Hello everybody. Welcome to another episode of
Simply Bitcoin IRL. I'm very excited for this
episode. Today's special guest is Peter
Dunworth. Looking forward to it.
But before we jump into the show into the interview, I want to
give a very quick shout out to the Bitcoin company that makes
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That's awesome. Anyways, no more delay.
Let's bring up Peter. Peter, how you doing today?
How? How's the it's it's it's crazy
in Bitcoin land, like every week something different is
happening. It's just, I feel like
everything's happening at 1,000,000 miles an hour.
So where's your head at? How's your experience?
Where are you in the Bitcoin roller coaster?
You know what that such an app description of what it feels
like banging in Bitcoin. So apologies for that going off
in the background, but. You know what?
I I share that sentiment. Things happen so quickly.
There's so much happening. Everything's moving so quickly.
There's, you know, constant feedback, change, updates that
you need to think about. But on on a personal level,
owning Bitcoin gives me a certain Peace of Mind and calm
that, you know, that feels like we're in the middle of a
hurricane financially and socially.
But there's a a great deal of calm and Zen that comes with
owning Bitcoin and being invested in it.
So for me, life is beautiful. Yeah.
And let's talk about that cuz I Opti refers that I think you
were just describing Bitcoin Zen, right.
So Opti calls that Bitcoin Zen. He's popping up in the in the
thing and it's this concept and it's this idea where you see the
world around you kind of disintegrating, right.
You see the late stage Fiat, I would call it right.
Some people describe it as clown world.
I I I think that, you know, if you put the conspiracy theories
aside and all the crazy stuff, I think you're just seeing a world
with misaligned incentives, right.
And it's starting to break apart and I think that you're seeing
the end result of that and it's just very interesting to see.
But at the same time you hit the nail on the head.
We're kind of protected by this Orange Force field of of hope
and peace and prosperity rules without rulers.
And it's just, you know, your energy, your time, your work is
gonna be protected no matter what.
So is that what you're describing?
Is that is that what gives you this Peace of Mind in this world
of chaos? Exactly right.
And it's funny, it takes a long time to get there and there's a
lot of learning to do, a lot of pain to go through in order to
understand that. But if you're here for the long
haul? I'm sure everyone gets to that
point in time that there is a sense of satisfaction and calm
around being heavily invested in Bitcoin.
And one of the things I I talk about is I think Bitcoin's one
of the very well. It's the only thing I think that
has the ability, to your point earlier, to align incentives for
8 billion people. And at the same time, I think
one of the very unique things about Bitcoin is if you look at
human needs and you look at the Maslow's needs hierarchy.
I think Bitcoin is the fastest way for individuals to scale up
that and ironically you know the longer you're in Bitcoin, the
the higher up that scale of Mezzo's needs hierarchy you go
and ultimately the top is self actualization, which is
basically a state of Zen in what OP is describing as Bitcoin Zen.
So ironic that all of those things sort of tie into each
other, but at the same time when you do a lot of work on Bitcoin,
you realize that that's I guess the the primary function of
what's going to. For the end result, and let me
ask you something cuz you said it does take quite a while to
learn and would it be safe to say that it's not necessarily,
it's not just a process of learning, but it's also a
process of unlearning some things.
And the analogy that I always use is this concept of the Fiat
matrix, right? If you spend a lot of time in
the Fiat Matrix, right, referencing the, you know, the
original Matrix movie, Matrix #1, and you know Neo gets woken
up and he kind of freaks out and he's like, whoa, like this isn't
real, you know? And he kind of passes out.
And then the next scene he wakes up and he realizes, holy crap,
like, you know, this thing is real and Morpheus is like
looking above him and he lives looking down.
He says Neo, I have to apologize.
After a certain age, we don't wake people up from the Matrix
because it's too much for their mind to handle.
And I think it's such a proper analogy to to what's going on
because I think a lot of people, the the comfort, the convenience
of outsourcing the personal responsibility of their wealth
to a third party, if you've lived in that world for a long
time, right? This idea of selfcustody, this
idea of a nonstate money, this idea of a money that's not
issued by a central bank, there's no customer support line
in terms of the Overton Window, it's a very radical idea.
It's it's very out there to the vast majority of the world
population. Obviously that's changing,
right? With BlackRock coming in with
amazing companies like Swan, of course, simply we're beating the
battle drum. But you know, there's people
working, there's entrepreneurs and there's bitcoiners that are
working actively to solve this problem.
Break the Bitcoin echo chamber, so to speak.
But what would you say to that? Is this not only a process of
learning, but perhaps unlearning for some people?
I know for me personally it was a process of unlearning like 25
years of traditional finance, education and training,
accounting and finance degree equivalent of a masters in
superannuation which is the equivalent to your 401K pension
system and. You know, I was the prime
example that, you know, there was so many things I had to
unlearn because it fundamentally breaks the mold of, you know,
the traditional education. And you know, education is
basically a process you go through to learn things.
And our financial system is built on the premise that you
know without getting too technical, but we've got
fundamentally a risk free right which is set by the US Federal
Reserve and that dictates basically the risk free right
for the world and then all of our financial models and
structures and. Evaluation and risk metrics are
basically built around that risk free model.
So Bitcoin is a complete paradigm shift.
It turns everything on its head And you know to your point
earlier about, you know, sort of being woken up.
I can tell you the thought of, you know, for most people of
being, you know, completely responsible for all of your net
assets that you hold in Bitcoin in one word would be terrifying
for most people. So this is where you know the
Bitcoin is who are here today, I think are a very unique breed
and that you know they're. They're they're effectively on
the forefront the, you know, their frontier Rangers basically
beating new parts of financial freedom and self autonomy.
So in a word, it's terrifying for the majority of the
population, but I guess part of our job is to highlight the
benefits of being self sovereign and and taking control and
ownership of that and then. On a broader sense, basically
building out products that scale to the rest of the population,
cuz I think we've got such a small percentage of the
population on board now. And this is where there's the
opportunity to basically on both the rest of the 99% of the
population or more that's not in Bitcoin now.
