of
a Bitcoin just over two years, right? But if you wait to start until, let's just say 2030,
let's just use round numbers, right? You wait five more years and say, okay, I'm going to start my
DCA plan and I'll put in a hundred dollars a week. Well, now you can see it's going to take you about
12 years to reach that same starting, uh, that same stacking target. Um, and you can do the same
math for one Bitcoin. It's, you just, it's basic algebra, but the, the, the, the price trajectory
is all based on the power law, uh, trend. So, um, that's what it all comes back to.
Yeah. So is it, is it too late to get to one Bitcoin? Is that what you're telling us here?
smitty it depends on how much cash you have um you know it's harder and harder all the time to
reach one one bitcoin indeed is going to be like a lot of people say is going to be like um you know
what what the goal the goal used to be to try to get to 10 bitcoin right everybody's the average
person's like am i going to get a stack 10 bitcoin now it's going to be difficult for people there's
another chart here i don't know if you end up pulling it up but if you take the same approach
to a lot of people $400 a month that's a lot of money right so right now if you were to do that in
2025 I mean good luck trying to get one bitcoin it's going to take you like 35 years um and that's
shocking to hear it put that way by some people but that's just the fact one bitcoin is is a lot
um if now if you want to put in uh you know let's say what's 500 you want to put in two thousand
dollars a month which some people might be able to pull that off with like a really good job you
know and they got their finances under control and you want to put in five hundred dollars a week or
two thousand dollars a month and you start this year then you're talking you could you could pull
that off in about four and a half years if you start right now in 2025 to one to get to one
but you know that's that's you got that's this is dca so you can't miss can't miss a couple
months here and there it's like and then and then again if you want to wait till let's say 2030
and that same two thousand dollars a month again is going to take you about uh looking here like
you know close to 30 years so don't wait around stack early and stack hard that that is the
that's what these charts are meant to to uh communicate yeah communicate that the growth
is exponential here. So, you know, it seems like all of these numbers, even though I feel like
they're a little conservative, the conservative numbers are still extremely bullish. So is there
anything that you see as a potential, I don't know, black swan or something that worries you
about the adoption going forward? Or have you run that thought experiment a million times like the
rest of us and just maybe you can't find anything at this point? Man, that's a great question. So I
have thought a lot about um the different fail so in my in my uh in my my day jobs i've spent a lot
of time doing failure analysis and reliability work and so um i like to think about a system
and its points of failure and its uh probability of failure and kind of look at things like a
probabilistic tree so i haven't done to be honest i haven't done a fully fleshed out mathematical
analysis on this but i will take what i see to be the biggest threats of bitcoin to see what the
the likelihood of those things would be. The easiest ones, the lowest hanging fruit, if you
think about those are like the world ending scenarios, right? Where it's like, we're all
back, we're pushed back into the dark ages. There's no electricity, a meteor has hit the earth and
it's okay. Well, like, okay. Like we have much, much bigger problems to worry about than how
Bitcoin is doing at that point, right? The internet gets shut off and forever and never
gets turned back on. Okay. We're kind of in a similar boat. I think I'm trying to keep an eye
on this quantum computing thing. I'm by no means a quantum computing expert, but what the experts
are saying and what the trends are saying is that it's going to threaten the protocol and access to
keys in not too long a timeframe from now. So it's something that we're going to have to adapt to
at the very least. So I think sort of in the next five to 10 year timeframe, we're going to have to
see some solutions arise from the Bitcoin developer community on that. But there are ways.
The good news on that is that I know for sure that there are ways to become quantum resilient.
And so I don't think that that's, I think it's a threat to Bitcoin, if we're being honest,
but I think it's not something we can't adapt to prevent from being a catastrophic failure.
Now, coming at this from a mathematics perspective, I always think is very interesting. I have an engineering background and a lot of what I have learned about economics has just been purely self-taught.
um you know a lot of what i learned is actually from preston pish in the show we study billionaires
talking about a lot of analysis uh and you know one thing that kind of i guess dissuaded me from
all of this was just looking at the amount of craziness during the 2020 times with the gme
craze seeing covid and uh you know basically the short squeeze aspect of all of it and you know
not really being able to explain what the hell was going on.
And it seems like Bitcoin is almost in a similar perspective
where a lot of people try to put mathematical equations on it,
but I don't know if there's an asset quite like it.
