Latest / Simply Bitcoin / Rapha Zagury | Bitcoin Fixes Everything | Simply Bitcoin IRL

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Rapha Zagury | Bitcoin Fixes Everything | Simply Bitcoin IRL · Simply Bitcoin

0:00
Yo, welcome to another episode of Simply Bitcoin IRL.
0:03
Today we have a very special guest, someone that I've been
0:06
looking forward to having on the show, Hoffa Zagury.
0:09
He goes by the name Alpha Zeta on Bitcoin Twitter.
0:12
He is Swan's chief investment officer.
0:15
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platform. Bring up Hoffa on stage.
1:02
Hoffa man, I've been looking forward to this for so long.
1:07
And I'm going to start it off with this because people don't
1:10
know this, but it was Dom yourself and it was during the
1:16
Nakamoto portfolio. I was actually producing that
1:19
show. I was in the background and I'll
1:22
be honest, Hoffa like I do a lot of shows.
1:25
So like, I'm like, OK, like I, I but I was so tuned in the entire
1:29
time because I was fascinated about the conversation.
1:32
And then the news dropped and it wasn't just a couple $1,000,000,
1:37
it was like $100 million investment exposure to Bitcoin.
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I have a feeling you might have played a small role in that.
1:46
Am I incorrect in saying that? I don't know what's up, Nico.
1:49
Great. Great being here, man.
1:51
Thanks for inviting me. Same here.
1:53
Was looking forward to joining you here for for a while.
1:56
So super happy to be here. But yeah, I don't know.
1:59
Hard to know, right? But as you described, it is
2:03
exactly right. We like to think that we had,
2:05
you know, even if it's a small part in this that we had some,
2:09
some part, part of it on it, right?
2:11
And just to recap, like we, we, we hosted that show, you know,
2:18
I'm going to have the dates wrong, but I think it was around
2:21
September of last year, right? And we went through their
2:26
portfolio. We looked at that.
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And by the way, we picked Wisconsin because they have one
2:30
of the best portfolios out there, right?
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They're very well established. They have very good asset
2:35
allocation, they have very good funds that they're ready
2:38
investment. They're very professional in the
2:40
way that they report. So we really like the way that
2:43
they were doing. But there was one thing missing,
2:45
right? They didn't have Bitcoin,
2:47
although they had, you know, inflation protection assets,
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they had real estate, they had all other things in their
2:52
portfolio, right? Had a lot of private equity.
2:55
They didn't have any Bitcoin exposure.
2:57
So we, you know, on that show for people that don't know what
3:00
we do is that we go through the portfolio.
3:02
First of all, we invite a guest, so we have a conversation around
3:06
why it makes sense to have Bitcoin and in the pension fund,
3:09
in an endowment, in a foundation, one of these large
3:11
institutions. Then we pull their portfolio, we
3:14
plug it into Nakamoto portfolio, right, and say, okay, if we were
3:18
CIOs for the company, if we were investment analysts for the
3:21
company, if we were looking for an allocation, how much wood
3:24
should we be putting in a portfolio, which is a question
3:28
we got from everybody's like, OK, I get the thesis, I
3:30
understand. So how much should I allocate,
3:33
right? The right answer is always 100%,
3:35
but we can't go back to them with 100% immediately, right?
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So we'll tell them like, you know, that he given your
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portfolio, given the risk reward characteristics that you have,
3:45
here's how much you should have. So we did that.
3:48
We went back and I put the numbers here now.
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So it was September 5th and at the end of the show we make a
3:54
recommendation and say, OK, you know, for this portfolio we
3:56
should have, you know, X percent.
3:59
Our recommendation was anywhere between 1:00 to a range of
4:03
between one and 3%. And he said right now we're
4:06
going to allocate 2%, right. Hypothetically Bitcoin was at
4:10
$25,000, so that would have been 160% performance.
4:19
So that 2% would have been, would become almost would have
4:22
been almost 5% of the portfolio at at this point, right?
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Which is just crazy to think about.
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You know, if they, they had followed through.
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Like we made some noise around it when we put this out there.
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We know we tagged some people from, from Wisconsin.
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I like to, you know, I, I like to think that we had even if it
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is a small impact on that, on that decision that, you know, it
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helped them. And by the way, like the
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analysis that I, you know, I did there with Dom and Foss and Joe,
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you know, it's, it's all of us. It's very similar to what I
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would have done to an institution.
4:55
Like when I was at Goldman doing these kind of, it's exactly the
4:58
same thing, right? We would sit down, look at the
4:59
portfolios and say, OK, you're thinking about investing in this
5:02
new hedge fund manager. You're thinking, here's what you
5:05
would do, right? So if they saw the show and if
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they got, you know, even if they read some, it would look like
5:12
something that, you know, they, they would know about.
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And this is exactly why I started the Nakamoto portfolio,
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right? This should talk in the language
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that these guys understand because when they go into
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Bitcoin Twitter, everything they see it's memes, noise and
5:28
monkeys jumping around. I mean, Hoffa, look, I, I, I
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100% maybe that's a stress. No, I'm sticking to it.
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I 100% have a feeling you guys are responsible for that.
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And the reason I'm saying that is my experience orange peeling
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people has been you plant the seed number goes up and they're
5:54
like, oh, like F like I should have listened.
5:59
And they definitely did the calculations that you just did.
6:03
And they're like, this was a, this was a major miss.
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And they literally handed to us and we didn't listen.
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So like, but I'm interested, Hoffa, in what you said about
6:15
your your Goldman experience. And the reason for that is I
6:19
have one of my best friends. I went to high school with him.
6:22
Not going to name him, obviously, but when I had John
6:25
Harr on the show, I literally said talked about the same thing
6:28
and a very successful Goldman here in Miami.
6:31
And you know, he's one out of my six best friends from high
6:36
school that still does not like Bitcoin.
6:39
Like he's still holding his gun. Then he like he hates me for
6:42
he's like it's gone up. He's like, you know, F Unico, I
6:44
don't want to talk about it. So how did you go from that
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traditional financial background and how did you, how did you get
6:53
orange pilled? What was it about Bitcoin that
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attracted you? Because like, maybe there's a
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stretch to say like Hoffa, someone that works in that world
7:01
is benefiting from the Fiat system.
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Like you, you're, you know, you're succeeding.
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What made you convert? Like what made you come to the
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side of Orange? Yeah, I think it's a it's a
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combination of several things. But before, before I go there,
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if you look, you know, today I posted something on Twitter that
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you know, you can, you can credit me in the future if it
7:25
happens. I said that Apple should also
7:28
think about looking into Bitcoin and allocating Bitcoin to their
7:30
treasury, which just it's mind blogging that that they have not
7:35
done that yet, right, Given where they are and the amount of
7:39
cash that they have and the fact that again, they are involved in
7:41
technology. So you know what, we can have
7:44
another show whenever Apple comes in, decides to allocate to
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to Bitcoin. But more important, right, I
7:52
think, and I think there is a, a switch happening where for a lot
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of these institutions up until I would say six months ago, a year
8:02
ago, talking about Bitcoin, right and thinking about
8:06
Bitcoin, putting Bitcoin in a portfolio was almost a career
8:12
risk, right? It was very hard for them to
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see. And I saw that like I tried to
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bring Bitcoin up in several conversations at Goldman,
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Deutsche, you know, Merrill Lynch and with different people
8:24
that I knew. And up until a year ago, people
8:29
didn't even want to listen to you with very, very rare
8:32
exceptions, right? Going back to your question, I
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think, you know, quite honestly, I think I was very lucky to have
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gone through a life journey that made me I think a little bit
8:44
more open to seeing Bitcoin. First of all, I was born and
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raised in Brazil through hyperinflation, right?
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And in crazy hyperinflation where we would see money
8:54
literally lose value overnight, right, My mother would give me
8:58
money to go to the school and say, okay, here's our lunch
9:01
money for tomorrow. Spend everything.
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Because if you just keep this money in your wallet in a week,
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it's going to be worthless. So that already shaped me.
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I think just start thinking about money in a different way.
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Then when I went to university, you know, I was also lucky and
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this wasn't by design. I didn't know this, you know,
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but my university taught us Austrian school economic and
9:24
also, you know, traditional Keynesian economics at the same
9:27
time. So that also, I think got me
9:28
primed to, to, to understand it a little bit better.
