Latest / The Income Show / Lyn Alden: The Dollar Endgame Is Here | The Income Show | Ep. 17

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Lyn Alden: The Dollar Endgame Is Here | The Income Show | Ep. 17 · The Income Show

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If you were in Bitcoin as the fastest horse and then you have, you know, NVIDIA or RAM stocks
0:04
soaring, some percentage of those will say that's the fastest horse now. I'm an AI trader now. If
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money goes elsewhere, it's kind of changing gradually over time the type of investors
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it's interested in. Bitcoin to gold ratio is somewhat bottoming and I'm pretty bullish on
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Bitcoin would say a two, three year view. I was on strategy's earnings call when they announced
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STRC and my take that I posted right after it was I do think it'll be their most successful
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preferred it ended up being so far the successful preferred in the world in terms of say market cap
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when strc had over 24 months of usd reserves for its dividends i asked what their guidance was and
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they said basically staying in that range then they gradually dipped down to 18 months and kind
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of the lowest point they had gotten down to six months bitcoin should be evaluated like a protocol
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will this thing be the first to reach scale compared to any other cryptocurrency that comes
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out but once it pretty notably did it's kind of won the protocol race for the protocol of liquid
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value on the internet, like protocols, I think Bitcoin is here to stay.
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Hey, everybody. Welcome back to The Income Show. This week, I have on Lynn Alden. Lynn, welcome.
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Thanks for having me. Happy to be here.
1:15
Absolutely. So, Lynn, let's first talk about macro and what's going on there.
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last week the U.S. Treasury doubled its long bond buybacks.
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Is this yield curve control by another name?
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What does this mean in markets?
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How should investors be thinking about what's going on right now?
1:36
Yeah, good question.
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I would say it's a fraction of what yield curve control is.
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Yield curve control is kind of the ultimate form of financial oppression.
1:45
So yield curve control is basically when a central bank
1:47
is basically saying that any bond yield that goes above our target,
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or putting it another way, any bond whose price goes below our target,
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we're going to buy unlimited amounts of that bond until it goes back.
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And ideally, if they do that consistently enough,
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they get other market participants mostly do it for them.
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Because if the bond slips at a higher yield,
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a bank could come in, buy it,
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and they know that they can resell to the government in some hours, days, or weeks,
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if the yield's staying at that elevated.
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But it's backed by the fact that the government's willing to,
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the central bank's willing to print any amount of base money
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to buy those bonds.
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That's what Japan was doing fairly recently.
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That's what the United States did for the better part of a decade
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during the 1940s and into the really early 1950s.
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And it's massive financial repression.
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What we have here is a softer version,
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a much softer version, I would say.
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It's nowhere near as strong as pure yield curve control.
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which is right now the central bank is not really buying long-duration bonds on net.
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They're reinvesting some of their maturing bonds,
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but they're not really going out and buying long-duration bonds,
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especially with any sort of goal of reducing their yield.
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And so the Treasury Department is basically concerned around long-term yields,
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I think somewhat prematurely.
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And they're going out and buying back some of their bonds.
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Now, in a vacuum, the initial kind of purpose of these treasury buybacks,
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and this gets a little bit kind of financial plumbing jargon,
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but basically there's on-the-run, off-the-run securities.
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And a simple way to look at it is if you just issue a fresh 10-year treasury,
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that's a very liquid asset.
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Everybody knows what a 10-year treasury is.
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It's very useful.
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Whereas if you have a 10-year treasury that's a year and a half old, so now it's like an eight and a half year treasury, that's a little bit of a weird security, right?
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I mean, we know what it is.
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It's just an aging 10-year treasury.
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So it's just a little bit less liquid because it's more specific in that sense.
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And that's an off-the-run security.
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And those are less liquid markets.
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And the treasurer is willing to come in and buy back off-the-run securities for various entities that need them off their books.
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And they do so generally by issuing new on-the-road securities.
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They issue a new 10-year, they buy back an aging 10-year, and it's not that big of a deal.
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Now, where buybacks can get somewhat of a big deal is if they buy back longer-duration treasuries by issuing more T-bills.
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So if they effectively shorten the average duration of public debt.
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And because they've not announced that they're going to increase the issuance of long-duration bonds,
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The presumption is that when they buy these bonds back, they're basically going to be issuing a little bit excess T-bills to do it.
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The next question then becomes magnitude.
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You know, if they go out and take back 10, 20, 30 percent of the outstanding long duration bond market, that's massive.
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If they go back and take, you know, a few billion here, a few billion here, a few billion year, you know, out of a $40 trillion market of which, you know, some meaningful percentage is long duration treasuries, then that is kind of dabbling around the margins.
5:08
You know, they're taking some pressure off of it. So I would say that, you know, the action itself is kind of benign. It's not like a huge deal. It's not like, you know, the Fed coming out with a massive liquidity bazooka like they did in 2020. It's nothing of that kind of magnitude.
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But it is an interesting signal,
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especially because this was announced
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between normal Treasury quarterly meetings
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where they announced things like, you know,
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what their Treasury general account target's going to be,
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what their buyback rate, you know.
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They generally have a certain cadence,
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whereas this just kind of came out between meetings.
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It'd be kind of like if the Fed just announced a new policy
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between normal FOMC meetings,
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which they generally reserve for emergencies.
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That's kind of what you see here.
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So it's notable for sure.
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Yeah, it's a very interesting point.
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Maybe taking a step back for the audience,
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why does the U.S. Treasury even care about long-term yields?
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What's the importance there?
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A couple of things.
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One is it affects the interest expense.
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I mean, obviously, short-term and long-term yields affect interest expense,
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but the short-term yields are more firmly in control by the Fed.
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So if the Fed sets near-term rates at a certain level,
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generally speaking, three-month, 12-month, even two-year treasuries are going to be somewhat
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near that level, whereas 10-year, 20-year, 30-year treasuries can be at meaningfully
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different levels and therefore affect overall interest expense that the government's paying.
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So that's one big factor. Two, when you're analyzing how much you should pay for an equity,
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let's say you have a moderately growing company, what price to earnings ratio should you pay for
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that company. And part of it is you're saying, well, what else could you buy with that money?
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And often the 10-year treasury is kind of used as the benchmark. Because usually, unless you're
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kind of an inverted yield curve, which is fairly rare, usually a 10-year yield is higher than a
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short-term yield. So if you're thinking long-term, which you should for equity, you're saying, well,
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I could buy this 10-year, which maybe gives me 4.5%, 5%. And what would I want to pay for equities
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to get a, you know, taking on more risk, more volatility, and I expect a better return.
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Now, the higher the 10-year treasury goes, or also, you know, same is true for even longer
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duration treasuries, that puts some pressure on average equity valuations, all else being
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equal.
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And it also affects all sorts of other lending.
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I mean, lending from banks to, you know, investment managers and to small businesses, to large
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businesses.
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I mean, it's all affected by basically the nominally risk-free rate of lending to the government.
