If the world understood Bitcoin the way I see it, then we would
have a multibillion dollar Bitcoin.
Bitcoin is the equivalent of the property market for the last 40
years, except that 100 X that you had to wait 40 years for in
property, you're probably going to get that condensed into the
next 10 years. So I look at this and think if
I'm a millennial, I'm trying to figure out how to get as much of
this Bitcoin as I can because, you know, property's not going
to do it. Stocks are stocks are definitely
not going to do it, and the bonds are just that.
That stuff's worth less than toilet paper. 12 months ago it
was a career risk to be advising on Bitcoin, and now it's a
career risk not to be advising on.
People who stand to benefit from Bitcoin the most are the
poorest. The smaller companies, they can
have an outsize return relative to the large companies.
It's not the big that eat the small, it's the faster they eat
the slow. Do you think we'll we'll still
see the classic cycles just because human psychology?
Then I think there's going to be a moment that things just
completely change and someone with a money printer understands
what this is and realises that there's no second best, there's
no ability to get more. Once this is gone and it's
tucked away in your coffins and they will buy literally every
Bitcoin available that's on the market, the powers that be will
understand that this is absolute scarcity in an asset and they
will want it. Everyone, just a quick note
before we start. Over the past few months, this
podcast has been growing and I'm super grateful for that.
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Bitcoin. I appreciate your support.
Thank you for watching. Keep the comments going.
Now let's dive into this episode.
I'm really excited to chat. You were guest #2 So now you're
back as in episode 138. So we're rolling.
And yeah, man, I'm, I'm super happy to, to chat.
I was thinking maybe it's nice for this conversation with you
to kind of like do a do like AQ1 recap and then kind of like an
outlook towards the rest of the year.
I know you follow all the macro stuff very closely more than I
do, so I'm always happy to learn from you.
So yeah, if you're up for that, let's let's do it.
Let's dig in then. I think Q1 has been really a
mixed bag. So Q 12025 where we are today,
it's the 24th of March, we're nearly at the end of the first
quarter. And to say the price action with
Bitcoin has been a little disappointing, I think would be
an understatement. And when we started the quarter,
price was ripping the you know, we were on our way to new all
time highs. And what's transpired in that
first quarter because price action dictates sentiment is we
reached an all time high of 109 thousand U.S. dollars and now
we're sitting at circa 8687 thousand, but that's off the off
the lows of a 76 and a half $1000 USD.
So we've peaked up to all time highs of 109.
Everyone was jubilant, thinking great, you know, we're on our
way to 200. And then the market had other
ideas and crashed the price, call it 30%, which in the grand
scheme of things isn't a big deal.
But in light of where we were in some macro events that were
happening and say probably more so geopolitical, I think it felt
like a real pick in the guts because the biggest thing that
we had in this quarter was the US government endorsed Bitcoin
and say that, you know, this is going to be part of their their
national policy moving forward. We had the announcement of the
strategic Bitcoin reserve. And if you've had have asked any
Bitcoiner in the last five years, if the US government
announces the support of Bitcoin and a strategic reserve where
they're going to get a million Bitcoin and they're going to get
as much Bitcoin as possible, you would have expected the price to
move at least a yeah, at least double in price.
But we didn't see any of that whatsoever.
We've seen the price drop 30%. And so I think there's just a,
and, and this is probably worth recapping for, you know, for
anyone new to Bitcoin, whatever you think Bitcoin's going to do,
it's just going to do whatever it's going to do.
And you've just got to deal with it.
It's it's something that I would never envisaged on the back of
that news. We'd have, we'd have a major
crash. But there are, there are sort of
to me in from a from a policy perspective, there are three
huge things that have happened. 2 have gotten the the attention,
but one I think has sailed under the radar, which will actually
in time supersede the importance of the previous two.
So the first is U.S. government support.
That's the biggest thing that that's to me that what that
represents is that now firmly shifts the ability to buy
Bitcoin in today's like in at today's prices as the best risk
adjusted return time to buy Bitcoin that I've ever seen.
And this is looking at this thing for the last 10 years.
And the reason why I say that is because when the government for
you, you know, the major superpower of the world endorses
this, all of a sudden this takes the left tail event of Bitcoin
going to 0 off the table. No longer are we going to 0 or
have a chance of going to 0 when they support it.
Now I I know that might not bring joy to my cypherpunk
friends, but that's just the reality of where we are right
now. And you know, Bitcoin is really
now, you know, shifting focus to the mainstream and go Wall
Street. And, and what that means is that
left tail event means that we have the best risk adjusted time
to be buying Bitcoin. So if you're not in Bitcoin now,
you should really be allocating quite heavily because now is
your opportunity because the downside's covered and it's
nothing but upside. And I certainly believe that
over the next, call it 15 to 20 years, there's more upside in
front of us than there is behind us.
And if you think that, then you know, we're going to see
probably at least 100 to 150 X return over the next 10 years.
And yeah, if you look back the last 10 years, you're probably
getting a yeah, 100 to 150 X return.
But those those returns are are going to happen again, I think
in the next 10 years. The second thing is the
strategic Bitcoin reserve. So on the top of government
endorsement by the US and removing that left hand tail
risk, you now have a strategic Bitcoin reserve where the, the
nation state gamifying, you know, the, this is what I find
really amusing. Now nation states are playing
the game that every Bitcoiner on earth is playing like, IE how do
we accumulate more Bitcoin for the lowest risk possible.
Now the existing Bitcoin that they've got has effectively been
stolen from people, but they're actually looking at how they
then go and purchase that. And they've talked about having
a million Bitcoin. There's been other people who've
talked about you should have 4 or 5 million and you've got a
whole host of Bitcoiners in that administration who are actively
pursuing Ways and Means to add to that strategic Bitcoin
reserve. Now importantly, and probably
one of the biggest things about that, that I believe is going to
be bought into the the policy regime of that is that whatever
they put into that strategic Bitcoin reserve is going to be
locked up for at least a 20 year period.
