Latest / Simply Bitcoin / James Lavish & David Foley | Simply Bitcoin IRL

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James Lavish & David Foley | Simply Bitcoin IRL · Simply Bitcoin

• 0:00
  The institutions are here, they're quietly buying and
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  they're they're accumulating. And if you look at the volumes,
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  that's solid. That's over $600 trillion of, of
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  value in the world right now. If you just get a, a just a
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  fraction of that into Bitcoin, Bitcoin double S triples,
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  quadruples overnight. So people are going to start to
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  realize I've got to protect my capital somewhere.
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  Where is the capital going to be reallocated from?
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  It's going to be reallocated from bonds and real estate
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  because it's easy to manage your, your holding of Bitcoin.
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  You don't have any tenants, you don't have a management company,
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  you don't have taxes on it. You just, you buy it, hold it,
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  put it there, and it just holds its value against the deep
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  appreciation of the US dollar, dollars being devalued to manage
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  all that debt. We know it.
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  It's reality. Everybody in the Bitcoin space
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  is becoming clear about this and people in my industry, in the
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  traditional investment industry are waking up to this.
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  Hey, James. Hey, David, it's been a long
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  time. Long time no see.
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  I mean, I feel like I see James tweets all the time, David.
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  I think it's been at least a couple months since we've seen
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  each other. Hope you guys are doing well.
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  I feel like in Bitcoin time, six months is like 50 years.
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  So I hope you guys are thriving, James.
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  All is good Nico. It's awesome to be here again.
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  Always fun to be on your show and talking to you.
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  You have some interesting and insightful questions SO.
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  Yeah, yeah. Thanks for having us, Nico.
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  I, I live in a cave and so occasionally I come up from rock
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  here. And so it's it's good to be with
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  you. Well, good to good to good to
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  see you guys and great to talk with you guys again.
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  So of course, for anyone who doesn't know, these gentlemen
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  are with the Bitcoin Opportunity Fund.
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  They're both managing partners and we're going to talk about
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  investing in the Bitcoin space. But before we get to that James
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  question for you first, has Bitcoin become boring?
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  I mean, you know, I think a lot of people were expecting
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  fireworks, right? Last year I think it was like
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  about 130% return. MicroStrategy outperformed
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  Bitcoin. This year it's going off to a
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  slow start. If you compare it to every other
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  cycle in bitcoins history, you know, it seems like it's
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  underperforming if anything. So James, what's going on in
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  Bitcoin? Has Wall Street captured it?
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  What's going? On it's manipulated no, it's
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  look it's it's grinding sideways, it's consolidating.
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  I think it's very healthy. So let's walk back, you know, to
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  the summer and heading into the election.
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  And this is this is a key point for for Bitcoin.
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  We had you had the the halving and everybody expected for
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  Bitcoin just RIP up, you know, from the halving and we had we
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  had continued kind of grinding sideways.
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  We did have a nice, you know, a nice acceleration upward from,
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  you know, the mid 30s into the into the 60s.
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  We had a great run there and they just consolidated sideways
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  all the way until the election. Why is that?
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  There was so much uncertainty, Nico.
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  We weren't sure which administration we were going to
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  get. And the last administration was
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  absolutely awful for cryptocurrency and Bitcoin.
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  There's just no other way to put it.
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  They were antagonistic, they were oppressive.
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  They were unclear on, on regulate regulatory rulings.
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  They they used, they actually the SEC would instead of going
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  through the proper legislative channels, they would instead
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  they would prosecute and use that as as kind of a rule of law
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  and weapon. And it got banks scared to even
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  hold Bitcoin to do any business with Bitcoin companies and in
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  the space. And so there was a lot of
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  uncertainty. You know, operation choke point
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  choke .2 point O was that was real.
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  We'll talk about it in a little bit if we want to.
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  But then we had the election and when Trump was elected, it was
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  very clear leading up to the election, he came to the Bitcoin
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  conference, He talked about Bitcoin, he talked about
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  cryptocurrency, and he was elected.
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  And Bitcoin ripped upwards from the high 60s all the way up to
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  almost 110 at some point late last year, early this year.
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  And so that has been in a significant move now since it
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  ripped higher up into late November and into December.
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  It's been grinding sideways. And I think as I was alluding at
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  the beginning here, it's a very healthy consolidation.
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  We have a lot of old, you know, O GS, the original gangsters who
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  were holding on to these coins have been holding on to years
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  and years and years have made many millions of dollars from
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  them. And I I believe that there's a
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  there's a significant portion of those that, that, that the
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  activity we're seeing. Some of that is just OG selling
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  out and, and, you know, capitalizing on their efforts
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  and, and, and their hard work to and this is, but I'm not being
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  funny here. That is hard work to hold on for
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  this long. That is admirable.
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  It's incredible. I believe that most of them
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  still have a core position they're holding on to and that's
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  great. So they're going to go and get
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  some maybe a nicer house or do some things that they've been
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  waiting on. It's a long winded answer to
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  tell you that I think this consolidation is healthy because
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  the institutions are here, they're quietly buying.
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  I know some extraordinarily intelligent investors in this
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  space, in the traditional space that are here.
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  Now I'm not talking about endowments or, or you know, you
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  know, large institutions, you know, like like pension funds,
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  but I'm talking about large hedge funds who are very smart
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  and longer term holders. They're here and they're quiet
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  about it and they're they're accumulating.
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  And if you look at the volumes, the volumes at the 9090 to 95
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  thousand level, it's, it's solid.
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  It's really solid volume in here, which is creating, you
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  know, quite a bit of of support. And we like to liken it to a
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  coiled spring. And that's where I believe we're
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  at Bitcoin and there's a ton of tailwinds we can talk about, but
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  that was that's kind of the way I see it.
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  Yeah, and, and, and so many, so many good points there.
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  So OG selling and what you said, the hard work of it, because as
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  anyone who's been in the in the space for a while, like Hodling
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  is easy conceptually. Like if you describe Hodling,
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  it's such an easy thing. But it's a spiritual journey.
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  It's an emotional journey. You really change and seeing
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  your net worth, you know, fluctuate, you know, 50, sixty
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  70% skyrocket, skyrocket, right? Yeah, yeah.
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  It, it's, it's, it's, it's pretty crazy what it does.
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  So, you know, for someone who has, you know, what was
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  acquiring Bitcoin at five, six, $700.00, you know, now it's at
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  100,000 or it was 100,000. It's more than 100 X, right?
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  That's completely life changing for a lot of people.
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  So that totally, totally makes sense.
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  And I think what you're talking about the election, because we
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  saw the price move up as soon it was certain that Trump won.
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  And I think of the industry with all the stuff that's been coming
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  up with Operation Choke Point 2.0.
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  I mean, I was just in DC with Senator Lummis two or three
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  weeks ago. And what she's saying, what was
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  happening with internally with the FDIC at the Federal Reserve,
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  it's becoming very clear that the previous administration did
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  not want this industry to succeed.
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  They're trying to isolate it from the traditional financial
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  system. So I think as soon as it was
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  clear Trump won, that obviously gave a lot of certainty to the
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  market. And I do agree with you, this is
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  a healthy consolidation. But you know, from the bitcoiner
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  coming from the 20/16/2017 era, this is very boring.
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  James David, I'm going to pass it on to you.
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  Has Bitcoin become boring? Is this a new era in Bitcoins
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  history? Now that institutions are coming
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  in, now that nation states are coming in, there's talk about a
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  strategic Bitcoin reserve on the federal level.
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  There's talk about strategic Bitcoin reserves on the state
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  level. David.
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  Yeah, no, I wouldn't. I wouldn't say it's boring.
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  Nico, I think kind of reminds me, excuse me, of last March
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  through September when you know, if you I could share the screen
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  if you want, but you can look at charts of Bitcoin.
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  It was in a bull flag period, right?
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  You had this momentum coming out of the whole downturn of 2223.
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  And then we kind of pause it just markets breathe a little
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  bit. And and I think that we're
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  seeing that again that, you know, it's run hard since the
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  election, as you said, Nico, and I think people are just waiting
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  for the next catalyst. You know, like David Sachs, you
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  know, his press conference last week, to me, that was very much
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  in line with what they've kind of alluded to over the last
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  month or two. So, you know, there's no real
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  great shakes. I think the question is just,
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  you know, what are the next catalysts that that move us up
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  and to the right? You know, and and conversely,
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  you know, is there people ask all the time, is there downside
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  risk here? And it's of course, you know,
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  like all assets can sell off if something happens in the world
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  with his risk off moment, but that's just temporary.
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  And in our view is that there's a lot of support down around the
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  90,000 area of Bitcoin and, and, and if it broke through that on
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  some, you know, market chaos, maybe it goes into the 70
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  thousands, you know, and there'd be next support there.
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  We'd actually be excited about that because for our funds, both
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  fund one that we run and the fund 2 that we're raising money
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  for now, we're able to take advantage of those downturns and
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  add more to positions, whether it's Bitcoin or Bitcoin related
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  companies. So I don't think it's boring, I
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  think just markets are breathing and pausing.
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  Yeah, absolutely. I agree with you guys.
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  So what do you guys think about the what do you guys think about
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  the strategic Bitcoin reserve? There was some news that was
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  coming out that a lot of people were expecting that Trump's
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  executive order was going to mention Bitcoin.
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  A lot of people were expecting that.
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  A lot of people were disappointed that it that it
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  didn't. I have some information, I can't
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  say from who, but from DC that the Ripple, the Ripple team was
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  essentially trying to sabotage the Bitcoin only strategic
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  reserve. Do you think that's, do you
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  think there's a possibility of it happening this year, James?