Yeah, 100%. And I kind of want to focus on
that, the the idea that not the idea, but what you were
breaking, what you were bringing up earlier, which is you came
from this traditional financial background.
What made you wake up, so to speak?
What made you realize, okay, there's something wrong here?
And what was it that initially attracted you, attracted you to
an alternative being Bitcoin? Well, 12 years ago I had my
brother tell me that I should buy some Bitcoin and it was $3
and I told him. That would never work.
That's a stupid idea. Government will shut it down.
And you know, you can literally go through the list of, I guess,
objections that most people have before Bitcoin.
And it's a very painful lesson to discuss.
But I like sharing it because it's an opportunity, hopefully
for everyone else to learn from my mistakes in not getting on
board sooner. But.
Michael was very patient with me and educating me.
He ran a Bitcoin exchange in San Francisco from 2013 onwards.
And you know, being so close to him every other day I'd be
calling him, ask him questions as to why, why it won't work and
sort of prodding. And I'm sad to say that I'm a
very slow learner and it took me 5 years to figure out that it
was it's nice to. Well, it was.
It was an investable asset and. But once I understood that it
was an investable asset, then we started talking to clients about
that too. So only in a very modest way,
but because that's all we're allowed to do.
But yeah, it was just a lot of learning and and that's the
problem that, you know, not only did I have to learn about
Bitcoin, but I had to suspend all of the all of the things
that I knew about the traditional finance system in
order to get it. And this is where I think
probably the key. Problem for most people to
understand this is that this is fundamentally a tech innovation,
not a finance innovation. It is a finance innovation, but
it's a tech innovation first. And this is where to give myself
some slack that you know the I I consider the tech guys to be a
lot smarter than the finance guys.
And so the tech guys pick up Bitcoin far faster than the
finance guys. And so this is where I was very
fortunate with my brother. To basically have a, you know,
Michael's very tech oriented, I'm very financed, focused.
I had the great pleasure of basically being able to learn
from him and hear his insights from a technical perspective or
technological perspective. So.
So why doesn't the average? I say average, but maybe that's
a derogatory term, let's say the everyday financial advisor.
I'll give you an example. I grew up with with one of my
friends from high school. We grew up together and he works
in Tradfight. He works for one of the big
firms who works at Goldman and you know he climbed up the
ladder, very successful, very well paid.
But I swear if I bring up the idea to Bitcoin to him, like
it's like he's it's like a, yeah, I'm like putting up garlic
and he's a vampires like, no, like terrible.
And I never forget one of the things that he told me.
He says like people when I told him, you know you get down the
rabbit hole conversations. And one of the things he told
me, I thought I brought up the Federal Reserve.
It went something along those lines.
And I never forget what he told me.
He's like, the people need monetary policy, And I heard him
say them like, whoa, you're totally bought into this thing.
You dictator, you call me you, you call us a cult.
You're in a cult, bro. So it you know that that was
very striking. So my question to you is why do
you believe that most of try, I know it's changing with Black,
with Black Rock and Fidelity and all that stuff, but why do you
believe most financial advisors are just so against this thing
they're they're not comfortable recommending this to their
clients? Look to your friend.
Here's, here's the ironic thing, I think.
The fact that Bitcoin is going to dislocate so many people in
finance should be a clear indication to your friend that
he should heavily invest in it for the fact that his financial
position and standing, his job, his livelihood could be
disrupted dramatically, effectively dislodged from his
position. So just as a hitch, he should
have a lot of Bitcoin to to save him from that eventual fight.
When it comes to financial advisors, I think there are sort
of three things that are difficult for traditional
financial advisors to get their head around.
That takes an enormous amount of work.
Firstly, there is an enormous amount of work to understand
Bitcoin. You know, I I I don't think 100
hours really cuts it. It's, you know, for me it's a
lot closer to 1000, maybe more to to really comprehend what
this thing is and understand it on a deeper level.
I think there's the convergence of tech and finance.
So, you know, because it is fundamentally technology, not
finance, you know? There's a different skill set
that you know, finance guys just don't have technical nows.
The second or third thing is traditional education training
basically in some way, shape or form creates norms that we
accept. So I mentioned briefly the
riskfree rate. A lot of financial modelling,
risk management, the rest of it basically revolves around the
riskfree rate and Bitcoin doesn't have a riskfree rate,
so. How do we, you know, value with
it? How do we value this thing?
You know, if it's not throwing off any cash flows, a lot of the
financial advice will. And you know, investor
investment advisors basically take their lead from Warren
Buffett. And you know, he doesn't invest
in commodities. He has, but he doesn't really
like investing in commodities because there's no way of
valuing those those things other than supply demand.
And they don't have, they don't have cash flows which enable him
to model how valuable that business should be.
So he doesn't invest in those things that don't throw off cash
flows and and Bitcoin doesn't throw off a cash flow.
So to a lot of finance guys, they look at this as a pet rock.
You know, what does this thing do?
It doesn't really do anything. And ironically that's the
feature, not the bug. But finally, and this is
probably the. The biggest reason for a lot of
the investment advisors not advising on this is that you
know their licensees basically don't allow them to advise on
Bitcoin. Now it's not a financial product
across the across the globe. So in the US it's not a
financial product, it's classified as a commodity.
In Australia it's not a financial product.
In the UK it's not a financial product either.
So those licenses and the professional indemnity that
cover them from any malpractice. Basically cover them for
financial products. So if Bitcoin's not classified
as a financial product, it's very difficult for them to
advise, to advise on. So that's probably the three
main reasons I think that the finance world has huge
difficulty advising on it. And this to me is why the, you
know, Larry Fint, the ETF lodgement with BlackRock is such
huge news. This is where it totally
redefines from a from a career perspective.
It's not a career ending move to advise on Bitcoin now.
It also solves the ESG fad because Larry is probably the
major proponent of getting ESG across corporate America and
corporate globally. So there are so many huge things
coming out of that ETF with BlackRock that it basically
makes Bitcoin a safe asset now to advise on.
And this is where you know the next five years is going to
totally redefine that investment advice space.
Gotcha. And what do you think it?