9:32
And even more important, I always love technology, man.
9:36
I, you know, like I started coding at the very early age.
9:40
I always loved to code. You know, all the summers, what
9:42
I would do is I would go to my friends house and you know, we
9:45
would, we would run around running BBSS, which were
9:48
bulletin board systems back in the 90s, right.
9:51
So I saw the whole, you know, cypherpunk movement starting
9:56
from the beginning. So, so I always liked
9:59
technology. I ended up going to finance
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because, you know, that's where I think of a lot of people that
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liked, you know, science and math ended up going, you know,
10:08
on my generation. But these three things, when I
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think about, you know, the fact that I was born and raised in a
10:16
place with hyperinflation, the fact that I like technology,
10:19
right? The fact that I already had a
10:21
little bit of an Austrian school background, it helped me
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significantly, I think, to see Bitcoin.
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And then the drop in the bucket was, you know, something that
10:29
it's right here. The in the corner is what
10:32
happened in 2000 and eight, 2009, you know, which is
10:35
something that Satoshi wrote on the genesis block that the, the
10:40
financial crisis really got me started thinking about, you
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know, I, I need to look into alternative things.
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And it's like most people, I looked at gold at that time
10:50
investing good. A lot of my clients at the time
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invested in alternative assets because they were worried about
10:56
what was happening with the with the financial system And Fast
11:02
forward and I heard about Bitcoin a couple of times,
11:05
completely ignored, like most people in the beginning.
11:08
And then around 2015, there was a guy that I used to follow who
11:12
was a gold bug also and wrote a lot about, you know, the Fed
11:17
already and the fact that the deficits were ready escalating
11:20
and the fact that, you know, regulation was just increasing
11:22
everywhere was harder and harder for banks to do any business.
11:26
And then he mentioned Bitcoin and that's kind of like how I
11:29
like I got started. I went through all the mistakes
11:33
that most of us go, you know, I bought some shit coins, you
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know, I sold my Bitcoin early. So but eventually I came back to
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it and let and then it's a very long way to answer your
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question. Back in 2019, no, sorry, 2020,
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the company that I was running in Brazil was starting to take
11:57
off was landing fintech. And as we went through different
12:01
rounds, right? So I was as embedded in the, in
12:04
the Fiat system as you can imagine, right?
12:06
I was running a lending fintech that got funded by SoftBank,
12:10
right? But that's the whole thing just
12:13
looked odd for me and just looked like, you know, it's,
12:15
it's all a lot of it is just make believe, right?
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Valuations, make believe, you know, the money is make believe.
12:21
And I always had the feeling that the system was broken.
12:23
So when I left the company and I'm like, OK, now I want to go
12:26
back to should basics go back to Bitcoin, spend some time, I
12:30
started going back to contributing to open source
12:33
software, right? Started going back and coding
12:35
again. I actually helped the Spectre
12:38
guys to write their first API back back in the day.
12:42
And then I started seeing what everybody was doing, including
12:46
Swan, right? And then I got interested in in
12:48
joining Swan. So yeah, that's how that's how I
12:51
got here. Man it, it's, it's so it's so
12:54
fascinating and I, I remember when I had that conversation
12:57
with John Harr, it was that was, I was like, what are you doing
13:00
here, man? Like what, what, what's going
13:01
on? And you know, and it's.
13:04
Question what? What are the other guys not?
13:06
Why they're not here, right? And why?
13:08
What are they doing at the other side?
13:10
Yeah, no, but it, it's almost like, and I remember I think it
13:13
was you that tweeted this, right?
13:15
And you, it was so funny. You're like, I used to like,
13:19
like, you know, the, the, the Fed meetings were some type of
13:22
ritual and we were like taking it so seriously back in the day.
13:27
And now I look at it and you know, the South Park clip right
13:31
where they're like, what, what should we do with the economy?
13:34
And they YouTube they metaphorically cut off the the
13:36
head of a. Chicken and the chicken.
13:39
Just runs around. So like, like, is it, is it a
13:43
cult? It is a cult, but we're a cult.
13:45
But at least our cult's better, right?
13:48
Our cult's much better. Like I will tell you, I'm not
13:51
kidding. Like Fed meetings would come up.
13:55
And not only Fed meetings, announcements like CPI would
13:58
come up. You know, even Treasury auctions
14:01
would come up and you could hear like a pin drop.
14:04
Imagine a trading like Marrow had this trading floor, It was
14:07
as big as almost like a football field, right?
14:10
And everybody was just focused on what, you know, a couple of
14:15
people were going to decide because that was and it, you
14:18
know, it's crazy, right? It was super important to to
14:21
their P&L, right? And they would get impacted by
14:23
those things and markets would move.
14:25
So of course people were, you know, we're very motivated by
14:27
money, right? It's a crazy thing.
14:30
And yeah, and, and now I look back and that that is the code,
14:34
right? That is the code.
14:36
It's not, it's not this like the fact that they're like they're
14:39
praying for these five guys or 10 guys or 15 guys to come up
14:43
and give the perspective in the way that they want, right?
14:46
I'd rather just open my code on the node and make sure that, you
14:50
know, the the C amount function is working and I know exactly
14:54
what the cap is going to be in and exactly when the having is
14:57
going to happen, right? And I know exactly what block we
14:59
are right now. They're calling that a code.
15:02
I I don't know, I think the other part's a code, not this.
15:06
Yeah, no, I totally agree. I and Hoffa, it's it's really
15:10
interesting. I've, I've had this conversation
15:12
with Lavish and Lapard and I've always had the same thing, which
15:15
is I've been in Bitcoin 1/3 of my life, right?
15:19
It's my career. But to do the podcast and to
15:23
have conversations like with people like you, man, that have
15:25
this tremendous amount of experience, I've had to go
15:29
backward and learn the traditional financial system
15:32
from a Bitcoiners perspective. Like I learned Bitcoin 1st and
15:35
then learn that. And I'm like, Oh my God, this is
15:38
crazy. This is archaic.
15:39
Like I can't believe this happens.
15:42
Bitcoiners. I've met more bitcoiners that
15:45
know more about macroeconomics than people that then then
15:48
traders that do this for their lives.
15:51
Because bitcoiners I think have a motivation that it's very
15:53
different, right? They want to learn for the, the
15:55
right reasons. And they're like, OK, I, I need
15:57
to understand this system because I really need to
15:58
understand if what I'm doing is right, right?
16:01
And what, why we always question like I up until today, I
16:04
question like, am I crazy, right?
16:07
Am I, am I the crazy one? Because everybody else still
16:10
there and imagine like for my generation for a long time.
16:14
You know, This is why I created the Alpha Zeta profile on on
16:17
Twitter, because for a long time I couldn't talk to anybody, you
16:21
know, around me about Bitcoin because the few times that I
16:23
tried, people just look at me like literally, I, I was crazy,
16:27
right? And I remember telling people
16:29
back in the day saying, listen, does that set is going to become
16:32
really important? It's going to be the subject of
16:34
presidential debates and people would look at me like, what are
16:39
you smoking? And here we are, right?
16:43
We were right. We were right, Hoffa.
16:46
So Hoffa, look, I and, and especially with someone with
16:49
your background and your experience and I, I because I
16:52
really want everyone to understand who, who's, who's
16:54
watching right now, the 455 of you that are watching right now.
17:00
Hoffa, I have a question. So what how monumental is this
17:05
in terms of BlackRock coming in the Wisconsin Investment Fund?
17:10
You had Wells Fargo that came out that had an allocation to
17:14
Bitcoin. You had the second largest bank
17:17
in in Europe, I guess PNB Baribus or something that the
17:21
French bank you had, I think it was AJP Morgan came out and they
17:26
had some type of exposure. You have nations, you have the
17:29
Kingdom of Bhutan, you have Kenya, you have El Salvador,
17:32
right? You have nation states, you
17:34
know, mining, you have the public miners going over there
17:37
like bit deer and marathon. What are we on the verge of?
17:41
Because you know, none of these things were true or even existed
17:46
the last time we were at these prices in 2021.
17:49
So I mean, am I being a over optimistically bullish because
17:56
you know, I, I, I might not have the background that you have
17:58
Hoffa, but it's common sense to see that the institutions are
18:02
here. You have Larry Fink going on
18:04
legacy financial media and he's sounding like a bitcoiner, like
18:08
he's using all our talking points.