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  Well, OK, so the strategic reserve, let's back up.
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  It's the the Bitcoin. It's the the act that Cynthia
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  Lummis, Senator Lummis from Wyoming, had authored and.
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  Well, there's two. There's two.
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  But to be clear, so there's two, There's the the the the thing a
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  lot of people were expecting a strategic reserve executive
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  order that would essentially make it so that the United
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  States wouldn't sell any Bitcoin.
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  And then for longevity, there's the Bitcoin Act, which would go
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  through the legislative process, which would make it very
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  difficult for a next president to essentially repeal that.
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  So. Yeah, yeah, there's 2.
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  So it became but but chronologically, the first one
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  that came about was was Senator Lumister's bill that she
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  authored early last year, I believe, and she has not.
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  Here's the thing that that is that has to go through a
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  legislative process to be adopted to to pass into
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  legislation. And what that means is she's got
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  to get a co-author. We don't have one yet or she
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  does not have one yet. It's got to go through
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  committees. It's got to have comment
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  periods. It's got to have revisions,
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  possibly major revisions, possibly major concessions.
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  And then once it gets through that gauntlet of legislative
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  process, which could take months or years, then it finally passes
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  both houses of Congress and and the and the Senate, and it ends
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  up on the president's desk, which we would fully expect
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  Trump to sign into law. But it's got to go through that
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  process and that could take a very long time.
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  So what people were hoping, like you're saying, is that in one
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  fell swoop, Trump could sign an executive order and be securing
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  the Bitcoin that we have in the balance sheet and protecting it
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  and possibly buying some more. The thing is, he wouldn't be
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  able to buy as much it it's it's unclear how much you'd be able
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  to buy and where they would actually where they would
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  actually hold it if if he did it through executive executive
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  order. And so people were disappointed
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  about that. That's for for sure.
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  And that's why you're seeing some of this downward grind of
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  price action in Bitcoin, you know, since David Sacks had had
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  spoken last week, since Trump has been in office and has not
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  announced anything about a Bitcoin reserve or any sort of
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  executive order on that. And so, and then you couple that
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  with macro headwinds that we can talk about, you know, that's
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  that's what's causing this. But All in all, to answer your
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  question, no, I don't expect that bill to be assigned into
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  law this year, that I think it's going to take time, but that's
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  OK. Here's the amazing thing.
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  Here's the thing that's that people are not acknowledging
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  that, that we need to acknowledge #1 we have an
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  administration that's not attacking the cryptocurrency
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  industry anymore. They're embracing it fully.
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  I mean, Trump had his own coin, right?
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  And so did his wife. So #2 Bitcoin is at the front
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  end of that. Regardless of what's going on
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  with the XRP, You know, I think that Bitcoin ultimately just
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  weathers that small storm and, and comes out as the clear
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  favorite to be in the strategic reserve, to be the main holding
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  of the strategic reserve as a digital asset.
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  That's that's what's happening. So, but this is front of
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  conversation in DC. This is on my Twitter feed.
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  Every single day I see people from DC, not just Senator Lummus
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  anymore talking about this. And that's important.
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  This is really important. It's a very like this is
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  becoming something that has to be a conversation now.
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  And, and it's front of mind for people who are lawmakers.
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  And that's important. And we, you know, we should
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  embrace that for two reasons. Number one, we're not going to
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  have that that nature of, of attack from the last
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  administration anymore. And #2 we'll probably get some
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  good clarity on regulation going forward.
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  And that's what we want as investors.
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  We want clarity. I don't, I, I'm not asking to be
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  in the Wild West over here. I would rather have clarity and
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  allow for institutions to start building their positions and
• 15:21
  their holdings in Bitcoin and start allocating to these
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  companies who are who are building things in the ecosystem
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  that are important, you know, important solutions for people
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  at that. Prior to this, they just
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  couldn't get off Ground Zero because of the nature of the
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  antagonism from from the Biden administration.
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  Yeah, absolutely. And I completely agree.
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  I think, you know, the, it was at first I believed it was, it
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  wasn't malicious. And then as time progressed, it
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  became very apparent and it, it almost kind of backfired them
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  backfired on them a little bit because I think Bitcoiners
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  inherently were not into politics.
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  But you know, from my perspective, I remember as soon
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  as the Samurai wallet developers were arrested, I in my, in my
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  show, I'm extremely neutral. All of a sudden I was saying RFK
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  2024, Trump 2024. And then of course, he was
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  promising to, to free Ross. So I'm going to pass it on to
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  David. And I agree with you, James,
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  right? Because there's two ways to go
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  about this. Trump could do it via executive
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  order, but it doesn't have the longevity that it get.
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  All it takes is the next administration to just reverse
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  his executive order. If a strategic Bitcoin reserve
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  is to last in the United States has to go through legislative
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  process. Do they have the votes?
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  The Republicans only have 53 seats in the Senate, right?
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  It's not filibuster proof. They need at least 60.
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  And that's something that what Senator Lummus was telling me.
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  So, David, what is the significance of, you know, the,
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  the talk of the, of the strategic Bitcoin reserve from
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  an investor's standpoint? Because the way that I see it,
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  is it essentially it kind of it legitimizes the asset in the
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  eyes of of traditional investors.
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  Oh. David, you're on mute.
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  Oh. There it is, there we go.
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  Yeah, a couple of things come to my mind, Nico, is, you know,
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  look, First off, there's a lot of states that are leading it.
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  It feels like Utah is the 1st and and.
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  And so to me, like all things in this country, most great things
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  have come through the state level and then work its way up
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  to the federal. So if we start seeing 20 some
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  odd states begin to put a strategic Bitcoin reserve, you
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  would think that the congressional folks down in
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  Washington representing those states begin to also embrace it.
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  So I think that we're getting a groundswell there.
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  I think the also from the Trump administration standpoint, I
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  mean, I agree with James is saying that you kind of need to,
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  you almost want the sausage making process to take time to
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  get it congressionally put in place so that it doesn't get
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  reversed 4 years from now like Nico you're talking about there.
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  And I think that, you know, I think that there's a bigger
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  thing going on here. Like, you know, we're we're
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  obviously watching the gold and silver markets because those are
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  sound money. You know, we think we believe
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  that Bitcoin is the soundest form of money in the world and
• 18:24
  will prove to be on is just so undervalued relative to all
• 18:27
  other asset classes. But gold and silver are going to
• 18:29
  be good proxies also to watch. And I think there's some
• 18:31
  interesting things going on in that market, including possibly
• 18:35
  the Descent and Trump teams, if you will, or, or the
• 18:39
  administration looking at, you know, possibly should they need
• 18:45
  to get the US Fed. Sorry, an audit of the gold held
• 18:49
  by the United States. There's been no audit done since
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  the 1960s. It's unclear how much gold is in
• 18:54
  Fort Knox. When Germany around 2010 asked
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  for its gold back that got parked in the United States
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  after World War 2, it took a long time, like, you know, over
• 19:07
  a year for the US to conjure up enough gold to get it back.
• 19:10
  And guess what? None of it was the gold bars
• 19:13
  that were segregated, that were time stamped, if you will,
• 19:17
  equivalent the the segregated gold bars that Germany put here.
• 19:20
  So something happened with that. In other words, have we sold out
• 19:24
  the gold? How much is there?
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  So where I go with that is because I think that Trump and
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  them are trying to do in dissent is to go back to a model that
• 19:34
  has a sound currency formation when it possibly it's going to
• 19:38
  like in my opinion, be Bitcoin and gold back type sound money.
• 19:42
  And you have to begin that process.
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  It's slow because of the audit factor on gold, but you know,
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  and achieve a few things. One, it's it's going to signal
• 19:51
  to the world that the US is about sound money again.
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  It's also going to allow the balance sheet of the United
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  States to be strengthened. If you can remark the gold that
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  you hold at a higher marked. Market level gold's only marked
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  at $42.20. Now on the Treasury's balance
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  sheet, it would get remarked to 2900 if you did there or could
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  they even remarket at 5600. Luke Romans talked a lot about
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  that. And then lastly it Gent.
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  That process would also gently depreciate the dollar which
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  would help the Trump administration in trying to
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  build back America again and bring back jobs and make us an
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  exporting nation. So from a strategic, financial
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  and also defensive standpoint of getting businesses back in
• 20:35
  America, I think there's some stuff going on.
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  So I've been long winded, but to summarize, I think that you
• 20:40
  know, it's going to start the state level and strategic
• 20:43
  Bitcoin reserve. But I think watch this process
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  over the top as it relates to some of what's going on in the
• 20:48
  gold market. I think Bitcoin could be part of
• 20:50
  that solution going forward. This this will take time, but
• 20:52
  something good could be on the other end of it.
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  So and appreciate that answer David.
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  And I'm going to ask you another question back, which is do you
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  believe now that do you believe that the air the, do you believe
• 21:07
  in the diminishing return theory?
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  Do you believe in the, in the theory that essentially, you
• 21:12
  know, Bitcoins best days are behind it?
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  You know, the opportunity's not there anymore.
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  The market cap is so big that it's it's extremely difficult
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  for it to double how you know in in, in its earlier history is a
• 21:25
  lot easier. I have a lot of thoughts on that
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  one. You know, James and I always
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  talk about, you know, our fun. We're open to looking at any
• 21:32
  model right where we, I think one of our superpowers is.
• 21:35
  We know that we don't have all the answers and we're willing to
• 21:38
  consider anything. So I look at the power law model
• 21:42
  as an example, and you could argue that, yeah, the curve
• 21:45
  flattens out over time. You don't get these, you know,
• 21:48
  compounding it 100% or 65% consistently for the next
• 21:53
  decade. That's possible.
