Latest / TFTC: A Bitcoin Podcast / Mainstream Finance Finally Embraces Bitcoin at $120K | Bitcoin Alpha E009

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Mainstream Finance Finally Embraces Bitcoin at $120K | Bitcoin Alpha E009 · TFTC: A Bitcoin Podcast

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  The following is for informational and entertainment purposes only and should not be construed as
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  financial advice.
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  This discussion is a presentation by 1031, the leading institutional investor focused
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  on the Bitcoin ecosystem.
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  1031 has over 10 years of experience in Bitcoin and has deployed nearly $150 million into the
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  leading opportunities in the space.
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  To learn more, visit 1031.vc.
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  Well, I am a firm believer that it's going much, much higher from here.
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  Think about corporate adoption. Corporate adoption is probably only about 2%. Central banks, only about 3%. Those are both going higher, much higher. Retail investors going much higher. So look at it through, I'll leave off with this, look at it through the market cap of Bitcoin. That's around 2 trillion, let's say.
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  Look at the market cap of gold. That's around 20 trillion. Maybe it doesn't have to be gold, but if it closes the gap to 50 percent, you're looking at five hundred thousand dollars per Bitcoin.
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  And I do think that in eyeshot, you're looking at $250,000, $350,000 pretty easily for crypto.
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  There's a couple of things, a couple of hurdles.
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  But I think those days of it losing 80% of its value and then rallying up are long gone.
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  There's too many people that are looking for the asset.
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  John, you are the artisanal curator of the list in the cold opens.
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  You picked this this week.
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  Why is that?
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  Yeah, I have been known for my dank cold open selections.
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  So hopefully this one qualifies.
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  Random boomer on CNBC says Bitcoin's going up.
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  Yeah, huge. Buckle up. No one's ready.
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  It's never going down, he said.
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  No, I mean, I think it stuck out to me just because I think it's emblematic of a shift that I think is important to keep in mind.
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  if you're in Bitcoin, if you've been looking at Bitcoin for a while, if you've owned it for a
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  while, or if you're coming to it kind of for the first time, this cycle is seeing it break 100k.
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  Regardless, I think it's important to look at a clip like that and remember what it says about
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  where we are. Like you're living in a timeline where, granted to your point, your average boomer
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  CNBC talking head is, you know, without any kind of reservation, just on the midday show or fast
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  money or whatever it was telling people, you know, he's very convinced that Bitcoin is going to a
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  price target that, you know, $500,000 that would have made most traditional finance folks, you
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  know, laugh you out of the room just a few years ago. I mean, a couple of years ago, we were at the,
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  you know, the bottom of the 22 cycle, the blowups post FTX, a lot of those same CNBC boomers,
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  were telling you that Bitcoin was finally dead. This is finally the end. No coming back from this.
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  And now here they are having capitulated like everyone does and floating that Bitcoin should
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  get to gold parity, maybe not quite gold parity, but close to there in the next few years. And
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  there are too many people looking at it for it to have an 80% drawdown again, which by the way,
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  I'll take the under on that. But we're just in a stage where that kind of viewpoint that again,
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  would have been like Bitcoin Twitter or like Bitcoin talk forum, like fan fiction, like five
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  years ago is just a run of the mill thing that a mainstream guy on CNBC says. Now it's, it's,
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  you don't even bat an eye at it, right? That would have been like the, the headline, you know,
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  fed Bitcoin Twitter for days, a few like last cycle, right? Now it's, it's basically just,
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  you know, it's, it's wallpaper, right? It's, it's something you can kind of look at and then
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  immediately scroll past. So just to frame up, you know, that's where we are right now. Bitcoin's
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  made an all-time high, another new all-time high over 120K. And no one even really thinks it's
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  interesting that CNBC guys are telling you it's going to 500K plus. Yeah. Welcome to the party,
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  pal. Great to have you. People have been saying that, but yeah, I mean, it's,
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  he got a lot of things wrong. I mean, he also said that central bank, did he say central bank
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  adoptions at like two or three percent is that what he said or was it in reference to something
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  else he said institutional adoption is three percent if he said the central bank comment i
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  missed that but yeah if so that's not that it's not not correct i actually ran the uh ran some
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  central bank analysis i talked with a swiss bitcoiner this morning on tftc the swiss national
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  Bank does have, I believe, $184 million worth of MSTR stock on its balance sheet.
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  Norges Bank, which is Norway's central bank, holds about $500 million worth of MSTR.
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  are Saudi Central Bank has 25,000 shares of MSTR. And there's a few others with de minimis
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  exposure. So if that's what he's determining to be like central bank adoption of Bitcoin,
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  maybe that's the bone we'll throw in there. Okay. Yeah. Steve Grasso, if you're out there,
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  I apologize. No, but I think the overarching thing to take from this,
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  the phrase I kept thinking about, John, as you were explaining why you picked this as the cold
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  open is like death by a thousand cuts and death to the fiat boomer having to capitulate that
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  Bitcoin is a thing by a thousand cuts over 16 years. I think, I don't want to say it's safe to
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  say, but we may have reached the point where the thousandth cut has been slashed into the body of
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  the fiat boomer and they're being forced to recognize that Bitcoin is a thing that is not
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  going away and something that they have to deal with and reorient their worldview around.
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  Yeah. I mean, you can't, you can't underrate the power of social consensus as it relates to,
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  especially the way that I think successful people with a lot of wealth and established careers,
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  especially, you know, there are a lot of those out there that have worked really hard to,
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  you know, reach that place in life. Um, it's really tough, I think for someone in that position
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  to take like an extremely variant viewpoint on something like magic internet money, like Bitcoin.
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  Um, and so it just takes, you know, going around and around on the mountain, you know,
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  up and up and up over time, kind of passing the same point, but from a higher and higher
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  perspective each time, um, you need these, you need these touch points and you need to see like
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  these constant, you know, to use your phrase, you know, death by a thousand cuts of like your
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  friends, your peers, your colleagues, all kind of like simultaneously slowly shifting in a certain
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  direction. Like, um, that's, that's what's necessary ultimately to, to turn the aircraft
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  carrier of, uh, those that have the most wealth in society towards something like Bitcoin. And,
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  and I think, yeah, it's, it's pretty clearly happening. It's, it's slower than a lot of us
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  would like or hope for or expect maybe. But yeah, clips like that, I think are just where we're
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  seeing, you know, one of those pretty much every day now, if not more. And I think that definitely
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  tells you something about the way that the boomer, for lack of a better word, kind of zeitgeist is
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  shifting. Well, this is a perfect segue into the next topic and we have a chart for it. And this,
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  I think, whether it's that spiraling upwards trajectory that you described, which I think
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  is much more palatable than death by a thousand cuts or something as visually stunning as this
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  chart like when you look at this chart look and pull it up the ibit chart we put in the chat and
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  you just look at the success of ibit uh in the first year in 10 days and all the other bitcoin
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  etfs versus some of the largest etfs that have ever been launched and it's pretty astonishing
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  how quickly the iBit ETF got to 80 billion compared to some of BlackRock's other large ETFs.
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  We're talking about 1,200 days here, four years faster than the second, more than four years
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  faster than the second largest ETF. Yeah. And I think it's important to realize when you look at
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  that too, like you could maybe write some of that off as, well, yeah, like Bitcoin's kind of just
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  ripped since the ETFs were launched to some extent. So it's just getting the benefit of price
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  appreciation, but a lot of it is organic inflows. I think the complex overall has taken in over $50
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  billion of net inflow. So that's new money flowing in and that's net of GBTC outflows,
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  which I think were like, you know, a $30 billion headwind, maybe $20, $30 billion.
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  Have to go back and look at that. But that was a huge headwind to it. So all that is to say like,
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  yeah, this is getting some benefit. I bet and the others are getting some benefit here from
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  price appreciation, you know, being very rapid on Bitcoin versus things like the S&P.
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  But a huge amount of this is just net new organic long demand flowing, rotating out of other things and into IBIT and other ETFs.
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  And I think it's, you know, the other headline that's not that's related to this that we saw, you know, the last week or two not represented, obviously, by this chart.
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  Um, but I bet for BlackRock now is reported, uh, drives more revenue, uh, to BlackRock
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  than the revenue they get, uh, from the fees on their, their S and P ETF.
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  Um, which is pretty remarkable, right?
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  Like the S and P is, is the de facto savings account essentially for most of the United
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  States.
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  Um, at least most of the United States that has not adopted Bitcoin yet.
