Latest / What Bitcoin Did / Bitcoin Power Law: The End of Exponential Growth | Matthew Mezinskis

Transcript

Bitcoin Power Law: The End of Exponential Growth | Matthew Mezinskis · What Bitcoin Did

• 0:00
  It's very interesting.
• 0:03
  We've never seen it before.
• 0:04
  In fact, in TradFi that there's been an asset that grows the way that Bitcoin grows.
• 0:10
  It's possible that Bitcoin as a power curve could pull the entire TradFi exponential curve into power.
• 0:18
  And that is the mind bending thing.
• 0:21
  Draw me a loan instrument that works in power growth.
• 0:26
  We're making interesting records.
• 0:29
  We're breaking interesting records almost every month with Bitcoin, right?
• 0:32
  It's not bigger than the US dollar yet.
• 0:34
  And that will be a fun one.
• 0:36
  I think it's possible that we could get into a Satoshi world where Bitcoin is still the growth of the network itself is this power curve, sustainable proportionate growth.
• 0:46
  And everybody starts to accept it, even governments.
• 0:51
  Matthew, it is very good to see you, man.
• 0:53
  How are you doing?
• 0:55
  Danny, doing just great.
• 0:58
  Happy to be here.
• 0:59
  Been too long, actually.
• 1:01
  Enjoyed seeing you in person in Riga for the Honey Badger.
• 1:04
  That was awesome.
• 1:05
  That was my first time in the Baltics.
• 1:06
  It was a cool city.
• 1:07
  I really liked it.
• 1:08
  Is it not, huh?
• 1:10
  It's a great town.
• 1:12
  Yeah, it was a good conference, too.
• 1:14
  Like, real good Bitcoiners.
• 1:16
  Like, I love the conferences.
• 1:18
  Like, they all have a different bit of a flavor.
• 1:19
  But that was some real, like, hardcore Bitcoiners,
• 1:22
  people working on some really cool stuff.
• 1:24
  I enjoyed it.
• 1:25
  It was a good trip.
• 1:26
  And they keep it, I mean, they keep it seriously OG.
• 1:28
  like it's been that way every year since like 2017. And they keep wondering if they're going
• 1:35
  to do it again every year, but hopefully they do next year. I hope so. If they do it again,
• 1:40
  I'll definitely be going back. But you're doing good even though Bitcoin is
• 1:45
  just over 100K. We've been crashing. What's your take on it?
• 1:49
  Yeah. I've been doing streams now most every day. I'm pretty casual about it.
• 1:56
  uh morning baltic time 11 a.m baltic time 9 a.m london time so it's it's not exactly uh prime
• 2:03
  u.s time or australian time i guess it is more australian time prime time it's not too bad for
• 2:09
  me yeah um you know it's sort of been my goal always basically uh you know i think of trace
• 2:18
  mayor kind of had this view it's like when he was promoting the mayor multiple way back in the day
• 2:23
  everybody can catch a wick and you can talk about momentum and all these trades uh you know
• 2:30
  literally forever uh but bitcoin as a system there's a story you can talk about how it grows
• 2:38
  can talk about um you know how it's going to affect the trad fi system and that stuff only
• 2:47
  the story only gets better and better and better so that's you know in a nutshell what i try to do
• 2:52
  on my stream. And so a lot of that does ground itself in the power curve or the power law. I know
• 2:58
  a lot of people don't like the word power law, but I've been talking about that just as long as
• 3:04
  anybody. Giovanni, the Italian, I think most well-known to the power law, he first posted about
• 3:14
  it as a power curve in time, something like September 2018. And I think he did it on Reddit
• 3:20
  and I posted it on Twitter,
• 3:22
  like my own curve,
• 3:23
  my own analysis,
• 3:25
  independently.
• 3:25
  I mean, I didn't hear about Giovanni
• 3:26
  until like two years ago.
• 3:29
  I did it, I think, in December 2018.
• 3:32
  So this curve,
• 3:35
  and my analysis, by the way,
• 3:37
  was based on,
• 3:38
  for the hardcore listeners,
• 3:39
  there's an old series
• 3:42
  of pretty well-known posts now
• 3:43
  by a user,
• 3:44
  TroLolo on Bitcoin Talk.
• 3:48
  He started to do some regression
• 3:49
  analyses of the Bitcoin price, actually in logarithmic, which is a slightly different
• 3:54
  curve. We don't need to get into that. But it turned out over time, and you could really see
• 3:59
  this from about 2016 in Bitcoin, that it was growing weirdly, not like gold or stocks or
• 4:07
  bonds or anything in TradFi. It was growing at this power curve, which is actually more,
• 4:14
  it's something you observe more around network growth or growth of organisms.
• 4:19
  We can talk about it if you want. But basically, yeah, I talk about it almost every day on my
• 4:23
  stream is just trying to ground ourselves in the power trend, what it means, how we can take
• 4:30
  comfort in it and, you know, not try to get too bogged down in the crazy trades because,
• 4:37
  you know we can go we can go into that if you want but but the at the end of the day yeah the
• 4:44
  price could go down to 80k could go down to 70k but i'd rather just look at the levels see where
• 4:49
  we are relative to the trend relative to the past and then um you know spend time with my family
• 4:55
  otherwise so that's what i try to do i do want to get into it though because i've always been i think
• 5:00
  you know this i've always been pretty skeptical of it and i think part of that was probably a gut
• 5:05
  reaction to the kind of cult that came around with the power law stuff and we've seen models in
• 5:13
  bitcoin time and time again like the the classic example is the stock to flow stuff that plan b did
• 5:19
  and like when people have so much faith in one of these models to the point where even when it
• 5:25
  seems to break they refuse to accept that it's broken um i was worried it was basically going
• 5:30
  to be another one of those but i know you've talked about this a lot for a long time so i
• 5:34
  want to know why you put so much faith in this. So it would be good to get into like what a power
• 5:38
  law actually is before Bitcoin. Like what does it mean in terms of like organisms and networks?
• 5:43
  Right. So the bottom line is power curves or power relationships, they grow proportionately.
• 5:51
  So they grow, another word is they just grow sustainably. So there's a lot of evidence that
• 5:57
  the internet itself grew that way. And just to explain a power relationship, it's actually like
• 6:02
  the 80-20 rule. So if you looked at it, if you think about it in terms of nodes, all right,
• 6:06
  nodes and Bitcoin are nodes just like AWS and Facebook versus all the other client-server
• 6:12
  relationships on the internet, there is usually a relationship where you have a few large nodes
• 6:19
  with many connections and you have many small nodes with a few connections. So that's just the
• 6:28
  nature of how things grow that's the nature of how things scale so we yeah lightning network's
• 6:33
  a perfect example of that right right we can explain and lightning network does the same thing
• 6:37
  right there's a few large uh nodes with many many connections the opposite is the case with uh with
• 6:43
  small nodes so that relationship we just observe across time we can reserve observe it in this case
• 6:51
  the y and the x-axis is size versus amount.
• 6:57
  You can observe it many different ways.
• 6:59
  It's going to do some sort of a gradual curve,
• 7:00
  kind of like an 80-20 curve.
• 7:02
  But what's interesting with Bitcoin
• 7:04
  is we can actually observe the price do this across time.
• 7:09
  And explaining that, again,
• 7:11
  I'll try to just keep it very, very brief,
• 7:12
  keep it very, very simple
• 7:13
  without going too much into the numbers.
• 7:14
  But if you think about any,
• 7:16
  and I can show you charts here in a second,
• 7:18
  but let's just talk about it with words for now.
• 7:20
  if you think about any chart, like anything you've seen on Twitter, anything you've seen on
• 7:25
  TradingView, when people put charts in log scale, and usually when they say log scale,
• 7:31
  they mean log linear. That means the y-axis is log and the x-axis is just time, right?
• 7:37
  You draw a trend line, or as the TA people, you just draw all your sort of mad, mad hatter trends
• 7:42
  that connect wicks and candles and all this stuff. It's very easy to draw a straight line
• 7:48
  in log space. Okay. Because, because the nature of TradFi is that it grows exponentially. It grows,
• 7:57
  uh, geometrically, it grows in compounding fashion. All of those things are basically
• 8:01
  synonyms. So why? Well, my theory, my personal theory, I've never actually fully read this,
• 8:09
  but you know, I've read a lot about the history of money and banking and stuff, but I think it
• 8:12
  probably mostly has to do with the nature of of credit of compound interest so bank loans work
• 8:21
  the same your mortgages work the same every everything anytime you hear on cnbc or bloomberg
• 8:26
  or whatever on twitter you hear a percent gain or a percent return you're comparing it to a
• 8:32
  compound return that you expect to get every year to keep up with not only inflation that's the
• 8:39
  common one and that's true but also to keep up with the pace of innovation to keep up with the
• 8:44
  pace of population growth it's not all bad actually that we grow right there are good things about
• 8:49
  growing there's just a lot of nefarious things about inflation so wading through that is also
• 8:54
  difficult but probably more to the nefarious side more to the side that bitcoiners can understand
• 9:00
  or like you know i think empathize with it is true that banking um and i'm not even talking
• 9:07
  the nature of fractional reserve banking and all the conspiracies and all this. It's just the nature
• 9:12
  of credit is that if you have a fixed rate over time, you're going to get to something that will
• 9:19
  constantly double at a certain amount of years based on the rate. The common example is a rule
• 9:26
  of 72, right? So rule of 72, if I have a 10% return, rule of 72, how long will it take to
• 9:32
  double every 7.2 years with a 10% return. You might think it's every 10 years, but that's not
• 9:39
  how compounding works. That's not how exponential geometric growth works. It's actually faster than
• 9:43
  you think because that's the nature of exponential growth. So rule of 72, basically you take 72,
• 9:51
  take the percentage, whatever the growth rate is, slash away the percent sign and just say,
• 9:55
  so 72 divided by 10, what's that? 7.2 years. That's how long it will take to double.
• 10:01
  You do the inverse of that.
• 10:03
  Say you have a 7.2% compounding growth and it stays the same.
• 10:08
  It's going to take you 10 years to double.
• 10:10
  But the next 10 years, you will double again and double again and again and again.
• 10:13
  So all of those words that I just used to explain exponential growth, geometric growth,
• 10:19
  compound growth, compound interest, which is the nature of all bank loans,
• 10:23
  they constantly grow and it cannot be any other way.
• 10:27
  This is why. And again, people frame this often in a conspiratorial way, like if they don't grow the market, if they don't print, the market will crash.
• 10:35
  Or if we don't grow enough, the market will crash. It's actually I mean, it is true. It's true.
• 10:41
  But it's also there's more of a deep. It's just there's this very interesting, deep mathematical properties there that.
• 10:51
  A lot of it has to do with credit, and I think probably even most of it, but there are other things, too.
• 10:57
  You know, innovation, invention, obviously, AI is the next one here.
• 11:01
  But the Internet, for sure, we've actually increased our growth now relative to, you know, times 30 years ago, 40 years ago because of wonderful technological innovations.
• 11:18
  And so what happens is, and Jeffrey West talks about this in his book Scale.
• 11:24
  I've quoted a lot.
• 11:25
  Giovanni's talked about it a lot, too.
• 11:26
  I did the tour. When I saw you in Riga, my speaking tour over the summer was on this.
• 11:31
  It's basically, it's even more crazy than exponential growth because we actually grow
• 11:36
  a little bit faster and a little bit faster and a little bit faster over these epochs.
• 11:42
  And that even makes exponential growth even crazier. So in the short term, it's constant,
• 11:48
  but in the long term, it even gets a little bit faster. So that's what exponential growth
• 11:52
  does and is, and that's what TradFi is, that's what the stock market is, it's growing a little
• 11:58
  bit faster over, say, the midterm to the longterm, and we have to keep up with it. And it's hard.
• 12:04
  We get distracted and now we have our attentions going in a thousand different directions and all
• 12:10
  the other social implications of this. Maybe some people make it, some people don't. Maybe
• 12:16
  older generations just, this is really cruel to say, but they just throw their hands up in the air
• 12:21
  and they live in retirement peacefully and they don't care.
• 12:25
  But, you know, the pace of innovation, the pace of our communication, everything,
• 12:30
  it's way faster and it's way arguably, I think, you know,
• 12:34
  I know there's a lot of doom and gloomers in the Bitcoin space.
• 12:36
  I try to not be one, but it's argued, you'd rather live now than at any time in the past.
• 12:44
  Do you wish you could access cash without selling your Bitcoin?
• 12:47
  Well, Leta makes that possible.
