Latest / What Bitcoin Did / Bitcoin’s Next Rally Could Break the Cycle | Eric Yakes

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Bitcoin’s Next Rally Could Break the Cycle | Eric Yakes · What Bitcoin Did

• 0:00
  When you invest in a monetary asset, growth begets growth. The scale and the acceptability
• 0:08
  of it makes it more valuable. So like these narratives I think are bringing us to that
• 0:12
  point. And I think that we have nation states right on the horizon as that happens. We're
• 0:16
  hitting an inflection point. We're hitting an inflection point when scarcity is gone
• 0:23
  in terms of the digital world. It's pretty much limited by the cost of energy at this point. And
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  And so under that type of an environment, you look at what are the scarce assets that
• 0:33
  exist in that type of an economy.
• 0:35
  There's one, and that is going to change everything.
• 0:42
  The world becoming monochrome though, isn't it?
• 0:44
  Have you seen all those pictures of like what McDonald's used to look like back in the 80s
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  compared to now and like the color of cars back then?
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  Like what does monochrome mean?
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  Like, I don't know.
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  Is it like scales of gray and white and black?
• 0:56
  Oh, okay.
• 0:57
  like yeah every everything being more like vibrant yeah yeah even the way people dress
• 1:02
  totally and I'm using grays now all I wear is white I'm in all grays yeah I wear colors though
• 1:09
  I'm very much like a good accent color I mean I'll wear I'll wear a bright a nice pocket square
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  a nice pot well yeah that's hilarious I could see I could see Rob Hamilton rocking he does I
• 1:24
  i saw him in new york at the treasury's company maybe that's why i got cute in my brain yeah big
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  bitcoin's got him wearing a pocket square a hundred percent yeah yeah but uh he's someone
• 1:33
  that's not monochrome did you see the picture i took him outside pub key oh yeah those were funny
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  the ben affleck meme of him yeah yeah he's dressed like uh mario yeah the meme culture around rob is
• 1:44
  evolving in a way that i if you were to have asked me this a year ago would this meme culture around
• 1:48
  rob evolved this way i never would have guessed yeah but you wouldn't have guessed he'd be the
• 1:50
  CEO of Bitcoin by now. I know. It's crazy
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  how it's happened. He was just there at the perfect moment
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  and he took the mantle.
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  The risk he has now.
• 2:00
  I like this idea that
• 2:02
  the hero of one cycle becomes a villain of next.
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  So you could use that with
• 2:06
  Roger Ver.
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  He was
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  Bitcoin Jesus and then obviously
• 2:12
  everything happened. Even like
• 2:14
  this is no hate here, but you could look at David
• 2:16
  Bay like that a little bit. He was
• 2:19
  the man that got Trump into Bitcoin
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  like put bitcoin into president that's a good point and then like the nakamoto that's a good
• 2:24
  point it's interesting i wonder i wonder what like underlies that kind of a dynamic i i feel like uh
• 2:31
  it's a bit tall poppy syndrome i think well actually what does that mean people up so it's
• 2:35
  not just that like because roger veer clearly like yeah got too big for his boots but i also think
• 2:40
  there is this element in bitcoin that's like if someone starts you know being big time they like
• 2:46
  to chop him down a little bit well exactly but i think that there's like a fundamental argument
• 2:49
  behind that like i think it's because people are used to as they rise hierarchies in life
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  you gain more momentum yeah the higher you are up the the greater your probability of further
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  rising it's almost like a lindy version of that type thing yeah and um and what's interesting
• 3:07
  about bitcoin is because of its decentralized nature it's probably goes against that human
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  elements like as people become more influential within it um it probably is it counteracts uh
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  you know the ego that you get and like all the things that then the hubris that emerges and
• 3:26
  basically like it the community it's not even just like the people or the social culture as much as um
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  and you're inevitably going to be like wrong about something that will like knock you down from that
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  position yeah and i think like we also know how important it is not to have a leader and if
• 3:41
  someone's looking too much like they're getting too much power like i think the exactly the bitcoin
• 3:45
  world likes to cut them down a little bit and obviously say there's not done anything that's
• 3:48
  like up but i think the his people's perception of him has definitely changed for like
• 3:54
  some people's perspective perspective what's the word yeah perception perception um
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  like he when he first came out talking about bitcoin i i loved say like the sailor the stuff
• 4:05
  that say was talking about back then was awesome when he first came out you were watching sailor
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  videos yeah like he came on the podcast pretty early like he obviously he did a few of them
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  um i think the stuff he was talking about was awesome it's cool like i i've never okay that's
• 4:18
  not true i've never watched like a sailor podcast i i other than when he went on jordan peterson
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  and actually my logic for that was like jordan peterson's so much bigger than him and it might
• 4:30
  be a real conversation um and don't get me wrong there's like i've seen the memes of his different
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  rants on different things, kind of rinse and repeat type stuff.
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  But, um, I don't know that that wasn't a narrative that compelled to me, but it compelled so
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  many other people, which is great, but there's some narratives that just, um, I'm just like,
• 4:51
  that's, that's cool.
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  I don't know what half of that means.
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  I don't think it makes any sense.
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  And I think say this still says tons of really interesting stuff.
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  Like, yeah, don't go.
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  I think he's still a value add for sure.
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  Um, and I still listen to him from time to time, but like the, the path he's gone down
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  is just a little bit less interesting to me right now So and because I a little bit removed from like what did he actually say But like I um well like people are saying that he going against like Bitcoin
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  is money type narratives. And, uh, and he's very much like, it's a store of wealth.
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  I think you can definitely imply his incentives for that. And I, I remember that I think at
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  some point in time, people were like, okay, well, you know, he doesn't want to poke the bear and he
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  is trying to create a narrative that will be sensitive to institutional
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  capitals allocation towards it.
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  And that's like a good way of Trojan horsing a capital asset into the market.
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  And like, um, I mean that, that may or may not be true, but like,
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  from my personal opinion and granted,
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  I'm not a billionaire sitting on a bunch of boards. So like, fair enough.
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  I can be very naive about this,
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  but my personal opinion is that like the incentives of this as an asset are,
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  uh, far and away strong enough. And if, you know,
• 6:00
  a bunch of plebs or a bunch of dudes on podcasts like us are talking about,
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  well, no, Bitcoin can be money.
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  And this would be something that's good for the world to be like a neutral
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  monetary system that that is not,
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  that is like a drop in the ocean of like, you know,
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  potential issues or criticisms that would ultimately stop Bitcoin from like
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  increasing its adoption. I don't know if that makes sense, but.
• 6:26
  I don't know exactly what you mean.
• 6:27
  Like, I don't think it's significant enough to where if that narrative existing doesn't mean that people that would want to stop Bitcoin are going to now say, okay, well, nobody's talking about how it could be money.
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  Therefore, it's not money.
• 6:45
  Yeah.
• 6:46
  So, okay.
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  So let's like keep doing stuff to support it.
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  It's like, no, people like everybody knows what it is and what its potential could theoretically be.
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  Yeah.
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  like whether or not the bitcoin community is promoting that or not it is beside the point
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  like the cat's out of the bag people are aware of the technology and where it could go yeah so
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  let's call it what it is you know and anybody who wants to be antagonistic towards that in terms of
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  narrative over the long term i don't think is uh um going to be stopped by us being silent about its
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  potential i totally agree with that yeah for sure and it's like like you say cats out the bag jeans
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  out the bottle yeah if you spend enough time you know what bitcoin is right right so in which case
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  it's like sailors talking about you know bitcoin's not money or payments and it's just like that's
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  bullshit like yeah i mean and he's definitely right in the sense that there's things that make
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  it very hard to be used as payment today yeah but from my understanding once again and i mean
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  specifically like not a technological thing but like the tax makes it really hard oh 100 percent
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  taxes is like there's all there's a million roadblocks to like bitcoin being used as money
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  today and like i've talked a lot about that um but but it sounds to me like there's more of a
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  posturing from uh that kind of like whether it's sale directly or the institutional crowd that it
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  is just this uh store value piece of property you know like the manhattan real estate comparisons or
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  you know those types of things and that's all it can ever be yeah and i think that's very wrong
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  yeah i agree with that and i also like i i never want to go too strong on this or make like a
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  definitive statement but i i do think if that's all bitcoin is to a degree it's failed i don't
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  think it's failed i think we talked about this on the last part like i i don't think it's failed
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  um that's why i say to a degree like it's not reaches full potential is another way of saying
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  that yeah and in that full potential i think is a very different world than a you know digital gold
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  permissionless asset but i i do think the world i do think the digital gold permissionless asset
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  world is a very different world. I think that's a very impactful thing. Being able to store your
• 8:53
  wealth, you know, by memorizing 12 words in your brain, that's huge. And in having some degree of
• 9:00
  like settlement, like today, like for people who are truly in need to conduct settlement in Bitcoin,
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  that is, you know, very possible to do. And it happens all the time. And so for that reason,
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  I don't think that, um, like that's something that impacts the incentives of government
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  as it gets bigger.