What do you think it will take? What do you what do you think
needs to happen for that to change?
It is it was BlackRock the catalyst is fidelity the
catalyst. Where do you see?
Because this is the way I see it.
Peter, perhaps this is naive with me, right.
I'm thinking they can just sweep this under the rug for so long.
It will get to a point where their own clients are going to
be up in arms and saying look like the fact that you didn't
advise me to put .5 or 1% of My Portfolio in this five years
ago. You cost me a lot of money with
very little downside, right? So what do you see a change in,
in in the winds? Like where do you see this
going? Is there perhaps some influence
from the government that is just like not encouraging this type
of alternative asset as as they would see it?
Of course, we just see it as the only asset, but what's your take
on that? There are just so many moving
parts to that, you know, the government's really are
incentivized not to push this operation choke point 2.0, which
you're experiencing the US we've got something similar in
Australia happening now where they're fundamentally trying to
limit the amount of cash that you can send to exchanges.
Our major bank in Australia who's just limited it to $10,000
a month. So we've got clients who are
literally just moving their their banking to alternative
institutions who don't rate limit how much they can send to
an exchange, which I I think just creates an enormous amount
of angst. And it's kind of like a Strassen
effect that you know, we're going to limit you and how much
you can move out to. You know, buy Bitcoin and we
don't want you to do that. So we'll right limit you, which
basically means the banks are going to lose their clients.
They're going to move to institutions who allow them to
do it. And this is where, you know,
basically the Straw's an effect of, you know, what they're
trying to avoid is going to come to fruition and it's probably
going to make this happen faster.
So I think there are just so many moving parts when it comes
to investment advice. There are so many.
So many things that you know, financial advisors, investment
advisors basically have to adhere to.
It's very heavily regulated. So to step outside and and
really advise on anything but what they're allowed to advise
on represents effectively a career ending risk for them And
This is why they haven't done it up until this point.
And and this is where to your point earlier, clients are going
to be really pissed at them because they see this thing
going up and they want to be on board and.
That the limitation is not with the advisor.
It's typically with the licensee who authorizes one of the
available investments. And so there are many advisors
we deal with who would love to advise on Bitcoin, but they're
prohibited from doing so because their license doesn't allow it.
And they're not prepared to potentially risk their, you
know, their income, their livelihood on giving an asset
allocation of even 1 to 2% to Bitcoin.
And I understand the risk of the trade-offs they're taking, but.
From a client perspective, excuse me, it's it's horrible
because a 1 to 2% allocation over the next 10 years I believe
can have life changing benefits to that client and it can
completely redefine their entire wealth.
So for investment advisors to do this, they need to take a career
risk in advising on it at the moment.
And this is where Larry and BlackRock is such a huge thing.
And you know, we. It totally redefines the market
because now there is not a career risk in doing it.
And also from a top down approach because BlackRock is
basically in every licensee, investment advisor across the
globe. Now that they have a product
selling Bitcoin, all of a sudden that's now on the approved
product list for every investment advisor and financial
advisor to sell globally. So now there's no career risk.
So. That can't be understated.
And I think you know across the globe investment advisors maybe
advise on somewhere between 50 and $100 trillion worth of
assets and you know and Okay, so interesting, interesting.
Okay, I have a question for you, a little bit of a change up.
So I had Caitlin Long and Larry Lapard on.
I think it was either last week or the week before and I had
boss and lavish on as well and I asked him about the BlackRock
ETF and to my surprise Caitlin and Lawrence said they're going
to rehypothecate, they're going to create paper Bitcoin lavish.
And Foss said no, that's impossible.
That's the whole point of an ETF.
You can withdraw it to spot ETF. So you know, and there's like a
a bit of a debate there, which I thought was fascinating.
What's your take is BlackRock going to rehypothecate Bitcoin
Peter or do you believe in the whole.
I come from the you know a I'm I'm a millennial.
I've I've we've gotten my generation just got screwed with
the money printing. So forgive me if I'm paranoid
when BlackRock out of all places, you know out of all any
institutions it's just you know the public perception of this
place of this financial is evil. You know ESG like what are they
doing? They, they own the world.
So like, I'm a little bit paranoid.
I'm like, yeah, they're gonna definitely do the whole paper
Bitcoin thing. So, you know, as a financial
advisor, someone who comes from that world, what's your take on
that? You know what one of my sort of
standards for determining what will happen and what won't
happen is show me the incentive. I'll show you the outcome.
Are they incentive us to rehypothecate?
Absolutely. You know, on the balance of
probabilities then we can assume that they're going to
rehypothecate. Now, one thing that I think is
going to become critically clear to them is that if they do do
that, they are going to risk catastrophic failure.
And we only need to look back, you know, over the last 12
months to see what sort of carnage happened in basically
the Bitcoin slash crypto markets for people who want to
rehypothecate. You know, we saw effectively
Terra Lunar blow up, we saw. Now Genesis blow up block 5,
blow up Celsius, blow up like, I mean the list goes on.
If the X blow up like it, it represents A catastrophic
failure. And this is where their risk
management team I think needs to really understand the level of
catastrophic failure that this digital bearer asset can
inflict. And this is where I think they
will approach this very differently if they've got any
study in this space at all. Personally, I wouldn't be
rehypothecating because it is. Although the short term gains
may be appealing and lucrative, the long term gain basically
only ends one way. It ends in tears.
And this is where, from a personal point of view, I hope
BlackRock doesn't rehypothecate because it could lead to a
catastrophic failure across the markets.
And this is where for me I. I would like to think that
they're better than that and they won't rehypothecate, but
the incentives are that they can, you know, make a few more
basis points by rehypothecating. So there's probably a backdoor
in that ETF application that will that they will justify
basically being able to do that. However, if they do do that,
they need to be prepared that that rehypothecation of the
Bitcoin ETF could blow up their entire business.
And I don't know if that's a risk they're willing to take,
so. That's a great question, to be
in the middle of those two and to sit on the fence right
between those two groups of powerhouses.
I would like to. I was just observing and I.