And so one of the big things that you know, as Bitcoin as we
worry about is it's all good and well to watch someone buy a
million Bitcoin. What happens if there's a change
of administration and they want to start unwinding that
position? And what's really interesting
about this, and this is where my brothers probably talk more
about this than anyone else that I'm aware of, is the ability to
time lock Bitcoin. And Bitcoin is one of the, well,
probably the only asset that I know on earth that you can
actually lock that asset up for a 20 year period.
So regardless of what the political machinations are at
the time or political leanings, you have the ability to lock
that time, lock that asset for the 20 year period to ensure
that no one can touch that in that period of time.
And hopefully there is a level of understanding and education
from the policy makers in that period of time that realizes I
wasn't that clever. They actually time locked this
Bitcoin for us so we couldn't touch it.
And, you know, you avoid a situation like what happened
during COVID where Joe Biden sold down hundreds of millions
of barrels of the the strategic oil reserve that the US was
hoarding. Now all of a sudden, this is a
very different strategic asset that has huge upside.
And the ability to do that means that from a protection
perspective of price, you are going to, I think, protect
yourself from the government dumping hundreds of thousands or
millions of Bitcoin on the market that will not be absorbed
by the market. So you'll have wild
fluctuations. So that's a really positive
thing. The final thing that happened in
this first quarter was the repeal of SAB 121.
I actually think it's bigger than the previous two because
this this goes to and you know, I'm a self custody guy.
I'm an advocate for that. I've got a business running self
custody for, you know, with clients.
But one thing that's sort of gone under the radar, hasn't had
much attention at all, is the repeal of SAB 121 in the US And
the US is kind of like a filtering system that whatever
they say goes globally as far as, you know, rules, regulations
and adoption. Your brethren in the EU have
different ideas sometimes, but ultimately they'll do whatever
the US says. And this repeal of Tab 121
removes the cost of the bank's casting Bitcoin.
So the reason why it was so costly and why not a lot of
banks did it was because in order to hold a billion dollars
worth of Bitcoin, you had to hold a billion dollars worth of
cash as a reserve to offset that.
Now they've repealed that 121 means they can hold a billion
dollars worth of Bitcoin and there's no cost of capital IEA
cash component to be left on the balance sheet.
They can they can use that billion dollars to then go and
lend out $20 billion worth of phone lines or whatever they
want to use it for. So I look at that and think that
is the first domino in a whole list of dominoes that is going
to bring in Bitcoin into the banking sector.
So they've now sorted Cassidy, obviously over the next five
years that'll build out. But then there are going to be
really simple products that are built on the back of that.
We're going to have a savings product and a loan product,
which will be built out. And you can see that Cantor
Fitzgerald, you know, owned by Howard Lutnick or he's a major
shareholder in that business. And yeah, one of the chief
administrators in Trump's organization or Trump's
administration, they're looking at putting, putting to work $2
billion in in the loan market. And that's only made possible
because of the repeal of Set 121.
So all of these things are lining up that we're going to,
whether we like it or not, have had this filter through the
banking system over the next 5 to 10 years.
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offering. So when we look at the market
right now and we are at 86 Ki think many bitcoins are thinking
like yeah, you're, you're it's crazy.
It should be a 200K or 300K just based on all the things that
we've learned especially this this quarter.
So is the market then wrong or is it right?
Like how should we view it? You know what, this is going to
be particularly unsettling for a few people to hear, but the
market is always right. And sadly it's our expectations
of other people's understanding of Bitcoin that is ultimately
wrong. And I share this with you that I
think good point and and I don't sort of there is no hyperbole
when I tell you this, but if the world understood Bitcoin the way
I see it, then we would have a multi billion dollar Bitcoin.
It's just that's how it would operate.
It would fill in so many holes that I see in the financial
system. And I look at this and think
that has the ability to solve so many problems that we're
currently facing. Now, just because I see it and
think this would be, you know, an accessible solution to a lot
of the problems that we're facing, doesn't mean the rest of
the world does. And sadly, you know, back to
Bitcoin being a consensus mechanism, the rest of the world
needs to find that consensus of what I believe to be true.
And this is what's so important about the work that you do, you
know, up to 138 podcasts now hearing all of these differing
opinions, trying to educate millennials about, you know, why
this is important. And This is why, you know, I
think you have one of the most important podcasts out there
because it's not going to be the boomers who rush headlong into
this. They've already done it.
They're reluctant to change. They've they've they've made it
in their, you know, they've either made it or they haven't
made it doing what they're doing and they're reluctant to change.
As we get older, it's just, you know, proven out that you are
less prone to changing. And this is where Bitcoin to me
represents a massive opportunity, an outsized
opportunity for millennials to adopt this and really ride that
wave up in a similar way to, you know, our baby boom, excuse me,
baby boomers had a massive wave up, massive tailwinds for 40
years from 1980. They had interest rates go from
18 to 20% down to 0, massive tailwind.
You had property prices, you know, unless you were lucky with
a few little bumps along the way, you had property prices
basically go 10 to 100 X in that 40 year period.
And I look at that and think now that, you know, interest rates
have changed, we've now in a period of quantitative
tightening, we've watched in the last five years, the 10 year
bond, bond rate in the US go from half a percent up to over
5%. And now it's back down to about
4.3%. Maybe that trade is over, the
boomer trade is over of property.
But guess what? And and this is where I think
the opportunity for millennials is Bitcoin is the equivalent of
the property market for the last 40 years, except that 100 X that
you had to wait 40 years for in property.
You're probably going to get that condensed into the next 10
years. So I look at this and think, if
I'm a millennial, I'm trying to figure out how to get as much of
this Bitcoin as I can because the next 10 years, there's
nothing that comes close to this as an investment opportunity.
You know, property's not going to do it.
Stocks are. Stocks are definitely not going
to do it. And the bonds are just that.
That stuff's worth less than toilet paper.
