Latest / The Income Show / Bitcoiners Will Be The New 1% | The Income Show | Ep. 21

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Bitcoiners Will Be The New 1% | The Income Show | Ep. 21 · The Income Show

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Developments like Seda and STRC have been extremely beneficial to me from the advisory seat because now we can satisfy that fixed income component in a portfolio with the underlying asset ultimately being Bitcoin.
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Finance industry embracing Bitcoin is like the only peaceful way we get a transition from dollar-denominated world to a Bitcoin-denominated world because people just hold Bitcoin in their 401k or, you know, they hold products like Strive or STRC or whatever in their 401k accounts and they don't even know.
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And then whatever happens and they're like, oh, wow, Bitcoin, I had no idea, like blah, blah, blah.
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My personal belief that Bitcoiners are going to be the 1% of political and economic power.
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Hey, everyone. Welcome back to The Income Show. This week I have on Wyatt O'Rourke.
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He's the founder of Basilic Financial, a Bitcoin-focused wealth management firm.
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He's the co-founder of Pax Partners, a private credit fund investing in Bitcoin collateralized
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loans. And he's the author of The Bitcoinization of Finance. Wyatt, welcome to the show.
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Dude, thanks for having me, Joe. I'm stoked.
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Absolutely. Glad to have you.
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Maybe as a starting point, walk us through your transition from traditional wealth management to operating a Bitcoin native wealth management firm.
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Yeah, certainly. You know, I always joke I got like a Keynesian finance degree and like a lot of good that did me.
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But, you know, I was just first heard of Bitcoin in 2017.
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but you know I was so steeped into that you know old system in school you know believed everything
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my finance professors were telling me and in the textbooks and all that but it wasn't until
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you know COVID really and unfortunately my my roommate orange-pilled me which I'm very thankful
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for I started listening to you know Preston Pysh and you know he kind of came at things through the
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you know economics and finance lens you know which resonated with me and you know I was working for a
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real estate investment company at the time and then left to do my own startup that failed
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miserably. But then, you know, in 23, you know, fast forward to then, I was very involved with
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the Denver Bitcoin community. You know, I consider myself a maximalist. My peers were maximalists. I
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knew I really want to start a Bitcoin company, but I was like, shoot, man, I don't know what to do.
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Like, I can't code all my career experiences in finance. I was just talking to friends and mentors.
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And so I just decided to adopt, you know, the RAA business model and, you know, got licensed and registered and all that jazz.
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But from the jump, you know, we decided, just made the conscious decision we were going to be Bitcoin native and service Bitcoiners.
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And one of the things I, you know, talk a lot about is, you know, regardless of what you're doing, you know, pouring coffee or, you know, helping people with their finances, like you can operate your business within the principles, values and ethos of Bitcoin.
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And so we always keep that in the back of our mind and how that really manifests in, you know, our business is aligning incentives.
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I think the wealth management industry is ripe for disruption.
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You know, a lot of folks still kind of do things like your father's financial advisor, you know, if you will.
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It hasn't been, you know, some innovation, but, you know, now it's on a lot, I would argue most folks are probably still charging their 1%, putting people on index funds, yada, yada.
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So, you know, a big thing, you know, I point out, it's like we don't charge AUM on Bitcoin as an example, because to me, that's rent seeking, right?
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I'm literally telling you to buy and hold Bitcoin.
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It's not like I'm putting together a portfolio for you.
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You know, we only work in Bitcoin.
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And so just little things like that operationally, I think, you know, make a big difference.
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You know, we're talking to, you know, Bitcoiners.
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A lot of my, you know, clients have, it's fun for me too, because, you know, one, I love Bitcoin.
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But two, I find, you know, your average Bitcoiner has way more financial education than, you know, Joe Sixpack off the street.
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And so they're pretty like tuned into, you know, their finances or, you know, the finance industry at large, I would say.
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And so, you know, a lot of times they've worked with a financial professional and they've brought up Bitcoin or, you know, their financial advisor wanted them to sell.
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and I tell them to come home and work with somebody that speaks their language and understands where they're coming from.
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So a lot of that is just meeting people where they're at.
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And, you know, I think it's a little bit of a Mexican conception in the industry.
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But, you know, as a fiduciary, we actually have a lot of flexibility with how we work with clients.
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Like clients with obviously very heavy, you know, Bitcoin exposure and portfolios,
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and we just work with them to make sure they understand, you know, the asset class,
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understand the asset itself, the network, the technology, and what they're getting into.
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And if they feel comfortable with that and we feel comfortable with that, like we're perfectly fine with that decision as long as they understand the pros and cons of what they're doing.
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So there's just like a lot of different things we can do to service people.
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But I'm really particularly excited about Bitcoin Financial Services as a subsect of the finance industry at large,
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whether it's folks like myself or the Bitcoin Financial Advisors Network.
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There's a lot of great work going on there.
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But also on the Bitcoin investment product design
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and some of those new tools, products, and strategies that are coming to market.
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I'm obviously biased, but I think it's the most exciting subsect of Bitcoin to be in right now.
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Yeah, I want to ask you in particular how you and some of your clients may think about
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this concept of digital credit, obviously pioneered by Michael Saylor.
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But first, kind of since you mentioned this before, like before, you know, in college, you studied more of like Keynesian economics.
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What was your investment philosophy before Bitcoin?
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Were you like buying S&P 500 index funds?
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How did you think about investing?
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Yeah, you know, it's kind of kind of funny.
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I would say, yeah, I have an old mentor from high school who's been tremendous to me.
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but he's the one that first kind of taught me about investing.