Tap dance through the middle of those two, I had the privilege
of being able to. I was able to host a debate on
the Swan channel and I and I put them together and I said Foss
and Lawrence, like, what do you think?
And they're like, you know, they had their different perspectives
and and whatnot. It was just it was a fascinating
conversation but I completely agree with you, right.
It it's, you know show me the incentives and that's the out
and I completely agree. I just you know, they're
incentivized to do it. But perhaps you know for people
in the audience that are are not well versed in this, why would
it lead to like because we know for example in the gold market a
lot of rehypothecation takes place but that's because of the
physical properties of gold and how difficult it is to take self
custody of it. Could you explain a little bit
why it's so different in Bitcoin, Why it would lead to a
potential blow up? What is it about Bitcoin that
makes rehypothecation a lot more riskier than doing it with
something like gold? That's a great question.
There's a lot to that. So the problem for BlackRock to
do rehypothecation is firstly they don't control the market.
So the majority of Bitcoin sits off exchanges, so there's no
centralized point of failure. There's no centralized housing
of Bitcoin. It's completely decent.
Well, it's not completely decentralized, but the majority
of the bitcoins available right now are basically distributed
across. Multiple, multiple people or
institutions that basically self custody that Bitcoin.
So I think and this is just plucking numbers out of the
year, but let's just say it's roughly 14 or 15 million out of
a total of 21 million. So you you're looking at roughly
75% of 75% of all Bitcoin available sitting in self
custody. Now, if that's the case, that's
not the case in gold. Basically all gold.
Well, the majority of gold is basically sitting in central
repositories. And you can basically do
whatever you want to that because there's no one, there's
no way to assess the Ledger that that gold in those central
positives has. And and this is the difference
between Bitcoin and gold is that everyone on earth who has an
Internet connection can verify the basically the total number
of Bitcoin and they can verify that they're holding their own
Bitcoin and so. That is totally verifiable.
Whereas with gold, there is absolutely no way of firstly
verifying how much there is, who's got what and whether or
not the gold you're holding is actually real gold or it's just
a tungsten bar covering gold. Now Chinese banks basically
discovered the hard way by someone basically wrapping
tungsten in gold and getting a four billion loan against it.
I think back in 2019 that you know this, it's very difficult
to verify if you're actually holding gold or if you've just
got tungsten. So for that reason.
And understanding the dynamics of the gold market, gold is very
easily rehypothecated because it's so opaque and there's no
real accounting or verifiability to it on many levels.
Compare that. The juxtaposition to Bitcoin is
that you can verify absolutely everything happening on the
network at any point in time. And this is where I call
Bitcoin. Basically, it's triple entry
accounting. It's an upgrade on our double
entry system because it's triple entry Ledger because anyone with
a node. Can basically assess everything
that's happening on the network and that has ever happened on
the network up until that point in time.
So it's a very unique technology that is something that we
haven't seen before and this is what makes Bitcoin far more
resilient to rehypothecation and.
The want of a better term fuckery in price discovery
markets. So this is where BlackRock is
gonna have a huge problem when they understand the backfill to
Bitcoin and the benefits that it has in able to manipulate and
rehypothecate the markets. Because it's not like the gold
markets. It's a completely different
based gotcha. Yeah, no.
And I completely agree with you. And the question is though,
right, is are they aware of that?
Are there executives? Aware that that that to me is a
is an interesting question. Are they aware that there's no
bailouts here? Right.
That's that's the $1,000,000 question.
I really hope they have smart people working with them because
it is going to cause carnage if they don't.
So let's let's just play this out there sort of two examples.
They take the moral High Road. They do everything that we don't
expect them to do. They don't rehop applicate.
They just have a great business running an ETF on Bitcoin.
You know that can that's probably the best outcome that
we can. You know, see, over the next 5
or 10 years, I expect they'll basically take probably
somewhere between 6:00 and 700,000 bitcoins into their ETF
and they'll become the largest ETF.
They'll outsize grayscale, you know, basically that'll take,
you know, bitcoins on exchange from 2,000,000 to 1.3, give or
take. That's the best case scenario.
In a worst case scenario, they've got stupid people
working for them who think they can basically pick up pennies in
front of a steamroller and make a few more basis points by
rehypothecating that Bitcoin. And I'm just wondering if Larry
is smart enough to figure out, to figure out whether or not
these few basis points that they're going to make is going
to be worthwhile, a total catastrophic failure of the
business. And this is where I really hope
that, you know, Larry seeks out the advice and guidance of
Michael Saylor because I think he's, you know, one of our best
risk managers and understands this better than just about
anyone in the space from a financial perspective.
And the convergence of the stock market and the risks that
happened from a corporate level. In holding Bitcoin, so fingers
crossed, Larry basically listens to some smart people and says,
look, the pennies aren't worth it.
So yeah, yeah. And then it kind of reminds me,
like on a smaller scale, right, People, unfortunately, you know,
everyone wants more Bitcoin, but the people who are chasing the
two or 3% yield on those products.
And then it's like what Bitcoin was returning historically 250%
next 10 years. You know on the conservative end
it's like 50% every year. You know, if you kind of zoom
out so you know you're chasing 3 to 4% and then giving up custody
of your coins in the process. I kind of see it the same way,
right. It's like you're just those
percentage points but this thing is is crazy anyhow.
So I kind of wanted to ask you this before I move on to I think
the big question, what I'm looking forward to cuz I heard
Dell talk to me about this for the longest time and I just I
want to hear from you directly. But before I get there I wanted
to ask you about so the bull market of 2021-2022, a lot of
people were expecting 100K Bitcoin.
I was I myself was in that camp. I have my own theories more so
rather than FTX selling paper Bitcoin and all that I really
believe that the the China mining ban played a huge role in
kind of really taking the momentum out of the market.
I've I've brought this up many times On the show you look at
the hash rate and the price is directly correlated.
The hash rate falls, price falls.
Obviously those miners have to sell Bitcoin in order to
physically relocate to other friendlier jurisdictions.
Most of them relocated to Texas. So I want to get your take.