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  And I think that that enables freedom to a pretty strong degree, but a completely neutral
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  financial system, the world's operating off of like, that's something else that we can't
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  quite like comprehend the potential of that's a full utopia.
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  Yes.
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  Um, you're a YouTuber now, man.
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  I'm a YouTuber and you're a sub stack guy.
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  Yeah.
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  Yakes.com.
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  Everybody check it out.
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  I'm making videos.
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  It's funny.
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  idea what I'm doing yet, but I wanted to make, I've wanted to do this since I was in the industry.
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  But setting up the venture firm and getting all those pieces together, I had to be very focused
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  on that. And I wasn't going to do it unless I had the time to do it well. Now I'm kind of at a point
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  where I can't commit that time. So it's fun. I get a like, I'm tapping back into the creative
• 10:03
  side of things again. Like I just put out this article on price, which I'd never done. Cause
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  like you and I have talked on podcasts about, and I've had these little one-off takes, but I've
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  never actually like written out like what's kind of my take on price and that's what this was the
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  newsletter has been going great um and i just write about interesting ideas that kind of are related to like bitcoin freedom tech um you know a little bit of macro like I don know just kind of anything that pops up AI tons of stuff And we going to be doing these a bit more
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  We're going to try and cover your writing.
• 10:33
  That's right.
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  I feel like, too, because Danny and I have been talking about doing this
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  as like a monthly thing.
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  Maybe we create some sort of like cool cadence or something.
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  I don't know if the audience has feedback for like something to recap
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  on a monthly basis.
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  Look at you, like bringing the chat in.
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  I'm a video and I'm a podcaster guy.
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  I just kind of think about things.
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  But so this is the latest piece on price.
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  I want to differentiate what this is when you talk about a piece that's on Bitcoin price.
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  This isn't like a checkmate on-chain analysis thing.
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  This isn't like a TA thing.
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  Give everyone the overview of why you wanted to do this piece.
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  I've always viewed everything from the perspective of long-term trends.
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  And I think that's kind of a key distinction, I would say, between in the world of financial professionals, you know, there's a big difference between guys who've spent their career investing in like public securities and guys who have invested in private markets.
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  They're almost a completely different profile of person. So to the person outside, you'd be like, they're both investors. To the person inside, you'd be like, well, a public markets investor is looking at completely different variables.
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  You have publicly disclosed information. That data is all standardized. It's enforced by regulation, and the due diligence is effectively limited to what's being publicly disclosed outside of you taking more extensive means.
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  But on the private side, and that's kind of the world I came from, it's like we buy out a company.
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  I'm getting like general ledger accounting data.
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  We are negotiating with creditors to build a capital structure.
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  Like you're a business operator, CEO in that world.
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  And it's kind of at another level.
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  And it's very hands-on.
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  You're thinking about the market potential of the business.
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  You're investing so much time and like the costs of making an investment like that.
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  all the work, all the third party advisors you have to pay, the cost of getting the financing
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  lined up, like all these things add up. So you have to make these bets over like five to 10 year
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  periods. And that's kind of like the world of a lot of private equity. What we're doing now in
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  venture capital is just like a startup niche of private equity and kind of a similar thing.
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  There's a lot more friction with it. So like when you invest like that, you think in terms of long
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  term trends. And I've always thought about Bitcoin like that. It's something where I'm not like,
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  is it going to go up or down over the next year? Not something I've ever really opined on much
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  outside of like memes and jokes. But like my perspective is more based on what are the long
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  term market trends that are impacting Bitcoin's adoption? And then how are those narratives
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  important over time because price is a very narrative influenced thing in markets.
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  So when I'm looking at like, okay, how, where is Bitcoin going to go over the next three to five
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  years? And what does that impact in terms of like the venture capital things that we're doing?
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  I think about that in terms of what these narratives will ultimately do to price over
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  that extended period.
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  In that scenario, what comes first, though?
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  Does price lead narratives or do narratives lead price?
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  I think it's both.
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  I think that's true of so many different things in markets.
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  There's situations where price leads narrative.
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  I think there's situations where narrative leads price.
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  I think there's...
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  In the problem and the reason people have a hard time really seeing what sticks
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  is because a price is a reflection of every market variable at a point in time.
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  And whatever the net impact is, whatever the strongest narrative is or the strongest belief, that is what's going to cause the directional shift over the opposite.
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  And so for that reason, it's like there could be a lot of things that are true.
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  You know, there could be, you know, Bitcoin could have a decent amount of buyers in the market that are buying it as a risk off asset at certain points.
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  But the people that are buying it as a risk on asset are far greater than the people buying it as a risk off.
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  And the net effect is that narrative prevailed, given like the size of the capital behind the buyers and sellers.
• 14:39
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• 17:07
  The risk on risk off thing
• 17:10
  is something that I've always struggled with
• 17:11
  because like Bitcoin, in my opinion,
• 17:14
  should trade like a risk off asset.
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  Like this is a gold-like asset, sound money asset.
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  But then it obviously,
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  because it's been through this like huge growth stage,
• 17:22
  has been trading like a high beta tech stock,
• 17:23
  like absolutely flying.
• 17:25
  Is it just both?
• 17:26
  Is it everything?
• 17:27
  Is it just like it's always the right time to buy Bitcoin?
• 17:29
  It's interesting.
• 17:30
  So that's what I think.
• 17:33
  I think so.
• 17:35
  At least it depends on.
• 17:42
  It's like a painting.
• 17:44
  I think like the background from which you've used something is dependent in this or is what that type of a reaction would depend on.
• 17:53
  So one of the things you learn when you go take a CFA exam, for example, is that you look at certain assets that generally have a negative correlation with one another in normal market environments.
• 18:15
  So you would expect a tradeoff between what happens in the stock market and the bond market in a normal market environment.
• 18:21
  What's interesting when you look at all these buckets of asset categories based on the historical data is that that is when the background is normal.
• 18:29
  It's sunny outside.
• 18:30
  But like when a storm comes in and everything is bad, the background changes and that impacts everything else.
• 18:37
  And what's interesting is certain negatively correlated relationships in one market environment will actually shift to positively correlated relationships in another market environment.
• 18:47
  So depending on the situation can determine whether or not a certain narrative about the relationship between two assets ultimately remains.
• 18:58
  And I think that so what you learn is that basically it's very hard to find risk off assets.
• 19:06
  assets. They're very rare in markets. When shit hits the fan, finding something that's going to
• 19:13
  just stay flat or go up in those types of environments is actually very hard.
• 19:18
  Generally, it's commodities. In reality, is that basically just gold?
• 19:22
  Yeah. In broader commodities, things people need. Gold's probably the least utility
• 19:27
  focused. And then often you can find exceptions with what is the thing that is needed given this
• 19:36
  crisis. If markets were to crash tomorrow because there was some sort of nuclear issue or something,
• 19:45
  then there might be some stock flying that has a technology that will be valuable in that type
• 19:51
  of a situation. So it's things people generally need in a crisis scenario that'll go up.
• 19:57
  And in history, the biggest probably risk off moment, at least in recent history,
• 20:02
  is the 2020 covid crash right bitcoin dropped like a fucking stone it was until bitmex turned
• 20:08
  the engine off it was like is it actually going to zero right um and then it bounced really quickly
• 20:14
  and i don't know if it bounced i can't exactly remember before any kind of interventions were
• 20:19
  mentioned but was there any part of that in that period that traded differently to you how you'd
• 20:25
  expect back then yeah i didn't i didn't know what to expect back then i would say um i think that
• 20:35
  the bitcoin has generally followed uh global liquidity i think that's pretty well known in
• 20:43
  terms of price uh now with this debasement trade narrative emerging and that's like that's an
• 20:50
  and some sort of conclusive thing.
• 20:51
  But now with this emerging,
• 20:54
  it's there's somewhat one in the same almost
• 20:57
  like a debasement trade is kind of like the next step
• 21:01
  following liquidity.
• 21:02
  But once again, that's dependent on the market environment.