So when you're doing your dives with Bitcoin analysis
and kind of looking at it in that respect,
um do you still see it as like the potential of uh i guess like breaking out or what kind of
reasonings did do you see that it's still following this mathematical model of like the
power law per se yes okay so yeah so a little bit of background on how i got into things and
what are the things that really can help me to want to um do this i guess semi-professionally
although I didn't intend that initially. So I, like you, have an engineering background. I have a PhD in material science and engineering.
I did some science-y stuff before that, but I am totally not in economics or finance at all. That's not my background.
But what I do have a background in is a lot of data analysis, right? And like you just said, for yourself.
And so one of the things that really drew me into this to take this seriously as an asset,
I had kind of multiple awakening points or I call them clicking points when things kind of click.
And one of those was when I actually saw the power law for the first time, I saw some people
analyzing the power law and I just looked, to be honest, I just, the feeling I got from seeing this
straight line plotted out when you look at things in a log log space, I was like, I don't think,
think, okay, this is interesting, right? And then so it's a very simple model, because I knew what
power laws were, because of the systems that I work with. And so I said, can I, this simple of a
model fit the entire history of Bitcoin that well? Of course, there's going to be noise, but so I just
started doing it on my own. It wasn't that difficult to do, you know, we all know how to pull data from
different databases and data sources. So yeah, I started putting a lot of my own analytics together
and looked at traditional regression approaches.
And then I very quickly started to realize
that there seems to be an underlying power law here.
And then the other, by the way,
as sort of an aside,
every time with Bitcoin,
I've had sort of an awakening,
strengthening of conviction of Bitcoin.
I then put in proportionally more investment into it,
a personal investment.
So that's kind of an interesting progression on my end.
But yeah, so I did that.
And then I very quickly noticed that there's like a power law trend here. Why is that? Like, where is that coming from? Why do stocks not behave like this? And then that got me to really discover more about network processes, which I'd never really thought about too much before. I read that book Scale by Jeffrey West. I don't know if you've read that yet, Brandon.
No, I have not.
That's a great book recommendation. It's basically a walkthrough of all sorts of different systems in nature and socioeconomics and cities where the underlying growth structure is based on a power law.
They call them scaling laws. It's kind of like an alternative name for power law.
And to me, Bitcoin now, looking back and having done all this research, it is following a scaling law.
You see all the different orders of magnitude that it's scaled.
And so we sort of see it repeat the same old patterns going forward.
But it takes longer and longer, but it reaches greater and greater orders of magnitude of scale.
So, yeah.
Yeah, it's very interesting.
And I'm, yeah, I like that you've got the engineering background similar to me, because
I think when you get into these economics modeling, a lot of stuff just, you know, is
taken for, I guess, assumptions that need to, I guess, you know, it just, it's the way
it's been, right?
Like the KZNX economics, all of these different aspects.
So everybody's just like, oh, you know, this is how it should be.
this is what we need because this is what we filled out in the textbook. But trying to describe
all of this is, you know, I think a reason I see a lot of engineers, even if they're not doing
stuff like you're doing, like kind of getting into the Bitcoin space, because we're always
trying to figure ways out and trying to explain things at a deeper route. And I feel like a lot
of the economists don't necessarily do that. But I really enjoy your work and enjoy all of the,
you know, mathematical breakdowns you've got going on. So why don't you tell people where
they can find more of that and, you know, follow along? Yeah, thanks a lot, Brandon. I appreciate
the discussion. I am purely on X right now. So find me at smidston, what is it? smidston underscore
with on X. And sorry if that's hard to pronounce. But then I am bringing up a website by the end of
the year. It's not done yet, but my plan is to bring up my own website. It'll be smidstonwith.com
and it'll basically have everything from my charts and analysis to kind of a blog style
thoughts and, you know, like kind of the more philosophical things that you and I are talking
about, as well as a lot of the retirement types of tools I'll have on there as well, which I'll
be updating. Yeah. So keep an eye out for that. Yeah. And I'll put all that in the show notes.
And yes, Smitty, I'm not going to lie to you.
Your name is a little tough to pronounce.
It's not as basic as a Brandon.
But hey, I appreciate all your work and you're a great follow.
So I'll put all that in the show notes.
Highly recommend everybody to check them out.
And thanks for coming on.
Thank you, Brandon.
Yeah, great being with you.
I appreciate it.
Thank you guys all for tuning in to another great episode of the State of Bitcoin podcast.
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