So I look at this and I think, yeah, in my day-to-day, I
literally look at, you know, what are the investment
opportunities out there, whether it's stocks, bonds, property,
commodities, alternative assets, private equity, venture capital.
And I look at this and I think, well, this is easy.
This is like the simplest decision that one can make.
It's just a matter of understanding what you're doing.
Yeah. To add to that, as a
professional financial advisor. Yeah, true.
Yeah, Yeah, OK. That's the pitch for millennials
guys. Like I could not have done that
any better. But yeah, I, I agree.
I think I, I think you're totally right.
Obviously this is, this is kind of my, my focus and also part of
my, my thesis, why I really want to focus on millennials that I,
I, yeah, I see this as the biggest, but also the only
opportunity to actually build wealth for, for just this
generation. But yeah, again, it's just hard
to understand, right? There's so many layers to it
before you really get to, I think also where you are at, you
know, like if you said like all the global trade will be settled
in Bitcoin, all the daily global trade will be settled in
Bitcoin, and then we're at like billions of dollars per per
Bitcoin. Like that is very far away.
But yeah, if people go back to episode 2, they can listen to
your argumentation and it's actually very, very rational,
right? But yeah, just the unlearning of
all your preconceptions and, and and all these things like that,
that just takes time. It's funny, since we since we
had that conversation, I think that argument has gotten more to
being the truth than further away from it.
I agree. And so we'll watch how this
plays out over the next 10 years.
Yeah, because a big part of that is the multi, multi polar world
that we're kind of like moving, moving into, right.
And the whole point of Bitcoin is that you can trade without
trust, which it looks like it's going to become increasingly
more more important, right? So, yeah, if I find that very
interesting. The one thing before I wanted to
go to like, what's what's your view on on the rest of this year
is what are the most important changes for people to look at
you? You mentioned like Seb, Seb 121,
that's of course more like a technically financial thing,
right? That will open up at least the
market for banks. But do you think there will be a
lot of a lot of competition there because like, why?
Why would I store my Bitcoin at a bank or why wouldn't I store
it at like a Bitcoin native bank made by Bitcoiners, for example?
How, how do you kind of like see that evolve?
Both. This isn't going to be popular,
but I'll tell you how I see it. You are going to break down
lending. It's all going to revolve around
lending and the banks are at a huge advantage when it comes to
lending on Bitcoin because there are now a host of things that
can open up that opportunity for the banks to succeed with that.
And I just want to maybe take a side note to give you a very
brief history lesson of borrowing money on residential
property and some of the iterations of that borrowing on
property that has come to market over the last 40-50 years, that
has totally changed that as an asset class.
And if you look at 2 drivers for asset prices, the number one is
availability of credit on it. And #2 when it comes to property
and demographics. So is the demographic growing
and people are wanting that good more?
Or is it declining? And sadly, and this is to the
point about property, we've got baby boomers sitting on nearly
80% of the wealth in property in the Western, Western
democracies. And young people can't afford to
buy all the properties that they're holding onto.
So it's just a simple law of supply and demand.
Something's got to roll off and the price will have to drop at
some point in time. In Australia, we're sitting on a
in Sydney, we're sitting on the average median house price is
$1.6 million and the average income is $100,000 a year.
SO1 average home is worth 16 years of income before tax, not
after tax, it's 30, two years after tax just for the home.
So I look at this and think, and well, that's before, that's
after income tax, 32 years and before any cost of living or
interest on the property. So it's wildly skewed to the
downside. I think as far as risk goes.
And, and this is where back to, you know, Bitcoin, there are
policies that the governments can institute to actually
encourage borrowing and saving in Bitcoin.
So if you look at some of the policies that were instituted
for residential property, the banks used to lend 50 like 50%
loan to value ratios. So if you want $100,000
property, you had to put in 50,000.
They had policies in the 70s that they wouldn't give single
women a home loan because they deemed them a high risk of
forfeiting or foreclosure on the home.
Because they might have a baby and then no longer work and they
didn't want to put that, that person through that.
Now that sounds highly misogynistic in today's terms,
but that was the reality 50 years ago.
And they evened up the, the lending so that women could
borrow. And the other thing is that
they, they moved the load of value ratios from 50% to 95%.
So now all you need is a 5% deposit.
You need 10% of the original deposit that you had.
So all of a sudden, what's that going to do?
You can borrow 95% of the property.
That's going to jam the property prices up.
Now, there are two instances of government influencing the
credit availability on an asset. And what I'm saying is the
government has the ability to do that to Bitcoin as well.
What if they said, hey, we're going to set up a Fannie Mae or
Freddie Mac like they did for US residential property that's
going to support the purchase and loaning of Bitcoin?
These things can be done. It's just a matter of will.
And we've just seen that the Trump administration has a
propensity to do things that are different and to institute
policies that they think are really good for America.
But I can't think of a better policy that they could institute
that would allow American citizens to go and borrow
whatever they can afford on buying Bitcoin and assuming that
they had that loan in good stead for say A5 or A10 year period.
The government would cover the volatility of that asset if it
dropped below what the the what they actually borrowed.
So these are all the things that are going to be coming to
Bitcoin, but we're just not thinking of it yet.
What do you think about the talk about selling gold to buy
Bitcoin? As you know, some people are
talking about in, in, in, in the state.
I think that's a great idea because if I'm looking at this
through the most brutal of lenses, and yeah, if you have
your war game on, that makes perfect sense.
You go and you destroy the price of the asset that your enemies
are holding by dumping it on the market.
You go and buy an asset that they can't purchase and they
can't steal from you, which makes perfect, perfect sense to
me. And most importantly, it's
absolute digital scarcity, meaning there's no way that they
can produce any more of it. And when they figure out what
they've done to them, it's too late and they'll be selling
their gold on the market, but they'll be driving the price
further down, in which case you could turn around and buy it for
nothing. And the US can do that anyway
because they hold the the global reserve money printer.
