Latest / Simply Bitcoin / Will MicroStrategy Outperform Bitcoin Itself? | Alex Thorn

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Will MicroStrategy Outperform Bitcoin Itself? | Alex Thorn · Simply Bitcoin

0:00
Whales are selling. There are OG whales that are
0:02
selling. I guess anything is possible.
0:04
The US government is extremely large does.
0:07
The US government still have that Bitcoin.
0:09
What's going on there? Not every coin that the US
0:11
government may or may not control at the moment is.
0:15
Did they sell the Bitcoin? Looking at the addresses in
0:18
various cases and then we look at that address, see that it
0:21
moved to a new place and now it's just Long story short, I
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don't know what to tell you like people like you know, this is
0:26
what drives so many to look for the next Bitcoin, right and and.
0:29
The most bullish cycle ever bro like.
0:32
Feels like, you know, the beginning of a true, like second
0:35
or third act for Bitcoin. Your life won't be better than
0:37
your parents, that you may never, you know, reach the
0:40
American Dream. And as far as I'm aware, there
0:43
have never been centralized companies with publicly listed
0:47
equities whose sole purpose is to use leverage and dilution to
0:51
acquire a commodity. They're safer than IC OS in that
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sense. The amount of people that are
0:56
taking self custody is actually going on a downward trend.
1:01
Should people buy be buying spot Bitcoin these days if
1:05
MicroStrategy is going to outperform if yeah, welcome to
1:11
another episode of simply Bitcoin IRL.
1:13
Today I have a very special guest.
1:14
I have the head of firm firm wide research, Alex Thorne in
1:19
the house. How you doing, Alex?
1:21
I'm great, Nico. Good to be here, man.
1:22
Good to be back. Just an exciting time.
1:25
It continues to be exciting. You know, I don't know, I guess
1:27
say this every time, but this market gets weirder and weirder.
1:32
Bro, it's so weird. I mean, this cycle, you know
1:36
what I've been saying? I've been saying that like this
1:38
cycle from like a price action from a from a news perspective
1:42
has been the most bullish cycle ever, bro.
1:45
Like the president is like, hey, look, I own, you know, I'm like
1:49
one of the biggest treasury companies now.
1:51
You know, he's saying like I want to make Bitcoin.
1:53
I want to make, you know, the United States a Bitcoin capital
1:55
of the world. Like it's all the stuff like all
1:57
the treasury companies sailors like taking over finance,
2:01
creating his own central bank and then the price action is
2:05
like. I agree.
2:06
I mean insane levels like billions being raised and
2:09
deployed and seeing ETF flows. But I mean you are seeing whales
2:14
are selling. There are OG whales that are
2:16
selling, you know, people. Who are they?
2:19
Are those way I don't know. I think you know one of the the
2:22
whales that recently moved these 80K coins.
2:25
I think Sani is one of the best. You know, from time chain index,
2:27
one of the better Bitcoin on chain analysts said it's one of
2:30
the last 10,000 BTCUTX OS that's not attributed.
2:34
So you know, maybe we're through the whale unknown whale era.
2:38
Maybe it's now those guys, if they're cashing out, they're
2:42
cashing out into MicroStrategy or ETFs or Metaplanet or CEP or
2:48
all right, you have a whole new, IT feels like, you know, the
2:52
beginning of a true like second or third act for Bitcoin now,
2:55
like it's a whole different scale and, and type of market
2:59
participant 100. Percent and the the price action
3:03
reflects that right. You can see that it's
3:06
institutional money buying, it's smart money buying.
3:10
It's not retail because you don't see these kind of
3:13
parabolas like kind of, you know, mania phase.
3:16
Yeah, perhaps we haven't reached there yet, but it's been this
3:18
like kind of slow trickle, right?
3:21
They don't want the price to go up 20% when they're buying half
3:25
a billion dollars, right? So, you know, I I think they're,
3:28
they're deploying it strategically.
3:30
Now. I don't know if you saw that
3:31
post by Willy Woo, but Willy Woo, you know, very famous
3:35
analyst in the community and he basically, I don't know if he
3:38
was trolling or, you know, boating accident, lol.
3:42
But you know, you basically said I don't, I don't have any
3:45
Bitcoin right now. You know, there's more return
3:47
potential in investing in Bitcoin startups.
3:50
And that leads me to my question, which is like, should
3:54
people buy, be buying spot Bitcoin these days?
3:57
If MicroStrategy is going to outperform, if Metaplan, it's
4:01
going to outperform. Like if you're a traditional
4:03
investor, you know, if you see what MicroStrategy has done over
4:07
the last 24 months, you know, what would you tell them?
4:12
I would say that you need to own Bitcoin in terms of buying it as
4:15
an investment. I think you always have to be
4:17
reconsidering your theses. I think there's an easy 10
4:21
bagger here in Bitcoin still over the next, you know, 5 to 10
4:25
years. I don't think that's crazy at
4:27
all. When you look at things like
4:28
gold parody or you know, obviously like the supreme
4:33
scarcity that that is only getting more scarce.
4:36
It's transition in a multi polar like sort of geopolitically more
4:42
complicated world. I think it will transition more
4:45
into a gold like asset, but that also means people will probably
4:49
start to get more gold like returns rather than, you know,
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the, you know, 10,000 X that you got when you invested in the
4:56
crazy Internet money that no one had ever heard of, right?
4:58
I mean, it's maturing. This is sort of natural.
5:01
I do think like, look, if you, if you, you know, savvy
5:04
investors want to beat an index, right, whether that's the S&P,
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if you're an active say equity hedge fund manager or something
5:12
else, I think it's reasonable for professional investors to
5:15
try to beat the price of Bitcoin.
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I don't think most people will long term.
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If you look at its, you know, compounding will growth rate
5:23
over many years, it's hard to beat that.
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It's certainly hard to beat it with like index funds, but I do
5:29
fundamentally think there was a large amount of upside left in
5:32
BTC before it becomes a gold like widely adopted asset.
5:36
But but even beyond that, if you're not an investor, if
5:39
you're a person, whether that's a legal person like an entity or
5:42
an individual, you need to own Bitcoin yourself because you
5:49
can't, you know, you get no censorship resistance buying
5:51
shares in a treasury company. You can't send it or use it,
5:54
can't send it cross-border. You can't hold it in a multi
5:57
sig. There's this the actual features
5:59
of actual Bitcoin are unfortunately not replicatable
6:03
by treasury companies, right. Those are equities.
6:06
You own shares in a company that itself does something in in the
6:10
case of, you know, something like strategy that something is
6:13
own and acquire more Bitcoin, but you you don't have access to
6:16
that Bitcoin. You can never withdraw that
6:18
Bitcoin and recall like that you to get the full feature set from
6:22
Bitcoin, you actually have to not only own it directly own
6:25
spot Bitcoin, but own, you know control the keys to it.
6:27
So I, I would encourage everyone to build a stack so that you
6:31
have that lifeboat freedom money that Bitcoin is so famous for
6:34
providing. And then I think from an
6:37
investment standpoint, every savvy investor is always
6:41
reconsidering their theses and what they own.
6:43
And is there something better to own?
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You know, the most aggressive investors will look at
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something, let's say they make 50% in a year, but but there was
6:51
another bet that they could have looked at or passed on that made
6:55
75% in the year. A lot of the most aggressive
6:57
investors will be upset with themselves for that, right?
6:59
So there may or may not always be a better investment, but if
7:03
in my mind, from a risk return standpoint, Bitcoin is still a
7:06
very good investment even at these levels from, you know, 119
7:09
K. Yeah, and and and let's you said
7:14
something really interesting. I kind of want to double back
7:17
and focus on that aspect, which is, you know, the fact that you
7:21
still see, you know, this 5 to 10 X opportunity within the
7:26
decade. But I mean, like compared to
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Bitcoin's early days, you know, that's, that's not really that
7:34
exciting. You know, me and my Co host and
7:37
we, we host simply Bitcoin every single day.
7:40
I mean, like every weekday. And we're like kind of joking
7:43
around. We're like, dude, are we just
7:44
like cheering on like gold and the SNP?
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Cause that's what the price action movement feels like.