Were you on the camp were you expecting 100K Bitcoin in
2021-2022 And if you were you know what Why do you think we
didn't hit that that that that price target?
I I, I truly believe it was meant to hit 100K.
I I think that we got a, we got a a neutered bull market in in
in my beliefs. I couldn't agree more with you
on that. I think we were ripped off and I
think there were a lot of, there was a lot of foul play at at
hand. I think the, you know, the first
sort of, I guess stumble in that bull market was, you know, China
banning Bitcoin mining. And, you know, I couldn't just
help but, you know, think back to the 2017.
South Park, China ban Bitcoin main That is one of my all time
favorites. I'm like, oh shit, this again,
right. OK oh, they're banning China's
banning Bitcoin mining. Oh, OK, right.
Like this is just what they've said it so many times.
It's. It's a yawn fest, but it was
actually a big deal, You know, basically the network hash rate
went from 183 down to 84 hexa hashes in the space of two or
three weeks, which you know, in any other network would have
been a catastrophic failure. But what happened with Bitcoin?
Basically blocks went from taking two weeks to three weeks,
and within three months we'd basically solved through that
problem and. What was, you know, a huge bonus
I think on the side of things is that that basically reduced the
the concern around a 51% attack to make.
We basically had a 51% attack where 51% of the network or more
basically shut down and had to be relocated.
And the Bitcoin network basically kept functioning.
It was slow and expensive, but it basically kept functioning.
So that was a huge win. Now when it comes to the price
discovery that I expected to see towards the back end of 21.
I think we were completely ripped off by fraudulent actors
in that space and I put that down to FTXI think is probably
the biggest reason in the marketplace that we didn't
achieve $100,000 Bitcoin. And what what shocks me in light
of what I learned about what happened with FTX is that, you
know we got to 70,000 roughly which is 70% of you know a a
minimum target that I would have expected for that bull run and I
think in light of. What they were doing, So if TX
was one of the biggest exchanges in the world at the time,
someone who does on chain analysis can basically tell me
these numbers. But roughly speaking, they were
responsible for somewhere between 10 and 20% of total
global trade in Bitcoin. And what they were doing was
they were basically selling their clients Bitcoin, storing
it on exchange, lending it out to Alameda immediately, where
Alameda would put that Bitcoin back on the exchange and sell
it, and then go and buy all coins with it now.
That merry go round of the transaction basically has two
effects. Firstly, it is a huge price
suppression for the price of Bitcoin and it's also a huge
outperformance for the altcoins. So at the same time the the
Bitcoin price was being suppressed, the altcoins were
outperforming massively. And this is where when you
understand that price is determined at the margin, if
you've got 10 to 15% of global trade.
Not really trading and effectively being rehypothecated
which is exactly what they did then there's no chance we can
get a parabolic blow off top like we did in 2017.
It just doesn't happen. Like prices determined at the
margin where a 3%, you know, variance can have that parabolic
spike effect. And so when you've got 10 to 20%
of the market being rehypothecated and and not
really being put into cold storage and there's cell
pressure, of that much cell pressure, I I think absolutely
we would have you know. That's my opinion that we would
have hit 100K easily and you know I had a much higher price
target on that that I thought it could have gone parabolic still.
So I'm hoping that you know, what we went through in 21 has
basically cleaned out a lot of bad actors.
I think there's, you know, still a number of question marks
across the industry, but this is where it's so vital that if you
want to see true. Price discovery in Bitcoin, It's
critical that you self custody Bitcoin so that the exchanges
and bad faith actors in the space don't have the opportunity
to to rehypothecate. Do you believe that's possible?
Do you believe that you know it, the everyday individual, the you
know the like just I see it. I see it with my mom like you
know, she my mom's a hardcore Bitcoin.
She's been stacking since 2016. She she has multi sig,
geographically separated as is. Is is cold storage.
Like literally it's cold storage.
However, if I told her, hey, could you send me a Bitcoin
transaction, Mom, she'd be like, I have no idea how to do that
and I'm going to have to be the Uncle Jim in that situation and
then kind of do it for her, right?
So I guess my question is, do you do you see a world where
where people because look if you could take it, if you take care
of a child, if you can open a bank account, right?
If you can send a wire transfer, like you could write down 12
words. But at the same time, we live in
this world of like hyper convenience.
You could just pull up an app on your phone and you can have food
delivered to your door, you can have it someone pick you up,
right? You can order anything and it
will come to your doorstep. So it's this world of hyper
convenience. Do you believe that?
Do you believe that people are gonna be willing to take a
little bit of personal responsibility for the benefits
of financial sovereignty? And that question, Peter, is
something that I've been divided on for a very, very long time.
So what are your thoughts? Many on this topic and this is
where I think for. You know for all of us who are
here now, we I think make up the disagreeable minority of the
point, 1% of the population who's prepared to self custody
their Bitcoin and believes in this from a long term
perspective. So it's a very small niche of
the broader population and this is where I think the solutions
that we're pushing. From the point 1% that's already
here, that not your keys, not your coins, you've got a self
custody is terrifying and unappealing to the 99.9% of the
population who's not here. So I look at the solutions that
are coming down the road and one of the things that we've got
which helps clients get probably 95% of the way there from a
Bitcoin Maxi Puritan perspective is collaborative Custody.
I think collaborative custody has the ability to help.
Say on board the next 10 to 20% of the population.
So we're not going to get all the population, but I think a
collaborative custody with a collaborative custody
arrangement where you've got trusted third parties and I know
that verify, don't don't trust, verify is a critical component
of Bitcoin, full stop. But a lot of people in the world
will feel far more confident in having multiple parties who are
experts in this in this domain. Who they outsource some level of
responsibility to And this is where on a personal perspective,
this is what we deliver to clients.
And so I'm talking my own book and I understand that everyone
on this call, it's really critical that you know I don't
pretend to give investment advice or advice to any Bitcoin
on how they should self custody their Bitcoin.
But I can tell you from a personal level and six or seven
years in this space giving advice to clients that.
