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Many people think the four year 
cycle has ended, $126,000 was 

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the top for Bitcoin, and we're 
only going down from here. 

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But what if I told you the math 
proves that the four year cycle 

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never really existed? 
Astrophysicist and mathematician

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Steven Perroneau joins me again 
to discuss why Bitcoin 

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mathematically outperforms gold,
why the volatility is fading, 

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how the four year having cycle 
narrative is false, and why 

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bubbles are actually spaced out 
by math and not by calendar 

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years. 
Steven reveals why the power law

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and his new insights point to a 
new date for the next major 

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Bitcoin bubble. 
And it's further away than you 

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think. 
All right, let's dive in. 

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All right, Steven Perrina, 
welcome back to Bitcoin for 

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Millennials. 
Oh it's great to be here with 

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you again, bro. 
I'm a student here. 

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The audience here is a, is a 
student. 

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So yeah, I'll just listen to 
your new findings and and try to

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ask clarifying or maybe even 
some noob questions probably. 

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And yeah, I'm, I'm excited to 
dive in and see what you've been

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been focusing on. 
So let's just let's just go into

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it. 
Great. 

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Well, I've been thinking a lot 
about bubbles all year, you 

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know, as to whether we're going 
to have one and how big it might

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be and when it might be and 
looking at the history of 

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bubbles and seeing that they 
were fading, you know, and 

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wondering whether we're going to
have bubbles in the future. 

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But in the last month, I've kind
of made some progress, 

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significant progress, I believe.
And I also want to talk about 

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relative to gold, because it's 
been a good year for gold and, 

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and less so for Bitcoin. 
And so I'm, I don't want to 

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sweep down under the rug. 
I want to dress that head on. 

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So on this first slide, this 
gentleman was the master of the 

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Royal Mint. 
His name you're familiar with, 

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it's Isaac Newton. 
And people, a lot of people 

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don't know that he spent just as
much time, you know, down in 

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London as he did in Cambridge. 
He spent about 30 years as 

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master of the Royal Mint in 
London after his, you know, time

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in, in Cambridge. 
So I'm actually going to talk 

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just a little bit about alchemy 
and energy because he was, he 

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was quite into alchemy, which, 
you know, at that time the 

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distinction between chemistry 
and alchemy was, was unclear, 

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shall we say. 
And then I'll get into, just 

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briefly remind you of the 
distinction between the way a 

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power law behaves and the way 
exponentials behave. 

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And then I want to get into a 
discussion of Bitcoin relative 

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to gold, and that will be the 
power law measured in gold 

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terms, in other words, Bitcoin 
measured in ounces. 

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I'll also look at the Kelly 
criterion. 

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If you have a 2 asset portfolio,
how much would you put into 

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Bitcoin, how much into gold? 
And then I want to look at the 

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bubbles. 
And I have a thesis I'm 

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presenting the last few weeks 
that the bubbles are really 

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spaced in logarithmic time, not 
in linear time. 

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So I'm dismissing the idea of a 
four year cycle. 

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And then I will talk about 
Bitcoin versus the dollar, just 

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some of the latest regression. 
If we have time, I'll talk about

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cities versus companies and also
a cosmology analogy for Bitcoin.

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And so people know Newton for 
calculus and from gravity. 

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And that was in the 1660s with 
calculus. 

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And he published Principia and 
laid out Newtonian dynamics in 

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1687. 
But then ten years later he, he 

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became master of the men and he 
held that job, you know, pretty 

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much until his death. 
So for three decades. 

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And he also, while at Cambridge,
worked in the area of alchemy. 

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And you can make an analogy 
between alchemy and Bitcoin and,

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and here it is in this table. 
Alchemy has this sort of raw 

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material that they want to 
transform into gold, and they 

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use some sort of Crucible or 
furnace, and then there's a 

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catalyst which they called the 
Philosopher's stone. 

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So maybe the idea was, could you
turn lead or a base metal into 

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gold with some alchemy process? 
And so transmutation into gold 

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and their quest for eternal 
value. 

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And it was also tied in with the
quest for immortality. 

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Well, Bitcoin has some analogy 
to all of this. 

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For US, electricity is the raw 
substance and the Crucible are 

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the ASIC miners. 
And of course on that, there's 

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the catalyst, which is the 
Nakamoto consensus. 

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And that is what enables the 
miner, which is just a piece of 

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hardware. 
It's true that the hardware is 

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optimized for running hashing, 
but running hashing is is not 

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enough to complete everything 
you need to run the full 

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Nakamoto consensus. 
So that's the catalyst that then

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at the other end actually 
creates Bitcoin and then puts it

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out, you know, for eternal value
on hard capped and incorruptible

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Ledger. 
And the idea of energy is 

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digital money has been around 
for 100 years. 

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And I think the earliest 
reference I can find is this 

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Nobel Prize winner in chemistry,
not alchemy, but chemistry, 

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Frederick Saudi. 
And in 1921, just over 100 years

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ago, he published a little 
pamphlet called Wealth, Virtual 

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Wealth and Debt. 
And he saw wealth is originating

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from the transformation of 
energy. 

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And he noted that debt grows 
exponentially. 

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Real world wealth has growth and
decay. 

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And he called for an energy 
currency. 

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And people are more familiar, I 
think, with Henry Ford's calls 

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for this, something like this in
the 1920s. 

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Buckminster Fuller in 1969 
talked about it. 

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And then the whole process that 
led to Bitcoin kind of started 

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with David Chalm and digital 
money in the 1980s. 

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And there are many, many 
contributors over more than 4 

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decades that, you know, led to 
the publication of the white 

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paper and end of 2008. 
Now a reminder that power laws 

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are not exponential and they're 
not compound annual growth rate.

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We find, you know, in physics, 
we find power laws everywhere. 

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There are 4 fundamental forces. 
Two of them are kind of pure 

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power laws, gravity and 
electromagnetism. 

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It gets a little more 
complicated with general 

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relativity, but if you take 
Newtonian gravity, it's just a 1

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/ r ^2 force, and 
electromagnetism is similar. 

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And then the other two forces 
are nuclear forces are strong 

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and the weak force and they have
power law components as well as 

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well as some other components. 
That weak nuclear force has a 

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decay component because it 
governs decay. 

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And then the strong nuclear 
force has a very strong spring 

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component that whole confines 
the quarks. 

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And here's some other examples. 
The first one is just the 

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simplest kind of power law for a
black hole that the radius is 

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proportional to the mass, which 
is not what you expect for the 

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Earth, right? 
But this is how it behaves for 

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black hole is the event horizon 
radius. 

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It's just a linear relationship.
It's the kind of the simplest 

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kind of black hole. 
If you have two that are 

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spiraling around each other and 
eventually merge and create 

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gravitational waves, then you 
have a steep power law where the

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time to the final merger 
increases very, you know, it's 

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very sensitive to the distance 
and so it's very long as the 

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distance is large. 
And a couple of others. 

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The last one is the the Higgs 
force and it shows both square 

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terms and the 4th power terms. 
So you can get rather steep 

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relationships in physics. 
And that's what we see with 

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Bitcoin. 
It's a steep power law. 

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Here are two graphs to show the 
distinction between exponentials

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and power laws. 
I think that is very interesting

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and kind of like attention or 
discussion type of of sense that

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these ways to look at like 
traditional finance and and, and

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you know, traditional assets is 
not necessarily the way you 

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should look at Bitcoin 
apparently, right? 

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Like that is why I'd say that 
the power laws of discovery is 

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like, OK, that this this Bitcoin
thing is behaving very 

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differently than than 
traditional assets. 

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Like how, how, how people looked
at that before. 

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And, and the, the foundational 
explanation for that is that 

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Bitcoin is first and foremost on
network. 

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It's a technology and it 
manifests as a network and it's 

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actually a meta network. 
There are many different sort of

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complementary networks. 
Just for example, there's a 

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network of minors and there's a 
network of full nodes and then 

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you have exchanges, you know, 
and so forth. 

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And so you get network effects. 
And what we know is from 

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communication networks, and this
is true for the Internet 

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certainly, that you get these 
kind of square effects where the

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value of the network grows with 
the square as the network scales

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to more and more users. 
And it was true for the fellow 

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telephone system. 
And it it was true during the 

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history of, of the Internet. 
It followed apparel law and it 

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eventually saturated. 
So it's, you know, it's 

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saturated eventually at 5 
billion or whatever. 

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Yeah. 
And really, Bitcoin is the 

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Internet plus money, right? 
And it's so this power law that 

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it scales is rather similar. 
But we also find the power laws 

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in the things like the hash 
rate. 

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So it's not just the price, it's
the address count. 

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It's the price, it's the hash 
rate. 

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And some other attributes show 
this kind of parallel behavior. 

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That's gemini.com/brom. 
So it's exponentials have a time

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00:12:04,600 --> 00:12:09,000
scale and you can say it's the 
time scale to grow by a factor 

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00:12:09,000 --> 00:12:11,680
of E, the base of the natural 
algorithm, or you can say it's 

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the time scale to double. 
And for people that know the 

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00:12:14,560 --> 00:12:18,200
rule of 72 in finance, you know 
if you get 8% compounded, it 

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00:12:18,200 --> 00:12:21,640
takes nine years to double and 
that'll happen again and again, 

206
00:12:21,640 --> 00:12:25,640
it'll keep doubling like that. 
And so if you plotted log 

207
00:12:25,640 --> 00:12:29,400
linear, which is the one in the 
center of the slide and the 

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00:12:29,400 --> 00:12:32,640
orange line for an exponential, 
it's just a straight line on the

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00:12:32,640 --> 00:12:34,880
log linear. 
So you'll see a lot of charts, 

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00:12:35,400 --> 00:12:38,200
you know, you'll see in finance 
with stock charts, you'll see 

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00:12:38,200 --> 00:12:40,360
linear linear charts or log 
linear charts. 

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00:12:40,360 --> 00:12:44,280
You never see log log charts. 
You never see ones that are 

213
00:12:44,280 --> 00:12:47,400
logarithmic in time in, in 
Treadfi. 

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00:12:48,640 --> 00:12:53,040
Now a power law will start out 
and look more steep than the 

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00:12:53,040 --> 00:12:55,320
exponential and eventually will 
be less steep. 

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00:12:56,000 --> 00:12:58,600
Now if you look in the right 
hand side, it's log log. 

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And in a log log plot a parallel
straight and there's no 

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00:13:03,560 --> 00:13:06,760
characteristic time scale. 
You have to know what the origin

219
00:13:06,760 --> 00:13:11,520
time is that's relevant or the 
origin position if it's like 

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gravity or something. 
But there's no fixed doubling 

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00:13:16,280 --> 00:13:18,440
time. 
And I'll show you later how the 

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00:13:19,000 --> 00:13:22,640
doubling time changes and how 
the growth rate changes. 

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00:13:23,360 --> 00:13:26,400
And so the power law can be more
steep than the exponential 

224
00:13:26,400 --> 00:13:29,440
depending on the what the actual
values of parameters are and 

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00:13:29,440 --> 00:13:32,680
eventually less steep. 
So in these examples, they're 

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00:13:32,680 --> 00:13:37,160
actually tangential at the same 
price point, but then they have 

227
00:13:37,160 --> 00:13:39,920
very different behaviors in the 
past and in the future. 

228
00:13:40,440 --> 00:13:43,160
OK, let's get into Bitcoin 
versus gold. 

229
00:13:43,160 --> 00:13:46,960
And I'll give you a very simple 
example that shows that gold 

230
00:13:46,960 --> 00:13:49,440
does not follow a power law on 
time. 

231
00:13:49,680 --> 00:13:53,040
And, you know, people would not 
be, would not naturally think 

232
00:13:53,040 --> 00:13:55,960
that since gold's been around 
for 5000 years. 

233
00:13:56,400 --> 00:13:59,600
And we, we, we're sort of 
comfortable with the idea of 

234
00:13:59,600 --> 00:14:02,720
what the gold prices were. 
You know, we have a rough, most 

235
00:14:02,720 --> 00:14:05,320
people have a rough idea what it
was 10 years ago and 20 years 

236
00:14:05,320 --> 00:14:08,080
ago. 
And this just shows annual 

237
00:14:08,080 --> 00:14:12,960
prices for 15 years and, you 
know, in the first of the year. 

238
00:14:13,680 --> 00:14:16,960
And then instead of age, I've 
got log 10 of age and I've got 

239
00:14:16,960 --> 00:14:19,200
log 10 of the Bitcoin price in 
dollars. 

240
00:14:19,200 --> 00:14:23,240
And then the next column has log
10 of gold in dollars. 

241
00:14:23,880 --> 00:14:26,680
And then the final column has 
the ratio. 

242
00:14:26,680 --> 00:14:30,920
So it's Bitcoin measured in gold
oz, but it's the log of that 

243
00:14:30,920 --> 00:14:34,800
quantity. 
So if you take the slope, you 

244
00:14:34,800 --> 00:14:37,920
know, comparing the third column
to the second column, that slope

245
00:14:37,920 --> 00:14:40,200
is 5.84. 
And that's the Bitcoin power 

246
00:14:40,200 --> 00:14:44,320
law. 
It's about 5.8 slope if you take

247
00:14:44,320 --> 00:14:49,680
the last column and calculate 
the slope relative to log age. 

248
00:14:49,680 --> 00:14:54,360
So log of Bitcoin measured in 
gold oz versus log age. 

249
00:14:55,160 --> 00:15:01,480
Just do this in a spreadsheet. 
Slope is 5.5 S One reason to 

250
00:15:02,080 --> 00:15:05,200
test against gold is well, 
people sometimes say well what 

251
00:15:05,200 --> 00:15:08,240
about inflation? 
You know, the dollar inflates, 

252
00:15:08,240 --> 00:15:13,880
the money supply goes up about 
7% on average and this 

253
00:15:13,880 --> 00:15:17,960
eliminates most of that 
objection because the gold 

254
00:15:17,960 --> 00:15:21,000
supply increases about 1 1/2 to 
2% per year. 

255
00:15:21,000 --> 00:15:24,560
So most of the inflation 
objection is eliminated. 