7:51
So, you know, I think a lot of people that are getting into
7:56
Bitcoin recently, you know, they're, I don't think they,
8:00
they see it as much. I don't think they see the, the
8:03
upside as much as, you know, perhaps in the, you know, when I
8:07
got into the 20/16/2017 era or you know that even the 2021 era
8:12
was, you know, I think we got like A5 or 6X in a year.
8:16
So what are your thoughts on that?
8:18
This is what winning looks like, I guess is what I would say.
8:22
Look, I mean the S&P 500 is up 13.1% year to date in 2025 on
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July 22nd. Bitcoin is up year to date.
8:33
Sorry, that was one year. It's up 6.8% year to date.
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The S&P 500 year to date in July 25 bitcoins up 27% year to date.
8:42
So I mean, you're looking at something to get those, you
8:46
know, 10,000 X like, well, I'm sorry, you and I shouldn't have
8:49
been playing Halo in 2010. We shouldn't have been playing
8:52
counter Strike, right? And I mean, it's I don't know
8:55
what to tell you. Like people like, you know, this
8:57
is what drives so many to look for the next Bitcoin, right?
9:00
And, and you know, low, but like Bitcoin was a low cap untested,
9:06
you know, like the tiny little thing in back then to get those
9:11
games, you had to have significant vision and still
9:14
pretty good size. Like, I mean, I, I bought
9:16
Bitcoin pretty early in 2012 and 2013, I think, and I didn't
9:20
really have any money. I didn't buy a lot of Bitcoin.
9:22
Even if I still had those Bitcoin, which I don't would
9:24
because I sold them at some point back then, it still
9:28
wouldn't be the games. I mean, you'd have to either be
9:30
mining as a true hobbyist before there were any tutorials or or
9:34
anything at all in the community was a couple 100 people or you
9:37
had to put pretty sizable money in for an average person and
9:41
hold it for 1415 years, right. I mean, it's there's a very
9:44
small number of people that fit that category.
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Like, and I I think the stories of them, they drive people to
9:50
look for these penny stocks that can thousand X.
9:54
You know, you see people say, well, it's $0.10, but if it goes
9:56
to $10, well, yeah, OK. That that's always been true.
10:01
Very tiny number of people ever hit a return like that in their
10:03
lives, right. I think the vast majority of
10:05
people should be looking for good investments that go up with
10:10
a variety of risk profiles, right?
10:13
And you can take a big risk if you want.
10:14
That's fine. But you know, there is, I think
10:17
part of the reason that is particularly younger people
10:21
these days are looking for these astronomical gains.
10:25
It stems partially from a deep malaise in the economy among
10:28
these younger generations that that, you know, a sense that our
10:32
lives will not be as good as our parents lives, that we won't
10:35
make as much money. The average age of a home buyer,
10:39
the median age I think is 39 now in the United States versus
10:42
something like the 20s, you know, couple decades ago that
10:46
that your life won't be better than your parents, that you may
10:48
never, you know, reach the American dream.
10:52
And in that spot, too many, I think are enticed by gambling.
10:58
Look at the rise of sports gambling is a great example.
11:00
These low cap longshot bets. They would rather gamble and
11:05
and, you know, risk it all to to get it all because the idea of
11:10
long term investing and hard work just doesn't seem fair in
11:14
the way the economy has become constructed, right?
11:17
Decades of crony capitalism and you know, you know, bailouts and
11:22
money printing have led people to gamble rather than learn
11:25
about saving and hard work and the savings technology that is
11:28
Bitcoin. I think that's where a lot of,
11:29
you know, low cap crypto gambling in the trenches stems
11:35
from. Is this deep seated malaise
11:37
among millennials and Gen. Z?
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This, not this nihilism just based on the fact that they got
11:44
the short end of the stick, you know, 2008, you know, they don't
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have the opportunity to their parents have.
11:52
And you know, they're they're looking for a quick way out,
11:55
right? Yeah, that's a very fantastic,
11:58
fantastic point. Another thing I wanted to bring
12:00
up to your attention to Alex, which is I don't know if you saw
12:03
this chart, but another thing that worries me a little bit
12:06
with the rise of all this institutional, institutional
12:11
money coming in is I don't know if you saw this chart, but
12:15
essentially the amount of people that are taking that is taking
12:20
self custody is actually going on a downward trend.
12:23
It's not going on an upward trend.
12:25
And this wasn't the case until the introduction of the ETFs in
12:29
January of 2024. And then of course, the
12:32
MicroStrategy stocks, right? What's your take on that?
12:36
Because I think like if, if most Bitcoin is not held in self
12:44
custody or at least transparent custody, where you know, El
12:48
Salvador, you can see their reserve, Tether, you can see
12:50
their reserve. I think you, I think the risk of
12:54
paper Bitcoin starts to increase over time.
12:57
And there's also a tremendous amount of centralization of
13:00
custody of Bitcoin. A lot of it is in Coinbase.
13:03
I think it's like 9 or 10 out of whatever ETFs.
13:06
They all have their Bitcoin with Coinbase.
13:07
I think Sailor has his Bitcoin with Coinbase, so it creates a
13:10
honey, honey, honey pot. And then not only that, like,
13:14
you know, do they really have the big one?
13:16
They say they do, right? So what's your take on that?
13:19
Yeah, it's a great question. I mean, I think that look, but
13:23
the highest level, I don't think it technical technologically
13:26
matters. They're proof of work coins like
13:30
Bitcoin. The Who holds the asset and
13:32
where it is doesn't necessarily determine or directly determine
13:35
governance control over the network the way it does in a
13:37
proof of stake asset. But you know, a couple points
13:41
you were making. I mean, when it comes to people
13:43
holding large amounts of coins in centralized entities,
13:49
institutional entities, whether it's BlackRock or Fidelity or
13:51
Invesco or Strategy or Metaplanet or whatever these
13:54
things are, they do have some influence over the network.
13:59
You could imagine in the case of a contentious hard fork, they,
14:02
you know, have have some amount of what we call fork choice
14:05
selection, right? They could say, you know,
14:08
BlackRock were to say, let's say there was a fork, another, you
14:11
know, block size war or something.
14:12
They could say, listen, guys, us and all our investors in our
14:15
fund, we're going to consider, you know, fork XYZ, the real
14:18
Bitcoin like that, that could be very impactful.
14:21
And it it does matter, but it's it's a sort of intangible, It's
14:25
a soft form of power. They can't directly tell
14:29
everyone upgrade the way that you could if you controlled an
14:31
enormous amount of a proof of stake network.
14:34
I do think it's sad to see that self custody isn't on the rise.
14:38
I mean, this is a core feature of Bitcoin in my opinion.
14:41
This is holding your own keys gives you self sovereignty.
14:45
It it distinguishes it from all forms of digital money that
14:48
exist, even stable coins under the new genius Act, which was
14:52
just signed into law, which I think they they are an
14:56
innovation on digital dollars because you can't even self
14:59
custody, you know, digital dollars say you have to use a
15:03
banking app or a fintech app or there's no way to like take self
15:06
custody and you can take self custody of the stable coins.
15:09
But of course, those are freeze freezable and feasible by the
15:12
issuer, either at the direction of the government or anyone else
15:17
or themselves, whereas Bitcoin is not.
15:18
So Bitcoin is that ultimate step of digital sovereignty.
15:21
And you only get it if you hold your own keys.
15:24
It's never been easier to hold your own keys.
15:26
So it is sad to to show the improvement in the UX of self
15:29
custody. It's still that we have had over
15:32
many years. It's much, much easier today
15:34
than it was two years ago, 5-10 years ago to see it, you know,
15:39
but with real capital and entering a lot of you know what,
15:42
not just institutional investors, but a lot of you
15:45
know, older people that have brokerage accounts or investors
15:48
and invest in other things that want some exposure to Bitcoin.
15:50
The ETFs are so easy, like the UX for an an existing investor
15:55
in things to buy the ETFs is better than buying spot and
15:59
sending it to self custody. So I, I, I, one of the things I
16:03
hope is that you'll see the brokerage firms, especially in
16:07
the, in the big banks, especially as we get more
16:10
clarity out of the US federal government's treatment of
16:13
digital assets broadly see them start to offer more spot
16:17
products so that it actually becomes possible.
16:19
Fidelity offers spot Bitcoin, but you can't yet withdraw.
16:22
And I'm I'm certain that they will eventually add the
16:25
withdrawal. It's kind of like the pathway.