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And so ideally, they don't want the long end to get too high relative to the short end.
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And then in addition, it's also, I mean, in this case, the Treasury Secretary made it a goal to get yields lower.
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So it's a little bit more personal in that sense.
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He also criticized his predecessor, Janet Yellen, for doing what he's doing now,
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which is issuing extra short-term debt to not disturb the long end.
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So it's interesting.
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It's easy to be a critic when they're out of office,
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and then when you're in office, you're actually dealing with a problem.
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But basically, I would say that right now they probably care too much.
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I think it's kind of interesting that they care as much as they are
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because unlike say the peak of the market crash in 2020 or compared to say late 2022 after the very aggressive kind of Fed and multiple central bank rate hiking cycle those were times where the bond market was
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legitimately having problems.
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Basically, the liquidity dried up or in some cases completely broke.
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And there were actually having major issues and they had to come in and kind of intervene
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either the UK or like the Bank of England had to do it.
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The Fed had to do it.
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Different areas.
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is there really wasn't a ton of stress in the treasury market this time when it came out.
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It's just kind of like yields are more elevated than where they want them to be.
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The yield curve is not that steep, meaning that it's not like, you know, they lost control
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of the long end of the yield curve.
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It's at a fairly moderate level compared to short end rates.
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There's no major liquidity problems.
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There's really not a ton of sign of stress.
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So the fact that they're, you know, they're coming out and doing all this is almost, I
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call it the Streisand effect in this context.
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Meaning that it's almost like the attention they're drawing to it might be, you know, more harmful than anything they're benefiting from it.
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But that's my take.
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Yeah, related to all of this, Druckenmiller, you know, a famous investor, published an op-ed in the Wall Street Journal, kind of also criticizing the move by the U.S. Treasury.
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Were his arguments kind of similar to the ones that you just made?
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Or what do you make of what he published?
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So pretty much, I mean, the difference is he would take on a more of a moral tone.
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I would describe him as more of an optimist in this case, ironically, which is, you know, I mean, he's obviously the GOAT investor.
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And so anytime he even when he doesn't write it, because in this case, he admitted he used AI.
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But if he's if he has AI write something and he signs off on it, that's still relevant.
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I mean, this one of the few times I'll read AI slop is if Drux says it's his AI slop.
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but anyway I generally agree with what he's saying
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he's basically criticizing them for doing
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interventions in what should be a fairly free market
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and should impose financial discipline on the United States
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that basically he's kind of saying that
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if you have a problem with the long end of the curve
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then maybe Congress should do their job better
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in terms of taxing and spending balances
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I think the challenge with that approach
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I would say that's kind of the
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that's the platonic ideal of how this is supposed to work
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it's not really how it works
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which is at no point is Congress going to say, oh, the 10-year is over 5% instead of 4%.
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Then maybe we should trim the defense spending, or maybe we should majorly reform Social Security and Medicare.
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This is not going to happen. There's no political will to do that.
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Less than 1% chance. I mean, negligible.
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And so in practice, it does not impose restrictions on them.
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If the Treasury market ever breaks, which it does occasionally, instead of Congress doing anything, the Fed steps in.
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And they kind of have to because it's kind of part of their mandate to have financial stability and moderate long-term yields.
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And so they just kind of push that onto the Fed.
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In this case, the Treasury is trying to take on some of the burden themselves.
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But either way, because Congress isn't doing it, and Congress isn't doing it because the people don't really want it.
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They want it in theory.
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If you say people, do you want a balanced budget?
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They're like, yes.
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They're like, okay, would you want to cut this, this, and this, and or raise your taxes?
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They're like, well, no, of course not.
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And so nothing stops his train.
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So for me, I would agree with what Druckenmiller is saying with the caveat that I just, I view it more cynically, and I would say realistically, which is that they're not going to cut the deficit anytime soon.
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And so you're going to see the end game for highly indebted governments, meaning debt in their own currency, so not an emerging market scenario where like, you know, Brazil's indebted in dollars or something, but a country indebted in its own currency, nearly 100% of the time, it ends with financial repression, trying to inflate that debt away and pairing cash and bondholders.
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and whether it's the central bank doing it,
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whether it's the treasury doing it,
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whether it's both doing it,
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whether they take turns.
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These are the types of things you see
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when you start getting over 100% of debt to GDP
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and no realistic austerity anywhere near on the horizon.
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Given the small magnitude, I guess,
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so far of what Scott Besson has done,
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were you surprised to see
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Bitcoin's fairly extreme positive reaction
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or do you think the signal is that important
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that this is moving in a different direction?
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I would say that in Bitcoin terms,
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it was an extreme reaction.
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I mean, Bitcoin is a volatile asset.
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I think the fact that you can look at gold too.
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Gold had a positive reaction.
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It's not a headline moving reaction,
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but hard money in general liked this
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because anything that's kind of unexpectedly dovish
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or unexpectedly pro-liquity,
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which these things are around the margins,
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are generally all else being equal, good for hard money,
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compared to the information you had the day prior to that announcement.
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And, you know, Bitcoin is the more volatile one of the two.
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Bitcoin was in a, you know, obviously a deeper bear market.
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Positioning was very negative.
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The fact that there is that much, like, liquidations of shorts,
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in Bitcoin terms, a pretty benign move.
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I mean, it's nice to get a candle that big.
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But in percentage terms, I mean, Bitcoin historically does multiple of those types of moves.
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But I think that the reactions make sense, not necessarily because the actual macro moves are going to be this big, but because it gives us new information about what Secretary Besant wakes up and wants to do every day, right?
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It gives us a signal about what their intentions and goals are, either, you know, at least leading up to the midterms and potentially throughout the rest of the administration, of that whenever things get a little tough, he's going to get dumbish in various capacities.
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And I think we saw some of that with the Fed too, which is the Fed's kind of not, you know, obviously we have above target inflation right now and they're being somewhat coy with what their plan is for interest rates.
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I mean, they say they would have less forward guidance, but also just being opaque in general, like unclear and kind of not super clear.
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And so for multiple reasons, people kind of looking at that and say, okay, there's no plan for the deficit.
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They're going to intervene.
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They're going to do financial repression.
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and so buy hard money.
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What do you make of kind of diving in a little bit deeper
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on the dynamic between the Treasury and the Fed?
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You know, like we talked about,
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Treasury seems to want lower long-term rates.
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The Fed seems to be a little bit more opaque, cloudy.
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They're keeping interest rates steady.
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Do you think the Fed will eventually lower rates
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and kind of play the game,
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or how do you see this playing out
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in regards to the Federal Reserve?
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So they have less than incentive to do so because unlike Besant, you know, war shouldn't come in and say, you know, my goal is to get the 10-year treasury down.
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And, you know, he getting ready for his job, he talked about kind of the deflationary benefits of AI and everything.
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But then obviously, you know, the Iran war and everything kind of changed circumstances that he walked into.