So I look at this and think it, it's extremely predatory, but it
makes perfect sense if you're in a war and a lot of people think
we are. So I think, you know, the US has
the ability to do it. Will they or will they not?
I'm not sure. But to me it makes logical
sense. If you're playing chess and you
want to win, then that's seems like a perfectly logical thing
to do, albeit brutal and ruthless.
Yeah. I personally think that like the
line between, even if they sell like 5% of the gold, I think it
already shows that Bitcoin is at at least as important.
But over time people will realize that it's, you know,
superior to gold. But I think just that signal,
like, I don't think it has to be a big percentage, if that makes
sense. Like it's just a signal like,
OK, sell part of my gold. I buy Bitcoin as a, a strategic
reserve or as a national asset, right?
And and that, that will show that it's at least at the same
level and the price is definitely not reflecting that.
So I think that could be a big catalyst as well.
But it's, yeah, it's, I think it's all about perception, not
necessarily about fully understanding.
Right. And it's intent.
What what it is is that is an intent.
You get to show the world your intention.
And yeah, incentives, Dr. Outcomes.
Yeah, I agree. And so how do you look at the at
the rest of of this year? What do you think will be like
big drivers? I think many people are talking
about global liquidity and to moving up again.
Yeah. What are the biggest things that
you're looking at? I think you nailed the big one,
but I think there's going to be a potential surprise.
So if we back out what you've just said, one of the biggest
announcement that we saw this quarter was after you know a
four year, well what is it 3-4? Well call it a three or four
year period of quantitative tightening and like interest
rates going up, we've now had Jerome Powell, Fed Chairman come
out and say that he is looking at the end of quantitative
tightening and what that means is we're close to quantitative
easing. So if quantitative tightening is
ending, then he's about to turn the money printer on.
The one thing I am not sure of is the the dynamic between Scott
Percent, the new Treasury Secretary, and Jerome Powell,
the Fed chair. Now, Scott Percent's taken over
from Janet Yellen and Janet Yellen was was not working in
conjunction with Jerome Powell. You had J Pal basically slamming
on the brakes, rising interest rates.
And then you had the secretary, Treasury Secretary Yellen out
there giving money away like it was like it was water.
And So what you had was this weird dichotomy in the economy
where you had J Pal slamming on the brakes, trying to slow this
thing down because he didn't want the inflation to run away.
And at the same time, you had Janet Yellen just throwing cash
around like it was, yeah, like the interest rates were 0%
again. Now that role has now changed.
Yellen's out the sense in and I agree with you, money supply has
gone up. One of the craziest things you
can look at is the M1 money supply of China over the last,
call it three months, it's nearly doubled.
That is a great forward-looking indicator.
China is a huge economy and that will have some flow through.
If we do have this M2 money supply explosion that everyone's
talking of, then we will have Bitcoin ripped faster than
anything else. But if you look at the
geopolitics, what's happening right now, you've got the new
administration. You've got Scott Percent needs
to make his mark and he needs to get the markets under control.
He needs to let them know that he is in control now.
And what we've got is really a role reversal between Jay Powell
and Scott Percent, Scott Percent, Trump, Musk and
Lutnick. They want to get that Dick down
and they want to show the market that they're capable of being
fiscally responsible so that they can get that 10 year note
down to three, 2 1/2, whatever it might be, because that's the
the key indicator rate that's going to set the the benchmark
for every other rate in the US economy.
Which is also very important for them this year, right, with the
rollover of the debt, like they need that to bring that cost of
that new debt that they're that they need in order to pay the
old debt off. Like they need to get that down,
right? Because eventually they want to
get all the interest payments down.
Because what's, what's really, you know, sort of it's hard
talking about this, but you know, five years ago Trump was
in power and the interest rates were half a percent.
And he said, why don't we just issue 100 year bond And
Secretary, well, Treasury Secretary Yellen turned around
and said, no, let's, let's not do that.
Let's put that on a short year term.
So Fast forward to where we are today, we've got 9 trillion of
the 36 trillion rolling out, 25% of the US federal debt is needs
to be refinanced this year. And so they need to get that
interest rate down dramatically. And what's really quite an
anomaly if you look at it in global terms, you've got the the
the US 10 year is trading at 4.3 give or take.
And you've got the 10 year German Borgia is trading at 2.7.
Now I can't believe that there's a 1 1/2 percent differential
between the German bond and the Usus bond.
The tenure like in not in any of the data that I look at is the
German economy doing better than the US.
And the problem is, is the German economy is the best of a
bad bunch when it comes to EU economies.
Now if I'm a you know, the risk reward, you know you should be
rewarded with the lowest rate if you're a lower risk.
And I look at this and think the German, the German economy is at
much greater risk relative to the US, particularly if you take
into consideration the fear of war with Russia. the US is on
the other side of the world that's got better metrics from
GDP, inflation, just about everything you look at
unemployment, all those numbers are better yet that the German
born is training at a 1 1/2% discount on the 10 year.
Now, in my world, that should be inverted. the US should be at 2
1/2 and the German bull should be at 4.3.
Now, Trump and percent probably feel the same way.
So they're going to do everything they can to really
lower expectations, dampen expectations.
And this is the thing that might stop money printed.
Go Burr is then having to refinance at $9 trillion and
really smash that rate down to 2 1/2 percent.
Refinance all of it, and then you can have it.
So what what does that mean in Bitcoin terms?
To me what that means is we might be, we might have a much
later bull run than people expect.
And if you overlay a political context on what they're trying
to achieve, they need to have probably a 12 month bull run in
the stocks and broader economy before the midterms, which means
we could see for the next six months, I believe a real
crushing of the economy to a point where they get that 2 1/2
percent that they're trying to target.
And then once they've got that rolled it over blocked in all
the rates, it's like, right, we're here boys, we're running.
But for Bitcoiners, it's like, no, we're ready to party now,
like 30% off. We want this thing to go to a
million, let's do it. But they've got they control it.
They've got different ideas. If you have your Bitcoin in self
custody, where are you keeping your Bitcoin seed words?