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  Um, and granted, you know, BlackRock doesn't administer, they don't own VOO or
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  SPY, which are the two biggest, you know, by far S&P ETFs. So their version of that is not nearly as
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  big as the biggest out there. But it's pretty wild. Again, just like frame up where we are,
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  right? Like a year, we're a year and a half into these things launching and already, even on a
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  basis of what their fee is still like 21 bps, right? I think that's probably going up over time,
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  But for now, it's like a very low fee. And, you know, it's already driving revenues in excess of what they're clipping off their S&P ETF.
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  So just as we get bored with price action going sideways, sometimes as we get bored with being in between 110 and 120K or whatever the range happens to be, just again, remember where we are.
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  So you're already bored. You're just as we're bored right now with price going sideways.
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  We haven't had a new all-time high in 24 hours.
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  I mean, there's nothing going on.
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  Well, I think Eric Buchanis, the Black Bloomberg ETF analyst, said yesterday that it's the most profitable.
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  Not only more profitable, the S&P ETF, but the most profitable ETF this year for BlackRock, which is stunning.
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  And to your point about the all-time high, we didn't even mention it yet on the show, but we surpassed 123,000 earlier this week.
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  We've corrected a bit, hovering in the mid-16,000, right on 117,000.
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  It seems like the coiling that we experienced for the first half of the year has broken out to the upside.
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  We'll see how much further it goes from here.
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  But I certainly get the sense, having been in Bitcoin for 12 years, that we're beginning to enter one of those phases that could end in some euphoria at some point later this year.
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  And that's just another factor driving the inability of, for lack of a better term, I guess we're running with it, the fiat boomer, TradFi guy to ignore Bitcoin any longer.
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  And I think this is a headline that came out last week that proves the point is only going to accelerate the social adoption of Bitcoin, at least being socially for Bitcoin, because it's pretty clear.
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  We said this a year ago that the career risk today is to not have exposure to Bitcoin or number two, recognize that it is a thing that's here to say.
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  Rick Edelman, who is vaunted as the king of the RIA world, came out with some pretty
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  bullish allocation recommendations for people looking to get exposure to Bitcoin.
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  Yeah, so if I have it right, Rick Edelman, who runs an RIA or network of RIAs,
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  managing collectively $300 billion of AUM, roughly, give or take,
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  is now out there telling people, again, with a straight face and making this recommendation
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  very seriously, that portfolios should have anywhere from 10 to 40% of an allocation to,
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  as he calls it, crypto. Yeah, here we go. And so, again, this is the kind of thing where
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  this isn't like your wealth management friend who was kind of a libertarian in college and he
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  runs like a small book in your hometown and he wants to, you know, find a way to put 1% of his
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  clients net worth in, in to Bitcoin, right. Which he'll then rebalance. He'll be half,
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  he'll have to rebalance when it doubles or whatever. Like this is a very different kind of,
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  you know, weight behind a recommendation like this and to make it, you know,
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  aggressively and publicly, you know, 10 to 40%. These are we've said it on the show before,
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  But everyone seems to be, whether it's Rick Edelman or Larry Fink, everyone kind of goes through this progression with Bitcoin of, you know, starting seeing it first as like a flyer.
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  You put, you know, 10 grand into it, maybe.
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  And then you think, well, I'll put one to two percent of my portfolio in it.
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  And then it just, you know, creeps up both in terms of its natural price appreciation, but also like you start to want more and more of it in the portfolio.
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  it starts to look more and more like the best risk adjusted bed. And before you know it, it's,
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  you know, something like, uh, you know, this level of an allocation. And that's how the talk track
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  has been from all the, uh, our CNBC talking heads and from, you know, Larry Fink and major kind of
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  asset management leaders. Um, so this is probably the most extreme example of that phenomenon that
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  I've seen yet of publicly calling for portfolios to kind of move in that direction. Um, but yeah,
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  Just yet another kind of data point that we can stack up in favor of this idea that we're just going to slowly grind higher and higher, both in terms of price and social acceptance among large asset managers.
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  One more social acceptance data point.
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  Logan, pull up the tweet.
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  I'll just put it in the chat.
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  The other John Arnold also came out with some pretty nonchalant views on Bitcoin.
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  John, you were sharing this.
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  You wrote about it collectively.
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  The two John Arnold are worth multiple billions of dollars This is very good to see that we have that collective amount of wealth being this bullish on Bitcoin But I think again John Arnold prolific hedge fund manager philanthropist came out
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  I guess he was just calling out a lot of the froth that he sees in the market and highlighting juxtapositions that exist and misconceptions people have about where they should be allocating money.
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  And he has a line in here about speculative tokens over Bitcoin.
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  It's like implicitly saying that Bitcoin is a safe investment that people should probably have in their portfolio.
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  But people feel compelled to go out in the risk curve and speculate with crypto tokens.
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  Yeah.
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  I mean, just even like, you know, I share a name with the guy and we share alma maters as well at Vanderbilt.
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  So a lot of a lot of connections there in addition to the, you know, the overlap in our net worths.
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  But, yeah, I think it's that tweet was interesting to me because if you look at it, it's the Bitcoin comparison is just kind of wedged among like a bunch of other things.
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  You know, he's talking about like kind of, you know, new up and coming artists versus like, you know, your established artists that have been around you.
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  Their paintings have been loved for hundreds of years or whatever.
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  And he's talking about, I can't remember all the other kind of examples he throws out.
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  I recommend you go back and look at the list.
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  But basically, like among the among all these different examples of kind of juxtaposing speculative high velocity trash economy type things that people are increasingly getting into.
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  You know, he has speculative tokens versus Bitcoin.
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  And just the idea that a very successful, again, kind of mainstream billionaire who's been successful in the world's traditional finance and is now a full-time philanthropist, who generally, if you look at his viewpoints, I certainly wouldn't say he kind of leans in the libertarian direction.
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  This is not like a, you know, a MAGA guy by any means or something like that, that someone like that would come out and just kind of take it for granted that among all these lists of kind of speculative things versus established things like Bitcoin, clearly it belongs among kind of these established assets or these established themes.
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  You know, again, just a couple of years ago, there was no differentiation or thought given to how Bitcoin might relate to or be different from the rest of crypto.
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  But the fact that, you know, it's just it's it's seeped into people's consciousness now that it is kind of like the boring thing in the cryptocurrency space.
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  And it's something that you can kind of think of as at the very least, it's probably not going away.
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  Right. Whether you think it's worth, you know, five hundred thousand or a million or 10 million or 21 million, as Michael Saylor says, or beyond that, it's tough to argue now that it's just going away or going to evaporate.
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  And that, again, is like the subtle indication of the slow sea change among kind of the wealthiest and most successful people among us on Bitcoin.
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  Yeah, he seems like he understands the difference between Bitcoin and everything else and would be like the language suggests that he may approach it with a longer term perspective rather than like this instant gratification point of view.
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  I think the comment or the, you know, the headlines from the Edelman article, you know, it suggests I think it's I mean, that is it's pretty crazy that you see the evolution, like the shift and someone going up that curve and maybe years ago suggesting an allocation that was much lower and gradually increasing it.
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  And I think we would probably argue those recommendations aren't crazy.
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  You know, you'll find plenty of people who have studied Bitcoin for a long time and they consider Bitcoin a risk off asset, that everything else is risk on assets.
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  And they view the right allocation of something significantly higher than 40 percent.
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  And there's plenty of people that view the right allocation as 100 percent.
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  Um, and I guess my point is we, we probably wouldn't argue that those are crazy allocations,
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  but I think it's being set up in a way.
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  Like if you think about the guy on CNBC and this idea of the social consensus, now there's
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  more of these TradFi, uh, people who are starting to pay attention and starting to believe that
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  having exposure makes sense and believing that it's going to keep going up and believing
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  that there's never going to be an 80% drawdown.
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  I think it's setting up for a lot of people
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  in this group to get absolutely wrecked.
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  I think the 10 to 40% allocation can make sense,
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  but I think you have to approach it
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  knowing that it's a long-term allocation
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  and that you're not worried about instant gratification.
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  You're not concerned about instant paper wealth loss because it's not about the amount of dollars that you have.
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  It's about the amount of Bitcoin.
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  So someone who might take these recommendations and might be watching CNBC and seeing, you know, it's going up to five or a thousand.