256
00:15:24,560 --> 00:15:28,000
If if you make put gold into the
denominator and you still see a 

257
00:15:28,000 --> 00:15:32,880
power law and you look at the 
R-squared, for Bitcoin dollar 

258
00:15:32,880 --> 00:15:36,120
it's .96 and for Bitcoin gold is
.94. 

259
00:15:36,120 --> 00:15:38,080
So it's very, very high in both 
cases. 

260
00:15:39,240 --> 00:15:43,800
Now if you try to do log gold, 
power log against log age, you 

261
00:15:43,800 --> 00:15:45,680
know, you get a slope, you have 
to, you're going to measure 

262
00:15:45,680 --> 00:15:47,200
something. 
But the R-squared is very low, 

263
00:15:47,200 --> 00:15:51,040
it's .28. 
So it's, it's not a, it's not a 

264
00:15:51,040 --> 00:15:55,080
good fit. 
And in fact, it fits well with a

265
00:15:55,080 --> 00:16:00,120
7.4% compound annual growth. 
And and as a reminder, the 

266
00:16:00,120 --> 00:16:06,000
R-squared is the yeah sorry 
amount that measures measures 

267
00:16:06,000 --> 00:16:09,760
how statistically correct. 
It's the quality of the fit. 

268
00:16:10,520 --> 00:16:15,360
It's the correlation coefficient
squared of the. 

269
00:16:15,360 --> 00:16:19,040
Data you're you're trying to 
correlate, right? 

270
00:16:19,040 --> 00:16:21,680
Right. 
This is just ordinarily squared.

271
00:16:22,200 --> 00:16:27,760
And so it's looking at how you 
know how well the two series 

272
00:16:27,760 --> 00:16:33,520
align and it's very high. 
You know, 9495 is a very high 

273
00:16:33,520 --> 00:16:35,800
correlation. 
It's a rare thing to see. 

274
00:16:36,360 --> 00:16:38,840
Yeah, 1 is the highest 2/2, 
right? 

275
00:16:39,920 --> 00:16:42,440
Basically 100% it would be 1, 
right? 

276
00:16:42,800 --> 00:16:46,080
That would be like a perfect 
perfect correlation basically. 

277
00:16:46,080 --> 00:16:47,320
Right. 
OK. 

278
00:16:48,000 --> 00:16:50,600
And so gold, your point here is 
that gold versus dollars there 

279
00:16:50,600 --> 00:16:59,560
there is no way to predictably 
well to to predict. 

280
00:17:00,120 --> 00:17:03,840
You can predict on long periods.
On very long periods, it keeps 

281
00:17:03,840 --> 00:17:06,520
up with inflation, right? 
Yeah, roughly. 

282
00:17:06,520 --> 00:17:08,960
So it kind of keeps up with the 
money supply. 

283
00:17:10,160 --> 00:17:13,440
The money supply grows at 7%, 
and gold has been growing at 

284
00:17:13,440 --> 00:17:16,800
about 7%. 
And some years it'll do much 

285
00:17:16,800 --> 00:17:21,599
better and some it won't do, you
know, and and it's got a lot of 

286
00:17:21,599 --> 00:17:25,920
volatility, not as high as 
Bitcoin, but over 50 years, you 

287
00:17:25,920 --> 00:17:27,520
know, you see the same sort of 
thing. 

288
00:17:28,520 --> 00:17:31,720
It basically keeps up with the 
inflation. 

289
00:17:31,760 --> 00:17:34,280
I mean, you know, to first 
order. 

290
00:17:34,880 --> 00:17:36,880
Obviously gold supply is also 
increased. 

291
00:17:36,880 --> 00:17:39,680
Some Bitcoin has work to do to 
prove itself. 

292
00:17:40,120 --> 00:17:41,200
Too. 
Yeah, exactly. 

293
00:17:41,200 --> 00:17:42,560
Yeah. 
Yeah, right. 

294
00:17:42,840 --> 00:17:45,080
That that you're invested in 
gold. 

295
00:17:45,520 --> 00:17:48,040
Yeah, I agree. 
OK. 

296
00:17:48,920 --> 00:17:52,200
This is just a graph of of what 
I showed before essentially. 

297
00:17:52,920 --> 00:17:57,200
So you can just take these 
annual points and you can see 

298
00:17:57,680 --> 00:18:00,760
the Bitcoin measured in gold. 
This is again, it's a log log 

299
00:18:00,760 --> 00:18:02,320
chart. 
So what we're seeing on the X 

300
00:18:02,320 --> 00:18:06,440
axis is the log age. 
So where it says 1.0, that's 10 

301
00:18:06,440 --> 00:18:09,960
years of age. 
So that's beginning of 2019, 

302
00:18:09,960 --> 00:18:12,720
right? 
And now we're a little over 1.2 

303
00:18:12,720 --> 00:18:16,920
in, in log 10 terms. 
And so that, you know, first 

304
00:18:16,920 --> 00:18:19,240
thing to notice is the points 
get closer and closer, right? 

305
00:18:19,240 --> 00:18:22,040
Because a year is getting 
shorter and shorter on a log 

306
00:18:22,040 --> 00:18:27,800
chart, right? 
And actually, if you're going to

307
00:18:27,800 --> 00:18:30,720
do the regression right, you 
would have points that are 

308
00:18:30,720 --> 00:18:35,040
equally spaced in log terms. 
And I've gone back and done that

309
00:18:35,040 --> 00:18:38,480
for, for Bitcoin dollar and it 
doesn't change the results. 

310
00:18:38,480 --> 00:18:41,840
We've got enough data that we're
determining it well, but this 

311
00:18:41,840 --> 00:18:45,840
just gives you a feel and the, 
the band is sort of the, the 

312
00:18:45,840 --> 00:18:48,000
uncertainty. 
And you can see, you know, the 

313
00:18:48,000 --> 00:18:49,640
points mostly lie within the 
band. 

314
00:18:49,640 --> 00:18:53,320
That's the one Sigma ±1 standard
deviation. 

315
00:18:54,960 --> 00:18:57,240
So Bitcoin is a power law in 
gold. 

316
00:18:57,240 --> 00:18:59,560
It's a little bit less than you 
see in dollars. 

317
00:18:59,560 --> 00:19:04,240
It's about 5.45 point 5, 
depending on what data you use. 

318
00:19:04,920 --> 00:19:12,160
This is just the correlations 
between Bitcoin and stocks and 

319
00:19:12,160 --> 00:19:17,520
gold, and it shows that Bitcoin 
has been more correlated with 

320
00:19:17,520 --> 00:19:19,560
tech stocks than it has with 
gold. 

321
00:19:20,160 --> 00:19:22,560
But the first thing I want to 
call your attention to is the 

322
00:19:23,120 --> 00:19:26,960
chart in the upper left. 
And it goes back to 2011, a 

323
00:19:27,480 --> 00:19:31,880
little bit earlier than 2011. 
Bitcoin went up in value by 100 

324
00:19:31,880 --> 00:19:36,520
/ 100,000 times. 
Gold went up in value by less 

325
00:19:36,520 --> 00:19:39,840
than three times. 
You know, you just don't hear 

326
00:19:39,840 --> 00:19:42,560
the gold bars talk about this 
too much, right? 

327
00:19:43,080 --> 00:19:46,480
They kind of like to look at the
most recent year when they've 

328
00:19:46,480 --> 00:19:49,960
had a good year. 
But if you look at the the vast 

329
00:19:49,960 --> 00:19:54,240
sweep of Bitcoin history, 
there's just been no contest. 

330
00:19:54,960 --> 00:19:57,840
Bitcoin has just been 
displacing, displacing, 

331
00:19:57,840 --> 00:20:00,480
displacing. 
In terms of relative terms, it's

332
00:20:00,480 --> 00:20:07,160
gone up over 30,000 * 40,000 
times in relative to gold. 

333
00:20:09,760 --> 00:20:13,000
Now it's about 20 oz. 
And at one time it was like a 

334
00:20:13,000 --> 00:20:18,560
thousandth of an ounce. 
The slide below that shows that 

335
00:20:19,400 --> 00:20:23,920
this is the Grainger causality 
test and it shows do Bitcoin. 

336
00:20:24,480 --> 00:20:29,000
Prices or gold prices lead, and 
in fact it's got both curves and

337
00:20:29,000 --> 00:20:32,680
the blue curves is testing 
whether Bitcoin leads gold. 

338
00:20:33,400 --> 00:20:35,720
And here you want to be low on 
the slide. 

339
00:20:35,720 --> 00:20:37,240
You don't want to be high on the
slide. 

340
00:20:39,920 --> 00:20:48,000
This P value is just what's the 
probability that you can produce

341
00:20:48,000 --> 00:20:52,320
this with random numbers? 
And so the Bitcoin gold blue 

342
00:20:52,320 --> 00:20:56,000
line, the numbers being high 
means that there's no 

343
00:20:56,000 --> 00:21:01,280
correlation or causality here of
Bitcoin prices leading gold 

344
00:21:01,280 --> 00:21:04,560
prices. 
But on the other hand, the gold 

345
00:21:04,760 --> 00:21:09,720
colored does gold leading 
Bitcoin by anywhere from 2 to 12

346
00:21:09,720 --> 00:21:13,480
weeks. 
They're all below the 5% level 

347
00:21:13,520 --> 00:21:16,000
and that's where it becomes 
statistically significant. 

348
00:21:17,120 --> 00:21:21,760
So gold prices do lead Bitcoin 
and it can range from a few 

349
00:21:21,760 --> 00:21:26,680
weeks up to 1/4 kind of a thing.
So that's kind of something 

350
00:21:26,680 --> 00:21:30,480
we've had going for us. 
It gives us a little hope that 

351
00:21:30,480 --> 00:21:34,720
we'll maybe see some shift in 
the next year, better 

352
00:21:34,720 --> 00:21:39,680
performance for Bitcoin. 
And the slide on the right shows

353
00:21:39,680 --> 00:21:44,560
the rolling 52 week correlation 
of Bitcoin and gold. 

354
00:21:45,640 --> 00:21:48,320
And you can see sometimes it's 
positive and sometimes it's 

355
00:21:48,320 --> 00:21:50,440
negative and it moves around a 
lot. 

356
00:21:51,600 --> 00:21:54,880
It's hard to conclude very much 
about that. 

357
00:21:55,080 --> 00:21:57,280
It's an unstable kind of 
relationship. 

358
00:21:57,880 --> 00:22:02,720
And this year they've been, you 
know, not not too well 

359
00:22:02,720 --> 00:22:06,040
correlated. 
OK. 

360
00:22:06,480 --> 00:22:11,360
This shows a more complete 
Bitcoin, Bitcoin versus gold 

361
00:22:11,360 --> 00:22:14,680
regression. 
And it shows both ordinary least

362
00:22:14,680 --> 00:22:19,560
squares tests and quantile 
regression tests that are done 

363
00:22:19,560 --> 00:22:23,840
at 5 different levels of point 
1.3 up to .9. 

364
00:22:23,840 --> 00:22:28,200
And those are the dashed lines. 
And then the solid line in the 

365
00:22:28,200 --> 00:22:30,760
middle is the ordinary least 
squares test. 

366
00:22:31,480 --> 00:22:35,040
So if you look at the line 
that's green dashed, it's close 

367
00:22:35,040 --> 00:22:38,000
to the solid line. 
That's the median in the 

368
00:22:38,000 --> 00:22:41,440
quantile regression, and it 
turns out they both give a 

369
00:22:41,440 --> 00:22:45,600
parallel index of 5.3 and the 
uncertainty there is small just 

370
00:22:45,600 --> 00:22:51,720
point O2 and R-squared is high, 
it's .94, but the trend values 

371
00:22:51,720 --> 00:22:53,800
would be much higher than we see
today. 

372
00:22:53,800 --> 00:23:02,120
They should be around in the 
high 40s or low 50s oz based on 

373
00:23:02,120 --> 00:23:03,640
that. 
Be double almost. 

374
00:23:03,880 --> 00:23:08,000
It should be. 
Actually we're down at about 20 

375
00:23:08,000 --> 00:23:14,280
oz right now. 
So it should be because gold 

376
00:23:14,280 --> 00:23:17,320
keeps hitting new highs. 
I think it just hit 4400. 

377
00:23:18,280 --> 00:23:22,400
So we're around 20 oz and we 
should be above 40 just to be at

378
00:23:22,400 --> 00:23:24,920
the power launch, long term 
power launch trend. 

379
00:23:25,920 --> 00:23:30,600
So we can say well, yeah, OK, 
we're down below the 10% level. 

380
00:23:31,080 --> 00:23:34,120
It's a little bit concerning. 
It's certainly weak performance.

381
00:23:34,960 --> 00:23:40,880
And if that continues, you would
start to measure a lot somewhat 

382
00:23:40,880 --> 00:23:44,240
lower power law index. 
And in fact we've done that over

383
00:23:44,240 --> 00:23:46,560
the last couple of years. 
It's it's lowered a little bit, 

384
00:23:47,800 --> 00:23:50,000
but it doesn't break the idea of
a power law. 

385
00:23:50,720 --> 00:23:54,760
And so that the assumption would
be we'd get some restoration and

386
00:23:54,760 --> 00:23:56,880
it would, you know, revert at 
some point. 

387
00:23:58,920 --> 00:24:01,880
We've actually modelled how this
behaves and there is this kind 

388
00:24:01,880 --> 00:24:08,120
of springiness to it. 
And I've done this in both gold 

389
00:24:08,200 --> 00:24:13,520
terms and in dollar terms where 
you get restoration back, you 

390
00:24:13,520 --> 00:24:17,200
know, from a bubble or from a 
through if you get restoration 

391
00:24:17,200 --> 00:24:20,520
back, yeah. 
I have a question about this 

392
00:24:20,520 --> 00:24:26,080
because I've, I, I think what 
is, I'd say difficult to 

393
00:24:26,080 --> 00:24:27,760
understand. 
You just correctly said, you 

394
00:24:27,760 --> 00:24:30,240
know, Bitcoin still has to prove
itself right. 

395
00:24:30,240 --> 00:24:38,680
I I think that is more like 
conceptually rather than price 

396
00:24:38,680 --> 00:24:39,840
wise. 
I mean they're kind of 

397
00:24:39,840 --> 00:24:43,080
intertwined, right? 
Like if you understand that 

398
00:24:43,080 --> 00:24:48,200
Bitcoin is superior, has 
superior characteristics over 

399
00:24:48,200 --> 00:24:49,760
gold. 
That's that's one. 