For me, there's only one way and it's backing up my seed phrase
with stamp seats. It's a single durable plate
without any parts or materials. Stamp your words into solid
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So the, I think this is an interesting point, right?
Because I want to ask you like eventually they kind of want to
weaken, weaken the dollar at least for some time.
But yeah, like how do you, how do you think, how do you think
that will affect Bitcoin? Because what I, I think is an
interesting conversation or topic is like, is Bitcoin risk
on or is it risk off? And you see BlackRock saying
like it's risk off. I think we both think it's risk
off, obviously, because we basically just move to, to a
whole new and different monetary system, right?
So we just literally leave the other system.
Sadly, it's going to take a lot longer than you and I would
like. So I think this is going to be a
process of the next 10 years really playing out because what
we have is a really infantile sized market in Bitcoin and
Bitcoin is hamstrung by two things.
Firstly, it's a very small market cap and it's quite
infantile in its development. So the problem with that is,
well, the third thing in addition to that is it's 247365
liquid, which means that is the first asset that gets sold.
And so although you and I understand Bitcoin to be the
risk off asset, a lot of people confuse risk and volatility and
they want to, you know, conflate the two.
And the the real problem is, is that if you have a margin call
coming up the next day, because the Asian market tanks over the
weekend and there's a huge shock to the system.
If you're sitting there on a Sunday night at 9:00 in New
York, there's only one market in the world that's open at that
time, and that's Bitcoin. And so you were going to sell?
Rep for the Monday morning, you mean?
Correct. You're going to sell whatever
you have to do to make that margin call in the morning.
And this is what the hedge funds, this is what the traders
do. They hold this as a hedge.
And the second there's a spike in the market, you'll see them
sell that. And this is where back in sort
of March 2020, we had nearly a 30% decline in a 48 hour period.
Now why was that? Because it was a Sunday night.
They needed liquidity. They needed to meet their
obligations the next day. And they did whatever they had
to do. They sold as much Bitcoin as
they could that they needed to meet the obligations the next
day. Sadly, there's no other asset in
the world that is going to take the place of that.
So although it's a risk off asset, it's going to trade like
a risk on asset because there's no market in the world that has
that liquidity profile. There's no market open on a
Sunday night at 6:00 in New York other than Bitcoin.
We spin that as a feature. Sorry.
Is that good? We spin that as a feature?
I think. I think it is a feature, right?
I mean, it's when we talked about countries, I had to think
about a tweet. I saw it's permissionless
cross-border final settlement. I read that like last week.
And then I thought, yeah, that's it.
Like it's constantly like it's the only thing you can move
constantly everywhere whenever instantly, right.
And so, yeah, that's a good thing.
But then the perception of I think that's a good explainer
that you that, that you just gave like in, in the perception
of people seeing Bitcoin tank, you know, with that carry trade
and like over the weekend, they're like, yeah, people are
dumping Bitcoin. But I think your explainer is
actually what is happening because yeah, if you truly
understood Bitcoin, you would probably not use it like that,
you know, and you would you would see it as a risk off asset
and just keep stacking it. Yeah, just basically that.
Agree and and this is where because market cap of Bitcoin is
so small, like it's less than $2 trillion on a relative scale.
As Bitcoin grows into, you know, a 10s of trillion dollar asset,
hundreds of trillions and what I think will be thousands of
trillions of dollars per, you know, market cap, as that grows
in size, that will be able to absorb more and more market
participants on a Sunday night selling.
So we're not going to have those massive drawdowns when there's
low liquidity in the market. And the other thing I should say
is, and how do we spend this? There's a positive, not a
negative is once people have finished selling, what's the
first asset they buy in and what's the asset that recovers
faster than everything else? That's Bitcoin.
So, you know, once they've dealt with the liquidity problem, the
first asset they're rushing to buy to get back is Bitcoin.
And so parallel to this, so I think, yeah, there's some things
that need time for people to understand.
But parallel to this, we do see like more institutional
investors are planning to increase their Bitcoin
allocation. I think we have some 13 F
filings coming up also for, for Q1, right?
So we're going to see companies that that hold over 100 million
in, in, in new assets. So, so every time that these
filings go public, we see new companies that have adopted
Bitcoin. That's also constantly
increasing. What do you expect is going to
be the the effect of this on the market?
Because, yeah, we, I think there's like multiple parallel
roads that are being our path that are being developed, right?
And, you know, each day more and more people understand what
Bitcoin is. They move into it.
You know, the institutional investors do that too.
So the holder rate will go up, more Bitcoin will be huddled.
I think that's what actually is a catalyst for the volatility.
You know, if we what we just talked about, you know, as if
there's just less Bitcoin that's traded, you know, the volatility
is going to be higher. So yeah, how do how do you look
at at that also, you know, with regards to to the work that you
do? I think the institutional
adoption has taken on in the last 12 months, a dramatic
shift, and 12 months ago it was a career risk to be advising on
Bitcoin and now it's a career risk not to be advising on.
And truth be told, we haven't seen anywhere near the level of
corporate adoption and institutional adoption that I
would have expected by now. My expectation is over the next
5 to 10 years, we have a 5 to 10% allocation to Bitcoin for
many institutions. And I think that's on the low
side. So I look at this and think
that's an that's a huge and obscene amount of capital it
needs to flow into Bitcoin in order to fill that requirement.
And what's interesting about this, and this is where I
probably go really, really deep with you if you wanted to on
this, but on a really shallow level, Bitcoin represents an
asset that is not going to affect mainstream when Wall
Street and institutions speculate on it.
Now, this is a huge development because this is the first asset
that's come to Wall Street that hasn't had a downstream
consequence or a social impact on Main Street.
And I look at this and think when the world figures this out,
the institutions, Wall Street, black rocks of the world are
going to spend most of their time speculating on Bitcoin and
coupling that with government bonds or treasuries.