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  and someone saying, well, you got to put 10 to 40 percent in, but recognizing like what's behind
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  the other John Arnold's comments that like we live in this instant gratification society,
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  like the Dopa Monster, whatever he called it. Like, I think that group who decides to,
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  you know, finally dip their toes into Bitcoin, they're not they're likely not to approach it
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  with the long-term perspective that it will require, even if those recommendations make sense.
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  Yeah, this reminds me of a conversation I had a month or two ago with Sean Bill and Adam Back
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  from Blockstream. And Sean, who comes from the traditional pension world, he made it a point to
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  basically explain when they're going out and pitching pensions today about an allocation
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  to Bitcoin, they're strongly arguing against rebalancing quarterly or even annually because
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  Bitcoin is about time in the market, not timing in the market. And so to your point, Grant,
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  I think a lot of these institutional investors are going to have to learn the hard lesson of
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  working outside their traditional processes of portfolio management process with Bitcoin
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  specifically to go into it with the knowledge that they shouldn't rebalance for probably at least one
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  cycle, maybe two, if they want to get the full, if they want to capture the full value appreciation
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  of Bitcoin and the benefits of that for the people whose money they're managing.
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  Yeah.
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  Yeah.
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  The other dynamic that I just found interesting, which is related, is when people in the US were
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  celebrating new all-time highs, you were seeing some of the commentary on social media saying,
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  well, we haven't hit an all-time high yet. And name your other currency. Bitcoin hit an all-time
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  high in the Argentinian peso, and then it hit an all-time high in the US dollar. But there were
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  some currencies that hadn't yet, which was a reflection of the relative strength of fiat
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  currencies to one another. And it highlights the importance of maybe looking at it differently.
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  You're pricing it, like the price of Bitcoin priced in something that's deflating or inflating.
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  That may not be the right way to think about it. I mean,
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  Bitcoin priced in gold is certainly not at an all-time high right now.
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  yeah i think we're just bumping up on uh key resistance levels um not that i uh am anything
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  like a ta expert that's something a chart that i check every day but um you saw you saw tur's tweet
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  then yeah oh did he have a tweet about it tweet about it yeah we're about to we're at those
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  resistant levels got it um i've definitely seen tweets about it in the last few days
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  as i'm sure a lot of our listeners have but yeah i mean i think it's a great point grant um that
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  You got to you got to check the denominator and know what you're pricing.
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  And it reminds me of the the Weimar Republic, the famous Weimar Republic gold chart.
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  As you know, gold goes parabolic in in marks.
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  It increasingly, you know, makes less and less sense to even have a price in that denomination.
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  And certainly don't think we're anywhere close to that with with the dollar.
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  But the same dynamic applies on on smaller scales, too.
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  Well, to this point, I think we all as individuals and as a fund at 1031 think this way.
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  You have to shift from fiat gains that are realized by your Bitcoin exposure and just think about your Bitcoin exposure overall.
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  How much of the $21 million supply do you have as an individual, as a corporation, as a fund, whatever it may be?
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  and like really use that barometer, like what slice of the overall pie are you getting? And
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  do you think you should be comfortable with? Yeah, I think that actually speaks to to like
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  grant the longer term mentality that you're exhorting people to have. I actually I'm somewhat
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  bullish, actually, that you shouldn't fade. I don't I definitely don't think we're past like
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  80% drawdowns like there's going to be, you know, there may be a lot of tops, they're going to be
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  levered games being played and Bitcoin will continue to remain crazy for many years to come.
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  So definitely don't expect no drawdowns anymore. But I do think people shouldn't fade the power of
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  like we keep using this term boomer. It's not really fair. I just mean like anyone who has like,
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  you know, an IRA or like a brokerage account. Right. A lot of generations of people from like,
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  you know, generations prior to us to millennials, to boomers, even younger people are coming to
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  into the workforce, like we've been trained for like decades to, to buy the dip, right. And to
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  just like keep DCAing. Like if there's so many accounts out there that aggressively buy all dips
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  and have been trained to do that for the last like 20 years in the stock market. And I don't have the
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  data in front of me, but you should go look up, um, how active, you know, retail investors so-called
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  were during, you know, liberation day chaos and how aggressively they were buying. And thus far,
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  that seems to have worked out kind of because we can talk about this later, but the system,
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  it kind of doesn't function if the stock market doesn't continue to make gains every year.
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  But people have been trained that that is kind of like what you do to build long-term wealth.
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  Like you don't necessarily think about how much the S&P is up this year. So you can go
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  have like a, you know, a nice like ski trip. Like, yeah, maybe you'll carve off like some of
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  your gains in a given year to, you know, for your lifestyle, but people have been trained to just
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  like set it and forget it, put it away, keep accumulating, keep DCAing in their equity
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  portfolios. And I think with the advent of the ETFs and also just like easier and easier ways to
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  access Bitcoin, a lot of which are provided by the companies that we support at 1031, whether
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  that's Strike or Unchained or many others, there are increasingly these ways to just apply that
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  exact same kind of mentality to Bitcoin, right? To set and forget it, auto DCA,
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  apportion some of your income each month to acquiring more Bitcoin, to acquiring more,
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  a greater share of that fixed $21 million pie and to think of it as a retirement asset, right? Or
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  this is going to pay for my kids' college or this is going to do something for me in 20 years.
• 27:30
  I'm not going to touch it for a very long time. I just want to build it and build it and build it.
• 27:33
  the vehicles to be able to do that, um, you know, to have greater and lesser kind of sovereignty
• 27:40
  trade-offs and greater and lesser costs and all these different kinds of things we could talk
• 27:44
  about. But like all those vehicles are just, uh, only expanding, um, in a way that I think is
• 27:50
  different certainly from prior cycles. And Logan, if you pull up this other chart, um,
• 27:54
  this BTCD chart that I put in the, uh, the chat, I think this is relevant to, uh, as,
• 28:00
  context for like this whole conversation with kind of your, as we think about boomer investors,
• 28:05
  retail investors, however you want to think about it, just kind of the mainstream coming to Bitcoin.
• 28:10
  This is a chart of Bitcoin dominance, which is basically Bitcoin market cap relative to the
• 28:15
  market caps of all other cryptocurrencies. You can define it different ways. And it's not like
• 28:19
  a fantastic metric necessarily on kind of short-term basis, but the long-term trends really
• 28:24
  interesting because you have like what you're seeing is the Rick Elmans of the world, the Steve
• 28:28
  Grasso's of the world, the John Arnold's of the world, increasingly having this differentiated
• 28:33
  view of Bitcoin and getting comfortable with it and getting comfortable with the idea it can go to,
• 28:38
  you know, 500,000 or a million or whatever, as you know, an asset that just grinds up and up and
• 28:42
  over time. All that's happening, not against the backdrop of like what we saw in 2021,
• 28:48
  where all of the broader crypto complex was just blowing up. People were buying,
• 28:53
  you know, everything that wasn't tied down, anything they could get their hands on,
• 28:57
  uh, Dogecoin, FTT token, you know, you name it, Terra Luna, you name it. Like what this chart is
• 29:03
  showing is that in 21 Bitcoin dominance just fell off, uh, fell off a cliff as the whole like
• 29:08
  broader crypto ecosystem kind of blew up alongside, you know, Bitcoin's price run. And actually in many
• 29:13
  cases, you know, for certain pockets of time outpaced it. And what we're seeing now is like
• 29:18
  people are getting more and more comfortable with Bitcoin and only Bitcoin, right? They're,
• 29:22
  they're only really adding to their Bitcoin positions. They're not really, you know,
• 29:26
  buying Bitcoin and 20 other cryptocurrencies to kind of like, quote unquote, diversify.
• 29:31
  The only thing they're talking about on CNBC mostly is Bitcoin.
• 29:34
  And, you know, the only ETFs that are really winning are Bitcoin ETFs.
• 29:39
  And, you know, you can see it just borne out to some extent in this chart.
• 29:43
  So it's an interesting data point for the backdrop as we consider the mainstreaming of Bitcoin and only Bitcoin.
• 29:50
  So this period, right, in 2021, when you see Bitcoin dominance take a sharp decline, I mean, that was a time when the price was just booming, right?
• 30:03
  Yeah.
• 30:03
  so i'm curious what do you think like let's let's just say we're still in the early innings of
• 30:11
  where price could go here and again priced in dollars i mean it's like
• 30:16
  perhaps a less relevant measuring stick uh but um we haven't yet had uh the fed cut rates so
• 30:26
  we're still i would argue likely very early in this run so let's say the price starts to run from
• 30:32
  here. Do you think that we see a sharp decline in this chart? Or are you arguing that this
• 30:41
  time is different and now everyone's recognizing that Bitcoin is the clear winner?