16:26
These often go right, Robin Hood and PayPal both started with you
16:29
can buy and sell, but you can't withdraw yet.
16:32
And then maybe if it is still easy for mom and pop or
16:35
institutional investor to buy spot through their existing
16:37
brokerage relationship, they can then also learn about self
16:40
custody and they may realize, you know, I think you're going
16:44
to have Bitcoin in sort of every everywhere that you have money
16:47
and investment. So you're going to have, you
16:49
know, bank Bitcoin. You might have 4O1K Bitcoin.
16:52
You know, if in, you know, retirement fund Bitcoin, you
16:53
might have brokerage account Bitcoin and and what I hope is
16:57
that people learn and at least have some, you know, under the
17:00
mattress Bitcoin, right, at least some.
17:02
You should always have some that's that's actually using the
17:05
network. And I get that, you know, for
17:08
people in the Bitcoin community on on on X or, you know, at at
17:12
conferences, like it's sacrilegious in some cases to
17:15
not store your own keys or even run your own node.
17:17
But if you want, you know, for Bitcoin to to win and reach the
17:22
promised land of wide adoption, you're going to have Bitcoin in
17:25
every every possible way that it could exist.
17:29
So it's on us, as you know, influencers, educators,
17:32
researchers to continue explaining the benefit of self
17:35
custody and that that, by the way, includes to the
17:38
institutions, right. You talked about, you know,
17:40
micro strategy, not doing proof of reserves, like not only
17:43
should they do proof of reserves, but they should
17:45
probably custody their own coins at some point.
17:47
And I would think any governments has decide to have
17:50
strategic reserves should also be self custodying as well.
17:54
Yeah, absolutely. And then self custody and making
17:57
the reserves public, like making that address public, there's no
18:00
reason as to why you shouldn't be doing that.
18:03
And that also builds a great deal of trust and it's taking
18:05
advantage of of the open Ledger system.
18:07
Like this is this is where gold failed, right?
18:10
You know, we, we have to take, I'm not saying it's not there,
18:13
but we have to take the government's word for it that,
18:15
you know, all that gold is at Fort Knox, right?
18:18
You know, it's like trust me, Bureau kind of system where, you
18:21
know, we have this open Ledger protocol where you don't have to
18:24
do that anymore. Question for you, Alex, are the
18:28
cycles dead? Is is, you know, is or is it
18:31
just evolving now that, you know, bitcoins definitely grown
18:35
up. It's definitely it heading into
18:37
the institutional era. Are these traditional four year
18:40
cycles that we've seen throughout Bitcoin's lifetime?
18:45
You know, are they still in tax? Good topic everyone's been
18:47
talking about. I think back until last winter
18:51
when the ETFs launched, I think a lot of people, you see the
18:54
passive flows in the ETFs and, and, and how they unlock capital
19:01
had a lot of people wondering that.
19:02
And I, I, I think, I think there is some truth that the cycles
19:06
will not look the same as they did in the past.
19:08
I think that is right. I, I think there will always be
19:14
business cycles in credit and, and monitor as long as it
19:17
certainly as long as we have Fiat currencies, you know,
19:20
there's always credit expansion and credit retraction.
19:23
And, and that is also sort of a natural human tendency.
19:25
We tend to get really excited, do a bunch of stuff or make much
19:29
of investment or build a bunch of things and then we usually
19:32
get over our skis a little bit and then have to pull it back
19:34
and then everybody calms down again.
19:36
And then you got right like that's kind of a natural human
19:39
behavior even outside of economies, like, you know, even
19:43
working on your house or buying, working on your car, whatever it
19:45
is like we tend to sort of overdo it and then pull it back
19:47
and then get comfortable again. So we will have cycles.
19:50
I just don't think that, you know, obviously, to the extent
19:53
that that cycles were driven by Bitcoin issuance, right?
19:57
The having cycle, I don't think those really matter that I don't
20:01
think they really probably have mattered for at least maybe one,
20:05
but maybe even 2 having cycles cause.
20:07
Right in an in an absolute basis, the production and net
20:11
Bitcoin instruments daily or weekly monthly, yearly, whatever
20:14
time for me to look at is so minimal at this point compared
20:18
to the daily transacted volume on the network or the traded
20:21
volume globally on exchanges and OTC as to be basically, you know
20:26
unimportant, right. So I don't think it's would be
20:30
driven by the having, I do think that you get people who take
20:34
gains, then they look with those gains for the next investment.
20:38
And so the intra crypto cyclicality, right where it used
20:41
to be like Bitcoin all time high December 2017, ether all time
20:45
high January 2018, a bunch of low cap all coins did stuff and
20:49
then everything you know, goes to 0, not just Bitcoin didn't go
20:51
to 0, but most other things did. And then you restart that.
20:55
I, I think that still happens in microcosms in this market.
20:59
You, you've kind of had it the last couple weeks with ether
21:02
running, you know, 30% last week alone.
21:07
But I still don't think that you're going to, I think those
21:10
are all so dampened. I think, you know, capital in a
21:12
Bitcoin ETF is not like Bitcoin held on Polonia X in 2017, where
21:18
it's very easy to trade the Bitcoin for an old coin, right?
21:21
Like these new pots of capital are stickier, right?
21:25
Whether it's strategy or these other treasury companies or the
21:28
ETF. So less likely to rotate than in
21:30
past years, the investors are more mature, less likely to be
21:34
enticed by the next quick game that they could get the Bitcoin
21:38
having's are a de minimis effect.
21:42
And now you have these passive bids, right.
21:44
And if you start seeing certainly if you start seeing
21:45
governments get involved or you know people earnestly doing it
21:49
in their retirement accounts, which has been a passive bid for
21:52
US equities for years, right. Like that should all dampen
21:56
volatility in the cyclicality. So I, I don't have a grain, it's
21:59
not a firm yes or no Nico, but I, I do think the cycles, if
22:03
they exist, will look a lot different.
22:06
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22:09
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I I think you that is a is a good answer because it, it,
22:48
there's a lot of nuance required to answer that question.
22:50
It isn't just a yes or no answer.
22:52
It's it's you have to you have to give the contacts.
22:56
So I did enjoy that answer. So my second question is did I
23:09
completely lost my friend of thought?
23:10
So I'm going to look at my notes.
23:12
OK, here we go. So oh, OK, I remember now.
23:19
Do you think that the do you think that the Bitcoin ETF Wow,
23:24
this is such a I love asking this question.
23:28
You think that the Bitcoin ETFs are the Iclas?
23:31
I don't think the ETFs. No, sorry, not ETFs, I
23:35
apologize. The Bitcoin treasury companies.
23:37
Man, and you know, it's a good question.
23:40
I would say first, it's a very good question there, you know,
23:43
without giving a, I'll give a nuanced answer in a second, but
23:47
I think shorthand it is fair to say that yes, they possibly are.
23:50
They're the mean coins of last cycle, the IC OS of the NFTS of
23:54
21 and possibly the IC OS of 17. It, it is an investment fad.
24:00
It is novel. It is totally novel.
24:03
There's never been, I mean, we're tracking over 120 digital
24:06
asset treasury companies. I don't know if Bitcoiners are
24:09
aware, but it's not just ether. I mean, there's a Chinese
24:12
limousine company doing an XRP strategy.
24:14
I saw there's a new Dogecoin strategy.
24:18
So there's a bunch of these. As far as I'm aware, there have
24:20
never been centralized companies with publicly listed equities
24:25
whose sole purpose is to use leverage and dilution to acquire
24:28
a commodity at scale. Never heard of that.
24:31
So it's new, just like those were new.
24:34
I think it could be drawing demand from spot Bitcoin.
24:38
I think that's possible. On the other hand, a lot of
24:41
these are buying spot Bitcoin, you know, and I will say, unlike
24:46
the ICO, if they're publicly listed, U.S. companies generally
24:50
publicly listed in any credible jurisdiction.
24:53
But let's talk about US equities.
24:55
They do come with significant disclosure and oversight regimes
24:59
that are meant to protect investors.
25:01
So unlike IC OS from 2017, when a white paper alone could let an
25:05
issuer raise a billion dollars with basically no promises and
25:09
no standard for disclosure, that's not how publicly listed
25:14
US equities work. So they're, they're, they're
25:16
safer than IC OS in that sense. And they are a fad.
