Latest / Elon Musk Thinking / Elon Musk Talking About BITCOIN!

Transcript

Elon Musk Talking About BITCOIN! · Elon Musk Thinking

0:00
Urgence between bitcoin and artificial intelligence, and the Lightning network is playing a big
0:07
role in that. Okay, I believe what of it. I've not seen
0:11
it in action. Elon Jack, who's a speaker on stage as an expert
0:16
on it. If you want to ask him any questions, what's up?
0:18
Elon, I would say Matt as well, I see you, Matt,
0:21
Matt Corolla is this is the Blue Matt. I met him in Uruguay,
0:28
a core developer. Very excited to have you on as well, Matt,
0:32
Thank you, yeah, thanks for having me. I really I really appreciate
0:36
all the work that everyone's been doing on all these ETFs, and I really
0:40
am looking forward to, you know, from the developer and working coin for
0:45
more than a decade, well more than that decade now now working full time
0:49
on Lightning, so trying to make bitcoin payments as much a thing as we
0:53
can. But I'm really looking forward to all of the Bitcoin Unlike nearly every
0:58
other cryptocurrency doesn't have any kind of foundation. There's no fees that people are
1:03
paying directly to developers, and there's no fund to fund people doing great work,
1:10
like all the work that Ark's been doing on making coin go more and
1:12
more mainstream by bringing the loopers to keep this software running, because ultimately bitcoin
1:19
is powered by a software project, and there's a lot of work that has
1:22
to go into all of that engineering. And we've seen several of the ETF
1:26
Bitcoin ECF offerings now offering to fund bitcoin development directly. Of course, ARC
1:33
also has directly funded, directly funded a lot of work for bitcoin, not
1:36
necessarily software research, and a lot of really important work. So I'm really
1:41
happy with where these things are going, just from the perspective of how much
1:44
more funding this is going to bring to the bitcoin ecosystem broadly and continue to
1:49
improve things like bitcoin technologies. Yeah, elon, so I brought up x
1:55
X X well truth and advertising. We own it in our venture fund and
2:00
and we're excited about the plans you have for it. We want to do
2:06
our part. This is part of what today is all about. We want
2:08
to break news on X and I think I think more and more companies and
2:15
people will break news on x SO hence ar KAB. But also you wanted
2:22
to be the everything app, and I know on this call there are a
2:27
lot of people who who have a strong view about how quickly you'd be able
2:32
to proliferate that throughout the world with bitcoin as as part of the infrastructure.
2:39
Yeah, I'm open to the using bitcoin. I mean, it's like it's
2:44
all the various things that I think about. I think about bitcoin very little,
2:47
but I've thought about monetary systems a lot, and the actual practicalities of
2:53
changing exchanging money or it's money's really just data information and a database and the
2:58
you know, it's money is information system for labor allocation. So most people
3:05
think of money as having power in and of itself. But you can obviously
3:08
run some basic court experiments and say, if you have eight twllion dollars on
3:12
it, you know, from you're marooned on an island, it's useless because
3:15
there's no labor to allocate you. Only once you have some complexity and you
3:21
know, you have people with different skills, then you need sort of an
3:24
information system for labor allocation and to shift obligations across time. But it's remarkable
3:30
how many people think money has power in and of itself, because that is
3:32
their experience, certainly in any advanced economy. You know, for for example,
3:37
if you were to say, like let's spend more money on healthcare,
3:42
I'm like, okay, well, you can't instantaneously change the number of doctors.
3:46
Doctors take roughly thirty years to you know, for for a new doctor,
3:52
a baby to be born and ultimately be educated, to be educated and
3:54
become doctor. You can't. Really, you can't just throw money at a
3:58
system and suddenly have you know, get doctors from a magic doctor factory.
4:02
So you can't over time change the r of doctors if you change the instead
4:06
of structure for doctors. But you cannot. Just adding money to a system
4:10
does not create more doctors. But people weirdly sometimes think that is the case
4:15
because that's they just they see what is immediately in front of them that they
4:17
do not see two or three layers deep. In fact, like this is
4:23
why inflation is such an effective means of taxation is because inflation is a few
4:29
layers deep, and most people simply see one or two layers deep. But
4:32
like if something is like three layers away, that they simply don't realize it,
4:36
and they will in fact be aggree at the store for the prices going
4:41
up, even though it is in fact the government that has caused the prices
4:44
to go up. That's why we have to get the government out right for
4:47