400
00:24:49,760 --> 00:24:52,800
But like acting on that is 2 
right? 

401
00:24:52,800 --> 00:24:58,160
So I think there's, there's just
a big learning curve there for 

402
00:24:58,160 --> 00:25:02,600
for a lot of people, right? 
And then you based on that, it's

403
00:25:02,600 --> 00:25:05,200
either people buy Bitcoin or 
they buy gold, right? 

404
00:25:06,080 --> 00:25:09,360
Other people don't understand 
that, you know, just like gold, 

405
00:25:09,360 --> 00:25:12,160
you shouldn't really trade or 
leverage Bitcoin, although you 

406
00:25:12,160 --> 00:25:16,360
can do that 24/7, 365, right? 
That's why we also see a lot of 

407
00:25:16,680 --> 00:25:20,400
leverage and you know, increased
volatility, etcetera. 

408
00:25:20,400 --> 00:25:22,840
So I think that's also like 
another part of just the 

409
00:25:22,840 --> 00:25:27,280
understanding of of Bitcoin and 
how how people handle that. 

410
00:25:27,280 --> 00:25:32,000
So there's kind of like this 
qualitative understanding 

411
00:25:32,000 --> 00:25:35,000
learning curve. 
And then when you look at like 

412
00:25:35,000 --> 00:25:38,360
the, the, the, the, the, the 
power law rights for me, the 

413
00:25:38,360 --> 00:25:43,600
essence of the power law is, you
know, apparently there's a 

414
00:25:43,600 --> 00:25:50,240
predictable way to look at 
Bitcoins adoption in, in several

415
00:25:50,240 --> 00:25:53,560
different dimensions, including 
price, like you said, hash rate 

416
00:25:53,560 --> 00:25:56,600
notes, etcetera, right? 
Like that, That is the discovery

417
00:25:56,600 --> 00:25:59,600
and the, and the, and the, and 
the connected theory. 

418
00:25:59,600 --> 00:26:04,200
So when I look at this slide, 
you know, the conclusion 

419
00:26:04,200 --> 00:26:08,080
basically is Bitcoin is 
undervalued or miss or 

420
00:26:08,080 --> 00:26:12,520
mispriced, whatever definition 
you want to you want to use, 

421
00:26:12,520 --> 00:26:18,360
right, based on the power law 
that up until this point has 

422
00:26:18,360 --> 00:26:22,280
proven itself with the also this
high, high R-squared, right? 

423
00:26:22,280 --> 00:26:27,720
So I think that is what together
creates this conclusion of 

424
00:26:27,720 --> 00:26:29,400
Bitcoin. 
Bitcoin is currently 

425
00:26:29,960 --> 00:26:32,720
underpriced. 
How can other people think true 

426
00:26:32,720 --> 00:26:38,400
that in in ways of yeah, kind of
like judging the math versus the

427
00:26:38,680 --> 00:26:41,480
sentiment versus the perception 
versus the, you know, I don't 

428
00:26:41,480 --> 00:26:43,880
know, like the understanding of 
of of of the market. 

429
00:26:43,880 --> 00:26:46,120
Does that make sense? 
Yeah, absolutely. 

430
00:26:46,120 --> 00:26:50,120
And you know, the market is 
right in the short term and the 

431
00:26:50,120 --> 00:26:56,280
math is correct and long term. 
You know, I think Buffett talked

432
00:26:56,280 --> 00:26:59,840
about voting machine and 
weighing machine, right, which 

433
00:26:59,840 --> 00:27:02,200
is actually goes back to 
Benjamin Graham. 

434
00:27:02,840 --> 00:27:06,280
So the the voting machine is the
short term, it's the market. 

435
00:27:06,280 --> 00:27:09,120
Now the weighing machine is the 
math, the long term. 

436
00:27:10,240 --> 00:27:12,120
What is the fundamental for 
Bitcoin? 

437
00:27:12,760 --> 00:27:16,280
The thing to keep in mind, of 
course, is the volatility is 

438
00:27:16,280 --> 00:27:19,560
very large. 
So the volatility is sitting 

439
00:27:19,560 --> 00:27:24,080
there in logarithm space and 
everybody gets all excited 

440
00:27:24,080 --> 00:27:29,080
because Bitcoin moves $5000. 
But that's noise. 1 standard 

441
00:27:29,080 --> 00:27:36,800
deviation is .2 in log 10 and .2
in log 10 is a factor of 1.58, a

442
00:27:36,800 --> 00:27:42,880
multiplicative factor of 1.58. 
So if fair value were at 100,000

443
00:27:43,560 --> 00:27:48,200
and now it's higher than that, 
but if it were at $100,000, then

444
00:27:48,320 --> 00:27:55,720
to move by 1 standard deviation 
you'd have to get to $158,000 to

445
00:27:55,720 --> 00:27:58,800
move to 1 standard deviation. 
On the downside, you know you'd 

446
00:27:58,800 --> 00:28:04,880
be below 70,000. 
So that is a normal. 

447
00:28:05,240 --> 00:28:11,080
It's normal to be in the 70,000 
to 150,000 kind of range. 

448
00:28:11,920 --> 00:28:18,080
This is another way of looking 
at the persistence of Bitcoin. 

449
00:28:19,280 --> 00:28:23,240
It's called the Hearst exponent.
I'm not going to go through the 

450
00:28:23,240 --> 00:28:25,920
method. 
I think I did it with on your 

451
00:28:25,920 --> 00:28:31,240
show half a year ago. 
What the method does is it 

452
00:28:31,240 --> 00:28:35,200
changes the window size of the 
data that it's looking at, and 

453
00:28:35,200 --> 00:28:38,560
it measures the full range, the 
full range of variation in the 

454
00:28:38,560 --> 00:28:43,120
data, and also measures the 
statistical uncertainty, the 

455
00:28:43,120 --> 00:28:45,440
standard deviation. 
And it looks at the ratio of 

456
00:28:45,440 --> 00:28:48,120
those two. 
And it finds as you grow the 

457
00:28:48,120 --> 00:28:54,600
window size, that actually that 
ratio has a power law behavior. 

458
00:28:55,040 --> 00:28:58,640
And normally this Hurst exponent
is between zero and one. 

459
00:28:59,200 --> 00:29:03,240
And if you have a random 
process, it's going to be 1/2. 

460
00:29:03,880 --> 00:29:07,040
And if you have something that's
reverting to mean, it's going to

461
00:29:07,040 --> 00:29:11,640
be near 0. 
I took 10 years of the SPY, 

462
00:29:11,640 --> 00:29:18,240
which is the SP500, you know, 
ETF and it has a value of 0.18. 

463
00:29:18,240 --> 00:29:23,000
So that indicates strong mean 
reversion for Bitcoin. 

464
00:29:24,040 --> 00:29:26,120
And you have to do this with the
residuals. 

465
00:29:27,080 --> 00:29:30,720
And normally what people do is 
they just take the kind of log 

466
00:29:30,720 --> 00:29:34,440
variation day-to-day because 
they're assuming a kind of 

467
00:29:35,120 --> 00:29:39,760
compound annual growth process. 
But for Bitcoin, if you take the

468
00:29:39,760 --> 00:29:43,480
residuals after taking out the 
power law, then you find that 

469
00:29:43,480 --> 00:29:47,480
this Hearst exponent is .9. 
And doesn't matter whether you 

470
00:29:47,480 --> 00:29:52,280
do it in gold or dollars, daily 
or weekly, it gets stronger. 

471
00:29:52,280 --> 00:29:57,360
If you do it daily, it's very, 
very high. 

472
00:29:57,360 --> 00:30:01,280
It's like nothing one sees. 
So this is a measure of very 

473
00:30:01,280 --> 00:30:04,640
long term persistence. 
It's another way of saying that 

474
00:30:05,280 --> 00:30:08,480
Bitcoin has embedded alpha, if 
you will. 

475
00:30:09,000 --> 00:30:10,040
What? 
What does that mean? 

476
00:30:10,680 --> 00:30:13,960
It means long term 
outperformance. 

477
00:30:16,160 --> 00:30:19,440
Right now, true 2025 Blockstream
is running their biggest sale 

478
00:30:19,440 --> 00:30:24,360
yet, 21% of the Blockstream Jade
Plus right in their store and 

479
00:30:24,360 --> 00:30:26,560
your price is adjusted at 
checkout. 

480
00:30:26,880 --> 00:30:29,800
This is the lowest price you'll 
see all year on the most trusted

481
00:30:29,800 --> 00:30:31,760
Bitcoin only hardware wallet on 
the planet. 

482
00:30:32,080 --> 00:30:34,960
The Blockstream Jade Plus is the
simplest, most secure way to 

483
00:30:34,960 --> 00:30:38,800
protect your Bitcoin with a 
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484
00:30:38,800 --> 00:30:41,760
and and a dead simple setup. 
You'll be securing your sets in 

485
00:30:41,760 --> 00:30:44,360
minutes and pair it with their 
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486
00:30:44,360 --> 00:30:47,520
smoothest onboarding, offering 
advanced features like air gap 

487
00:30:47,520 --> 00:30:50,640
setup, QR mode and native multi 
sync support. 

488
00:30:50,640 --> 00:30:54,560
As your stack grows, go to 
store.blockstream.com where the 

489
00:30:54,560 --> 00:30:57,480
21% discount is active through 
December 31st. 

490
00:30:57,760 --> 00:31:01,600
And if you use my code Brum 
that's BR AM, you get an extra 

491
00:31:01,600 --> 00:31:06,200
10% off your order. 
Let's talk about something that 

492
00:31:06,200 --> 00:31:08,720
not a lot of people think about 
before it's too late. 

493
00:31:08,880 --> 00:31:11,240
Where are you storing your 
Bitcoin seed words? 

494
00:31:11,480 --> 00:31:14,520
Are they truly secure? 
I found my solution with stamp 

495
00:31:14,520 --> 00:31:16,520
Seat. 
It's an elegant all in one 

496
00:31:16,520 --> 00:31:20,120
titanium plate solution with no 
separate pieces to lose or 

497
00:31:20,120 --> 00:31:22,120
manage. 
Your seat phrase gets 

498
00:31:22,120 --> 00:31:25,800
permanently stamped into pure 
titanium that withstands fire, 

499
00:31:25,800 --> 00:31:28,600
survives water and lasts for 
generations. 

500
00:31:28,840 --> 00:31:31,160
And like shallow etching 
methods, stamp Seats better. 

501
00:31:31,160 --> 00:31:34,480
The tools help you to deeply 
stamp every letter for permanent

502
00:31:34,480 --> 00:31:37,320
readability, protecting your 
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503
00:31:37,640 --> 00:31:40,640
When you order a titanium seed 
plate from Stamp Seed, you can 

504
00:31:40,640 --> 00:31:44,000
also upload a custom design or 
your logo to customize the back 

505
00:31:44,000 --> 00:31:46,560
of your plate to make it fully 
personalized. 

506
00:31:46,920 --> 00:31:49,680
They proceed phrases are a 
disaster waiting to happen. 

507
00:31:49,680 --> 00:31:52,680
Secure your Bitcoin with Stamp 
Seed for decades to come. 

508
00:31:52,920 --> 00:31:55,160
Visit stampse-ed.com and use 
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509
00:31:55,160 --> 00:31:58,720
That's Bram to get 15% of your 
order. 

510
00:31:59,240 --> 00:32:04,200
OK, now I want to look at the 
Kelly criterion for optimal log 

511
00:32:04,200 --> 00:32:07,200
wealth. 
Shannon is the guy who figured 

512
00:32:07,200 --> 00:32:11,840
out entropy for information and 
John Kelly was one of his 

513
00:32:11,840 --> 00:32:15,880
associates at Bell Labs in the 
early 50s. 

514
00:32:15,880 --> 00:32:21,040
He he published his his 
criterion and it's derived from 

515
00:32:21,040 --> 00:32:25,920
the entropy of information 
criteria, but it's applied to a 

516
00:32:25,920 --> 00:32:29,560
kind of betting process or 
investing process and. 

517
00:32:29,880 --> 00:32:35,480
This last time right like the 
criterion is, is a way to to 

518
00:32:35,480 --> 00:32:41,680
calculate your your portfolio 
allocation over a certain amount

519
00:32:41,680 --> 00:32:45,840
of of time. 
So I'm right and I'm going to 

520
00:32:45,840 --> 00:32:48,800
show you some update and 
comparison. 

521
00:32:48,800 --> 00:32:53,680
Bitcoin versus gold, if you had 
a 2 asset portfolio and also a 

522
00:32:53,680 --> 00:32:57,560
different method that would 
include stocks also. 

523
00:32:58,200 --> 00:33:00,440
And you could do this with 
master against Bitcoin if you 

524
00:33:00,440 --> 00:33:03,520
want to, but I'm not going to 
show that today. 

525
00:33:04,080 --> 00:33:07,040
And this is just think about 
what's minted, what's mined and 

526
00:33:07,040 --> 00:33:09,520
what's a printed, right? 
Bitcoins minted. 

527
00:33:10,720 --> 00:33:13,520
Gold is mined because it's not 
really mined. 

528
00:33:13,520 --> 00:33:15,680
We don't, we don't dig into the 
ground we minted. 

529
00:33:16,800 --> 00:33:22,280
Yeah, these are 10 years of 
annual returns with 16 different

530
00:33:22,280 --> 00:33:26,480
asset classes, half of which are
debt kind of classes. 

531
00:33:26,480 --> 00:33:30,680
So they don't have huge returns.
So I'm going to throw those out 

532
00:33:30,680 --> 00:33:35,000
in the next chart. 
But Bitcoin from 2015 to 2024 

533
00:33:35,920 --> 00:33:39,640
won 8 out of 10 years. 
It was #1 in these amongst these

534
00:33:39,640 --> 00:33:43,680
16 asset classes. 
And you can see gold bounced 

535
00:33:43,680 --> 00:33:45,120
around. 
And of course, Bitcoin was the 

536
00:33:45,120 --> 00:33:49,520
biggest loser also too, too, 
when it had the the lowest 

537
00:33:49,520 --> 00:33:51,600
return. 
The gold is in dark green, so 

538
00:33:51,600 --> 00:33:56,280
you can see where the gold was. 
But now I, I took out the bond 

539
00:33:56,280 --> 00:33:59,560
once because they don't return a
lot and I so I've got 8 asset 

540
00:33:59,560 --> 00:34:03,760
classes here, Bitcoin, broad 
tech, large and small caps, real

541
00:34:03,760 --> 00:34:06,360
estate, gold, commodities, 
international equities. 