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And so if anything, I think there's, I mean, in the markets expecting this, there's a higher chance of a Fed hike than a Fed cut as their next move.
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If anything, I mean, 25 basis points doesn't do a lot, you know, especially when you have fiscal dominance.
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This isn't really a Fed problem. It's more of a treasury problem.
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But symbolically, so far, they've, you know, been neutral in the face of above target inflation.
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And so one or two hikes can be symbolically hawkish while not really doing a ton.
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And so I think they might do that.
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Now, whether they end up trimming from there will probably depend on what, you know, CPI does and other measures of inflation that the Fed has.
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In general, you know, I think that they're not going to aggressively cut if inflation is still high.
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But one thing they will do is, I mean, if the Treasury market ever gets truly liquid, the Fed will step in regardless of what inflation is with balance sheet moves.
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even though the chairman is a balance sheet hawk historically.
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I mean, he's been on record since like 2011
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wanting a smaller Fed balance sheet.
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And also one of the few things that the Fed did though
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is like even from their first SOMC statement
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under the new Fed share,
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they basically said they're going to maintain ample reserves.
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It basically means maintaining a large Fed balance sheet.
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And they also keep saying over and over again that any changes to the balance sheet that they do are going to be like telegraphed in advance not surprising to market uh you know they not going to you know they kind of managing
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expectations around what they're going to do there so yeah in general i think both the fed and the
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treasury will accommodate whatever is needed to keep a liquid bond market um uh with the treasury
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being more concerned around long-end yields and the fed in general being more concerned around
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just that the market's reasonably liquid
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and that they're managing the credibility
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where they can around being viewed as inflation fighters.
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So this concept that you've talked about
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quite extensively, physical dominance,
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this train has no brakes.
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How long, and obviously it would be a period,
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as you mentioned, where cash and bonds
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perform rather poorly over a long period of time
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and scarce assets do quite well.
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how long do you expect this period to last?
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Is it like a five-year thing, 10-year, 20-year?
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How long?
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So that's partially a political question.
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The trade-off there is kind of like duration versus magnitude.
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I mean, like in, say, World War II,
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they held the yield curve,
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like short-end rates were nearly zero.
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The long-end was 2.5%.
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And at one point, you had 19% inflation.
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and they just completely held the old curve down at those rock bottom levels uh so if you
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inflate away faster uh when you have that bigger gap now they also had a better excuse back then
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i mean the the you know that wasn't frontline news compared to you know what's going on in the
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pacific what's going on in d-day and all that right and so um you know then there's a time kind
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of political unity where people were kind of putting aside the differences and saying you've
19:04
gotta kill the Nazis first. And so, you know, they can get away with that kind of faster approach.
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In general, when the problem is like structural entitlement issues, bloated DOD and no major war
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other than ones we start, kind of, there's just less overall appetite for it. And so my expectation
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is it's a very long ordeal. I mean, this has arguably been going on since, I mean, really since
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the global financial crisis, but, you know, the more recent wave of it, I would say, started in
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kind of 2019 or so, right before COVID. And obviously, COVID then accelerated for a period
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of time. I mean, I think this will at least be going on in the 2030s and perhaps longer,
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because it's a slower motion type of train wreck, rather than a more imminent type of crisis.
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Now, there have been economies in the past, like, you know, I think Israel had like triple
19:59
digit inflation for a period of time and then and then you know they kind of this really big
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rapid move obviously other countries struggle with it more persistently they have both
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magnitude end duration you know turkey for example super high inflation and pretty persistent
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uh those are you know those are emerging markets you know at least turkey's an emerging market
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uh and so for from for a developed market uh i i think it's more of a long-term grind similar to
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what we've been seeing out of japan i mean japan's ahead of the curve on this um and i think
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we're going to see more countries go the Japanification route. As we trend towards this
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end game or perhaps like reach this end game what role do you think Bitcoin plays in the world?
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Is Bitcoin still this you know as Saylor portrays it digital capital kind of like digital gold the
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scarce bearer asset that's not really a day-to-day money or does it you know perhaps replace the dollar
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and other fiat currencies and actually become like a daily transactional currency.
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How do you think about that?
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And has your thinking evolved at all?
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I think it depends on time frame.
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I mean, I think that that's one of the things that Bitcoin does.
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I also do think it is money.
21:10
You know, I've paid for things in Bitcoin.
21:12
I have received payment for things in Bitcoin.
21:15
I haven't done that with gold or silver.
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I could.
21:19
I've done that with dollars.
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I've done it with other fiat currencies.
21:22
So and I haven't done it with like Nvidia stock.
21:24
It's actually really hard to do that.
21:25
And so on the scale of moneyness, Bitcoin is money. It's got properties as money. It was designed intentionally as money. But money is a network effect good. And generally speaking, people are going to hold their working capital. So the shorter term savings is something that's fairly stable. So that kind of partially rules out Bitcoin because Bitcoin is quite volatile. It's more an investment in that sense.
21:50
in addition people will generally hold their their savings in something that matches their
21:57
liabilities so right now unless you're shorting bitcoin few people will want to borrow bitcoin
22:02
for any reason why would you want to borrow the you know the scarcest like you know digital gold
22:06
and so you know if you don't have your liabilities denominator and you instead if you have
22:13
liabilities in dollars or other fiat currencies they want their assets to mirror that for the
22:17
most part, or at least, you know, they're shortened and intermediate term savings.
22:22
And so there's a lot of kind of like headwinds against the huge, a huge volume of transactions
22:29
happening in Bitcoin.
22:30
So I think it'll take a very long time.
22:33
Now, the intermediate stage, I would say, is portable money like assets with the option
22:39
to use them as money sometimes.
22:40
And like I said, I've used and still use Bitcoin as money.
22:43
um you know i recently got got paid for for an article in bitcoin uh and just and i kept it
22:50
in bitcoin it wasn't converted to dollars it was just native bitcoin transaction um uh but you know
22:55
i think the volumes will be limited and the the money-like aspect here is that so you know right
23:01
now i'm filming some egypt that's why my background looks different i'm not even in my normal egyptian
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home i'm in like a relative's home uh and but like when i come to egypt you know uh like if i
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brought a gold coin with me, for example, I could find a way to get off my hands here
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that day for something approximating the market price. It's a liquid portable unit that I can go
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around and do stuff with. I can't do that with my Nvidia stock. I can't do that with my house,
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obviously. There's most assets I can't do that with. Gold and silver I can do that with.
23:36
Dollars I can do that with. It's actually somewhat hard to buy things here in dollars,
23:39
even though a lot of people want dollars.
23:41
It's just a lot of accounting systems are not set up.
23:43
You know, they'd go to a random restaurant,
23:45
a chain restaurant, not set up to take dollars.
23:48
But there's plenty of ways to get dollars off your hands
23:50
for the local currency.
23:53
And Bitcoin, depending on where you go in the world,
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has that property.
23:57
It's not super high in Egypt.
23:59
This is more of a physical dollars and gold type of place.