18:10
So could you like, what's your take on that?
18:13
Like what? What is happening right now?
18:16
Yeah, I think, listen, this all goes back to to fundamentals or
18:20
I think the fact that people are starting to wake up to a few
18:23
things there. As we were saying, like, you
18:25
know, Bitcoin is the ultimate savings technology.
18:28
It's immune to the the whims of a few, right?
18:30
So doesn't matter if a couple of people want to change the, the,
18:36
the, the monetary policy, right? It won't change the monetary
18:39
policy has 15 years of very stable, very predictable
18:43
monetary policy and in the world that we live right, we live in a
18:47
world of uncertainty and people would say that Bitcoin is
18:50
volatile. I think the volatility is in the
18:53
world right now. Bitcoin is a is just a beacon of
18:56
predictability, right? And in this world and if people
18:59
think people are gradually waking up to that and through
19:02
that process, Bitcoin is going to demonetize a lot of the
19:06
assets out there. But let's go back to, to some of
19:09
the things that you mentioned because then, you know, I think
19:12
going through time, it's important to understand what is
19:14
happening and I think the importance of what we we are
19:18
witnessing. So first of all, I think the big
19:21
change that we saw and we were talking about this through last
19:24
year's, we started to see that the ETF was going to get
19:27
approved. This is a massive change because
19:31
first of all, it provides, it's like a plug and play technology
19:36
that a lot of the financial advisors, a lot of the funds out
19:39
there can just allocate to Bitcoin pretty much immediately
19:41
using the software that they have, the brokered accounts that
19:45
they have, right? They don't need to go in on
19:48
board with somebody else, which for an individual it's easier
19:52
like, you know, for me opening an account that's one at
19:55
Coinbase, whatever it is, it's an easy process.
19:58
But for an institution, right, it's a little bit harder because
20:02
they need to understand how the keys are going to be managed,
20:04
where they're going to have the keys or they're going to do, you
20:06
know how they're going to do the custody, right?
20:10
They're going to do their own custody, they're going to get a
20:11
custodian. So they're all things that an
20:13
institution is going to is going to work.
20:15
And when you do that in an institution?
20:17
You have to sit down in a committee, you have to sit down
20:20
with your partners, you have to sit down with your shareholders.
20:22
You need to convince them right. And a lot of times it's, it's
20:25
not an easy conversation. Side Story here, I'll tell you
20:29
one story. So I mentioned like we went
20:32
through Series A to D for, for my company when we did the
20:36
Series D when SoftBank came in as an investor to the company,
20:42
that one of the things that I wanted to do, I was already a
20:44
Bitcoiner by then. And I told them, like, listen,
20:47
this is an opportunity for us to become the first company in
20:52
Brazil to have to show that we have Bitcoin in the balance
20:56
sheet. So what I want to do with you
20:57
guys is, you know, we're going to raise, instead of raising X,
21:00
we're going to do X + a little bit.
21:02
That little bit is going to sit in Bitcoin is going to be our
21:05
Bitcoin treasury. We're not going to touch it.
21:07
We're going to be committed to touch it, not touch it for five
21:09
years, right. That amount, you know, I don't
21:13
need to to say it would have been significantly higher, but
21:17
it was hard like I couldn't convince my board like my board
21:21
couldn't understand like I it was pretty much free money
21:23
because what's coming from the shareholders already from the
21:27
investors already said that they were going to do that, right.
21:29
But my board couldn't couldn't understand it like whoa, so
21:31
you're going to put in Bitcoin, Why not invest in the business,
21:34
right? So it LED conversations that and
21:37
I was founder and CFO of the company.
21:39
So it led to conversations that were much longer than I wanted.
21:43
I dropped that very quickly. I said, listen, I'm just wasting
21:46
time. And then I just started thinking
21:48
about the company and raising capital.
21:49
And then, you know, I don't want to put this the, the, the, the
21:52
series, the round was seriously round true at risk, right?
21:57
So then I, I completely abandoned the idea.
22:01
And I think that has happened for a long time because of the,
22:03
you know, difficulty of people understanding and also thinking
22:06
like we went to discussion about custody.
22:08
So how are we going to custody the bitcoins where it's going to
22:10
say it's right? It was a word that was
22:13
completely opposite from what everybody was was seeing, right?
22:18
The ETF changes that significantly.
22:20
It becomes much easier for anybody to get access
22:24
immediately. Do I think it's the right way to
22:27
hold Bitcoin? Do I think people should be
22:29
buying an ETF instead? Of course not.
22:31
People should buy Bitcoin, Have self custody of Bitcoin,
22:33
Understand the process of self custody.
22:36
I think one of the best experiences should go through.
22:39
I'll tell you like he and I had a meeting with some billionaire
22:43
Brazilians about a year ago, and as we were sitting there now
22:48
we're talking about Bitcoin. Go through all the things like
22:50
the cap, everything, everybody understood.
22:53
What's really got them converted was the 2nd that you know, GE
22:58
gets his phone out, sends me some sats in my phone, right?
23:02
And they see the sats going from one phone to the other pretty
23:05
much immediately. And then you know, I send it
23:08
back to him. That experience for them was
23:10
just like, so let me get this right.
23:12
I just saw one person that had custody of an asset send it to
23:16
another person pretty much immediately and we could have
23:20
been sitting, you know, thousands of kilometers away.
23:22
So that experience I think everybody needs to go through to
23:25
really understand, because that's how you're going to
23:27
understand. You know, the also the details
23:30
around how the manpool was set up, you know, how transactions
23:32
are built. And ultimately I think people
23:36
get there. But going back to the importance
23:38
of the ETF, it's kind of like a gateway drug, right?
23:41
People are going to get in, they're going to understand more
23:43
the asset, the number is going to go up, you know, number go
23:47
up. It's a very strong incentive for
23:50
learning. Then people Start learning a
23:51
little bit more, right. And before, you know, an
23:55
allocation, as price goes up, an allocation as we saw, you know,
23:58
if Wisconsin that started at 2% becomes 5%, it becomes relevant
24:02
in the portfolio. So you really need to understand
24:04
at that point. So one thing just just leads to
24:07
to the other. Then we started having, you
24:10
know, after the ETF came out. And I think that that started
24:13
should bring some legitimacy to to the asset class.
24:17
Then we started to see just the dominoes start to fall into
24:20
place, right. And as you said, you know, we
24:22
saw BlackRock coming in and completely changing their tune
24:26
around Bitcoin, saw, you know, pension funds like Wisconsin
24:30
coming in and allocating, right? We sort of continue to see a
24:33
wave of different institutions putting Bitcoin in their
24:36
portfolio. And gradually as that happens,
24:39
it just brings more and more legitimacy to the asset.
24:43
I already fought until 2-3 weeks ago or a month ago, right, as
24:47
this was all happening. Listen, impossible for Bitcoin
24:50
to be to be banned right now because the adoption is already
24:54
so wide right, already have, you know, a sanitary, you know, a
24:58
clear Bitcoiner with Senator alumnus.
25:01
So I think it's very hard for Bitcoin to be banned after what
25:05
happened this weekend, right? Which I think it's a culmination
25:08
of all these things with Trump coming in.
25:10
And now it's clear that it became, you know, not only it's
25:15
a it's a political issue, right? It's a platform.
25:18
And whoever is going to be against Bitcoin is definitely
25:21
going to lose a lot of votes, right?
25:23
And that's not only in the US, right?
25:25
The USI think it's it's it's it's the most important place
25:28
for this to happen because it's kind of like showcases for the
25:31
rest of the world. But I can guarantee you that,
25:33
you know, politicians in Brazil, in Argentina, in Chile, right,
25:37
in Europe, they, they are taking notes and you're like, listen,
25:41
my next election is coming in. I better be pro Bitcoiners
25:45
because you know, the, the bit, there's one thing with
25:48
Bitcoiners, right? We're, we're very noisy.
25:50
It's a quote, as you say, and we're going to come back and,
25:53
you know, if we, if bitcoiners like you, they're going to be
25:56
promoting you. But if they don't like you,
25:58
right, they're also going to be telling people, right, you know,
26:01
about the things that you know, you should be paying attention
26:03
to. You're not.