542
00:34:07,520 --> 00:34:09,360
And I apply this Kelly 
criterion. 

543
00:34:10,280 --> 00:34:13,840
Now the way it works is you look
at not how many years did it 

544
00:34:13,840 --> 00:34:17,320
come in first place, but you 
look at how many years did it 

545
00:34:17,920 --> 00:34:22,080
out did it outperform. 
So the first thing you can do is

546
00:34:22,280 --> 00:34:25,520
just cast it outperform cash and
you can do that with or without 

547
00:34:25,520 --> 00:34:29,880
a risk free rate for the cash. 
And for Bitcoin it was 8 times 

548
00:34:29,880 --> 00:34:33,480
out of 10. 
So this probability, which is 

549
00:34:33,480 --> 00:34:36,719
the first term in the Kelly 
fraction F is 0.8. 

550
00:34:38,560 --> 00:34:43,080
Then you have to subtract out 
your losses, but you divide your

551
00:34:43,080 --> 00:34:45,239
losses by the edge that you 
have. 

552
00:34:45,880 --> 00:34:48,480
So you actually get 2 edges in 
this formula. 

553
00:34:48,480 --> 00:34:51,639
The first edges if you win more 
than half of the time. 

554
00:34:51,639 --> 00:34:53,360
And that's the P and the Q, 
right? 

555
00:34:53,360 --> 00:34:57,360
The P is the win percentage, the
Q is the loss percentage. 

556
00:34:57,360 --> 00:35:01,400
P + Q is 1, but the B is the 
ratio. 

557
00:35:01,400 --> 00:35:06,800
If your wins are bigger than 
your losses, then that's a 

558
00:35:06,800 --> 00:35:11,640
second advantage. 
And so if if your wins and 

559
00:35:11,640 --> 00:35:13,960
losses were equal, you'd say P 
-, Q. 

560
00:35:13,960 --> 00:35:17,920
So if you had a processor where 
you won 70% of the time and you 

561
00:35:17,920 --> 00:35:22,800
lost 30% of the time, P -, Q 
would be 40% and your optimal 

562
00:35:22,800 --> 00:35:26,880
portfolio allocation would be 
40%. 

563
00:35:27,840 --> 00:35:31,440
That would be your your the 
maximizing the growth of your 

564
00:35:31,440 --> 00:35:34,640
log wealth. 
But you can allocate more if 

565
00:35:34,640 --> 00:35:36,360
your wins outperform your 
losses. 

566
00:35:36,400 --> 00:35:39,280
Well, for Bitcoin, they do very 
substantially. 

567
00:35:39,280 --> 00:35:43,040
In fact, the average win was 
close to 300%. 

568
00:35:44,280 --> 00:35:49,400
The average loss was about 70%. 
So this B ratio is 44.2. 

569
00:35:50,080 --> 00:35:54,960
That means the F is 75%. 
So it would tell you that in a 2

570
00:35:54,960 --> 00:35:59,240
asset portfolio with dollars, 
you can allocate 75% to Bitcoin.

571
00:35:59,680 --> 00:36:04,920
Now in the next two columns I 
make adjustment for earning AT 

572
00:36:04,920 --> 00:36:07,520
bill rate and I set it to fours 
or risk free rate. 

573
00:36:07,800 --> 00:36:09,840
It's still 75% in the case of 
Bitcoin. 

574
00:36:10,920 --> 00:36:14,120
If you go through this for 
technology, you had a high win 

575
00:36:14,120 --> 00:36:20,200
rate in recent years and it 
comes out to be 6065 percent, 

576
00:36:20,200 --> 00:36:23,720
66% depending on whether you 
apply the risk free rate. 

577
00:36:24,800 --> 00:36:28,360
Small caps didn't work out at 
all once you've applied the risk

578
00:36:28,360 --> 00:36:32,240
free rate. 
Large caps were OK because 

579
00:36:32,240 --> 00:36:34,320
they're not that different from 
broad tech lately. 

580
00:36:35,320 --> 00:36:40,440
And after the risk free rate it 
would be a 40% maximum 

581
00:36:40,440 --> 00:36:43,240
allocation in A2 asset portfolio
with dollars. 

582
00:36:43,240 --> 00:36:48,040
Real estate was a loser once you
risk free rate, and gold did 

583
00:36:48,040 --> 00:36:50,040
well. 
But once you subtract the risk 

584
00:36:50,040 --> 00:36:53,080
free rate, you have a problem. 
Because look, gold had an 

585
00:36:53,080 --> 00:36:56,640
average win of 13%, but it had 
an average loss of 8%. 

586
00:36:56,880 --> 00:37:00,360
If you subtract 4% from this, 
it's down to 9. 

587
00:37:00,360 --> 00:37:03,520
And if you subtract 4% from, 
this is -12 right? 

588
00:37:04,120 --> 00:37:06,160
Yeah. 
So even. 

589
00:37:06,160 --> 00:37:10,640
Clue include this right, because
the risk free rate is of the 4% 

590
00:37:10,640 --> 00:37:16,040
of bonds is, is is like a like a
classic place to park your money

591
00:37:16,040 --> 00:37:18,560
basically. 
So that that's, that's yeah. 

592
00:37:18,560 --> 00:37:24,720
So that's kind of a, an assured 
return of 4% that you use as a 

593
00:37:25,920 --> 00:37:28,360
let's call it an existing 
alternative, right? 

594
00:37:28,360 --> 00:37:32,120
It's not necessarily the a good 
alternative, but it exists if 

595
00:37:32,120 --> 00:37:35,520
you want to take air quotes less
risk. 

596
00:37:36,200 --> 00:37:39,120
You know, that's another debate 
if, if T-bills are risky, but 

597
00:37:39,160 --> 00:37:42,280
you know, nominally there's a 4%
return. 

598
00:37:42,800 --> 00:37:46,480
And you actually have to 
allocate some to cash because it

599
00:37:46,560 --> 00:37:52,360
it OK, you take the best asset, 
Bitcoin, you shouldn't be 

600
00:37:52,360 --> 00:37:55,120
allocating more than 75% 
according to Kelly. 

601
00:37:55,960 --> 00:37:59,440
So the rest should be in cash, 
just T bill waiting for an 

602
00:37:59,440 --> 00:38:02,680
opportunity when the price pulls
back. 

603
00:38:02,720 --> 00:38:04,880
And the idea is that you 
rebalance, right? 

604
00:38:05,440 --> 00:38:07,880
And the rebalance window is 
very, very important. 

605
00:38:08,320 --> 00:38:10,640
So this is for an annual 
rebalance window. 

606
00:38:11,120 --> 00:38:14,480
And for Bitcoin, the longer your
window is, the higher the Kelly 

607
00:38:14,480 --> 00:38:17,920
fraction. 
Actually, if you use four years,

608
00:38:18,040 --> 00:38:21,200
you'd have a Kelly fraction of 
100% because every four year 

609
00:38:21,200 --> 00:38:22,760
period has been a winning 
period. 

610
00:38:23,160 --> 00:38:25,520
Yeah, but the problem with doing
that is you'd only have four 

611
00:38:25,520 --> 00:38:27,720
data points, so your statistics 
are poor. 

612
00:38:28,320 --> 00:38:31,200
So the rebalancing is in bit in 
between, right? 

613
00:38:31,200 --> 00:38:35,520
So if, if the, if the, if the, 
if the price goes down, you go 

614
00:38:35,520 --> 00:38:40,080
below your 75% total allocation 
in your portfolio and you can 

615
00:38:40,080 --> 00:38:46,520
use the part of the 25% cash or 
well the cash you had to to to 

616
00:38:46,520 --> 00:38:50,200
buy more Bitcoin to get back to 
that allocation, right. 

617
00:38:50,200 --> 00:38:52,560
OK. 
That's that's the idea, yeah. 

618
00:38:53,120 --> 00:38:55,880
OK. 
Now Bitcoin, you know, we've 

619
00:38:55,880 --> 00:38:59,280
talked about a little bit about 
how the return actually drops 

620
00:38:59,280 --> 00:39:02,080
with time, and we had some crazy
years in the beginning, right, 

621
00:39:02,800 --> 00:39:04,440
that we don't expect to see 
again. 

622
00:39:04,440 --> 00:39:08,760
If we just go back to that slide
for a moment, this third one, 

623
00:39:08,760 --> 00:39:13,560
14149%, yeah, we don't expect to
see that again. 

624
00:39:13,560 --> 00:39:16,360
Here's another one, 300% Yeah, 
we might see that. 

625
00:39:17,160 --> 00:39:22,680
So I've also calculated with 
five years only just to mitigate

626
00:39:22,800 --> 00:39:24,920
or see how strong the effect 
was. 

627
00:39:25,960 --> 00:39:30,880
But it's great still. 
I mean, the B drops to 2.4, but 

628
00:39:30,920 --> 00:39:36,600
the the computed F is now 71%. 
It didn't drop that much at all.

629
00:39:37,240 --> 00:39:41,400
Now if you were to pick just 
three assets, Bitcoin, broad 

630
00:39:41,400 --> 00:39:45,720
tech in gold and look at their F
values and then normalize 

631
00:39:45,720 --> 00:39:51,600
everything, it would say 52% 
Bitcoin, 42% broad tech, 6% 

632
00:39:51,640 --> 00:39:53,520
gold. 
Over 10 years, right? 

633
00:39:53,520 --> 00:39:55,000
That's good to add. 
Over those last. 

634
00:39:55,160 --> 00:39:56,560
May. 
Yeah, exactly. 

635
00:39:56,560 --> 00:39:58,120
Yeah. 
OK, OK. 

636
00:39:58,120 --> 00:40:03,360
What about this year? 
This year we we have to adjust 

637
00:40:03,360 --> 00:40:07,000
for and we say, OK, we didn't 
get another. 

638
00:40:08,080 --> 00:40:09,920
You know we're down this year, 
right? 

639
00:40:10,200 --> 00:40:12,640
So instead of being 8 out of 10,
we're 8 out of 11. 

640
00:40:13,360 --> 00:40:16,960
So that drops us to 73% win 
rate. 

641
00:40:18,280 --> 00:40:25,600
But interestingly, the B value 
goes up because the loss here is

642
00:40:25,600 --> 00:40:28,840
based on a totally two years and
they were very big losses, 

643
00:40:28,840 --> 00:40:31,520
whereas this year we've got a 
loss, it's very small. 

644
00:40:32,160 --> 00:40:34,800
We're down like 5% or something 
for the year. 

645
00:40:35,600 --> 00:40:39,920
Yes, we average those 3. 
Instead of it being a 70% 

646
00:40:39,920 --> 00:40:42,560
average, it's like a 40 or 45% 
average. 

647
00:40:43,200 --> 00:40:47,520
So then the ratio with the 
winds, the winds are still the 

648
00:40:47,520 --> 00:40:49,200
same and now the B value goes 
up. 

649
00:40:49,840 --> 00:40:53,000
So the F value doesn't drop that
much, but it does drop to about 

650
00:40:53,320 --> 00:40:58,320
.6868% allocation. 
That's a 2 asset portfolio 

651
00:40:58,320 --> 00:41:02,040
against dollars. 
And if you just say, well, just 

652
00:41:02,040 --> 00:41:04,960
the past four years, then you do
get a little lower value, you 

653
00:41:04,960 --> 00:41:07,800
get about 60%. 
OK. 

654
00:41:07,920 --> 00:41:10,080
I think this is a good noob 
question. 

655
00:41:10,120 --> 00:41:14,720
You said the wins, the the wins 
are still high, right? 

656
00:41:14,720 --> 00:41:21,080
And I think a classic like 
investment finance disclaimer is

657
00:41:21,080 --> 00:41:24,000
right like past performance is 
not indicative of the of the 

658
00:41:24,000 --> 00:41:27,600
future, right. 
So I think a good noob question 

659
00:41:27,600 --> 00:41:35,560
would be why are you using still
the 292% of of the past? 

660
00:41:36,320 --> 00:41:39,080
You know, like how, how can you 
take that towards the future, if

661
00:41:39,080 --> 00:41:40,760
that makes sense? 
That is sounds like a noob 

662
00:41:40,760 --> 00:41:43,120
question. 
So it's a good question, you 

663
00:41:43,120 --> 00:41:43,880
know what I mean? 
Like how? 

664
00:41:44,080 --> 00:41:46,440
Why can't you still use that 
number? 

665
00:41:47,280 --> 00:41:49,720
First of all, you've got 
statistics of small numbers, so 

666
00:41:49,720 --> 00:41:51,960
you kind of have to live with 
what you've got, right? 

667
00:41:52,280 --> 00:41:55,560
And over time they roll off. 
But if you don't like that, look

668
00:41:55,560 --> 00:41:57,720
at the last row. 
That's just five years. 

669
00:41:58,280 --> 00:42:01,880
And so they're the win. 
The average win is 155%. 

670
00:42:01,880 --> 00:42:04,000
So it's only half as large, 
right? 

671
00:42:04,960 --> 00:42:11,160
And the average loss is 64%. 
And then if I fold in, you know,

672
00:42:11,160 --> 00:42:16,480
that's a ratio of 2.41. 
But if I fold in the latest 5% 

673
00:42:16,800 --> 00:42:22,560
loss, that ratio actually jumps 
up to 4.4 because it gets weight

674
00:42:22,560 --> 00:42:25,880
weighted in with these other two
numbers that gave you this one. 

675
00:42:26,320 --> 00:42:28,120
Actually that's one number. 
They gave you this one. 

676
00:42:29,120 --> 00:42:33,000
So the 64% against average with 
the -5%. 

677
00:42:33,960 --> 00:42:40,560
And then this ratio goes up. 
So it does drop from .71 down to

678
00:42:40,560 --> 00:42:43,080
.59. 
But it's not an enormous drop. 