• 21:55
  I also think of a 2. I think of it from a standpoint
• 21:58
  of valuation, though, that bitcoins a $2 trillion asset
• 22:01
  class in a world of 900 trillion in global financial assets.
• 22:05
  You know, and Jesse Myers and James have talked a lot about
• 22:08
  this that, you know, it's so asymmetric and how and so tiny
• 22:13
  right now at less than one, well, less than 1% of global
• 22:16
  financial assets Bitcoin that then I start thinking of like,
• 22:19
  well, if you had a financial crisis like O 8 and it's now
• 22:22
  this time going to be at the sovereign level and they're
• 22:24
  forced to print money or just in the midst of that chaos, like
• 22:28
  this could be like credit default swap market where it's
• 22:31
  far more asymmetric and it goes from 2 trillion to 30 trillion
• 22:35
  faster than any of us could imagine.
• 22:37
  And so I don't, I'm not really answer your question, but I, I
• 22:40
  guess I think anything is possible.
• 22:42
  What I do know is that this is probably the cheap Bitcoin is
• 22:46
  the cheapest assets class in the world.
• 22:48
  And I think, I don't think any other assets will compound
• 22:50
  faster than it over the next decade.
• 22:53
  That to me seems really highly probable.
• 22:56
  And then, you know, could we end up at $1,000,000 a coin far
• 22:59
  sooner than that over the next, you know, three to four years,
• 23:02
  you know, again, possibly if depending on what shakes out in
• 23:04
  the world. And, and James, why is that?
• 23:07
  Why would that phenomenon happen?
• 23:09
  Like why would Bitcoin grow from a $2 trillion asset class to a
• 23:14
  $30 trillion asset class? What is what characteristics
• 23:18
  does this Bitcoin have that make it appealing for investors?
• 23:24
  Yeah, I'm going to, well, I'm going to share this, this chart
• 23:27
  that Jesse might he, he, he has allowed us to or he, he's agreed
• 23:33
  to allow us to use this so graciously so I don't have to
• 23:37
  keep making it myself or they look so similar.
• 23:39
  But what David is saying is that, look, this thing is, it's
• 23:44
  a, it's a $2 trillion asset, $900 trillion of, of global
• 23:48
  assets. So let's, let's talk through
• 23:50
  that. Where when, when you have
• 23:53
  institutions that are coming in and they see Bitcoin as a
• 23:58
  separate allocation in their portfolio, that's an important
• 24:02
  allocation. The smart institutions are
• 24:05
  starting to realize that the allocations to Bitcoin not only
• 24:12
  enhance their returns, but they enhance their risk adjusted
• 24:15
  returns. That means it makes their sharp
• 24:17
  ratio better. When you include Bitcoin in a
• 24:20
  larger portfolio, it enhances your sharp ratio.
• 24:23
  That blows their mind. Then when they see that, they
• 24:27
  realize that this is an asset class they need to start
• 24:30
  allocating to. Now we can go all the way up the
• 24:32
  top level and say, well, why is it important to have sound money
• 24:37
  like this and some money that's different than gold?
• 24:40
  Well, we've seen a lot of problems with the manipulation
• 24:42
  of gold, especially recently. You own gold in a vault in
• 24:46
  London, and even if it's held by the Bank of England, you may not
• 24:51
  be able to get access to that for months.
• 24:53
  And that's just insane. Bitcoin you get access to in 10
• 24:57
  minutes. It's, you have your, your, you
• 25:00
  know, not only can you get access to it, but you can move
• 25:02
  it for a fraction of the cost. I mean, think about how much
• 25:05
  money it costs to move gold. Nothing against gold, you know,
• 25:10
  but let's talk about the future digital currency, digital
• 25:13
  assets. And so when when you have
• 25:17
  investors that realize that, my God, I can move a billion
• 25:20
  dollars of Bitcoin in 10 minutes or less for just a few dollars
• 25:25
  as opposed to a billion dollars of gold, how long it's going to
• 25:29
  take that? Get that out of the vaults of
• 25:31
  Bank of England. Get it on trucks with armored
• 25:34
  vehicles and guards. Get it onto a ship or a plane or
• 25:37
  wherever it has to go to get over to Switzerland or wherever
• 25:40
  they want to put it. Suddenly, you know, you're
• 25:43
  trying to bring that back to New York.
• 25:45
  That's a that's a big undertaking.
• 25:47
  OK. So with Bitcoin, it's done like
• 25:50
  that and it's all verified. You don't have to go in and see
• 25:53
  if it's just gold plated nickel, like, you know, it's there, OK.
• 25:57
  So that's really important. And investors are coming into
• 25:59
  this realizing, OK, you've got this asset class that's growing,
• 26:03
  it's gaining traction. It's being talked about in DC.
• 26:06
  You have Bitcoin spot ETFs that were launched last year at this
• 26:10
  time one year ago, and they're the fastest growing ETFs in the
• 26:14
  history of ETFs. It's just not even close.
• 26:16
  It's actually laughable looking at them.
• 26:18
  You know, the Black Rocks ETFI bit gained over $50 billion in
• 26:23
  less than a year. So you'd say it's mind blowing.
• 26:26
  And then, you know, Fidelity gained another 20 billion.
• 26:30
  So between all 11 or 12 of them there, there's just a massive
• 26:33
  amount of of, of demand for these things.
• 26:36
  Why is that? Because it's easier for
• 26:38
  institutions to buy them. It takes away all the
• 26:40
  operational hurdles that is. That's one big part.
• 26:46
  When you look at the total assets though, and you look at
• 26:49
  how many, you know, how much money is in just in cash, $120
• 26:53
  trillion in cash or $300 trillion in bonds, $330 trillion
• 26:57
  in real estate. Bitcoin right now up to this
• 27:00
  point has only been taking market share really from
• 27:03
  equities, risk assets and a little bit from gold, you know,
• 27:08
  But as it gains, as it as it gains traction and widespread
• 27:12
  adoption, as it as its individual class of asset,
• 27:17
  that's much like gold, but an upgrade like we just talked
• 27:20
  about. Well, then people are starting
• 27:22
  to realize that, Oh my God, the Fed just lowered rates by a full
• 27:26
  percentage point and the 10 year went up by a full percentage
• 27:29
  point. Why is that?
• 27:30
  Well, because inflation might run hot.
• 27:32
  Flash forward just just five or six weeks later and sure enough,
• 27:36
  you've had two prints that are come in pretty hot between the
• 27:39
  CPI and and now the producer price index where people are
• 27:43
  realizing, Oh my God, that we, we might have inflation flare
• 27:47
  back up here. So I need higher interest on my
• 27:50
  bonds to get a real return on those.
• 27:53
  I've got to protect my money somewhere.
• 27:56
  And so you will start to see as we just get a deluge of, of
• 28:01
  additional treasuries being issued here and floated by the
• 28:06
  US Treasury to just keep printing all to to keep filling
• 28:12
  those deficit holes regardless of how well Doge does, you're
• 28:16
  not going to clear that deficit. Let's just get real.
• 28:18
  It's not happening. It's just mathematically not
• 28:21
  possible where we are. OK.
• 28:23
  So I'm glad that we're doing that.
• 28:26
  I'm in full support of it. But let's just get real here.
• 28:30
  We were running such large deficits that that's not going
• 28:32
  to solve itself in in a year, not not going to solve itself in
• 28:36
  four years, in my opinion. So people are going to start to
• 28:39
  realize I've got to protect my capital somewhere.
• 28:42
  Where is the capital going to be reallocated from?
• 28:44
  It's going to be reallocated from bonds and real estate
• 28:47
  because it's easy to manage your your holding of Bitcoin.
• 28:51
  You don't, you don't have any tenants, you don't have a
• 28:53
  management company, you don't have taxes on it.
• 28:56
  You just, you buy it, hold it, put it there, and it just holds
• 28:59
  its value against the depreciation of the US dollar
• 29:01
  with the, the, the dollar is being devalued to manage all
• 29:05
  that debt. We know it.
• 29:07
  It's reality. Everybody in the Bitcoin space
• 29:09
  is becoming clear about this. And people in my industry, in
• 29:13
  the traditional investment industry are waking up to this.
• 29:16
  And so where's the money going to come from?
• 29:17
  It's going to come from bonds and real estate.
• 29:19
  And when those start getting allocated over, just think about
• 29:22
  that. That's over $600 trillion of, of
• 29:25
  value in the world right now, Nico.
• 29:28
  If you just get a just a fraction of that into Bitcoin,
• 29:31
  Bitcoin double S triples, quadruples overnight.
• 29:35
  You know, we talked about having the strategic reserve.
• 29:38
  If that happens, well, now you've got game theory, you've
• 29:40
  got all the all the other sovereigns that feel like
• 29:42
  they've got to own some too. So I full agreement with David
• 29:48
  that, yeah, if you just hold everything constant, if you
• 29:51
  don't keep expanding the money supply, then Bitcoin would
• 29:55
  probably continue this adoption like this.
• 29:57
  But if you continue to expand the money supply, which we
• 30:01
  believe that it's just no way around that.
• 30:04
  And you now have a different structural adoption, a change
• 30:11
  like it just it's, it's a sea change of a of adoption in the
• 30:15
  investment world of this new asset.
• 30:17
  It becomes something that will break from those models.
• 30:20
  I know that Michael Saylor, like say all your, all your models
• 30:24
  we've broken really talking about hyper bitcoinization.