• 21:05
  So like there could be an environment where,
• 21:13
  you know, let's say the economy is just running really hot
• 21:18
  and growth is very rapid and the federal reserve is trying to slow things and they're raising
• 21:23
  interest rates intentionally to do that um that could have a few variables that are kind of like
• 21:29
  right now and it could actually be trying to reduce liquidity in the economy and we'd still
• 21:34
  be looking at like a rising interest rate environment and it the that backdrop i think
• 21:40
  is ultimately what influences where the liquidity could or could not lead to basically so i do want
• 21:46
  to talk about that because that's similar to the situation we have right now in a lot of ways but
• 21:50
  just an interesting sort of thing to play through if we went through a covid slip dial flash crash
• 21:55
  now with what bitcoin is today do you think it would behave differently to how it did in 2020
• 22:00
  okay um so you're saying okay i guess what the the point of that question is then it traded
• 22:09
  from my perspective it looked like a risk on asset you know it was crashing when everything
• 22:13
  was crashing and it wasn't until they like started i think i that that is a great way
• 22:17
  of isolating the question i hadn't thought about it from that perspective um yes i and i think the
• 22:24
  reason is that at the time uh inflation expectations were markedly distinct from where they are today
• 22:33
  and so i think that if with with the current perception of the market basically that um
• 22:41
  that we've exhausted so much of our ability to influence the credit market, given the degree of
• 22:53
  fiscal dominance that currently exists. That belief didn't exist during the 2020 flash crash,
• 23:00
  not nearly to this type of an extent. And it was that crash in the subsequent liquidity and then
• 23:06
  the fiscal deficit spending that ultimately occurred from it that put us back into worldwide
• 23:11
  War One levels of deficit spending.
• 23:15
  And then from that is what people started to draw a lot of the parallels from.
• 23:19
  So like this, us, the government spending more money than it has and the cumulative
• 23:25
  impact that that ultimately has on markets, which ultimately needs to be financed by
• 23:30
  inflation, is we've done that for the past five years to such a significant degree that
• 23:38
  would look like fiscally we're fighting a war a global war and and i think that that is kind of
• 23:45
  the distinction is we've exhausted it's like we've shot the steroids up and and now we're you know
• 23:51
  we've done all we can at this point now we're starting to get man boobs so so that is interesting
• 23:57
  but it's actually not what i was thinking of when i asked the question okay it was more like put
• 24:01
  bitcoin as we know it today back in the market conditions we had then do you think it's matured
• 24:06
  to a degree where the market might see it as slightly more risk off maybe not fully risk off
• 24:10
  oh it's more so than yeah i i would agree with that um it's it's much larger right i think that
• 24:17
  that's huge it's institutional adoption has occurred there's a passive bid for the asset
• 24:22
  um i think that like i i would say that that behavior is probably what drew
• 24:29
  this breaking of the four-year cycle narrative um where bitcoin didn't go up as much as people
• 24:37
  thought it would and it didn't go down as much as people thought it would i think that's more of
• 24:41
  like an institutional bid that's happening in the market that's probably the best explanation for it
• 24:45
  um changing whatever this uh self-fulfilling prophecy type narrative was to uh more of like
• 24:53
  a market reality yeah and again i definitely want to get into the four-year cycle stuff with you
• 24:57
  because you had a cool chart in that piece you wrote.
• 25:00
  But before we do that, like Bitcoin now has,
• 25:02
  I don't know what we're at, 86K or something like that.
• 25:06
  It's looked good over the last few months
• 25:07
  and it's looked good in not like what you would consider
• 25:10
  the best macro environment, rates of going up,
• 25:12
  like yields are skyrocketing.
• 25:14
  Has that surprised you?
• 25:17
  Yes.
• 25:18
  I think the main thing was,
• 25:21
  like if you would have told me five years ago
• 25:23
  that Bitcoin was performing this well
• 25:26
  And it was in response to, you know, 10-year yields crossing 5% in fiscal deficit spending being this high, you know, back in the 2020 timeframe.
• 25:38
  If you would have told me that, I would have been very surprised.
• 25:41
  It would have been, you know, a very different way of viewing the asset at that point.
• 25:44
  That's what I think is kind of like the shift that's happening here.
• 25:48
  I think if we continue to see, like, what's the market reflecting?
• 25:53
  I think the market reflecting that more monetization of this deficit spending is going to come That kind of the narrative of the debasement trade It going to be debasing assets And assets that are not dollar denominated
• 26:10
  and are not fixed to a dollar denomination are going to be benefiting from that. So it's like,
• 26:16
  it's going to impact some assets more broad. It's not just Bitcoin. But I think the degree
• 26:22
  to which scares assets like it's a magnitude thing not just a directional thing it's like
• 26:27
  stocks can keep going up yeah gold can go up bitcoin can go up uh but some might go up more
• 26:32
  than others and uh and i think it's going to take a year of like us witnessing how it reacts to
• 26:37
  markets over time but if you know the 10 years at seven percent this time next year and bitcoin's at
• 26:43
  150 200 000 now we're living in a new world for bitcoin yeah now people are going to perceive this
• 26:50
  asset very differently and so in in sort of simple terms is that the market betting that
• 26:56
  this is now unsustainable there's going to be intervention at some point therefore own the
• 26:59
  scarce assets that that's what i would believe right like i i don't um once again i i don't think
• 27:07
  we totally you know it's it's not clear yet like i don't think the market's clear on this i think
• 27:13
  we're in this like awkward puberty or like you know we're in this weird evolution of growth for
• 27:20
  bitcoin where there's kind of this new buyer universe that emerged over the past cycle um
• 27:27
  a lot of people aren't sure what bucket to put it in because that's how people work we need to have
• 27:31
  some sort of bucket like all these narratives we're talking about like they're they're just ways
• 27:37
  that because people have a hard time thinking dynamically and bringing together a lot of
• 27:41
  of variables and synthesizing them, we have to create these simple narratives.
• 27:46
  Like this asset is this, you know, we sell it to Wall Street.
• 27:48
  We say it has to be digital gold.
• 27:51
  The reality is, is that there's a bunch of different types of buyers.
• 27:53
  There's SF guys in tech who think that like, you know, the payments nature of it's really
• 27:59
  valuable and there's Wall Street guys that think digital gold is something that's going
• 28:02
  to keep going up.
• 28:04
  And, you know, there's a world of people that think it's freedom money and that this is a
• 28:08
  revolutionary thing.
• 28:09
  And they're this passive bid that buys us indiscriminately no matter what.
• 28:13
  And all of those are true.
• 28:14
  And all those things are true.
• 28:16
  And that's actually what makes Bitcoin different is like the freedom buyers of it.
• 28:20
  There isn't another asset that has that type of quality.
• 28:23
  You would say gold ultimately has that.
• 28:26
  But Bitcoin...
• 28:27
  Gold doesn't have that.
• 28:28
  There's libertarians who buy gold.
• 28:30
  No, no.
• 28:30
  But the freedom aspect, when you say like, when I say Bitcoin is free to money,
• 28:34
  I'm thinking Bitcoin is money for anyone, like anywhere in the world.
• 28:37
  I don't think gold has that.
• 28:38
  No, it doesn't have it. That's what I want to say is like, it doesn't have it to nearly the same degree that I think gold can ultimately have it. But there's a bunch of libertarians out there that are bidding gold, and they're going to hold it no matter what, because they think, you know, the government's eventually going to come and take everything from them. And Bitcoin has that to a much greater degree, because you can go send it, as we do all the time, to people that we know around the world. And that's very valuable.
• 29:02
  So you have these different groups of people that are all buying it for different reasons.
• 29:07
  And some of those I think are more represented as marginal buyers and sellers of the price
• 29:11
  at different point.
• 29:12
  So like we're all just trying to associate narratives with what these disparate groups
• 29:16
  ultimately think about it.
• 29:19
  But once one becomes very dominant and then the question is like, well, what makes something
• 29:24
  become dominant?
• 29:25
  Memes.
• 29:26
  Yeah, or memes.
• 29:27
  Yeah, memes, literally.
• 29:28
  No, it's 100% true.
• 29:30
  and like that that's why i think it's important to uh that's why podcasting matters and that's why
• 29:37
  coin join chris matters yeah that's why that's why you matter danny that's why i got a youtube
• 29:42
  channel i matter like the uh i don't think um like i i think that like you know we can you
• 29:51
  there's kind of like the x culture we're memeing things into existence but i ultimately um things
• 29:57
  Things that make significant pools of capital allocated to the asset, those types of narratives
• 30:05
  are what I think will become very dominant as marginal buyers quickly because a 1% allocation
• 30:12
  to them is more than the universe of buyers that are currently in the market today, right?
• 30:19
  Things like that.
• 30:23
  That's where the risk off or counter cyclical nature and narratives that are associated with that start to impact those very large pools of capital.
• 30:34
  So like that's kind of where I see Bitcoin getting to.