24:02
If it was Nigeria, it'd be a little bit more
24:04
of a stable coin, a Bitcoin type of place,
24:06
you know, a little bit more tech there.
24:08
you know you go to Vietnam you go to Argentina you know there are ways to get you know these
24:14
assets off your hands and that's a very kind of powerful trait portable money-like capital and
24:20
really money too now Bitcoin's advantage compared to something like gold is that you know like we
24:26
could exchange transactions in Bitcoin and we can't do it with gold unless we're willing to
24:33
rely on a credit intermediary, which, you know, for moderate transactions, maybe we would.
24:39
You know, maybe we would say we're going to use a gold-backed stablecoin and we could,
24:42
you know, we could trade in gold, which, you know, as Americans, or let's say if I was
24:48
Argentinian and you're American, that's not a big deal because neither of us are worried
24:52
about, you know, getting our gold or dollar stablecoin censored, frozen, confiscated.
24:57
But if I was Iranian, we'd have issues or another country, right?
25:03
So Bitcoin being kind of the most permissionless way to hold capital, move around the world, and then depending on what jurisdiction you're in, either get it off your hands for local money units or in some cases directly buy things with it.
25:18
yeah i guess like as we head towards the end game where the cash and the bonds do poorly and bitcoin
25:26
obviously and gold do do quite well um is there a point where it would just always make sense to
25:33
buy treasuries where the valuation just makes sense relative to i don't know hard money assets
25:39
or is there a point where like bitcoin is the de facto currency and treasuries and dollars kind of
25:47
So there a couple kind of points of history we can look at So in the late 70s obviously the dollar is having problems Volcker comes in Jack have been traded super high Gold had already run up a ton i mean it it was a very popular trade very very kind of highly priced for the era uh and so there was a period of
26:09
time where positive real rates were so good that it did make sense to buy treasury instead of gold
26:16
because you're basically selling a generational run for finally getting positive real yields
26:21
and that was at a time when the u.s still had pretty good demographics uh they had 35 40 percent
26:28
debt to gdp um so they could they could sustain high interest rates for quite a while uh and and
26:35
they could do this so that was a a multi-year multi-decade trade that actually made a lot of
26:39
sense uh because people said okay it's you know the situation looked bad but this is long-term
26:44
fixable uh and so that was a good trade uh you know really until like kind of the early 2000s
26:50
when gold started to kind of take off again.
26:53
And so, yeah, for 20 years, that made sense.
26:55
Now, in many emerging markets, when yields go up,
26:59
I mean, if Argentina is going to pay 50% yields or something like that,
27:03
I mean, if the money supply is growing by 60%,
27:04
it's not the right trade, right?
27:07
I'm just using an example for periods of time.
27:10
So if something is truly in a spiral,
27:14
even three triple-digit yields don't necessarily compensate you.
27:20
And just, you know, kind of trust is lost.
27:22
The other example we can point to along those lines is we, there's, I mean, there's dozens of currencies, either in our lifetimes or our parents' lifetimes that have pretty much failed.
27:31
Either spectacularly, like in Zimbabwe's case, or slightly less spectacularly, like in Argentina, Brazil, Turkey, currencies fail.
27:41
And one thing that they do is they cut off zeros from their currency, basically.
27:45
But if it gets bad enough in the heat of the moment, people will turn to other things.
27:51
Like in Venezuela, especially when you're in kind of a failed state environment, people use a combination of neighboring currencies.
28:00
So you might use a Colombian currency.
28:03
You might use the dollar.
28:04
You might even use precious metals shavings.
28:07
You might use Bitcoin.
28:08
So people will start incorporating other monies that are actually still working compared to something that's failed so spectacularly.
28:15
And so in a world where the dollar ever gets to a point where it's just truly on a spiral, basically what happens there is that merchants say, I don't want that.
28:25
By the time I receive it as payment, when I, at the end of the day or tomorrow, want to get that off my hands for something, it's already going to be devalued enough that it's a mess.
28:35
I just don't even want to get it in the first place.
28:37
that's when people will turn to other things.
28:41
It's, you know, as a buyer,
28:44
I just want to get the weakest currency off my hands.
28:48
As a merchant, I want the strongest currency,
28:50
you know, the one that's low cost of acquiring it
28:53
that I can hold and get off my hands whenever I want.
28:56
And, you know, at a certain point,
28:58
you know, that can break the dollar.
29:01
I think we're a very long way away from that.
29:03
but I think that if you envision how that one day works,
29:08
that's what it would look like.
29:10
It's not tomorrow.
29:11
It's not next year.
29:12
It's not the year after that,
29:13
but a long enough timeline, you know, potentially.
29:18
Yesterday, the Wall Street Journal published an article,
29:21
written by you, actually.
29:23
It was a great article.
29:24
It was titled,
29:25
Not Just Another Technology, A Protocol of Value.
29:28
Can you kind of tell us about that?
29:31
Sure.
29:31
So, yeah, Nakamoto Project's putting together a series of articles to the Wall Street Journal.
29:37
And I wrote the first one.
29:39
It's interesting for me because I usually write long form.
29:43
So it was like an interesting test to get something actually short by me, fairly short.
29:49
And so basically, it's something I've talked about before, but I wanted to dedicate an article for it in this purpose, which is, you know, why is it like Silicon Valley super interested in Bitcoin?
30:00
despite being otherwise pretty good with technology?
30:03
Why is it basically more hard money type folks?
30:06
Why is the Bitcoin ecosystem just kind of very different
30:08
than the tech ecosystem, for example?
30:10
And that's because people that are savvy with tech
30:12
generally have the knowledge base
30:17
that the first tech usually is not the one that wins.
30:20
Ask Jeeves or didn't win the search race, for example,
30:23
or Yahoo.
30:24
These don't win.
30:25
It was Google that eventually won.
30:27
And MySpace didn't win the social media space.
30:31
And so they, you know, they kind of see this as, okay, that's interesting technology.
30:34
But of course, the technology that wins must be a newer, better, faster, more bells and whistles version.
30:41
And so what my article does is says, okay, there's a subset of technology called a communications protocol.
30:47
And more broadly, a protocol doesn't have to be a technology.
30:50
It can be a language.
30:52
English is a protocol.
30:53
You know, social things that happen like handshakes at certain intervals are a type of protocol.
30:58
It's a way of signaling.
30:59
But a communication protocol is a specific type of technology where they generally don't get replaced once they win.
31:09
Basically, in the era of the Internet, so far, the lifetime of protocols tends to be indefinite, which is that kind of the foundational Internet protocols are still the foundational Internet protocols.
31:20
So internet protocol itself, Ethernet, simple mail transfer protocol, you know, physical things like USB, you know, just the fact that billions of devices have USB in various capacities is very self-sustaining unless something literally comes out that's 10x better.
31:37
That's a concept that Jeff Booth has talked about a number of times.
31:41
And so basically my argument is that Bitcoin should be evaluated like a protocol, meaning that, you know, in the early stages, there's an open question.