25:22
And who knows will they be here to stay?
25:24
I, you know, I think certainly some will make it through and
25:27
become long lasting. I, I don't think strategy is
25:30
going anywhere. You know, with the Bitcoin ones
25:32
in particular, you wonder, you know, who else can cross that
25:35
chasm and last. But hey, some of the things,
25:38
some of the projects that raise IC OS are also still here.
25:41
Not certainly not all of them, but not all of them you know
25:45
didn't launch and or disappeared or were outright scams.
25:47
They might have resulted in projects there or block chains
25:51
you don't think are useful, but some of them do exist so.
25:57
I I I saw the link, CEO or sheet to the wrongs of Trump at the
26:01
White House the other day. I have no idea what link.
26:07
I mean, I would say not that I, I without passing judgement one
26:10
way or another on the project and project, it does exist.
26:13
It did launch. It didn't rug.
26:15
It might not be good. I don't know a lot about link.
26:18
I don't know if it's a great investment or a bad one or
26:19
anything like that. But like another one, Cardano,
26:21
which you know, I happen to think is a mostly useless
26:24
blockchain. It did launch it.
26:26
It is a real blockchain. There are it does operate right
26:28
like so you know, even if you end up thinking that they're not
26:32
good investments, they doesn't mean they're all scams, even
26:35
though many IC OS were literally scams, right.
26:38
Like where people, you know, delete the white paper right
26:41
after raising and disappear on the Internet, right.
26:43
Like that is very unlikely to happen with the treasury
26:47
companies because they are well at least the ones that are in
26:51
the US and going and trying to be publicly listed companies.
26:53
They're highly regulated, right. So I would say that's a key
26:56
difference. But I think from the investment
26:58
standpoint, like I have to think just surely many of these will
27:02
fail, right? Or they will fail.
27:05
I think a lot of them will fail to actually raise the money that
27:07
they've announced they're trying to raise.
27:08
And so they won't even really launch, I think is a
27:11
possibility. Also, I do think though, even
27:15
letting I, you know, I did some of the comparison, direct
27:17
comparisons between the two. But even setting that aside, it
27:21
does feel like if we just think about like, you know, hype
27:25
narrative, like I think about like IC OS in 17, NFTS were a
27:30
huge hype narrative in 21, meme coins in 24.
27:34
Like this does kind of feel like the 25 like hype narrative in
27:38
broader crypto markets. And I mean, you, you have to
27:42
give credit separately, not maybe blame too for the
27:45
explosion of them. But Sailor has has grown a
27:48
behemoth and he's found a way to tap pools of traditional capital
27:52
and steer them towards Bitcoin investment in ways that I think
27:55
will will honestly be studied for decades.
27:59
Right. I mean truly a a feat of
28:01
financial engineering to achieve a specified end.
28:04
That has never been done and I I don't think many will be able to
28:08
successfully copy it. Yeah, I, I completely agree.
28:12
And and and it seems like he's created a product to target
28:15
every pool of capital, right. Like it's like one for the
28:19
bonds, one for, you know, like the old investors, one for like,
28:24
you know, people that just are holding cat like there's a
28:26
product for every single thing, which is absolutely fascinating.
28:31
So I agree the financial engineering there has been, you
28:34
know, absolutely crazy to say the least.
28:37
I just want to get your thoughts on this because I don't think
28:38
we've I don't think you've come on the show.
28:40
I. Think it was on this year I
28:41
think. It's been a while since you're
28:42
on the show, but so, yeah, so it's a totally different world.
28:48
We won, right? Which is massive because last
28:50
year we were like under attack. Our industry was under attack.
28:56
November was a big victory. And many Bitcoiners, you know, I
28:59
remember calling this out when it became apparent as soon as
29:02
they arrested the samurai wall of developers, I said, like,
29:05
guys, listen, let's be real here.
29:08
It's probably not a good idea that Biden wins another
29:10
election. And then I remember that tweet
29:13
blew up, which tells me that it was everybody.
29:15
It was on everyone's subconscious mind, but no one
29:18
wanted to say the quiet part out loud.
29:20
And then a couple weeks later you have Trump on the campaign
29:24
trail basically saying no CBDC's and everyone's like, yeah.
29:27
And then he's like, you guys like that no CBDC's.
29:31
And I remember I was telling my Co host AFTI, I was like, all
29:34
right, dude, like probably like two or three weeks, he's
29:36
probably going to say Bitcoin. And then he goes to Libertarian,
29:39
you know, convention. He's like, all right, if you
29:42
vote for me, I'll end Operation Truck Point 2.0.
29:44
I'll free Ross and Bitcoin and everyone's like I'll keep
29:46
Elizabeth for new game and conference bitcoins.
29:49
Yeah, yeah. Yeah, Yeah, it was.
29:52
It was hilarious. It was hilarious.
29:54
The guy's a character and we haven't talked.
29:57
We haven't talked since then. So like, bro, like this is a
29:59
totally different world. The executive order, the
30:03
strategic Bitcoin Reserve. They're supposed to be something
30:05
that came out today, by the way. I don't know.
30:07
Yeah, I don't. I know if it.
30:08
Doesn't come out. Enormous amount of talk about
30:10
that. The Presidential Working Group
30:11
report also, Nico, I mean, an enormous amount has happened,
30:16
OK, like the banking regulators, the Fed, the FDICOCC, they've
30:20
largely rescinded their antagonistic rules.
30:24
The OCC rescinded their Biden era stuff that prevented banks
30:27
from touching blockchains at all, touching Bitcoin,
30:30
custodying it. They just put out guidance for
30:33
bank risk managers, all three together saying how to custody.
30:37
And it's literally a checklist for yeah, like it is a risk for
30:41
a bank's risk manager to say if you demonstrate to us that
30:44
you're doing these things, then you can custody Bitcoin.
30:47
And that's that's normal for a risk manager to need to know
30:51
what to cover and how to design their custody program or
30:55
whatever the product is so that when the bank examiner comes,
30:58
they'll have done it right. So important steps there.
31:01
SE CS done an enormous amount on, on a variety of things.
31:04
They said mining pools are not securities, right?
31:06
Your interest as a miner when you send, you know, your, your
31:09
hash shares to a mining pool does it does not count that
31:12
relationship between you and the pools.
31:13
Not a security. They've said tons of other stuff
31:16
too on mostly like crypto related, but tons, tons coming
31:20
out of the SEC Yeah, you had the presidential working group which
31:24
ordered the government. That's an executive order on, on
31:26
like the second or third day of the presidency that orders the
31:29
government agencies across the government to look at like every
31:33
crypto related policy that may or may not be within the
31:36
regulatory jurisdiction, decide if it's good or bad, if it
31:40
should be changed, if there's some that aren't, don't exist,
31:43
but should exist, and then go ahead and make those changes.
31:46
And, and, and it also ordered a conglomerate of those agencies,
31:50
sort of led by the Treasury Department to write this big
31:53
report, the Presidential Working group report on digital asset
31:56
markets that is due from that working group to the White House
32:00
today, on July 22nd. It doesn't mean that the White
32:03
House will release it today. In fact, I expect they'll
32:05
probably publish it next week before the end of the month.
32:09
That's going to have a giant pile of recommendations of
32:13
government policy as it relates to Bitcoin and digital assets
32:16
across the the gamut. And then obviously they have the
32:18
strategic Bitcoin Reserve executive order, which I mean,
32:22
that really went a funny way. You remember it was that weekend
32:24
and Trump tweeted that ADDA, XRP and Seoul would be included in
32:28
the reserve and he hadn't even said Bitcoin yet.
32:33
Dude, and, and I remember and I was, I had some like I had some
32:39
like sources like in DC and they were telling me what was going
32:42
on in the backroom, Alex. And it was basically the Ripple
32:45
lobby was like putting a tremendous amount of pressure on
32:50
on the Trump administration. And like I was just and I
32:55
remember I was getting these texts like Nico, retweet this
32:58
from the simply account, like you have to put attention to
33:00
this. And it was it was the Ripple
33:04
guys like trying to buy themselves into the room.
33:06
But what I find absolutely hilarious is master stroke,
33:11
right? Like a strategic Bitcoin reserve
33:13
and in a digital asset stockpile.
33:16
And then you see Brad Garlinghouse and like the the
33:18
corner, the corner side of the table when he had it.