• 30:28
  I don't think we even need that for it to breakthrough some of
• 30:31
  these. So that's, that's kind of, but
• 30:34
  the models are important. It helps us manage risk and
• 30:37
  their self, their, their, their self fulfilling prophecies.
• 30:40
  People close closely watch these and monitor them and they trade
• 30:45
  around them. So it gives us opportunity to
• 30:47
  move in and out of positions and and risk management strategies
• 30:52
  while we watch those it those. So they are important.
• 30:55
  But in the end, I believe that bitcoins adoption starts eating
• 31:00
  into those other asset classes and it goes from a 2 trillion
• 31:02
  asset to a 20, thirty, $40 trillion asset eventually.
• 31:07
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• 31:11
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• 31:13
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• 31:16
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• 31:19
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• 31:22
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• 31:26
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• 31:29
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• 31:46
  Absolutely. And I want to talk about
• 31:49
  something is you mentioned sailor and you know he said all
• 31:53
  your models are destroyed and I think a lot of people were not
• 31:55
  anticipating his stock to do what it did in 2024 five X
• 32:02
  right. Absolutely incredible.
• 32:04
  When he started the the the Bitcoin strategy, he changed the
• 32:09
  name of his company to strategy. Now I was at a billion dollar
• 32:12
  market cap. Now it's 100 billion.
• 32:15
  And then of course, the first company in Japan to kind of
• 32:18
  follow in the footsteps of Michael Saylor.
• 32:20
  And it was like a zombie company essentially.
• 32:22
  It was like a hotel chain 48 X in the last 12 months alone.
• 32:28
  So absolutely crazy. David, why is that happening?
• 32:32
  What why is this phenomenon happening?
• 32:33
  I mean that why is Michael Saylor's company outperforming
• 32:39
  NVIDIA? What's going on there?
• 32:41
  Well, I, I think he's unlocked just the ability to do a capital
• 32:45
  markets arbitrage right by, you know, he controlled the stock of
• 32:50
  his company, the vote that is, and, and he was able to set it
• 32:55
  up where he could issue equity. So again, he started with 500
• 32:59
  million of cash in his balance sheet, 2020 bought Bitcoin
• 33:02
  began, then this capital markets arbitrage strategy of issuing
• 33:05
  equity and then tapping into the convertible bond market at 0%
• 33:10
  financing and he arbitrage that to do modest prudent amounts of
• 33:15
  leverage. I think he's learned good
• 33:16
  lessons from the Silvergate loan that kind of really nearly bit
• 33:20
  him a few years ago. And and and they've just got
• 33:24
  prudent leverage on this that's generally termed out, that's
• 33:26
  cheap. We're able to continue to raise
• 33:28
  equity and cash through that. And they're arbitraging that to
• 33:31
  turn around and buy Bitcoin as part of the Bitcoin treasury
• 33:34
  strategy. And I think that, you know, if
• 33:37
  you in the future, I think micro strategy is going to end up
• 33:41
  being one of the leading financial service businesses in
• 33:45
  the world, you know, think JP Morgan modern day, you know,
• 33:49
  where they're the leading bank. You could argue today and and
• 33:52
  seller will own or micro strategy rather will own 3 to 5%
• 33:56
  likely of all Bitcoin in the world.
• 33:59
  And so the old saying, you know, he who has the gold makes the
• 34:02
  rules. I kind of analogous to this,
• 34:05
  that when they have that kind of collateral, they're going to be
• 34:08
  dominant as a financial service provider in being able to borrow
• 34:12
  against that to do all sorts of interesting business enterprises
• 34:15
  from there. And so JP Morgan trades at a 2
• 34:18
  times book value today. Micro Strategy trades it just
• 34:21
  over 2 times book value on its Bitcoin holdings.
• 34:25
  You know, I think that it's got upside both, both in terms of
• 34:30
  its ability to grow its book value as Bitcoin prices go
• 34:34
  higher, as it continues to do that arbitrage in the capital
• 34:37
  markets. I think it's phenomenal what
• 34:39
  he's unlocked and he's got a flywheel going and he has the
• 34:42
  first mover advantage. Yeah, just just to build on
• 34:45
  that. So people understand that two,
• 34:47
  that 2X, you know, book value evaluation at David's quoting,
• 34:50
  we, we like to look at as a fully diluted cap table.
• 34:56
  So when you look at all of the convertible bonds, all of the
• 35:00
  executive pay packages, everything, you dilute it all.
• 35:02
  You, you dilute all that and you convert all that to common.
• 35:06
  That's that's how we're getting to that 2X.
• 35:08
  That's that's an important distinction.
• 35:11
  And then, yeah, you know, something that's interesting
• 35:13
  about this, Nico, is that, and when I've talked to Sharish, the
• 35:17
  the treasurer of, of strategy and the, the company formerly
• 35:22
  known as MicroStrategy and you know, he he talked about how
• 35:29
  they had this advantage of buying this asset, this
• 35:32
  underlying asset that was still volatile.
• 35:34
  So David will remember this. Back in the day, we used to in
• 35:37
  the late 90s, we used to trade this these convertible bond,
• 35:41
  convertible bonds of a company called Qualcomm.
• 35:44
  Now you guys know Qualcomm and your chipsets in your phones,
• 35:47
  but back then Qualcomm was issuing these bonds just hand
• 35:52
  over fist and, and, and the entire St. would just buy them
• 35:55
  up, gobble them up because the, the volatility of the stock was
• 35:58
  amazing. So these convert bond traders,
• 36:01
  you know, they could arbitrage the heck out of that.
• 36:03
  They just, they would delta hedge it, they would trade
• 36:06
  around it, they'd have conversion rights.
• 36:07
  It was, it was awesome. And we were doing that all day
• 36:10
  every day. Flash forward to today and
• 36:13
  they've got this, you know, company that's got volatility
• 36:16
  that that volatility is tied to that underlying Bitcoin.
• 36:20
  And so it's not because the stock is not, you know, Qualcomm
• 36:23
  was volatile because it was a tech business, it was a fast
• 36:25
  growing business and all that. But you know, MicroStrategy is
• 36:29
  not volatile because of structural underlying issues of
• 36:32
  the stock. And it's not like the, the
• 36:35
  company has problems or anything like that, or it's not because
• 36:37
  of illiquidity, it's because the underlying ownership of Bitcoin,
• 36:41
  the more Bitcoin they put on the balance sheet, the more volatile
• 36:43
  they got. They the more they follow the
• 36:45
  volatility of Bitcoin. And suddenly these bonds have
• 36:50
  become something that everybody wants to own because of the
• 36:53
  upside optionality on them. And so, and because of that
• 36:57
  volatility arbitrage, you can play with delta hedging around
• 37:00
  it. And for the, for your listeners
• 37:02
  that don't understand what I'm saying is that convertible bond
• 37:05
  traders, they'll buy a convert like that, then they'll short a
• 37:08
  certain amount of stock. It's called the delta short,
• 37:10
  which the optimal amount to short against it because that
• 37:14
  convert can be converted into shares eventually.
• 37:17
  And so you trade around it and you can buy and sell around it
• 37:21
  and it's called delta trading and delta hedging and you can
• 37:24
  make a lot of money doing that. So they kind of hit on a Nirvana
• 37:27
  there and and they've continued to capitalize on it.
• 37:30
  But I fully agree with David. And This is why it became one of
• 37:32
  our core positions at the fund is that this strategy is going
• 37:38
  to continue to build on itself. And we do believe that Michael
• 37:42
  and strategy will become the main financial center of Wall
• 37:48
  Street eventually as Bitcoin takes hold and becomes that
• 37:51
  undeniable asset that everybody needs to own.
• 37:55
  So when you say they're going to become like a main, a major
• 37:58
  financial center and by the way, I agree with you, what does that
• 38:01
  mean? What does that entail?
• 38:02
  So are they going to become some type of some type of Bitcoin
• 38:05
  bank? I go ahead, James.
• 38:09
  You go first. Yeah, no, I that's that's that's
• 38:11
  what I would say something like a Bitcoin bank.
• 38:14
  Just think about having a million his, his goal is to get
• 38:17
  a million Bitcoin, which would be 5% of the, the full full
• 38:21
  flow, which we know there's no longer a full flow and so many
• 38:24
  people have lost coins along the way.
• 38:26
  Who knows how many have been lost, but certainly a a million
• 38:29
  or two, right? So he'll own over 5% of the
• 38:33
  float. And so he'll have the, the
• 38:36
  ability to use that as collateral.
• 38:39
  You know, he'll have the ability to do things like lending
• 38:42
  products, insurance products, you know, there's all kinds of
• 38:45
  stuff they can do. When you have that kind of that,
• 38:48
  that base of assets on your balance sheet, you, you can
• 38:52
  become an institution that that doesn't have control, but has
• 38:58
  the ability and, and is given the affordability to do things
• 39:03
  like that and to open products for people that other companies
• 39:06
  just won't be able to do. Yeah.
• 39:08
  And I think the only thing I'd add on to that is, you know,
• 39:10
  look at a company like Visa, right?
• 39:12
  Stock is trading at 16 times book value, 17 times actually
• 39:17
  today. It's a toll road.
• 39:19
  You know, you could argue Visa is one of the most beautiful
• 39:21
  cash flow businesses you can imagine over the last, you know,
• 39:25
  30-40 years where it's just the middleman collecting fees.