679
00:42:43,720 --> 00:42:46,440
But it gives you a feeling and 
you can, you know, try these. 

680
00:42:46,440 --> 00:42:50,480
And then, but I would say the 
one thing is people should not 

681
00:42:50,480 --> 00:42:55,440
go out beyond the edge because 
the curve kind of rises like 

682
00:42:55,440 --> 00:42:58,760
this and falls sort of steeply 
if if you get out over your skis

683
00:42:58,760 --> 00:43:01,600
on this. 
It's basically quantifying kind 

684
00:43:01,600 --> 00:43:05,640
of like the risk appetite for a 
person who holds Bitcoin 

685
00:43:05,640 --> 00:43:10,080
depending on the time frame that
they look at Bitcoin, right? 

686
00:43:10,080 --> 00:43:15,120
So if you look at it, if your 
outlook is five years, you know 

687
00:43:15,120 --> 00:43:17,720
it's you're, you're probably 
towards the 59%, right? 

688
00:43:17,720 --> 00:43:21,760
If your outlook is 10 years, 
then you know you could take the

689
00:43:21,800 --> 00:43:25,960
risk again air quotes to like 
75% allocation if if that is the

690
00:43:25,960 --> 00:43:30,360
frame of reference that you 
constantly want to use, not only

691
00:43:30,360 --> 00:43:33,640
looking back but but also 
looking looking forward, right? 

692
00:43:34,200 --> 00:43:35,360
Right. 
OK. 

693
00:43:36,320 --> 00:43:41,960
And this actually shows how the 
Kelly fraction develops for two 

694
00:43:41,960 --> 00:43:45,600
cases. 1 is where you have 
annual window and the other is 

695
00:43:45,600 --> 00:43:50,640
you have quarterly window and 
it's a little bit longer series.

696
00:43:50,640 --> 00:43:56,640
It goes back like 14 years in 
the quarterly case and about 12 

697
00:43:56,640 --> 00:44:05,440
years in the other case. 
And yeah, I mean sort of 1213 

698
00:44:05,440 --> 00:44:09,200
years and you can see that in 
the beginning it jumps up to 

699
00:44:09,200 --> 00:44:13,400
100% and it drops down and it 
moves up again depending on when

700
00:44:13,400 --> 00:44:18,800
the bubbles hit etcetera. 
But it settles down and for the 

701
00:44:18,800 --> 00:44:24,440
annual it ends up essentially at
at around 75%. 

702
00:44:25,920 --> 00:44:30,560
This does not subtract out the 
risk free rate, I don't think. 

703
00:44:31,120 --> 00:44:35,360
Yeah, I don't think it does. 
And then the other one settles 

704
00:44:35,360 --> 00:44:38,760
at around 50%. 
So if you're using quarterly 

705
00:44:38,760 --> 00:44:42,960
rebalancing, you are going to 
have a lower allocation than if 

706
00:44:42,960 --> 00:44:45,360
you use annual rebalancing. 
Yeah, yeah, yeah. 

707
00:44:45,840 --> 00:44:49,960
Because you're just more likely 
to win if you've looked at a 

708
00:44:49,960 --> 00:44:54,520
full year. 
Yeah, this is illustrating my 

709
00:44:54,520 --> 00:44:57,760
point, right. 
Just depending on how and when 

710
00:44:57,760 --> 00:45:00,640
you want to allocate, right? 
Or like kind of like rebalance 

711
00:45:00,640 --> 00:45:04,360
your risk, so to say. 
It's funny because this shows 

712
00:45:04,360 --> 00:45:10,000
that huddling, right? 
Just huddling is, is, is is 

713
00:45:10,000 --> 00:45:14,400
giving you a better result also,
right. 

714
00:45:14,640 --> 00:45:18,400
And that, that I, I find one of 
the most fascinating things 

715
00:45:18,400 --> 00:45:21,520
about this, like the math backs 
up the meme. 

716
00:45:22,520 --> 00:45:26,720
So just huddle and you don't 
have to try to like time, time 

717
00:45:26,720 --> 00:45:30,600
the market and, and, and 
constantly do this, this, this 

718
00:45:30,600 --> 00:45:32,360
reallocation. 
But again, like that is 

719
00:45:33,200 --> 00:45:35,760
connected to what I said before.
It just depends on your 

720
00:45:36,040 --> 00:45:39,000
understanding and your own 
conceptualization of what 

721
00:45:39,000 --> 00:45:42,640
Bitcoin is by itself. 
And then also compared to all 

722
00:45:42,640 --> 00:45:45,640
the other things that you, you 
could invest in, right? 

723
00:45:45,640 --> 00:45:49,320
So I, I, you know, there's, 
there's different pieces of 

724
00:45:49,320 --> 00:45:54,200
understanding and, and, and 
weight also that eventually help

725
00:45:54,200 --> 00:45:57,720
a person create their own 
investment thesis and allocation

726
00:45:57,720 --> 00:46:00,240
and and risk appetite. 
But I, I think it's very 

727
00:46:00,240 --> 00:46:04,760
interesting that the the math 
connects back to, to the meme. 

728
00:46:04,760 --> 00:46:09,920
So huddling is yeah, preferred 
that sense. 

729
00:46:09,920 --> 00:46:12,720
Yeah. 
This is a different technique 

730
00:46:12,920 --> 00:46:14,960
and it gives somewhat similar 
results. 

731
00:46:16,280 --> 00:46:19,720
It's called MVSK and it looks, 
it's kind of like sharp ratios, 

732
00:46:19,720 --> 00:46:24,040
but it adds skew and kurtosis, 
which is the S and the K and you

733
00:46:24,040 --> 00:46:26,440
do the same thing. 
You take out the parallel trend 

734
00:46:26,440 --> 00:46:31,160
and then look at the residuals. 
And this is showing the 

735
00:46:31,160 --> 00:46:35,120
percentage in a three asset 
portfolio actually with both 

736
00:46:35,120 --> 00:46:41,280
gold and stocks. 
And even then, you're above 50% 

737
00:46:41,280 --> 00:46:45,280
in most cases. 
And what you have on these two 

738
00:46:45,280 --> 00:46:48,360
axes is the skew and the 
kurtosis weight. 

739
00:46:49,520 --> 00:46:53,920
So if you look at the one for 
the beta, that's how much weight

740
00:46:53,920 --> 00:46:58,880
you want to put on the skew, you
know, which is the moment. 

741
00:46:59,920 --> 00:47:04,120
This is envy is mean and 
variance, right? 

742
00:47:04,800 --> 00:47:07,480
So these are the moments and the
skew is the next moment. 

743
00:47:07,880 --> 00:47:10,320
And then how much you want to 
weight the kurtosis. 

744
00:47:10,320 --> 00:47:12,440
And that's the Lambda. 
So if you just say 1:00 and 

745
00:47:12,440 --> 00:47:16,680
1:00, you're going to be 58% 
even in a three asset portfolio 

746
00:47:16,680 --> 00:47:21,080
with with golden stocks. 
OK, But I want to move on 

747
00:47:21,080 --> 00:47:23,240
because I want to get to the log
periodic stuff. 

748
00:47:24,000 --> 00:47:28,320
That's just Buffett saying don't
over diversify. 

749
00:47:29,160 --> 00:47:32,480
You know, if you know what 
you're doing, you can huddle. 

750
00:47:34,080 --> 00:47:37,640
OK, this is Bitcoin against the 
dollar. 

751
00:47:37,640 --> 00:47:44,920
It's a log, log chart slope 
5.75.9 depending on whether you 

752
00:47:44,920 --> 00:47:49,200
use ordinary least squares or 
whether you use quantile. 

753
00:47:49,200 --> 00:47:53,320
There's just two parameters, you
know, there's a constant in 

754
00:47:53,320 --> 00:47:55,880
front of everything. 
And then the K is the power law 

755
00:47:55,880 --> 00:48:00,120
index, which is very similar for
the two techniques. 

756
00:48:00,160 --> 00:48:04,080
And then you can see the 
projections there for December 

757
00:48:04,400 --> 00:48:07,680
of next year. 
If you're on the mean or the 

758
00:48:07,680 --> 00:48:12,320
median for the QR, you'd be 
around 160,000 a year from now. 

759
00:48:13,720 --> 00:48:16,600
Yeah. 
And maybe maybe that's not this 

760
00:48:16,600 --> 00:48:18,400
slide, we probably have another 
slide. 

761
00:48:18,400 --> 00:48:23,560
But what you sent me upfront is 
that you know, when you when you

762
00:48:24,280 --> 00:48:32,080
talk about the existence of of 
bubbles and basically put aside 

763
00:48:32,080 --> 00:48:36,880
the four year cycle frame and 
you just look at the at the 

764
00:48:36,880 --> 00:48:39,520
math, right? 
You say your timing suggests 

765
00:48:39,520 --> 00:48:44,680
like a very strong 2026 in the 
in the second-half, like leading

766
00:48:44,680 --> 00:48:51,000
towards a peak more like mid 
2027 and then something similar 

767
00:48:51,000 --> 00:48:53,960
for gold. 
But now because we're under the 

768
00:48:54,040 --> 00:48:57,880
the power line trend, basically 
what you're saying, what the 

769
00:48:57,880 --> 00:49:02,800
math shows you is that that we 
are, yeah, looking towards a 

770
00:49:02,800 --> 00:49:07,240
catch up back to to the trend 
and then and then back above, 

771
00:49:07,720 --> 00:49:08,600
right. 
Is that correct? 

772
00:49:08,960 --> 00:49:10,560
Right. 
And, and to set up that 

773
00:49:10,560 --> 00:49:14,480
discussion, note first that the 
first bubble was in 2011, the 

774
00:49:14,480 --> 00:49:18,040
next one was 2013. 
So that gap was a little over 2 

775
00:49:18,040 --> 00:49:19,800
years, nothing like a four year 
gap. 

776
00:49:20,680 --> 00:49:25,640
Then 2013 to 2017. 
Yes, you had four years, 2017 to

777
00:49:25,640 --> 00:49:28,640
2021. 
It actually was less than four 

778
00:49:28,640 --> 00:49:31,400
years. 
It was more like 3.3 because the

779
00:49:31,400 --> 00:49:36,480
left shoulder in April is higher
relative to the regression line 

780
00:49:37,240 --> 00:49:40,800
than the right shoulders. 
Yeah, that was more like a 

781
00:49:40,800 --> 00:49:42,880
double top also. 
Right, double top. 

782
00:49:43,640 --> 00:49:48,520
OK, how to calculate the growth?
The formula is you take the 

783
00:49:48,520 --> 00:49:53,040
ratio of ages, you raise it to 
the K power and you subtract 1 

784
00:49:53,040 --> 00:49:54,800
and that gives you the 
percentage growth. 

785
00:49:55,560 --> 00:50:01,680
So if you want to look at one 
year is t + 1 / t raised to the 

786
00:50:01,680 --> 00:50:07,440
K power -1 And if you do what's 
called a Taylor series 

787
00:50:07,440 --> 00:50:11,520
expansion, you kind of only need
the 1st 2 terms and first term 

788
00:50:11,520 --> 00:50:16,560
is just K / t. 
So if K right now is 5.8 and our

789
00:50:16,560 --> 00:50:24,280
age is 17, that gives you 34.6% 
point 346. 

790
00:50:25,360 --> 00:50:27,880
And then there's a second order 
term that goes as a square of 

791
00:50:27,880 --> 00:50:31,400
that K / T, it gives you another
6%. 

792
00:50:32,160 --> 00:50:38,320
So if K is 5.87, you're getting 
about 41% as the projection for 

793
00:50:38,320 --> 00:50:43,120
the next year for the main 
trend, how much you would expect

794
00:50:43,120 --> 00:50:45,520
the main trend to grow? 
So that's kind of the fair value

795
00:50:45,520 --> 00:50:49,320
price on trend. 
Yeah, there's a trick that you 

796
00:50:49,320 --> 00:50:52,400
can do. 
If they use the OLS index, 

797
00:50:52,400 --> 00:50:56,560
that's 5.68. 
If you increase the age by 50%, 

798
00:50:56,560 --> 00:50:59,520
you're raising 1.5 to the 5.68 
power. 

799
00:50:59,520 --> 00:51:03,880
That's exactly 1010.00, just by 
coincidence. 

800
00:51:04,480 --> 00:51:08,360
So increase the age by 50%, you 
expect 10 times the price. 

801
00:51:09,080 --> 00:51:15,680
So if we're age 17 now you add 8
1/2 years, you're at 2034.5 

802
00:51:16,320 --> 00:51:21,480
because we're at the beginning 
of 2026 and you expect over 

803
00:51:21,480 --> 00:51:23,080
1,000,000 on the power log 
trend. 

804
00:51:23,200 --> 00:51:25,680
Because right now the power log 
trend is about it's a little 

805
00:51:25,680 --> 00:51:30,640
over 110,000. 
And then another 12.75 years 

806
00:51:30,640 --> 00:51:34,560
after that, you'd expect to be a
10 million or above 1 trend and 

807
00:51:34,560 --> 00:51:37,600
that would be early 2047. 
Yeah. 

808
00:51:38,360 --> 00:51:42,840
And on trend would also be. 
Is that the same as fair value 

809
00:51:42,840 --> 00:51:43,960
then? 
Right, because it's? 

810
00:51:44,720 --> 00:51:47,360
Yeah, that's my fair value quote
UN quote. 

811
00:51:47,360 --> 00:51:52,680
Yeah, exactly. 
So the what does it say 2034 

812
00:51:52,680 --> 00:51:55,760
like half, Yeah. 
So I I think the estimates are 

813
00:51:55,760 --> 00:52:00,440
kind of between 2032 and 2035 
depending on like it could hit a

814
00:52:00,440 --> 00:52:07,240
million before, right, if it's 
in this above trend, right. 

815
00:52:08,320 --> 00:52:13,880
But basically you're saying 
within 10 years we are at a 

816
00:52:14,000 --> 00:52:18,160
million on the on the trend. 
Doesn't mean it could be a bit 

817
00:52:18,160 --> 00:52:20,160
over, doesn't mean it could be a
bit below. 