31:50
Will this thing be the first to reach scale compared to any other cryptocurrency that comes out?
31:55
But once it pretty notably did, it's kind of won the protocol race for the protocol of liquid value on the Internet.
32:04
And so then the question becomes, is it decentralized and secure?
32:09
Is it going to stay that way?
32:12
Is anything on the horizon that could possibly 10x better to challenge its network effect?
32:16
And if not, then the question is, you know, just what is the total adjustment market of this protocol?
32:22
And it's not, you know, OK, what is what technology is going to replace it?
32:26
Because like protocols, I think Bitcoin is here to stay.
32:31
Yeah, I love that article. I think it's a it's a great one to share with any sort of Bitcoin skeptics still.
32:38
Another topic that I want to talk about is Bitcoin and gold.
32:40
I mean, you look back over the last 18, 24 months, gold has done quite well.
32:45
Bitcoin, you know, relative to gold really hasn't done quite well.
32:49
I mean, if you look at the Bitcoin and gold chart,
32:52
Bitcoin's kind of been going sideways and down and up a little bit as well,
32:56
of course, for like the last five years since the peak of the 2021 bull market.
33:02
What do you make of that relative performance between Bitcoin and gold?
33:06
Yeah, I think partially these go in cycles,
33:08
which is, you know, when Bitcoin at one point was like,
33:11
was 3,000 something during the bottom of the 2020 cycle
33:16
and then got up to, you know, 60,000, like a year later,
33:21
that's a bigger move than gold did percentage-wise.
33:25
And then it also fell more, of course.
33:27
And so, you know, depending on what starting point we use, right,
33:31
either Bitcoin dramatically outperformed gold
33:33
or if you use a shorter period of time,
33:35
then gold has outperformed Bitcoin.
33:38
So I think part of it is just we're in a bear market in Bitcoin.
33:41
The other one is that gold did have a pretty generational run in 2024 and 2025, which I think was warranted.
33:48
I think that that's more geopolitically driven.
33:51
I mean, central banks primarily own gold, not Bitcoin.
33:53
You know, around the margins, you have a couple that own Bitcoin, but for the most part, it's gold and treasuries.
33:59
And, you know, when the U.S. was freezing reserves and when the U.S. is growing its money supply by 40%,
34:06
you know, in the peak of the, you know, kind of the global financial crisis, I mean, the
34:10
COVID crisis, you know, in a two-year period, it was like a 40% money supply growth.
34:16
You know, countries are saying, well, maybe we should increase our tonnage of gold.
34:20
And then, of course, retail investors and traders and everyone else can buy gold as well.
34:25
It's still the best physical type of hard money.
34:29
And so I think it was rightly going from kind of undervalued to somewhat more fairly valued.
34:34
So it had a really big run.
34:37
And Bitcoin had its own cycle.
34:39
Bitcoin also struggles with the fact that it has more competitors in any given cycle,
34:42
A Bitcoin bull run, you generally get this broadening altcoin type of cycle.
34:47
So capital goes everywhere else.
34:49
And this time we also had the treasury company cycle.
34:52
So the marginal dollar could go into buying a treasury company and say three times MNAF,
34:57
then buying Bitcoin itself.
34:59
So you get a little more of that blow off top in some of those treasury companies than in
35:03
Bitcoin itself.
35:04
We have more of that kind of rounded top.
35:06
And so, you know, for a variety of reasons, Bitcoin is muted.
35:10
But I think, you know, the fast money's out.
35:12
You know, also Bitcoin, unlike gold, for a while was considered the fastest horse. And when AI came around, the type of money that was in Bitcoin was somewhat different than gold in the sense that no one really considers gold the fastest horse. Gold's kind of like the slow and steady horse.
35:29
so if you were in bitcoin as the fastest horse and then you have you know nvidia or ram stocks
35:35
like soaring uh some percentage of those will say well that's the fastest horse now i'm an ai
35:41
trader now right so so money goes elsewhere uh bitcoin kind of matures to being somewhere between
35:47
early bitcoin and current gold meaning it's not as explosive as bitcoin was it was smaller but
35:52
it's not as you know large and liquid as gold and so that's kind of changing over gradually over
35:58
time the type of investors that are interested in it. On the other hand, you have new buyers coming
36:02
in saying, oh, I can actually hold an ETF now, or I can hold a treasury company now,
36:06
or it's liquid enough in general that I can get in and out of it with confidence
36:10
because it's a trillion-plus asset even in a bear market.
36:15
So I think the investor profile was shifting around Bitcoin, which
36:18
makes sense for a 17-year-old asset. And basically, I think that it's going
36:22
through a cycle. I do think that the Bitcoin-to-gold ratio is somewhat bottoming,
36:26
and I'm pretty bullish on Bitcoin with say a two three year view.
36:31
I want to shift a little bit to talking about digital credit. First maybe we can start with
36:37
like what's your high level perspective on this concept of digital credit referring to something
36:42
like Stretch by Strategy and Seda issued by Shrive. Maybe we can start there and go with that.
36:50
Yeah, good question. So I was on Strategies earnings call when they announced STRC. So it's like kind of a literal front row. And my take that I posted right after it was that I do think it'll be, you know, their most successful preferred.
37:06
uh it ended up being so far the most successful preferred in the world in terms of say market cap
37:11
uh and in terms of kind of investor demand for it i do think in general uh that a perpetual um
37:18
you know you know yield adjusting type of asset uh is attractive uh you know for a while people
37:25
were talking about before this came around was like basically um bitcoin collateralized stable
37:30
coins. That was kind of a topic that had been coming up for a while. And this isn't that,
37:35
but it's in the same realm of thought, basically, that there's different types of credit. Generally
37:40
speaking, if you're buying an investment grade bond, right, let's say you're buying, you know,
37:45
a Microsoft bond or an Apple bond, you're basically buying something in a Fortress balance sheet
37:50
that has a very low rate of bankruptcy or problems in the next, call it five or 10 years,
37:56
but then you're getting a very low yield to compensate you for that risk.
38:00
And if you want to increase that yield, historically, there have been too many ways to do it.
38:03
One is you take on more credit risk.
38:05
So instead of buying a Microsoft bond, you buy a, you know, a junk rated company that's going through some challenges and is willing to pay you 9% or 11% or whatever the case may be.
38:17
But there's a non-zero chance that it defaults on you as a capacity in the next five, 10 years.
38:23
So that's one way to get more yield.
38:25
The other one is to extend your duration.
38:26
meaning that maybe instead of buying a five-year bond,
38:30
you're willing to buy a 20 or 30-year corporate bond
38:33
and take on more volatility, more risk
38:36
in exchange for a somewhat higher yield.
38:39
And what these products do is currently
38:41
they're offering higher yields without high duration
38:46
and on balance sheets that have more assets than liabilities,
38:50
which is different than what you get
38:52
in most junk-rated securities.