• 12:48
  They're the global leader in Bitcoin-backed lending.
• 12:50
  and since 2018 they've issued over $9 billion in loans with a perfect record of protecting client
• 12:56
  assets. With Ledin you get full custody loans with no credit checks or monthly repayments,
• 13:01
  just easy access to dollars without selling a single sat. As of July 1st, Ledin is Bitcoin only
• 13:07
  meaning they exclusively offer Bitcoin-backed loans with all collateral held by Ledin directly
• 13:12
  or their funding partners. Your Bitcoin is never lent out to generate interest.
• 13:16
  I recently took out a loan with Ledin. The whole process was super easy.
• 13:20
  The application took me less than 15 minutes and in a few hours I had the dollars in my account.
• 13:25
  It was really smooth.
• 13:27
  So if you need cash but you don't want to sell Bitcoin, head over to ledin.io forward slash WBD
• 13:32
  and you'll get 0.25% off your first loan.
• 13:35
  That's ledin.io forward slash WBD.
• 13:38
  If you already self-custody of Bitcoin, you know the deal with hardware wallets.
• 13:42
  complex setups, clumsy interfaces, and a seed phrase that can be lost, stolen, or forgotten.
• 13:47
  Well, BitKey fixes that. BitKey is a multi-sig hardware wallet built by the team behind Square
• 13:52
  and Cash App. It packs a cryptographic recovery system and built-in inheritance feature into an
• 13:57
  intuitive, easy-to-use wallet with no seed phrase to sweat over. It's simple, secure self-custody
• 14:03
  without the stress. And Time named BitKey one of the best inventions of 2024. Get 20% off at
• 14:10
  bitkey.world when you use the code WBD. That's B-I-T-K-E-Y.world and use the code WBD.
• 14:18
  This episode is brought to you by Anchor Watch. The thing that keeps me up at night is the idea
• 14:22
  of a critical error with my Bitcoin cold storage. And this is where Anchor Watch comes in. With
• 14:27
  Anchor Watch, your Bitcoin is insured with your own A-plus rated Lloyds of London insurance policy
• 14:32
  and all Bitcoin is held in their time-locked multi-sig vaults. So you have the peace of mind
• 14:36
  know when your Bitcoin is insured while not giving up custody. So whether you're worried
• 14:40
  about inheritance planning, wrench attacks, natural disasters, or just your own silly mistakes,
• 14:45
  you're protected by AnchorWatch. Rates for fully insured custody start as low as 0.55%
• 14:50
  and are available for individual and commercial customers located in the US. Speak to AnchorWatch
• 14:55
  for a quote and for more details about your security options and coverage. Visit anchorwatch.com
• 15:01
  today. That is anchorwatch.com. No, that's super interesting though. Let me ask you a question
• 15:06
  on that before we we get into the organism stuff because why is bitcoin not subject to the same
• 15:12
  things as tradfying that because things like money supply growth credit creation um growth
• 15:18
  population like why is why is bitcoin immune to that in its price performance yeah well immune
• 15:24
  is not a word i would use and also uh that it has to be is not a word i would use so for example the
• 15:32
  old stock to flow models which by the way we can talk about i can show you some hilarious uh
• 15:36
  prior predictions and what they are now. Those are based in exponential space. So the stock-to-flow
• 15:45
  model, he was using exponential coefficients for a power model. Anyway, I'm getting ahead of myself.
• 15:50
  It doesn't have to be in the future that Bitcoin is for sure following a power law.
• 15:54
  It's just right now. And as we've observed for the last 16 years or so of Bitcoin,
• 16:00
  it has followed a power curve. So it doesn't really matter why, it just is.
• 16:05
  Well, to get a little bit more to the why, the why is more sustainable. It's more proportional.
• 16:17
  Those are two words that you would use with power growth that you don't use with exponential growth.
• 16:21
  So exponential growth, all those things that I just talked about, we grow faster and faster,
• 16:24
  a lot of innovation. There's also a lot of inflation. There's booms, there's busts.
• 16:29
  It's volatile. It's maybe a little bit unsustainable, you could use the word,
• 16:34
  right? You think about all the debt that we have. Those things are all features of exponential
• 16:40
  growth. You can get to fast booms, but also fast busts like the Great Depression or the global
• 16:47
  financial crisis. That's just the TradFi world. There's no explaining your way out of that paper
• 16:53
  bag. That's the world. That's the universe that we're in. That's what it does. Bitcoin,
• 16:58
  it's provably observable with the statistics that it is not following an exponential curve.
• 17:05
  And I can show you a chart that exactly illustrates this, but it's just not following an exponential
• 17:10
  curve. Price is not exponential. So then you would say, why? Well, as I talked about with
• 17:15
  the nodes, with the 80-20 rule, with scaling, with networks, it's just a feature of scaling.
• 17:23
  it's a feature of networks that you do have um not everybody running the full you know the full
• 17:32
  node to use the old scaling or example um you know you don't you just have more top heavy nodes on the
• 17:40
  on the on the on one side and not as heavy nodes on the other side not as busy of traffic and that's
• 17:47
  how the network scales. And it's actually more sustainable that way. But of course, it's true.
• 17:53
  If you rely too much on those consolidated, concentrated nodes, you might lose some things,
• 17:57
  you might lose some security. You got to be careful about that. And that's why there's
• 18:01
  people way smarter than me having a lot of these arguments right now about how Bitcoin can truly
• 18:07
  scale, how it might, things that I don't actually completely see as relevant now, I don't think we
• 18:12
  need to get into, but how there might even be legal implications of what's on the blockchain
• 18:16
  right now, right? I don't quite see that at the moment, but I know a lot of people are
• 18:20
  talking about that, at least on Twitter. But anyway, all of this stuff is just,
• 18:26
  that's how networks grow, but it's growing not in a constant exponential fashion where you can pick
• 18:37
  a number and say, okay, Bitcoin is growing at 10% a year. If it's growing at 10% per year,
• 18:41
  the network's going to double in 7.2 years. And then 7.2 years from then, it's going to double
• 18:46
  again. That's not what it's doing. It's growing according to a power curve over time. And so what
• 18:53
  that means is that actually the growth rate shrinks. The growth rate shrinks. So back in the
• 18:59
  day, let's just use pricing as an example. It's pretty obvious if you bought Bitcoin for a dollar
• 19:03
  or whatever back in 2011 or 10, you were mining it maybe before there was even a price.
• 19:08
  your compound growth was huge. Even holding to today, your compound growth is hundreds of a
• 19:17
  percent. But as time goes on, and as the coin gets a little bit top heavy, it gets a little
• 19:23
  bit bigger, a little bit heavier. The growth is proportionately less. So, or actually it's
• 19:30
  proportionately the same. It just takes longer. That's a better way to say it. So, but if you
• 19:37
  look at it on a yearly basis, a yearly basis, that annual growth will fall. So for example,
• 19:42
  back in 2010, 2011, anybody could have had a thousand, thousands of a percent return.
• 19:49
  Now on a curve, on a curve, Bitcoin by the end of this year, we'll do 42% per year.
• 19:55
  And next year it's going to be 38 and some change. I actually don't know off the top of my head from
• 20:00
  that. I'll just tell you, Rick, it's on my website, by the way. So basemoney.world or
• 20:04
  porkopolis.io, you can find all this information. Let me find you the exact. It's scheduled to be
• 20:13
  39.2% by the end of 2026. So 42% by the end of the year, 39.2% by 2026, and 36.7% by 2027.
• 20:23
  And you can see this table where it shows you exactly the slope of the curve and how the curve
• 20:29
  declines in growth rate on my website, if you want to dig into those statistics. But that's a
• 20:35
  power relationship. It's actually, it's sustainable, it's proportional, but it grows
• 20:40
  slower and slower as it gets bigger. So when you see people, like, I'm not trying to call
• 20:46
  Saylor out here at all, but like Saylor will often in presentations present like the Kager
• 20:50
  of Bitcoin as 38% or whatever ongoing. Do you think he's missing part of the point there?
• 20:55
  I do. Yeah. And there's a fellow MIT grad from Saylor that everybody should follow. His handle
• 21:02
  is money or debt, money or debt. Steven Perinod is his name. I haven't interviewed him yet,
• 21:08
  but we've been on like some streams together. He's a great, he's a great mind at Bitcoin.
• 21:12
  And he's long said as an MIT grad, Saylor should get on the, you know, the power law train,
• 21:17
  the power curve train, because it's just not, it's not true. And people have actually,
• 21:22
  it is one of the ironic kind of funny things about sailor like he said for years all your
• 21:27
  models will be destroyed and then he made a model like a few years ago he came out with a bull case
• 21:33
  bear case normal case that was a model uh yet all of our models are going to be destroyed so again
• 21:38
  we make models all the time the people before the gfc made insane uh you know linear and exponential
• 21:44
  models according to rental rates that were just insane they wouldn't work they're unsustainable
• 21:49
  so we can do that but it's funny in his model he did this sort of like it was like a mckinsey
• 21:54
  person sort of got it it's like they do make uh it it almost mimics a power curve like it declines
• 22:01
  but it's like in this jagged stair step kind of weird way he's using exponential growth but
• 22:06
  decreasing it in a weird way to try to match a power curve and i've never heard him come out
• 22:11
  and and say for sure or say that it clearly seems like this is uh you know uh matching a power
• 22:18
  growth. But one more thing about this, which is highly interesting, and I don't know how much time
• 22:22
  we have to go in this episode, but this is going to have implications for the way that Bitcoin
• 22:28
  interacts with the TradFi system. And the jury is way still out on this fact. Okay. So, um,
• 22:36
  you want me to share a, share a chart? I've got too many questions for you. Can we hold off on
• 22:40
  that just for one second? Cause I want to know the answer to, or your answer to that, but just
• 22:46
  quickly before we never got onto the organism piece and I'm interested to know how this works
• 22:49
  in like the natural world. Yeah. So, um, you can look at, uh, just as a very, very simple example,
• 22:57
  you look at like a chart of mammals, like from, you know, a mouse to an elephant to a whale,
• 23:03
  the the calories that they need will scale proportionally Okay so it not that though a whale is whatever X times bigger than a mouse
• 23:17
  that a whale or an elephant, for example, is easier than a whale,
• 23:22
  that an elephant will also need X times amount of calories.
• 23:26
  It's actually proportionally less as the animal gets proportionally bigger.
• 23:30
  And again, just trying to short circuit a lot of the math,
• 23:34
  everything, the word that you need to understand there is sustainable. It's a sustainable,
• 23:39
  it's a sustainable growth rate. It's not, it's not all the way through, you know, sort of this
• 23:46
  exponential curve, which is just, there's a, I think Jeffrey West actually does this in his book
• 23:51
  as well. There's the example of Godzilla, like anyone who knows basic stats would understand
• 23:56
  and basic physics that some, someone like something like Godzilla is, is mathematically
• 24:02
  impossible. It would literally, if there was an organism that big, first of all, it would need
• 24:08
  like a mountain of food to keep it up. And its weight would just collapse it on itself.
• 24:15
  So it has to do with physics, has to do with gravity, has to do with nourishment. It just
• 24:20
  doesn't work that way. It's just nature. It just doesn't work that way on the planet that we live
• 24:24
  in. So again, the words, if there's two words that I can give to the listeners and to you about
• 24:32
  the power curve, about the power law. And I like to say power curve because for some reason,
• 24:36
  law triggers people, even though that's the technical term. The two words are proportionate
• 24:41
  and sustainable. That is the growth that is exhibited in a power relationship, whether it's
• 24:47
  organisms, networks, or Bitcoin. And that's a good thing, not a bad thing. It's a very good thing.