• 30:47
  Well I just say I not necessarily arguing that this time is different I arguing that I arguing that we made like substantial all time highs Right Against the backdrop against what to me looks like a pretty different backdrop
• 30:59
  up. And I actually, I mean, I, I'm, I'm even more bullish on Bitcoin to the point that you're
• 31:05
  making as well, that we're seeing all this happen with a benchmark interest rates at still, you
• 31:11
  know, multi-decade highs and the money printer not being aggressively turned on and liquidity,
• 31:16
  not being, you know, aggressively pumped yet into the system to nearly the same degree that it was
• 31:22
  in 2020 and 21. But Marty, what do you think? I was just going to say Bitcoin,
• 31:27
  the the bitcoin is a low interest rate phenomenon mean has completely been dismantled over the last
• 31:34
  three years um there is an archetype of trad fi investor and crypto investor that straddles the
• 31:45
  world of trad fi and crypto that are really beginning to get out there and beat the drum
• 31:51
  about stable coins and Ethereum specifically.
• 31:54
  So who knows if it will be a last gas pump for Ethereum,
• 31:59
  but there does seem to be some institutional momentum
• 32:04
  in terms of pushing that narrative.
• 32:06
  We can get into the reasons why I think it's not going to happen.
• 32:12
  Ultimately, maybe there will be some price appreciation,
• 32:15
  but will Ethereum get widely adopted
• 32:18
  and implemented into the global financial system?
• 32:21
  I'm highly skeptical of that.
• 32:23
  And I think it's funny that the TradFi supporters of Ethereum this time around are really pushing stable coins where when if you understand how the dynamics between each layer one and layer twos work, we've seen this many times again.
• 32:40
  And this is why you see stable coin chain hopping happening.
• 32:43
  if like Ethereum is a victim of its own success,
• 32:46
  if people begin to use it more, gas fees go up
• 32:49
  and the economics, the economic feasibility
• 32:52
  of actually using stable coins at scale
• 32:55
  sort of diminishes rapidly as activity increases.
• 33:00
  So I could see that, but no, I think I agree overall
• 33:04
  that there has never been a clear demarcation
• 33:07
  between Bitcoin and broader crypto.
• 33:11
  And I actually think if any of you
• 33:12
  who are listening to this have not seen Alex Gladstein's presentation at the Bitcoin Policy
• 33:18
  Institute Summit last month. Go check it out because I think he made a really good point in
• 33:24
  the second half of his speech, which was we need to get to the point where if you're describing
• 33:31
  crypto, a lot of times these pundits and TradFi guys will say crypto and they really mean Bitcoin
• 33:39
  and a few altcoins.
• 33:41
  These should be specific.
• 33:42
  Are you talking about Bitcoin?
• 33:43
  Are you talking about Ethereum?
• 33:44
  Are you talking about Solana?
• 33:46
  God forbid, are you talking about Ripple?
• 33:47
  Be specific because there are incredible,
• 33:51
  vast differences between each protocol.
• 33:53
  I think we're pretty wholly convinced
• 33:56
  that Bitcoin is the only one worth,
• 34:00
  I mean, I could say with 100% conviction,
• 34:02
  it is the only one worth paying attention to
• 34:04
  and building around for the long term.
• 34:07
  But I do think this conflation of crypto
• 34:09
  So in the pundits and traditional finance people really trying to push these narratives these days, not being specific is not only doing them a disservice, but their end customers, their end clients at the end of the day as well.
• 34:27
  Yeah, I think there's this cycle, there seems to be a bit more of a gravitational pull towards Bitcoin rather than some of the other assets.
• 34:39
  You know, although I would note on, I guess it must have been yesterday that the former CEO of Barclays was on CNBC talking about a treasury play for some random crypto coin.
• 34:57
  So I think, you know, perhaps there's still going to be some of that, but it feels like a lot of the opportunists who are recognizing a cyclical time in the market where liquidity is starting to become available.
• 35:13
  Markets are loosening up a bit that, you know, those type of people are gravitating.
• 35:18
  there may be more of a gravitational pull towards Bitcoin because of some of the opportunities like
• 35:24
  the Bitcoin treasury companies, for example, where, which, which those, you know, some of them do feel
• 35:30
  like cycles of the past where, you know, 2016, 2017, like the ICO boom, and, you know, you could
• 35:38
  get into the ICOs early and get an early allocation and get a discounted price relative to what the
• 35:46
  rest of the public was going to get. And a lot of those same themes, you know, you sort of,
• 35:51
  they rhyme in some of these treasury plays that you see while you're, you're able to invest
• 35:57
  at one times now before it trades up and you can get an early allocation
• 36:01
  through the investment banks before they begin trading on the public market. So I think,
• 36:08
  you know, some of that capital and attention that otherwise would have gone elsewhere seems to be
• 36:14
  going more into Bitcoin, which will ultimately have a positive short-term impact on the price.
• 36:24
  Now, how that plays out with some of these treasury companies, I think that remains to be seen. But
• 36:29
  I think we're all agreeing that Bitcoin certainly has probably a bit more support
• 36:36
  from a relative market share perspective than it has in the past.
• 36:42
  Yeah. To really tie up the section of external anecdotal social indicators, talking about a lot of traditional finance, people who are throwing their support behind Bitcoin.
• 36:59
  But I do think it's important to note this is the headline came out, I believe, two or three weeks ago.
• 37:05
  It was really pleasantly surprising for me to see, which was Figma, which filed an S9 to go public after the regulators under the Biden administration sort of prevented them from getting acquired by Adobe, merging with Adobe.
• 37:21
  They went back to the sidelines, sort of buttoned up everything, and are now set to go public.
• 37:29
  Figma is one of the darlings of Silicon Valley used by many designers and developers.
• 37:34
  I believe the stat in their S9 is 95% of Fortune 500 companies leverage Figma to some degree to do some product design and prototyping.
• 37:44
  it was disclosed in that S9 filing that they have $70 million worth of IBIT shares on their
• 37:52
  balance sheet and have the ability and intention to buy $30 million worth of spot Bitcoin to put
• 37:58
  on their balance sheet as well. So that was a pleasant surprise for me to see an established
• 38:04
  Silicon Valley unicorn on the cusp of going public, basically letting the world know due to
• 38:10
  the process of going public that that they have a good amount of bitcoin on their balance sheet
• 38:16
  hundred billion dollars is nothing to scoff at yeah and it's uh again like it you know it made
• 38:24
  headlines in kind of bitcoin circles and it was on bitcoin twitter it was on nostr you know we
• 38:30
  we talked about it internally um but the the interesting thing to me again is kind of like
• 38:37
  these other points that we're highlighting, like it's kind of just in the background. It's just
• 38:41
  like an assumed thing that, oh, they have like, you know, of course a tech company would have
• 38:45
  some Bitcoin on their balance sheet. Like that's, it's not thought of as some like outre thing that
• 38:50
  needs to, you know, that would be like critiqued by, you know, you're talking ads on CNBC or,
• 38:57
  you know, Wall Street analysts or something. It's kind of just kind of came and went right as a
• 39:03
  headline. So it's, again, I think just indicative of it's great to see, but it's also great to see
• 39:09
  in some ways that the response to it was like somewhat muted. I think people are like,
• 39:15
  that means partially people are underpricing, you know, the people are not pricing in
• 39:20
  the degree to which Bitcoin is becoming a standard treasury asset. Like that is not
• 39:28
  fully reflected in the price by any means. But I think also the kind of the lack of reaction
• 39:34
  outside of the Bitcoin echo chamber, at least that I saw, it to me also signals this is
• 39:40
  increasingly becoming something that it's not going to be on every company's balance sheet,
• 39:43
  but it also isn't, you know, it's not a meme anymore that a major tech company going public
• 39:49
  has, you know, some Bitcoin on its balance sheet. It's not something that you're going to see kind
• 39:52
  of, you know, mocked on, you know, the Tonight Show or something like that. It's just something
• 39:57
  that's a standard thing that a company like us would do.
• 40:02
  Yeah, I mean, I thought this headline was really interesting.
• 40:09
  For all the reasons you guys mentioned,
• 40:10
  I was just Googling right now to see how much money had they raised.
• 40:13
  Because one of the things that I didn't see anyone talk about,
• 40:17
  and I didn't pay a ton of attention to this,
• 40:19
  but it was more about just thinking about the implications
• 40:22
  of them having Bitcoin exposure on the balance sheet
• 40:27
  and potentially the intention to have more, right?