818
00:52:20,160 --> 00:52:25,120
But just like you now calculated
I think around what was the the 

819
00:52:25,120 --> 00:52:27,920
fair value now it's it's like 
over just over 100, right. 

820
00:52:30,120 --> 00:52:33,760
That would be the fair value at 
that at that point. 

821
00:52:33,760 --> 00:52:36,920
Yeah, right. 
And this sorry if you go back. 

822
00:52:36,920 --> 00:52:38,920
Yeah. 
And then because this kind of 

823
00:52:38,920 --> 00:52:43,960
shows the speed that you talked 
about before, right? 

824
00:52:43,960 --> 00:52:47,800
2047 the, the, the, the 10 
million. 

825
00:52:47,800 --> 00:52:54,160
So although when you look at the
power law and you, you see the 

826
00:52:54,160 --> 00:52:59,560
diminishing returns in 
percentages, the, the absolute 

827
00:52:59,560 --> 00:53:05,400
nominal amounts are are at at at
a totally different level, 

828
00:53:05,800 --> 00:53:06,720
right? 
Like so the. 

829
00:53:08,000 --> 00:53:11,880
Drops kind of a couple of 
percent as you go from age 17 to

830
00:53:11,880 --> 00:53:17,560
age 18, that kind of a thing. 
Yeah, but I mean more the the. 

831
00:53:18,960 --> 00:53:21,920
I don't know if the correct word
is exponential, but like just 

832
00:53:21,920 --> 00:53:26,040
the going from the one to 10 so 
you see it takes longer. 

833
00:53:26,440 --> 00:53:32,480
Yes. 
Right from 8 1/2 to 1275. 

834
00:53:33,880 --> 00:53:37,160
But it's still predictable. 
That's the whole point of the of

835
00:53:37,160 --> 00:53:41,280
the of the power law. 
And it's still rapid. 

836
00:53:41,680 --> 00:53:44,360
This just shows the stability of
the power law over time. 

837
00:53:44,360 --> 00:53:47,960
It started out noisy, you know, 
it shot up. 

838
00:53:48,280 --> 00:53:51,240
There's the big bubbles in 11 
and 2013. 

839
00:53:51,240 --> 00:53:54,280
And so it shot up above 10. 
It's just if you measured the 

840
00:53:54,280 --> 00:53:56,800
power law at any given time and 
you only had the date up till 

841
00:53:56,800 --> 00:54:01,360
then, what would you see? 
But by 2016, it dropped out to 

842
00:54:01,360 --> 00:54:03,960
six. 
And then since then it's been 

843
00:54:04,000 --> 00:54:10,680
relatively stable around, you 
know, 5.65.7, 5.8 kinds of 

844
00:54:10,680 --> 00:54:14,120
numbers. 
Right now it's 5.68 for the 

845
00:54:14,120 --> 00:54:19,040
ordinarily squared. 
And this band around here shows 

846
00:54:19,040 --> 00:54:21,560
the uncertainty which has gotten
smaller and smaller. 

847
00:54:22,480 --> 00:54:25,120
This shows how the volatility 
has come down. 

848
00:54:25,200 --> 00:54:27,680
Sorry, that's what I remember 
from our last conversation is 

849
00:54:27,680 --> 00:54:31,400
that really struck me that that 
that is also why I say like, OK,

850
00:54:31,400 --> 00:54:35,080
this is not an opinion, right? 
It's not an opinion. 

851
00:54:35,080 --> 00:54:37,360
Like sometimes you see people to
say, oh, the power law is an 

852
00:54:37,360 --> 00:54:41,520
opinion. 
But this actually shows almost 

853
00:54:41,520 --> 00:54:45,640
like a constant in, in the level
of certainty slash slash 

854
00:54:45,640 --> 00:54:47,640
uncertainty, however you want to
define it, right? 

855
00:54:47,640 --> 00:54:51,440
But I think that actually is 
extremely interesting. 

856
00:54:51,440 --> 00:54:57,080
Like this is not a random, 
random formula or calculation 

857
00:54:57,080 --> 00:55:01,440
that that you're following. 
Apparently it is something that 

858
00:55:02,360 --> 00:55:05,880
stays predictable within a 
certain range, right? 

859
00:55:05,880 --> 00:55:09,400
Like there's the. 
Yeah, it's, you know, to go into

860
00:55:09,400 --> 00:55:13,920
the physics of it a bit and the 
physics and networks, if the 

861
00:55:13,920 --> 00:55:18,720
networks have structure and they
develop like fat nodes, you 

862
00:55:18,720 --> 00:55:20,960
know, where you've got some fat 
wallets or you've got some 

863
00:55:20,960 --> 00:55:23,800
exchanges and so forth. 
And they have preferential 

864
00:55:24,080 --> 00:55:28,000
connectivity that tends to give 
rise to parallel behavior. 

865
00:55:28,000 --> 00:55:31,480
And they, it's stabilizing the 
system actually so that it 

866
00:55:31,480 --> 00:55:35,280
doesn't behave in an exponential
manner because exponentials run 

867
00:55:35,280 --> 00:55:38,080
away on the upside, but then 
they crash on the downside. 

868
00:55:38,760 --> 00:55:41,840
So it's exponential can be in 
both directions, right? 

869
00:55:43,520 --> 00:55:50,000
And this is like a system that's
operating kind of at the edge of

870
00:55:50,000 --> 00:55:52,120
stability, but it's self 
regulating. 

871
00:55:52,800 --> 00:55:57,360
And you can model it as having 
this kind of spring like motion 

872
00:55:57,880 --> 00:56:01,560
where you get liquidity waves 
come in, it moves up, you get a 

873
00:56:01,560 --> 00:56:04,840
bubble, but you get liquidity 
absorption and you get 

874
00:56:04,840 --> 00:56:06,720
restoration back to the power 
law. 

875
00:56:06,720 --> 00:56:10,000
And you could model it with 
dynamics and include a spring 

876
00:56:10,000 --> 00:56:12,520
like term to restore. 
OK. 

877
00:56:12,520 --> 00:56:16,800
This just shows though that the 
volatility has come down and not

878
00:56:16,800 --> 00:56:18,320
for the points that are below 
the line. 

879
00:56:18,320 --> 00:56:24,120
If you split into like you can 
split into two bell curves, 1 is

880
00:56:24,120 --> 00:56:27,040
for the bubbles and one is for 
the core behavior. 

881
00:56:27,040 --> 00:56:30,200
But essentially, and what you 
find is the volatility has been 

882
00:56:30,200 --> 00:56:33,960
flat, the green line for their 
core behavior, but the bubbles, 

883
00:56:33,960 --> 00:56:38,000
it's been coming down. 
So it, you know, it was a factor

884
00:56:38,000 --> 00:56:43,360
of 3 and it's cut in half to a 
factor of 1 and a half, 1.6. 

885
00:56:44,240 --> 00:56:45,720
This shows the same kind of 
thing. 

886
00:56:45,720 --> 00:56:49,720
It's basically come down as a 
reciprocal of time. 

887
00:56:50,360 --> 00:56:55,160
And this is now looking at the 
bubbles, setting a threshold and

888
00:56:55,160 --> 00:56:59,040
saying you have to be above a 
certain threshold of .2 in the 

889
00:56:59,040 --> 00:57:03,480
log 10, which is the current 1 
standard deviation and you need 

890
00:57:03,480 --> 00:57:07,240
to have at least a 10 day 
duration. 

891
00:57:07,240 --> 00:57:11,680
And when you do that, you see a 
bunch of tiny bubbles and anti 

892
00:57:11,680 --> 00:57:15,040
bubbles, you know, both, both 
directions, but they're only 

893
00:57:15,040 --> 00:57:19,480
four that really stand out and 
they're the ones we all know in 

894
00:57:19,480 --> 00:57:25,240
2011, 2013, 27, 142021. 
If you take out the power law, 

895
00:57:25,240 --> 00:57:29,800
you get the lower chart and you 
can approximate the energy by 

896
00:57:29,800 --> 00:57:33,960
drawing these triangles. 
And the the triangle height and 

897
00:57:33,960 --> 00:57:37,240
width is just measuring what's 
above the green dashed line. 

898
00:57:37,240 --> 00:57:40,920
So it's only if it went above 
the threshold that it's 

899
00:57:40,920 --> 00:57:43,560
represented by the triangle. 
And you see the other things are

900
00:57:43,560 --> 00:57:47,920
just noise pretty much, although
there are fewer and fewer even 

901
00:57:47,920 --> 00:57:51,120
of the noisy ones. 
And the energy has gone down in 

902
00:57:51,120 --> 00:57:55,520
the bubbles and the distance 
between them is about 2 1/2 

903
00:57:55,520 --> 00:57:59,480
years, four years and about 3.3.
And we've had no bubbles since 

904
00:57:59,480 --> 00:58:03,200
mid 2022. 
So I believe the four year cycle

905
00:58:03,200 --> 00:58:07,000
is invalidated by two things. 
One is 2011, which everyone 

906
00:58:07,000 --> 00:58:12,800
likes to ignore, and then that 
we've had no bubble in 2025 S. 

907
00:58:12,800 --> 00:58:18,600
Translation would be like like 
bubbles up and down are noise 

908
00:58:19,040 --> 00:58:21,880
right? 
Then the signal is basically a a

909
00:58:22,160 --> 00:58:25,200
a constant growth. 
You don't. 

910
00:58:25,480 --> 00:58:28,120
There is one. 
Direction you don't get big anti

911
00:58:28,120 --> 00:58:32,520
bubbles. 
In other words what you get is 

912
00:58:32,960 --> 00:58:37,000
you get bubble motion up and 
then restore to the power law 

913
00:58:37,000 --> 00:58:39,240
and below the power law but not 
as far. 

914
00:58:40,120 --> 00:58:45,120
So if you say your threshold is 
is .2 in log space, you don't 

915
00:58:45,120 --> 00:58:49,680
get below that very much. 
In other words, the right tails 

916
00:58:49,680 --> 00:58:51,640
a lot bigger than the left tail,
right. 

917
00:58:52,640 --> 00:58:56,080
You can fit a bubble with this 
large periodic power law that's 

918
00:58:56,080 --> 00:59:01,280
been popularized by Cernad for a
variety of phenomena, including 

919
00:59:01,280 --> 00:59:05,120
financial markets. 
This was a projection I did in 

920
00:59:05,120 --> 00:59:10,720
July and it said we could get a 
peak in in mid-september. 

921
00:59:10,720 --> 00:59:12,600
It turned out to be early 
October. 

922
00:59:13,240 --> 00:59:16,520
And so that was one case. 
When it's right, it's pretty 

923
00:59:16,520 --> 00:59:19,520
tricky to use this thing because
it has seven parameters. 

924
00:59:20,240 --> 00:59:22,640
So you need to always be 
rechecking and tested on 

925
00:59:22,640 --> 00:59:26,760
different scales. 
But it's it's this long periodic

926
00:59:26,760 --> 00:59:31,880
parallel that's was the 
motivator for how you fit the 

927
00:59:31,880 --> 00:59:34,960
whole series of bubbles. 
And actually Giovanni did this 

928
00:59:34,960 --> 00:59:39,880
back in 2019. 
And so we only had the 2011, 

929
00:59:39,880 --> 00:59:44,800
2013, 2017 large bubbles. 
And he fits something like this,

930
00:59:45,680 --> 00:59:50,440
but it's a slightly different 
formula because with the one 

931
00:59:50,440 --> 00:59:53,800
that I showed you before, it 
works up to a critical time. 

932
00:59:53,800 --> 00:59:55,840
And then the idea is that 
there's a crash. 

933
00:59:56,960 --> 01:00:01,400
And we kind of saw that, right? 
And in October, in this case, 

934
01:00:01,400 --> 01:00:06,760
you just run time forward and so
you get these waves going 

935
01:00:06,760 --> 01:00:09,800
forward. 
And so he matched the 2011, 

936
01:00:09,800 --> 01:00:13,840
2013, 2017, not necessarily the 
peaks, but when they occurred 

937
01:00:14,440 --> 01:00:20,040
and his projection that the next
one would be at age 18, actually

938
01:00:20,040 --> 01:00:22,880
17.96. 
And he's got it right there. 

939
01:00:22,880 --> 01:00:26,520
He's got the X value, it's the 
log of number of days, and it 

940
01:00:26,520 --> 01:00:34,080
works out to be 18.0 or 17.96. 
Now I've now got six years more 

941
01:00:34,080 --> 01:00:37,280
of data, so I've got a somewhat 
more precise reading on this, 

942
01:00:38,240 --> 01:00:42,160
but the spirit is the same and 
the idea that it's long 

943
01:00:42,160 --> 01:00:46,600
periodic, that the spacing 
interval grows by roughly a 

944
01:00:46,600 --> 01:00:53,280
factor of 2 and we the age went 
from 2.45 to 4.9 to 9. 

945
01:00:53,280 --> 01:00:56,760
And so you can see that the 
bubbles are getting further and 

946
01:00:56,760 --> 01:00:59,360
further apart. 
Yeah, this is interesting, 

947
01:00:59,360 --> 01:01:02,360
right? 
Because this is what people also

948
01:01:02,360 --> 01:01:11,200
talk about with regard to gold 
that I I don't have the the the 

949
01:01:11,320 --> 01:01:16,120
periods on top of mind, but 
there was basically was that the

950
01:01:16,120 --> 01:01:19,640
introduction of the gold ETFs. 
I think that was it that that 

951
01:01:19,640 --> 01:01:24,720
they also talked about like gold
basically had a seven-year kind 

952
01:01:24,720 --> 01:01:28,800
of like a bull bull run. 
I found it interesting that 

953
01:01:28,920 --> 01:01:32,800
there is a certain behavior that
that you now show with Bitcoin 

954
01:01:32,800 --> 01:01:38,960
also that it's kind of like the,
the volatility dampens and the, 

955
01:01:39,120 --> 01:01:45,200
the space between the, the, the 
bubbles gets longer, which in my

956
01:01:45,200 --> 01:01:49,000
mind would translate to a good 
thing that that means like 

957
01:01:49,200 --> 01:01:51,960
Bitcoin is actually an 
established or becoming an 

958
01:01:51,960 --> 01:01:57,880
established asset. 
That is a, that is a like in, in

959
01:01:57,880 --> 01:02:01,440
a serious consideration for for 
people to, to, to put in their 

960
01:02:01,440 --> 01:02:03,760
portfolio, right. 
Like that, that whole argument 

961
01:02:03,760 --> 01:02:07,280
of, oh, it's volatile, etcetera.
That well that's basically this 

962
01:02:07,280 --> 01:02:12,200
graph I think showing that that 
that is a non argument 

963
01:02:12,320 --> 01:02:15,160
basically. 
Over time, I mean, you know. 