26:04
Yeah, a a 100% and oh man, I'm, you're making me extremely
26:10
bullish. OK, so Hoffa, the institutional,
26:16
what you're saying is the institutional stamp of approval.
26:19
I think BlackRock had a lot to do with that.
26:22
Definitely the change in tune. Now what I would say from the,
26:26
because I, I really see Bitcoin as two things fundamentally.
26:30
There's the investment and then there's the revolution.
26:32
The revolution I, in my opinion, is self custody.
26:35
I think that's really going to change things fundamentally in
26:39
the sense that it's going to change the relationship between
26:41
the individual and the state. You as a Brazilian, me as a
26:44
Venezuelan, we understand that very well, right?
26:48
So does it worry you at all that the vast majority of the Bitcoin
26:54
that these institutions hold, we, we have a name for it.
26:57
It's simply that captured Bitcoin is all custodied with
27:02
Coinbase like it's just one big honeypot. 1 executive order 6102
27:08
Bitcoin version away from, you know, just like that.
27:13
Do you think we can ever get to a point where, you know, you
27:16
have public companies actually taking self custody themselves?
27:21
I mean, Jack Dorsey made it open source, like what to do and how
27:24
to do it. Do you think we'll ever get to
27:27
that point and do you think that's necessary?
27:31
I think we will, it is absolutely necessary, no
27:34
question about that. I think Bitcoin go let's go back
27:37
to to the fundamentals, right? It's the first time that we have
27:42
an asset, right? Not only financial assets, but
27:46
you know, an asset that we actually have can have custody
27:50
of it and personal custody of it.
27:51
There's no other asset that I can hold that, you know, just by
27:54
memorizing 12 words in my mind, I would hold the assets, right?
27:59
So one of the things that a lot of these institutions haven't
28:02
realized yet is that this is the ultimate collateral.
28:06
Bitcoin is better than, you know, anything out there that we
28:10
use as collateral today. Let's use gold as an example,
28:14
right? So if we use gold as a
28:15
collateral, I mean, you need to verify that the gold is going to
28:19
be in, in a vault somewhere that it it is real gold, right?
28:23
First of all, that's what you have there.
28:25
All the bars are gold and that that just not being re
28:28
hypothecated, re hypothecated between you and 100 other
28:31
clients, right? As I was saying, like back in
28:34
2007 as that there's one thing in 2007, everybody knew that the
28:39
crisis was going to come, right? Everybody was talking about it.
28:42
Everybody thought that prices in real estate were really
28:44
stretched, that everybody was super leveraged, right?
28:47
So it was very well announced that the crisis was is going to
28:50
come. It took much longer than than
28:52
expected, just like most things usually take in financial
28:56
markets. But I had several clients coming
28:59
to me. There was one specific.
29:02
I was at Goldman at this point and they like, listen, we want
29:05
to protect ourselves. We've looked at everything.
29:07
We want to buy gold and then GLD, the gold ETF was already
29:13
available. So the first thing they came to
29:16
us like, OK, so we're looking at different options.
29:18
Let's start with GLD, right? Very quickly they looked at GLD
29:22
and like, well, I don't know exactly where this is held,
29:25
right? I don't know exactly where the
29:26
gold is. I don't know if the gold that
29:28
they have there is rehypothecated or not, right?
29:30
It's gonna take and you can get you these, you can do due
29:33
diligence, you can really understand, right?
29:34
But these are all risks that you're still, you're still
29:37
running, right? And you're very, very far away
29:40
from from the collateral. The could be the, the distance
29:43
between the holder and the collateral is gigantic, right?
29:48
And it is subject to things, as you said, right?
29:50
The government could come in and could just confiscate, not that
29:54
they've done this before, right? You could come in and confiscate
29:58
the gold, right? And he was worried about that.
30:01
So I said, okay, so I don't want to do that.
30:03
What's the next option? And so we go through all the
30:06
options, right? At the end of the day, it's
30:07
like, okay, So what I should do is maybe, and this is a large
30:11
family office, so it's not like they can just buy the bars of
30:14
gold and hold them, you know, in their office.
30:17
It needs to be somewhere, right? So what got they couldn't get
30:20
comfortable. They went all the way saying,
30:22
OK, so we're going to go to Switzerland, we're going to see
30:23
the vault. We know where the vault is.
30:25
We know that the gold, gold is there.
30:27
But then they started going to this endless analysis, like, I
30:30
don't know if it's my gold again, I don't know if it's
30:32
gold. I don't know if the day that I
30:34
leave there that they're going to sell that gold to somebody
30:36
else, right? There's nothing saying the gold,
30:38
it's my gold, right? Bitcoin sorts all of this out,
30:41
right? You know that the Bitcoin is
30:43
your Bitcoin. I can sign a message verifying
30:46
that, you know, I own a UTXO that you know, can, can, can
30:49
hold, you know, 10 SATS, for example, right.
30:52
So I can, I have proof of ownership.
30:54
It's really, really easy. It's completely verifiable.
30:57
I can look, you know, after knowing exactly the address for
31:00
that Bitcoin, I can just look at the blockchain 24/7.
31:03
I can monitor that it's not going anywhere.
31:05
It's not being rehypothecated and more important, it's
31:08
controlled by by me, right? I memorize 12/24 words and
31:13
that's it. I can hold as much as I want and
31:16
I don't need security guards, right?
31:18
I don't need complex vaults, any of that.
31:23
Literally, you know, somebody can cross a border escaping from
31:28
Venezuela, escaping from even Brazil, right?
31:31
You never know. I mean, countries have changed
31:34
significantly pretty much overnight, right?
31:37
So the fact that we have access to an asset like this, it's I
31:42
think it's, it's, it's completely under underplayed and
31:45
people don't understand that. Well, it will happen with time.
31:48
I think as I was saying, as you get into Bitcoin, you understand
31:52
all of these things, then it comes to the realization of how
31:56
much better it is than anything else that it's out there, right?
32:00
It's, it can hold its value across time across space much
32:06
better than all of the other assets that you have there,
32:09
right? Living in Brazil, like one of
32:12
the things that Brazilians do a lot to store value is to buy
32:16
real estate. And I don't think people
32:19
understand, you know, all first of all, all the costs that they,
32:23
they run with real estate and then more important, all the
32:26
risks, right? It's, it's not really your real
32:28
estate and you can stake it across the border if something
32:31
happens, right? It's always going to be there.
32:34
Try stop paying your taxes. You'll see what happens.
32:37
Ultimately, you're going to lose your real estate, you're going
32:40
to be taxed to death because you know, when you fleece in Brazil,
32:43
when you pass that real estate to your kids, you have to pay an
32:46
inheritance tax and you know, you have to pay taxes on pretty
32:49
much everything and to pay annual taxes.
32:52
So you know, it's, it's Bitcoin, you don't pay anything for it,
32:56
right? It's just it's sitting there by
32:58
by definition. So I, I just, and I go back also
33:04
a lot to like the reason why I ended up in Brazil is because
33:09
both my grandparents, you know, at some point had to escape
33:12
their countries to, because of several things, right?
33:16
Either World War Two or, you know, they're being persecuted
33:20
for other things. So these things have happened in
33:22
history, right? And we we always think that, you
33:25
know, these times should they are different and that's never
33:27
going to happen. That is happening, right?
33:29
I mean, if you were in Ukraine, you had to leave Ukraine, right?
33:33
If you are different countries that get into a war, you may
33:36
have to leave and may have to leave everything behind.
33:39
You know, after doing that and try leaving a country like
33:43
Brazil with a bar of gold and going through customs, right?
33:46
I wish you luck. You're not not going to get
33:50
through. And again, I think that the
33:53
characteristics of Bitcoin are just very, very different than
33:55
anything else that we we have out there.
33:57
And people are going to see that that with with time.
34:00
Just another side, very quick Side Story here.
34:04
After, you know, I, I came to Swan and I went back to Goldman
34:09
because we were at some point. They were.
34:11
They let you in. They they asked hardly, did
34:14
they? Arrest you at the door.
34:17
I don't know why they had like two guys, you know, watching me
34:20
and Kanye escorting me up, but that was weird.