• 39:29
  What if lightning channels are really where the settlement
• 39:32
  layer is happening in the world? Because Fast forward the year
• 39:36
  2030, something stable coins were interesting and that was a
• 39:41
  great way for the emerging market folks to get access to
• 39:44
  dollars. But what if we're in a world
• 39:46
  where the dollar, despite the efforts of the Trump
• 39:49
  administration and DOGE and all that, it proves that debt is
• 39:53
  debt and you can really not put that genie back in the bottle.
• 39:58
  And then inflation and debasement continue and
• 40:01
  suddenly. The dollar is not a great asset
• 40:06
  and U.S. Treasury bonds are not great
• 40:08
  assets and therefore stable coins are not that great of an
• 40:11
  asset. Despite me believing that stable
• 40:13
  coins will continue to grow over the next few years, I just worry
• 40:16
  about their longevity. Crypto, in my opinion, has
• 40:20
  different set of problems. We don't need to go into that.
• 40:22
  And so I, you know, I'm sounding like a Bitcoin maxi here, but in
• 40:25
  general, it's just it's the soundest form of money.
• 40:28
  And if the settlement layer becomes Bitcoin for this AI
• 40:32
  world that we live in out there over the horizon and all assets
• 40:37
  are set are settling back there will then sell or controlling or
• 40:41
  micro strategy controlling 5% of the of the flow could be the
• 40:47
  business that is opening all sorts of lightning channels
• 40:50
  using his Bitcoin to do that, getting paid a toll to do that
• 40:53
  the way MasterCard and Visa do and are just beautiful cash flow
• 40:57
  businesses. Again, VSAT 17 times book value
• 41:01
  today, MicroStrategy at two times.
• 41:04
  So these are the interesting things that we think about, but
• 41:08
  you know, it's going to be interesting.
• 41:09
  But again, he who has the gold makes the rules that bitcoins
• 41:13
  going to prove to be great collateral.
• 41:14
  And for a company to have 5% of that, that's pretty damn
• 41:16
  attractive to us. Yeah, And this perfect segue
• 41:19
  that leads me to my next question, which is, you know, I,
• 41:23
  I, and now I'll talk about my, my personal journey, which is
• 41:26
  now I got into Bitcoin 2016. I think the first Bitcoin I
• 41:29
  bought was at like 6-7 hundred dollars.
• 41:33
  Been at this for nine years. And now I'm looking at
• 41:35
  MicroStrategy, I'm looking at Metaplanet.
• 41:38
  And I'm like, maybe it would have been wise, you know, to buy
• 41:45
  a little bit of that instead of, you know, approaching it from a,
• 41:49
  you know, 100% Bitcoin, 100% in self custody especially.
• 41:55
  I mean, MicroStrategy outperformed.
• 41:56
  Like, let's be blunt, right? MicroStrategy outperformed
• 42:01
  Bitcoin in 2024. That's that's the truth, right?
• 42:04
  Metaplanet 48X. Yeah, you know.
• 42:07
  Bitcoin. Yeah, but that's but the point
• 42:10
  is though, Nico is like, yeah, they're confusing to understand.
• 42:14
  You know, it took me a minute to get my head around it.
• 42:17
  And actually talking to Cherish was the actual what what their
• 42:20
  what their strategy was on the on the whole thing to really get
• 42:23
  a handle on that. So for the for the, for the
• 42:28
  normal person who's not doing the stuff we're doing every
• 42:30
  single day to hear that you just use here.
• 42:34
  Oh, yeah. When bit when, when Michael
• 42:36
  Saylor floats equity and buys Bitcoin, it's accretive.
• 42:41
  You're like, what how does that? I don't understand how the how,
• 42:44
  what does that even mean? Well, it means that he was able
• 42:47
  to float stock, right? Get a certain amount of of cash,
• 42:53
  turn around and buy Bitcoin and get a 2X return on that on his
• 42:56
  stock. So the stock will go up 2X of
• 43:00
  the amount that he had bought. So if you bought $100 million
• 43:03
  worth of worth of Bitcoin, like you flowed $100 million worth of
• 43:06
  stock, bought $100 million worth of Bitcoin, his stock went up to
• 43:10
  $100 million. And so that's what he was doing
• 43:13
  all along that way. This is a very difficult thing
• 43:15
  to kind of get wrap your head around.
• 43:17
  The Metaplanet thing was even it was something similar, he they,
• 43:22
  they can't do the converts. They don't have the convert
• 43:24
  market in Japan. But what they did have in Japan
• 43:27
  is the lack of ability to buy Bitcoin.
• 43:31
  So, you know, they're, they're the Japanese citizens couldn't
• 43:37
  go out and buy an, a Bitcoin ETF for their, you know, equivalent
• 43:42
  4O1K or IRA, but they could buy Metaplanet.
• 43:46
  So you had this struggling hotel chain that turned around and
• 43:51
  decided to add Bitcoin to their balance sheet.
• 43:53
  And suddenly everybody's like, oh, wait, if I own this, if I
• 43:56
  own Metaplanet, then I've got exposure to Bitcoin, which they
• 43:58
  wouldn't, they couldn't do otherwise unless they were
• 44:01
  somehow buying Bitcoin themselves.
• 44:04
  And so, and again, that's not an easy thing for a normal everyday
• 44:09
  person to go buy Bitcoin in exchange, get off the exchange,
• 44:13
  put in a wallet. It's all, it's pretty scary
• 44:15
  stuff. And that's why these ETFs were
• 44:18
  so big and that's why it's something like Metaplanet was so
• 44:20
  big because it gave an Ave. for, for people in Japan to buy
• 44:24
  Bitcoin or a proxy of it. So those are things that, you
• 44:29
  know, I, I wouldn't kick yourself.
• 44:31
  They're hard to, unless you're focused on investing and, and
• 44:36
  capturing all this stuff every single day, of course you're
• 44:38
  going to miss out on that stuff. And that leads to another point,
• 44:41
  which is like Dave and I harp on this every single day.
• 44:45
  I mean, you're forced to go invest and take risk to battle
• 44:49
  against the devalue, the debasing of, of our, of our
• 44:53
  currency, our U.S. dollar. You're forced to do that.
• 44:56
  And so you're kicking yourself because, Oh my God, I missed a
• 44:58
  chance to get a little bit of ahead of this whole devaluing
• 45:02
  game. You know, I can't just buy
• 45:03
  bonds. The, the, the dollar is being
• 45:06
  devalued at a rate that's going faster than you're going to get
• 45:09
  paid on those bonds, right? You're getting a negative real
• 45:12
  yield. You have to go take risks
• 45:13
  somewhere anyways. That's why we're paid to do
• 45:16
  that. But because we do it every
• 45:17
  single day, this is what we do when we analyze this stuff
• 45:20
  continuously. And that's.
• 45:22
  Yeah. And let's talk about what you
• 45:24
  guys do because that was a perfect segue to the Bitcoin
• 45:29
  Opportunity Fund investing in the Bitcoin space.
• 45:32
  You guys dedicate your your time to this.
• 45:35
  This is what you guys do. What is the Bitcoin opportunity
• 45:39
  Fund and what's the pitch? So let's say you know, you're
• 45:42
  an, you know, higher net worth individual, you're older, you're
• 45:46
  successful in life and you know, you made your money, right?
• 45:50
  You're, you're happy making, you know, 1012%, you know, and, and
• 45:55
  they look at the Bitcoin opportunity fund.
• 45:57
  What's the pitch? How do you convince them, David?
• 46:00
  Yeah, I think you know, excuse me.
• 46:03
  It, it, it's a couple of things that we are a, we are an
• 46:08
  investment firm that is investing in public and private
• 46:11
  assets for companies in this Bitcoin space.
• 46:15
  And we have our seasoned team where we have a lot of
• 46:18
  experiences, value investors and across the cap structure, debt,
• 46:23
  equity, everything in between public and private VC, hedge
• 46:25
  fund, all that we include that in included in that is our
• 46:29
  ability to manage the portfolio hedging and risk management for
• 46:33
  the portfolio overall. So as you were talking about
• 46:36
  before kind of kicking yourself on, on Metaplanet, it's like
• 46:39
  like our views, we'll get that asked a lot.
• 46:41
  Why wouldn't I just buy Bitcoin itself?
• 46:43
  Why wouldn't I invest in you guys?
• 46:44
  Why would I invest in you guys? And, and the answer is, well,
• 46:47
  you should do both. I, I think you should own, it's
• 46:50
  all about diversification. You should own some Bitcoin and
• 46:53
  then you can allow yourself to invest a sleeve in us that
• 46:56
  allows us to to invest in some of those levered Bitcoin
• 47:02
  strategies to do some portfolio hedging risk in you for you
• 47:05
  through the portfolio to invest in public and private
• 47:09
  opportunities in this space. Some of these venture capital
• 47:12
  companies that we're investing in the private side, you know,
• 47:15
  could prove over the next 7 plus years to be phenomenally, you
• 47:20
  know, growth businesses. So we're we're excited about
• 47:23
  what we're doing there. And, and, and I think what
• 47:25
  you're describing is, yeah, we're able to take a shots on
• 47:29
  goal to buy, get some levered upside to Bitcoin, but also then
• 47:33
  to do some hedging to manage that risk.
• 47:35
  I'll pause there. And, and James, by definition,
• 47:39
  you guys have to outperform Bitcoin, right?
• 47:41
  So you can make a, you can make a, you know, if you look at
• 47:47
  sailors model, right, with the base case, $13 million by 2045,
• 47:53
  you know, between 40 to 20% CAGAR, right?
• 47:58
  You guys have to outperform that, which is that that's that
• 48:02
  that's a lot of for someone to make for, for it to make sense,
• 48:06
  right? Because if not, it's like, why
• 48:08
  don't I just buy Bitcoin, put it in cold storage?