33:23
So it was just incredible political maneuvering by the
33:26
Trump administration. I mean, we got everything we
33:29
wanted. And well, that was it was almost
33:30
like that, you know, there was a Politico story that also went
33:34
behind the scenes after the fact and explained some of how that
33:37
that ripple thing got added and the seemed like they overplayed
33:40
their hand and it backfired significantly.
33:42
You even had a cataloguing that day on that Sunday and Monday,
33:45
you had Brian Armstrong come out and say it should be Bitcoin
33:49
only. You had major like crypto
33:51
executives that certainly have interests outside of just
33:54
Bitcoin saying, OK, wait a SEC, XRP and Adda and Seoul like this
33:58
has gone too far. And it was the backlash that I
34:01
think resulted in the strong language we got.
34:04
That was because, remember, what we end up getting in that
34:06
executive order is a prohibition on the government ever selling
34:12
its Bitcoin, right? And then an order to parts of
34:15
the government treasury, mostly to develop strategies that are
34:18
budget neutral to get more Bitcoin while simultaneously
34:22
saying that the the digital asset stockpile everything other
34:26
than Bitcoin that the government has.
34:28
They should try to keep it, but they don't have to.
34:30
They're not prohibited from selling like they are with the
34:32
Bitcoin, but they are prohibited from buying.
34:35
So it's like Bitcoin ended up getting exactly what it wanted
34:39
for the strategic reserve and really everything else is
34:42
technically in a sell only mode at the US government.
34:44
They can get more through civil asset forfeiture or criminal
34:48
penalties and stuff like that, but they can't buy it and
34:50
they're not prohibited from selling it.
34:52
So it went from like, wait a SEC, it's going to be like
34:55
Bitcoin, Ether, XRP, Soul and ADDA on a Sunday to that
35:00
Thursday. I think Thursday night when they
35:02
released it, it was like, oh wait, it's Bitcoin only and
35:04
everything else like could be sold.
35:07
Yeah, dude, it was, it was like the art of the deal, you know,
35:10
because I went through like emotions, you know, like I was
35:13
like, oh, this is such a bad ass.
35:14
And then I was like, it's Bitcoin only.
35:16
Like, yeah, orange man, orange man.
35:18
Good. But yeah, I remember that.
35:21
Like it was, it was, it was so cryptic.
35:23
You know, it was like, it was like he's not mentioning
35:25
Bitcoin. But now you look back in
35:26
hindsight and you could tell he did it on purpose.
35:29
Right, I don't know, I. Don't know if he prompted it on
35:31
very very well. I'm not.
35:33
It does look like art of the deal.
35:34
I think it could also just be like wildly overplaying your
35:37
hand from, not from Trump, but from the, you know, the Alcorn
35:40
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Check out leaden dot IO today. So another thing too that came
36:55
out recently and shout out Lola Litz, which is apparently the US
37:01
government doesn't have as much Bitcoin as originally believed
37:07
that. It seems like they sold a lot
37:09
during the last days of the Biden administration, which a
37:12
lot of us were actually suspecting they were doing.
37:17
But we don't know this for sure. This is only data coming out of
37:21
US Marshall's office or what not.
37:25
But what's your take on that? I'm sure you have more you've
37:28
done more research on this specific topic, like did they
37:31
sell the Bitcoin? Does the US governance still
37:33
have that Bitcoin? What's going on?
37:34
Elegance, right? I think that the commonly
37:36
accepted crypto market view of how much Bitcoin the government
37:41
probably has is about 200,000 coins, right, which is billions
37:44
of dollars. And that that list that is based
37:48
on on chain attribution, that is mostly related to looking at the
37:53
addresses in various cases that the government says they from
37:56
which the government says they seized coins and then seeing
38:00
where they move them to. And if they haven't moved since,
38:02
right? So like, you know, if Alex is
38:04
under arrest and they put in the thing that we seized, Alex is
38:06
like, you know, BC1Q, whatever Bitcoin.
38:09
And then we look at that address, see that it moved to a
38:11
new place and now it's just inert there.
38:12
We assume that new place is the government, right?
38:15
And you Add all that up and it still looks like hundreds of
38:18
thousands of Bitcoin. I got to give Lil elites
38:21
credits. Great piece of journalism, but
38:24
it is what you said. It is what the US Marshals Asset
38:27
Forfeiture Division says that it holds or owns, I should say, so
38:32
that it controls, right? It's a list of addresses that it
38:35
controls. the US government's very big, OK.
38:38
Not everybody, not every coin that the US government may or
38:41
may not control at the moment is in the possession of the US
38:45
Marshals Asset Forfeiture Division, right?
38:47
And part of me thinks that she asked there because David Bailey
38:50
had put out a bounty for that specific thing, right?
38:53
Like, he didn't say how much Bitcoin does the government
38:57
have. He said how much does the US
38:58
Marshals have was the actual bounty.
39:02
So I, I, I think the, you know, the US Marshals are not the US
39:05
Treasury Department. I think one of the reasons
39:08
people, we, we still haven't seen the coins move.
39:11
Almost none of from those addresses that people think
39:13
belong to the government, they haven't moved.
39:15
So if you believe they were sold, I think the idea is that,
39:18
well, if the government say, let's say some of those
39:20
addresses are at Coinbase and the Coinbase is holding it for
39:22
the government, Coinbase, just like you know, coins are
39:26
fungible. So Coinbase can sell those coins
39:29
on behalf of the government while actually just delivering
39:31
other coins and not moving the coins, right?
39:33
Delivering other coins to the buyer by re ledgering them
39:35
internally could be done so they could be sold.
39:37
To be clear, we don't know exactly what has or hasn't been
39:41
sold. But I would caution, I don't
39:43
think the government went from 200,000 coins under its
39:45
possession to what 20,000 is what Marshall says at all.
39:49
And I think there are also 93 US attorney districts, right?
39:53
Those are the, the law, the criminal lawyers for the, for
39:56
the Department of Justice, right?
39:57
There's the Southern District of New York and the Eastern
39:59
District of New York and the whatever, right?
40:01
They're all over. Like they have a level of
40:03
autonomy. They don't when they arrest, you
40:06
know, a criminal and find Bitcoin on a Ledger or a cold
40:09
card, they don't, they're not required to instantly send it to
40:12
the marshals either. So I think the the process of
40:15
gathering the coins for the reserve itself is
40:20
technologically and logistically complicated.
40:23
And it's also legally complicated because there are
40:26
civil asset forfeiture laws there.
40:28
The government is not necessarily free to do whatever
40:31
it wants with things that it confiscates as as part of
40:36
criminal investigations or as the proceeds of crime.
40:39
So it's possible that maybe the Marshals holds a lot more, but
40:43
in the context of setting up the reserve and doing legal analysis
40:48
and every little piece of coin that might be there, the
40:49
Treasury might have said, Hey, these like 80,000 coins that
40:53
you're holding, those are going to be ours.
40:55
So those are no longer in your control, although we choose at
40:58
the moment not to move in one chain, right?
41:01
So you, it, it is even possible that the 28 K that the marshals,
41:04
it's possible that they've identified is every coin that
41:09
won't be part of the reserve. And that the others, they, they
41:12
didn't say, here's every, you know, key key that we've ever
41:16
held the, the keys to. Here's every UTX that we were
41:18
held the keys to, right? It's possible that by the time
41:24
that I think that the snapshot is what, March 31st.
41:26
So like that would be pretty quick after the SBREO came out,
41:30
which I think was like March 6. But it's possible that Treasury
41:33
said, look, those hundred, maybe they had 128 and Treasury said,
41:37
hey, actually those hundred, we've done the work and those
41:40
are ours now, but don't move them.
41:41
We don't want to move them yet. So like it, it really, I don't
41:44
actually think it tells you much.
41:46
I guess the Long story short about how many coins the
41:50
government actually possesses or how many coins will or won't end
41:53
up in the strategic reserve. But it is a fantastic, I think
41:57
we know that, you know, the Marshall's asset forfeiture
41:59
division has only those, you know, somewhat about 30,000
42:02
coins. I just don't think it tells us
42:04
that they sold, and it doesn't really help us in figuring out
42:08
where the which part of the government thinks it controls
42:10
which other coins. And so I heard a rumor, and let
42:14
me know if you believe it's true, but I heard the rumor that
42:19
basically during the Biden administration, Janet Yellen had
42:22
all the US government's Bitcoin on a cold card in her desk.