• 40:33
  But how did they go about doing that?
• 40:35
  Well, it needs to be something that not just the management team
• 40:40
  was interested in, but also the board.
• 40:42
  So according to my quick search, perhaps they've raised over $300 million.
• 40:47
  I mean, this is a quintessential traditional Silicon Valley venture capital funded startup.
• 40:56
  So like, well, okay, peel back the layer.
• 40:59
  Who was involved in this decision and would have signed off on it?
• 41:03
  Obviously, they would have multiple people who just sit in their executive leadership roles.
• 41:08
  But according to the S1, I'll just read the quick bios of the people who are on the board, which presumably these are all people who signed off on this idea.
• 41:19
  There's a partner from Kleiner Perkins.
• 41:22
  There's a partner from Greylock.
• 41:26
  There's a partner from Sequoia.
• 41:30
  So three big brand name Silicon Valley venture funds.
• 41:33
  uh there's a member of the board who is the cfo of cisco there's a member of the board who's the
• 41:41
  ceo of service now a massive public company like workforce a workflow management company
• 41:48
  um and then also index ventures another like big name venture capital firm so there's that's four
• 41:56
  big name VC funds right there that have all been like, you know, it's one individual partner
• 42:04
  sitting around the table. So not necessarily a firm blessing by their underlying management
• 42:11
  companies, but I just think that's a really interesting dynamic. Yeah. And it makes you
• 42:18
  wonder how many other of these now private or unicorn level Silicon Valley backed companies
• 42:26
  have material amounts of Bitcoin and how many need to either get acquired or go public and
• 42:33
  disclose this information before it becomes table stakes for any of these emergent tech
• 42:39
  companies to have Bitcoin treasuries. Well, the other grant, the other thing that
• 42:44
  it makes me think of, it's interesting is like, we forget, or it's easy to forget after the last
• 42:50
  decade, how forward thinking a lot of your like Silicon Valley stalwarts were on Bitcoin in like
• 42:58
  the early 2010s. I mean, Mark Andreessen had a piece on it in like 2013 or 14. David Sachs was
• 43:06
  really early into Bitcoin and, you know, has tweeted over the course of the last decade about,
• 43:10
  you know, kind of grokking Bitcoin's differentiation versus everything else.
• 43:15
  And there are various others that we could certainly point to. Peter Thiel was a big kind
• 43:20
  of early Bitcoin holder and proponent. But over the last like five to eight years, you know,
• 43:26
  traditional Silicon Valley VC has become very has become synonymous with, you know,
• 43:33
  shit coining essentially, right? Looking for the next kind of altcoin project or the next project
• 43:39
  that's going to have a native token that will leverage this or that blockchain, usually some
• 43:45
  permissioned blockchain. And usually the VC has gotten early economics and early allocation in the
• 43:52
  pre-mine for whatever the token is. And so it's interesting that Silicon Valley over the last
• 43:59
  decade or so has become this hotbed, this breeding ground for the altcoin industry and the blockchain,
• 44:06
  not Bitcoin industry. And yet here we are with a company like this, going public with some major
• 44:12
  Silicon Valley VCs on the cap table and on the board. And what are they holding on their balance
• 44:18
  sheet? Like there's one crypto asset that has stood the test of time that is worthy of being
• 44:25
  on this company's balance sheet. You know, it's not Ethereum. It's not Solana. It's not the thousand
• 44:31
  other kind of proprietary tokens that have been launched by a lot of these firms, you know,
• 44:37
  directly or indirectly to support their portfolio companies. It's it all just comes back to Bitcoin.
• 44:42
  Right. So it's an interesting kind of full circle moment to for to see kind of your your blue chip Silicon Valley names taking company public, taking kind of a major investment of theirs public.
• 44:55
  And the one thing that is on the balance sheet of that company from the digital asset ecosystem is Bitcoin and Bitcoin only.
• 45:05
  Yeah, I want to please forgive me for confusing S1 for S9. I have Bitcoin miners on the mind at all time.
• 45:12
  I was saying that earlier.
• 45:14
  But no, to that point, it's like, number one, again, how many of these companies out there that are doing this already?
• 45:24
  And Grant, to your point, I believe, if I recall correctly, in the S1, they had $70 million of IBIT exposure
• 45:33
  and the intent to buy $30 million of spot Bitcoin collectively, $100 million.
• 45:38
  And as you highlighted, they've only ever raised $300 million.
• 45:41
  Obviously, they're a very profitable company right now, so they have cash flows extending runway.
• 45:47
  But I think using that sort of barometer, like they've raised $300 million,
• 45:53
  and a third of what they've ever raised is held in Bitcoin or Bitcoin proxy exposure via the ETF is pretty interesting.
• 46:04
  With that, we'll transition more to the fiscal side of things, which is hot in the news right now.
• 46:11
  and has been since our last episode which is the big beautiful bill after some contention some back and forth some revotes officially passes and the deficits are projected to go higher after Trump ran on a campaign of the Department of the Department of
• 46:32
  Government efficiency, Department of Government efficiency.
• 46:35
  Yes, it's so irrelevant. You've already forgotten about.
• 46:37
  Yes, exactly. But this is the big, big topic here.
• 46:42
  It's a lot of. How would you describe this, John? I think a lot of.
• 46:50
  Literal sort of. Backflipping on policy decisions, whether it's it's the intention to not cut deficits and really blow it out, turn it on turbo.
• 47:01
  So and then the other thing which you have on the list as well, which we could probably tie these two together is his percent beginning to signal that he's OK staying on the front end.
• 47:12
  The yield curve when the Trump administration came into office, they were berating Janet Yellen for over indexing on the front end of the curve.
• 47:22
  And now it seems like they're making about face about that as well right now.
• 47:26
  Yeah. I mean, look, like I think we were saying this on prior episodes, like I think we all mostly took the under on Doge. And I think we all felt like it was probably only ever going to go this way. You know, that that chart is interesting to me because it outlines all these different paths that the deficit could take under the one big, beautiful bill.
• 47:48
  Um, but if you were to look at it, the, the, the blue line on the bottom, like with, which
• 47:53
  is basically the, the path of deficit, um, or the debt to GDP, debt to GDP over time
• 47:59
  without the big, beautiful bill, you know, it's still going up dramatically.
• 48:03
  And that's in like a relatively conservative, uh, estimate that I believe excludes the impact
• 48:09
  of like potential recessions, which would cause, you know, increase in, um, deficit
• 48:13
  spending.
• 48:14
  It's very likely not thinking about. I think that's just like the CBO baseline estimate, which is almost certainly not contemplating increases, aggressive increases in defense spending.
• 48:26
  Definitely giving generous credit for entitlement spending that's going to have to happen when Social Security finally runs down the trust fund, which, by the way, I guess we should say one of the headlines that has popped up since our last episode is that's now going to happen a couple of years.
• 48:44
  sooner than expected. So I think we're looking at depletion of that in 2034. So you put, you pile
• 48:48
  all these things on and you look at us coming, coming into the Trump administration, well over
• 48:53
  a hundred percent debt, GDP, um, interest becoming, uh, a larger line item for the federal budget than
• 49:00
  defense spending. Um, you, you look at all those dynamics and it's like, okay, uh, the, the Doge
• 49:06
  narrative was, was nice. And, uh, yeah, maybe 20 years ago we could have pulled it off. Um, but it's
• 49:12
  just, it was never going to happen in the way that was being promoted. And it just like, it was,
• 49:17
  I think it was obvious if you listened to anything Trump said about what he wanted to do
• 49:20
  with policy that he could pay lip service to, you know, cutting spending, but it almost certainly
• 49:26
  was never going to happen to get, you know, multiple trillions of dollars out of the budget,
• 49:30
  like, you know, Elon wanted to do. So all that is to say, here we are. And it seems pretty clear
• 49:39
  to me and I think to a lot of us and to an increasing number of investors that the plan
• 49:44
  now like pretty explicitly is like doge didn't work. You know, how how committed were we ever
• 49:50
  to that in the first place? I don't know. But that didn't work. The tariff shock didn't really like
• 49:56
  get long term rates lower. We didn't scare people into into bonds and treasuries if that was ever
• 50:03
  the plan. So that's you know, we're still sitting here sitting here today, 10 years at four and a
• 50:07
  half, uh, hasn't been much lower than that 30 years, like so close to five. Um, so the, the plan
• 50:14
  then seems to be, uh, much more shifting much more to what, uh, Besson has talked about with,
• 50:20
  um, trying to outgrow the debt, right. Trying to turn on the, the afterburners and spend as much
• 50:26
  as you need to, um, keep, uh, incremental debt issuance, uh, to, to toward the front end and
• 50:32
  the way that Janet Yellen decided she needed to do. Maybe Besson's kind of, whether he knew it or
• 50:38
  not going in, he certainly seems to be kind of discovering now that she did that for a reason.