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He's very much of, you know, the Warren Buffett value investing.
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So that was kind of like my first exposure, you know,
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simply just like buy undervalued assets, right?
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And, you know, you can discount the cash flows
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and, you know, assign, you know, a multiple to it
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and you can kind of come up with like what you think an asset should be trading at.
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If it's trading less than that, buy it.
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More than that, don't buy it.
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And so that to me made a lot of sense.
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but that, you know, I entered the professional workforce, you know, we're kind of, you know,
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talking about the tail end of Zerp here and, you know, tech valuations have gone crazy.
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And I kind of, you know, transitioned more to, you know, growth.
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I drew a lot of influence from folks like Ben Thompson at Estratechery.
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And he's been on, oh, shoot, I can't, Invest With The Best, I think.
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Invest Like The Best.
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I can't remember the name of the podcast right now, but, you know, it's more of a tried five.
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podcasts and he really kind of opened my mind into like different valuation techniques and you know
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a little backdoor into understanding Bitcoin there but you know he talks a lot about you know network
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effects which you know in your traditional discounted cash flow model like you know a lot
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of these newer companies whether it's you know Facebook or Google or whatever like a lot of their
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intellectual property or a lot of the value that they bring to market is like failing to be
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properly valued in a lot of these traditional valuation models. And so that kind of like
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started opening my mind up more to, you know, the tech ecosystem and what these companies were
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actually doing and what the value was there. So, you know, I've always been more of a individual,
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you know, stock picker. And, you know, I would say this is kind of a failure of the wealth
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management industry in general is just, you know, if somebody is paying you to manage your portfolio
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and you're just kind of blindly putting them into, you know, index funds,
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I think you're probably doing your clients a disservice there.
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Like you should lean into your specialty and being able to understand how companies make money,
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how they, you know, get valued and in the market.
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You know, I think index funds are great inventions.
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I'm not like poo-pooing them at all.
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And especially, you know, if you're managing your own finances or, you know,
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you don't want to think about it necessarily.
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like there can be great vehicles for people to just get equity exposure and own an asset and
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be a participant in capital markets but i always yeah kind of leaned towards like the individual stocks or you know kind of more of the alternate space So your book The Bitcoinization of Finance can you maybe tell the audience like what the general thesis behind that book
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Yeah, definitely.
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Well, it really kind of came out of, I was tired of Bitcoiners poking me in the ribs.
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Or it's like, I have Bitcoin.
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I don't need a financial plan, you know.
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or it's like finance is stupid.
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I'm a Bitcoiner.
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It's like, okay, like I get it.
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You know, Bitcoiners understand like the money's broke.
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I agree.
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I think so too.
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Like these are all important things for us to understand.
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But I just felt like there was a big misconception
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from a lot of the Bitcoin community
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on the role finance I think will play
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in hyper-Bitcoinization.
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So I mean like the broad high-level thesis is,
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you know, I believe hyper-Bitcoinization happens
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if we're able to give the largest pools of capital
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the tools, products, and strategies to get into Bitcoin.
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And throughout the book, we really start exploring how to do that.
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And your guys' work at Strive, I think he's Paramount
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and obviously Michael Saylor really kind of the pioneer in this space.
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And there's so much we can do to deepen Bitcoin capital markets.
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I think the Bitcoin industry at whole will be doing a vast disservice to itself if we just like broadly, you know, excommunicate like this massive industry.
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Right. And so it's really kind of trying to merge, you know, finance of Bitcoin.
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And it's not like this carte blanche, like defense of finance.
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Obviously, there's a lot of shenanigans and stuff that go on.
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And we talk about that, you know, in the book, I use the example of like how, you know, people have been crying wolf that gold's manipulated.
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you know, for decades now, right?
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And we kind of break down that example.
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I think, you know, kind of part of the problem with gold
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and as Bitcoin as we know,
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and sympathetic to our gold bug friends,
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gold obviously has a lot of sound money principles, right?
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But the fact that it's physical
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and, you know, constrained to, you know, physical worlds,
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there's a lot of finance tricks you can do with it, right?
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You know, the futures markets
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and the asset never actually settles in kind.
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And so, you know, my kind of call to action,
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you know, throughout the course of the book
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And ultimately what we end with is like, again, kind of what I started with, like it's incumbent on us, I think, working in the finance industry to build a Bitcoinized financial system where the asset actually settles and trades in kind.
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And if we're able to develop these tools, products and strategies with that in mind, we ultimately live in a better world.
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I think a lot of maybe non-Bitcoin investors or Bitcoin skeptics or people that have a very small, like a small allocation of Bitcoin, they probably think of investing in maybe potentially two different buckets.
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They have the growth bucket and then more of like the income bucket. Do you see that among clients and people that think that way?
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and do you see value in having like a growth kind of bucket and an income bucket or or do you think
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of investing as completely different um different manner no i think that's kind of conceptually
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right you know my clientele you know skews you know obviously bitcoin heavy so you know and
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there's a couple different ways like the traditional industry would value that it's either
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you know risk on sometimes growth you know people call it different names but i think and not this
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sounds super cheesy but it is true it's like it ultimately really depends on like what your goals
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are and what you're trying to achieve you know so if you're working with you know younger clientele
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which mine you know tends to to skew I would say from your classic you know wealth management firm
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a lot of those folks are still in accumulation stage and like they understand bitcoin they
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understand they want to save their time labor and capital in a in a hard asset and you know they're
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willing to ride with the ebbs and the flows of the Bitcoin market, but that's ultimately, you know,
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what they're interested in accumulating. But, you know, given some of the properties and benefits
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of Bitcoin, a lot of my clients, you know, retired or closer to retired too. And, you know, in that
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case, like we do have a need or desire for fixed income. A lot of times, you know, most people,
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I would say their liabilities are still dollar denominated.