• 24:54
  So if you could calculate the calories that a mouse needs and the calories that an elephant
• 24:59
  needs and then you found out the mass of like a tiger could you with the power curve could you
• 25:05
  calculate the calories that a tiger needs based just on the math in the power curve yeah it would
• 25:13
  just be a straight line it would be a straight line through on log log so not log linear but you
• 25:18
  would have like calories and mass and you put them in log log space you line up the different sizes
• 25:25
  of the animals and you'd have a straight line cut right through it. So that would be, that would be
• 25:30
  a power relationship. So another tell, another tell, by the way, we didn't talk about this,
• 25:35
  that a relationship is a power curve is when you put it in log log, that is the y-axis and the x-axis
• 25:42
  in log log space, it's a straight line. Unlike all the first part of the show, which we talked
• 25:48
  about exponential geometric compound growth, which is the entire TradFi world. GDP, bonds, gold,
• 25:58
  S&P, all of that is a straight line. The trend line is a straight line on log linear. So that's
• 26:05
  the difference. That's the difference between the two. And so it's very fascinating. It's very
• 26:09
  interesting. We've never seen it before, in fact, in TradFi, that there's been an asset that grows
• 26:15
  the way that Bitcoin grows. Okay. Just lastly, before we get onto the actual chart, I want to
• 26:20
  know your take on what this means for how Bitcoin is going to interact with the traditional financial
• 26:24
  world. I'd rather show you some charts as I talk about that, but I absolutely say that the jury
• 26:32
  is still out there because TradFi is huge. The dollar itself is still huge, even though everybody's
• 26:42
  the bond vigilantes have been out for decades if you've been reading any gold newsletter and
• 26:47
  um yeah interest rates are going up maybe the dollar is going to get uh you know for some rough
• 26:53
  years but so is the russian ruble so it's just um it's it's not it's not clear how necessarily
• 27:01
  you know what i would prefer of course is the bitcoin vision and everything but basically the
• 27:05
  way i would sum it up and we'll get to some charts is i think one of two things is going to happen
• 27:10
  and explaining that is going to be easier with the chart. But it's either Bitcoin as a power
• 27:16
  law asset gets pulled into an exponential asset, which actually is fine for Bitcoiners because the
• 27:23
  price is even going to grow faster. All right. As I remember, I told you power growth slows over
• 27:27
  time, exponential stays constant. So it's actually, but again, that's not the world that I would
• 27:32
  imagine a lot of the purists would like, including myself. So if Bitcoin just turns into an exponential
• 27:39
  asset, then it's just like everything else. It's like gold. Another possibility, though,
• 27:44
  is if people start to understand the nature of Bitcoin, the nature of scarce satoshis,
• 27:49
  that these can't be printed, that fiat interest might not make as much sense on these scarce
• 27:54
  satoshis, which become more scarce and more scarce every year, then it's possible that Bitcoin
• 28:01
  as a power curve could pull the entire TradFi exponential curve into power. And that is the
• 28:09
  mind-bending thing that would be perhaps the philosophical thing with what hyper-Bitcoinization
• 28:14
  actually looks like. Are we on a Satoshi standard? The big X factor here, and I've said this a lot
• 28:22
  on my streams, big X factor to me, and it goes back to what I said at the beginning, is the nature
• 28:26
  of credit because you cannot, you cannot, it's mathematically impossible. You know, I posit this
• 28:36
  to any mathematician listening to this. Draw me a loan instrument that works in power growth.
• 28:44
  It does not work in power growth, but it's just not the nature of a credit instrument. Credit
• 28:50
  instruments work in exponential growth. They work in geometric growth, compounding growth,
• 28:54
  just like the rest of the TradFi system. So why is that? Is that because interest would have to
• 28:59
  drop constantly? Correct. So don't think of an annuity because that's kind of a little bit
• 29:04
  more complicated, but it's still, it's still the same idea. But, um, it's just think about something
• 29:10
  that just think about the same example I said before, the 10% growth rate from interest. Okay.
• 29:17
  In your native fiat unit, if you're going to get 10% every year, every year, every year,
• 29:23
  you're just going to double every 10 years. Bitcoin doesn't do that. The growth rate of
• 29:28
  Bitcoin, which is a power growth rate, declines over time. So I've thought about this a lot. I've
• 29:34
  thought about modeling it and showing it on my stream. I haven't even done it yet, but
• 29:37
  maybe something like simple interest over the short term could work a little bit.
• 29:42
  And by the way, this is going to have huge implications for TradFi and for stuff that
• 29:46
  Saylor's doing, for example, because all his instruments pay a fixed 10%. But Bitcoin is not
• 29:52
  fixed at a 38% growth. This is a challenge for him. Again, he's doing wonderful things. I just
• 30:01
  saw a tweet, maybe from Steven as well, that showed that the last purchases that they just
• 30:06
  made over the course of a day were more than miners would make with their latest. I don't
• 30:11
  think it was the Euro interest or the Euro instrument. Maybe it was actually, but which
• 30:15
  they just released. Anyway, it's amazing the amount of coins that he's accumulating, but he's
• 30:21
  also accumulating a lot of debt in fiat units that are fixed, fixed, fixed, fixed, constant.
• 30:27
  And the nature of Bitcoin is it does not grow in a fixed rate. It just does not. I've seen TA
• 30:34
  TradingView folks try to do these straight lines with Bitcoin on a log scale. I imagine every
• 30:41
  listener knows that that doesn't work. You just know that when you put that Bitcoin price over
• 30:46
  So the entire life of Bitcoin on log scale, log linear, you get that gentle curve.
• 30:51
  That's what a power curve looks like on log linear.
• 30:53
  If you do a log log, you'll get a straight line, but that's a different thing.
• 30:58
  Does that make sense?
• 30:59
  It does make sense.
• 31:00
  So this might be really naive to think that I could even sort of suggest an answer, but
• 31:06
  would the answer not be just a price interest in sats?
• 31:09
  uh if you price interest in sats you're uh you can absolutely do that and then we're in a satoshi
• 31:19
  world um but the nature of the satoshis themselves does not as as everybody knows they do not
• 31:29
  increase exponentially they don't in fact they decline exponentially which is weird they do
• 31:35
  So there's been a ceiling on how much credit can actually be issued.
• 31:39
  I mean, theoretically in SATs, unless you want to allow, and by the way, this can totally
• 31:44
  happen.
• 31:45
  You can allow certificates in Satoshis, and everybody knows that there's just not enough
• 31:51
  Satoshis to actually back and those things.
• 31:53
  So it's open.
• 31:56
  In my mind, it's open.
• 31:58
  But for sure, 100%, it would be basically foolish to have, well, before I say the foolish part, for sure, everybody knows that in the TradFi system, there's more and more currency units issued every year.
• 32:19
  Yeah, on the margin, you might actually have to destroy the money supply a little bit, and we can show you curves of that as well.
• 32:24
  But most of the time, the money supply increases at 7%, 10%, 12% per year. And that's a fixed number. So again, the money supply is doubling every seven. In my monetary base, exhibits show that the money supply doubles even a little bit less than six years globally worldwide. So in native unit terms.
• 32:43
  so that's that's how fiat works everybody knows that they increase and then everybody knows
• 32:50
  looking at bitcoin that's not how bitcoin works in fact bitcoin declines the rate of satoshi's
• 32:55
  declines exponentially at something like 16 a year so every four years it's uh 16 per year
• 33:05
  but then it halves so i mean the 16 a year represents the having a 16 declining declining
• 33:13
  satoshis um so that's that's just complete everybody knows that that's a completely different
• 33:19
  model than what fiat does so um yeah that's that's that's how it looks all right we should
• 33:27
  get into the chart um and as you're going through this one of the questions i want to know your
• 33:31
  answer to is if you had to put like a probability on it do you think bitcoin does pull tradfire into
• 33:37
  Bitcoin or do you think it works the other way around? Yeah. So first, uh, I do think that that's
• 33:43
  a good way to phrase it. And I haven't heard anybody else in the power crew, uh, phrase that
• 33:48
  like this. Uh, I've been wanting to talk to Steven and Giovanni and some of these guys, uh,
• 33:54
  seen as another very good, um, he's a Harvard, uh, guy that's, that's into the power curve.
• 34:00
  So if I had to put a probability on it, that's a good question, actually.
• 34:07
  Um, I'd say right now, right now, the probability is that Bitcoin gets pulled into the TradFi world.
• 34:19
  That's just the world that we live in.
• 34:21
  That's the nature of coercion.
• 34:23
  It's the nature of fiat money laws.
• 34:26
  Uh, but I also think the future is unpredictable.
• 34:31
  gosh and i can i can totally see i can totally see a world where you know
• 34:40
  the accumulating satoshis for even a government is so important that people understand that you
• 34:49
  know you can't just keep printing this money it's it's worthless the bonds become less let's not
• 34:55
  even say worthless, but let's just say less valuable over time relative to Bitcoin. And so
• 35:01
  I think it's possible that we could get into a Satoshi world where Bitcoin is still, the growth
• 35:08
  of the network itself is this power curve, sustainable proportionate growth, and everybody
• 35:13
  starts to accept it, even governments. I absolutely think that is possible. It's the here to there,
• 35:18
  right? That's the most difficult thing for me to grasp. And I would say anybody who's
• 35:25
  lying if they, if they would tell you otherwise. I mean, I I've heard Saylor speak in conferences.
• 35:29
  I mean, he's, he's even, uh, offhand say like, you know, yeah, I would like, I would like all
• 35:36
  the bureaucrats in Washington to see it my way. Uh, you know, many of them don't at the moment
• 35:41
  and they have, uh, he hasn't said it. I'm now putting words into his mouth, but they have the
• 35:46
  power basically to court. I mean, you know, who's to say that the United States might not say a
• 35:51
  couple of years from now, your Bitcoin stash is in the national security interest of the United
• 35:56
  States. We're just going to take that property. That's not a good thing. That's definitely not a
• 35:59
  good thing. Not for property rights, not for anything. And that's going to give more authority,
• 36:06
  not in a good way of that term. It's going to give more authority to the dollar if that happens.
• 36:11
  And it could happen. Again, that's a dark thing to say, but everybody knows that that's been
• 36:15
  theorized. What Bitcoin did is brought to you by the massive legends, Iron, the largest NASDAQ
• 36:21
  listed Bitcoin miner using 100% renewable energy. IREN are not just powering the Bitcoin network,
• 36:27
  they're also providing cutting-edge computing resources for AI, all backed by renewable energy.
• 36:32
  We've been working with their founders Dan and Will for quite some time now and have been really
• 36:36
  impressed with their values, especially their commitment to local communities and sustainable
• 36:40
  computing power. So whether you're interested in mining Bitcoin or harnessing AI compute power,
• 36:44
  IREN is setting the standard. Visit iren.com to learn more, which is I-R-E-N.com.
• 36:50
  This episode is brought to you by River and they've just launched a very cool new product
• 36:54
  where you can automatically buy every price dip.
• 36:57
  Their zero fee recurring buys are a proven way to build wealth with Bitcoin
• 37:01
  and you can now supercharge them and buy up to 100% more Bitcoin
• 37:04
  if the price is dipping at the time of your order.
• 37:08
  It's a great tool to buy more Bitcoin at lower prices
• 37:10
  and while your cash is waiting to be deployed, you earn 3.75% interest on it paid in Bitcoin.
• 37:16
  River is built to last with security at its core
• 37:19
  and is the only Bitcoin exchange in the US with proof of reserves.
• 37:22
  To open an account, go to river.com forward slash WBD
• 37:26
  and earn up to $100 in Bitcoin when you buy.
• 37:29
  That's river.com forward slash WBD.
• 37:32
  What if you could lower your tax bill and stack Bitcoin at the same time?
• 37:36
  Well, by mining Bitcoin with blockware, you can.
• 37:39
  New tax guidelines from the Big Beautiful Bill allow American miners
• 37:42
  to write off 100% of the cost of their mining hardware in a single tax year.
• 37:46
  That's right, 100% write-off.
• 37:49
  So if you have $100,000 in capital gains or income, you can purchase $100,000 of miners and offset it entirely.
• 37:55
  Blockware's mining as a service enables you to start mining Bitcoin right now without lifting a finger.
• 38:00
  Blockware handles everything from securing the miners to sourcing low-cost power to configuring
• 38:05
  the pool, they do it all. You get to stack Bitcoin at a discount every single day while also saving
• 38:11
  big come tax season. Get started today by going to mining.blockwaresolutions.com forward slash wbd.
• 38:17
  Of course, none of this is tax advice. Speak to your accountant or tax advisor to understand how these rules apply to you.
• 38:23
  And then head over to mining.blockwaresolutions.com forward slash WBD and you'll get one week of free hosting and electricity with each hosted miner purchased.
• 38:32
  This episode is brought to you by Bitcoin Mina. On December 8th and 9th, I'll be in Abu Dhabi for Bitcoin Mina along with 10,000 other Bitcoiners.
• 38:40
  There's an amazing lineup of over 200 speakers sharing Bitcoin insights and innovation from all over the world.