• 50:44
  We may all criticize her for it, but the Treasury market was giving her kind of only one option if
• 50:52
  she wanted to continue to fund the government. And so he's picked up that baton and is running
• 50:57
  with it. And I think we can make criticisms of all that and wish it were something different.
• 51:05
  And I think everyone on this podcast, probably many of our listeners, want it to be different
• 51:10
  and are not necessarily interested in seeing this trajectory continue. But as it stands,
• 51:16
  I just encourage people to think about if the explicit plan now is we're going to outgrow the
• 51:22
  debt. We're just going to grow GDP faster than the accumulation of debt and hopefully try to,
• 51:28
  you know, keep yields in check with front end issuance, kind of like an emerging market.
• 51:34
  And, you know, do issuance on that front end, which is much more stimulative and much more
• 51:38
  kind of, you know, money like like, you know, a four week or an eight week or three month note.
• 51:42
  Those are much more kind of money like issuances than a 10 year note or 10 year bond. If all that's
• 51:48
  happening. I just encourage people to ask themselves what that means for risk assets
• 51:52
  and what that means, especially for hard assets like gold to some extent, and especially for
• 51:58
  Bitcoin, if that's the environment that we are aggressively and explicitly kind of running into
• 52:04
  now. Yeah. And then on top of all this, you have Trump almost daily now at this point,
• 52:11
  getting on true social and berating Fed Chairman Jerome Powell, you had Bill Pulte,
• 52:17
  from FHA come out with a one word.
• 52:22
  The press release saying that Jerome Powell is hindering the ability of Americans to buy
• 52:28
  houses because mortgage rates are too high.
• 52:32
  And then at the same time, you have inflation still above the historical 2% target.
• 52:38
  I believe the last print I saw was 2.6.
• 52:41
  There was talk of switching the target at 3%.
• 52:44
  So maybe the Trump administration is taking that number and saying you're below your new historical target.
• 52:53
  And I just worry. And who knows? I don't know if worry is the right word.
• 52:58
  But I think the consensus within the Trump administration is that Jerome Powell either needs to lower rates or resign or get fired.
• 53:06
  It seems like they're looking for some sort of roundabout ways to fire him, I believe, with the I believe the Fed's building a new building or something like that.
• 53:15
  And the Trump administration is trying to figure out ways of that's wasteful spending that could be deemed a fireable offense, which is crazy.
• 53:23
  But long story short, it seems like their intent is to get rates lower as fast as possible with what I would imagine is the belief that it will help drag down the five, excuse me, the 10-year and the 30-year bond yields.
• 53:38
  But I think people have amnesia, like literally less than a year ago in September, when Jerome Powell first lowered rates 100 bps, 150 bps, whatever he did in this couple of months, like the yields went the other way and they went up.
• 53:54
  I don't think there's a strong case to be made that that won't happen again this time around.
• 54:00
  I think the argument would be, I agree with you if we had a free and kind of unmanaged bond market. And increasingly, we already, like for the last, you know, since the beginning of the FOMC, we really haven't had that.
• 54:17
  But certainly post-COVID, we saw 2020 and 2021, we really didn't have it. And I think the goal is ultimately going to be to move to a much more kind of Japanified system as it relates to kind of having an activist central bank that's going to do whatever it takes to fund the government and to pin yields.
• 54:38
  Right. So you can call that yield curve control or call it whatever you want, call it QE or call it some new made up acronym that they'll figure out this time.
• 54:46
  But I think the key is going to be like they don't just need to.
• 54:50
  I think you're right. They don't just need to get the Fed funds rate lower.
• 54:53
  That's a part of it. But they need an aggressive central bank that's going to play ball and that's going to, you know, kick the balance sheet up another order of magnitude like like we did in 2020.
• 55:03
  And then like we did before that in 08, right? Like, um, I think people I've, I've started to
• 55:10
  kind of come around the viewpoint that people are maybe underestimating, um, how kind of shameless
• 55:16
  it can get in terms of what the, what the fed can ultimately do in terms of growing its balance sheet,
• 55:22
  just to make sure the rates stay where they need to stay. Um, and I think there's a lot more head
• 55:26
  room to do that and to put it, put some crazy numbers out there to make sure it happens. Um,
• 55:31
  especially if Trump gets a guy in that seat who's going to play ball, whether that's Kevin Warsh or Kevin Hassett or Scott Besson himself or, you know, some some unnamed candidate.
• 55:40
  If you get the right guy in there, if you get people on sides, I think they can grow the balance sheet a lot to get what they need to get done.
• 55:48
  The question is just who paid who pays for that? You know, it's not it's not free.
• 55:52
  Asset owners win from it. Bitcoin holders win from it. Gold holders, equity holders, et cetera.
• 55:57
  real people who own their homes, right? With, especially if they have cheap debt on top of it,
• 56:02
  you know, they, they can all win from it. Unfortunately, it's going to be probably a
• 56:06
  worse deal for those that don't own many assets or those that are in kind of a net debt position and,
• 56:12
  you know, are struggling to pay for their groceries and struggling to, you know,
• 56:15
  pay for the basic things they need to support their families. You know, that's,
• 56:18
  that's the release valve, right? It's, it's going to be, unfortunately, I think on the side of,
• 56:23
  you know, the currency. And I don't think we're heading into, I think we're far away from heading
• 56:27
  into kind of, you know, Weimar style hyperinflation. It's a very different situation, but I think,
• 56:33
  you know, the, the sacrifice is going to be, let it get uncomfortable for people for a while,
• 56:38
  let it get to like, you know, mid to high single digit CPI prints, which really means like, you
• 56:44
  know, actual 15%, 20% annualized inflation, something like that. You know, no idea if that's
• 56:50
  exactly how it's going to play out. But if you look at just the way that, you know, Trump,
• 56:54
  Bessent and the whole administration are operating right now with both the debt issuance and the
• 56:59
  commentary on the Fed, it sure seems like the plan is just to pin yields and make non-asset
• 57:06
  owners take it on the chin, you know, yet again. I need on turbo. That's what said by Elon Musk
• 57:13
  earlier this year.
• 57:15
  But at that point, I mean, you've smirked when you said Besson,
• 57:23
  but I think that interview on CNBC was incredibly telling and astonishing
• 57:28
  that he sort of would not answer the question of would you,
• 57:33
  is there the potential that you could be the Fed chair
• 57:36
  and the Treasury secretary at the same time?
• 57:39
  And I've had a lot of conversations on TFTC over the last year where there are analysts like Luke Roman,
• 57:46
  Mel Madison and others that are pretty wholly convinced that the intent is to fully merge the Fed and the Treasury at some point during this administration,
• 57:57
  just so they have the Japanese style control over the bond markets and the Fed that is necessary to do yield curve control.
• 58:06
  So yeah, increasingly, it just seems like it's the only path forward other than just truly let the bond market feel pain and have it go for a hard reset.
• 58:19
  But my sense is they're not looking to do that and totally blow up all U.S. hegemony and tell retirees to go take a hike and stop spending money on defense to counter China.
• 58:33
  So I don't think that's the path we're going to choose.
• 58:36
  no
• 58:38
  speaking of countering China
• 58:41
  you have this on the list
• 58:42
  this is interesting
• 58:43
  I didn't see it until
• 58:44
  you put it on the list
• 58:45
  did some research on it
• 58:45
  but
• 58:46
  MT Materials did a deal
• 58:48
  with the Pentagon
• 58:48
  to become
• 58:49
  the Pentagon
• 58:49
  has become the largest shareholder
• 58:51
  MP Materials
• 58:53
  the leading US rare earths miner
• 58:55
  signaling a shift
• 58:56
  about right
• 58:57
  industrial policy
• 58:59
  and then earlier today
• 59:00
  I'm not sure if you saw this John
• 59:01
  but Apple
• 59:01
  signed a big deal
• 59:02
  with MP Materials too
• 59:04
  so I guess
• 59:05
  One of the goals with this fiscal and economic policy of the Trump administration is, and obviously we see with tariffs and immigration policy, is to really try to reshore manufacturing, bolster the U.S. jobs economy to ensure that if we are going through periods of higher inflation, that Americans are getting back to work and hopefully getting higher wage jobs.