• 30:36
  I think over the next year, it's like we have something like a debasement trade narrative that's going to make people start thinking of it directionally more like that.
• 30:44
  It's not like a true like own this in a financial crisis or, you know, own this when everything else goes to shit because it's money that you can move anywhere you want.
• 30:54
  For us to ultimately get to that point, it needs to get to a much greater scale.
• 30:57
  What I think has happened with this most recent drawdown, a 54% drawdown for the bear market is the bottom.
• 31:04
  Then that changes the that changes the risk profile that investors view of this asset and when that happens that will enable more scaled capital to come in and say like okay now we know that like I can recommend this
• 31:20
  So, um, you know, in our annual report this year, we put in a bunch of charts of like
• 31:24
  the potential size of buyers around this.
• 31:26
  And, um, if you look at like us, uh, asset managers, and if they just had like a one
• 31:31
  to 4% allocation, that's, that's like range.
• 31:34
  It was somewhere around like, you know, four to 20 times the amount of AUM of the Bitcoin ETF demand.
• 31:43
  And we saw how much the Bitcoin ETF impacted price.
• 31:47
  So this capitals could literally be, you know, so many multiples greater than that.
• 31:51
  And that's just from people basically saying, like, if we had Morgan Stanley say, we need a 4% allocation.
• 31:59
  and they put that into their model portfolios,
• 32:01
  which means like, you know,
• 32:03
  you sell your podcast,
• 32:04
  you're worth 50 million bucks
• 32:05
  and you go into Morgan Stanley,
• 32:07
  say, I want to work with their private bank.
• 32:08
  And they say, okay, well here,
• 32:10
  you know, wire us over all the funds.
• 32:12
  We're going to just put it
• 32:13
  into our standardized model portfolio.
• 32:15
  And 4% of that immediately goes into Bitcoin.
• 32:18
  So if that starts happening with people
• 32:20
  through Morgan Stanley,
• 32:21
  then like it's a massive pool of capital
• 32:23
  that starts moving into it.
• 32:25
  That's one of the narratives
• 32:26
  that does frustrate me
• 32:27
  in that people are saying like,
• 32:28
  institutions are coming to bitcoin have come to bitcoin to a degree and then governments come to
• 32:32
  bitcoin which again to a very very small degree they have with el salvador and bhutan and these
• 32:37
  places and everyone's like what's next it's like it doesn't matter it's just more yeah more of the
• 32:42
  same people and there's there's there's different narratives that are uh like you know bringing
• 32:48
  people in like i think a lot you know i think a lot of people got brought in because of like
• 32:52
  digital energy yeah and i was ranting online about digital energy is a retarded narrative that makes
• 32:57
  no sense to me at all but a lot of engineers really like that narrative i think it totally
• 33:02
  doesn't make sense when you compare it from a monetary perspective yeah but we don't want this
• 33:06
  to be like a monoculture where everyone's on the 100 i'm cool with it like digital energy go have
• 33:10
  fun with it i still think it's stupid like you know enjoy guys so one of the obviously everyone's
• 33:17
  talking about bitcoin as a debasement trade bitcoin has been talking about this for a long
• 33:20
  time but like even jp morgan coming out with this as the debasement trade along with gold i think
• 33:24
  was jp morgan um i had a show with geordie vissa recently i don't know if you know him
• 33:29
  um he was saying he doesn't think bitcoin's a debasement trade and i think the crux of his
• 33:35
  argument was like in debasement all assets do well it's not a bitcoin thing yeah yeah i mean
• 33:41
  uh not all assets but like um i yeah probably to the point i'm saying earlier of like
• 33:48
  equities are going to do well um and you know gold's going to do well bitcoin's going to do well
• 33:56
  bonds shouldn't do well yeah sure take bonds out of it but but like bonds are huge it you know
• 34:01
  what's interesting is um the monetary policy that has occurred when when we used to look at like the
• 34:09
  size of the fixed income market compared to equities like fixed income was the dog and
• 34:15
  equities was the tail they were you know it was it was well when i was in college it was like the
• 34:21
  fixed income market is where all the value currently exists yeah equities are kind of this minority
• 34:25
  proportion and it was really interesting is this is the 60 40 portfolio stuff right right and um
• 34:33
  in today equities are becoming more dominant of course market and like equities have just gotten
• 34:39
  so large when you compare that to like the bond market um so now equities are like this
• 34:45
  dominant capital asset and like structurally these variables i think change like where is the
• 34:50
  wealth and what what are we uh what's going to hurt the most people the most and it's just like
• 34:55
  you know bondholders are getting murdered but like bondholders are not winning into the basement
• 35:00
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• 35:06
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• 35:10
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• 35:15
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• 35:20
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• 35:25
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• 35:28
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• 35:42
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• 35:48
  definitely made me rethink my entire security setup as i'm sure it has for a lot of bitcoiners
• 35:52
  and the uncomfortable truth is that no single security product can promise there'll never be
• 35:56
  a problem which is exactly why the design matters bitkey is a self-custody hardware wallet that
• 36:01
  uses three keys created in three separate environments there's one on your phone one
• 36:05
  on the bitkey hardware itself and one on a secure bitkey server two of those three keys are required
• 36:10
  to sign any transaction.
• 36:12
  So a problem isolated to just one key
• 36:14
  is never enough to move your Bitcoin.
• 36:16
  So if you are rethinking your setup right now,
• 36:17
  as I'm sure a lot of people are,
• 36:19
  you should really think about the BitKey.
• 36:20
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• 36:22
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• 36:36
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• 36:44
  that model portfolio which was always 60 40 between bonds and equities what would you in a sort of
• 36:51
  model portfolio environment now what do you think the right allocation for bitcoin is because like
• 36:56
  not everyone's psychos like us it's going to go 100 bitcoin but like what do you think is a sort of
• 37:01
  safe allocation to bitcoin is for those people yeah so what the cfa curriculum teaches you is that
• 37:06
  a safe allocation is based on a personal investment policy mandate no don't be
• 37:10
  given your constraints but like the main thing is uh what's good for one person isn't good for
• 37:16
  another uh it depends based on primarily but we're talking about the model portfolio like
• 37:20
  the standard portfolio yeah yeah in like a standard portfolio is kind of like um uh i don't know
• 37:27
  honestly i don't really think about that like i guess what i think about is uh how much bitcoin
• 37:31
  i can get that's pretty much how i think about it um in terms of i i i'm somebody who's young
• 37:37
  i can take on a lot of risk i'm an entrepreneur so i take on a ton of risk and i want to live my
• 37:43
  life like that like uh i can't imagine living another way i i don't think it's like based on
• 37:48
  financial narratives and like, you know, statistical theory, always the most rational thing. But like,
• 37:52
  who gives a shit? Like, you got to do what you want to do. And like, so all of my money is in my
• 37:59
  business and in Bitcoin, basically. And like, so that's my, my actions probably describe the
• 38:07
  majority of what I think. I think for like, most people that I meet, if I'm talking to a family
• 38:13
  office, I'm like pushing them to say 10% allocation to Bitcoin.
• 38:17
  Well, what you'll see when you're talking to most people today of like, kind of, I think
• 38:21
  this might allude to your question of like, most people are thinking in terms of private
• 38:26
  markets, like that's become very dominant in terms of the family office community.
• 38:31
  And, you know, private credit was a big piece, but now like private equity, alternative assets,
• 38:36
  interesting strategies around that.
• 38:38
  There's actually a ton of shifts that have happened in terms of, you know, over the past
• 38:41
  decade where more people can get access into investing into those types of markets.
• 38:48
  And in the nature of that investing has changed, you know, venture has changed a lot. What makes
• 38:54
  a venture fund competitive has changed. So like people kind of find a lot of that more compelling.
• 39:00
  And I think when those types of portfolios are being sold, remember, it's like these things are
• 39:06
  being sold given what does the client want? And what does the client want? The client wants like
• 39:10
  really good service and they want things that are interesting to them and they want things they can
• 39:14
  go brag to their friends about so um that's kind of what it's kind of interesting how that ultimately
• 39:20
  impacts markets and what happens in private capital like people invest in uh you know venture capital
• 39:26
  funds because they want to meet cool people and they want to get access to interesting companies
• 39:30
  um and and yeah i don't i guess it's a bit of a ramble to your question but the point is is like
• 39:35
  private capital is becoming like a new category that a lot of people are moving to.
• 39:41
  And I think a lot of that is, you know, pushed down the risk curve in terms of private credit,
• 39:47
  as well as an expansion of new categories in private equity.
• 39:52
  Have you dyed your hair?
• 39:54
  No, does it look good?
• 39:55
  Yeah, you're looking very dark over there.
• 39:57
  Really? It's probably because I showered recently. I don't know.