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And we really kind of go into it's like, okay, you worked your butt off, you stack sats, like now what?
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And that's where we really kind of come in at the most value, I would say, in my opinion,
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is like how can we either help make our Bitcoin grow for us in different investment products
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or how can we preserve our Bitcoin by allocating some of our portfolio to, you know,
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kind of that fixed income or, you know, dividend bucket.
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So, you know, we have those dollar denominated liabilities accounted for,
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and we can either use what's left over to continue stacking or preserve our stack.
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And so I think it really kind of depends on, like,
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what stage of life you're in and ultimately what you're trying to achieve.
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Yeah, it makes perfect sense.
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What would you say is maybe the biggest mistake that a Bitcoiner,
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or not even a Bitcoiner,
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just anyone that has accumulated a significant amount of wealth, what's like the biggest mistake
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that they make at their stage in life? Yeah, one of the things we really try to focus on,
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it's not necessarily an active mistake they've made. It's more of a mistake, you know, we're
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trying to see around the corner and prevent them from making in the future. And that is really kind
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of we there's obviously a lot of quantitative work we do but some of the work I'm most proud of is
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what we do on the qualitative side and you know it's my personal belief that Bitcoiners are going
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to be you know the one percent of political and economic power right and whether we like it or
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not we're the first generation of Bitcoiners so there's like a tremendous responsibility I think
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incumbent on us to be good stewards of our wealth. And, you know, when you started investing in
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Bitcoin, you're excited, you're watching the market goes up and down. But then, you know,
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20, 30, 40 years later, when you're at the end of life or, you know, at the stage of your life,
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or, you know, you built your state and you're thinking about passing it down.
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And that's really what we want to try to prepare for, because it's likely going to be a much larger dollar denominated amount than what you thought it was going to be when you first started investing in Bitcoin.
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And, you know, our kids are going to look to us. It's like, well, how did my dad, you know, make sure I got the Bitcoin I got or have we identified causes close to our hearts, whether it's a church or charity or something that that Bitcoin is likely going to have a profound impact on whatever cause you identify and you want to help.
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So we really try to make sure our clients are buttoned up to make sure that Bitcoin can get to its intended destination.
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And we don't make any, you know, unforced errors in the meantime.
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You know, we're big advocates of self-custody.
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Obviously, we know, especially with like recent events, like there's a lot of potential pitfalls in there.
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And I think it was Willy Woo tweeted out this graph.
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Like most Bitcoin that has been lost in self-custody is like human error.
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So we do like a custody analysis and we think of self custody in terms of tradeoffs.
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And it's like, are we shrinking our risk surface area?
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Are we increasing our risk surface area?
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Understanding there's no silver bullets.
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And we try to game plan out different scenarios to make sure, regardless of what happens,
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like that Bitcoin is stewarded to its intended destination because it's a finite asset.
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You know, there's no redos.
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It's not like custodying, you know, normal stocks and bonds or whatever that, you know, you would ask your father about, like he passed to you sort of thing. And so we really kind of have to embrace the responsibility on being on the forefront of that and being a good example for future generations.
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Yeah, maybe that's the next question. How do you see the evolution of getting exposure to Bitcoin? I mean, I think probably every person at Strive is highly supportive of self-custody.
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With that being said obviously the Bitcoin ETFs came out a little over two years ago Those have done quite well BlackRock is one of the largest BlackRock ETFs Treasury companies Strategy has outperformed Bitcoin since inception Digital credit another another unique way to kind of get bitcoin like exposure how do you see yeah kind of one of my hottest like homer
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takes is i think you know the finance industry embracing bitcoin is like the actually the only
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peaceful way we get a transition from you know dollar denominated world to a bitcoin denominated
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world because people just hold Bitcoin in their 401k or, you know, they hold products like Strive
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or, you know, STRC or whatever in, you know, their 401k accounts and they don't even know.
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And then, you know, whatever happens and like, oh, wow, I had Bitcoin. I had no idea, like blah,
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blah, blah. So I think that actually is the peaceful, you know, transition, you know,
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whether it's a pension fund managing it. Like I am doing more work on Bitcoin investment product
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design and it's really fun right now because it's a little bit of the the wild west and there's a
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lot of different things to try but i think it's also exciting too because you literally have this
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massive tried five playbook that just needs to be you know applied to bitcoin right like sailor
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didn't invent a preferred stock right he just like applied a preferred stock to like a bitcoin
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centric you know investment product and so i think there's tremendous you know opportunity there and
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And so I think, yeah, people end up just like accidentally owning it or owning, you know, some sort of synthetic vehicle with Bitcoin exposure, which is ultimately exciting.
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I think everybody obviously wins in that instance.
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I think a decent amount of Bitcoin, you know, will be inherited.
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You know, I think, you know, when we're old and gray, you know, we'll be hearing stories at the bar or whatever about how so-and-so came into Bitcoin just because, you know, they had a crazy uncle or whatever that was stacking.
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and they were the beneficiary of that.
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So I think it, and then ultimately too,
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I think Bitcoin adoption is just going to end up growing
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and more people are going to be buying,
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you know, spot bear asset Bitcoin,
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which I'm always, you know, an advocate for as well.
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So I think it's kind of those three buckets
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is how I've mapped out the future of Bitcoin accumulation.
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Yeah, it seems like a good way to look at it.