964
01:02:15,600 --> 01:02:19,040
Exactly you. 
You, you buy Bitcoin at the 

965
01:02:19,320 --> 01:02:22,360
volatility you can handle, 
right? 

966
01:02:22,720 --> 01:02:27,760
And so higher tiers of capital 
come in and their institutional 

967
01:02:27,760 --> 01:02:30,720
capital. 
There are two things that they 

968
01:02:30,720 --> 01:02:36,400
expect that they understand the 
volatility and can manage it. 

969
01:02:37,240 --> 01:02:39,920
And in general they would like 
lower volatility. 

970
01:02:39,920 --> 01:02:46,160
And the second is that Bitcoin 
is expensive enough that if they

971
01:02:46,160 --> 01:02:49,080
buy some that it makes a 
difference to their portfolio. 

972
01:02:49,760 --> 01:02:52,240
And This is why Apple hasn't 
bought a lot of Bitcoin yet 

973
01:02:52,240 --> 01:02:56,480
because they cannot change their
life by buying Bitcoin. 

974
01:02:56,760 --> 01:02:59,840
Sailor could change his life 
because he had a small company 

975
01:03:00,480 --> 01:03:06,400
by going all in. 
But as Bitcoin goes to higher 

976
01:03:06,400 --> 01:03:10,640
and higher value, it attracts 
higher tiers of capital. 

977
01:03:11,120 --> 01:03:14,280
And this is actually a dynamic 
behind this long periodic 

978
01:03:15,040 --> 01:03:18,720
behavior. 
You can model it with a simpler 

979
01:03:19,480 --> 01:03:24,520
kind of equation that has five 
terms and it's got this large 

980
01:03:24,520 --> 01:03:29,880
spacing parameter, which is 
Lambda, and it relates to the 

981
01:03:29,880 --> 01:03:32,760
angular frequency, which is in 
this cosine term. 

982
01:03:32,760 --> 01:03:36,360
It's cosine of a Omega, which is
an angular frequency. 

983
01:03:36,360 --> 01:03:39,880
And then there's a log of the 
time and there's a phase term. 

984
01:03:39,880 --> 01:03:43,640
So that's essentially what we're
modeling to time when when the 

985
01:03:43,640 --> 01:03:46,480
peaks happen. 
So in order to do that and 

986
01:03:46,480 --> 01:03:52,040
extract that Lambda value, I did
a 4A transform of the data. 

987
01:03:52,040 --> 01:03:56,920
First I determine the residuals.
I did this for both gold and 

988
01:03:56,920 --> 01:04:00,120
dollar, but this chart is 
Bitcoin measured against gold 

989
01:04:00,480 --> 01:04:03,400
because I thought, well, you 
know, I don't know for fun, 

990
01:04:03,400 --> 01:04:07,120
let's try it against gold 1st. 
And so these are just the 

991
01:04:07,120 --> 01:04:09,200
residuals. 
The power law is taken out. 

992
01:04:09,200 --> 01:04:13,040
I do the 4A transform and I find
that this fundamental parameter 

993
01:04:13,040 --> 01:04:15,360
Lambda has a value of two point 
O 7. 

994
01:04:16,640 --> 01:04:19,720
It's a 5.3 power law as I showed
you before. 

995
01:04:20,280 --> 01:04:24,840
And you can see the residuals 
are the peaks and the bubbles 

996
01:04:24,840 --> 01:04:26,520
are quite well defined and 
sharp. 

997
01:04:27,200 --> 01:04:33,520
And then the red lines are the 
fundamental behavior with this 

998
01:04:33,520 --> 01:04:35,880
parameter, Lambda equals 2 point
O 7. 

999
01:04:37,280 --> 01:04:40,680
And they you can see they line 
up right with the peaks and 

1000
01:04:40,680 --> 01:04:44,160
there's a face term and it's not
too hard to match the peaks. 

1001
01:04:44,880 --> 01:04:49,640
But once you've lined those up, 
where's the next peak? 

1002
01:04:49,960 --> 01:04:51,800
Well, it's out here way on the 
right. 

1003
01:04:51,800 --> 01:04:59,040
It's at age 18.4. 
So that's May twenty 27th and 

1004
01:04:59,040 --> 01:05:01,560
that's when you'd expect the 
next fundamental peak. 

1005
01:05:02,600 --> 01:05:05,680
So that explains 2011, 2013, 
2017. 

1006
01:05:05,680 --> 01:05:09,600
Well, what about 2021? 
People that play music know that

1007
01:05:09,920 --> 01:05:13,320
you know you have C and then you
have the next octave is a 

1008
01:05:13,320 --> 01:05:16,600
harmonic and you can have 
subharmonics. 

1009
01:05:16,600 --> 01:05:23,480
So you could have the lower 
octave and those are slower, so 

1010
01:05:23,480 --> 01:05:26,640
the first harmonics faster. 
And you see three, they actually

1011
01:05:26,640 --> 01:05:29,160
happen in this case, they happen
in between the red ones. 

1012
01:05:29,520 --> 01:05:31,520
They happen logarithmically in 
between. 

1013
01:05:31,520 --> 01:05:34,320
So there's like the square root 
of this two point O 7. 

1014
01:05:34,960 --> 01:05:39,320
So there are three blue vertical
lines marked and one of them 

1015
01:05:39,320 --> 01:05:43,640
lines up with the 2021 bubble 
and the other two don't work 

1016
01:05:43,640 --> 01:05:45,880
that well. 
They sort of kind of fit against

1017
01:05:45,880 --> 01:05:48,400
local peaks, but they're not 
very large amplitude. 

1018
01:05:49,640 --> 01:05:53,040
And then the one sub harmonic is
only one because it's slower 

1019
01:05:53,040 --> 01:05:57,880
appears and it does line up with
a little bubble roughly that 

1020
01:05:57,880 --> 01:06:00,520
happened in in the 2019 time 
frame. 

1021
01:06:02,400 --> 01:06:05,960
So I I suggest that this is a 
better explanation of what's 

1022
01:06:05,960 --> 01:06:13,240
going on than a four year cycle.
I think yeah, it's interesting 

1023
01:06:13,240 --> 01:06:17,320
because some some people would 
argue that's kind of like the 

1024
01:06:18,680 --> 01:06:24,000
the the 2021 bull market, you 
know, that people would expect 

1025
01:06:24,000 --> 01:06:27,480
when they follow the four year 
cycle was kind of like a muted 

1026
01:06:27,480 --> 01:06:32,440
thing kind of went up crazy. 
But it was it was also a weird 

1027
01:06:32,440 --> 01:06:35,080
period with with COVID and and 
stuff like that, right. 

1028
01:06:35,080 --> 01:06:38,120
So I think that's a general 
thing that people say like, oh, 

1029
01:06:38,160 --> 01:06:40,880
that was kind of like a muted 
bull market. 

1030
01:06:40,880 --> 01:06:43,160
So that's kind of what I'm 
recognizing here. 

1031
01:06:43,160 --> 01:06:48,000
And on the on the other side, 
what people kind of like say now

1032
01:06:48,000 --> 01:06:55,600
is, OK, maybe 2025 was almost 
like a bear, bear market year, 

1033
01:06:55,600 --> 01:06:57,840
right? 
Like that there hasn't even been

1034
01:06:58,640 --> 01:07:04,680
a bull type market let's let's 
call it, you know, a right a 

1035
01:07:04,680 --> 01:07:08,640
rising market that I don't think
bull and bear kind of applies to

1036
01:07:08,680 --> 01:07:10,800
to this. 
But I think that's what the 

1037
01:07:10,800 --> 01:07:14,240
graph does show, right. 
There's like this very long 

1038
01:07:14,800 --> 01:07:21,680
almost yeah, like a like a chop 
solidation type behavior here 

1039
01:07:22,720 --> 01:07:25,360
that I think a lot of people 
discuss. 

1040
01:07:25,760 --> 01:07:29,960
But you're showing that this is 
actually part of the 

1041
01:07:29,960 --> 01:07:34,360
mathematical behavior in a sense
that is not a logical to to see 

1042
01:07:34,360 --> 01:07:38,040
this, this kind of kind of what 
how I would translate this in in

1043
01:07:38,040 --> 01:07:41,320
my head, right. 
So people create certain 

1044
01:07:41,320 --> 01:07:44,080
narratives to talk about what is
happening. 

1045
01:07:45,040 --> 01:07:49,040
Whether that's correct, correct 
description or not, I don't, I 

1046
01:07:49,040 --> 01:07:50,440
don't know. 
But I think it's interesting 

1047
01:07:50,440 --> 01:07:55,520
that the math does kind of like 
match how people talk about the 

1048
01:07:55,720 --> 01:08:00,520
the market that we saw like 2021
or like what is happening now. 

1049
01:08:00,520 --> 01:08:03,880
And when I look at this, I think
that then there's some 

1050
01:08:03,880 --> 01:08:06,120
interesting times to come, 
right? 

1051
01:08:06,120 --> 01:08:13,160
Like the comment 12 1618 months?
18 months, yeah. 

1052
01:08:13,520 --> 01:08:18,399
Yeah. 
Now, this value of 2.0 is 

1053
01:08:19,319 --> 01:08:22,520
characteristic of a lot of other
physical processes. 

1054
01:08:22,920 --> 01:08:27,560
If you look at earthquakes, a 
typical land is 2 to 2.4. 

1055
01:08:28,040 --> 01:08:33,279
Rock fractures it's around 2. 
Fluid turbulence cascades around

1056
01:08:33,279 --> 01:08:40,479
2, tremors and volcanoes, and 
even the financial bubbles. 

1057
01:08:40,479 --> 01:08:44,560
If you look at the tail 
distributions even in stocks, 

1058
01:08:44,560 --> 01:08:50,200
you can find these in ecology 
and in statistical physics. 

1059
01:08:51,040 --> 01:08:55,600
They all kind of around 2, or 
you know, not too far removed 

1060
01:08:55,600 --> 01:09:00,920
from 2 for this parameter. 
I also did this with a technique

1061
01:09:00,920 --> 01:09:05,120
called wavelets and it found 
several wavelets, but they were 

1062
01:09:05,120 --> 01:09:08,479
all between 2.0 and 2.1, so they
were consistent. 

1063
01:09:09,160 --> 01:09:12,439
Broad idea is that you're seeing
the capital inflow come in 

1064
01:09:12,439 --> 01:09:16,560
discrete hierarchy tiers and it 
takes longer and longer for 

1065
01:09:16,560 --> 01:09:20,240
Bitcoin to have its price go up 
by a factor of 10 with the power

1066
01:09:20,240 --> 01:09:22,439
law. 
So it takes longer and longer to

1067
01:09:22,439 --> 01:09:25,960
get these big new entrants of 
capital, whether it be the 

1068
01:09:25,960 --> 01:09:30,680
treasury companies or the ETFs 
or earlier on hedge funds. 

1069
01:09:31,880 --> 01:09:36,040
And so when the price gets to a 
certain level, it kind of opens 

1070
01:09:36,040 --> 01:09:38,920
it up for the hedge funds to 
come in or later for the 

1071
01:09:38,920 --> 01:09:43,680
treasury companies come in. 
And that helps drive, you know, 

1072
01:09:43,680 --> 01:09:45,960
a bubble. 
And people kind of jump on when 

1073
01:09:45,960 --> 01:09:47,760
they see the price momentum as 
well. 

1074
01:09:48,880 --> 01:09:52,640
But eventually that's over, 
plays his hand and it comes 

1075
01:09:52,640 --> 01:09:55,880
back, you know, to blow the 
power law and then catches up to

1076
01:09:55,880 --> 01:09:58,920
the power law. 
When you say this is such a 

1077
01:09:58,920 --> 01:10:06,880
clean result, how, how surprised
are you by the fact that Bitcoin

1078
01:10:07,000 --> 01:10:12,600
again apparently behaves so 
predictably or like according to

1079
01:10:13,120 --> 01:10:15,840
almost natural law, right? 
Like I'd like the power law you 

1080
01:10:16,160 --> 01:10:19,720
you see in nature and that you 
know, my conclusion here is that

1081
01:10:20,000 --> 01:10:21,800
this is not a random thing, 
right? 

1082
01:10:21,800 --> 01:10:24,680
Like this is not a random 
product that this introduced 

1083
01:10:25,240 --> 01:10:28,640
into a market where, well, some 
people might see the value and 

1084
01:10:28,640 --> 01:10:31,360
buy it and other people's don't,
other people don't, right? 

1085
01:10:31,360 --> 01:10:37,520
Like there's not really, well, 
there's a surprising amount of 

1086
01:10:37,520 --> 01:10:39,360
predictability, let's call it 
that, right? 

1087
01:10:39,360 --> 01:10:45,680
And, and I think that by itself 
is something that is very hard 

1088
01:10:45,680 --> 01:10:48,920
to, I almost want to say create,
right? 

1089
01:10:48,920 --> 01:10:52,840
Like like with just random new 
companies going on the market 

1090
01:10:52,840 --> 01:10:54,640
with their IPO and stuff like 
that. 

1091
01:10:54,640 --> 01:11:00,120
They are, they are way less 
predictable than Bitcoin, right?

1092
01:11:00,120 --> 01:11:03,800
So how, how, how, how surprised 
are you by that, right? 

1093
01:11:03,800 --> 01:11:06,160
Or how special is that? 
Maybe that's a better question, 

1094
01:11:06,160 --> 01:11:06,920
right? 
Like why? 

1095
01:11:07,160 --> 01:11:10,640
Why should you pay attention 
when you're seeing stuff like 

1096
01:11:10,640 --> 01:11:12,440
this? 
It is special. 

1097
01:11:12,600 --> 01:11:15,920
Bitcoin belongs to a set with 
one member. 