Every one of my clients is far happier with a collaborative
custody arrangement because it builds in multiple redundancies
that enables them to completely fuck things up and still not
lose their Bitcoin. And this is where they're not
your keys, not your coins. Fabulous for those who want the
self responsibility and the accountability to have full
control over it, but understanding that most of the
population is not there yet and may never be there, it's
important we have solutions that span the spectrum of.
Custody, So, So I'd like collaborative custody for the
reasons that you said, right, that there's some people that
are just not going to be accustomed to that.
Also in the US, I think there's some laws that if you're I don't
know the specifics of it, but let's say you're managing
someone else's money has to be held in a trust, like it has to
be held in some type of environment.
It can't be held by the financial advisor, by the
person. So it's legally in certain
situations it pushes you to that collaborative custody model.
Now I'm assuming when you mentioned collaborative custody,
you're talking about multi sig between different institutions
but there's only a handful of companies that so there's
Nunchuck, there's Unchained, there's Casa, you know Swan is
about to to roll out their own version really looking forward
to that as well. So so you know like there's
they're amazing products all of them, right.
But there's there's really not that many options at the same
time. But I but I do agree it solves
the major issue because it's it removes the moral hazard like it
that because that's the fundamental issues is the the
moral hazard of of let's say you're Celsius or your FTX,
right. And you're looking at this this
mountain of Bitcoin and you're looking at that and you're like
saying like look I'm just gonna take some of that speculate with
it. I'm gonna make a return for
myself but I'm also gonna make a return for my client.
Everyone wins, but they never incorporate the the bear market
into that, into that equation. Not like that.
So, so I guess that's what you're referring to, correct.
Correct. And this is how like to sort of
explain how the collaborative custody works with us.
We use Unchained, we use Casa, we use Nunchuck and we do that
in collaborative custody where say the software provider being
say Unchained or Casa Nunchuck, they hold a key.
We set up a hardware device for the client for them to hold a
key and it's their account, so they've got full control over it
and then we hold a default key in the event that basically they
lose their key or alternatively something happens, there's
always a way to recover their Bitcoin and move that to an
alternate multi sync provider. So you know we're comfortable
with the trade-offs we've made and I think it's critical to
understand that there's no solutions, only trade-offs and
the level of trade-offs that you need to make to get comfortable
with. I think you know for our clients
they're they're comfortable with that trade off so.
Yeah. And and and I love how you, how
you phrase that, right. Is this idea where, yes, there
is no salute, there's no perfect solution to this, right.
You know, and then this is a very, very deep rabbit hole.
Like I think everyone kind of starts with like a Ledger or
treasure. The 24 words and you had a 25th
word and you're like, wait a second, how do I trust the
random number generator on this Ledger?
Let me just roll some dice. Let me cut up all the 2000
words. Put it in the hat, mix it, fix
it up. And pick the words myself and
create my own entropy, right. So we all kind of go down that
rabbit hole. And I agree, like there is no
perfect solution to this, there's just trade off.
But I do agree, I think that Collaborative Custody and Multi
Sig really does solve a lot of these issues.
Anyways, so I'm going to use the last 20 minutes to really talk
about, really talk about Dell and really talk about this,
this, this Bitcoin price prediction which is just
absolutely crazy, this idea of $7 billion per coin.
And let me start off with this, right?
So you had Adam backs famous prediction.
I know, I know, I know. You know what I'm talking about,
which is the $10 million Bitcoin.
Oh yeah, how Finny. How Finny?
Oh, I'm so sorry. How finny I'm bumping the
Bitcoin goes. This could be $10 million.
I'm confusing. I'm confusing the Satoshi's.
I apologize. Yeah.
And then I didn't say that. And then, yeah, so you had Hal
Finny's original prediction of $10 million Bitcoin, and then
you had Adam back prediction of $8,000,000 Bitcoin and then?
I think it was Jesse Mess, Jesse Myers BTC crosus on Twitter.
He had like a $10 million Bitcoin, of which that Medium
article was reposted by Michael Saylor.
So you like, you know, it's like the general consensus in the
Intelligentsia, so to speak, Is this $10 million Bitcoin price
target. You're completely just
destroying that. You're like, no, this $7
billion. So how did you get to that
number? Does hyperinflation need to
happen in order for a $7 billion Bitcoin?
No, it doesn't. And this is where I think, look,
you know, probably the most enlightened of all Bitcoin, as I
feel is Jeff Booth with his, with with his commentary around
it's impossible to value a, you know, a system, a new system
from within the existing paradigm.
And this is where I think he is 100% correct.
Then we have Knut with is everything divided by 21
million, which I think is directionally correct.
And then I'm a very distant third in trying to bridge a gap
and a financial framework slash modeling thought experiment to
get us to bridge the gap to what I think Knut and Jeff Berth talk
about. And this is where the reason for
coming up with that business model, all that framework for
valuing Bitcoin was twofold. Firstly, most people don't
really understand the upside that's left in front of us.
Everyone thinks the returns and the best of Bitcoin is behind
us, but I actually think the best Bitcoin is in front of us.
And if I gave you the option today to buy Bitcoin, if I could
take you back to the year 2009 and buy as much Bitcoin as you
wanted, everyone would fill their boots.
But my point with, you know, building a framework on thinking
about Bitcoin as a billion dollar Bitcoin is twofold.
Firstly, to tell people that today is the day that you can
buy Bitcoin in 2009 and there's more upside in front of us than
behind us. And secondly, as a way to help
people avoid the carnage that comes with investing in
altcoins. Yeah, bitcoins are roller
coaster ride to riches and altcoins are a roller coaster
ride to financial poverty. And this is where if people
understood how much is in front of us with Bitcoin and relative
to everything else and on a risk adjusted basis, they just buy
Bitcoin and we wouldn't have to worry about our coins and the
rest of it, we'd just get on with improving society.
So that's I guess the fundamental premise of why I
talk about a billion dollar Bitcoin is to help shift the
over the window for people to think about Bitcoin could be
billions of dollars and all we need to do is really buy and
save dollar cost average in it to to get to that valuation.