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I mean, I think you make a great point of,
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if we do enter a period of hyper-Bitcoinization,
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whatever that might mean and Bitcoin becomes the default and main or only store of value.
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I don't really want that to happen necessarily overnight where the 99 people that live next to me own zero Bitcoin
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and Bitcoin's $100 million or $10 million a coin.
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That might be like an unsafe different world unless they own some of it with us.
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well exactly exactly and trust me i like i love the the maxis and i don't think maximalism is dead
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it's actually you know i think it's an important movement but i think sometimes i get a little
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carried away or it's like do i want it tomorrow part of me is like yes but do i 100 agree with you
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absolutely yes you know so i think it's it's actually much better for for bitcoin if it is
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this slower transition i think it actually gives bitcoin a ton of credit not necessarily that i
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think it needs to prove itself anymore but i think you know kind of within the vein of tick tock next
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block if bitcoin just continuously proves itself over and over again like you're really kind of
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left with no arguments about why you shouldn't be saving or you know transacting in a in a better
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money. And I think that this stuff just takes time, you know, gold didn't become, you know,
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sort of value or, you know, unit of account, like in 16 years either, you know, and it's tough for
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us sometimes to get excited and, you know, want this tomorrow, but I think it's actually in our
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benefit if it's not tomorrow. Yeah. I'm curious if you agree with this framing as well. Like it's,
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It's almost maybe unreasonable to not expect entrepreneurs and people building public companies
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or people operating pension funds or endowments or whatnot,
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if they do also believe that Bitcoin is going to outperform almost everything else,
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you would expect there to be some people that kind of capitalize on that transition period
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where 99.9% of capital is outside of cold storage Bitcoin.
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These people happen to manage a lot of capital.
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Of course, there's going to be people that are going to be building that bridge
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because it's kind of profitable to do so if Bitcoin goes up.
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Totally, totally.
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And I'm a big believer in the foreturning thesis.
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I think we're probably living through one of those right now.
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It's like intimidating on one hand when there's a lot of upheaval, whether that's, you know, in markets or culture or whatever.
22:13
But in those times, too, there's also tremendous opportunity.
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You know, if you study history and look back, you know, when those have previously happened, you know, that's also how we got like steel and railroads, you know.
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And so if you're like willing to be, you know, brave enough, do your homework and have conviction in how you're actually allocating your capital, which is just a representation of your, your human output, then yeah, I think, you know, you should feel confident, you know, making that bet.
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And, you know, it's kind of like, you know, everything, you know, like the bell curve, you know, it's like the, you know, two and a half percent on, you know, the what's the I'm trying to think of like the meme equivalent, you know, like the the super Chad, you know, is going to have like be the winner there because he, you know, zigged on everybody else zagged.
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And that's just how most markets are developed.
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And sometimes, I don't know, maybe I'm just too in it, but it feels like when we start talking about Bitcoin, people just turn like parts of their brain off.
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And, you know, they completely will negate like or not consider like the network effects of like Google or Facebook.
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You know, I feel I find people just in normal conversation, people drastically undervalue the network of Bitcoin.
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You know, they just focus way too much on the assets.
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There's a lot of like comparables you could kind of look at there.
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People fail to kind of, I think, grasp like the gravity of technology adoption and like, you know, S-curve and kind of how like the long tail effects of all this stuff works out.
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unfortunately kind of muddied himself with the the bitcoin crew but nasim talib you know
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talks about this like very elegantly you know in his uh trilogy of of books and and how people like
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fail to consider like a lot of these black swan events you know they're obvious in in hindsight
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but um over you know the the course of time when you have not only people you know moving and
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gravitating to an idea, but you have their resources gravitating to an idea and that
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compounds and, you know, you look back 20, 30 years, whatever, it's like, wow, that was
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a massive movement.
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Yeah, no, that's a really great point.
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I want to shift towards this concept of digital credit, obviously pioneered by Michael Saylor.
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We're doing it at Strive as well.
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Maybe starting at a high level, what's your perspective on this concept of digital credit?
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Well, I think it's awesome. And it was funny because I think, you know, Jeff and Matt were going through the Twitter trenches a couple months ago, like defending the moniker.
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Is it actually credit for first stocks? I always like chuckle.
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So it's like, yeah, there's obviously truth on both sides. It feels like people talk past each other on things that don't seem to matter all that much.
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what I'm focused on is like the you know invention you know if we can call that itself I think is
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is profound right and you know I kind of you root this in a couple different things one like I
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mentioned it's like I think one it's a brilliant idea of or example I should say of this you know
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Trad5 playbook being applied to to Bitcoin and you know to kind of your previous question now like my
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existing investment philosophy with our our clients whether it's you know Bitcoin or exposure and
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traditional capital markets is, you know, I think we're seeing this for return to real world physical
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assets, right? And so we want exposure, you know, to those things, Bitcoin obviously being,
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you know a huge part of it And then if they have like a cash flow component to them like that even better um because that that allows us to you know ideally compound our our acquisition of
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those assets and a lot of times like you know let's say my my older clients that have a need
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or desire for fixed income me managing their wealth being a bitcoiner i can't in good faith
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like put them in like a treasury bond just so you know they're earning four percent right because i
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know with money printing and inflation like we're we're probably that's like a losing trade it's
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like sure anomaly and we made you know four percent but like our wealth was not preserved
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we're actually falling behind and so developments like seda and strc have been extremely beneficial
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to me from the advisory seat because now we can satisfy that fixed income component in a portfolio
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with the underlying asset ultimately being Bitcoin. And I think this is like an extremely
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exciting and important phenomenon. And I kind of try to frame it as like we're in a unique moment
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in time, I think is, you know, fun and exciting in the investment landscape because I think, you know,
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Bitcoin's maturation cycle, store value, medium exchange, unit of account.