34:22
But it did it happen. But you know, jokes aside, like
34:28
when I raised the the capital for my company in Brazil, so we
34:31
did my company in Brazil did unsecured landing for
34:35
individuals in Brazil doesn't get riskier than that, right?
34:39
I mean, very high default rates. So we had of course very good
34:43
technology to monitor the clients to underwriting of the
34:47
clients, right? Goldman invested in our credit
34:49
fund, right? So they gave us capital to go
34:51
out and land to, to the clients, very high yield as you can
34:55
expect, but very high risk and risk that it's unpredictable
35:00
because default, typical default rates in this market to give you
35:03
an idea, Nico is like 20%. When we were have like 20%
35:06
default rates, we were very happy, right?
35:08
And we were making a ton of money because banks in Brazil
35:12
will lend money to their clients, right?
35:14
If it is short term capital at 10% a month.
35:19
So it's not 10% yet, 10% a month.
35:21
So today in Brazil, you need capital from a bank, right?
35:24
They would charge you, if you're lucky, they're going to charge a
35:27
10% a month, right? So we were landing at less than
35:30
that at like 7%. And we were already making a
35:34
fortune because again, like the, the, but the risk is the market
35:40
starts to decline. The default rates go from 20 to
35:43
40 and you're screwed, right? So anyway, so we did that.
35:47
Fast forward, I come to Bitcoin only company.
35:50
So I called the Goldman guys. I went there to visit them,
35:53
right? And like, listen, I'm thinking
35:55
about doing a Bitcoin back landing fund, right?
35:58
So it's completely collateralized by Bitcoin.
36:00
You see the Bitcoin, it's over collateralized, right?
36:04
Let me tell you again, there's no risk on this, right?
36:06
You're seeing the Bitcoin, your risk is the remote risk that
36:11
overnight it's 50% over collateralize it, 50% of the
36:14
value of Bitcoin evaporates overnight.
36:17
It need literally needs to be overnight because otherwise you
36:20
can just do margin calls, right? What did they tell me?
36:23
Oh, we don't want to do that. That's too risky, right?
36:26
So that just tells you everything.
36:27
It's like it's not logical, right?
36:29
It's not logical. There's no logic in this because
36:32
if the IT would be logical, they would just put the numbers in a
36:35
spreadsheet, right? They say, OK, And then at the
36:38
end I pressure them like, guys, you're out of your mind, right?
36:40
This is much better economic than what you have.
36:42
I don't understand. And at the end of the meeting of
36:45
the part and tells me it's like, listen, the reality is that I'm
36:48
gonna have a very tough time going to my investment committee
36:51
and talking about Bitcoin and explaining to them what Bitcoin
36:54
is. And he's like, I get it.
36:56
He didn't get it, but he's like, I get it, right.
36:58
But I'm going to them and explaining that it's gonna take
37:01
me a month. It's gonna take me two months,
37:03
right? I don't think they're ready for
37:05
that. And he's right.
37:05
They're not ready for that. And remember also like this is a
37:08
guy that, you know, has a pipeline of ten of their funds.
37:11
They're looking to get capital with him, right?
37:12
There are other opportunities. He doesn't need to pay attention
37:15
to this. And there was, they were up
37:18
until, and this is again just to close it up, but up until I
37:23
would say the beginning of this year, the career risk for all of
37:27
these guys was to not look at Bitcoin, right?
37:30
And very, very soon, and it's starting already, I can tell you
37:34
the career risk for all of them is going to be to not look at
37:38
Bitcoin. I wish luck to a lot of these
37:41
pension funds that 5-10 years down the road they're going to
37:44
get asked by, you know, their constituents.
37:46
You're going to say, you had all these people talking about
37:49
Bitcoin. This as expected went up and you
37:51
have Wisconsin that allocated is doing really well.
37:54
And now we can't pay, you know, our pensioners, they're going to
37:58
have to come up with a very good justification of that, why they
38:01
didn't allocate to Bitcoin, right?
38:02
And at the minimum, and this is what I've been done, like it's
38:05
OK if they decided, you know, it doesn't fit their portfolio, but
38:08
they need to take a look at the assets, sit down and understand.
38:11
And really, and people are not even doing that.
38:13
And I, I think, I, I don't think, I'm sure this is a
38:16
fiduciary breach to, to their, to their investors, right. 100%
38:20
I 100% agree with you. And it it again, we were talking
38:24
about it in the very beginning, right?
38:26
It's it's almost like cult like behavior.
38:28
But you know, you have the CEO Vanguard Grant and I don't think
38:33
it's a coincidence that he resigned when he resigned.
38:36
He's grandstanding. It's like no, like with the tie,
38:40
like we're we can't do that BlackRock best performing ETF in
38:45
history. So, yeah, it 100% if you're a
38:50
quote, UN quote financial advisor and you're not, you
38:53
know, telling your, your, your client to allocate at least 1%
38:58
of which I think is very concerned.
39:00
It always starts with one and ends up two and ends up three,
39:02
right. We all know that you just need
39:03
the foot in the door. But yeah.
39:06
On that point, this is this is important.
39:09
Like I was discussing this with Terence the other day and he
39:13
mentioned that Lynn mentions the same thing, which is I would
39:18
rather an investor start with a small allocation and not
39:23
rebalance. Then it's starting to for larger
39:26
allocation and try to trade in and out.
39:28
Because Bitcoin is an asset that it's because of the volatility
39:31
and because it's early and because it's still capturing
39:33
monetary value of a lot of assets out there, it is going to
39:36
have volatility. There's no question volatility,
39:38
we should embrace it. It's a good thing.
39:40
It's not a bad thing. It means that it's early, right?
39:42
So I would rather these investors start small, but don't
39:46
mess with it. Believe it.
39:47
I always tell the institutional investors like, listen, you're
39:49
going to allocate for this asset right in your investment policy
39:53
that you're not going to touch it for a minimum of four years,
39:56
right? Ideally 10, but a minimum of
39:59
four years. You're going to allocate, you're
40:01
going to leave it there and it's going to go up significantly.
40:05
It's going to go down significantly, right?
40:06
But if you just start trading this asset and rebalancing, you
40:10
may end up with with less asset assets at the end of the day.
40:14
Yeah. And I think that's that's it.
40:17
I call it the price of tuition. If you first start shit coining
40:21
then whatever. And it's all just cuz you want
40:23
more Bitcoin. But it usually Odell has the
40:27
famous line right? Stay humble stack sacks.
40:29
It's really that simple. You know, Hoffa like an
40:32
interesting phenomenon too, with like high net worth individuals
40:36
that are like kind of forced to become investors just to
40:39
maintain their purchasing power, right?
40:42
They either outsource that they try to do it themselves.
40:45
It's almost a shock to them when you go to them and you're like,
40:50
you just have to buy it and you put it in cold storage and
40:53
that's it. And they're like, that is
40:55
impossible. And they kind of go through this
40:58
like mental process of like, that's insane.
41:02
And then they start to listen to you because it's like, wait, the
41:04
kid in the T-shirt and the hoodie and like, he's giving me
41:07
better advice and you know, this, this, this guy, like what
41:10
is going on here? So you know, but Bitcoin does
41:13
that. Starts with what you know, even
41:16
before all of that, let's question why does the doctor
41:20
right? Why does the lawyer have to
41:23
think about buying stocks, about buying bonds, right, about
41:27
thinking about. I'll tell you, like my father is
41:29
a doctor and he needs to invest. He's like, oh, so where do I put
41:33
the money now, right? And it stresses him out like
41:36
every month he calls me, it's like, listen, I have these
41:38
bonzer coming due, you know, where do I put the money?
41:40
How do I invest, right? And it, this happens all the
41:45
time. And the reason why it happens is
41:47
because again, the money is broken, right?
41:49
You need, it's a current. You're swimming against the
41:51
current and if you just sit there and if you just, and
41:54
people very quickly realize this, they leave the capital
41:58
sitting in their checking account, right.
42:00
Five years down the road, 1010 years down the road, you're
42:02
purchasing power ready went down by almost half.
42:05
And when, when, when I worked with high net worth individuals,
42:10
right. The number one concern, and
42:13
these are people, they're worth like $50 million, a $100 million
42:16
number one concern on their minds was running out of their
42:20
of money, which is I remember looking at like absolutely no
42:23
way this guy's going to run out of money.