And what that is going to do is that's going to dislocate almost
permanently the risk that Wall Street has inflicted on Main
Street for the last 40 or 50 years, well, in perpetuity.
And So what we have now is a speculative asset that Wall
Street can play amongst themselves and blow themselves
up with that's not going to have downstream consequences and
costs to the mainstream world. And I look at this and I think a
very real, real world application of this is Larry
Fink in the 1980s created his tokenization of mortgage-backed
securities. Now if you follow that forward
to 2008, the evolution of that product created the global
financial crisis where they packaged up and securitized
through tokens and not the tokens we know, but they
securitized through tokens the entire residential property
market of the US And what did that lead to?
That led to poor credit decisions, lower quality of
borrowers and it effectively led to prices running up
dramatically, cost of housing getting out of hand and then a
huge pop in the US housing bubble.
And that was all made possible because of the speculation that
Wall Street was making and the demand that they had on those
residential and commercial backed mortgage securities.
And now we have an asset that is removed from Main Street that
Wall Street can speculate on. The problem is it's just such a
small $2 trillion industry at the moment, not even.
But through time, my expectation is that will be a multi, well,
multi. That'll be a multi quadrillion
dollar market cap and they'll be able to speculate and remove the
risk to Main Street from the Wall Street speculation.
Yeah, one thought I have there is that they are probably going
to do that, but the the absolute.
Scarcity of Bitcoin will will bite them eventually, right?
Like I think that and, and, and forced transparency.
I call that forced transparency, right?
Like you cannot play these abstracted games anymore.
They will try, but when you get called upon, you know the the
proof of reserves, for example, yeah, you should show them.
And if you don't show them, then you instantly lose trust.
So I think that's a very interesting thing that is going
to play out in some way. I think there will be like some
Trat 5 firms that will have huge damage from it that will show
kind of like the games that that they are playing.
Absolutely. But it's not possible on
Bitcoin. No, they're trying.
People will try and game it. You're you're correct.
And a lot of people are going to get hurt.
And yeah, sort of a message that's going to become really
important for us long term, I think is, you know, you're only
going to leave your Bitcoin in custody that you're prepared to
lose because the banks at one point in time will blow up.
The governments won't step in to support it or bail them out, in
which case you will lose your Bitcoin and you'll have to deal
with the consequences. And there are plenty of examples
of Bitcoin lenders going to the wall and really creating havoc.
But it's just going to be at a scale that we haven't seen and
we're not aware of yet because it's going to be on a basically
a retail baking scale. Yeah.
Well, you mentioned lending and also a bit before I wanted to
ask about that. It kind of feels like 20252026
will be like the period where Bitcoin backed loans will really
enter enter the market. There are many, many players
that are setting this up, are launching this.
I know you are working on something.
Yeah. How how do you see that grow
this year and how important is that for the evolution of
Bitcoin I? Think it's a natural evolution
for Bitcoin and a lot of people, the hard money guys, the early
sophomoks, look at that and think, no, we don't want to be a
part of that. But I look at this and think
there are going to be people who want to speculate with their
Bitcoin or who don't want to sell their Bitcoin, but want to
monetize some of that time that they've invested in Bitcoin.
And a way to do that without having to sell you Bitcoin and
pay the tax consequences on that is going to be through
effectively borrowing on your Bitcoin.
And I look at this and I think there are going to be two ways
to structure this. And there are sort of two
offerings in the marketplace that I see.
And I think there's room for a third, but we might have to talk
about that another time. But first two offerings that I
see you've got, you've got an offering that classifieds
Bitcoin as property. So you've got your huddle,
huddle you debify and maybe your leaden that would be classified
in that as an Unchained and on ramp with arch lending.
So I look at those four offerings in the marketplace and
I look at that and think they classified Bitcoin as property,
meaning that they are not going to re hypothecate your Bitcoin
and the interest rate is going to be over 10% in order to
achieve that. But what that means is that
lender is not going to re hypothecate your Bitcoin.
You don't have to worry about them lending that one Bitcoin
out to 10 people and trading it and watching those people blow
up and then they lose your Bitcoin.
And on top of losing your Bitcoin, they've lent you
$1,000,000 or whatever it might be.
And then the creditor through a liquidation or administration
comes to you and says, look, I know they lost your Bitcoin, but
you still owe them $1,000,000. Can you pay us?
It's, it's insult to injury, but, and the first type is the
property type and that's going to be with a much higher
interest rate because it's classified as property.
And then the second type is going to be classified as
currency where the banks will put that on their balance sheet.
They will rehypothecate that somewhere to the tune of 10 to
20X. And this is my conjecture that
they are going to pay you to borrow money on your Bitcoin if
you use that as collateral. And that's such a weird thing to
get your head around. But I'm certain with the way the
market's moving, if you look at how how lending works, when you
can rehypothecate one Bitcoin to the tune of 20X, which is what
the current banking regulations in the Basel 3 accords allow the
banks to do. Well, if if one bitcoins call it
worth $1,000,000, they can lend out $20 million on a home loan
because you can lend out that 20X.
And on that $20 million, they might be making a 2% margin or
nearly $400,000 in interest. And I look at that and think
there's going to be a bank globally who's prepared to cut
you in on the revenues that they're making on the back of
your Bitcoin. And this is the really
interesting thing that I look at and think Bitcoin's the first
globally ubiquitous asset. And so you'll be able to shop
any bank on earth to put your Bitcoin with.
And the repeal of Seb 121 is one of the most important things to
allow this to happen. So this will happen over the
next, say 5 or 10 years. You'll be able to go shopping.
And you know, if you look at and talk to all of the hedge funds,
then probably the most interesting thing they've done
over the last 30 years is that the yen carry trade.
They borrowed money in Japanese yen, invested in the US stock
market, and they crammed the difference, an arbitrage of
probably somewhere between 5 or 6% per annum.