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I think we're kind of like halfway between like store value and medium exchange probably.
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And I think there's a new market that's emerging in that opportunity.
27:28
Like it won't last forever because, you know, it's my personal belief, you know, we will be in a Bitcoinized world.
27:34
And so the unit of account is just Bitcoin.
27:36
But in the meantime, I think we're operating this new market, which I've kind of dubbed like fiat return on Bitcoin exposure.
27:43
And that is like tremendously valuable. And again, I think just another stepping stone to hyper Bitcoinization. But when we're evaluating investment opportunities in that market, the competitive advantage for investment product issuers, how do I create a product that has the least synthetic Bitcoin exposure with the highest fiat denominated return?
28:07
and we in like our wealth management seat try to help our clients evaluate different opportunities
28:15
and do due diligence and identify them and I it I'm curious in your opinion on this but I kind of
28:22
put you know SATA and STRC and kind of like v1 investment products and like the market and the
28:31
finance industry will keep iterating on top of those yeah i i agree with that i mean i think the
28:39
whole concept of a balance sheet powered by bitcoin and and building like credit or senior
28:47
tranches of it that offer some form of yield or and lower volatility than bitcoin itself like to
28:54
me seems like an absolutely massive market i know like you i believe you're working on things like
28:59
Bitcoin collateralized loans, like that I think could be an extremely massive market.
29:04
And I agree with what you said earlier, where it's like, you know, some people may not be
29:08
100% a fan of things like this.
29:12
But I would argue like today, we live in a world where Bitcoin is a store value.
29:16
Maybe we get to a world where Bitcoin is the primary form of money and their dollars don't
29:22
even exist.
29:22
But it's obvious that we're kind of a ways away from that, especially when it comes to
29:27
like what the price of Bitcoin would be
29:29
or what the value of Bitcoin would be
29:30
relative to everything else.
29:32
And so while we're in this obvious transition period,
29:37
it's inevitable that there would be products like this
29:40
because it's capitalizing on the fastest growing asset
29:43
that's sucking the monetary premium out of everything else.
29:48
And then people are just building bridges from that asset
29:50
into everything else that happens to have a monetary premium,
29:54
whether that's stocks, pervert equity, fixed income, credit,
29:59
you know, whatever you want to, however you want to call it.
30:01
I think that's the case, but it's a fascinating time.
30:05
Well, it certainly is.
30:06
And that's something, you know, it's a little disappointing to me
30:10
that like the Bitcoin community fails, I think, to grasp it.
30:14
And large is like people actually have different risk tolerances,
30:17
you know, and it's like, yeah, you may still be like this trying true Bitcoiner.
30:22
you've done your 40 hours of you know bitcoin podcasts like a week like you're about it well
30:26
it doesn't mean like you don't have like a mortgage and a wife and kids and other responsibilities
30:32
like you need to support through like different market environments different times in your life
30:37
obviously things like come up right and so to me it makes just like a ton of sense because you know
30:44
when i think of like okay well what's like a good like v2 bitcoin investment product we're kind of
30:51
using you know say an strc is like this this v1 so i think it's and like again like this will only
30:57
be a market opportunity for a finite period of time as well but if you package bitcoin spot bear
31:04
asset bitcoin so you know that investor has like some upside potential uh of the bear asset itself
31:09
another hard asset so you're kind of dampening your volatility you know ideally has some sort
31:17
like cash flow component as well and then you tranche out that risk well now somebody that may
31:23
be like a very risk adverse investor can still potentially share in some bitcoin upside you know
31:31
they're probably getting a lower dividend payment and say for you know example sake 20 percent and
31:36
like or excuse me seven percent on the senior so they have and then you have the you know hard asset
31:44
you know non-correlated hard assets like land or some sort of um your rent producing property
31:52
um conda you know apartment complex like whatever so that can balance that because that value isn't
32:00
you know fluctuating that you know mark to market value isn't fluctuating as much as like
32:05
bitcoin will be so they're feel more comfortable with like the risk profile they're taking on still
32:11
have the bitcoin upside and they get their fixed income payment while the junior you know they have
32:16
a higher upside potential but everybody like walks away happy and it's like well as like
32:22
i'm just confused like why the bitcoin industry wouldn't embrace that you know it's literally
32:27
more bitcoin adoption i think it ultimately leads to a you know kind of higher floor in the price of
32:34
bitcoin because you have more bitcoin purchased by more people that have different you know goals and
32:40
and desires with that Bitcoin.
32:42
And so it's likely not being, you know, traded as frequently.
32:45
It's probably locked in some sort of a vehicle.
32:49
And so we have more Bitcoin be accumulated that's held for, you know, longer.
32:54
And then you still have like spot Bitcoin exposures.
32:58
I think like fair, I guess, you know, a lot of the hardcore maxi crowd like will, you know, downplay.
33:07
I think you know the the development of products like strc because you don't have like straight
33:14
spot bitcoin exposure it's like well you know we're literally just getting going here it's like
33:20
give the industry like some time to develop new markets I would even you know kind of argue that
33:24
you know sailor took him five ish years you know to to find product market fit with strc which I
33:32
I think, you know, he probably has.
33:34
And I obviously started with like the common
33:36
and different convertible debt strategies.
33:37
And so, you know, you have to give entrepreneurs
33:39
and capital allocators time to build products,
33:43
feel out the market, like what do they like?