42:25
But they knew something I didn't know, right.
42:26
They're like, oh, I'm getting older and you know, my
42:29
healthcare costs are just exploding up, right.
42:32
And they just seen what has happened and they're
42:34
extrapolating to the future and say, well, what happens in a
42:37
world that, you know, inflation really picks up?
42:41
And I can just sit here and think that, you know, I have
42:44
$100 million maybe is an exaggeration.
42:46
But the guy that, you know, used to have like $5,000,000, you
42:50
know, in 2008, it was considered like, oh, this guy doesn't need
42:54
to. I remember like saying like
42:55
$5,000,000, you don't need to work anymore in your life, like
42:58
never, right? I mean, you can just go enjoy,
43:00
enjoy life, buy a boat, right? Go buy a nice house and you can
43:04
just enjoy life. The rest thought that $5 million
43:07
is little much, still a lot of money, right?
43:10
But I think that's hard to retire.
43:12
Yeah, with $5 million today, right?
43:16
And it was even less than that, right.
43:18
Look, in the 70s, there was this show called the $1,000,000 man,
43:21
right? That used to run in the in the
43:24
US and $1 million was like, oh, this guy, it's like a
43:27
billionaire. Actually, it's pretty much the
43:29
same thing. It's like a billionaire today,
43:30
right? Somebody that has so much money
43:32
that doesn't even know where to put the money, right?
43:35
And look at the number of millionaires that exists today
43:38
in the in the US, right? It's ridiculous.
43:40
And it's not because people are getting richer, it's because the
43:43
money, it's becoming worthless, right?
43:46
And through this process, we saw, you know, the monetization
43:51
of assets that should have never been used.
43:54
For premium on real estate is bonkers.
43:58
It's insane. Doubling in like one or two
44:01
years. It's it's insane.
44:02
Yeah, it's crazy in the secondary if and it's all again,
44:06
the government's fault because in the US you have all these
44:09
benefits to buy real estate. You can deduct the interest that
44:12
you get right from your taxes. So you are very incentivized to
44:18
buy, to buy real estate and people did like people were
44:21
rational in that decision. But what it ended up doing is
44:24
now you have a new generation that's coming in to buy homes
44:27
and they can't afford homes, right?
44:28
Their homes became this Frankenstein of an asset that
44:33
you know, shouldn't be a savings account.
44:35
And it became a savings account got it got morphed into
44:39
something that, you know, it was never supposed to be that way.
44:42
It's supposed to be a place where you live and you raise
44:44
your kids and you have your or your family, right, and not the
44:48
place where you put your money. And and that's what I was going
44:51
to say, like in in Brazil, historically, that's where
44:54
people put their money, right? They come here to.
44:56
Miami. They come here, they buy an
44:59
apartment completely empty, just leave it there.
45:02
They'll pay the condo fee and they're like, I am good, I'm
45:06
doing great. And then prices double and then
45:09
they see it. There's a huge Brazilian
45:11
community here, so I know exactly what you're talking
45:13
about. And they're not being, you know,
45:17
irrational by doing that. First of all, an apartment in
45:21
Miami, the Brazilian government, good luck going to take it over,
45:24
right? It's going to be much harder.
45:25
So just for them crossing the cap, the potential capital
45:28
controls already has a lot of value to it, right?
45:31
But more important, they just look at the charts and like,
45:34
yeah, Miami real estate went up, you know, pretty much every
45:37
every year for the last 5-10 years, right?
45:40
So as an investor investment, it's the best investment that I,
45:44
I can probably do. Now there's a limit to how much
45:49
monetization and an asset like that can take, right?
45:54
I think in real terms, not in, in no, in nominal terms, maybe
45:58
there's no limit because people keep printing money and then,
46:00
you know, of course prices keep going up.
46:02
But in real terms, there's a limit, right?
46:05
I can guarantee you that prices of real estate in Miami priced
46:11
in Bitcoin are not going to go up in the next 5-10 years.
46:14
They're five years from now. We're going to look at prices of
46:17
a home or condo in new in Miami or New York City or whatever big
46:20
town that you want to get right and price it today in Bitcoin.
46:24
Look at again in five years, right?
46:26
Very, very hard. And I can't guarantee that it's
46:29
a guarantee because I'm exaggerating a little bit, but
46:31
very, very hard for prices to be when they're priced in a, in a
46:35
hard asset that, you know, has a hard cap.
46:39
We're not gonna be producing more people.
46:41
Can, you know, governments can ask as much as they want.
46:44
They can change the code as much as they want.
46:46
They can trash do whatever they want.
46:48
We're always gonna have 21 million.
46:50
That's it. It's a cap, right?
46:53
And people are gonna realize that also, I think, and This is
46:56
why it bothers me when people say that, you know, there's
46:59
there's a lot of volatility in bitcoins.
47:01
No volatility, man. Again, look at this like it says
47:04
at the most stable monetary policy that you can find in the
47:08
world today, right? None of none other governments
47:11
are this stable. None.
47:13
None of the other shit coins are this stable, right?
47:16
None of them have this track record.
47:17
So it's simple, don't complicate, right?
47:20
That's a sad stay humble stack. Sad. 100% And you said something
47:25
really interesting, which is that we have this idea that the
47:28
American Dream is dead. And specifically, if you're a
47:31
millennial, you're a zoomer, The American Dream is dead on a Fiat
47:35
standard, on a Bitcoin standard, it's thriving and it's been
47:39
exported worldwide. Life just gets cheaper.
47:41
Even Miami real estate, you're going to get at a discount five
47:45
years from now if you denominate your wealth in Bitcoin.
47:48
Now, Hoffa, I want to double back to something you said
47:51
earlier in the conversation, and this is something that I hear a
47:54
lot, which is we are too late to Bitcoin.
47:58
But you said actually we are very early to Bitcoin.
48:01
What do you mean by that? Yeah.
48:03
So let's go back to what we were talking about, right, the, the,
48:08
the monetary premium that a lot of these assets have captured
48:13
through, through decades, right. So real estate, I think it's a
48:17
good example. Let's stick with that $320
48:20
trillion market gap in, in real estate, right, estimated, I
48:26
think maybe actually higher than that.
48:28
I would argue that more than 50% of that value, it's in real
48:33
estate because as we were saying, real estate became this
48:36
savings technology, this Frankenstein of a savings
48:40
technology, right? So it's assets that went there
48:44
they because they needed to, right.
48:46
Everybody says, well, you know, COVID came in.
48:48
There was a lot of money, money printing and everybody said it
48:51
was going to be inflation. Inflation ever came.
48:53
Inflation first of all, came it's already significant.
48:57
Even if you look at CPI of, you know, all these made made
49:00
believe indices, but the rear inflation didn't go into like
49:05
like the the groceries, right? The re inflation went through
49:08
the savings assets because if you're close to the money
49:11
printer, right, you're not the going out and buying groceries.
49:16
You are also, but you're putting your money to to to be invested
49:20
somewhere. And that's typically in the
49:22
stock market. That's typically in real estate,
49:25
right. So stocks became even more
49:27
monetized, right. The fact that we kept seeing
49:30
prices go up right, right in the middle of COVID, like people
49:33
couldn't understand like, well, what's happening?
49:34
Why is the S&P up so much right in the middle of a pandemic?
49:38
And that's because it's like the the monetization of the asset
49:41
right? Got money printer prints the
49:43
land somewhere the money needs to go somewhere right.
49:46
It doesn't sit in checking accounts everywhere and it ends
49:49
up, and this is not a trivial process, but it ends up in, in
49:52
all of these assets and all of these assets kept getting an
49:56
even higher monetary premium, right?
49:58
So if you look at all of these in Bitcoin today compared to a
50:02
$323 market cap, right? Which is again, and it's not
50:07
only real estate, it's real estate, it's gold, it's silver,
50:11
it's art, it's stocks, it's bonds, right?
50:13
All of these assets that have been monetized for the wrong
50:16
reasons. I'll give you another example.
50:19
Look at the US stock market. The S&P compare the performance
50:24
of the stock market with any other developed or developing
50:29
market in the world. The S&P trades at the
50:32
significant premium, right? The Brazilian stock market
50:35
hasn't gone anywhere in the last 10 years.