So there are a number of ways to to get to that billion dollar
valuation. The 1st and the most simple
model I think of getting to a billion dollar Bitcoin is
thinking about. Firstly, Bitcoin is the best
form of money that's ever been invented and I'll go into that
in the sort of second framework for thinking about Bitcoin.
But the first framework is really simple in that we've got
$6.3 trillion of global trade on a daily basis that includes the
Forex markets, the rest of it, which is probably a highly
inflated figure, but let's just work with the numbers that you
can Google today. My expectation is, is that once
people realize that Bitcoin is the first money that can't be
inflated or isn't arbitrary, they will want to be paid in
Bitcoin because it's the best form of money ever invented.
And so when you have, excuse me, a functioning credit market with
a stable coin on Bitcoin, people will never have to sell their
Bitcoin. They'll there'll be credit
products that enable them to hold on to it forever.
And this is where I believe daily global trade divided by
the number of bitcoins minted on the day will work out to be
roughly what the price of Bitcoin is on a daily basis.
So if we look at those numbers, we have roughly 6.3 trillion /
900 Bitcoin, and that gets us out to a $7 billion Bitcoin.
But what would that put? So like the total global wealth,
right is like, you know, what is it?
It's like It's like 900 trillion if you include derivatives.
It's like 2 to 300 trillion if you don't.
How? Yeah, I feel like that would.
What is what is above 900 trillion, What a trillion?
It's a quadrillion. Yeah.
And I think 9 quin trillion. So.
So this is where I think there's a big misconception in people
have a myopic view and think, oh, well, there's, let's just
say there's 2.1 quadrillion dollars worth of value in the
world that needs to be accounted for.
That includes derivatives. That includes stocks, bonds,
properties, shares, the whole lot.
So that gives you a very round Number to basically divide 2.1
quadrillion by 21 million and we get to $100 million a coin.
Everyone understands that simply.
And probably where you can add nuance to that is thinking about
the prices determined at the margin.
There's 4,000,000 Bitcoin that are lost.
There's 17 or call it 1514 million in cold storage.
So there's really only two million Bitcoin available for
trade and there's 2.1 quadrillion of value.
So that basically changes the dynamics and moves Bitcoin from
100 million to a billion dollars.
I I think that's an overly simplistic way of thinking about
it. And this is where what's really
important to understand from an economic principle perspective
is that price is determined at the margin and market cap of the
2.1 quadrillion is downstream of how price is determined at the
margin. And So what I see happening is
Bitcoin has the ability to expand the the total value of
assets globally. So we've got 2.1 quadrillion
dollars worth of value in the world right now.
A lot of that's made-up of derivatives and basically
arbitrary ship that you know, we can't really touch, get
products, instruments, credit, collateral, the rest of it.
And this is where Bitcoin I think has the ability to consume
10s if not thousands of quadrillions of dollars worth of
value and store it there. And that's not going to change
how much is available in stocks, bonds, property and the rest of
it, But it's just going to expand the part dramatically
because the market cap of total assets globally are going to be
downstream of the price determined at the margin.
Interesting Okay. Wow.
Okay. That is, that is very, very
interesting. Okay.
So this would all we need to think about conceptually is at
the moment we have half a trillion dollars in the Bitcoin
market right now. And let's just say in round
numbers, the total addressable market is 1000 trillion dollars
or one quadrillion dollars. So we have the ability to
basically expand Bitcoin 2000 times market cap just to reach
what is available now. Gotcha.
Interesting. So it can go up in value 2000
times, but there's nothing stopping Bitcoin going up a
million times from here. And all it does is the π goes
from being, you know, .002 of a percent of the total value of
assets globally to 99.9% of global assets will be stored in
Bitcoin, and then there'll be a little percentage for stocks,
bonds, property. And that little percentage stays
roughly the same numerically. But yeah, okay, but the value of
Bitcoin. We can have millions of
quadrillions of dollars in Bitcoin because everyone will
want to store that their their value in Bitcoin because it's
the best store of value. Not only is it the best store of
value, it's the best made of exchange.
It's the best unit of account. It provides the greatest
optionality for all of us. So why would you buy a house
when you can buy Bitcoin? And this is where Bitcoin can
take on huge amounts of the world's wealth.
It can store 99% of the world's wealth or more, because people
will want the optionality of being able to buy a house, or
buy a boat, or buy a car, or buy education or buy whatever, and
because that's the best asset that's going to appreciate the
fastest. Gotcha.
Interesting, Very interesting. It's the first time I've heard
that a lot to impact there. How long do you believe this
process is gonna take to play out?
Right, so you have ARC Investments predicting?
And other someone commented Nikko's minds it is expanding.
Yes my mind is expanding literally like Bitcoin in the
future it's it's expanding in real time.
So how long is this process going to take to play out?
You have ARC investments, Kathy Wood, bullish prediction
thinking 1.5 million by 20-30. You have, you have you know the
the more conservative prediction, I think it's a 258K.
In the base case is around 700,000 by 20-30.
Then a lot of other intelligent people are also predicting
around a 1,000,000 dollar, 500,000 to $1,000,000 Bitcoin by
by 2030. So but $1,000,000 to $7 billion
very big jump. So is this a multigenerational
thing that's going to play out? Is this going to happen very,
very quickly? And I'll add my own little
opinion on there, I think. With the current U.S. debt and
their expenditures and the interests of which you know they
they owe for that debt, that is not a sustainable model 10/15/20
years from now. So I I really believe
something's going to break to. With all that said, what what's
your take? How, how long is this thing
going to take that? How long is this going to take
to play out? I I I think the US can go on for
a lot longer than we think. So I'm I I never ruled the US
out and I'm rooting for the success of the US Yeah I want
you guys to win. I think you're beacon of hope
for the rest of the world. The rest of the world looks up
to you. Not only is there it's the
number one place that people want to migrate to.
It's the number one place for capital and property rights.
So you know I'm I'm invested in making sure the US wins this but
that that show can go on for a whole lot longer than we could
ever dream of. But what fundamentally happens
when the debt rises there then becomes a collateral problem.