33:45
What do they don't like?
33:46
And then, you know, also give these products
33:49
like a track record.
33:50
So, you know, larger institutions can, you know,
33:53
come in and make an allocation
33:54
because you can't do that
33:56
if you're sitting on, you know, a large pool of capital.
34:00
And it's like, yeah, we're going to do like this,
34:02
this new thing that's just not how the the world works i think we need to have some humility as
34:07
as bitcoiners to allow like the finance industry to just do its thing if you believe in bitcoin
34:13
you will know inherently bitcoin will find a way into those products yeah you made a really
34:19
interesting point of pairing bitcoin as a base with something else whether it's land or a business
34:26
or some sort of cash flowing asset and then tranching that out and giving people some bitcoin
34:31
exposure, but also some cash flow and some income and less volatility.
34:37
And to me, I think that like that concept is a really interesting concept.
34:42
And I think one of the main, I'm curious if you agree with this framing, like one of the main reasons why that is so interesting is because it would have less volatility than Bitcoin itself.
34:54
Like in my mind, if, you know, you and I, or I believe that, you know, Bitcoin is great long duration savings technology.
35:01
Like I think over four or five, 10 plus year period from here, like I'm like 95, I don't know, 99% sure that Bitcoin could have a cake year of 30% or higher, at least 20% or higher.
35:15
Like those are my odds.
35:16
Like I think it's pretty, pretty high odds, but it doesn't come in a straight line.
35:21
But I think that like if you went to the average person and you were like, here's a bank account that pays 30%, they would be like, everyone would put their money in it if it was not volatile.
35:34
But because it's volatile, it scares everybody and it frightens people.
35:39
Do you agree with that framing?
35:41
And do you think that like these products kind of help address that?
35:45
Absolutely.
35:46
I do agree with that framing.
35:47
I do believe that these products help address this.
35:51
There's like this funny saying in finance that I love,
35:54
which I think, you know, more true than that,
35:56
but it's like concentration is how you get rich.
36:00
Diversification is how you stay wealthy, right?
36:02
And I think there are ways to diversify within Bitcoin
36:06
because I believe it's money at the end of the day, right?
36:09
Like when I'm building like a strict TradFi portfolio,
36:12
I'm diversifying between different asset types.
36:15
they're all dollar denominated right so i believe like we're at the very early innings and you know
36:21
to the the credit for the the strive team and the strategy team like well you're now giving us more
36:31
or less obviously still dollar denominated but you know we're starting to see like the ability to
36:34
diversify within bitcoin and like bitcoin kind of being like the underlying unit of account and the
36:41
underlying powerhouse even though absolutely we're not technically all the way there but that's how
36:45
I'm seeing is like where the early innings of being able to to do that and you know I think
36:51
we're just kind of up against like some human psychology you know I don't think like humans
36:57
are wired to thrive in chaos like I think we like to operate under you know the assumption that
37:04
you know tomorrow will be better than than today there's obviously work you have to do
37:10
within that. But, you know, if you do look at, you know, large pools of capital, let's just say,
37:16
you know, like a pension fund, like they have real responsibilities to people, right? So,
37:21
you know, a firefighter is retiring tomorrow, right? But, you know, if your pension fund
37:28
owned Bitcoin from January to today, like those are his retirement dollars that are worth way
37:33
less and he still needs to retire. And, you know, the next day another one's retiring, right? And
37:37
there are obviously people you know entering the the system and volatility i don't want to make it
37:43
sound like it is a a bad thing altogether right because you know in volatility there is you know
37:50
opportunity and on ramp you know numbers probably need to be updated recently but you know a year or
37:57
two ago they did a great report it's like bitcoin has more good volatility than than bad volatility
38:03
I think that's, you know, just the nature of a maturing asset class.
38:08
But then it's like, OK, well, if we know, you know, assuming this is your position, but we want more people to get Bitcoin exposure, understanding they're in, you know, that firefighter retiring tomorrow is obviously in a different position than me.
38:23
Why won't we give him the opportunity to dampen the volatility but still have some of the upside exposure?
38:31
And the person using that firefighter example, like he's entering that bet or it's like, yeah, I'm willing to forego some of the up to cap the down.
38:41
And I think most people actually want to make that trade.
38:44
You know, they want to go through, you know, life knowing like I can do tomorrow, you know, tomorrow's not wrecked.
38:52
You know, everything I've spent my entire life building isn't like, you know, obliterated in a bear market.
38:58
And so obviously, you know, we know to, you know, four year cycles and just having, you
39:04
know, low term, you know, time preferences, all important things.
39:07
But, you know, I think your your average investor and this kind of, you know, another trope
39:11
where it like you know rich people don necessarily is specifically like family offices I hear this all the time you know it not that they want to make 30 They don want to lose 30 right You know if you spend a lot of time accumulating
39:26
this wealth, like your main prerogative is probably not losing it. And so I think there's a lot of
39:31
opportunity to dampen the volatility of Bitcoin. And just given the nature of capital markets too,
39:36
that means there's somebody else on the other side of that trade that's willing to accept that
39:39
risk. And it's not a bad thing, right? Those are just two market participants coming together,
39:45
making a trade and they each walk away understanding the bet they've made.
39:50
Completely agree.
39:51
And, you know, your point about volatility not necessarily always being a bad thing,
39:56
of course.
39:56
I mean, it's like, you know, Bitcoin was, I don't know,
39:59
the last few months was kind of doing nothing at around $70,000 or so,
40:05
or maybe $60,000.
40:07
And then all of a sudden it just rocketed higher above $70,000 quite rapidly.