• 40:00
  I'm jealous.
• 40:01
  Yeah, that does suck.
• 40:05
  i had to give you a little bit um okay i've thrown myself off
• 40:13
  um wait i had a question we've gone i'm such a mess i really threw myself off there yeah just
• 40:26
  couldn't help um so in terms of these narratives like bitcoin versus crypto
• 40:33
  like a kind of solve narrative bitcoin seems very differentiated from crypto i don't think
• 40:38
  many people put in the same bucket but over the last you know six months or so zcash has been
• 40:43
  absolutely ripping and i think kind of back to what we were saying before this is off both a
• 40:49
  small group of rich silicon valley vcs plus memes yeah um what's been your take on that
• 40:56
  i'm glad you asked me about this i didn't think you're gonna ask me about this um so
• 41:01
  So I've been vocal about this on Twitter because when I first got into Bitcoin, I thought Zcash was awesome.
• 41:11
  And honestly, there's things about it today where like from a technology standpoint and everything, like there's a lot of great things.
• 41:18
  There's a lot of-
• 41:18
  They've done some cool cryptography.
• 41:19
  They've done a lot of really cool things.
• 41:20
  I'm not sitting here trying to like destroy every aspect of it or something like that.
• 41:24
  I got involved in Bitcoin and people were like, okay.
• 41:27
  As I got more familiar with the Bitcoin Maxi community
• 41:30
  and everybody's like, you know, money converges to one,
• 41:33
  there's gonna be one money.
• 41:34
  And I was always like, nah, man, I think these,
• 41:36
  like there's gonna be small markets that still exist.
• 41:40
  Privacy was always the most obvious example to me. I was like Monero and Zcash are like,
• 41:45
  they're cool. There's cool things you can do with that. It's good for freedom.
• 41:50
  And it was something I always had an interest in. And I kind of thought basically what's happened
• 41:55
  over the past year, I assumed all the way back in 2019 that that was going to happen. I assumed
• 41:59
  that narrative would be taking off. I don't think it is today. I think people are trying to get other
• 42:05
  people to believe that that narrative is taking off today. But basically, to answer the broad
• 42:12
  question, Bitcoin versus crypto, I think that there's been a ton of narratives that have been
• 42:16
  exhausted within crypto over time. They've tried a million different things, right?
• 42:20
  Where has the value moved? The value has moved to Bitcoin far and away, drastically. We know what
• 42:29
  the winning formula is and that's scarce permissionless money like indisputable 17
• 42:35
  year track record um that's impossible to argue against um so all these other narratives and like
• 42:43
  anybody who's been in this industry long enough has watched people you've seen the playbooks like
• 42:47
  there's a new cryptocurrency it does something better than bitcoin it's the world computer it's
• 42:52
  got faster transaction per seconds like all the it's faster yeah it does more things cheaper it's
• 42:57
  cheaper and it moves more quickly.
• 43:00
  Ultrasound money.
• 43:02
  Ultrasound money.
• 43:02
  It moves more quickly than Bitcoin.
• 43:05
  And that's a key thing is like the broader crypto community has always tried to dog Bitcoin
• 43:10
  for the idea of like, oh, it's ossified.
• 43:13
  Like it doesn't upgrade and that's going to be the death of it.
• 43:16
  And it was supposed to have been the death of it for a long time now.
• 43:20
  And it hasn't been and it's consumed all the value in crypto.
• 43:24
  And so I kind of view Zcash as almost a bit of a, what's the word?
• 43:32
  It's a concession.
• 43:33
  It's a concession by the broader crypto community to basically be like, okay, now we're going
• 43:38
  to bet on basically the closest thing to Bitcoin that's not Bitcoin that we can find in the
• 43:43
  crypto market.
• 43:44
  And that's basically them saying, okay, all of our stupid narratives didn't work.
• 43:49
  So now we're going to go after the Bitcoin narrative.
• 43:52
  The last chance.
• 43:53
  And that pissed me off.
• 43:55
  And that's when I'm like, okay, I'm going to write about this.
• 43:58
  Because I've been through this journey and I'm a bit familiar with Zcash,
• 44:00
  so I was like, I'm going to write a little bit about this.
• 44:02
  Because they started calling it private Bitcoin.
• 44:04
  And that pissed me off.
• 44:05
  And I'm like, okay, there's going to be a bunch of retail people I'm going to be talking to.
• 44:09
  Or even institutional people are going to be like, I bought private Bitcoin.
• 44:11
  And it went up to $2,000 and it crashed to zero.
• 44:14
  And I don't buy this stuff anymore.
• 44:17
  And they're going to sell people this crap narrative that's going to break in a year.
• 44:20
  And I'm upset about it.
• 44:23
  But Ethereum tried this too.
• 44:24
  Like when they started like saying they were ultrasound money
• 44:27
  and that it was deflationary, not disinflationary.
• 44:29
  And like that at the time was obviously bullshit.
• 44:32
  In hindsight, obviously bullshit.
• 44:33
  But they tried that too.
• 44:34
  Like they came after the Bitcoin sort of main selling point as well.
• 44:37
  Yep.
• 44:39
  Why has this one pissed you off more?
• 44:45
  They're trying to say that,
• 44:48
  I guess it's because I'm familiar with Zcash.
• 44:51
  is it because you also want privacy on Bitcoin?
• 44:55
  Well, yeah, I think that there's a lot of explanations for it.
• 44:57
  Like there's path,
• 44:59
  the path towards achieving quantum resistance within Bitcoin
• 45:04
  have the same trade-offs that you would get in Zcash.
• 45:08
  Those are the two things.
• 45:09
  They sell privacy, they sell quantum resistance as their narrative.
• 45:12
  They do all that and it's the same as Bitcoin and that's crap.
• 45:15
  It's not at all.
• 45:17
  If it was, it would have the same scale of mining network.
• 45:19
  If it was, it would have the same transaction throughput in a volume.
• 45:25
  I had put in my paper on this, just went down the line.
• 45:28
  Here's every reason Bitcoin is a far larger, more decentralized, more permissionless network than Zcash.
• 45:33
  And even beyond that, I don't know the exact details.
• 45:36
  I don't pay that much attention to CryptoWorld, but they had that inflation bug recently.
• 45:39
  And didn't they hard fork a day later and tell all the miners to turn off?
• 45:43
  Yeah, these guys all know each other.
• 45:45
  They all have, you know, these are small networks.
• 45:49
  The Winklevoss twins could go take the whole hash rate if they wanted.
• 45:54
  And they've started mining.
• 45:56
  And these guys are going to get a pretty significant share of all of it.
• 46:00
  They're trying to bootstrap the decentralization of Bitcoin that came from being started by a cypherpunk movement on an email list that evolved through black market transactions and drug trade and blew up on a massive exchange.
• 46:14
  That was the cypherpunk thing.
• 46:16
  Bitcoin was able to grow like that.
• 46:19
  because there wasn't competition.
• 46:21
  There was nothing else.
• 46:22
  There was just Bitcoin.
• 46:24
  And everything else that launches today
• 46:26
  launches under an environment of competition.
• 46:29
  So what does that mean?
• 46:29
  You need VCs.
• 46:30
  You need marketing.
• 46:32
  You need bullshit narratives to sell to retail investors.
• 46:34
  That's the only way to get adoption
• 46:36
  in this modern type of market.
• 46:37
  So like the immaculate conception meme of Bitcoin,
• 46:40
  there's a lot of truth to it.
• 46:42
  You know, I was posting about like
• 46:43
  buy your last name domain the other day.
• 46:46
  It like you know still around Like crypto people try to say like Bitcoin only has a first mover advantage and it such a like disqualifying version of no emergent assets in a market of no competition
• 47:03
  for creating a monetary standard and not having to drive growth through financial incentives
• 47:08
  that is the advantage you know it's not like a first mover advantage it's a it's an only mover
• 47:13
  in the monetary direction advantage.
• 47:16
  It's going to far and away remain the standard because of that.
• 47:19
  It's like the dot-com of all of these things.
• 47:22
  And they're just going to keep attempting to swindle people
• 47:26
  into believing something else is going to happen.
• 47:29
  But that being said, I do think the narrative is strong.
• 47:34
  And that was another reason I think I was reactive
• 47:36
  when this happened last year or something
• 47:38
  when Zcash popped up and we were talking about it.
• 47:40
  And I was like, yeah, this thing's going to run up a lot more.
• 47:45
  It surely has.
• 47:46
  And I think it's a strong narrative.
• 47:48
  I think a lot of people are going to believe it for a significant period of time.
• 47:50
  But I think this over the next year, it's going to find its peak in Bitcoin terms.