• 38:46
  and if you're looking for the ultimate vip experience with exclusive networking plus premium
• 38:51
  food and drink then grab the whale pass and the whale night party even includes surfing so you know
• 38:56
  i'm going to be there tickets are on sale now use code wbd to get 10 off at checkout on all pass types
• 39:01
  the website is mina.b.tc and use code wbd for 10 off and i would guess like from sales perspective
• 39:09
  perspective that's why he would want the u.s government and other institutions getting
• 39:14
  involved in Bitcoin because if everyone has Bitcoin, he's not the honeypot. Right. But
• 39:19
  everybody knows as well, if everybody's involved in Bitcoin and Bitcoin is, you know, you seriously
• 39:25
  understand that Satoshis are more and more scarce, less and less prevalent as far as the mining is
• 39:32
  concerned every year. That's going to have implications for the money printer. It's going
• 39:36
  to have implications for how we think about value in the future. And it's really, yeah,
• 39:41
  it's a really big deal. So that's how I actually frame it. And I haven't heard anybody else
• 39:45
  frame it this way. But in my view, it's either TradFi pulls Bitcoin exponential.
• 39:50
  You might see some big Bitcoin numbers there, but that's not that exciting. That's like digital gold
• 39:54
  in the worst way. Or Bitcoin pulls TradFi power and we're growing on a sustainable,
• 40:00
  open network that everybody agrees on. And even the people that own the guns
• 40:05
  in some way are going to understand
• 40:09
  that they can't buy more guns with printed money.
• 40:12
  That's how I'd say it.
• 40:14
  I've said this about 50 times on the show at this point,
• 40:17
  but something Thomas Pacquiao from PubKey said to me
• 40:19
  is like, we're all going to be rich and depressed
• 40:21
  because the project failed.
• 40:22
  And that seems like the traditional finance world
• 40:26
  pulling Bitcoin into it, that's the outcome.
• 40:28
  I saw that episode with Thomas, actually, or one of those.
• 40:31
  I would agree with that sentiment.
• 40:32
  I would say that sentiment, what he just said,
• 40:34
  is my, that's another way of saying TradFi pulls Bitcoin exponential. You might like that number.
• 40:40
  You may like seeing Bitcoin increase at 20% a year, every year on a trend, but that's not what
• 40:47
  we don't get the promise of the full promise. Most of us are here for. Yeah. Yeah. Yeah.
• 40:51
  All right. Let's do the chart. I want to see it.
• 40:55
  All right. So here's my website again. Just this is the only chart I have up at the moment. I've
• 41:00
  read on my website many times, but this is the old power curve. This is log linear.
• 41:04
  all right this is just the price of bitcoin you can see it on my chart this is monthly frequency
• 41:08
  because it's a lot of data uh we'll do more detail in a second now here's log log okay so
• 41:16
  key thing to understand and i'll say this one more time is power curves are straight lines how you
• 41:24
  know it's a power curve this is a straight line on a log log curve so here if it was a straight
• 41:28
  line on log linear that would be an exponential but it's not it's curved it's clearly curved
• 41:32
  but it's a straight line on log log that's a power curve the next thing to understand is again
• 41:39
  you see dates here you see like 2010 and then you know further away 2012 but as we get closer
• 41:45
  and this one actually is not short as well but the dates become compressed basically like
• 41:49
  2023 march is very close to you know 2024 march whereas here it's like way farther away at the
• 41:56
  beginning of the the axis so again that's that's the effect of of the nature of putting it in log
• 42:02
  but it's important to understand that it's not the dates here that go into the formula
• 42:08
  the power curve formula it is days it is days since the genesis block and so another way of
• 42:15
  saying this and i don't think i actually said this part yet uh you can't really derive this
• 42:20
  from the formula you have to back into this but i like thinking about doubling time so power curves
• 42:25
  do not have a fixed doubling time like like exponential but we can still translate this
• 42:30
  into something like doubling, what does it mean? And the number is 13%. So that's that proportional
• 42:36
  growth. So you have it here on this chart. It's 13%, 12.7%, 12.8%. So what it means is for every
• 42:43
  increase of 12.8% to 13% in the life of Bitcoin, the price doubles or the adoption doubles. That's
• 42:53
  the definition of the power curve as I describe it, as I've found it. Other people, if they run
• 42:58
  numbers, they're going to get very, very similar numbers. So let's describe that now. When Bitcoin
• 43:04
  was 60 days old, 60 days old, roughly, roughly, and of course we didn't have a price at the time,
• 43:10
  but roughly what was happening is the adoption was doubling every seven days, every seven days.
• 43:15
  For every 60 days, then seven more days, the adoption of the price doubles. When it was 600
• 43:20
  days old, the price doubled every 70 days or so. And now we're a little over 6,000 days
• 43:27
  and Bitcoin is doubling every 700 days, aka every two years. So that is, again, another way to
• 43:35
  describe power growth. Totally different, totally different than exponential growth. Exponential
• 43:42
  growth, you get that fixed number. You tell me 10% growth, double every 7.2 years, double every
• 43:47
  7.2 years, double every 7.2 years. That's how TradFi works. That's how credit works. That's how
• 43:51
  banks work. It's not how Bitcoin works. So let's, did you have anything there?
• 43:56
  yeah i was just gonna say so based off this um what is the kind of fair price right now
• 44:02
  yeah so here's the here's a curve i show every day on my stream uh this is this is the price
• 44:09
  we got this out long into the future for fun and i have here the uh 10th to the 90th percentile
• 44:17
  and i do things you know maybe people have seen the quantile regression model that plan c or cena
• 44:21
  have done. There you'll get a nice smooth curve in the back because you're finding different
• 44:26
  percentiles to meet everything. I like to keep it simple. People like one number. So I like to look
• 44:32
  at multiples over or under the trend at the time. And to keep the multiples fixed, you get a little
• 44:36
  wavy action here, but you can still do it smooth in the future. So bottom line is, where are we
• 44:42
  right now? Let's just go right now. Right now, as you can see, we're under trend. All right. Not
• 44:49
  much, but we are under and a few things to say. So price, when I pulled it into the model this
• 44:57
  morning, actually, I should have the seventh here. No, I don't know why I didn't pull in.
• 45:02
  But anyway, yesterday's price 101. Basically the same price. Yeah, basically the same price.
• 45:11
  101. Okay, so the regression itself, the power curve is 119. My curve, some people are going to
• 45:17
  have a little bit different numbers. Other people are going to have different numbers.
• 45:21
  But notice that the curve itself, if we look at these percentiles, it's somewhere between the
• 45:27
  50th. Sorry, the price. The price is between the 50th and the 60th percentile. So you see 91,
• 45:35
  898, and 113, 777 is the 60th percentile. The curve itself is between the 60th and the 70th
• 45:45
  percentile. And it's about so that we can actually say that the power curve, interestingly, in
• 45:50
  Bitcoin's case, is about a two thirds sort of observation. So two thirds of the time, price is
• 45:56
  actually relative to the trend below it, one third of the time above it. And it's always exciting when
• 46:02
  it's above it, because first of all, that's a minority of the time. But it's also every day
• 46:07
  that it's above it, you know, unlike a rigid stock to flow model, which again, we can talk about that.
• 46:12
  this just adapts over time So it going to every time we above this curve we pull it up a little bit And every time we below that black line we pull it down a little bit That just the nature of how it goes That the model That trying to model what Bitcoin does
• 46:26
  So we are a little bit below it. That's not as fun, but we're not much below it. We're in about
• 46:31
  the 55th percentile. And by the way, 50th percentile means the median. So 50% of the time,
• 46:37
  that's the median. So that's where we are, Danny. That's where we are, about the 55th percentile.
• 46:43
  again, I just had Checkmate on the show yesterday.
• 46:48
  He's very good with the on-chain data,
• 46:49
  looking at, is this just a dip?
• 46:51
  Not, you know, he was even leaning into the idea
• 46:55
  without fully saying it,
• 46:56
  that this kind of looks like a dip.
• 46:59
  But, you know, I'm the same way as him.
• 47:03
  I make disclaimers all the time.
• 47:05
  Like, I do not day trade.
• 47:08
  I'm not here to, I'm just here to try to resolve
• 47:11
  the Maalox moments a little bit. Like bottom line, we're on trend. We're above the median.
• 47:17
  We're a little bit below the OLS, which is the power law, basically the ordinary least squares,
• 47:22
  the regression line, which is almost like saying the mean, slightly different, but basically it's
• 47:27
  like the mean. It's the best fitting trend that the price has done over the last 16 years. We're
• 47:32
  slightly below it. Now we look at these numbers. Let's see how far we could dip. So just before we
• 47:39
  do that can i just throw a couple of questions at you um can you just zoom right out so we can see
• 47:44
  the entire history of bitcoin on this yep so when i look at this obviously like 2013 2017 2011 there's
• 47:54
  these big peaks like way above that median line and then if you go to sort of the last few years
• 48:00
  we're staying much closer is this just like bitcoin maturing and and will it remain closer
• 48:07
  to that line as the sort of life cycle of Bitcoin increases. Yeah. So I, it seems to me that I'm
• 48:14
  about the last person standing that still says, I'm not saying that the cycles are not over,
• 48:19
  but I just, I find it curious or interesting that I've seen so many, you know, long-term
• 48:26
  Bitcoiners saying the cycles are over, the cycles are over, TradFi's here, Bitcoin IPO moment,
• 48:30
  which I actually liked that analogy a lot. I thought that was a great piece.
• 48:33
  It's a great analogy. I agree. I agree. I agree. And yet, and yet, we still have these statistics.
• 48:43
  I would say, you know, let's talk in six months. All right. Maybe it's a little bit longer,
• 48:49
  maybe a little shorter. But if in six months, this, you know, nice little green shaded area of the
• 48:55
  price growing in power terms is still between roughly, I don't know, the four and the eight
• 49:01
  here, that is the 40th percentile and the 80th percentile, then I would say cycles are over,
• 49:05
  or at least definitely the four-year cycle is over. But it's funny. I think I'm like,
• 49:11
  I'm not on Twitter so much, to be honest, so it might not be, but I've been saying every day on
• 49:16
  my stream, I'm not going to call it that it's over until it's over. And I know some people
• 49:21
  have done the math, like from trough to peak, we've now passed the average days of all the prior
• 49:30
  cycles together. I get all that. I get it. But like you said, every time there's been a pump,
• 49:38
  and it's true that this double pump in 2021 was kind of weird. But every time on this chart,
• 49:44
  we've been above the 90th percentile, which is fun. It's fun times. It's certainly Maalox
• 49:49
  moments for a lot of people, but we've had it. So I have not, I'm not saying I know for sure,
• 49:57
  This does not tell you timing.
• 49:59
  It just tells you relative risk.
• 50:01
  So I'm not saying that cycles are over.
• 50:03
  The four-year cycles are over.
• 50:05
  But I'm also not saying that they're not over.
• 50:08
  The hard thing with this, though, is what makes a cycle?
• 50:12
  What does it have to do to classify as a typical four-year cycle?
• 50:16
  Because, again, on this chart, it's barely been above the trend line this time.
• 50:21
  And so if we do go into a bear market, you would imagine that it's not going to be as volatile as the downside.
• 50:25
  side and does that mean the cycle's over or is that still the cycle continuing like this is where
• 50:29
  I think it gets tricky yeah no yes and yes I mean again I wouldn't I wouldn't be too complicated
• 50:33
  with it uh I think you're right yes and yes if we don't have a huge boom probably not a huge bust
• 50:39
  although again never say never no one knows um but here you can clearly see this was the start of
• 50:45
  the ETF run right so the ETFs were approved January February 2024 and you can clearly see
• 50:52
  and and uh james had you know verified this with a lot of the old coins they really came to life
• 50:57
  here and then for sure here all right when we got over 100k and the trump the trump pump and then
• 51:03
  you have you know liberation day dump and we're back up again but we're now there's a lot of
• 51:08
  softness so i totally understand and i would empathize with the idea that the cycles are over
• 51:15
  it's totally possible. I'm just saying
• 51:18
  every time
• 51:21
  we've been this 18, 20 months after the having
• 51:25
  eventually grandma gives a lot of money
• 51:28
  to her grandkids to buy Bitcoin.
• 51:31
  I know it's a narrative. I'm not looking
• 51:34
  at any trendline analysis. I'm just saying
• 51:37
  I am looking at trendline analysis. I'm not looking at
• 51:41
  TA analysis. I'm not looking at whatever they call
• 51:44
  the impulses and the ABC correction, all this Elliott Wave stuff, which I've heard some of
• 51:49
  these gold bugs for years on these newsletters, like this Robert Prechter guy, this deflationist,
• 51:53
  this Elliott Wave deflationist guy. It was never right. So I never put much stock into that stuff.