40:11
but I definitely think that like
40:14
one of the main reasons people don't own
40:18
a large portion of their portfolio in Bitcoin
40:20
is because volatility creates a lot of uncertainty
40:22
and like that uncertainty
40:24
you and I are more than happy to bear it
40:27
and exchange we think we'll be able to produce
40:32
outsized returns compared to
40:34
almost every other asset class
40:36
but right now for whatever reason
40:38
a lot of people don't want to do that
40:41
And obviously it shows in the price of Bitcoin relative to everything else.
40:46
I think that's a really great point.
40:50
Anything else in regards to digital credit or just broadly this Bitcoin-powered credit idea that you want to share?
41:02
Or maybe more specifically, like, do you think that this concept of digital credit could revitalize income investing as a whole?
41:16
Excuse me.
41:17
I do.
41:18
I do.
41:18
Because, you know, if you think of, like, fixed income, you know, largest market on planet Earth, right?
41:25
And a lot of that has been, you know, fueled by sovereign debt.
41:32
And, you know, it's like the ability for a nation state to repay its investors with tax revenues.
41:38
And it's like, well, you know, big Lynn Alden fan, nothing stops us trying, right?
41:43
So I think, you know, we're in this debt spiral, you know, the U.S. particularly being like the largest issuer of, you know, a debt in the world.
41:50
and so you know that was kind of you know a more tried and and true classic trad fi
41:59
I borrow money from you I can pay back I can pay you back plus interest with my revenue I have
42:09
coming in it's like slightly different in like this v1 of these bitcoin investment products like
42:15
strc right because you know bitcoin itself doesn't have revenue component right so we're making like
42:24
the appreciation bet but again i i'm comfortable with that given my framing as i was talking about
42:30
earlier about like this moment in time i still think you know we have the ability for a ton of
42:36
bitcoin adoption to come in the market right and so that to me makes sense right now and that's why
42:42
I think that like this fiat return on Bitcoin exposure market, one, has a massive opportunity,
42:49
but two, ultimately when, will, I don't know when, obviously, will have like a finite,
42:56
you know, time on it because I think the dollar will become extinct.
42:59
And so, you know, when we transition to that hyper-Bitcoinized world and we start moving
43:04
into a Bitcoin-denominated world, it's like, okay, well then what additional value am I
43:10
adding to generate more Bitcoin, right? And so that is pretty interesting. Like I have a ton of
43:19
clients asking, you know, it's like, how can I invest my Bitcoin to make more Bitcoin? It's like,
43:25
there's not too many ways that I've legitimately been able to identify. I'll point out my favorite
43:31
is a company called Meanwhile. They have a Bitcoin denominated whole life insurance policy,
43:37
right that's another great example of like they didn't invent whole life insurance policies they
43:42
just applied it to bitcoin and you know they target like a two percent bitcoin and bitcoin
43:48
return for their policy holders well how are they able to do that will they have a second product a repo product that you know they predominantly market to you know Bitcoin miners or other large Bitcoin holders where you can you know pledge your Bitcoin receive fresh cost basis Bitcoin back
44:09
You pay them three and a half percent in Bitcoin terms for the ability to do that.
44:13
But then if you need to sell your Bitcoin, you can do it at a fresh cost basis.
44:16
So, you know, you can maneuver around a potential tax liability.
44:21
and you know they keep one and a half percent for themselves and they pay the other two percent to
44:26
the policy holders it's like well that works because they have a business denominating bitcoin
44:32
that adds value to a different you know market subsect right and so that's ultimately how i think
44:38
you know things play out uh in the future you know i think as we've kind of reached like i think yeah
44:44
we are in dollar end days and like our lives are so fiat they're so financialized like the market
44:52
then obviously demands like this higher return rate we're gonna kind of like go backwards in
44:58
time in some sense when like a bitcoin denominated world like your return is smaller but it means
45:06
more because it's sound money yeah that's very well said i i think you know thinking forward
45:14
on what does a Bitcoin standard look like
45:17
and how do you value things
45:20
and what does a typical portfolio allocation
45:22
look like under a Bitcoin standard.
45:24
It's kind of a brain warp in of itself
45:28
to try to think of how that will play out.
45:30
Because like you said,
45:31
there aren't, especially today,
45:33
there aren't really any or many opportunities out there
45:38
that enable you to outperform Bitcoin.
45:40
I agree.
45:40
Meanwhile, it's interesting.
45:42
I think obviously, personally,
45:43
I think the treasury company
45:44
model with the correct way to get amplification makes sense because you can access the cost of
45:51
capital that's lower than my personal expected CAGR birth rate for Bitcoin. But other than that,
46:00
it's like there aren't really many things. So I guess maybe one of our final questions,
46:06
what do you think a typical portfolio looks like on a Bitcoin standard? Is it
46:11
people just stack Bitcoin and like that's 50, 60, 80% of their portfolio. Do people like invest
46:19
in businesses here and there, just maybe a better valuations or when they see unique opportunity?