And I look at this and think when you hold Bitcoin, whether
you're in, you know, Europe or you're in Australia or you're in
America, you'll be able to go to the Japanese banks with your
Bitcoin and borrow at 1%. And I look at this and think for
those people who hold Bitcoin as their collateral, think of all
of the industries that rely on cheap capital in order to get
ahead. You know, it's every finance
industry, it's property, it's building.
If you've got cheap financing, you're going to have a huge
advantage. The the two companies in the
last 20 years who have had a distinct advantage in the cost
of capital. The first company 20 years ago
was Amazon and the second company that's really only
identified that as a a huge advantage to them in the last
five years is micro strategy. And they're probably two of the
best performing assets over the last 20 years.
And why is that? It's cost of capital.
And So what happens when you can bring the cost of capital on a
personal level down to the lowest interest rate in the
world? And sadly, you know the bank,
you know the retail banks in Japan aren't going to take an
Australian residential title deed and they're not going to
take a European one, but they'll take a Bitcoin.
It's interesting because this is the same part of the feature
that that we just mentioned, right?
The the fact that it is globally liquid 24/7, 365.
It is a feature when when you talk about this because if
Bitcoin is recognized as a global borderless commodity,
then yeah, you can actually start shopping around and, and,
and, and yeah, maybe borrow in Japan if you live in Western
Europe. I, I love that idea actually,
also in terms of like how that would fuel a market because
eventually that that borrowing could be a perpetual thing and
like a perpetual business also for liquidity providers around
the world, right? So, yeah, I, I think there's so
much game theory also in Bitcoin, not only like
individual adoption, but also this company adoption, the
products and services people can build the, the treasuries, you
know, corporate treasuries, country treasuries, all these
things. Like there's all this little
game theory and and I think that's all fueled by the
absolute scarcity, right? Like it's, you know, this this
game, game ISA game and air quotes.
You know, it's it's here and you can participate, but it's it's
such a huge, huge opportunity that many people still don't
see. I don't know if you're very
active on LinkedIn, but I love seeing the financial advisors on
LinkedIn talk about bitcoins world.
Yeah, so they are still very far away from that.
But again, yeah, the asymmetric opportunity comes from from
doing the work right and. It's funny, I stick up for say,
fellow investment advisors. A lot of them are hamstrung by
their their regulators in that they can't advise on Bitcoin
because it's not on the approved product list.
They can't get any professional indemnity for it, so they can't
by default give any advice on it.
And that worm is turning, but it's just turning very, very
light. They're going to be really like
to the party and they're costing their clients a lot of money
from an investment upside perspective, so.
Yeah, I agree. So when we talk about game
theory in countries, do you think this year we'll see
another serious country adopt Bitcoin?
Do you think this will actually be the year where we kind of
like see this game theory start or play out?
Or do you also think that that eventually will take longer?
Because one kind of like counter take that I that I like is that
if America really adopts Bitcoin, then it could also be
that half of the world just things like they're crazy.
They're selling goals for Bitcoin.
Wow, they're crazy. We've got to stay away from this
Bitcoin thing, you know, and then it's not going to happen,
for example. Yeah.
What are your thoughts there? Look, I just want to caveat this
by saying we are closer than we have ever been to nation state
adoption and game theory at a nation state level playing out.
However, I can't help but think that history is going to repeat
itself. When I first figured out
Bitcoin, I was scratching around thinking, gosh, I've got to buy
as much of this as quickly as I can before someone else figures
it out and it goes up 10X overnight.
You know, you hear Michael Saylor talk about sleepless
nights when he figured it out and then he realized, hang on a
SEC, I've got to get this money allocated as quickly as
possible. I can't help but think that
history's going to repeat. And this is the thing that's
going to be mind blind. You've got the largest country.
Well, the most powerful country on earth has told you they're
going to do this. And the rest of the world's
going to look around and go, yeah, this is probably what's
going to happen. Now, I could be wrong, but if I
look at, say, on a personal level, a corporate level, those
two former situations have played out where there's, you
know, one person has LED and the rest of the market's been
totally ambivalent about what they're doing.
And I can't help but think it's going to play out the same way
at a nation state level. But I would be very pleasantly
surprised if I'm wrong, and I hope I am.
Yeah, again, that that's why this is so entertaining to
follow, don't you think? I think the, the upside for
smaller countries that perhaps have a bit more, how do you say
that like, you know, freedom to move away from, you know, or, or
act more in their own interest and kind of like the block that
they are maybe associated with, you know, like their upside is,
is huge. And I don't know if you saw
that. Did you see the video little
report that was done on Bhutan with like the leader of Bhutan
that talked about how they are mining Bitcoin with their hydro,
etcetera. Like I, I think it's actually
smaller countries like this that that could actually benefit the
most because they have, you know, they have more autonomy in
making this decision, you know, not necessarily just the buying,
but like the longer strategic outlook.
And, and when I heard him talk, that's a leader of Bhutan, he's
like totally orange built. Like, he totally gets it, you
know? What's funny you you if you boil
that thought down to a personal level, the people who stand to
benefit from Bitcoin the most are the poorest.
Yes. They can buy Bitcoin now and
they can do it and they can have an outsized return.
The smaller companies, they can have an outsized return relative
to large companies and the smaller countries, they can do
that too. And where it's funny, probably
one of the best business analogies I think, which applies
to Bitcoin is it's not the big that eat the small, it's the
fast that eat the slow. And this is where small
countries who are nimble, they have the ability to move much
quicker than people with a whole host of assets.
So they can get set at 100% much quicker than say larger or more
disorganized organizations. So it's not the fast, well, it's
not the big eating the small, it's the fast eating the slow.
And this is where Bhutan is a perfect example.
But Kelly again with El Salvador first mover advantage.
It's fun to see and it puts pressure on the big guys.
Yeah, with you, it's always fun to end talking about price and
predictions. We can we briefly touched upon
it before when we when we talked about liquidity, of course.
I think I have two questions here.
Maybe the first one is an intro to the second one.