• 51:59
  But bottom line, sorry, I get all these tangents. I think it's possible. I think it's possible
• 52:06
  that we could have a nice boom here at the end of the year. Here's another thing, which is fun.
• 52:12
  uh fernando my old co-host uh and i about five years ago we interviewed um i was just thinking
• 52:19
  about this this morning now i'm now i'm uh blanking it's not jim rogers but who's the other guy
• 52:25
  guy that lives in asia mark faber it was mark faber uh we interviewed him you know the famous
• 52:31
  you know asian bull western bear and he was so angry i mean like as a lot of those guys like so
• 52:37
  you're like where is our gold run you know and he of course he says crypto he doesn't say bitcoin
• 52:42
  he's like all this money's going into crypto it's not going into gold that's a very uh famous sort
• 52:47
  of sentiment of gold bugs over the last 10 years i think they're having their time to shine now and
• 52:52
  i want to show you the same chart in gold ounces this is even more fun the the funny thing about
• 52:58
  that is i feel like bitcoiners are doing that now complaining all the money's going into gold and
• 53:02
  all the money's going into like ai stocks precisely and and they're they're right actually i think
• 53:07
  So there's real rotations here.
• 53:10
  You know, old Bitcoiners giving those coins away to Ibit and to new Wall Street investors.
• 53:16
  And old Bitcoiners probably moving into gold or to AI.
• 53:24
  Or just gold finally catching up from, you know, regular Trad 5.
• 53:30
  People thinking, okay, Bitcoin's done or whatever.
• 53:32
  The softness, maybe the four-year cycle's not happening.
• 53:34
  So all those narratives are actually, to some extent, true.
• 53:38
  But here's what's very interesting.
• 53:39
  If we look at the power curve in terms of gold ounces, Bitcoin price in gold ounces,
• 53:44
  it's very similar.
• 53:45
  So 95% R squared, that means 95% of the time the price moves around this line better than
• 53:51
  just a straight line average, which is obvious.
• 53:55
  That's the scientific definition of it.
• 53:56
  And we can see here that we are super cheap as far as Bitcoin priced in gold.
• 54:05
  So unlike here in the dollar chart, where we're just below trend and we have been hovering around trend basically for the last two years here, we haven't hit the trend line since 2022.
• 54:19
  All right.
• 54:19
  And it makes sense, right?
• 54:20
  At $4,000, $4,000 plus gold.
• 54:22
  and the actual price as of, let's call it the sixth, 25.39 ounces of gold per Bitcoin. The
• 54:31
  trend is 63. So almost a third, almost a third. I'm looking at this and I'm seeing
• 54:37
  from a gold bug's perspective, Bitcoin is on the trend, some of the cheapest that it's ever been.
• 54:46
  All right. We are at look at look at the percentiles now. 2026. Let me get back to the number.
• 54:53
  Twenty five point three nine ounces is under the 20th percentile, which is point four X the trend and above the 10th percentile, which is point three X the trend, which is 22 ounces.
• 55:04
  So in other words, extremely cheap. And yet and yet for as soft as you might think Bitcoin is relative to gold.
• 55:11
  Let's go back to 2022 to the puking, the SBF, you know, Terra Luna, all the disaster of, you know, the weak hands in 2022.
• 55:21
  How many ounces of gold do you see there?
• 55:23
  The actual prices?
• 55:24
  9.7?
• 55:26
  Yeah.
• 55:27
  So we are still, you know, nearly three times the value of gold from 2022.
• 55:37
  two, that to me shows enormous power curve growth for Bitcoin. The growth is still very strong,
• 55:47
  very fast, even though right now it's very weak relative to the trend. In other words,
• 55:52
  I really wonder how much longer the gold bugs, which are very similar, there's a lot of overlap,
• 55:57
  obviously, in these markets. I wonder how much longer they're going to hold their gold and see
• 56:01
  Bitcoin get to these cheap levels. So you think there's going to be a big rotation from gold to
• 56:06
  Bitcoin? I do. I personally do. Because again, it's just statistics. It is possible to say that
• 56:13
  gold really has been, I'm not using this as a real market manipulation term, but let's say
• 56:19
  suppressed over the last 15 years. It's just been out of favor. People are finally getting it.
• 56:25
  China's buying. A few things that don't jive with that in my view. First of all, government buying,
• 56:32
  which is the biggest buyers of gold, government gold holdings, is at the same very light 1.2%
• 56:38
  trend since 2008. If you do a trend line, I have this chart, I can pull it up. If you do a trend
• 56:44
  line on all the official gold ounces that governments have, it's not that much. I mean,
• 56:48
  it's increasing. It has been increasing since the GFC in 2008, 1% to 2% per year. That's the same.
• 56:57
  So where is this appetite coming? Where is this increase in the price coming?
• 57:03
  What also happens with the gold market and actually with any market, but not Bitcoin, which is great for Bitcoin, is we have the supply and demand functions.
• 57:12
  With Bitcoin, the supply is rigorous to the protocol because of the difficulty adjustment.
• 57:19
  The balance sheet budgets every 10, the balance sheet balance, the budget balances, that's
• 57:26
  what I should say.
• 57:27
  The budget balances every 10 minutes with Bitcoin.
• 57:29
  With gold, there's a lot of dislocation always, and it's always overshooting or undershooting.
• 57:35
  For example, a high gold price is going to bring in a lot of jokers to the gold industry.
• 57:42
  A lot of people that didn't care about it forever, but now care about it.
• 57:45
  Old mining projects that were completely unprofitable at $1,000 an ounce look pretty good at $4,000 an ounce.
• 57:52
  And that can work for a time.
• 57:54
  But there is still this mean reversion, which I don't see gold being immune from.
• 58:02
  Bitcoin is immune from that.
• 58:04
  We have a number of technology for Bitcoin, but gold is not immune to that.
• 58:09
  And by the way, here's the number.
• 58:11
  I have all the charts, but it's almost better to just talk about it.
• 58:14
  I think one of the really interesting things that's happened in gold this year is that
• 58:17
  Bitcoin, this, if you want to call it a cycle cycle, has not really attracted that much
• 58:23
  retail interest.
• 58:24
  But gold has had the retail FOMO.
• 58:26
  I'm sure you saw the pictures.
• 58:27
  I think it was actually in Australia.
• 58:29
  There was a huge queue out onto the street at a gold bullion place, people literally queuing
• 58:35
  up in the street to go and buy gold.
• 58:37
  Yeah, Bitcoin has seemingly flown under the radar.
• 58:40
  Nice.
• 58:41
  I did not see that.
• 58:42
  Makes perfect sense.
• 58:43
  And yeah.
• 58:46
  Let me just show you, you'll like this.
• 58:48
  So just while you're pulling that chart up,
• 58:50
  one of the things that this has made me think,
• 58:51
  getting back to the cycles thing,
• 58:53
  is I think your sort of power law take on this
• 58:57
  actually plays into a lot of the cycle people's play,
• 59:02
  which is that like a lot of people have said,
• 59:04
  maybe cycles aren't over, maybe they're elongating.
• 59:06
  And elongating is basically just saying power law.
• 59:10
  Yeah.
• 59:11
  Yeah, well, the power law, again, it doesn't, it actually doesn't predict the time. It just predicts, it just tells you the risk. So right now, theoretically, in dollar terms, we're at fair value. In gold, we're cheap. If you have gold, Bitcoin's looking pretty cheap. And again, I just want to harp on that point.
• 59:29
  it would be just statistically an anomaly if Bitcoin goes back to say 10 ounces of gold,
• 59:36
  like it was in 2022, right? I mean, that's just, that's, that's a, that's, that's completely
• 59:43
  different. And it's not, that's not what, uh, the markets project, let's say for the longterm.
• 59:49
  And so here's the example of projecting for the longterm. So here's gold over, uh, 55 years.
• 59:58
  Now, a lot of people, when they do trends of gold, just so you know, and I'm sure you've seen this,
• 1:00:03
  they pull like $35 an ounce in August 1971, and it was actually 42. That's a statutory rate at the
• 1:00:09
  time. That's what the US still values their gold at is 42 bucks an ounce. So they take this,
• 1:00:15
  and then they take the price today, and they get a number that's pretty gangbusters right now.
• 1:00:19
  It's still not over 10%. I don't actually know the latest. It might be closer to nine or something
• 1:00:24
  right now, if you do the compound growth, that exponential growth, but that's cheating a little
• 1:00:28
  bit because you're ignoring the peaks, the troughs. What you got to do with all this stuff,
• 1:00:32
  and this is one of the things that really harp on my channel, is it's not about picking peaks
• 1:00:37
  and troughs and everything. It's take the trend, take the trend. And okay, so here's a very
• 1:00:42
  beautiful, perfect, exponential trend line slicing through the gold market on log scale.
• 1:00:47
  This is what we talked about at the top of the show. This is all TradFi works like this.
• 1:00:50
  So what's the slope of that trend? 5.3% CAGR. It's actually not that much to write home about. Now, it might be better. It might in the future. But let's look where we are now relative to literally the max that we've ever seen. We're not there yet. And we could get there. I absolutely think we could get there. But we didn't get there in 2011. And it's possible that we could do something like this.
• 1:01:13
  Like this, this was so early in the data that, you know, getting so what I'm what I'm to be clear, what you're seeing here, this this line didn't exist at the time.
• 1:01:23
  So what you're seeing is sort of the evolution of how the trend would grow.
• 1:01:27
  But it was always this red line is 2.54x the trend at the time.
• 1:01:32
  So it's possible that right now we could just blow through this and to keep us at our 2.54x the trend, which is 100.
• 1:01:40
  You know, that's basically the max observation.
• 1:01:42
  We could do that here.
• 1:01:43
  we could pull even higher i could totally see a world where it goes i think that what was the
• 1:01:48
  price there about five thousand dollars uh yeah five five thousand is that number so five thousand
• 1:01:54
  the number gets to five thousand dollars yep but let me show you now and i have a chart like this
• 1:01:59
  for ai as well or basically the top tech stops tech stocks in the u.s let's just look at this
• 1:02:05
  period which is from actually not even this period just from this period from 2022
• 1:02:09
  too. It's the best R-squared, the fastest trend line I can show you for gold, the most favorable,
• 1:02:15
  the Peter Schiff curve, basically. And it's right here. You started here, actually, in December.
• 1:02:23
  No, October. Where did I start it? October 2023 at that dip and then grow.
• 1:02:30
  It's a curve that Peter Schiff has been waiting his whole life for. It would be amazing,
• 1:02:35
  all the rest. Let's see how long it would take to get through the all-time trend, top-level
• 1:02:41
  observation ever. It would be $5,351 an ounce. That would be the number. So totally possible
• 1:02:50
  we can get there, right? I'm absolutely saying it's possible. What is highly improbable,
• 1:02:56
  and we can show this with the market cap of gold, it would be like the size of the US
• 1:02:59
  debt by 2038 or something. What's highly improbable is that we go, again, compound growth,
• 1:03:07
  41. I didn't even say, what's the slope of that curve? 41.3% CAGR. That's what Bitcoin does right
• 1:03:14
  now. Yeah, that's what Bitcoin does right now. And Bitcoin's slowing. So for that just to keep up,
• 1:03:20
  you're at $100,000 gold by 2035. Peter Schiff would love this.
• 1:03:25
  Bitcoin's tiny compared to gold.
• 1:03:27
  That makes no sense.
• 1:03:28
  Precise.
• 1:03:28
  It makes no sense.
• 1:03:30
  It just doesn't make any sense.
• 1:03:32
  And you have to think about the supply and demand dynamics that I said.
• 1:03:36
  They say in the commodity industry, right?
• 1:03:39
  It's like the cure for high prices is high prices.
• 1:03:41
  The cure for low prices is low prices.
• 1:03:43
  But it's depending on your perspective.
• 1:03:45
  So if you're a consumer, the cure for high prices is high prices.