• 59:30
  and even just like basic access to to like to these materials and these minerals right like
• 59:38
  um if you look up you know what uh what industry is going to use and rely on different rare earth
• 59:45
  elements in different ways i mean it's like basically every uh physical industry out there
• 59:49
  like in some way and certainly like you know the semis um you know electrical infrastructure
• 59:54
  A lot of AI infrastructure is going to be relying on it. A lot of defense type infrastructure and weapons manufacturing depends on rare earth inputs in some way.
• 1:00:07
  And right now, anyone who's kind of watching CNBC every day is getting hit with a headline every other day that there's some new export curve for rare earth materials out of China.
• 1:00:19
  China's leading supplier, or at least one of the major suppliers of several key rare earth elements.
• 1:00:25
  And as the trade war has picked up, that's obviously become a huge point of sensitivity and a huge sticking point and a big leverage point for China.
• 1:00:33
  So interesting to see. This is kind of like if you're going to run this playbook that the Trump administration has decided they want to run.
• 1:00:42
  This this does feel like an inevitable kind of element of something you have to have.
• 1:00:48
  A leg you have to have in the stool is the ability to have access to the infrastructure that you will need to do the things you want to do to reshore, to grow the manufacturing base.
• 1:00:59
  And even just to like maintain a basic defense base that allows you to kind of defend your borders and and wage your proxy wars, you know, with without asking China for their permission or their help.
• 1:01:13
  Um, you know, there, there are a lot of, uh, reports.
• 1:01:16
  I don't, I don't have the data in front of me here, but, um, of the degree to which,
• 1:01:20
  you know, we've, uh, you know, run down like weapons stockpiles in the U S, um, shipping
• 1:01:25
  weapons to Ukraine or, um, how costly it was to do kind of the bombing run that we did
• 1:01:30
  in, um, Iran, uh, you know, a few weeks ago, um, with the Israel Iran conflict.
• 1:01:36
  And, um, you just, you look at these situations and to the extent that you want to remain the
• 1:01:40
  global hegemon and you want to maintain a decent standard of living,
• 1:01:44
  for your citizens so they won't vote you out at the midterms. You can't suddenly have your
• 1:01:50
  entire access to key supply chain elements like this cut off. And so it's an interesting
• 1:01:56
  acknowledgement that this is strategically sensitive. We got to have it. It's a non-negotiable.
• 1:02:01
  So we're not going to nationalize this company. We're not going to nationalize this industry,
• 1:02:05
  but we are going to become the largest shareholder and strike a very rich deal with them for
• 1:02:12
  you know, take or pay agreements and kind of guaranteed offtake agreements. If you look into
• 1:02:18
  the kind of the details, it's at least on a top level view, very, very favorable to MP materials.
• 1:02:24
  So it's an interesting, it's the latest salvo and like the clearest indication I've seen yet
• 1:02:30
  of a true like movement to explicit what you would call industrial policy. So explicitly kind
• 1:02:38
  of managing different key industries from kind of a federal like Politburo, you know, level and
• 1:02:44
  having this very explicit public private partnership between key industrial players,
• 1:02:49
  which is kind of exactly what you'd expect to see in a situation where the, you know,
• 1:02:55
  we look at those budget lines that, that I, that we showed a few minutes ago. If you're really kind
• 1:03:00
  of ripping the bandaid off and running it hot, running it turbo and, you know, trying to just
• 1:03:05
  grow as fast as you can and pump as much stimulus as you can into the industries that you care about.
• 1:03:10
  Like, you know, the logical conclusion of that is something like this, you know, for for better and for worse, probably.
• 1:03:18
  Yeah, it's I mean, it's as we're moving away from completely, you know, globally connected economy into more survival of the fittest,
• 1:03:31
  you know everyone fends for themselves i mean that's the the extreme end but um it naturally
• 1:03:38
  means that uh there's going to be you know people people are trying to reshore manufacturing they're
• 1:03:45
  trying to get more control of natural resources can they do all this completely no but all of it
• 1:03:52
  it points to inevitable inflation, like continuous debasement of the currency,
• 1:04:01
  continuous deficit spending. People are going to have to bolster their defense,
• 1:04:09
  countries that is going to have to bolster their defenses if they can't rely on other countries to
• 1:04:16
  protect them and everyone's starting to fend for themselves. And I saw some interesting stats
• 1:04:21
  the other day, which was just highlighting the movements from the 2022 bear market lows of the
• 1:04:32
  markets to today. And from bear market lows of 2022, the S&P 500 up 80%, the NASDAQ up 120%.
• 1:04:44
  But where have we seen the gains? Well, NVIDIA, you guys probably know that stat, right? It's like
• 1:04:50
  1500%. But how about take a guess on Palantir? How much do you think Palantir is up? It's up
• 1:04:59
  2400%, right? So like these, I think you're going to see more moves like this with
• 1:05:05
  continued spending, continued defense, people trying to get access to some of these rare
• 1:05:11
  earth materials. It seems to be pointing in one direction.
• 1:05:16
  and not to not to beat a dead horse but to bring it back to why we're all here um if if this
• 1:05:25
  continues right and you have this ongoing shift to a truly more multipolar world where you know
• 1:05:33
  to your point the the just-in-time inventory type uh approach to building industry right we've we've
• 1:05:39
  spent the last 30 years at least in the u.s and the west um kind of de-stocking uh warehouses
• 1:05:46
  You know, it's been you've wanted to move toward like an asset light model, like hold as little inventory as possible.
• 1:05:52
  And certainly there are like you know from a cash flow perspective reasons you don want to have too much aggressively tied up into inventory in any environment But you know we gotten to a point where and this was really exposed during COVID the supply chains in the US were operating on the
• 1:06:11
  assumption that at any moment you could get something from China or something from some
• 1:06:16
  international market that we had effectively outsourced the industry to in two days. Two days
• 1:06:23
  or seven days or whatever, like we had very smooth, um, supply chains, open, open sea lanes,
• 1:06:29
  open shipping lanes, everyone got along, everyone kind of knew the arrangement. Um, and then COVID
• 1:06:34
  happened and it was clear that, uh, you know, how rough it might look in the U S. Um, if we,
• 1:06:42
  if we couldn't rely on the just in time inventory framework, uh, for everything. And, you know,
• 1:06:47
  anyone who was around at that time will remember how hard it was and how long you had to wait to
• 1:06:51
  get, you know, just, uh, basic items that you would never think you'd have to wait on. Um,
• 1:06:56
  and that was really not even that, you know, we, we, we figured that out. And fortunately,
• 1:07:01
  you know, other than kind of like some, you know, sensitive medical equipment,
• 1:07:04
  you know, most people probably only just got inconvenienced by that, but it seems like we're
• 1:07:08
  moving more and more to a world where you definitely cannot assume that anything will
• 1:07:13
  show up at your door for, you know, a trivial price, um, it pretty much anytime you order it.
• 1:07:18
  And so, you know, that's going to flow through to heavy industry as well.
• 1:07:23
  And in that world, that increasingly multipolar world, that's a that's a much lower trust world.
• 1:07:27
  It's a probably, as you say, Grant, a much more kind of inflationary world or just a world of where there's generally kind of higher prices than we're willing to pay there than we're used to paying for a lot of things, both kind of as retail end users and businesses.
• 1:07:41
  And in that world, it seems like they're in that that multipolar, low trust, highly inflationary world.
• 1:07:48
  It seems like there are certain assets that you really want to own.
• 1:07:51
  And I would highly encourage anyone to think about not financial advice, but consider the benefit of owning neutral, decentralized, fixed 21 million supply asset that can be sent around the world for pennies, if that, at any time of day, without permission or censorship.
• 1:08:13
  That may be a valuable asset to have in that environment.
• 1:08:16
  And if there's going to be increased demand for such an asset, what might it imply for the companies that are building the infrastructure, the products and services to make getting access and leveraging and utilizing that asset more easy?
• 1:08:36
  Might that be an interesting category of investment to consider?
• 1:08:44
  It may just be.
• 1:08:45
  I mean, and on that note, I know we didn't decide exactly what we wanted to talk about from our mid-year investor letter that we sent out to our LPs last Friday.