38:55
And so instead, it's basically saying, if you're moderately to bullish on Bitcoin, right, as long as you're not kind of a Bitcoin bear, and you look at these pools of assets, you say, well, they have that much Bitcoin.
39:08
So depending on the company, they have that much dollar reserves.
39:11
And then they have liabilities and the liabilities are less.
39:17
And you're getting paid this yield.
39:19
It's interesting.
39:19
I mean, it's compelling if someone is, you know, aware of the risks, aware of the volatility, but they think that Bitcoin is a structurally good underlying collateral.
39:29
So I do think it's obviously been an effective gathering method in the prior cycle for investor money coming in, that investor money buying Bitcoin.
39:39
I think where it runs into some challenges, if it's over-promised how low volatility it is.
39:44
And actually, I brought this up back on their February earnings call, Strategist February earnings call.
39:49
I asked them if they were monitoring leverage being built on top of STRC.
39:55
And part of that is because a partner at EgoDeath Capital,
39:59
and we just had a lot of companies come to us saying,
40:01
hey, we want to build on top of STRC.
40:04
You know, we want to offer this product.
40:06
And some of them would actually kind of not really signal clearly
40:09
how much risk there is potentially that we were seeing.
40:13
And then, of course, there's just normal TradFi leverage,
40:16
which is basically a carry trade.
40:18
Kind of like how if you can borrow yen for 2%, you'll go out and buy any number of assets with it and make that spread.
40:25
Similarly, you know, if, you know, margin rates are much lower than STRC or SATA, there are pools of capital that will go out and buy and then borrow and buy.
40:38
And they hope that there's no kind of sharp drawdown and risk a margin call or risk, you know, the solvency of their dividends.
40:46
and so I do think that
40:48
in mind that whenever you have that meaningful
40:51
yield gap you risk periods of leverage
40:54
being built on top of it and deleveraging periods which can be kind of violent
40:57
so I do think that volatility has to be
41:00
appreciated and respected but I think that the
41:03
assets are useful for those that like the yield
41:06
you know they like the dollar exposure
41:09
but they doing it in the context of being someone who at least moderately bullish on the long term prospects of Bitcoin How do you think about valuing or the valuation of digital credit or instruments like these Like
41:23
is there a credit spread that you would assign to it? Is there a specific benchmark or duration,
41:29
you know, type credit instrument that you would benchmark these to? How would you think about
41:33
valuation? It's a good question. I think, I mean, this has been around for like a year.
41:38
and so it's still a very new asset class.
41:41
In general, you're looking at,
41:43
I mean, the benchmarks are roughly what we talked about,
41:45
which is a treasury, right?
41:47
So that's low yield.
41:48
So if you're doing something different,
41:50
you should be offering a higher yield, which they do.
41:53
Then you're saying, okay,
41:54
well, what can I get by doing junk bond investing?
41:58
And billionaire Howard Marks became a billionaire
42:02
by investing in junk bonds.
42:04
Junk bonds have that negative reputation,
42:06
But if you buy a bond yielding 15%, that really probably should be yielding 9%, meaning that it's actually undervalued, you can make a lot of money.
42:16
Like, you know, if the market thinks there's a half, you know, a 50% chance it goes bankrupt, whereas you dig in and say, this actually only has a 20% chance of going bankrupt.
42:23
And you do that enough times with a big enough sample, you do great.
42:26
So you have to compare, okay, right now, there's varying spreads between junk bonds and treasuries.
42:38
So generally speaking, in a very strong market, investors are willing to pay lower spreads because there's less bankruptcies in a positive market.
42:47
On the other hand, if you're in kind of a recession, usually those spreads, those gaps go up really high because people are saying, well, the economy is not great.
42:55
This is when bankruptcies happen.
42:57
So if I'm going to invest in a junk-graded company,
42:59
I want a lot of yield compared to a treasury.
43:01
And I think there's somewhat similar dynamics here
43:04
with these companies, which is that
43:06
depending on the company in question,
43:07
you're generally looking at a borderline profitable company.
43:12
So one where it's primarily the Bitcoin price that matters.
43:15
And then the question is, okay,
43:17
so if Bitcoin's in a bear market,
43:19
you're going to have a lower kind of
43:20
quote-unquote collateralization ratio.
43:24
You're going to have these other things.
43:25
So you can generally expect a higher spread.
43:28
On the other hand, if you're in a bull market and Bitcoin, the number just went up a ton,
43:32
assets to liabilities got better on paper.
43:36
And people are just in general, the sentiment around Bitcoin's two, three, four, five-year
43:41
prospects are better.
43:43
They probably get investors willing to pay a lower spread.
43:47
And so something like STRC can be knocked down from 100 to 75, partially from leverage.
43:54
but then for a period of time when it hovers at say 90 uh even after recovering from a liquidation
44:00
cascade that's kind of the market saying i i you know that's that's the spread that i think is
44:05
currently reasonable you know i'm going to discount the price to get a higher yield uh but for example
44:10
we've seen that as bitcoin kind of rallied strc gradually rallied too because people are saying
44:16
okay i'm fine with a somewhat lower spread uh because bitcoin jumped from 60s to upper 70s and
44:22
even briefly over 80.
44:24
And so the balance sheet just improved.
44:28
And so I think it's somewhat,
44:29
the best probably scenario is looking at the junk market,
44:32
but for very different reasons.
44:33
Instead of worrying about the company's bankruptcy,
44:36
you're generally just more looking at the price of Bitcoin,
44:38
the overall assets liabilities ratio,
44:41
and just how kind of bullish or bearish the market is on Bitcoin.
44:45
Since these instruments are perpetual preferred equity,
44:49
yet the issuers obviously have issued price guidance and a variable dividend rate and
44:55
do other capital markets activity in order to maintain that more shorter duration moderate
45:03
duration like credit instrument how do you reconcile those two things like the perpetual
45:07
nature of it but then the issuer guidance that makes it trade more like a shorter or moderate
45:13
duration credit asset it's a good question because those all factor into what kind of spread is
45:18
reasonable. I mean, when SGRC had, you know, over 24 months of USD reserves for its dividends,
45:26
or just in general, the company had that much reserves for its various preferreds,
45:30
I asked what their guidance was, and they said basically staying in that range.
45:33
Then they gradually dipped down to 18 months. And, you know, at that kind of the lowest point,
45:39
they had gotten down to six months. And so that kind of brought into question, I mean,
45:43
are they going to be willing to sell Bitcoin to support it and so forth, right? Those are all
45:48
kind of questions at that kind of bear market period.
45:51
Whereas on the other hand, you know, having a bigger dollar reserve or just in general
45:55
a balance sheet that's more ready to support those dividends increases confidence and therefore
46:00
on average will reduce the spread.
46:02
And two, interventions are also, you know, if you know that the company is willing to
46:08
come in, you know, if it's trading, say, more than 10% below the target that they wanted
46:13
app and they have a pretty big bid to do that with, then when it gets to that level, you
46:18
might start buying because you have the foreknowledge that they're probably going to be buying too.