And you know, take a, you know, sort of that discussion that
we've probably all heard about that, you know, nation states
have a problem when they reach 130% debt to GDP levels because
the US is a global reserve currency.
That's meaningless. It's a meaningless metric to
look at. But it's important to think
about how they adjust, you know, and how they can create growth
on the back of it and what happens when we reach those debt
levels across nation States and indebtedness across corporate
and personal as well as governments.
There needs to be a rewriting of the collateral.
Now one thing can happen, you can pay that debt down and take
it from 130 to 20% or you can just inflate the assets.
So you've got effectively a 20% LVR under value ratio or
indebtedness. Now it's far easy to just
inflate the assets than it is to pay the debt back.
So my expectation is, is that Bitcoin's going to be in
beneficiary of the underlying collateral of these debts
basically inflating. That's my bet.
Gotcha. Interesting, Okay.
I do agree. But here's the thing.
Yes, they can get away with it as long as the world's reserve
currency, everyone's holding the US dollar.
How long is that gonna be the case?
Right. You have the whole thing about
bricks and then. You have, you know, and of
course this is just like sidelined stuff.
But clearly China, Russia, you know, a lot of other countries
are, you know, they feel the injustice of the money printing.
They're like this is just crazy what they're doing.
Why are we using these dollars? You know, let me coin a term
that I think everyone should incorporate, particularly in
Bitcoin land. It's only abroad if you're not
in on it. That's why Russia and China are
shitty. It's because they don't get the
privilege. So you know what they're not a
great custodian of global reserve currency and as
egregious as some of the things are that the US has done and the
money printing particularly that we've seen over the last three
years is as distasteful as it is.
It's you know the US has been the best custodian over the last
100 years of a global currency. They've they've they've done a
better job than any other nation state.
So you know to coin Foss, you know it's the cleanest dirty
shirt in the pile and it it literally is that.
So you know this whole bricks, this whole bricks thing.
I find just, you know, I live in Australia, our major export is
to China and our largest exporter is BHP day basically
for the first time in history accepted a contract in China as
you want. And I'm thinking no one wants
yuan. Like, if you think the US is
bad, you know, the Chinese yuan's even worse because
they're running two sets of books.
They've got an internal set of books which runs the internal
money in the country. But if you want to export
anything, well, you use the, the external books.
And I'm like, you know, people who are running two sets of book
are running abroad and China's doing it on a nation state
level. So I'm like no one's trusting
that currency. And then Russia, you know,
they're kind of in a pickle at the moment.
They're not. Politically, they're persona non
grata on a global scale at the moment.
And, you know, no one's taking the Indian rupee.
And you look at Russia, they're already trying to sell the
Indian rupee back out of what they've got.
So, you know, for the foreseeable future, it's the US
And when you look at actually the bond markets, you know, the
US is paying five and a half off the bat.
You know, Europe's paying three, 3 1/2.
And they've got inflation at 7:00 or 8:00.
They've got real rates of -, 4%. And the US has got real rates of
positive, too. You know your currency is golden
for the foreseeable future. Gotcha.
Interesting. I love the.
I love the different thing cuz you hear it from all the macro,
the macro heavyweights of Bitcoin, Twitter and like the
dollar, it's over, it's done, it's this, but you know, but
from your perspective it's like no, no, it's still a long way to
go anyways. So I kinda wanna go back to this
and we are getting to the top of the hour and I do wanna be
respectful of your time. This idea of $1,000,000 Bitcoin
by 20 Thirty $500,000 Bitcoin by 2030.
Now, I know that you cannot give financial advice, so this is not
financial advice. This is just.
Just, you know, two acquaintances, hopefully one day
friends talking about the potential price of Bitcoin in
the future. So do you think, and then my
followup question to that was the idea of of the $7 billion
question at the $7 billion Bitcoin, So from $1,000,000
Bitcoin to $7 billion, that's a that's a huge gap, right?
So is this a multigenerational thing?
Is this going to take decades? This is going to play out very,
very quickly. What's going to happen in your
opinion? I think it'll play out a lot
quicker than we we think. You know, we're only one nation
stayed away from setting a floor of Bitcoin at $1,000,000.
And this is where, you know, listen to Frost Foss, who I
consider a friend, even though we haven't spoken so much, but
I've listened to so much of him. Don't You can make price
predictions with no time limits or time limits with no price
predictions to to give you both and you know, just ignore that
advice because it's fun to speculate.
I think Bitcoin will be 10 million USA coin by 2030 and I
think we'll have a billion dollar Bitcoin by 2040 in
today's terms. So you know, for me personally,
I think you know they represents huge, huge upside and the risks
are, you know, completely overstated.
People confuse risk with volatility.
Risk is completely different to volatility.
And yes a little Bitcoin's volatile.
I I think it's the risk free asset of the of the world right
now. So I think the asymmetrical
upside to Bitcoin for the next sort of seven or eight, even 10
years is a bit that you can't, can't ignore and basically just
get some. Yeah, just get some.
Just get some just in case it catches on.
And I'm glad to hear that. You and Foss.
Next time we'll put you and Foss together and we'll do a simply
Bitcoin IRL between the three of us.
Anyways, Peter, I love that. Thank.
You, Peter. It's been an absolute honor.
Thank you so much for joining us today on Simply Bitcoin IRL.
I put up Peter's handle and his website on the screen guys for
you guys to check it out. But Peter, in case just for
audio listeners, why don't you tell everybody where they could
find you on the interwebs? In the interwebs, well there's a
website thebitcoinadvisor.com that's advisor with an er My
handle on Twitter is probably the best place to catch me at
Peterbtc Advisor and any questions please reach out.
Love to help you and appreciate your time, Nico and big fan of
the channel. So thanks for all the hard work
you do and educating us all. Appreciate you and the Honors
mine. Thank you Peter.
Hanging out backstage for a second while I wrap it up guys,
Thank you so much for tuning in to another episode of Simply
Bitcoin IRL Special. Shout out to our swan tour.
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We'll be back tomorrow. The live show 12:15 PM Eastern
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enjoy that, but until then, enjoy your evening.
Peace out guys, We'll see you tomorrow.