42:26
Is that? True.
42:27
I did not hear that. I have no idea.
42:30
I don't, I don't think it's true.
42:32
I would guess it's not true, I think, but there had been for
42:37
sure there had been Colt ledgers and evidence lockers around
42:40
those federal prosecutors offices.
42:42
Like that's what I'm saying even just like finding all the coins
42:46
that the government supposedly has like is not a the US
42:49
government is extremely large. I doubt Janet Yellen herself was
42:54
holding them in the Treasury Department.
42:56
But I guess anything's possible. It would be a funny image.
43:00
And that's I'm just like imagining that in my head, just
43:03
like her pulling it up, like putting in her pen, like, oh
43:06
man, I I got the pin wrong. You have the words.
43:10
We've lost some Bitcoin anyways, So what do you think is the
43:16
current state of the lightning network in second layers?
43:21
Because we all know that this Bitcoin can't scale on the first
43:25
layer. What do you think the current
43:27
status of, of second, second layer solutions are?
43:31
What do you think about light network?
43:32
You know, there's fediment, right?
43:34
You know, there's liquid, right? There's a couple, you know,
43:38
different types of solutions and stuff.
43:41
And then there's like I would say, which kind of connects to
43:44
that question, which is like, is Bitcoin actually being used as
43:49
money right now? Because I, I, I see it really
43:52
being used as a commodity, you know, as, as like this, you
43:58
know, thing that you know, to use sailors where it's this
44:01
pristine collateral, this encapsulated energy.
44:07
But is it actually being used as money?
44:09
And I believe it was Jack Dorsey that tweeted out like, if
44:13
Bitcoin isn't used as money, it is a failure.
44:16
It is being used as money. It's not probably the the
44:21
circulating supply of all coins, which is like 19.8 something
44:25
million at the moment, not the majority of those coins are
44:28
being used as money. But you know, I've seen it used
44:31
as money. We know about it being used as
44:32
money and really we mean medium of exchange, right?
44:36
Like to buy and sell goods and services.
44:40
But there's no doubt that it's uses digital gold as a sort of a
44:44
global non sovereign scarce digital asset as an investment
44:48
or store value is the dominant narrative in Bitcoin world these
44:53
days. I don't know if it needs to be
44:57
used as a medium of exchange to be long term successful.
45:00
I do think it's possible you end up with, you know, Fiat stays
45:03
around forever and maybe governments never succeed in
45:07
getting rid of it. But Bitcoin becomes the the
45:10
gold, the alternative, right? Like for for, you know,
45:12
millennia you've had gold. There've obviously been times
45:16
when governments issued their Fiat on the gold platform,
45:21
right? But we've had an untethered
45:24
paper only no backing Fiat regime since I guess you could
45:28
say the 70s since the, you know, US halt to the convertibility of
45:32
the dollar to gold. But in some cases that you could
45:35
say longer and, and, and certainly, you know,
45:38
historically monetary regimes have shifted between hard and
45:41
sound money, you know, hard and sound money to soft and Fiat
45:44
money back and forth. The the Romans themselves like
45:47
debased and rebase their currency multiple times across
45:50
their empire's history. So I think it can exist next to
45:55
Fiat money and be very successful as store of value,
45:58
which by the way, a store of value that's gold like, but
46:01
digital transferable self custody bowl, all of it in size,
46:05
right. So like it is kind of like gold
46:06
with wings already. It could.
46:09
I don't agree with Jack therefore, that it must be used
46:13
for wide amounts of day-to-day medium of exchange to be long
46:16
term successful. I don't agree with that.
46:18
I think it can be long term successful without that.
46:21
I do think it is being used for that, not at the scale that it's
46:24
being used to store a value. When it comes to the state of L
46:27
twos, I think lightning is. It's never been easier for me to
46:30
run. I'm running C Lightning right
46:33
now on my umbrella. You know I'm not.
46:36
I'm still. Are you balancing channels?
46:38
Not really and I'm not using it that often.
46:40
I just have a couple like nice channels with, you know people I
46:44
know that are and I haven't had to, I don't use it enough or
46:48
push enough coin down the channels to really need to
46:51
rebalance that much. But it is it is not easy to be
46:54
clear and I and I do prefer to use, you know, a combination of
46:57
like a semi custodial wallet like Phoenix with like, you
47:03
know, a brokerage like River as my on and off ramp in and out of
47:06
Lightning. Like that's so convenient.
47:09
It's so I, I, I literally just have money on, on, on Primal and
47:14
I just like, and I'm just like, you know, whatever this is my
47:17
lightning wallet. Yeah.
47:18
And I don't care if it's completely custodial like it's
47:20
just it's. Like yeah, cuz you're not like
47:22
your life savings on there. It's like walk around money
47:24
kinda. Correct.
47:26
And then if you want to do the same thing but with with self
47:30
custody, lightning dude, the hoop.
47:32
Is very hard, I agree. The Hoops.
47:35
Well, and lightning like lightning capacity, sorry,
47:39
though the number of transactions on lightning has
47:42
been declining, but the size has been going up.
47:45
That's which is interesting. It makes me think that it is
47:48
maybe this is sad to a lot of lightning, like real true
47:51
lightning believers, but maybe it is more custodial lightning,
47:54
right, sending in bigger size settling right?
47:58
Or it's the network also being more resilient.
48:00
I, I don't know. I, I don't think I think
48:02
lightning is extremely useful. It's I think it's by far the
48:05
most decentralized L2 across the entire crypto ecosystem.
48:08
It is not even an L2 right? I mean, it's, it is a network of
48:13
overlapping bilateral payment chances that happens to form a
48:17
network. It's not even there's no, it's
48:18
not stateful. There's no coordination across
48:21
the network, right? You can't even get a good view
48:23
on the data on what's happening on the network unless you
48:26
yourself have a highly connected node, right?
48:28
So it's extremely decentralized and I think that's very
48:32
powerful. And other networks like Etherium
48:34
have have looked at payment channels and as a, as an L2
48:38
scaling methodology and rejected them because, for example, you
48:43
can't like run a smart contract that's stateful across the
48:45
entirety of the network on a, on a payment channel L2.
48:50
And because of that, they sort of halted all advancement in
48:53
payment channel research, whereas I think the Bitcoiners
48:56
have shown that Lightning can and, and these bilateral payment
48:59
channel L twos can be very, very powerful.
49:03
And you know, now, if you have like, I, I haven't seen it used
49:06
yet and I don't know a lot about it, but like the taproot assets
49:09
protocol that could see like tokens on these networks, such
49:12
as stable coins could, could revolutionize them.
49:15
But I will say it is not that widely used.
49:18
Also, you know, you said that we know L twos need to be used.
49:21
I mean, Bitcoin fees are like almost nothing.
49:25
And right now, my gosh, we've got a whopping 18 megabytes in
49:28
the public mempool for you've seen for there been days and
49:32
days over the last couple months where there's literally not even
49:35
a full block of pending transactions at the mempool.
49:38
So like, you know, I think if it if the mempool becomes really
49:43
clogged and transactions become really expensive, then yeah,
49:48
that will create further incentive for more L2
49:50
development. But at the moment, like there's
49:52
not a huge need. I mean, frankly, like which I
49:55
think could be problematic. Part of that's probably because
49:57
a lot of people rather than even buying on a crypto exchange or
50:01
whatever Poloni X in 2017 and withdrawing the self custody,
50:04
they are buying ETFs and they are buying treasury companies.
50:08
And those to the extent that they hit the Memphol, they hit
50:11
in big batch transactions, not in many small ones, you know, So
50:17
I, it, it goes also to the, the spam and arbitrary data dispute
50:21
about, you know, opera turn. And like, it's just ironic to me
50:25
that we're having that debate when like, the man pool's empty,
50:28
like spam, it's barely being transacted on at all.
50:32
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15% off anything on the store. Yeah, I completely agree.
51:28
What? What do you?
51:29
What do you it's, it's, it's fascinating too, because a lot
51:32
of people put a lot of hope on lightning, right?