• 1:03:48
  Because if you just want to buy gold or you want to buy jewelry or whatever,
• 1:03:51
  you know if prices stay so elevated relative to the cost of mining you're just going to get more
• 1:04:00
  entrance into the market more competition price will come down conversely if prices are so low
• 1:04:07
  relative to uh to uh mining then you're going to get more producers uh coming in and uh you know
• 1:04:16
  figuring out or sorry you're getting more consumers more consumers coming in and buying until the
• 1:04:21
  price rises. So that's that dichotomy, right? So the cure for high prices is high prices in the
• 1:04:28
  case of gold. So it's a long-winded way of saying I don't see this lasting, let's say, more than,
• 1:04:34
  I don't know, two years, three years. It totally could blow through the old record, which would be
• 1:04:39
  $5,300 an ounce, maybe it goes to $10,000, maybe it goes to $15,000. On this trend, it would only
• 1:04:44
  take till 2029 at some point uh the numbers are so wacky compared to all the other base
• 1:04:52
  level things like um like government balance sheets right it just it it wouldn't it wouldn't
• 1:05:00
  it wouldn't hold in my even if it makes it to 2029 it's not going to make it to 2039 on that curve
• 1:05:05
  right precisely so it's going to go back to this it's going to revert to the mean at some point so
• 1:05:09
  Have you ever done a log log power lower on gold?
• 1:05:15
  No, it wouldn't fit.
• 1:05:16
  Actually, no, I have.
• 1:05:17
  Let's see if I can pull it up for you.
• 1:05:20
  Just to show you how it does not fit.
• 1:05:23
  So here's a power curve on gold.
• 1:05:26
  Now, I can't log log is sort of bad on my software here.
• 1:05:29
  I can do it at my break.
• 1:05:31
  Yeah, so here's log log.
• 1:05:34
  All right.
• 1:05:36
  Don't watch these dates here.
• 1:05:37
  It's annoying.
• 1:05:37
  The tooltip will be correct.
• 1:05:39
  But basically, you're spread out way here back in the 70s.
• 1:05:43
  There's a lot of distance between points.
• 1:05:45
  And then as we go here, you compress and compress.
• 1:05:47
  See that it's a straight line, right?
• 1:05:50
  It's a long, long straight line.
• 1:05:51
  It's a little bit weird because of the little bit not straight here.
• 1:05:55
  But basically, it's a straight line.
• 1:05:56
  This is a power curve, right?
• 1:05:58
  So, but taking that off, you get that gentle curve, which is faster at the beginning.
• 1:06:05
  You can see it doesn't fit well for gold.
• 1:06:09
  Yeah.
• 1:06:10
  Actually, R squared is better than I would think relative to the exponential.
• 1:06:14
  But it's nothing like the Bitcoin mom.
• 1:06:17
  Right.
• 1:06:18
  It's nothing like it.
• 1:06:19
  And also, it's not doing that.
• 1:06:22
  Nothing in the gold environment makes sense there.
• 1:06:25
  Like gold increases.
• 1:06:26
  Gold ounces come out of the ground at 1.8% per year.
• 1:06:29
  That's pretty been a fixed number for about 200 years.
• 1:06:32
  That's exponential growth.
• 1:06:33
  It's compound growth.
• 1:06:34
  It's just like the rate of interest.
• 1:06:36
  So, yeah.
• 1:06:38
  I could keep going on all these topics.
• 1:06:39
  What should we cover next?
• 1:06:40
  The thing that I would be interested in is your read on the AI stuff that's happening
• 1:06:45
  right now.
• 1:06:46
  Because there's a lot of people calling for like a huge bubble in that.
• 1:06:48
  Like, I want to know what your data says.
• 1:06:50
  Yeah.
• 1:06:51
  So I would say the exact same thing that this analysis I made for gold is going to happen
• 1:06:56
  with AI.
• 1:06:58
  Again, I don't know the true, let's say, stabilized cost for building a data center
• 1:07:06
  that would make sense.
• 1:07:08
  Um, you know, that's not crazy, but what I can tell you right now is if you look at the,
• 1:07:13
  here's the top eight market caps of us stocks, including, you know, Broadcom and NVIDIA,
• 1:07:19
  which are two chip makers, which obviously are going gangbusters right now.
• 1:07:22
  Here's the, here's the top eight market caps in the world.
• 1:07:27
  Uh, tech, us tech.
• 1:07:29
  I think TSMC might, might be a bigger than a couple of these companies, but I'm just
• 1:07:34
  sticking with us tech.
• 1:07:34
  so we're at 23.2 trillion that right now is the is the top that's about eight yeah 23.2 trillion
• 1:07:46
  dollars let's look at this on liberation day earlier this year is 15 trillion before liberation
• 1:07:54
  day when trump got elected and everybody thought he was going to save the world 18 trillion
• 1:07:58
  so higher it went from 18 down to to uh maybe even 13 13.8 and then you know just back
• 1:08:08
  two years into the biden administration uh it was 6.8 trillion total total so let's put some
• 1:08:16
  trend lines on this and i'll show you okay so the same same deal let me know if you have a question
• 1:08:22
  on this one pulling up the chart that's all good i just i just uh i need to see these trend lines on
• 1:08:27
  Yeah. So you can see, obviously, booms and busts and Maylocks moments for everybody. It's just
• 1:08:35
  exponential growth, crazy days. Here is the from 2008 trend line. It's a very good trend.
• 1:08:44
  98.7% R squared. I'm putting this on log scale already just to show you straight lines. This
• 1:08:51
  is this chart. It's just total, total, total eight stocks, Amazon, Google, Meta, NVIDIA,
• 1:08:58
  Apple, Microsoft, Broadcom. Here's the CAGR. It's a pretty great CAGR, 24.3%. If you bought,
• 1:09:07
  and even before this, you bought Apple in 2000, Google obviously in 2004, you're happy.
• 1:09:12
  All right. But still, huge deviations can happen from the mean. You have the pandemic silliness
• 1:09:19
  here meme stock trading and then liberation day takes you well below the minute It can be crazy but it clearly an exponential relationship not like Bitcoin not like bitcoin all right now let do that same thing we just did with gold let go to the hundredth percentile first of all notice it much tighter than gold right
• 1:09:35
  the old gold one was like you know gold gold went through a long bear so anyway this is a you know
• 1:09:42
  it's pretty this is why they say the trend is your friend like i'm not i'm not saying if you
• 1:09:47
  want to and bitcoiners do this by the way if you if you want to throw some money into some
• 1:09:51
  tech stocks and take some 2011 sat gains in dollar terms, whatever. Never financial advice on my
• 1:10:00
  channel, but it's much tighter and we're actually not there yet. So this is the max max. Now notice
• 1:10:08
  how tight this is. It's only 1.37x. The trend will be the record. We're not there yet, but let's draw
• 1:10:16
  like we did the Peter Schiff trend. Let's catch the best trend over, I think I did here. Actually,
• 1:10:22
  I can't remember. Let's pull it up. Yeah, good. I took it here, not just Liberation Day. So
• 1:10:26
  same deal, basically. The last two years, ChatGPT came out, started 2023, same deal.
• 1:10:32
  Massive growth. And indeed, about the same as gold and Bitcoin at the moment, 41% CAGR.
• 1:10:38
  So how long can that go? How long can that go? Well, here it's a little bit longer,
• 1:10:43
  actually to reach the max. I'm not saying that this red line needs to be hit, by the way. Again,
• 1:10:48
  this is just statistics. If we think AI is a crazy boom, if we think it's all it's cracked up to be,
• 1:10:55
  and a lot of people don't think that, right? They think it's overrated and chat GPT seems to get
• 1:10:59
  worse and worse every day, taking longer and giving more insane answers. But if you think
• 1:11:05
  that it is going to be a sea change, a narrative change. Okay. Well, where would be the level that
• 1:11:13
  that would outstretch the prior trend? The level in terms of market cap of these companies is right
• 1:11:21
  here. It's about, I told you right now, they're about 23 trillion. So sticking on that same trend
• 1:11:27
  line of the last two years when Chad GBT came out, that would take us to 35 trillion. So we need to
• 1:11:34
  go up $12 trillion in market gap, which by the way, you know, again, you could have huge booms,
• 1:11:39
  huge busts, but that's, that's the number. And then of course the question remains, how,
• 1:11:43
  how much longer could that go? Would that be a new trend? Would we settle in? I,
• 1:11:46
  I don't know all the answers to those questions, but, um, you know,
• 1:11:51
  this could run, this could run. I'm absolutely not saying that it, it, uh, it will not.
• 1:11:58
  But then you just got to start asking the question, is a 41.1% CAGR in the top tech companies in the
• 1:12:07
  world, is that sustainable? Does the cost make sense? Does the data centers make sense? Does
• 1:12:12
  the electricity consumption make sense? Some people think that it is. It seems that Wall
• 1:12:16
  Street is way more bullish on TradFi than it is on Bitcoin, even at this moment. So I'm just going
• 1:12:22
  have to see. But again, I try to harp on the same ideas on my stream, like just draw a trend line,
• 1:12:30
  draw a trend line to understand where we've been, which is here on the max level, and where we could
• 1:12:38
  go, which is here. And, you know, and then we'll see. And I would say, you know, caution, like
• 1:12:46
  Caution would be advised if we get to a $35 trillion industry in 2027 and
• 1:12:50
  chat TPT still seems as bad as it is today.
• 1:12:55
  So,
• 1:12:55
  you know,
• 1:12:56
  again,
• 1:12:57
  I got nothing against them.
• 1:12:58
  It's just whatever.
• 1:13:00
  So the thing that I'm interested in there is like the,
• 1:13:03
  I think it was around 35 trillion where it crosses the line.
• 1:13:07
  I wonder if in before this reverts,
• 1:13:10
  if it gets to the size of being bigger than the U S debt,
• 1:13:15
  that would be interesting.
• 1:13:16
  Yeah, it would.
• 1:13:19
  The, I mean, I don't know how the parallels,
• 1:13:24
  it would be fun to run some analyses
• 1:13:25
  on like what they pay in taxes
• 1:13:27
  and tax receipts and stuff.
• 1:13:30
  That would be interesting,
• 1:13:31
  but I don't have that data yet.
• 1:13:33
  What I can tell you with the gold,
• 1:13:35
  back to the gold one,
• 1:13:36
  is it gets very silly.
• 1:13:39
  Let's actually just show you.
• 1:13:40
  Yeah, that one's way more crazy than the tech stocks.
• 1:13:43
  Right, but I can even show you in market cap.
• 1:13:46
  The lesson from this, I think, is sell gold, sell tech stocks, buy Bitcoin.
• 1:13:52
  That's my financial advice.
• 1:13:53
  Never financial advice from me, but yeah, you can.
• 1:13:56
  Here, here's the official holdings.
• 1:13:58
  This is another reason why I'm not so...
• 1:14:02
  Again, I got no problem with gold.
• 1:14:05
  It's fine to hold some gold.
• 1:14:07
  I know a lot of people in Bitcoin hedge with some gold.
• 1:14:11
  But if you look at something like this, this is the official holdings.
• 1:14:15
  in dollar terms.
• 1:14:18
  Same deal.
• 1:14:19
  Same chart.
• 1:14:19
  I got a long and a short trend.
• 1:14:21
  All right.
• 1:14:22
  So this is worldwide central bank
• 1:14:24
  and treasury holdings of gold
• 1:14:26
  from the 70s.
• 1:14:30
  Very similar.
• 1:14:31
  It's going to move with the price, right?
• 1:14:32
  But right now,
• 1:14:34
  we're at records.
• 1:14:36
  This is actually only of July.
• 1:14:37
  It's going to be a little bit higher than this.
• 1:14:39
  It's $4 trillion.
• 1:14:40
  Wait, tell me what I'm looking at here.
• 1:14:42
  Sorry, I missed that.
• 1:14:42
  Yeah.
• 1:14:43
  You're looking at...
• 1:14:44
  So central banks hold about 1.1 billion ounces of gold.
• 1:14:48
  I like to think in ounces, not in tons.
• 1:14:51
  I know like World Gold Council talks in tons,
• 1:14:52
  but there's 6 billion ounces of gold available worldwide,
• 1:14:57
  jewelry, bullion, coins, bars.
• 1:15:01
  7 billion has been mined throughout humanity.
• 1:15:04
  So that extra billion is usually,
• 1:15:08
  I chalk it up to industrial or losses.
• 1:15:11
  No one knows exactly, but it's something like that.
• 1:15:12
  So 6 billion is available.
• 1:15:15
  1.1, now it's getting close to 1.2 billion ounces
• 1:15:20
  is owned by central banks.
• 1:15:21
  See, that's a number that I could imagine going up a lot.
• 1:15:25
  It's not, though.
• 1:15:26
  This is the thing.
• 1:15:28
  This is the funny thing.
• 1:15:29
  So here's the lifetime trend.
• 1:15:33
  All right, the lifetime trend.
• 1:15:38
  And actually, I didn't, I should have done it from 2008.
• 1:15:40
  this is actually, you're going to think it is going up a lot and it is, but it's relative to
• 1:15:44
  the price. I need to show you announces, which I can show you in a second. So anyway, this is,
• 1:15:51
  let's look at the lifetime trend of all central bank gold holdings out to say 2050. All right.