46:23
And so those are meaningful factors that determine what the spread should be.
46:30
And of course, the health of the company gives them more options for those types of things.
46:34
It's obviously easier to buy back digital credit if your equity has an MNAP premium to
46:40
or if you already have a big fiat reserve
46:43
or if you're willing to sell Bitcoin.
46:46
And so there's obviously a balance between the preferred holders,
46:49
the common equity holders and all this.
46:52
And so these are things that are being assessed when buying it.
46:55
So you have this mix of, okay,
46:57
what does the assets liability mix look like?
47:00
What does the yield look like versus, you know,
47:03
treasuries or safe corporate bonds?
47:05
What does it look like compared to what I could get
47:07
in private credit or junk bonds?
47:09
and then what does it look like relative to what the company is willing to do
47:13
and the ammo they have to do it in terms of buybacks and reserves
47:17
and kind of the expectation of the dividends or kind of price support.
47:23
Earlier you mentioned the concept of this mythical idea of the Bitcoin-backed stablecoin.
47:29
Do you see a future where a stablecoin like Tether or other stablecoins
47:34
buy and hold digital credit or a senior tranche of digital credit
47:39
on their balance sheet to effectively back their reserves?
47:44
Potentially I mean so we already seen in some markets tokenized digital credit which is someone says hey you know STRC trades on this exchange
47:54
And if you're in Brazil and you want to buy it, you can buy it via token proxy on this.
47:59
So there are there's already this tokenization of that.
48:03
Then, yeah, you can you can put it in another product and say, well, OK, it's not you're not buying purely that you're buying, say, a mix of T-bills and some of this.
48:12
right so that that's an option this is okay you can be getting slightly better yields doing this
48:16
um now currently stable coins uh the yield doesn't pass through for most of them so it's mostly a
48:23
decision by the company where they say okay will this spook our holders uh if we have a little more
48:29
of this than to say 100 treasuries or something then there's also regulations you know these these
48:34
recent uh legislations are out of the u.s that stipulates certain things for at least for stable
48:38
coins that are in those jurisdictions so that can affect what they use as collateral uh but
48:42
in general uh i think these things can absolutely show up uh in things like stable coins or in you
48:48
know tokenized types of of real world assets or financialized assets absolutely um the initial
48:55
concept of kind of a bitcoin backed stable coin partially related to censorship resistance which
49:01
was people like the idea of stable coins but they didn't like the fact that they were so centralized
49:06
so that's where you got like algorithmic stable coins uh some of the most of those have ended
49:11
pretty spectacularly.
49:12
Some of those have kind of
49:14
run into more of a,
49:15
you know, less spectacular failure,
49:17
but they've had various issues
49:18
because they're all kind of
49:19
these like Frankenstein
49:21
approximations of a dollar
49:23
rather than actual dollar.
49:26
And so that, you know,
49:27
Bitcoin collateralized stable coins
49:28
were in the discussion back then.
49:30
And to some extent exists
49:32
in algorithmic form
49:33
in very kind of low market cap
49:35
and low liquidity context.
49:38
Using something like digital credit,
49:40
from a leading company is similar to it,
49:46
but it's still centralized.
49:47
So it's more of that yield differential,
49:49
which is basically saying
49:49
some percentage of stablecoin holders
49:52
probably are bullish on Bitcoin.
49:55
And if you had a, say,
49:58
somehow a bearish Bitcoin stablecoin holder,
50:01
that person probably says,
50:03
I just want my stablecoin to be backed by T-bills
50:05
or T-bill-like things.
50:08
Another candidate, if you have a Bitcoin bullish stablecoin user that says, hey, I hold Bitcoin for long term.
50:14
I use stablecoins for a shorter intermediate term and international cross-border stuff.
50:19
And, you know, I'm bullish on Bitcoin.
50:21
If you want to have, say, 20% of the stablecoin treasury in, you know, Bitcoin backed type of higher yielding things, they might not care.
50:31
They say, well, that's fine.
50:32
I'm, you know, I think that's OK.
50:33
and then especially there's ways to pass on the yield,
50:36
like in the case of just outright tokenized digital credit.
50:40
So I think there is a spectrum of opportunity here.
50:44
I'm always obviously concerned around kind of looping leverage
50:47
or just like a recursive leverage.
50:49
That's where things get nasty.
50:52
But I do think there's a pretty big market
50:54
for just a spectrum of risk,
50:57
a spectrum of yields on dollar access globally.
51:02
is there a scenario where this accelerates quite rapidly maybe you know in this iteration of
51:10
digital credit as we know it today or some possibly some future iteration of this bitcoin
51:15
collateralized dollar is there a scenario where effectively the supply of dollar-like
51:21
assets starts to expand rapidly and and those assets are created in acquiring bitcoin and it
51:30
kind of forms this reflexive feedback loop,
51:33
kind of inflating the supply of dollars
51:35
and sucking up supply of Bitcoin?
51:38
That's a partial.
51:39
I mean, some would say that already happened.
51:40
I mean, I've been bullish on stablecoins since January 2021.
51:45
And the market for stablecoins is like 10x bigger now than then.
51:49
And, you know, it went from basically tens of billions
51:52
to hundreds of billions.
51:54
And around the margins, that has fueled Bitcoin demand
51:57
because, for example, you'd have Tether,
51:58
making money from their stablecoins
52:01
and then saying we're going to put part of our
52:03
corporate balance sheet on Bitcoin.
52:06
So around the margins,
52:08
the more stablecoin demand there was,
52:09
that would add to some Bitcoin.
52:12
And then when STRC came out,
52:16
it quickly became the biggest preferred ever
52:19
in terms of just market capitalization and liquidity.
52:22
SAT has been very successful
52:23
by those metrics as well.
52:26
and so some would say it's already been
52:29
kind of a pretty rapid growth.
52:31
Now, this latter category is still a lot smaller
52:34
than stablecoins and I think stablecoins in general
52:37
are still below their total adjustable market.
52:40
So I do think we'll see a continuation of growth
52:41
in these things.
52:44
In general, I mean, I don't really expect
52:47
like maybe necessarily a huge exponential growth in them.
52:51
Like, you know, the market cap five years from now
52:53
I think will be higher for both stablecoins
52:55
and for these types of securities like prefers and things like that.
53:01
It could be twice as high, three times as high, four times as high.
53:04
Partially depends on how good Bitcoin's bull run will be.
53:09
So it's not that I expect any takeoff scenario.
53:13
But much like how strategy had a bigger cycle this time than the prior cycle,
53:18
I think that these things can keep growing.
53:21
I think the thing that probably will be more challenged next cycle
53:24
is that I think investors will rightly be more skeptical
53:28
of paying very high MNAVs for the common equity
53:30
of pure play or nearly pure play Bitcoin treasury companies.
53:37
Because we've seen that in the altcoin space,
53:40
which is anytime there's like a new concept,
53:41
there's a lot of hype for it.