51:34
And then a lot of people also put on one of one of my favorite
51:38
things is I, I would say it's favorite because it, I find it
51:42
fascinating, which was basically like Bitcoiners had this
51:46
preconceived notion that you were going to see this wide
51:50
adoption of Bitcoin specifically in developing countries that had
51:53
high inflation. But what you saw instead was
51:57
this viral adoption of USDT of stable coins instead, right?
52:04
Which is like completely contradicting what Bitcoiners
52:07
originally believed because they're like, Oh my God, this
52:09
Bitcoin fixes this thing where people are just like, you know,
52:12
like they, they wanted something that didn't have the volatility
52:15
that Bitcoin had. So they can kind of Live Today,
52:17
live day-to-day. And then there's also the
52:18
educational component, right? Because if you're in Latin
52:21
America, you know, like I'm originally Venezuelan, like, you
52:24
know, you get $100 bill, like that's, that's like, you know,
52:27
that is the, you're on top of the world, right?
52:30
So if you can have that in digital form, you know, you're
52:33
in a good spot, right? What is the most contrarian or
52:37
unpopular belief you hold about Bitcoin right now?
52:41
Oh man, that's a good question. Most contrarian on.
52:49
Well, to the point that I would just boot you off the show if I
52:52
hear it. And my God, well, I mean, end
52:55
the recording. End the recording.
52:56
I see. I mean, I, you know, I'll riff a
52:58
little bit on your last point. I mean, I think stable coins are
53:00
an incredible innovation. I think they really are
53:02
powerful. I think the world wants dollars.
53:05
They they have for a long time. And I think, like I said this
53:09
before, but you know, you could self custody dollars for the
53:12
first time ever once now. I mean, now that we have stable
53:15
coins, obviously the issuer for like Tether or circle like and
53:19
and certainly any new ones that emerge under this genius act
53:22
framework, the the issuer can freeze them and and kill them.
53:27
That's true. Like we know that then it's not
53:29
as it isn't digital cash the way literally physical cash, the
53:33
$100 bill would be. Nobody can, you know, reach in
53:36
from afar and burn the dollar under my under my bed, right?
53:40
But oh, and similarly, they can't steal your Bitcoin out of
53:44
your address. And so it's not as good from a
53:48
censorship resistance standpoint, obviously as Bitcoin
53:51
or physical cash. But it is a lot better
53:54
potentially self custodying a stable coin than having a
53:57
balance on a fintech app, right? I mean, it is better than that.
54:02
And that is very interesting to me.
54:03
I think you're going to see. The.
54:07
Global remittance firms, the Western unions and the trans
54:10
trans unions and they're going to come under significant
54:12
pressure from stable coins. I think their margins, the cost
54:16
of moving dollars over borders is basically going to 0, whereas
54:21
it's very high today. It's one of the most expensive
54:23
and tricky things to do is move money across borders.
54:27
Here's a Bitcoin specific one. I do think Quantum will be a
54:30
threat to Bitcoin. I don't know when I think and by
54:33
the way, not just Bitcoin, you know, we can take solace on the
54:36
fact that actually EVM based change are significant, like
54:39
like Aetherium are significantly more at risk actually than
54:42
Bitcoin. But Bitcoin is that would be at
54:45
risk. And it's not just Satoshi's
54:47
coins in the case that quantum cryptography became
54:51
cryptographically relevant, meaning that you could
54:54
successfully, you know, run Shore's algorithm and, and, and,
54:58
you know, break ECDSA. It is potentially all coins when
55:04
you go to send them, because in Bitcoin, when you sign a
55:06
transaction and put it in the men pool, you reveal the public
55:08
key. So even if you know, the reason
55:11
we say like Satoshi's coins are uniquely vulnerable is that
55:14
they're largely in pay to public key addresses where the public
55:17
key itself is sitting there on the chain, right.
55:19
So you could, I could right now task this computer at trying to
55:23
brute force the cryptography from that on that public key and
55:27
derive the private key from it. It would take, you know what
55:30
like, you know, as many years as there are grains of sand in the
55:33
universe, right? Like so possible, technically
55:35
possible, so unbelievably difficult as to be, you know,
55:40
infeasible. The ideas with a quantum
55:43
computer capable of, you know, step change function, more
55:47
amount of computation, many step changes that that length of time
55:51
could shrink to a very small amount of time.
55:53
But that's why hashed addresses address formats on Bitcoin.
55:57
The NNH right paid a public key hash paid a script hash paid a
56:01
you know, whatever they are the public key pass through a one
56:05
way hash function. And there's not even really the
56:08
contention in quantum research that they could reverse a one
56:11
way hash function to then find the Bitcoin key public key to
56:16
then brute force. So those are safe in when
56:19
they're inert. But even from those hash address
56:21
formats, when you go to spend, you reveal the public key.
56:24
And the idea is that even the again, assuming that we ever get
56:29
a quanta, A cryptographically relevant quantum computer, the
56:33
distance between needing a year to brute force something, you
56:36
know, you could just spend forever on the Satoshi's public
56:39
keys are available. So like anyone could be brute
56:42
force trying to brute force them.
56:43
Right now you can't really brute force a hash public key address,
56:47
but when you go to spend, they will sit there in the men pool
56:50
until they're confirmed. And so you could imagine that
56:52
the if we get to that point with cryptographically relevant
56:55
quantum computers, that the the time, oh, it takes a year to a
56:59
month to a week to a minute to break.
57:02
Like once you make that key breakthrough, you have to
57:05
basically adversarially assume that they will get so good that
57:09
they could break it instantly in the men pool.
57:11
So we really need something better as a solution.
57:14
And there are solutions being worked on by many Bitcoiners and
57:18
Bitcoin developers that that exist.
57:20
So while I say I do believe it will be a problem at some point
57:24
in the future, Bitcoin can also upgrade.
57:27
There's, there's interesting new hashing algorithms and, and
57:31
address formats, as well as really interesting commit reveal
57:34
scheme that Taj Dridja, the original white paper author of
57:39
Lightning proposed last week in in at Presidio Bitcoin.
57:43
So there are solutions, but I do think it will matter.
57:46
And don't ask me when because I don't think it's soon, but I
57:49
also have no idea. But it's not it's not that soon
57:51
when the two big questions obviously are when and how do we
57:54
fix it? I'm pretty encouraged after
57:57
going to this Quantum Bitcoin Summit at Presidio Bitcoin last
58:00
week that. Oh, tell me more.
58:02
How did the solutions are isn't as scary as I had thought?
58:06
It's not. It's not, but it has to be a
58:08
hard fork. Yeah, it it may the the commit
58:11
reveal scheme. Yeah, it it's not clear if it
58:14
has to be a hard fork yet. It's not clear it does have to
58:17
be some kind of fork. Probably there might be ways to
58:20
do there's, there's a new signature scheme called Sphinx
58:25
Plus that Lalu from Lightning Labs, right roast beef proposed
58:30
has advocated for. I don't think he's the original
58:32
creator of it. That's compelling.
58:35
Don't ask me to explain it in detail.
58:36
I am not a cryptographer, but it it it's compelling.
58:40
Some of those currently those schema require very large
58:44
signatures. So you could be looking at
58:47
either a block size increase to implement them or just many
58:51
fewer transactions per block, right?
58:53
So lowering the transaction, the TPS of Bitcoin in order to
58:56
accommodate that. But those could one day also be
58:59
reduced. You know, we don't know.
59:01
And then this commit reveal scheme is like, it's sort of
59:03
like a break glass in case of emergency.
59:06
There is a way where you could create a proof where a system of
59:10
proofs where you first broadcast a proof and then later broadcast
59:13
the coins. So and, and, and I think Taj is
59:17
going to put something out on this soon.
59:18
And, and so we'll see. I'm also planning on running a
59:20
big paper on this over the next month or so to explain like what
59:24
my understanding is of the current state of the problem and
59:27
some of the top solutions being proposed.
59:31
I don't think you're no one really knows when
59:34
cryptographically relevant quantum computers will happen.
59:37
Maybe governments do, but if they do, it's classified.
59:39
I think one thing worth pointing to is that the US government
59:42
mandates that U.S. government agencies be off classical
59:46
cryptography by 2030. So that's 4 1/2 years.
59:51
That's not 20 years. So I think it will be relevant.
59:55
I don't think it's a reason to buy or not buy Bitcoin today.
1:00:00
But I do think that the corner should be, look, even if it
1:00:04
doesn't happen, why not work on potential solutions for it?