46:26
How do you see that playing out like very long-term? Yeah, it's a great question. And
46:33
office face, you know, it sounds kind of simple, right? But to your point, like it really actually
46:39
is you kind of find yourself in a mental pretzel big like at least i do because
46:45
my gut reaction is like you know majority of people's um portfolio will probably just be in
46:52
bitcoin but like we talked about i just believe bitcoin's money but when you say a majority of
46:57
your portfolio is going to be money like it sounds weird but then you kind of have to like
47:01
go second third fourth order effects of bitcoin's like but that's okay because it's actual sound
47:08
money with a finite supply and like your your time labor and capital are preserved so you don't
47:13
actually need to like keep trying to juice everything out of your money as you possibly
47:17
can because you're not getting debased 24 7 365 right so i do think i like people's portfolio in
47:26
in a bitcoin nominee world will probably just be like money uh one of my kind of you know big macro
47:33
trends too I think you know largely with like the the advent of you know AI and just like all the
47:40
technology out there I do think um we're kind of entering like an entrepreneurial boom um so I do
47:48
think it could be a lot more just like friends and family or like small business you know investing
47:53
I hope that you know becomes a little bit easier for people there's obviously regulations I have to
47:57
change around you know accredited investor laws and everything but if I just like broadly look
48:04
back to like you know think of you know an old village in like Europe or something I think a lot
48:09
of that economy was like circular within that economy like people are investing within themselves
48:14
I think that's kind of going to be a larger portion of people's portfolio but we don't really
48:19
necessarily think of that being a part of our portfolio now necessarily because one I don't
48:25
think it happens a ton unless you know you're like an angel investor or something but to like
48:30
my point earlier we forced to find returns outside of like that category of investing if you will if we can call a category of investing And then I think there will probably like I think public markets are
48:43
just going to become smaller. You know, I think there's a ton of zombie companies and trash
48:48
companies out there that are just propped up by playing fiat games and they're able to get away
48:53
with it just being in, you know, the dollar endgame times. And, you know, I think Bitcoin is going to
48:59
have a forced extinction event on those companies.
49:02
So there are obviously be great companies in the,
49:06
the future.
49:07
Again,
49:07
I'm not like bearish on capital markets or,
49:10
you know,
49:11
entrepreneurs necessarily.
49:12
I just don't think it's like,
49:14
and we've even,
49:15
you know,
49:15
seen this trend already.
49:16
Like,
49:17
you know,
49:17
the public,
49:19
public companies are,
49:20
are shrinking.
49:20
I think like you will,
49:21
to be a public company,
49:22
you will have to be extremely lean and wise with your,
49:26
your capital allocation decisions and embrace a,
49:29
a Bitcoin standard. So I would probably say like broad strokes. That's kind of how I would imagine
49:36
things playing out. Yeah, no, that seems reasonable. I mean, if you think about it,
49:43
or this is kind of an interesting way to frame it, is in a Bitcoin world, you'd have a lot of
49:49
your portfolio just in gold storage Bitcoin. But even today, where, you know, as a Bitcoiner,
49:55
I think of all other asset classes have this embedded monetary premium in it.
50:00
I would say people today kind of hold all of their money or all of their money and money like assets, which is why like it's gravitated to public markets, which are liquid.
50:12
You can get access to it quickly.
50:14
It's, you know, if you buy an index fund, it's not terribly volatile, has like certain monetary like properties because everyone knows that the dollar is such poor money that they have to do.
50:24
they have to buy everything and use everything as their bunny and bitcoin kind of brings that back
50:29
and kind of fixes the obvious problem there but um yeah no this is why this has been a very
50:35
interesting great conversation um do you have any final closing thoughts yeah well uh thank you joe
50:41
it was a pleasure to come on and talk some some shop with you i've been a huge fan of yours
50:45
for a while and super excited what the the team in strive is is doing and you know really appreciate
50:51
of what you guys are contributing to this industry and ecosystem.
50:56
And yeah, I would really encourage people to embrace the Bitcoinization of finance.
51:03
Again, I think we need finance to get to a hyper-Bitcoinized world.
51:07
And there's a lot of opportunities out there.
51:09
Do your due diligence and make smart capital allocation.
51:13
But this is ultimately a good thing for Bitcoin.
51:17
And I'll just plug to you if you don't mind some of the work I'm doing on this.
51:21
This front is trying to bring, you know, more professionals,
51:24
finance professionals into the fold of Bitcoin.
51:26
In Denver, on October 20th or 22nd,
51:30
we're having the Bitcoin Financial Services Summit
51:32
to, you know, bring together folks like, you know,
51:34
Strive and the Meanwhiles of the World
51:36
that are building these products.
51:38
You know, from my vantage point as like, you know,
51:41
Bitcoin-focused financial advisor,
51:43
it's a tremendous value add to me for my advisory seat
51:46
to have options to talk to my clients about.
51:48
and then you know if you're been in the industry for a while and you're newer to like the bitcoin
51:54
fold and you want to your clients are asking you about it you want to you know learn more not just
51:59
outright dismiss them like we want to give people like the avenue to to do that and and meet the
52:06
folks moving and shaking in the the industry and ultimately i i think the the bitcoin industry too
52:11
can benefit from uh kind of leveling up our our professionalism you know one of my main drives
52:17
in Bitcoin. I don't have too many, just two, actually. It's like one, people make Bitcoin
52:22
an idol, which I think is wrong. Two, Bitcoiners dress terribly. I was like, we don't need to be
52:30
the punks wearing the hoodie. It's okay to value the work we're doing because I think Bitcoin has
52:39
this tremendous nobility to it. I think Bitcoin is like a noble cause. I just encourage people
52:47
to rise to that occasion and treat your work and the work of your friends, family, and neighbors
52:55
with the respect it deserves.
52:57
And so that's kind of my personal mission.
53:01
I love it.
53:02
I think that's a great spot to end it on.
53:04
I agree with those two critiques of the Bitcoin community.
53:09
Wyatt, thanks so much.
53:10
This has been a great conversation.
53:12
Awesome.
53:13
Thanks, Joe.
53:13
Appreciate it, man.