• 47:54
  And then it'll be down from there.
• 47:56
  So people wanting to trade it, good luck.
• 47:59
  No shade on people who want to try to trade and speculate on these things.
• 48:02
  But I think a decade from now, you're going to be a lot happier that you just were buying
• 48:07
  Bitcoin over that period and holding it and not selling it for a decade.
• 48:10
  Bitcoin is literally a once in history thing.
• 48:12
  Yeah.
• 48:13
  Yeah.
• 48:13
  And it's going to get significantly larger over time.
• 48:17
  How large?
• 48:19
  How much?
• 48:19
  How large?
• 48:22
  What's your framework when you think about this?
• 48:25
  What's going to drive both Bitcoin price and Bitcoin adoption over the next decade?
• 48:30
  We're going after the gold market right now.
• 48:32
  The two things I see as immediate for that is asset management.
• 48:36
  like we're talking about earlier,
• 48:38
  one to 4% allocation type range thing.
• 48:41
  And nation states.
• 48:42
  Nation states are the ones where it's like,
• 48:44
  that's like the dark horse that I'm just waiting for.
• 48:48
  I've talked about this a lot on podcasts.
• 48:51
  You know, Bitcoin is always and everywhere
• 48:52
  subject to, you know,
• 48:54
  a massive adoption announcement in some form.
• 48:56
  And on the nation state level,
• 48:59
  it's gonna, I think that's gonna happen.
• 49:01
  It's gonna be swift.
• 49:03
  And the reason for that,
• 49:06
  The framework is that if you were to think about, I think about Bitcoin as a good in a market.
• 49:14
  It is in the market of money and that market has substitutes.
• 49:19
  There's competition.
• 49:21
  And what I wrote my book about was if you look at the fundamental properties that determine what makes something a good money, Bitcoin is a superior money in basically everything but one.
• 49:32
  And that one is acceptability.
• 49:34
  what makes something a good money is that everybody accepts it and that takes a lot of
• 49:39
  time to build that is just like an entrenchment of a standard that emerges over time um bitcoin
• 49:46
  does not have that and because it doesn't have that it doesn't have a very large scale compared
• 49:50
  to other money so if you look at scale that also implies liquidity the larger the scale of an asset
• 49:57
  typically you can find deeper liquidity in that to some degree um so the so the larger something is
• 50:02
  the deeper it is and the more people that accept it. That is paramount for a nation state to put
• 50:09
  more of its wealth into it. That's where I think we are at in terms of as Bitcoin competes with
• 50:16
  gold, gold is the largest homogenous commodity in the world to where you can get that type of deep
• 50:24
  liquidity and scarcity at one point. So Bitcoin has all these other advantages. It's just not as
• 50:30
  big as gold. And it's going to take it a while to get there. But I think we might be surprised
• 50:35
  because it has so many other advantages. If you could walk with gold through the airport with 12
• 50:41
  words in your head, or if you could store it on a USB drive, then I would say gold's in a pretty
• 50:49
  good position. But until that point, something like Bitcoin is going to have a very serious
• 50:55
  advantage over it. And that's like it, that's that 10x improvement, you know, the saying that
• 50:59
  for, for like a software to overtake an incumbent competitor, it has to be 10 times more valuable
• 51:07
  to the user for it ultimately to get people to switch over to it. And that is a 10x improvement
• 51:12
  over a, you know, scarce monetary asset. And so we're going to witness that happen. And I,
• 51:19
  I think that these narratives that we're witnessing right now, Bitcoin having a 50% drawdown, moving towards a more counter cyclical asset, like a risk off type asset over time.
• 51:32
  I think that that is what changes scale.
• 51:35
  I think that that is something that can drive it.
• 51:37
  Once we get into that five to trillion range, now it becomes an asset where a nation state can go put 100 billion into it.
• 51:44
  Now they can say, hey, we have, you know, 500 billion in gold reserves.
• 51:47
  we're going to go put 50 to 100 billion into Bitcoin.
• 51:50
  That scale and liquidity begets more demand for it as it gets larger.
• 51:54
  So that's the reflexive nature of this.
• 51:56
  And that's what's so compelling about investing in Bitcoin is when you invest in securities,
• 51:59
  when you invest in companies growth does not beget growth When you invest in a monetary asset growth begets growth The scale and the acceptability of it makes it more valuable
• 52:11
  That, so like these narratives I think are bringing us to that point.
• 52:16
  And I think that we have nation states right on the horizon as that happens.
• 52:20
  So you said like growth begets growth.
• 52:23
  And this is again, getting back to narratives, this is something people talk
• 52:25
  about all the time in that Bitcoin needs to be bigger for people
• 52:29
  like central banks to start allocating money to bitcoin like it's a two trillion dollar asset like
• 52:33
  they can't put enough money in there right now how big does it need to get before we can see
• 52:38
  the real big players come into bitcoin
• 52:40
  gold's a 30 trillion dollar asset class currently um so i think for it to be considered kind of
• 52:52
  comparable in that realm then it needs to cross 10 trillion i think if it's about a third of that
• 52:59
  size i mean you're effectively i mean gold was 10 trillion a few years ago it wasn't that yeah
• 53:03
  exactly so like once we get to 10 trillion it's like we're kind of playing in that realm of scale
• 53:08
  um and you would expect there there's a little bit there's a time advantage you know there's
• 53:14
  the amount that it's sat around um and people have gained a reasonable expectation that they're
• 53:20
  not going to lose a ton of short-term value in it you know is there a custody question for
• 53:25
  people like central banks to own bitcoin what do you mean exactly like there's obviously the the
• 53:31
  scale and the liquidity is going to stop them from coming into bitcoin while it's still quite small
• 53:36
  as that grows that gets sold but is there going to be a question of like how how they can actually
• 53:42
  hold that bitcoin like with gold they they know what they're doing they have vaults they have
• 53:45
  guards like they know exactly how to store gold yeah this is new like yeah how much do you think
• 53:50
  that can that's a great point i think that's emergent and i think that there's novel custodial
• 53:56
  methods that might start to exist you know um china might hold a backup key for russia you know
• 54:04
  things like that i think that multi-signature schemes and custodial arrangements can get far
• 54:09
  more sophisticated at the nation state level um insured custodial arrangements could be a lot more
• 54:15
  important as well you can't like if these people hold a hell of a lot of bitcoin they can't do
• 54:20
  bitcoin denominated insurance without someone else holding a very large amount of bitcoin this is true
• 54:24
  there is a cap on how much bitcoin can ultimately be insured in bitcoin like for people like us it
• 54:30
  is probably going to be possible very soon yeah at that scale i don't know how they do that is true
• 54:35
  yeah the operational complexity will be will be very important um you can lose your gold too but
• 54:42
  it's it's probably a little bit harder it can get stolen it's more likely to be seized than
• 54:46
  lose it yeah that's true i mean that happened to the venezuelans i think it's still in london
• 54:50
  right um interesting yeah when you said before the four-year cycle's dead
• 54:57
  so i've been making that claim since last cycle and it looked like i was very stupid
• 55:04
  it tops in october it's what the four-year cycle bros were saying um but then this year things have
• 55:09
  change a little bit and you had a chart in your article you did recently that i think if you look
• 55:14
  at that chart honestly it's not the four-year cycle like the price movement is very different
• 55:19
  this time yeah do you think it's over it went up less it went down less so in uh our epoch annual
• 55:26
  bitcoin ecosystem report that was one of the main things on price that we wrote about that was that
• 55:30
  was the number one thing we wrote about on price uh was that we think that the four-year cycle is
• 55:34
  breaking. And that looked stupid back in May. And now it's looking a little bit smarter.
• 55:43
  Because it looked like back in May, we were probably going to end up following a similar
• 55:47
  trend. But so, you know, we'll see. I don't believe in like these narratives fundamentally.
• 55:56
  You know, I just think that these are things that people come up with because people need to
• 56:00
  come up with ways of explaining complex things in a simple way. It's always going to depart from
• 56:04
  reality, you know? Um, but I, um, I think we're witnessing that change. And I think that's
• 56:11
  because certain buyers have stepped in that are the types of people that are going to say that's
• 56:16
  stupid. We're going to sell before it. And then we're going to buy before it. And then that's
• 56:19
  going to change the structure, um, in the market. And then the narrative is going to die. But, um,
• 56:25
  yeah so i like i i think it's definitely changing um maybe it crashes in october and maybe we're
• 56:32
  wrong but i don't think so yeah this could age like milk but i don't think we're about to get
• 56:36
  into up only we're in october yeah um and then so then on the flip side of that is is this now
• 56:43
  a far less volatile asset to like both the up and the downside because we've seen a 50 drawdown
• 56:49
  huge difference to an 80 drawdown totally do you think we are going to be capped on the upside
• 56:53
  going forward we certainly were last cycle that that's that's the big thing that i think breaks
• 56:58
  i think that we had this cycle that broke this structure um and i think that these narratives
• 57:03
  have now been broken yeah um i think that if bitcoin continues the trend of acting as somewhat
• 57:11
  of like a counter cyclical asset basically meaning if it if it continues to mirror gold the way that it moved when Besant made his announcement of buying the long end and it does that for nine to 12 months straight
• 57:25
  then I think the diminishing returns narrative breaks.