1:00:07
That's sort of my viewpoint anyway that maybe that's
1:00:10
contrarian, I'm not sure. It seems to be coming more
1:00:12
popular right now these these. I I would say that the tether
1:00:17
for anyone who who understands stable coins, it is contrarian.
1:00:23
I I'm on your camp, by the way. I love them.
1:00:25
I think they've like basically changed the world of anyone
1:00:28
that's living in developing country.
1:00:30
Like the fact that you have access to dollars like literally
1:00:33
gives you a new shot on life. I think it is contrarian because
1:00:37
I think a lot of bitcoiners expected that to be Bitcoin, but
1:00:41
at fundamentally like what in in my mind, I'm like, dude, aren't
1:00:44
you a free market Maximus, bro? You know, like the free market
1:00:47
is selling you something, right? And I think stablecoins are a
1:00:52
stepping stone towards Bitcoin because it gives people access
1:00:54
to digital wallets and then they're just one step away,
1:00:57
right? And I think anyone that adopts a
1:01:00
digital dollar, you're going to come to the realization very
1:01:04
quickly that we've come to the realization in the West that
1:01:07
inflation sucks. Like if you're coming from
1:01:10
double digit inflation and you're switching to a
1:01:11
stablecoin, you're like, wow, this fixes everything, but over
1:01:14
a couple over, you know, a couple of years, you're going to
1:01:17
start to feel the inflation of the dollar.
1:01:18
And then of course, this is where Bitcoin comes in.
1:01:20
So I, I, I see it as a Trojan horse.
1:01:23
I think the genius act was incredibly positive for the
1:01:26
industry. So I completely agree with you
1:01:30
there. Now regards to quantum
1:01:32
computing, I, I just, I don't know enough.
1:01:35
What what I do know is that, you know, it's like the way that the
1:01:40
computer is like built essentially.
1:01:42
It basically allows it to, allows the binary to be in a, in
1:01:46
a, in a quantum state. So it basically it's able to
1:01:50
guess numbers a lot faster than the traditional.
1:01:52
That's basically what I know. To be fair, I don't want to put
1:01:55
myself out as I'm neither a cryptographer nor quantum, a
1:01:58
computing expert. I am a Bitcoin researcher and I
1:02:00
attended that this conference in in San Francisco last week for
1:02:04
the purpose of learning what people are thinking and working
1:02:08
on, not because I'm myself contributing to the quantum
1:02:11
research. And I will say there is, I also
1:02:15
am told and and witnessed and told by a lot of smart people
1:02:18
that they, they're not close at all.
1:02:20
I think the the issue is they have made a couple breakthroughs
1:02:23
that make it plausible that there could be the additional
1:02:27
breakthroughs that one day lead to the cryptographically
1:02:30
relevant quantum computer. So like it's not close in like a
1:02:34
linear standpoint, right. And, and, and also point out
1:02:38
that some very smart actual cryptographers I know, like
1:02:41
Peter Willa, like Bob Miguelrath, are not concerned at
1:02:44
all and don't think will ever happen.
1:02:46
So, you know, to me, I think it's fine.
1:02:49
I, I, I certainly don't want people to think that I'm
1:02:51
spreading it like FUD very much the opposite.
1:02:53
I do think it could happen. And so bit corners.
1:02:57
I mean, a lot of people like to say, well, surely the nuclear
1:02:59
launch codes are like Wall Street are like at risk too,
1:03:02
like, you know, as some kind of the argument, like it's like a
1:03:05
what about ISM argument? And I say, well, yeah, I mean,
1:03:08
anything that uses cryptography, if this happens could be at
1:03:12
risk, right? But surely it's somebody else's
1:03:14
job to work on the nuclear launch codes and Wall Street.
1:03:16
That's not our job. Like that's somebody else's job.
1:03:19
But like, if you care about Bitcoin and you own Bitcoin,
1:03:21
then maybe it is your job to get involved and think about how
1:03:24
solving it. So I I think the nihilism in the
1:03:25
face of what could be a big deal is also very short sighted and
1:03:30
and not helpful. So I'm very supportive of people
1:03:32
thinking about all different types of threat models that
1:03:35
could impact Bitcoin, including Quantum.
1:03:39
Gotcha. Well, if you have any final
1:03:41
thoughts for the audience and what you think don't want to
1:03:46
hold you to it, but you know what do you think where where is
1:03:49
the price of Bitcoin at the end of the year and what are your
1:03:52
final thoughts towards anybody who.
1:03:56
Yeah, in December of 24, I said in published research saying
1:04:01
that it could hit, it would hit as a prediction 185 K U.S.
1:04:05
dollars during Q4 of this year. I still think that's very much
1:04:08
in play. I'm not really.
1:04:10
I was asked if I would adjust that.
1:04:13
I'm not adjusting it. I think that's bullish and also
1:04:17
fair. I think look, I think to me,
1:04:20
I've been dollar cost averaging into Bitcoin for at this point
1:04:25
years and and I view it as a savings technology with extreme
1:04:30
sovereignty properties as well as transactional capabilities.
1:04:33
And I think that's just an unbelievably powerful thing.
1:04:37
I think when you compare it to other digital assets, it is the
1:04:41
best single asset. It's not the most composable
1:04:45
network, right. There are others that have more
1:04:47
features, but I, I think, you know, when you look at it and I
1:04:52
and I say this and, and, and someone, you know, we write
1:04:54
research about all crypto markets.
1:04:57
You know, I think there are interesting things you can't
1:05:00
really do stable coins on Bitcoin.
1:05:02
Sure, you could do something like the Omni network like
1:05:04
Tether used to like stable coins broadly are not happening on
1:05:07
Bitcoin and that I think that's OK.
1:05:09
I think it's, it's great for Bitcoin to be focused on the
1:05:12
sovereignty store value, a censorship resistance properties
1:05:16
of its asset like BTC. The asset is a revolutionary
1:05:20
asset that I think everybody should know about, should
1:05:24
consider whether they want to own some of.
1:05:26
And I think particularly as you go into this, I mean, we are
1:05:29
certainly I think through in my view Pax Americana, right.
1:05:33
It was that it's like 91 fall of the Soviet Union to like, I
1:05:36
don't know, maybe like 911 or 2010 somewhere after maybe after
1:05:39
the great financial crisis. But today, I think it's now very
1:05:42
clear with how the world is treating our debt and, you know,
1:05:48
declining demand to use U.S. dollars and things like
1:05:51
international trade settlement and sovereign wealth funds that
1:05:54
we are probably in a more multi polar world.
1:05:58
The dollar is absolutely still the best, you know, of the
1:06:02
worst, which are the all the Fiat currencies.
1:06:05
But I, I think demand for debt is waning.
1:06:07
I think stablecoins can help, you know, continue and maybe
1:06:12
grow dollar dominance relative to the others.
1:06:14
But it does feel like the cat is out of the bag.
1:06:17
The world is going to be more and more ready over time for a
1:06:20
global decentralized, non sovereign, digital scarce
1:06:23
commodity money like Bitcoin. And I think, you know, 16 years
1:06:27
in now to this Bitcoin thing and Bitcoin still 60 plus percent of
1:06:30
the entire crypto market. And that's with 10s of millions
1:06:34
of coins having been launched. So I just encourage people,
1:06:37
even, you know, friends of of mine who are interested in other
1:06:41
digital assets, clients and counterparties of Galaxy will
1:06:44
not be surprised to hear me say this.
1:06:46
I say this all the time. Surely you must have considered
1:06:49
a Bitcoin position if you're already deep down the altcoin
1:06:55
rabbit hole. I do think there are other
1:06:56
interesting things happening crypto, then it's not all scams,
1:06:59
but I think you're crazy if you're, if you're not already
1:07:03
owning Bitcoin before you look at the rest of the stuff in this
1:07:06
market. That's what I'll say.
1:07:08
I'll leave it there, Nico. Well, Alex Thorne, thank you so
1:07:12
much for joining me on Simply Bitcoin IRO.
1:07:14
I really, really appreciate it. Guys.
1:07:15
You can find more about Alex, go give him a follow on Twitter if
1:07:19
you're not already doing so. It's intangible coins at
1:07:24
intangible coins. Alex, thank you so much for
1:07:26
joining me. Thank you, Nico.