• 48:10
  You guys have to essentially outperform that for your clients
• 48:13
  to be happy. Is that correct, James?
• 48:15
  Yeah, that's, that's actually not the way we look at it, Nico.
• 48:18
  We don't, we don't, we don't, we don't look at it and say, hey,
• 48:20
  we're going to outperform Bitcoin for you.
• 48:21
  I think that's a, that's a that's kind of a crazy
• 48:24
  assumption. What we do say is that we're
• 48:27
  going to what our goal is to deliver better risk adjusted
• 48:31
  returns for your typical investor for a family office
• 48:36
  that wants to get exposure to this fast growing and exciting
• 48:39
  space, but just doesn't understand it.
• 48:41
  Or if you're a high net worth investor, you have Bitcoin and
• 48:45
  you want to augment that with something that is invested in
• 48:48
  this space and exposure to some of the companies and things that
• 48:52
  we're doing that you wouldn't otherwise get exposure to.
• 48:55
  Now remember we like just to give you some numbers to give
• 48:59
  hard numbers for people understand, you know this last
• 49:02
  year we were up 65% net, net, net net of all fees and
• 49:06
  everything, OK? And we were we're up over 80%,
• 49:09
  eighty, 2% life to date, which is over just five quarters and
• 49:15
  that's all net, net, net, net. But that does not include marks
• 49:19
  on privates, OK. So when you hear some VCs for
• 49:24
  instance talk about their returns, their Irrs, they're by
• 49:29
  and large not real returns. Those are just, those are marks
• 49:32
  on, on companies that they may have made add on investments or
• 49:36
  something like that. And they're just marking them up
• 49:38
  to where that next investment was made from Series A to Series
• 49:41
  B or whatever it is with ours. We, we, we're, if we liquidate
• 49:45
  the portfolio, that's what you get because you know, the, the,
• 49:48
  the privates are not marked up so that, that can act as a drag
• 49:52
  on our returns. So I want to be very clear that
• 49:56
  over the long period of time, we may do exactly what you just
• 49:58
  said, Nico. And we are very excited about
• 50:01
  some of these companies that we're invested in, especially
• 50:03
  the things that the typical VC can't do.
• 50:06
  So you've got kind of two questions.
• 50:07
  Well, why would I just buy Bitcoin and why wouldn't I just
• 50:10
  buy AVC? Well, we're doing something
• 50:12
  different. We can operate anywhere in the
• 50:14
  space. We can buy public, private,
• 50:15
  early stage, late stage. We can do structured debt notes,
• 50:18
  which we've done. We could hedge out the
• 50:20
  portfolio, which we've done. We can hedge out some of the
• 50:23
  that that beta risk in the markets, which we we will talk
• 50:27
  about, we can talk about and you hear us talk about.
• 50:30
  But what's important is that we're able to go places that a
• 50:35
  typical person, like you just said, may be intimidated or just
• 50:39
  may not have the tools or the access to.
• 50:41
  And there are a few things that we're doing now that you know,
• 50:46
  that we're working on that other the the other people in the
• 50:50
  space just aren't doing like I could see a hedge fund doing it,
• 50:53
  but they're not interested in it because they're not interested
• 50:56
  in, in, in operating in the Bitcoin space yet like we are.
• 50:59
  It's different. And so I mean there's a couple
• 51:02
  things David, why don't you actually just talk about a few
• 51:05
  things that we're that we're focusing on for, you know, for
• 51:09
  this next fund that both funds will get allocation to.
• 51:14
  But these are things that we're doing that are that you may not
• 51:18
  hear about all in other places. Yeah, I mean to James point, I
• 51:22
  mean you know we we've got our fund one that we're managing and
• 51:26
  then this new fund to that we're about to commence with.
• 51:30
  It's just going to be pro rata investments.
• 51:32
  We feel like we can repeat the same process we've been doing
• 51:34
  and we've got about 3:00 to 4:00 private opportunities that we're
• 51:39
  looking at now that would be probably in the fund here in
• 51:43
  fund 2 this spring and in fund one too.
• 51:45
  But in fund two, the first one is it would be the first Bitcoin
• 51:51
  leveraged buyout and what we would do and we're inactive
• 51:54
  diligence for discussions with these guys.
• 51:57
  We've known the Magic team for a while.
• 51:58
  They've had a very successful business track record.
• 52:01
  And we can't say a lot about the exact industry it's in, but it's
• 52:04
  a non cyclical industrial service business and it's a roll
• 52:09
  up of various locations in that it's incredibly cash flow,
• 52:13
  lucrative businesses. You're able to buy these at low
• 52:16
  multiples. And as you scale the business,
• 52:18
  you could someday package this up three to four years from now
• 52:21
  and sell the entire enterprise scaled up with multiple
• 52:24
  locations at a much higher multiple.
• 52:27
  And the beauty of this cash flow that it generates, we can do two
• 52:31
  things. One, we can put most amounts of
• 52:32
  leverage on it to do that Bitcoin LBO.
• 52:36
  And two, we can invest some of that cash flow in a Bitcoin
• 52:39
  treasury management strategy to then grow its asset value over
• 52:43
  time as Bitcoin grows. So hence the term, this would be
• 52:45
  the first Bitcoin leveraged buyout.
• 52:48
  So we're very excited about that.
• 52:50
  And again, any investors in our fund prior to that deal get
• 52:54
  access to that, you know, and in their in their statements in the
• 52:59
  fund. So, so we're we're intrigued
• 53:01
  with that. There's a couple others I'll
• 53:02
  talk about is there's a series E pre IPO round of a really good
• 53:07
  business that does over a billion dollars in revenue.
• 53:09
  So it's a real business with real cash flow tied to the
• 53:12
  space. Again, can't say a lot about it,
• 53:14
  but they need to put a pin in their valuation to ahead of
• 53:20
  their IPO, both for stock option policy reasons, meaning pricing
• 53:25
  their stock options of recent hires and two to have capital,
• 53:29
  working capital that they need to grow their business right
• 53:32
  ahead of the IPO. So we're excited about playing a
• 53:36
  part of that. And then lastly, I'll talk about
• 53:39
  is just there's a few hours, but one more I'll talk about is
• 53:42
  there's an emerging market mini MicroStrategy play.
• 53:46
  So everything we just thought about MicroStrategy of being a,
• 53:50
  a, a future financial services business, we're going to be able
• 53:55
  to buy in at a very low price to book value multiple on this
• 54:00
  emerging market. Mini micro strategy would be
• 54:02
  buying a public company in this emerging market country doing a
• 54:06
  reverse IPO again under NDNA. So I can't say a lot about where
• 54:10
  it is, but we're excited about that.
• 54:12
  And and so we're, we're working on those and a few others.
• 54:16
  And again, anyone in our fund ahead of those gets access to
• 54:19
  that. It's it's, it's really cool.
• 54:22
  And why, let me ask you this, James, like why are you guys
• 54:25
  specifically focused on the Bitcoin space?
• 54:29
  Like in a way you can make an argument that that constrains
• 54:32
  you. So why is it about the Bitcoin
• 54:34
  space that it's appealing to you?
• 54:38
  I like to sleep at night. We are very, look, Nico, you
• 54:46
  know, short of calling myself a Bitcoin maxi, I mean, I don't
• 54:50
  believe in any other protocol like I do in Bitcoin.
• 54:54
  And so I believe that everything will be built around this
• 54:58
  protocol eventually. And this is the protocol that
• 55:01
  may not be as exciting, may not have the flash and sizzle of
• 55:04
  some of the other things that are that are out there.
• 55:07
  And there are protocols that have value.
• 55:11
  I'm not going to say that things like Solana or whatever don't
• 55:13
  have value. They do for certain things, but
• 55:17
  this is the one I trust. This is the one I can look at
• 55:20
  and say I can trust the vast majority of my personal net
• 55:24
  wealth can be parked in. And that I can honestly with,
• 55:29
  with, with a, with full transparency and confidence, go
• 55:35
  out and invest my limited partners money in this space and
• 55:39
  feel good about it because I what we want to do, like, look,
• 55:44
  Dave and I come from this traditional hedge fund private
• 55:48
  equity world. There are a lot of people come
• 55:50
  into this space and just sling it around and are just trying
• 55:52
  to, you know, obviously there's, there's opportunity here to, to
• 55:58
  do things that we wouldn't do. You know, we saw it in the
• 56:01
  collapse of FTX and Celsius and all that stuff.
• 56:04
  There's some there's possibility for that, but for us, you know,
• 56:08
  we want to do well by our partners.
• 56:10
  We want to find good partners that will work with us who are
• 56:12
  exposed in the space, who have knowledge in the space, who may
• 56:15
  be good operating partners. I mean, that's what it's all
• 56:18
  about for us. Like this is a, this is a way of
• 56:21
  life for us and we truly enjoy finding great partners and feel
• 56:27
  like some of these people are my friends.
• 56:29
  Nico, I see them over, you know, down at the the club here.
• 56:33
  I don't. I want to have to look at them
• 56:35
  and and feel like I'm doing something I don't feel full
• 56:38
  confidence in. I want to feel good about what
• 56:42
  I'm investing in at all times and feel very confident that I'm
• 56:45
  going to deliver for them what they hope.
• 56:48
  Absolutely. And one of the things that you
• 56:49
  said in before we went on air and I found it really, really
• 56:52
  interesting and I would love for you to elaborate on it.
• 56:55
  You said macro headwinds and Bitcoin tailwinds.