• 1:08:56
  But I think I'm going to throw it to you, too, because you guys put in the yeoman's work to put it together.
• 1:09:02
  The most beautiful letter that's ever been sent out by 1031.
• 1:09:06
  I was proud of it.
• 1:09:08
  And you guys should be extremely proud of it.
• 1:09:10
  But it felt good to get that out.
• 1:09:12
  And I think that's one thing, I guess I'll start with this, like considering everything going on, I feel incredibly fortunate and validated that we've made the decisions that we have to focus on our niche here within Bitcoin because the companies are doing very well.
• 1:09:32
  And Bitcoin is a large factor in that, particularly the Bitcoin treasury aspect that we've been very vociferous about as investors in terms of supporting companies allocating a large portion of their raises and their cash flow to Bitcoin sit in their treasury.
• 1:09:55
  yeah um i guess i would say in relation to like as we were aggregating our thoughts for
• 1:10:08
  like to put in perspective where we said obviously we all are very optimistic about the backdrop
• 1:10:14
  put aside like the macro situation is came you know it pretty crazy and who knows where we going to go from here But the backdrop specifically as it relates to Bitcoin is a positive one And there not many places I would say not many industries where you have such a positive backdrop as we see with where we focus our time
• 1:10:38
  And we've been on the ground doing this for years now.
• 1:10:43
  All of us individually for a long time.
• 1:10:46
  But then as a platform focused on helping drive development and investment into the space, you know, it's across a number of years, a number of funds by now.
• 1:10:59
  And we're now able to just track the progress of how things are going and assess, you know, what's the state of the portfolio?
• 1:11:10
  What's the state of individual companies?
• 1:11:12
  how do we think we're doing from an investment decision perspective it also comes back to that
• 1:11:18
  question around but what do you you know we were talking about earlier like what what do you
• 1:11:24
  ultimately price what do you price things in you know are you pricing in dollars are you pricing
• 1:11:30
  in bitcoin like is the opportunity cost really like how much of the total bitcoin supply do you
• 1:11:38
  have. And so one of the measuring sticks that we've used from the outset is like, how do we
• 1:11:44
  think we're doing relative to Bitcoin? And we're only a few years in for, you know, our most recent
• 1:11:50
  fund. But I think, you know, I think we're all pretty optimistic about the results so far. And
• 1:11:59
  it's still early. There's lots of maturation still left to do among the companies and the funds.
• 1:12:08
  overall, despite what looks like some very early successes for some of the companies that have
• 1:12:16
  started to have breakout success. We think that there's a lot more room to run. And the objective
• 1:12:23
  for us is certainly to outperform Bitcoin. And we think that's doable. And based on the performance
• 1:12:30
  so far, we think it's justified. Yeah, couldn't have said it better myself.
• 1:12:38
  Um, you know, I think, yeah, I'll, I'll echo all that.
• 1:12:43
  Um, the only, the only thing maybe that I would add would just be putting the, putting
• 1:12:49
  the letter together, um, kind of reflecting back on, you know, the first half of this
• 1:12:53
  year and over the last couple of years as the portfolio has come together.
• 1:12:58
  Um, just that I, you know, proud to be kind of involved in constructing a portfolio in
• 1:13:05
  a way that we feel like makes sense to us. You know, we are very focused on doing deals that
• 1:13:15
  make sense for both sides. And in the best, when we're able to, the best companies out there,
• 1:13:22
  right? We really want to work with the best of the best. And I think if you, you know,
• 1:13:26
  go to our website, look at our portfolio, you'll, you'll see that kind of proven out and,
• 1:13:31
  And not necessarily just following the latest meta in the space or the latest hot trend or the latest hot company in the space.
• 1:13:42
  Really just focusing in on what we think are the best long-term businesses out there and doubling down on those time and time again as we see them continue to prove themselves out.
• 1:13:51
  Proud of building a portfolio where, in a ton of cases, we are the only party at the table, the only investor that a company reaches out to.
• 1:14:01
  and not necessarily having a ton of overlap as a result in our portfolio with other investors out there.
• 1:14:09
  And so just proud of having built it in a way that honors what we think is our focus on independent thinking
• 1:14:19
  and building a portfolio that isn't just... We're not just there to be there.
• 1:14:25
  We're not just there to say that we were involved.
• 1:14:28
  Like if we're there, we're there because we have high, high conviction and we want to be there in size over time.
• 1:14:35
  So yeah I think that how I how I look at it I proud to proud to be involved proud to be along for the ride And like you said Grant I think the best is very much to come I don think I can say anything better than that or add anything to that
• 1:14:50
  Other than I'm proud as well to be on this journey with you gentlemen.
• 1:14:54
  And I think we did a tight rip of Artisanal Alpha this week.
• 1:14:58
  I think we fit a lot into an hour and 15 minutes here.
• 1:15:02
  So any parting thoughts before we wrap up here?
• 1:15:06
  are you going to make a an x price by conference today call are we not there yet no not there yet
• 1:15:14
  no no it's probably a good probably good move i will say i tweeted this out i wrote a newsletter
• 1:15:21
  about it last week but particularly about figma that was two weeks ago now okay do not um do not
• 1:15:28
  underestimate the power of social contagion, particularly in industries where herd mentality
• 1:15:36
  is pervasive. And I would include TratFi and Silicon Valley tech investing as two areas where
• 1:15:45
  that is pervasive. And I think it's something that people aren't paying enough attention to,
• 1:15:50
  particularly with the Figma story, is if that becomes social contagion and table stakes,
• 1:15:56
  things get very interesting. Well, I think it actually, so actually my closing thought,
• 1:16:01
  it loops back, I think, to the thing we said at the beginning about kind of retail flows,
• 1:16:06
  passive flows into whether it's ETFs or, you know, underlying Bitcoin itself.
• 1:16:13
  I wouldn't underestimate, you know, I wouldn't fade the power of passive flows at scale
• 1:16:19
  and the auto DCA set it and forget it mindset. And in the same way, I wouldn't underestimate
• 1:16:24
  the growth of, you know, a thousand or 10,000 or a hundred thousand companies out there
• 1:16:31
  on the bid for Bitcoin with their cash flows, right? Not like running the MSTR playbook,
• 1:16:37
  not trying to, you know, weaponize the public markets to go aggressively acquire Bitcoin.
• 1:16:42
  That's going to keep happening and that's going to be a demand driver for sure.
• 1:16:45
  And we're, you know, probably a cycle away from this still, but the idea of having,
• 1:16:50
  a bunch of figmas out there that are just passively allocating some percentage of the
• 1:16:56
  treasury balance to Bitcoin, seeing it as a long-term reserve asset, the way that they would
• 1:17:01
  look at ultimately bonds, short-term bills, or equities they might hold in the balance sheet,
• 1:17:07
  anything like that. If they see it as just a boring piece of their cash balance that they're
• 1:17:13
  passively allocating into at some percentage over time, if you get a wall of thousands of companies
• 1:17:19
  doing that over time around the world. I also wouldn't underestimate that trend, right? Just
• 1:17:24
  the boring passive stacking, the, you know, Chinese water torture, uh, from, you know,
• 1:17:30
  bidders that have really no huge price sensitivity and no real sensitivity to volatility or have like
• 1:17:37
  a need to sell anytime soon. Right. So, um, two, two trends on both the retail and the corporate
• 1:17:42
  side that I think are very much underpriced at the moment. And sort of unrelated final thought
• 1:17:51
  for me is just like, I was thinking about this the other day. It just feels like there's
• 1:17:56
  so much to do. Like we're focused on so much and there's a lot of excitement around like what else
• 1:18:06
  we can be doing for our business, what else all the companies we've invested in can be doing.
• 1:18:14
  And everyone always says like, build during the bear market. I'm just sort of like what was going
• 1:18:20
  through my head is like, build during the bull market. Like, don't get distracted by price.
• 1:18:27
  Sort of like this relentless stacking that John, that you're talking about, like just relentless,
• 1:18:31
  just one step at a time, one day at a time.
• 1:18:35
  Don't get distracted by the shiny object.
• 1:18:38
  Just keep working.
• 1:18:41
  And that compounds over time.
• 1:18:43
  So that's sort of what's going through my head right now.
• 1:18:48
  I love it, gentlemen.
• 1:18:49
  It was a great rip.
• 1:18:51
  Everybody out there, that was your Bitcoin Alpha of the week.
• 1:18:54
  We'll be back at some point in the future with our artisanal Alpha.
• 1:18:58
  Enjoy it.