• 1:15:58
  Can you read that? So it's 6,900 billion, 7,000 billion. That's a, that's 7 trillion,
• 1:16:05
  right? A thousand billions, a trillion. So $7 trillion. It's not even, you know, that's,
• 1:16:10
  That's the whole world, central banks, not just the US.
• 1:16:12
  And it's well smaller than the US debt today, which is going to grow.
• 1:16:17
  So that actually makes theoretical sense.
• 1:16:19
  Again, if we think in exponential, things grow constantly.
• 1:16:23
  It makes sense.
• 1:16:24
  Now let's look at this gold price growth explosion.
• 1:16:28
  It starts to look insane even by, let's say, 2035.
• 1:16:32
  You're at $75 billion of just holding gold of an explosive gold price.
• 1:16:41
  Yeah, that's crazy.
• 1:16:43
  It doesn't seem to make sense.
• 1:16:44
  And you're going to start to get to numbers that are already bigger than the United States debt.
• 1:16:48
  So again, I would love for everybody to just go on a gold standard and we buy gold, but we all know that's not going to happen.
• 1:16:53
  And it was already completely centralized after the first year of World War II.
• 1:16:59
  Most of the gold went into the United States.
• 1:17:00
  So with that chart, though, like the kind of obvious questions putting our conspiracy theorist hat on is like you're relying on central bank data here.
• 1:17:09
  Who knows if the U.S. has the gold that they have and who knows if China has way more gold than they have?
• 1:17:14
  Like. How reliable do you think this can be?
• 1:17:21
  I think it's it's a fairly it's a fairly good picture, but I totally understand, you know, GATA has all this.
• 1:17:30
  They've been talking about it for years that the U.S. most of the gold that you see on the U.S.'s books, which, by the way, isn't even marked to market.
• 1:17:36
  They put it at 42 bucks an ounce so they can have more room for the treasuries that they hold with their printed money.
• 1:17:40
  But they say that, you know, they have it all.
• 1:17:45
  Maybe they don't.
• 1:17:46
  Fort Knox hasn't been audited since the Eisenhower administration.
• 1:17:49
  All that stuff, I think, is is true.
• 1:17:50
  But the more important thing is just that gold is notably failed.
• 1:17:55
  I mean, again, I say this as someone who has no problem with gold, but it has just failed in the, you know, what's the Bitcoin word I should use?
• 1:18:07
  Or the Taleb term, anti-fragile.
• 1:18:11
  You know, it's just not.
• 1:18:12
  It's been centralized.
• 1:18:13
  So here's another reason why I don't necessarily think gold's going to the moon.
• 1:18:19
  The biggest buyers of gold have been buying.
• 1:18:23
  all right and by the way the euro area holds the most all right which is hasn't changed in uh
• 1:18:29
  really it's gone down a little bit from when the euro started but this was a this is a big thing
• 1:18:34
  that germany did when they decided that they agreed to come on the euro so we got it back
• 1:18:38
  by gold so it is officially backed um it was at least 10 to start even more maybe here 15
• 1:18:44
  i think it's still maybe something like 10 um the dollar which again they might not have so
• 1:18:52
  the euro and the dollar. So at least the Western nations do have it, IMF, which the US controls.
• 1:18:56
  And then people always talk about, okay, Russia, China, India, they're going to be the big buyers,
• 1:19:00
  or they're going to be the big drivers of gold demand. First of all, they're not that small.
• 1:19:08
  They're not that big. They are small. So I'll take away the Europe, United States, IMF,
• 1:19:13
  and Switzerland. All right. So we do have the rest of the world. It's growing here. But it's not like,
• 1:19:19
  in my view, this is, you know, justifying such a insane price as of recently. And if you did a
• 1:19:27
  trend here, I don't have it on this chart, but if you went from say here, which, uh, this is
• 1:19:33
  confusing because I haven't dollars in ounces, but basically this amount, which is something like
• 1:19:40
  220 million ounces for these emerging market players in the rest of the world, 220 million
• 1:19:46
  ounces from 2008, the GFC. It has gone up. It has indeed gone up, but you're at 400,
• 1:19:55
  maybe not even 400 million ounces. I should have the total here. So 220, 230 to 400. If you do a
• 1:20:03
  compound on that, an exponential growth trend, it's less than 2% a year in actual ounce buying.
• 1:20:09
  Again, we just talked about how gold is growing at 40% on a trend over two years, the actual price
• 1:20:16
  how does that correlate with central bank buying which is two percent a year or less
• 1:20:21
  it doesn't square so i'm not interesting yeah i'm not a big believer that this is
• 1:20:27
  gonna change the world yeah because like the narrative that i mean i don't follow gold closely
• 1:20:32
  but the narrative i see on like twitter and stuff is that this is like china central bank buying a
• 1:20:37
  load of gold that's driving the price up like if it's not the central banks what do you think is
• 1:20:41
  causing the price probably the uh rotation that you know uh mark faber was depressed about five
• 1:20:49
  years ago and all the gold bugs were depressed about five to ten years ago that we got no action
• 1:20:53
  sideways movement from gold since 2011 uh you know it was let's just go back to the long-term
• 1:21:00
  trend it was it wasn't like even off the trend but it's just you know it's just it's it's just
• 1:21:08
  markets, right? They spring. You can have a lot of movements. And if you can catch that momentum
• 1:21:14
  and you can draw lines on the wicks, all power to you. I just prefer to look at things relative
• 1:21:19
  to the overall rate of change. Gold is pretty hot right now. It could stay hot for another
• 1:21:25
  two to three years. But at some point, the numbers are so insane. Like central banks,
• 1:21:32
  basically, if this is what it is, then governments can just keep printing money and just hold
• 1:21:38
  the gold that they have. And, you know, Bob is your uncle, as the Brits like to say.
• 1:21:44
  As we know, as we know, you know, that's just not how markets work. And the numbers are just,
• 1:21:54
  you know, I guess you could theorize that in 10 to 20 years, either we're going to go back to a
• 1:22:03
  gold standard or we're going to go back to we're going to go on a bitcoin standard okay uh or we'll
• 1:22:08
  have a little bit of both maybe central banks will start to hold more gold and more bitcoin
• 1:22:13
  that's fine but still relative to the mining cost relative to the uh to the sales price
• 1:22:23
  there's it's just like it's like ai valuations it's just so silly after some time that it
• 1:22:30
  eventually has to revert. Yeah, but it can go. Look, I'm not saying we can go look here. I mean,
• 1:22:35
  it can go by 2030, $20,000 an ounce. That's possible. But with the nature of compounding
• 1:22:40
  at 40% per year, like something will break somewhere in the system here. Like that's,
• 1:22:44
  that's reverting to a gold standard or something, you know. I guess the bullish thing for Bitcoin
• 1:22:49
  here is that if this isn't like a huge geopolitical shift, if it's not central bank stacking tons of
• 1:22:54
  gold and it is just a trade, like at some point you would expect a rotation back to things like
• 1:22:59
  Bitcoin. And more importantly, I don't see anything in the buying now that reflects
• 1:23:07
  the price action that justifies the price action. It's the same old central bank buyers
• 1:23:14
  that have been buying since 2008. You know, Russia is like a client state of China now.
• 1:23:22
  I mean, Russia, Russia's issuing bonds in Chinese yuan. Did you see this?
• 1:23:27
  no i didn't that's insane there's now russian government bonds denominated in chinese yuan
• 1:23:33
  and they're going to force you know russian banks and clients to hold them like that's it's such a
• 1:23:38
  disaster that's wild state yeah so you know and you know good luck convincing at least the same
• 1:23:47
  people to buy those so it's it's not it's nothing it's it's it's continuation of the past yes china
• 1:23:54
  is getting stronger. They also got demographic problems. You know, we can talk about the
• 1:23:57
  geopolitics all day long, but it's probably more important things to talk about. So maybe quickly,
• 1:24:02
  before we do close out, we should talk about Bitcoin becoming the world's biggest base money.
• 1:24:09
  I know, I know it's been close. I'm sure the price action in the last few weeks has dropped
• 1:24:12
  that down a little bit, but maybe it's worth just very quickly explaining what base money is as sort
• 1:24:17
  of like cash in this economy. And then maybe just put into context, like the scale of Bitcoin,
• 1:24:23
  because I think it's really easy to not understand how close Bitcoin is to the US dollar in this.
• 1:24:28
  Yeah, let's do that. So I made a tweet of this.
• 1:24:32
  Yes, I did see this tweet, but I've not really gone into it in detail. So walk us through it,
• 1:24:37
  explain what's going on here. So I'm showing a snapshot of only America's money supply,
• 1:24:43
  which is based abroad, which is base money to M3 back in 2015 to 2025, June. In 2015,
• 1:24:53
  there was $22 trillion of total US money supply, total dollars in all different
• 1:24:59
  savings accounts, checking accounts, time deposits, repurchase agreements.
• 1:25:03
  And in 2025, June, we have 40. All right. So nearly a double. And if you remember our
• 1:25:09
  compounding a double in 10 years is a 7.2% CAGR. So that's roughly what the total money supply is
• 1:25:20
  doing. I'm also layering in Bitcoin. So Bitcoin you see here, incredible, $4 billion in 2015,
• 1:25:29
  June. That was the crypto winter as they called it, but I know Bitcoiners don't like that word.
• 1:25:35
  um 2025 june all right we have uh we have 2.13 trillion dollar valuation okay and we've gotten
• 1:25:47
  close to 2.3 so what i try to talk about a lot as well so the power curve i look at if i could do
• 1:25:55
  a broad statement about two main pieces of my research is is the power relationship that bitcoin
• 1:26:00
  has, you know, to itself, to the hash rate growth, address growth, price adoption.
• 1:26:07
  There's this power relationship that can ground us and help us understand what Bitcoin does.
• 1:26:12
  There's also, of course, the TradFi world, the money supply.
• 1:26:14
  Bitcoin is money.
• 1:26:15
  So how does that fit in?
• 1:26:16
  I still believe that at the moment, the power growth, the power relationship of Bitcoin,
• 1:26:23
  you know, to itself, to its price over time is 95% of the story.
• 1:26:29
  95%.
• 1:26:30
  5% is the Fed, interest rates,
• 1:26:34
  the economy, deficits, taxes.
• 1:26:36
  Yeah.
• 1:26:37
  It's just too small.
• 1:26:38
  It's just too small to affect it at the moment.
• 1:26:39
  And you can still see that here.
• 1:26:41
  Okay.
• 1:26:42
  So again, even at 2.1 trillion,
• 1:26:45
  and by the way, this is only America.
• 1:26:46
  This is, you know,
• 1:26:47
  the European Union has a similar breakdown,
• 1:26:50
  a little bit smaller, the Euro,
• 1:26:52
  the Yen, the Yuan, you know,
• 1:26:54
  Russia's shitty currency.
• 1:26:56
  They all have, uh,
• 1:26:59
  broad money supplies, which is deposits, which are representations of value that people give to
• 1:27:07
  the banks. And then the banks hold assets, which are loans. That's how the banking system works.
• 1:27:10
  And all of that is a compounding function with a rate of growth, an interest rate of growth
• 1:27:16
  year on year. So it's going to grow. It's always going to grow. Bitcoin's going to grow and fiat's
• 1:27:20
  going to grow. The most economically comparable money supply to Bitcoin is what's called base
• 1:27:28
  money. Okay. So it's here. And that's just like cash in the economy, right? Yeah. So I, I try to
• 1:27:35
  literally show you exactly. So what it is, is it's bank reserves, right? Which is what banks
• 1:27:40
  hold. This is like the bank account with the Fed. That's what that, sorry. This is the bank's bank
• 1:27:46
  account with the Fed. It's called the master account. It is digital. It's the, it's the,
• 1:27:50
  it's the main account. Okay. So it's bank reserves. Also the vault cash, you know,
• 1:27:53
  banks, even though it's kind of weird, uh, they do hold a little cash still. It's not much.
• 1:27:58
  Not enough.
• 1:28:00
  Yeah, not enough.
• 1:28:00
  Not enough.
• 1:28:01
  And then in cash and circulation, which is cash outside the banks, you know, in grocery
• 1:28:05
  stores, in retail shops, in your wallet, in a safe, under your mattress, whatever.
• 1:28:11
  These three things, bank reserves, vault cash and cash in circulation, total base money.
• 1:28:16
  Okay.