• 57:00
  What does that mean? Well, the macro headwinds we
• 57:03
  we're seeing right now, we're you know, David can talk a
• 57:07
  little bit about how evaluations have gotten way ahead of
• 57:10
  themselves on the in, in just the S&P and, and the total
• 57:14
  market space, especially in mag sevens, it's gotten a little bit
• 57:18
  out of control. We're due for some sort of, you
• 57:21
  know, we talk about this on, on Macro Monday almost every single
• 57:25
  week we're due for some sort of pullback or some massive
• 57:29
  liquidity, right? So either way, you've, there's
• 57:33
  a, there's these, these two have kind of been, they've, they've
• 57:41
  digressed from each other, right?
• 57:42
  So you've got the, the valuations are going up
• 57:45
  exponentially and then you've got the money supply that kind
• 57:48
  of turned over. It's not just starting to turn
• 57:50
  back up like the growth of the money supply and liquidity.
• 57:54
  We're seeing that the Fed is very wary of where rates are.
• 57:58
  We're seeing that bond investors are very wary about where
• 58:03
  inflation is now, where it's going to be.
• 58:06
  They're worried about a deluge of of Treasury bonds coming into
• 58:10
  the market. So price of the the price of
• 58:14
  bonds are going down. Yields are going up on the
• 58:15
  longer end of the curve. That means that liquidity is
• 58:20
  more or less constrained in a way.
• 58:22
  You know, it costs more to borrow and with that volatility
• 58:26
  of bonds, it costs more to borrow against collateral.
• 58:30
  These are all things that play into liquidity and the expansion
• 58:34
  of the money supply and expansion multiples.
• 58:37
  So you got that one thing going on, on one side, tariffs and all
• 58:41
  that, you know, we just don't know.
• 58:43
  Markets hate uncertainty. So there's a there is a distinct
• 58:47
  possibility that we get a drawdown over the next 6 to 12
• 58:50
  months. OK.
• 58:51
  So that's number one #2 you've got tailwinds for Bitcoin.
• 58:55
  We talked about some of them. You've got the gap accounting
• 58:57
  that that was passed in 22 that has now taken effect where
• 59:02
  companies can hold Bitcoin and not be penalized on it by having
• 59:06
  to market as as a an impaired asset at the lowest value it's
• 59:09
  traded at since the time they bought it.
• 59:12
  Now they can hold that fair market value.
• 59:13
  Big deal that that was a big hurdle for companies to even
• 59:16
  want to put it in their treasury hold it on a balance sheet
• 59:19
  that's gone now so companies can do that.
• 59:22
  You've got Saab 121 has been fully repealed now the SEC
• 59:26
  reverse course on that. So there's no longer the the
• 59:30
  worry from banks are holding Bitcoin on their balance sheet
• 59:33
  that will open up all kinds of products and and and you know
• 59:38
  possibilities for major banks to play in this space, especially
• 59:43
  in Bitcoin. That's another one you get the
• 59:45
  ETFs and you get the ETF options that allows for institutions to
• 59:49
  manage volatility around holding Bitcoin really important.
• 59:53
  The ETFs are have have taken off and and the options on them are
• 59:57
  are also getting pretty liquid, especially in the Ibit and FBTC
• 1:00:01
  ones. So that's important.
• 1:00:04
  Then you've got. You've got the Bitcoin reserve
• 1:00:06
  that we talked about. You've got executive orders that
• 1:00:09
  are possible that we talked about.
• 1:00:11
  You've got the sovereign reserve that we talked about.
• 1:00:14
  So these are all things that are that are tailwinds, including
• 1:00:18
  most importantly in my mind is an administration that's going
• 1:00:22
  to give us clarity and not be antagonistic against the
• 1:00:26
  industry anymore. That's a really big deal.
• 1:00:28
  And I think that those are all very strong tailwinds that will
• 1:00:31
  carry Bitcoin into new highs going into the the later end of
• 1:00:36
  this later parts of this year. And I don't know David, you may
• 1:00:40
  want to add, add, add some stuff on the on the macro side, but
• 1:00:43
  that's kind of the way that we see it and maybe how we we have
• 1:00:48
  the ability to manage our risk around that really important
• 1:00:52
  part of our fund is that we have the ability to manage risk.
• 1:00:55
  So, David, and, and before you add to, to what James said, my
• 1:00:59
  question to you is like generally what's tended to
• 1:01:02
  happen is that Bitcoin tracks the market, right?
• 1:01:05
  It just kind of tracks the SMP and attracts the NASDAQ.
• 1:01:08
  So it wouldn't Bitcoin go down if if there was a correction?
• 1:01:12
  Well, I think couple thoughts, yeah.
• 1:01:14
  I mean, certainly there's strong correlation over the last, call
• 1:01:17
  it, 10 plus years of Bitcoin to tech stocks, for instance, the
• 1:01:22
  NASDAQ and, and, and, and so I think it's still kind of that
• 1:01:26
  risk on kind of correlation. But I think at some point, and
• 1:01:31
  as we move through time and we're getting closer to that
• 1:01:34
  point, Bitcoin will also become risk off, right?
• 1:01:38
  It's, it's going to remain risk on just as a $2 trillion asset
• 1:01:41
  class with massive growth tailwinds for all the reasons we
• 1:01:44
  talked about earlier of bond money coming into this space as
• 1:01:49
  an example, right, to hedge the inflation and debasement risk
• 1:01:53
  and just to general growth for all these tailwinds James is
• 1:01:56
  talking about. So I think that those are going
• 1:02:00
  to be the risk on side, but the risk off side too, where you see
• 1:02:05
  kind of gold and silver and Bitcoin now being in my opinion,
• 1:02:10
  those flight to safeties. The thing that the US Treasury
• 1:02:13
  used to be 20 plus years ago that when the world was falling
• 1:02:17
  apart in O 8 and Treasury bonds became the ramp that everyone
• 1:02:20
  ran to. And you'd watch Treasury bonds
• 1:02:23
  come, yields come flying back in toward 2% because it was the
• 1:02:27
  safe harbor to be in again. What if on that next crisis is
• 1:02:30
  the sovereign level and all balance sheets at the sovereign
• 1:02:33
  level are being questioned because of all the debasement
• 1:02:36
  that's coming? It's going to be Bitcoin among
• 1:02:39
  others. It's going to be the safest
• 1:02:40
  harbor in the world. It will be the risk off asset.
• 1:02:43
  So to answer your question, sure in moments like March of 2020 or
• 1:02:50
  moments like September of 08 with Lehman going down, all risk
• 1:02:55
  assets can correlate to one temporarily that creates
• 1:02:58
  opportunity. But I think then ultimately, as
• 1:03:02
  you saw with gold in O 8, for instance, it came flying out of
• 1:03:05
  that gold was the best performing asset in the 2001,
• 1:03:08
  2011 period up 8X, gold miners were up 12 to 14X.
• 1:03:14
  We see that same thing here with Bitcoin that it will be that
• 1:03:17
  flight to safety. That will be a massive grower
• 1:03:20
  for the tailwinds James mentioned and the off the risk
• 1:03:23
  off factors flight to safety that I'm talking about.
• 1:03:27
  This is why we're so highly convicted in our view and to
• 1:03:31
  answer your question of why we've jumped in from our careers
• 1:03:34
  in traditional hedge fund land into this space, why we see the
• 1:03:38
  opportunity and why we think our fund can can really take
• 1:03:41
  advantage of that and and make a lot of money for our LP's over
• 1:03:44
  time. So I don't know if that answers
• 1:03:46
  your question. That's how we think about.
• 1:03:47
  It just just to augment that, you know, and because you may
• 1:03:50
  have listeners going, yeah, but it really has just been a risk
• 1:03:53
  asset has been the tip of the risk spear for a while and it
• 1:03:56
  does grow it, it kind of lags the, the Bitcoin lags the
• 1:04:00
  expansion of the money supply by about 3 months.
• 1:04:03
  They just move lockstep, right. There is one moment though that
• 1:04:07
  like what Dave is talking about where Bitcoin became risk off
• 1:04:10
  and people didn't really realize what was going on.
• 1:04:12
  That's back in March, April of 23 when you had the meltdown of
• 1:04:16
  Silicon Valley Bank and Bitcoin had, you know, it had gone from
• 1:04:20
  20,000 all the way up to 30,000 basically during that time.
• 1:04:25
  And so it was up like 40, almost 50% during this, this crisis
• 1:04:31
  that people saw unfolding. They thought, Oh my God, what if
• 1:04:34
  I can't get my money out of my bank?
• 1:04:37
  I better own Bitcoin because that can't be controlled.
• 1:04:40
  That was new and that was really important.
• 1:04:43
  And that was again, that was before the ETF.
• 1:04:45
  So this is, you know, this was an important moment for Bitcoin.
• 1:04:49
  And I think it's kind of telling that if you have a bank crisis,
• 1:04:52
  or like David's saying, if you had a, if you have a, a
• 1:04:55
  sovereign level debt crisis, where are you going to go?
• 1:04:59
  Where are you going to hide? Are you going to hide in gold?
• 1:05:01
  Again, it's likely paper gold that you're buying and that's
• 1:05:05
  problematic. Or you may just not be able to
• 1:05:09
  get access to it. Do I think that gold will
• 1:05:12
  benefit from a crisis of, of, you know, the sovereign level?
• 1:05:15
  Of course. I mean, that would be, yeah.
• 1:05:18
  One one thing I just want to build on to James's point, Nico
• 1:05:20
  2 on the same question topic. So when we were raising fund 1-2
• 1:05:25
  years ago, it was interesting to us how no family offices really
• 1:05:29
  it was like maybe a handful of family offices that we're
• 1:05:31
  taking, you know, we'd get comments like, well, I thought
• 1:05:34
  Bitcoin and crypto are dead, that Sam Bankman freed guy
• 1:05:36
  killed it and we're no, no, no bitcoins different than crypto.