1098
01:11:15,960 --> 01:11:20,840
It's unique, you know, there are
thousands and thousands of 

1099
01:11:20,840 --> 01:11:24,160
companies that trade on public 
stock exchanges. 

1100
01:11:25,200 --> 01:11:27,480
There's no crypto that's like 
Bitcoin. 

1101
01:11:27,480 --> 01:11:30,680
They don't belong to the same 
set that Bitcoin belongs to. 

1102
01:11:31,800 --> 01:11:38,720
And you know, I, I think, you 
know, we know why it is a 

1103
01:11:38,720 --> 01:11:42,880
definitional scientific standard
for money rooted in energy and 

1104
01:11:42,880 --> 01:11:47,560
cryptography and built on a 
network that has achieved, you 

1105
01:11:47,560 --> 01:11:51,880
know, it's past the level of 
critical success and it's built 

1106
01:11:51,880 --> 01:11:55,880
this structure. 
And really what this is saying 

1107
01:11:55,880 --> 01:12:01,120
is that it has this structure 
that's self reinforcing is a 

1108
01:12:01,120 --> 01:12:04,160
word for it. 
It's called autopoietic. 

1109
01:12:04,840 --> 01:12:10,400
It's self reinforcing. 
It has to live in a larger 

1110
01:12:10,400 --> 01:12:14,680
environment, but cells are 
autopoietic. 

1111
01:12:14,680 --> 01:12:19,520
They have to depend on organs, 
but they're self organizing. 

1112
01:12:19,520 --> 01:12:23,280
They have their own rules of 
self organization and then they 

1113
01:12:23,280 --> 01:12:26,360
absorb energy and resources from
the environment. 

1114
01:12:26,840 --> 01:12:31,040
Bitcoin is autopoietic. 
It has its own rules of its 

1115
01:12:31,040 --> 01:12:36,480
organization, but it it absorbs 
Fiat into the environment and it

1116
01:12:36,480 --> 01:12:41,840
incentivizes humans to go out 
and mine it, mint it, and to run

1117
01:12:41,840 --> 01:12:46,240
full nodes right and to 
participate in the ecosystem 

1118
01:12:46,960 --> 01:12:51,200
because of what it does. 
And it incentivizes new tiers of

1119
01:12:51,200 --> 01:12:55,240
capital to come in as it grows 
its price in this parallel 

1120
01:12:55,240 --> 01:12:58,000
manner. 
It's very interesting. 

1121
01:12:58,000 --> 01:13:00,800
I, I, I googled it, I never, I 
never heard this term, but it 

1122
01:13:00,800 --> 01:13:03,040
says the core idea is self 
creation. 

1123
01:13:03,040 --> 01:13:06,040
So the system's processes 
generate its own components and 

1124
01:13:06,040 --> 01:13:08,320
organization. 
It's self maintenance. 

1125
01:13:08,320 --> 01:13:10,520
It defines and preserves its own
boundaries. 

1126
01:13:10,920 --> 01:13:14,360
That's interesting, right? 
Because that is, that is, you 

1127
01:13:14,360 --> 01:13:17,400
know, if you, if you think about
Bitcoin as this like 3D cube 

1128
01:13:17,400 --> 01:13:20,440
with the 21 million units and 
like all the energy is basically

1129
01:13:20,440 --> 01:13:22,440
captured in that. 
But also the protocol has 

1130
01:13:22,440 --> 01:13:25,200
boundaries, right? 
There's just a set amount of 

1131
01:13:25,200 --> 01:13:29,720
rules and that's just it like 
the rules live in this, in this 

1132
01:13:29,720 --> 01:13:31,120
system. 
And then the third one is 

1133
01:13:31,120 --> 01:13:33,960
autonomy itself producing itself
sustaining, not dependent on 

1134
01:13:33,960 --> 01:13:36,840
external creation, right? 
And I think it's so fascinating 

1135
01:13:36,840 --> 01:13:38,640
that a lot of these things come 
together. 

1136
01:13:38,640 --> 01:13:44,160
Just the idea of a protocol 
enabling something that is 

1137
01:13:44,160 --> 01:13:48,400
digitally scarce, I think it's 
one thing, but also the amount 

1138
01:13:48,400 --> 01:13:53,040
of like, like taking physical 
energy, which is high entropy, 

1139
01:13:53,240 --> 01:13:57,720
turning it into a low entropy, 
basically immutable database 

1140
01:13:57,720 --> 01:14:02,000
that the longer it lives and the
more data it stores, it becomes 

1141
01:14:02,000 --> 01:14:04,480
more trustworthy. 
So more people are gravitated 

1142
01:14:04,480 --> 01:14:07,160
towards that, right? 
They mine and they have wallets 

1143
01:14:07,160 --> 01:14:09,200
and, and, and, you know, more 
addresses and stuff. 

1144
01:14:09,200 --> 01:14:12,720
And so it's, it's all these 
elements to together that kind 

1145
01:14:12,720 --> 01:14:20,640
of fuel this reinforcing loop 
that is, do you have any outside

1146
01:14:20,640 --> 01:14:23,960
of human body that, that that's 
the example I, I saw, right. 

1147
01:14:23,960 --> 01:14:27,720
Are there any like other systems
that are that are like that? 

1148
01:14:27,720 --> 01:14:32,640
Because it's pretty wild if you 
can compare Bitcoin to like how 

1149
01:14:32,640 --> 01:14:38,480
a human cell behaves. 
Sure, galaxies are like that is 

1150
01:14:38,520 --> 01:14:43,160
self organizing, 
self-sustaining, but they also 

1151
01:14:43,160 --> 01:14:45,000
interact. 
They interact with their 

1152
01:14:45,000 --> 01:14:49,800
neighbors or they have, you 
know, as they form gas comes in,

1153
01:14:50,080 --> 01:14:52,880
they do suffer collisions and 
they'll reorganize when they 

1154
01:14:52,880 --> 01:14:57,760
have collisions. 
And, and they show this kind of 

1155
01:15:00,240 --> 01:15:03,760
same kind of capability that 
they have a power law in terms 

1156
01:15:03,760 --> 01:15:08,760
of the continuous behavior of 
the spiral arms, but they also 

1157
01:15:08,760 --> 01:15:12,360
have this log periodic behavior 
and some of the details of the 

1158
01:15:12,360 --> 01:15:16,080
spacing of those or when you 
have branching and and those. 

1159
01:15:16,080 --> 01:15:19,960
So that's another example. 
It's wild. 

1160
01:15:19,960 --> 01:15:22,440
Bitcoin is at that level. 
I just think that's mind blowing

1161
01:15:22,440 --> 01:15:25,440
that that again, apparently this
is this is so. 

1162
01:15:25,440 --> 01:15:26,880
Yeah. 
All right. 

1163
01:15:27,480 --> 01:15:30,320
Now if you want to know when the
peaks happen, you can do this 

1164
01:15:30,320 --> 01:15:34,200
weird numerology. 
You could just take this Lambda 

1165
01:15:35,040 --> 01:15:38,240
and add it to 2009. 
That gives you your first peak. 

1166
01:15:39,560 --> 01:15:42,120
You can take Lambda squared, 
that's your next peak Lambda 

1167
01:15:42,120 --> 01:15:47,280
cube 2017 Lambda to the 4th 
power 2027 and then the one 

1168
01:15:47,280 --> 01:15:50,760
after that would be 2047. 
Wow. 

1169
01:15:51,120 --> 01:15:56,440
And the value spacing the, you 
know, the price in the market 

1170
01:15:56,440 --> 01:16:02,480
cap spacing is Lambda to the K 
power and we know K is about 5.7

1171
01:16:03,120 --> 01:16:06,840
and Lambda's a little over 2 and
it's turned out to be 60 times. 

1172
01:16:07,560 --> 01:16:11,720
So very roughly you going to see
60 times increase in market cap 

1173
01:16:11,720 --> 01:16:14,400
as you go from one to the next 
to the next to the next. 

1174
01:16:15,800 --> 01:16:19,000
Maybe eventually you saturate 
before 2087, right? 

1175
01:16:19,000 --> 01:16:22,640
And you become, you know, hyper 
Bitcoin happens right? 

1176
01:16:22,640 --> 01:16:30,800
If we keep going by that time 
the 2047 takes you to as we said

1177
01:16:30,800 --> 01:16:35,800
before something of order 10 
million or so, which is over 200

1178
01:16:36,000 --> 01:16:42,040
trillion and that'll put it in 
the roughly won't be quite as 

1179
01:16:42,040 --> 01:16:45,480
large as the future in two of 
the US dollar, but it'll be in 

1180
01:16:45,480 --> 01:16:48,880
the in the same class of that. 
So huddling is going to be 

1181
01:16:48,880 --> 01:16:51,440
harder. 
Hardly is going to be hard, 

1182
01:16:52,560 --> 01:16:55,440
yeah, but you can afford to sell
a small amount and huddle the 

1183
01:16:55,440 --> 01:16:57,480
rest. 
No, I I agree, but I think it's 

1184
01:16:57,480 --> 01:17:02,640
just interesting that the whole 
idea of your own proof of work 

1185
01:17:02,640 --> 01:17:07,080
is going to be tested the longer
you you, you own this asset, 

1186
01:17:07,080 --> 01:17:10,800
right? 
Like can you that that is why I 

1187
01:17:10,800 --> 01:17:13,880
again, I also love this stuff. 
It's kind of like if, if, if you

1188
01:17:13,880 --> 01:17:18,920
follow the math, that's quite 
reassuring in a sense that you 

1189
01:17:18,920 --> 01:17:23,760
don't like, you're just your ego
and like your own perception of 

1190
01:17:23,760 --> 01:17:26,880
adoption or the speed or, you 
know, however that's mixed with 

1191
01:17:26,880 --> 01:17:28,960
your wants and needs and, and 
desires. 

1192
01:17:28,960 --> 01:17:33,600
You can kind of like put that 
aside and and and and follow the

1193
01:17:33,600 --> 01:17:39,520
math also as a as a guide in in 
holding and also understanding 

1194
01:17:40,080 --> 01:17:43,920
not only the direction, but of 
like the size where this is 

1195
01:17:43,920 --> 01:17:45,440
going, right. 
So yeah, I think it's very 

1196
01:17:45,440 --> 01:17:47,320
interesting. 
Actually I thought I would close

1197
01:17:47,320 --> 01:17:51,840
with this slide. 
This is the comparison of the 

1198
01:17:51,840 --> 01:17:54,200
four year cycle to the long 
periodic bubbles. 

1199
01:17:55,680 --> 01:18:00,400
So does bubble years down here 
2011 through a future 

1200
01:18:00,400 --> 01:18:05,400
possibility in 2027 and noting 
there was none in 2025. 

1201
01:18:06,200 --> 01:18:09,400
And so four year model ignores 
2011. 

1202
01:18:10,080 --> 01:18:14,120
It says yes to 20/13/2017. 
It was correct for 20/21. 

1203
01:18:15,000 --> 01:18:19,440
It failed for this year. 
The long periodic is correct for

1204
01:18:19,440 --> 01:18:24,080
20/11/2013 2017. 
It says that 2021 is the first 

1205
01:18:24,080 --> 01:18:28,760
harmonic of that same 
fundamental mode explains why 

1206
01:18:28,760 --> 01:18:34,360
there was nothing in 2025 and 
then we have expected in 2027. 

1207
01:18:34,360 --> 01:18:38,840
So we're right five times so far
as opposed to being wrong two 

1208
01:18:38,840 --> 01:18:41,280
times. 
And the other thing is you can 

1209
01:18:41,280 --> 01:18:44,680
measure the RMS error and 
that's, you know, how wrong is 

1210
01:18:44,680 --> 01:18:47,800
your prediction relative to when
the thing actually happened. 

1211
01:18:47,800 --> 01:18:51,400
And the case of the four year 
model, your average error is 

1212
01:18:51,400 --> 01:18:56,000
over one year, it's like 1.2 
years, but for the long periodic

1213
01:18:56,000 --> 01:18:59,600
you're only off by half a year. 
So it's about 3 times better in 

1214
01:18:59,600 --> 01:19:03,640
terms of the error. 
Fascinating man like thanks, 

1215
01:19:03,640 --> 01:19:05,880
thanks so much for for taking me
true. 

1216
01:19:06,280 --> 01:19:11,760
Like I just said, I, I think 
this for me as a, as a, as a non

1217
01:19:11,760 --> 01:19:16,040
mathematician, I think it's very
helpful to see that there's like

1218
01:19:16,040 --> 01:19:19,360
practical guidance in the, in 
the math, right? 

1219
01:19:19,360 --> 01:19:22,640
I think it's amazing you're 
doing this work and, and I 

1220
01:19:22,640 --> 01:19:25,440
really also appreciate your time
just sharing that here. 

1221
01:19:26,680 --> 01:19:31,120
I'm going to link to, you know, 
your socials and stuff like that

1222
01:19:31,120 --> 01:19:34,840
so people can can follow you. 
And yeah, I hope we can we can 

1223
01:19:34,840 --> 01:19:37,680
do this again, like do some 
updates, see, see where we're 

1224
01:19:37,680 --> 01:19:39,360
at, right? 
Yeah. 

1225
01:19:39,520 --> 01:19:40,800
I want to thank you for your 
time. 

1226
01:19:40,800 --> 01:19:43,360
I really appreciate it. 
It's been my pleasure, enjoyed 

1227
01:19:43,360 --> 01:19:46,920
being on again. 
Likewise, thank you, thank you. 

1228
01:19:46,960 --> 01:19:49,840
I hope you enjoyed this episode.
If you did, you can click here 

1229
01:19:49,840 --> 01:19:53,200
to find more just like it and 
click here to find all Bitcoin 

1230
01:19:53,200 --> 01:19:55,200
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episodes. 

1231
01:19:55,600 --> 01:19:58,760
Also, please like this video if 
you want to help shine a light 

1232
01:19:58,760 --> 01:20:01,760
on the message of Bitcoin and 
subscribe to my channel to stay 

1233
01:20:01,760 --> 01:20:03,920
connected. 
I hope to see you for a next 

1234
01:20:03,920 --> 01:20:04,920
episode. 
Bye.