• 57:28
  And I think that that happens because the scale of capital that's looking for a risk
• 57:35
  off asset, because it's so rare in the amount of capital that's looking for something like
• 57:40
  that in this type of an environment or that also has exposure to a debasement trade, like
• 57:47
  Bitcoin can offer both to what we were talking about earlier.
• 57:50
  It can offer the growth of an early stage investment and it can also offer risk off
• 57:55
  characteristics, I believe, as it's monetizing.
• 57:59
  And that's just going to be such a compelling proposition to people.
• 58:04
  And I think that that breaks the narrative that it has diminishing returns.
• 58:07
  I think that happens in like a year.
• 58:09
  I think the really important thing there, though, is like we've been making a big fuss about Bitcoin only going down 50% this time and how that changes how institutions are going to look at Bitcoin.
• 58:17
  But if it does have like, you know, a swing up like we've seen in the past where we get to 300k in the next 18 months, two years, do we then see or 500k, whatever it is, do we then see a real drawdown again, an 80% bear market?
• 58:32
  Because if we can have the upswings with normal downside, like that, that is the asset changed fundamentally.
• 58:38
  Right.
• 58:39
  Um, obviously anything's possible, but I like the way that I think about this is, um, the types of
• 58:48
  buyers that are coming in and the, the more we have more passive long-term buyers of the asset,
• 58:57
  the, uh, the more we're going to continue to see this type of price behavior. I think in terms of
• 59:03
  like run-ups, if it, like, if you want any proof for why something can run up drastically, like
• 59:08
  look at the gold market last year.
• 59:10
  You know, what happened to gold after, you know, decades of decline?
• 59:14
  And well, I guess I won't say decades.
• 59:17
  I'd have to remember that chart, but
• 59:21
  a very similar thing can happen to Bitcoin.
• 59:23
  This is another thing we talked about in the report.
• 59:25
  I expected a gold rotation to happen this year.
• 59:27
  And our prediction was basically that there would be a 50% increase
• 59:31
  in the Bitcoin to gold ratio.
• 59:33
  Ooh, what are we up today?
• 59:35
  We're probably I think we're just barely up on it now.
• 59:38
  Because we made this back in January.
• 59:41
  So that was right around this price level.
• 59:46
  And I think the gold ratio, it's like we're slightly up.
• 59:50
  But that basically means if we have a 50% run up in price,
• 59:53
  if we get to all-time highs by the end of this year,
• 59:55
  that prediction will probably be right if gold stays flat.
• 59:59
  And that would be like the growth aspect, I think, of Bitcoin.
• 1:00:04
  Some of that coming back in and people speculating on it,
• 1:00:07
  continuing to like you know just generally grows an asset with adoption so we were out for dinner
• 1:00:12
  with parker last night shout out to parker um do you think his gradually and suddenly sort of
• 1:00:16
  time frame are we getting close to the suddenly period yeah i i think that i i do um look look at
• 1:00:27
  everything happening around us right now right like take a step back think about geopolitics
• 1:00:33
  Think about AI. We've been alive a decent amount at this point. What the hell is going on? Yeah, the world's changing drastically. I think things are getting out of control for a lot of people. Not in a negative way necessarily, but I think that a dominant political power has lost significant influence over the world.
• 1:00:59
  I think technology has obviously hit an inflection point that we're losing control over its capabilities.
• 1:01:08
  What's going to happen with these open source models?
• 1:01:11
  What's going to be created?
• 1:01:13
  What is a black market even going to become at that point?
• 1:01:16
  I mean, there's going to be things that nobody wants that they can't stop.
• 1:01:19
  The idea of like Napster, but with open source models, like what's going to happen to property rights under that type of an environment?
• 1:01:27
  you know we're hitting an inflection point we're hitting an inflection point when scarcity
• 1:01:35
  is gone in terms of the digital world it's it's very it's pretty much limited by the cost of
• 1:01:43
  energy at this point and and so under that type of an environment you look at what are the scarce
• 1:01:51
  assets that exist in that type of an economy. There's one, and that is going to change everything.
• 1:01:58
  So like this is us talking about the growth story now. I think this is a bit more of a long-term view
• 1:02:03
  and I plan to write more on this in the newsletter. I want to expand into a few areas around the topic,
• 1:02:08
  but the AI adoption of Bitcoin is going to be a very real aspect of interacting online.
• 1:02:15
  But for now, we're still worried about like Wall Street and things like that. But you look around
• 1:02:19
  It's just like, yeah, the stage is set like it's fertile ground.
• 1:02:25
  And and I think now is just like the best time in the world to try things.
• 1:02:29
  be an entrepreneur yeah i had a conversation with zach shapiro maybe three or four months ago and it
• 1:02:36
  was all about ai and he's obviously looking at this through a legal lens but he said something
• 1:02:39
  that i thought was really interesting because all the conversations on like what if ai kills everyone
• 1:02:43
  but i think it's actually more interesting to be like what if ai just does what it's told but the
• 1:02:49
  the prompt or the instruction is vague so he made this example of like what if some kid in his
• 1:02:54
  basement kimmy k5's out this is in a few years time just goes go and make me money and what if
• 1:03:00
  it then goes and tries to you know hack a defy protocol it goes to a politician tries to bribe
• 1:03:05
  them to get money like no one's in control of that behavior once you've given it the prompt
• 1:03:10
  and what does that mean for the world i think there's just so much uncertainty like both legally
• 1:03:14
  in in every element there's so much uncertainty to what that does i think that's a really strange
• 1:03:20
  future that we're very close to totally i i think like the way that that's being adopted within
• 1:03:24
  businesses right now is people are viewing it as like a mandate based consumer purchasing behavior
• 1:03:30
  what does that mean so like the llms are basically just going to be given a mandate
• 1:03:34
  i'm going to be like hey you know go get all the stuff i need from amazon and um here's kind of how
• 1:03:40
  i want my life to be you know i want all my basic necessities covered and uh you know i'm on a
• 1:03:45
  of health kick right now.
• 1:03:47
  You know, it's going to be like a mandate that it's given and it goes to execute.
• 1:03:50
  It's interesting because it's going to change the way that like consumer choice works within,
• 1:03:55
  you know, a lot of these major companies.
• 1:03:58
  But, but yeah, I think that like that, that kind of perspective on how it impacts.
• 1:04:05
  I'm not, so I've been reading into this and I've held off on some of the writing because
• 1:04:11
  I want to read more.
• 1:04:12
  But I've been trying to form a little bit of a perspective and reading into the history of neural networks, scaling LLMs, and where we kind of are today, and what the prevailing wisdom is around where we're going with it.
• 1:04:29
  So the current point that I'm at is that one, it's interesting how much of neuroscience was ultimately the model for how we were developing LLMs with machine learning and creating, you know, like neuron circuits of firing off.
• 1:04:46
  That's why they're a black box.
• 1:04:47
  It is just kind of like, um, there's a degree of randomness, like non-deterministic behavior
• 1:04:55
  within the connection of, uh, neurons that are creating certain outcomes of pattern recognition.
• 1:04:59
  And like, it is just kind of like a spontaneous thing that happens through iteration, which
• 1:05:05
  is sweet.
• 1:05:06
  That's like how evolution works.
• 1:05:07
  Like, it's cool.
• 1:05:08
  It's like, it's like so captivating.
• 1:05:10
  We, we basically are trying to follow the similar biological model and what you realize
• 1:05:14
  of where we're at today, like I think when it comes to AGI, finding motivations, where I'm
• 1:05:21
  currently at, subject to change, like I want to read a lot more, but like where I'm currently at
• 1:05:25
  is I think when you think about our brain like the human brain is valuable because of some of its parts We have these different parts of the brain that do completely different things
• 1:05:38
  And it's the fact that they're all connected together in a holistic way that creates this intelligence that we have.
• 1:05:46
  We have a short-term memory.
• 1:05:47
  We have a long-term memory.
• 1:05:49
  We have a fear emotion.
• 1:05:51
  We have an endocrine system providing feedback to all of that.