• 1:05:39
  Let's explain. Well, they weren't interested.
• 1:05:41
  What's interesting is we raised fund to now we're getting more
• 1:05:45
  engagement from family offices and what they're seeing is, hey,
• 1:05:49
  you know, 2 to 3% of my assets I need to have in these inflation
• 1:05:52
  hedges for debasement risk. I don't really I the family
• 1:05:56
  office don't fully understand Bitcoin, but you guys talk our
• 1:05:59
  language, you understand it. We like what you're doing.
• 1:06:03
  We're interested in that. So that's just one example of
• 1:06:06
  progress we're seeing of maybe not the institutional classes
• 1:06:10
  yet. I'm not sure it's interesting.
• 1:06:12
  I had a discussion with an one guy, one of the top three guys
• 1:06:16
  at one of the endowments at a really good liberal arts college
• 1:06:19
  here in the Northeast. I won't say the school.
• 1:06:23
  And he said to me said, you know, David, he said, I love
• 1:06:25
  what you guys are doing in Bitcoin and I'm a Bitcoin.
• 1:06:27
  I believe in it. And I said, why isn't your
• 1:06:30
  endowment doing it? Why wouldn't you guys just make
• 1:06:32
  a 2% allocation to this space, to Bitcoin itself or a fun like
• 1:06:36
  ours? And he said, well, you know,
• 1:06:38
  it's something. But he was honest.
• 1:06:39
  He goes to be honest, I think it's career risk.
• 1:06:41
  We're afraid that we'll look stupid in front of the college
• 1:06:43
  president and the trustees. And we have a nice cuz she, he
• 1:06:46
  was very direct and honest. And I, I, I appreciate it as
• 1:06:49
  honesty, but I, I think that's where we're at.
• 1:06:51
  But I see the family offices warming up and I think the smart
• 1:06:54
  family offices are seeing that a 2 to 3% allocation to this asset
• 1:06:59
  class. And through funds like us, it
• 1:07:01
  makes sense to protect their their risk of de basement and
• 1:07:05
  knowing that they'll outperform most other peers and benchmarks
• 1:07:09
  that they go off of by just having some of that exposure to
• 1:07:12
  the space. Right, absolutely.
• 1:07:14
  And and just to finish off the last the tail end of your
• 1:07:17
  question there Nico, which is we do see possible headwinds right
• 1:07:23
  that we talked about in the general markets.
• 1:07:27
  But one of the things that we can do is we can hedge around
• 1:07:31
  that and isolate out that that risk there.
• 1:07:35
  You know, we can't hedge out bitcoins correlation to the
• 1:07:40
  overall market, but we can hedge out the overall market and help
• 1:07:44
  mitigate downside risk in in moments of volatility.
• 1:07:49
  Like David's saying we have a drawdown that creates
• 1:07:52
  opportunity. So if you have some hedges on
• 1:07:55
  and you're able to, to move around that, then you end up
• 1:07:58
  having the opportunity to to weather that number one, but
• 1:08:03
  then have capital ready because you've now created liquidity in
• 1:08:07
  a drawdown to take advantage of that drawdown and put it into
• 1:08:12
  Bitcoin related investments that may have have a better upside
• 1:08:17
  volatility and more beta to the upside.
• 1:08:20
  Then then when you put on those hedges.
• 1:08:23
  And that's so it's something that we that we can do.
• 1:08:25
  We can, we can capture that volatility and turn around and
• 1:08:28
  put it back into the portfolio. So it's an important
• 1:08:31
  distinction. Absolutely.
• 1:08:33
  And final question guys, because I want to be respectful of your
• 1:08:37
  time. So you guys are both very
• 1:08:40
  successful individuals. You guys have very impressive
• 1:08:43
  resumes and backgrounds and, and you guys technically could just,
• 1:08:48
  you know, like I'm just going to have my Bitcoin, I'm going to
• 1:08:51
  live my life. What motivated you to to, to, to
• 1:08:54
  start this, James? And then same question to you,
• 1:08:56
  David. Well, I mean, I wanted to be in
• 1:09:00
  the space and, and I've wanted to continue doing what I was
• 1:09:04
  doing, which is investing. And I didn't want to go back to
• 1:09:07
  the regular hedge fund world. But when I saw the opportunity
• 1:09:11
  here and just the, the gaping hole for what we're offering,
• 1:09:17
  like there's just, there's nothing that I know of that's
• 1:09:19
  doing exactly what we're doing. I, I thought that it would be
• 1:09:23
  something that people would want to join in and do alongside with
• 1:09:27
  me. I love the people I've met in
• 1:09:29
  this space and a lot of them are limited partners now with me and
• 1:09:35
  we're having a blast doing it. I say that, but I truly Nico, I
• 1:09:39
  wouldn't have done this if I hadn't met and and trusted David
• 1:09:44
  so quickly. I met David through Larry
• 1:09:47
  Leopard and you know, we're the two managers of the fund.
• 1:09:51
  We're the Co managing partners and that we do, we do all of it
• 1:09:55
  day-to-day. And, and I really, we, we play
• 1:09:59
  off well with each other because I come from an arbitrage, you
• 1:10:03
  know, kind of kind of a, a very interest rate sensitive world
• 1:10:10
  with bonds and arbitrage converts and that stuff.
• 1:10:13
  And David comes from a deep analytical structured finance,
• 1:10:18
  corporate finance world. And so the two of us, you put it
• 1:10:21
  together and it works pretty well.
• 1:10:25
  Yeah, I think the only thing I'd add to that, yeah, it's it's,
• 1:10:27
  it's a lot of fun working with James and and our advisors.
• 1:10:32
  We got a great team. And I think secondly, just the
• 1:10:35
  asymmetry of this opportunity, right?
• 1:10:37
  Just understanding that the world, I've always been a
• 1:10:39
  contrarian by nature. And and kind of when you see
• 1:10:43
  kind of a contrarian investment of an asset class that's
• 1:10:46
  misunderstood. So you think about Michael
• 1:10:48
  Milken, for instance, in the 70s, like any, any guy like
• 1:10:51
  Howard Marks at Oak Tree who's a billionaire, right?
• 1:10:54
  You could argue that he saw the under misunderstood and under
• 1:10:59
  allocated space of the junk bond market in the 70s and guys like
• 1:11:03
  Milken that saw it and then grew this market and it took off over
• 1:11:08
  time. I think Bitcoin is the modern
• 1:11:10
  day version of that. It's misunderstood.
• 1:11:13
  It's under allocated as we've talked about with like
• 1:11:15
  endowments examples. And when you can find a team
• 1:11:18
  like we have that can have a hell of a lot of fun that thinks
• 1:11:22
  similarly, that can build bring your name of our magic companies
• 1:11:26
  grey beard Bitcoin management because we have our Gray hair.
• 1:11:29
  We've got our experience. And if we could come to here and
• 1:11:32
  change the world in some fashion and really deliver returns for
• 1:11:36
  our LP's, like one of the best things that makes us happy is
• 1:11:40
  when we get calls or emails from LP's in our funds saying thanks
• 1:11:43
  guys for generating these type of returns.
• 1:11:46
  That that's what feels good, right?
• 1:11:48
  When you, you're helping out families grow their wealth and,
• 1:11:52
  and you could say, wow, you could just buy Bitcoin.
• 1:11:54
  Well, they're diversifying. They're doing both having some
• 1:11:57
  of their assets in us, having some in mutual funds, having
• 1:12:00
  some in Bitcoin, having some in the real estate.
• 1:12:02
  We are a tool for them to help grow it.
• 1:12:04
  And then we're helping. Lastly, it's a hell of a lot of
• 1:12:07
  fun working with, you know, companies, especially on the
• 1:12:10
  private side, where you can advise entrepreneurs.
• 1:12:13
  Give your two cents from our cheap seats of what we have seen
• 1:12:17
  in our careers. Give them some advice that might
• 1:12:19
  be worth something to them to cheer them on as they grow great
• 1:12:23
  companies and they're changing the world.
• 1:12:25
  That has a lot of gratification too.
• 1:12:26
  So we're really excited about this.
• 1:12:29
  Absolutely. So where can people find out
• 1:12:31
  more about Bitcoin Opportunity Fund and stay up to date with
• 1:12:35
  you guys, James? Yeah, you just said it.
• 1:12:38
  For anybody who's an accredited investor and is interested, you
• 1:12:40
  can just go to Bitcoin opportunity dot fund WWW.
• 1:12:45
  And it's a short questionnaire. Just fill it out and we can send
• 1:12:50
  you information, jump on a call. We've done some webinars and you
• 1:12:54
  can find a lot of information there, so.
• 1:12:58
  Appreciate it. What about you, David?
• 1:13:00
  Where can people? Find you yeah nothing to add.
• 1:13:02
  I was just James got it Bitcoin opportunity dot fund and and
• 1:13:06
  obviously James is active on Twitter.
• 1:13:07
  I'm I'm DAF 17. I'm the quiet one.
• 1:13:10
  As I said, I live in a cave. I I come up for air every once
• 1:13:13
  in a while and post something but.
• 1:13:15
  David's the brains of the fund. No, just try.
• 1:13:18
  Just trying to keep my head down.
• 1:13:19
  Well, James, David, it's always an honor.
• 1:13:21
  Thank you guys so much for joining me.
• 1:13:24
  Really appreciate it.