50:36
Euro stocks hasn't gone pretty much anywhere in the last 10
50:40
years, right? So there is a premium that
50:42
people are paying to go into U.S. stocks to U.S. stocks keep
50:45
getting again monetized. People are throwing money when
50:48
it means stocks, right? Again, just tells you that
50:51
there's a lot of money going around, right?
50:53
A lot of fiats going around, which is easy money, which is
50:57
soft money, right? So the addressable market for
51:01
Bitcoin is all of these assets. It may not demonize and it won't
51:06
demonetize all of them overnight, but will gradually
51:09
enhance started ready to demonetize all of these, right?
51:13
I've met real estate investors that sold real estate property
51:17
to invest in Bitcoin, right? I've met people that sold stock
51:20
to invest in Bitcoin and it's still a tiny drop in this huge
51:24
ocean of liquidity, but it's happening.
51:27
I actually people want to see the numbers, right?
51:30
They can go to to Nakamoto portfolio and I wrote there what
51:36
I call it's the, it's the the Schrodinger model and not going
51:38
to go too much issue detail, but it, it basically puts
51:41
probability you can address put down any probability you want
51:46
and then you can show it can say, OK, if I think that, you
51:49
know, Bitcoin has a 5% probability of capturing the
51:52
monetary premium of real estate. And I think that's going to
51:55
happen in 20 years from now, right?
51:57
How much should Bitcoin be worth if I believe in that world,
52:01
right? And then it will give you an
52:02
estimate based on that. And the numbers are usually way,
52:06
way, way higher than where we are right now because again, we
52:10
have just capture a fraction of the fraction.
52:13
Yeah. So if you click there on run the
52:15
numbers on the on the left side on the Bitcoin Schrodinger
52:18
model. So here people can put down any
52:21
if you click there on, for example, real estate on the
52:23
right on the arrow down. Yep.
52:26
So you can change here the the monetary premium and how much
52:30
you think it's going to capture of each of these assets and what
52:33
the probability is. And you would see by doing this
52:37
that Bitcoin it's absolutely and massively underpriced at the
52:42
current levels, right, Even at very low probability.
52:45
A lot of times in conversations, again with institutions, I do an
52:51
experience and I'll tell like even before I took, I have all
52:53
these conversations I tell like, listen, I know you're not very
52:57
bullish in Bitcoin, right? I know you're just getting
52:59
started on this, but let's think about two scenarios.
53:02
Let's think a scenario that, yeah, Bitcoin fails didn't work,
53:05
right? It's a catastrophe for some
53:08
reason, right? We find out something that you
53:10
know, was I think probability is very low, but there's some some
53:14
bug in the code, right? For these people, they think
53:16
there is something like that, right?
53:17
So think about that. And then there's the other
53:19
scenario, right, the other extreme.
53:21
So let's talk about the two extremes where Bitcoin really
53:25
captures the monetary premium in all of these assets and it
53:28
becomes the global standard for pricing everything, right?
53:33
How much probability you think of that scenario?
53:36
And I always shocked of the numbers that people tell you.
53:40
I think it's, I don't know, it's a 5% probability that happens or
53:43
a 2% probability. And then I plug the numbers in
53:46
and I say, OK, So what you're telling me it's right, right.
53:49
So if it's only a 2% probability and I plug it in here and I look
53:53
at all of these assets, Bitcoin should already be 10X from where
53:57
it is today. So you should be.
53:58
But you, you are telling me, is that me?
54:00
You're telling me that in your role that you just made-up for
54:03
me, Bitcoin should already be priced today.
54:06
It should be priced today 10X or 5X or whatever is their
54:09
assumption of where it is right now.
54:11
Never, never in one of these conversations we get to the
54:15
right price of what? It's always much higher than
54:17
where Bitcoin is, which again, just go, sure, if you do the
54:20
opposite calculation, you just plug in, OK, so what's the
54:22
current price of Bitcoin and what kind of probabilities will
54:26
get you to this price? You'll see that the
54:28
probabilities are very, very low.
54:30
And I think this is also another way that to show people that,
54:33
you know why we have volatility, because it's these probabilities
54:36
in everybody's mind, right, Go from 5% to 10% to 15%.
54:41
It's the reflection, right? It's it's going to be massive
54:44
changes in price at the end of the day.
54:47
So Hoffa, first of all, huge fan of Nakamoto portfolio and I and
54:50
I got to produce a couple, I think the first two shows for
54:54
it. So start with with you and Dom
54:56
and and Joe Carlos, sorry, I believe was on there as well.
55:02
And and Foss Foss man love Foss legend.
55:05
So OK, so now I want to get into what Hoffa thinks.
55:10
OK, so this is, you know, the potential, right?
55:13
Are we early? That was a great answer.
55:15
But what what is your personal, you know, your personal bias?
55:20
Like are we talking about, you know, a 10X over 20 years like
55:24
that? That makes me a little
55:25
depressed. Are we talking about a 10X over
55:28
the next 5 to 10 years? You know, I think I heard you
55:32
somewhere drop the 100 X statement.
55:37
So what what are you personally doing with your financial
55:41
planning? Like what are you expecting
55:43
Bitcoin to do? Yeah, quick disclaimer before
55:47
like, and this is first page. If you go to the first page of
55:51
Nakamoto portfolio, you see it's written there.
55:53
Like, you know, I don't make price predictions because making
55:55
price predictions it they, they are all going to be wrong.
55:59
So if I tell yeah, Bitcoin and if anybody tells like Bitcoin
56:01
price is going to be at the $100,000 by this day, it's
56:05
right, just run away because it's, it's impossible to predict
56:08
the price in an asset that it's still super, super early and
56:12
it's still capturing as we just saw the, the monetary premium
56:15
for a lot of other assets, right?
56:17
It's also true for start up, right?
56:19
If I just started a company, I told you, Nico, you know, let's
56:22
get the price for this company, the price would be zero in one
56:25
day. The next day, you know,
56:26
something good happens and then the price is 10X and the next
56:29
day, you know, something bad happens and goes back to zero,
56:31
right? So it's the same way.
56:33
It's the earlier an asset is the higher volatility you're going
56:39
to have, right? Which again, think the other
56:42
way, the fact that we still have volatility in Bitcoin, it's a
56:46
very good sign that shows that we are early, right?
56:48
If Bitcoin price was just going up like 5.05% everyday, very
56:54
stable, very predictable, I would know that, you know, we
56:57
were close to the end of the cycle, right?
56:59
So this is the first indication that I, I look and I say, Oh
57:03
yeah, probably did. It's super early, right?
57:06
How quick this is going to happen, I don't know.
57:09
Does it matter if it's going to be 10XA100XI?
57:11
Don't know also because it could, it could then a hundred X
57:14
in one year, but based on a dollar that it's worthless,
57:18
right? And that doesn't mean anything,
57:20
right? I think purchasing power is
57:23
going to continue to go up in Bitcoin terms, right?
57:26
So going back to our example, I think that, you know, five years
57:29
with, you know, 100,000 sets, you're going to be able to buy
57:32
more things than you can buy today.
57:35
Quick thing also that we have, it's hidden there in the
57:37
Nakamoto portfolio, but it's a, it's a fun exercise to go
57:40
through. I recreated the Big Mac index,
57:44
which is, you know, a traditional index that it's used
57:47
for, it's down on the right somewhere that it's used for
57:52
currency. So they got, like I said, the
57:55
Economist writes, there's this index and they'll go to
57:59
different countries and they'll say, OK, with what is the price
58:02
of one Big Mac in each of these countries, right?
58:05
And then some of them are cheap, some of them are, are more
58:07
expensive. So I did the same thing but with
58:10
Bitcoin, right? And you can see like it's a big,
58:13
big Sat index. So you can see where it's cheap,
58:16
where it's more expensive. But then if you Scroll down,
58:19
there's a chart that all the way down, just keep going down.
58:23
There is a chart. There you go that you can
58:26
actually go back in time here there are arrows somewhere that
58:31
you can go back in time and you can see, you know, So today this
58:34
is the amount of, I don't forgot how many sets, but you can just
58:38
click and animate it and you see that, you know, with time you
58:41
just bought more and more Big Macs with the same amount of
58:44
sets, right? That trend, I don't make
58:47
predictions, but I can predict that that trend is gonna
58:49
continue. I'm gonna be able to beat more
58:51
Big Macs in the future than can buy today.