Do you think we'll keep seeing like the classic cycles or are
you, are you more in on the side of we'll have a prolonged less
crazy run up bull market? Like just a, you know, we're
going up, we're going steady, we're going up, we're going
steady. Kind of like how some people say
like this is how gold went after, you know, the gold ETFs
were introduced. Like do you think we'll have
like a prolonged bull market because like the perpetual
buying, the size of the perpetual buying is slowly
growing. Basically, I think as we alluded
to before, like is, is are you in that camp or do you think
we'll we'll still see the classic cycles just because
human psychology? I I think we're going to see
probably a hybrid of what you just described.
I think we're going to see up and grind up and grind up and
grind until the nation states figure it out and someone who
has access to their finger on the money printer can buy an
unlimited amount of Bitcoin. And then we're going to see
Samson prove correct with his Omega candle and we're going to
see a 5 or a 10X overnight and we're just going to set the
floor to $1,000,000. And what's funny is, and this is
where one of my great Bitcoiner mates is Checkmatey.
I think he's one of, if not the best on chain analyst that we
have. And I'm so impressed with his
work and he's advocating for a, you know, pop grind, pop grind.
And that's going to be the, the, the situation that's going to
grind us to $1,000,000. And we're all going to be drying
our eyes with $100 bills and upset that it's a million and
it's taken two or three years to get there.
And I think, I think there's, there's the probability that he
will be correct. And I think if you look at that
skew, I would, I would weigh that at a 9010 skew that he will
be correct. And what's interesting, he's
going to be correct most of the way up.
And then I think there's going to be a moment that things just
completely change. And someone with a money printer
understands what this is and realizes that there's no,
there's no second best, that there's no ability to get more
once this is gone and it's tucked away in your coffins.
And they will buy literally every Bitcoin available that's
on the market and they will set a price that's ridiculous just
to pry that out of your hands. And if you don't have the
ability to have a lending facility against that, then you
know you'll sell. You might sell 5 or 10% of your
stack and sail off into the sunset richer than you ever
dreamed of. And that's what I expect to
happen at some point in time. The the powers that they will
understand that this is absolute scarcity in an asset and they
will want it. Yeah, I think 84 K is kind of
like the new 58K sort of kind of proves proves the point.
I I think it's a very reasonable idea just because we have the
perpetual buying I don't think we'll see the 80% drawdown
again. I think we just had like 30 for
35 was kind of like the Max yeah now and it.
Felt like 50 in previous cycles. Of course, yeah, I think I mean
for me as well, like after 10 years, the, the red, you know,
double digit red kind of hurts still.
But, you know, we know, we know what this is.
So that keeps us more at peace. But I think it's a very
reasonable, that's probably the Max Payne scenario, what you
just described, right. Yeah, the this slow grind, like
you're right, but it goes very slow, you know, so, yeah.
And then if we look at this year, that was my second
question, like where, where do you think it could go?
Because you know, if you, if you look at it from like the, the,
the classic cycle behaviour, this should be the peak year of,
of a bull run. Of course, it's a bit dam, but
dam. But now as we talked about
before, like what, what are your thoughts on the price for for
this year? I think the cycle is going to be
a lot later than we think and my expectation is we see a three to
10 X, but it might not happen this year.
And the reason for that is going to be tempered with the
requirement of the US to refinance that 9 trillion of
debt. And they need to really crush
the economy to get that done in an expedient fashion.
So, you know, I've got a whole host of sort of indicators and
reminders that start in July, August, September, October, Hey,
getting frothy, getting frothy, getting frothy, getting frothy,
you know, need to start talking to clients about, you know, what
they want to do. If we have a subdued money
printer and into growth at the money supply over the next six
months, then I think that's just going to delay it.
And you know, we might push through past into, you know,
sort of Q2 next year where we see a peak in Q2 next year.
Whereas I would have, you know, if you asked me this two years
ago, I would have had an expectation that the start of Q4
this year would be the peak. But you know, with everything
that's going on, we could see that pushed out to Q2 in 2025.
All right, last question and maybe that's good to kind of set
our expectations. What are the biggest challenges
you actually see on the horizon, whether it's this year or you
know, in the prolonged bull cycle as you as you just
described? I still think it's it's
adoption. I think there is.
And This is why what you do is so important.
Yeah, 138 episodes later, absolutely killing it.
But the messaging and education around Bitcoin is the number one
thing that we need to focus on self custody of, you know,
age-old principles, not your case, not your coins are, you
know, really important because we have 50% more bitcoiners
every year come into the market who don't understand, you know,
what this thing was originally built on.
And they're learning. And that's probably why we've
seen in the last couple of months, everyone's screaming,
kicking and crying and feeling so depressed because 50% of
Bitcoin is a brand new to Bitcoin and they haven't been
through a 30% drawdown. The other thing I think it's
going to be one of the greatest challenges and a great mate of
mine in Jeff Booth is probably doing so much work in this space
along with another legend Gigi in really focusing on meaning
the exchange for Bitcoin. There is no doubt there is a
scaling problem with Bitcoin past, you know, past layer 1.
You know, layer 1 is not able to deliver the ability to buy
coffee and then buy a container ship it.
It's not built for that because the limitations of the number of
blocks per annum and the number of transactions per block.
So I think the work that cars like Jeff and Gigi are doing.
Absolutely critical in garnering further adoption and really
creating that circular economy. And that's probably going to be
one of our most important things because if we don't have a
circular economy built on Bitcoin, then it makes it far
more vulnerable to a state level attack.
And so the work they're doing, I think it's the hardest problem
to solve in Bitcoin. And I'm just thrilled we've got
some of the best minds in Bitcoin focused on it because
ICE, I don't know how they do it, but they're making headway
and they're making inroads in what I think is the most
important problem with Bitcoins all.
Right, well, thanks for sharing. Thanks so much for your time.
Really enjoyed this update. Maybe we should do this more
often and then we also get to talk more often.
Yeah, man, always a pleasure talking to you.
So thank you so much. I'd love that.
Appreciate your time, prayer. Cheers.
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