• 1:05:54
  and when you bring all of these pieces together is what allows us to think in reason and think
• 1:06:03
  outside of our own perspective and others and you know maintain relevant context within the short
• 1:06:09
  term and the long term and that allows us to behave in all the ways we do and because like
• 1:06:13
  we think llms are so smart sometimes and that we think they're so stupid sometimes and it's
• 1:06:18
  basically because we're talking to like one part of our brain and it's, there's, there's a lack of,
• 1:06:24
  uh, the holistic nature of what it needs to be, I think, create like a synchronized mind.
• 1:06:29
  I think we created a very good form of intelligence, like a really strong, like,
• 1:06:34
  you know, cortex, and that allows us to get a certain type of output out of it.
• 1:06:39
  But for it to have like the entirety of intelligence, it needs to get the memory
• 1:06:44
  problem solved you know it needs other components that are going to enable you know learning or
• 1:06:50
  they're going to enable fear-based reactions yeah it needs input from the outside world and then it
• 1:06:54
  needs input from the outside world and like and then the question becomes so like if it gets more
• 1:06:58
  input and it's kind of getting that through prompting right now but like if it was you know
• 1:07:02
  put into a robot it can go around it can see the world it can track data all day like kind of what
• 1:07:06
  we're doing um i think the main thing that i i don't know maybe there's some interesting research
• 1:07:12
  on this at this point but like i think it needs an endocrine system and i think that that is a
• 1:07:16
  complex thing because for it to truly have its own intentions uh what makes us have intentions is we
• 1:07:24
  like the a priori like the fundamental thing that it doesn't um uh uh regress past it just is is
• 1:07:32
  feeling good or bad you know that is our most fundamental base desire we just know that this
• 1:07:38
  feeling in us is a good thing and we know this other feeling us and it's a bad thing um and in
• 1:07:45
  that type of a system with nerves and all of that to like us be associated with the feedback
• 1:07:50
  is what ultimately allows our brain to make decisions and um and so like all of these things
• 1:07:57
  need to really be built i think before we have a true you know uncontrollable intentions of a
• 1:08:03
  separate entity see the cool thing here is like if you get into the world of robotics we have like
• 1:08:07
  AI robots walking around and inside they have like a, their siloed model, which is, which
• 1:08:11
  is their sort of core operating system.
• 1:08:13
  And then somewhere else in the world, there's like the centralized ultra model that has all
• 1:08:18
  the intelligence and they can feed in and out of that, but they also pick up their experiences
• 1:08:22
  throughout the day.
• 1:08:23
  Like then you have very unique different AIs everywhere Every AI is then different based on their experience what they done Yeah it almost like humans and then consciousness that somewhere else totally a shared constant it a um it like
• 1:08:39
  an ay this gets cool yeah um i want to get back though to how this kind of impacts markets because
• 1:08:44
  sure yeah because you're describing the fact that the world is changing the world is very clearly
• 1:08:50
  changing at the most rapid rate that i've ever experienced yeah um markets hate uncertainty and
• 1:08:56
  there's so much uncertainty like we had this apocalypse earlier in the year yes and that's
• 1:09:01
  gonna change how people prioritize where they put their money is bitcoin is bitcoin the place is that
• 1:09:09
  the only place no this is a great point like um if there was something so let's
• 1:09:19
  If I were to, here I am talking about all these bullish narratives.
• 1:09:23
  If I were to say, well, what is the case against?
• 1:09:26
  The number one thing is this, that we do not know what is going to happen to software over the next year.
• 1:09:36
  I think that, you know, Bitcoin was a honeypot.
• 1:09:38
  What we saw in terms of software companies that interact with Bitcoin, you know, having very major hacks occur and a lot of that getting hardened.
• 1:09:47
  I'm not concerned about it over the long term.
• 1:09:49
  I view this as an arms race. As long as models are open to everyone, then the arms race will continue and eventually we'll just have very hardened software.
• 1:09:59
  But in the short term, there's a lot of things that can happen that can just absolutely scare the shit out of investors.
• 1:10:04
  So if we think about it, it was interesting when I, in our annual report, when I wrote a section on quantum, I addressed it because I didn't, you know, the investment community has been concerned with that issue generally.
• 1:10:15
  and I view it as something that is very solvable in the long term with Bitcoin.
• 1:10:22
  But I think in the short term, what is far more scary is investing in something with the degree of uncertainty around.
• 1:10:30
  How do people find security in the software of a digitally native asset to where you can't move it into a physical form
• 1:10:41
  when the digital world might be pretty insecure for a period of time.
• 1:10:47
  I think that that is a hard thing to argue against.
• 1:10:51
  If somebody came to me and they're like,
• 1:10:52
  hey, I'm selling my Bitcoin.
• 1:10:54
  I'm scared of what's going to happen with all these AI hacks.
• 1:10:57
  I don't know what's going to happen to my computer.
• 1:11:00
  I don't know what is going to happen to everybody.
• 1:11:02
  I don't know if I'm going to get wrench attacked over it.
• 1:11:04
  There's all these different things that could emerge.
• 1:11:06
  I would understand that.
• 1:11:07
  I think that that is far and away the best argument
• 1:11:09
  against owning Bitcoin right now.
• 1:11:11
  I actually think you can look at that from both perspectives.
• 1:11:14
  I do understand that theory.
• 1:11:15
  But also, Bitcoin was the first thing that I was aware of that got any kind of major hack because of AI.
• 1:11:22
  And that's because it's on the frontier, right?
• 1:11:24
  If you can get into someone wallet you get their private keys however it works That your Bitcoin There no recourse It going to hit everything and i feel like bitcoin getting that first taste allowed us to harden ourselves first totally i agree i tweeted that too and it all happened i agree but we don know that right like um we will
• 1:11:44
  see i i believe that that will be true and i think it's probable that that will be true but i think
• 1:11:50
  the case against this there's a lot of unknown unknowns out there right now you know interest
• 1:11:56
  rates are spiking to 6% right now. What's going to break in financial markets? Here I am. I'm
• 1:12:02
  going to fearmonger everybody out of this podcast. But there is a case against everything, right?
• 1:12:06
  There's a lot of things that could break. We don't know what's going to happen with software
• 1:12:10
  insecurity and people's perspectives on it. Bad things can happen. Not a great perspective to go
• 1:12:16
  through life with, though. I'll tell you that, Danny. We can't end the show on that note, though.
• 1:12:20
  Not at all. Give us something bullish to close out.
• 1:12:23
  Okay. Every time there's a bear market, I ask myself, is Bitcoin still the scarcest asset in the world and the most permissionless network? I ask myself that this bear market, that was still the case.
• 1:12:41
  haven't been worried at all about that.
• 1:12:44
  The ability to send money anywhere in the world
• 1:12:46
  whenever you want it,
• 1:12:47
  when that money being the scarcest in the world
• 1:12:49
  is going to accrue very significant value
• 1:12:54
  over the next decade
• 1:12:55
  when the vast majority of things
• 1:12:56
  aren't going to be very scarce anymore.
• 1:12:59
  So that's a good enough reason, I think,
• 1:13:01
  on a risk-adjusted basis,
• 1:13:02
  it makes Bitcoin the best asset
• 1:13:03
  that you could possibly be considering
• 1:13:05
  in terms of an allocation.
• 1:13:07
  And the worst thing is to not own any of it,
• 1:13:10
  I think owning just a 1% or something, you know, just a small percentage,
• 1:13:15
  just in case all these crazy things we're talking about, we're right about.
• 1:13:19
  This is a smart decision.
• 1:13:20
  You've diversified in this bear market that you've gone into content creation.
• 1:13:24
  Yeah. And, and starting a podcast and owning your domain.
• 1:13:28
  Well, that's probably going to be dead too.
• 1:13:30
  They is going to take all that.
• 1:13:33
  Tell people where they can go and get your videos.
• 1:13:35
  Yakes.com. I bought my last name.
• 1:13:38
  Yeah, it's cool.
• 1:13:39
  I have like an idea box you can you can give me feedback follow subscribe to all of my stuff
• 1:13:45
  sub stack's the main thing doing the writing on that uh YouTube I have no subscribers subscribe
• 1:13:50
  to my YouTube um yeah it's pretty cool I love it man I don't think I've ever said subscribe to my
• 1:13:56
  YouTube on my YouTube channel you beat me to the punch yeah subscribe to my YouTube channel too
• 1:14:02
  yeah it's funny because Danny gets so many viewers but you don't have that many subscribers you're
• 1:14:07
  pump those numbers up we do we've no i mean the new channel's not been going long we're doing okay
• 1:14:10
  this is true you've been hustling you've been hustling um great to see you man all right man
• 1:14:14
  this has been awesome