58:54
Hoffa, that is a very clever way of not making a prediction.
59:01
OK, All right, guys. There you go.
59:03
There's your model. Very, very clever.
59:07
But that's absolutely awesome. That is so funny.
59:11
That's incredible, man. OK, OK, OK.
59:14
So Hoffa, historically speaking, Bitcoin has followed this cycle,
59:22
right? Usually about 12 months to 18
59:25
months after the halving, things tend to go parabolic.
59:29
A lot of people are saying that the halving, you know, that the
59:32
the cycles don't play that big of a deal anymore because the
59:35
subsidy is not that high anymore.
59:39
What's your take on that? Right.
59:40
A lot of people are anticipating, you know, 2025,
59:44
it's going to be a good year for Bitcoin, especially with all the
59:47
things going on, on the institutional level, on the
59:50
nation state level, on the, you know, minor level as well.
59:54
You know, what are your expectations?
59:56
And you can answer in in Big Macs if if you like.
1:00:01
Yeah, Bitcoin has a weird way of always surprising everybody to
1:00:05
the upside and to the downside, right?
1:00:07
Whenever you start seeing people say, yeah, it's definitely going
1:00:11
to be at the 100K by conference day or it's, you know, it's,
1:00:14
it's going to go down to seven K, whatever it is, you know that
1:00:18
it's not going to do that and it is going to surprise one way or
1:00:22
the other. I think we don't have enough
1:00:24
data, right? So if we look at the cycles,
1:00:26
right, there's basically like 2 full cycles.
1:00:29
They're starting the third one where you have good enough price
1:00:31
status. Take a look, it's super
1:00:33
interesting and almost, you know, scary to see that in the
1:00:36
tops and the bottoms were made. That's I kind of like the close
1:00:40
to the same. There's that charge, you know,
1:00:42
the spiral chart of rise that shows that, you know, the, the,
1:00:45
the dates are very, very close. So I don't know if that's a
1:00:48
coincidence or not. I do think that the this cycle
1:00:52
is different, like the fact and I think it's going to surprise
1:00:55
with the upside because the, the floodgates are open, right?
1:00:58
The what we were talking about that institutions can get very
1:01:02
quick access Bitcoin. This is a game changer, I'll
1:01:05
tell you. Doesn't hold on Hoffa because I
1:01:07
heard this the other day. Doesn't this actually like
1:01:09
suppress the volatility as these institutions start to sell some
1:01:14
of it to like their portfolios? I don't know what the technical
1:01:17
term for it is, but doesn't that cause a little bit of downward
1:01:21
cell pressure? No, no, because the, the, the
1:01:24
amounts of new institutions coming in compared to the ones
1:01:28
that are ready in and rebalancing, they're not one
1:01:31
order of magnitude different, like two, probably three
1:01:33
different, three orders of magnitude like you have for
1:01:36
every institution that it's rebalancing and selling to
1:01:38
rebalance at this point. Because you know, again, the
1:01:41
adoption is like, think about it, people to talk about this,
1:01:44
they don't understand the addressable market of Bitcoin,
1:01:47
the addressable market to Bitcoin.
1:01:48
Again, it's everything. All of the assets that got
1:01:51
monetized through years for the wrong reasons, right boats are
1:01:55
it's real estate, equities, right bonds, all of these
1:01:58
assets. This is the addressable market.
1:02:01
As people realize that the amount of institutions that are
1:02:04
going to be coming in and putting one percent, 2%, three
1:02:07
percent, 5% of their portfolios in Bitcoin, this is going to
1:02:11
have an impact on price. Quite honestly, that hasn't
1:02:14
happened yet. I mean, we've seen very, very
1:02:18
early indications that some institutions are allocating, but
1:02:22
even if you look at the amounts that went into the ETFs, it's,
1:02:24
it's great, but it's, it's small compared to the total assets
1:02:28
under management that you have out there.
1:02:30
So I don't think you know, we are at that stage that the
1:02:32
rebalancing of these institutions going to have any
1:02:35
impact whatsoever in the price exactly for the things that
1:02:39
again we, we, we just discussed. Yeah.
1:02:42
And, and I agree with you by the way, I, I think, and, and again,
1:02:46
I'm, you know, my, my, my career in 1/3 of my life has been
1:02:50
Bitcoin. So I'm looking at it from that
1:02:53
lens. But basically the last cycle, I
1:02:56
feel like a lot of people have PTSD from it.
1:02:59
I think it was cut short because of the China mining ban.
1:03:02
The hash rate dropped off a Cliff, 50%.
1:03:06
I thought, I think it brought the price down with it.
1:03:08
It's like literally correlated the hash rate and the price.
1:03:12
And then within nine months, of course, you know, the hash rate
1:03:15
recovered price made an all time high.
1:03:16
But I feel like it kind of like took away a lot of the momentum.
1:03:19
Was it on purpose maybe? And then of course, you know the
1:03:23
whole FTX debacle and stuff. So what I'm the general
1:03:26
consensus here is what I'm seeing now is that people are
1:03:30
like, oh, 100K, you know, this is there.
1:03:33
That's what I'm hearing. And I'm like, and then it's what
1:03:35
you said. Bitcoin tends to do the exact
1:03:38
opposite of what everyone thinks.
1:03:41
So no one knows. Like you said, if if someone
1:03:44
tells you what's gonna happen with the price of Bitcoin next
1:03:46
year, they have no idea what they're talking about.
1:03:48
They're probably trying to sell you a paid trading course or
1:03:51
something. But yeah, I'm.
1:03:53
That's one point there which is important.
1:03:55
Like this is the one of the hardest assets that I've ever
1:03:59
seen in my career to hold because it's, I always say this,
1:04:05
it's months and years of pain and you only have days of
1:04:10
pleasure, right? You're going to be happy for
1:04:12
very short periods of time because price is going to go up
1:04:15
explosively up very, very quickly in concentrated periods
1:04:20
of time. In vast majority of the time
1:04:22
you're going to be like now, which you like, you're just
1:04:24
looking at the price like, oh, it's still 60 K, still 60 K.
1:04:26
So it's not going anywhere. And then it goes down to 59 and
1:04:29
you're like, damn, this thing is not, I was wrong, right?
1:04:32
Bitcoin is not going to go anywhere.
1:04:34
And then when you're almost giving up, right, and you're at
1:04:36
the point of puking it out, then it just surprises you.
1:04:40
And then it's obvious. Then everybody's like, yeah, of
1:04:42
course it was going to 250K, right?
1:04:44
Of course, Like I always knew that.
1:04:46
And now it's going to 5 million, right?
1:04:48
And then, of course, then they get screwed again and it's going
1:04:51
to continue to be like that, man.
1:04:53
Yeah, no, it's it literally takes the path of most pain
1:04:57
every single time. And man, I really enjoyed this
1:05:01
conversation. Hoffa, thank you so much for
1:05:05
joining us. Taking way too long for joining
1:05:08
me on Simply Bitcoin IRL. It's been a pleasure and thank
1:05:12
you so much. Why don't you tell everybody
1:05:13
where they can find you on the interwebs?
1:05:15
Yeah, don't, don't find me. I'm kidding.
1:05:19
So Twitter, usually it's where I am, Alpha Zeta with 2A's, it's
1:05:24
right there on the screen so people can find me there and
1:05:27
they're happy to help with any questions, asset, the location,
1:05:30
whatever it is, just hit me up and happy to help always.
1:05:33
Absolutely. And then the website you were
1:05:34
showing off is nakamotoportfolio.com and you
1:05:39
can have fun with it. I didn't even I think I heard
1:05:42
about the cheeseburger thing, but I never really played with
1:05:45
it. But anyways, Hoffa, thank you so
1:05:48
much for joining us. Appreciate it.
1:05:50
Thanks Nico. Great being here man.
1:05:52
Alright guys, that was another episode of Simply Bitcoin IRL.
1:05:54
If you guys enjoyed the show, smash the like button, consider
1:05:56
subscribing if you feel like we provided you value, and we'll be
1:05:59
back tomorrow for the live show at 12:15 PM Eastern Standard
1:06:02
Time. Peace out, everybody.
1:06:05
Episode was brought to you by bitcoinwell.com on a mission to
1:06:09
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