• 1:28:17
  And in the US right now, if you look at it here in 2025, we got 3.357 bank reserves,
• 1:28:24
  85 billion vault cash, 2.3 trillion.
• 1:28:27
  Did I say 3.35 billion?
• 1:28:28
  3.3 trillion bank reserves vault cash 85 billion 2.3 trillion cash are you getting somewhere a
• 1:28:34
  little over 5.5 5.6 trillion dollars in base money okay 10 years ago it was 3.7 all right so it grows
• 1:28:45
  uh then you have m1 okay so you have m1 is actually the only money supply that overlaps
• 1:28:53
  with a so you notice if you can see these shaded things here yeah this one's kind of purple
• 1:28:58
  That's because there's an overlap.
• 1:28:59
  So cash in circulation is also called M0.
• 1:29:02
  That plus your demand deposits is M1.
• 1:29:05
  So that's M1 money.
• 1:29:07
  A lot of people like to say, oh, Bitcoin's M1 money.
• 1:29:09
  It's not at all M1 money.
• 1:29:12
  Yes, the cash in circulation is bare.
• 1:29:14
  That's very much relatable to Bitcoin.
• 1:29:15
  But demand deposits have nothing to do with Bitcoin.
• 1:29:17
  So demand deposits are a representation of wealth that someone deposits with the bank.
• 1:29:23
  The bank turns around, loans it, tries to make interest.
• 1:29:25
  They may or they may not.
• 1:29:27
  Um, but that's, you know, that, that's not anything what Bitcoin is.
• 1:29:31
  Bitcoin is a UTXO on Bitcoin is bear.
• 1:29:34
  It's final.
• 1:29:35
  It's just like, uh, the cash part, but it's not at all like demand deposits.
• 1:29:39
  So anyway, M1 is M0, which is also part of the monetary base.
• 1:29:46
  Um, plus demand deposits.
• 1:29:49
  That is M1.
• 1:29:49
  M1 is demand deposits plus M0.
• 1:29:51
  All right.
• 1:29:52
  You can see here back in 2015, it was about 3.7 trillion.
• 1:29:57
  Today, after the massive stimulus of the pandemic, people still have a lot of cash.
• 1:30:03
  It's over 10, it's about $10 trillion.
• 1:30:06
  $10 trillion.
• 1:30:08
  Yeah.
• 1:30:08
  So that's M1.
• 1:30:09
  Then M2, you got the biggest stack savings deposits.
• 1:30:14
  That is $7 trillion in 2015, 8.8 today.
• 1:30:19
  All right.
• 1:30:19
  Then you got retail time deposits.
• 1:30:22
  People know that, right?
• 1:30:23
  That's when you actually explicitly put your money in the bank for a specified term.
• 1:30:27
  That was $500 billion back in the day, 10 years ago only.
• 1:30:30
  Now it's a trillion.
• 1:30:31
  So there you go.
• 1:30:32
  It's a 7.2% CAGR per year in growth.
• 1:30:35
  You got retail money market funds.
• 1:30:37
  That's basically like a stable coin, but it's basically brokerage account money.
• 1:30:40
  $600 billion 10 years ago.
• 1:30:43
  Today, $2.1 trillion.
• 1:30:46
  All right.
• 1:30:46
  And then M3 money.
• 1:30:48
  Now, no one on Twitter posts about M3 because the Fed doesn't use it anymore.
• 1:30:52
  So people in their broadest representations, they like to do charts of M2 all the time.
• 1:30:57
  That's not the total money supply.
• 1:30:59
  It has to be M3.
• 1:31:00
  They stopped telling you what that was.
• 1:31:02
  The Fed stopped telling you what that was in February 2006.
• 1:31:06
  I wonder why.
• 1:31:06
  Conveniently, two years before the crisis.
• 1:31:09
  There's two things that are important in M3 that they stopped.
• 1:31:13
  So first is repurchase agreements.
• 1:31:15
  Repurchase agreements are basically like treasuries that trade like cash.
• 1:31:19
  It's people levering up treasuries.
• 1:31:20
  It's like you put liquidity in your, I don't know, your Kraken or your Coinbase account and you trade with leverage. That's what people do. They're posting a treasury bond, hedge funds posting a treasury bond with a money market fund and trying to short or do something else more aggressively. And the money market fund in return for allowing that, giving them that liquidity to do that in the market, they earn excess of what they would earn if they just bought the treasury bond itself directly from the government.
• 1:31:49
  so that's that's so basically the bottom line is m3 money's less regulated highly liquid highly
• 1:31:55
  fast money and it's all institutional money so you got institutional time deposits institutional
• 1:32:00
  money market funds are like stable coins repurchase agreements or repos so here you can see this is
• 1:32:05
  the total amount and notice uh institutional money market funds and repos big dollar numbers now okay
• 1:32:13
  They've all roughly grown with the exception of savings deposits and the exceptions of
• 1:32:19
  demand deposits, which grew faster because of the stimulus from the 2020 period.
• 1:32:24
  They all roughly grow at, they double every 10 years, right?
• 1:32:29
  They grow at 7% to 8% a year, but that's what's happening sort of inside the
• 1:32:37
  the system and it's also my again i i want to keep going back to the idea that
• 1:32:44
  um 95 of what you see in bitcoin is the network growth itself it's adoption is the power curve
• 1:32:51
  only five percent is actually this stuff so you know i'm not i'm not saying just forget about it
• 1:32:56
  or whatever but you know this is rarely this is rarely and not very significantly on the feds
• 1:33:04
  radar at the moment right there's there's so many other things that they're trying to attend to in
• 1:33:08
  the economy i'm not i'm not defending them i'm not saying they do it do it right but bitcoin is just
• 1:33:12
  still so small yeah that we got a while we got a while and i expect money supply to double again
• 1:33:19
  within 10 years and uh you know double again after that so if not maybe even a little bit faster so
• 1:33:28
  that's the lesson i would just try to say is like look there's a lot of different money supplies out
• 1:33:33
  there everything i just drew here for the americas or for the united states you can draw for other
• 1:33:38
  countries uh and there's even one more thing that actually is not here which is another reason why
• 1:33:42
  the fed stopped publishing m3 and that is euro dollars so euro dollars or offshore dollars
• 1:33:47
  basically dollar-based accounts in you know japan that's not that was never really counted very well
• 1:33:54
  i i are they even able to count that that's that's the question i i think you could if
• 1:33:58
  If someone, I bet the IMF has some idea.
• 1:34:01
  I haven't seen good estimates.
• 1:34:04
  But if you were to like just try and even guess what that number would be,
• 1:34:08
  I mean, I imagine this would that would blow all the rest of these off the chart.
• 1:34:11
  Like it would be.
• 1:34:11
  It's definitely on the higher end.
• 1:34:13
  Yeah I seen wild estimates of Euro dollars from being like a couple trillion to ten trillion to 30 trillion to 100 trillion Yeah There a lot of mixture there That some people mixing you know
• 1:34:27
  just holding a treasury versus holding an actual dollar denominated account. So it's, yeah,
• 1:34:32
  it's hard to tell. And I don't have it either. So that's the one asterisk to this money supply
• 1:34:37
  that I actually don't have euro dollars. But in any event, I don't want to be too long here.
• 1:34:40
  The point is the money supply is complicated. I'm not defending it. Bitcoin is still very,
• 1:34:45
  very small. And at the end of the day, Bitcoin is most like what you call the base money section
• 1:34:51
  here, which is bank reserves, vault cash, and cash in circulation. And so it's growing. It's
• 1:34:58
  very close to the United States. Physical cash, look at this. You see, this was June, right? So
• 1:35:04
  cash in circulation in June was 2.3. It's a little bit more now. Bitcoin was close to passing that
• 1:35:10
  this month, whatever the market cap is now, it's not going to be 2.3 trillion by, or it didn't
• 1:35:16
  close at 2.3 trillion by October. I thought it was possible. Maybe November, if we have the
• 1:35:20
  cycle continue, as I say may have, maybe we will pass it. But this is actually the last
• 1:35:26
  fiat money supply part of base money that's just cash that's bigger than Bitcoin.
• 1:35:34
  That seems like a huge signal if Bitcoin gets to the scale where it's bigger than all,
• 1:35:39
  you know, US cash in circulation at least. And it's not even a million miles from the entire base
• 1:35:44
  money. Yeah. Yeah. It's true. I mean, it's, it's growing fast. It's growing at 40% a year,
• 1:35:49
  although declining on a power curve. So yeah, it's, it's, it's important. It's growing. I mean,
• 1:35:54
  we all know the benefits of Bitcoin, but I'm just trying to temper people's expectations because,
• 1:35:59
  um you know as much as we might think hyperinflation is coming tomorrow or hyperbitcoinization is coming tomorrow none of those things hyperinflation in particular is not a good thing
• 1:36:12
  It's not something I particularly cheer for. And, you know, some of this, you know, I was on a panel
• 1:36:18
  with Peter Todd and Adam Back in Helsinki, and Peter's been on about this a lot. He talks about
• 1:36:23
  like what the, you know, the cypherpunks had to do with code and the national security laws in the
• 1:36:27
  90s. Like at some point, and I don't want to say that the United States Supreme Court is the
• 1:36:32
  ultimate arbiter of this stuff, but at some point politically, we're going to have to win
• 1:36:37
  on some levels here, right? It goes back to, is Bitcoin going to be pulled to the TradFi curve,
• 1:36:42
  or is Bitcoin going to pull TradFi to the power curve? There will be some political victories that
• 1:36:47
  we will need to have. Like, you know, an obvious, I know you got to jump to any, but like an obvious
• 1:36:52
  problem to this would be if everyone in the world just accepts that we can't withdraw our Bitcoin
• 1:36:57
  from mainstream exchanges.
• 1:36:59
  That's not a future I want to see.
• 1:37:01
  Exactly.
• 1:37:02
  So these are still open questions.
• 1:37:04
  I know a lot of people with the Trump admin
• 1:37:06
  thought that that threat was over.
• 1:37:10
  I don't see that over yet.
• 1:37:13
  And I see that money supply is still growing.
• 1:37:14
  I see the military industrial complex growing.
• 1:37:17
  I see a lot of things that are difficult
• 1:37:19
  for sort of the Bitcoin future that we all want.
• 1:37:24
  So, yeah, maybe it's not the most optimistic note to end the show on, but I would say,
• 1:37:30
  look, we're making interesting records.
• 1:37:35
  We're breaking interesting records almost every month with Bitcoin, right?
• 1:37:37
  And like I said, this 2.3 cash in circulation here is the last...
• 1:37:42
  That the last fiat stock that Bitcoin hasn passed in value It bigger than euros yen yuan you know shitty Russian ribbles for sure But it not bigger than the US dollar yet And that
• 1:37:54
  will be a fun one. It could happen in November, could happen in December. But that's not even the
• 1:37:59
  size of the monetary base. You still got to count the bank reserves on top of that. It's going to
• 1:38:03
  take time. All that, by the way, is about $27 trillion. I'll release my update coming soon this
• 1:38:07
  quarter. So $27 trillion is the total base money of the world. $27 equivalent. Bitcoin, as you know,
• 1:38:14
  is 10% of that. So we got some time. Yeah, but it's going to happen. It's not a if, it's a when.
• 1:38:24
  I think we're in the right industry. Yeah, I think we're in the right industry.
• 1:38:28
  Bit of a sobering thought to end on, but Matthew, I appreciate you, man. I could talk to you all day.
• 1:38:33
  um i think maybe honestly i've got like three or four other like half hour topics to talk about so
• 1:38:38
  maybe we give it a few months and we go again but i appreciate you man this is great yeah likewise
• 1:38:43
  danny uh all the best to you congrats on everything you're doing and uh you know hope to see you
• 1:38:47
  hope to see you sooner rather than later i'm sure we will before we close out actually you should
• 1:38:52
  tell everyone where they can watch your streams get all your updates everything you do yeah you
• 1:38:57
  You can just find me.
• 1:38:58
  The handle is OneBaseMoney on Noster, Twitter, whatever.
• 1:39:02
  YouTube OneBaseMoney is my handle.
• 1:39:05
  You can...
• 1:39:06
  BaseMoney.world is my website.
• 1:39:08
  It's the easiest way to remember, probably.
• 1:39:10
  Let's go.
• 1:39:11
  All right.
• 1:39:11
  Thank you, Matthew.
• 1:39:12
  This was great.
• 1:39:13
  Thank you, Danny.
• 1:39:14
  Take care, man.
• 1:39:27
  Thank you.