53:43
And when that concept comes back in the next cycle,
53:45
it's like people have seen this game before,
53:47
so they know how this ends.
53:49
So I think that investors,
53:50
they're not going to probably want to pay
53:52
three times MNAV for strategy
53:53
or eight times MNAV for MetaPlanet,
53:56
they're going to be some, I think, more conservative.
53:59
Now, maybe at the extreme, you can hit those levels again,
54:02
but I, in general, would err toward more bearishness on MNAVs,
54:07
which then takes off some of the fuel for these other types of things
54:11
because MNAVs fuel how much Bitcoin they can get,
54:14
how much Bitcoin they get partially affects how much credit they can issue and still have a pretty good asset to liability mix while buying more of the assets as well So you know I think that there more cycles of growth ahead I tend to be in the Bitcoin space
54:29
I'm often like a bearish bull, which is that my price targets are not, you know, kind of
54:33
the super high ones, even though I am structurally bullish.
54:37
And that probably.
54:40
Maybe as we start to close it out, I'll ask you a couple more questions more specific to
54:45
Bitcoin.
54:46
One thing that I've seen a couple people mention recently is this concept of compute, specifically as it relates to AI and AI tokens, being like the new form of money or currency.
54:59
How do you think about that in the context of Bitcoin?
55:02
I think it's somewhat categorically different.
55:05
I mean, just so obviously proof of work is different than AI tokens.
55:11
In general, I think it's been rational for a lot of the big Bitcoin miners to shift over to AI because it's generally higher margin.
55:20
If you have high uptime and you're close to population centers, you're somewhat close, AI can be really good.
55:29
I think over time, Bitcoin mining will get more scrappier.
55:33
It'll be more in the periphery.
55:35
And I think that's a good thing for decentralization.
55:36
I think basically Bitcoin is more price sensitive for electricity than AI.
55:43
It's more kind of ruthlessly competitive in that sense.
55:47
And there's a bigger ratio of electricity costs versus upfront capital costs
55:51
compared to, say, GPU and other types of high performance compute.
55:56
And so as a result, it's generally going to gravitate toward areas
56:01
where energy is effectively free, which means effectively stranded.
56:04
So either stranded in location, like spare gas at an oil well, for example, or stranded in time, meaning that, you know, let's say solar panels or wind produces electricity at a certain time of day.
56:18
It's too much and it'd be curtailed.
56:21
You know, Bitcoin miner can soak it up and then shut off later in the day when there's a shortage.
56:26
I think that's where Bitcoin will increasingly show up.
56:29
uh and you know money money itself like actually using things to to you know exchange for goods and
56:35
services or to exchange for other currencies like i mentioned before you know when i come to egypt
56:41
with a say a gold coin it's not necessarily that if i ever buy something with it but it gives me an
56:45
optionality of just a physical bare asset that i could turn into local money that i can then turn
56:49
into goods and services which i can't do with my nvidia stock i can't do with my house can't do
56:54
with like a, if I have fine art, you know, somewhere.
56:58
And so again, you kind of run into that problem
57:01
with AI tokens, right?
57:03
So, or compute tokens.
57:04
So in general, I just view it as a kind of a category
57:07
of a different area.
57:10
Last question.
57:11
Elon Musk has kind of talked about this a good bit,
57:14
maybe over the last few months or recently,
57:16
where he thinks we're entering this abundance future
57:19
filled with AI and, you know,
57:21
the cost of basic goods and services
57:23
will effectively trend towards zero
57:26
and there won't be a need for money
57:28
or possibly, you know, Bitcoin as well.
57:31
What do you make of his perspective there
57:33
and how would you respond to him?
57:35
I think it's economically naive.
57:37
I think, I mean, right now,
57:39
like as we're having this conversation,
57:41
we both live in more luxury
57:42
than most kings and queens did,
57:44
you know, centuries ago.
57:46
Like, it's just magic.
57:48
Like we're talking over basically magical orbs,
57:50
across an ocean.
57:54
It's climate-controlled, magical running water.
57:58
I can look up most information in a second.
58:02
Talk to anyone in the world almost.
58:04
It's just incredible.
58:07
And yet, there's things that are scarce,
58:09
there's things that are not, right?
58:11
So private jet travel is still scarce,
58:14
whereas this type of communication is mostly not scarce
58:17
unless you're in kind of the poorest parts of the world.
58:19
and so in a future where you know say robotics and ai can can make things more abundant
58:26
there's still scarcity there's still penthouses at the top of the building versus smaller units
58:32
lower there's still material constraints uh robots have they take materials they wear out
58:39
they have to be replaced um you know we can go into space to get more but again there's there's
58:44
massive costs and challenges of doing that,
58:47
that there's real world costs for multiple types of scarcity.
58:52
And so I think there's still, you know,
58:55
there's a spectrum of goods and services.
58:57
The scarcer end, at least, is always going to require
58:59
some type of contribution to get it
59:02
because it can't go to everyone.
59:04
And then there's going to be basically
59:06
whatever is the most liquid, you know,
59:08
most saleable good is what becomes money,
59:10
either something that's designed to be money
59:12
or something that's kind of used by money on accident
59:14
because it happens to be the most saleable good
59:16
compared to other things around it.
59:18
So yeah, I think that take from him is economically naive.
59:23
So yeah, I would say that's,
59:26
you can be very bullish on the future
59:28
in terms of technological abundance
59:29
and still recognize that there's going to be
59:32
like layers of scarcity
59:33
and that liquidity and saleabilities
59:37
are highly relevant when it comes to money
59:39
and trading and commerce in general.
59:40
Yeah, that makes perfect sense to me.
59:44
Lynn, this has been an awesome conversation.
59:46
We covered a lot of ground.
59:48
Any final closing thoughts for the audience?
59:52
I mean, I think we're in an interesting time.
59:53
I think a lot of the fast money is out of the Bitcoin space.
59:57
I think a lot of concepts in the space have been tested,
1:00:01
not always positively.
1:00:04
But those things also harden the ecosystem,
1:00:08
especially for people that learn from the challenges
1:00:11
rather than repeat them.
1:00:13
So I do think that we're setting up a foundation
1:00:15
for the next cycle
1:00:16
and that can attract money to come in.
1:00:20
And at the same time,
1:00:21
there are other pockets of the market
1:00:22
that are kind of the opposite.
1:00:23
So there's a lot of money stuffed into AI trade.
1:00:27
And I am bullish on AI,
1:00:29
but it can get ahead of itself from time to time.
1:00:31
Just like Bitcoin can get ahead of itself from time to time.
1:00:34
And I think that there is a recipe here
1:00:36
for whether it's what the treasury secretary is doing
1:00:39
or AI for money to come from much bigger markets out there
1:00:44
and partially get into Bitcoin
1:00:46
and Bitcoin adjacent types of products.
1:00:49
I think that's a great spot to end it.
1:00:51
Len, thanks so much for your time.
1:00:53
Really enjoyed it.
1:00:54
Thanks for having me.