any given system, whatever the incentive structure is, whatever the incentives are,
4:51
that's what will happen. And it then it should be no surprise if you
4:55
incentse something better will happen. It would be weird if you intense something and
4:58
it didn't happen. Then the context of your company's elon SpaceX and Tesla,
5:02
like, what was the rationale behind using bitcoin and the treasury and is it
5:09
something that you've kind of backed off with or is it something that you're amenable
5:12
to kind of more broadly, well, I mean, we did make some
5:15
prominent purchases a bitcoin at Tesla were we just can't a bit concerned that the
5:20
big changes in the ratio of dollars to bitcoins, you know, that that
5:26
that value ratio of changing too much, you know, and the case we
5:29
needed the working capital, it would be better for us not to have a
5:32
bitcoin. And now space still has most of the bitcoin because basics did not
5:38
anticipate any working capital issues potential working capital risks, and you know, and
5:44
yeah, just and I was at one point it really seemed like the use
5:48
of electricity for bitcoin was on the margins really being quite a lot of dirty
5:55
electricity, and I hope people got always you know, rebuttals to high you
5:59
know high. I see it's energy being useful bitcoin. But like there was
6:01
at one point, like I think, an entire power station and coal mine
6:05
in China that was a truly gigantic one that was responsible for a massive amount
6:12
of bitcoin wining. Now I believe that is no bag shut down, but
6:15
I think that actually constituted some insane amount of bitcoin hashing at one point.
6:19
I think things have gotten better with just the usage full bitcoin hashing. It's
6:25
still a little bit of a concern, but it seems not as serious a
6:29
concern as it was in the past. That's analogy to me arguing that electric
6:32
vehicles are bad because I live because they're powered by a coal power plant.
6:36
Like I think you have to divorce the source of the electricity from the actual
6:40
fundamental good that spending energy to secure the bitcoin network produces. And that like
6:46
the reason the thing that Kathe and Hard are talking about is that, hey,
6:49
here's a currency that a government can't control. It can't control because you
6:54
have a basically decentralized distributed denial of service system preventing it from being kind of
7:00
controlled. And co opted, and the cost of that is the energy used.
7:03
I don't think they were exactly analogous. So in this case of the
7:06
gigantic coal mine and coal power plant in China, its sole purpose was bitcoin
7:12
mining, and it was really not something that would be used for anything other
7:15
than the bitcoin mining. In fact, when that plant went offline, there
7:19
was a massive drop in the in hashes for a second boitcoin. That's how
7:25
you could tell it was that plant. You know, that's it's when it's
7:29
that that was problematic. It went too far at a certain point. Now,
7:31
like I said, I think at this point it is better. And
7:34
when you look at electricity usage, when it's not being pushed beyond a reasonable
7:40
bounds, it is electricity use. Electricity production is increasingly sustainable coming from wind
7:46
and solar with buffering, with battery pack buffering, eatl on. If you
7:51
don't back the monetary units with work, something that actually takes energy as opposed
7:58
to keystrokes, I just don't know how you can build a better system that
8:03
actually pegs Fiat currency around the world without some type of proof of work mechanism.
8:07
No, I'm not saying we're going to have some proof of work mechanism.
8:11
I'm just saying that. And look, I don't want to you know,
8:13
I'm on this cope goest. Kathy asked me to be on this call,
8:16
not because I'm what's to argue about bitcoin. I still do think this
8:20
is this is an important If forget his annoying bitcoint arguments, I'll sign off.
8:24
I think Elon you you kind of raising some of these concerns. I
8:28
think part is part of the education process for understanding bitcoin. This is exactly
8:33
why we have these conversations. You know, we don't necessarily need to go
8:37
back and forth. But maybe I see Harry's actually on the line. He
8:41
is a bitcoin minor, perhaps kind of setting up the case for just energy
8:46
and bitcoin and how you're effectively converting electricity into a hard asset. Perhaps my
8:52
help as a framing. Hey you seen thinks great to be your congratulations Kathy.
8:56
The entire art team. We've actually been through our own SEC process in
9:01
the last two or three weeks as well and got approval to take grid public.
9:05
So congratulations. Than we're in good company with you. To say the
9:09
least, I want to address just the energy thing in general, because I
9:15
actually think Elon sort of is light about the more fundamental heuristic, which is
9:20
that bitcoin provides a revenue stream to energy generation assets that they wouldn't have otherwise,
9:26
and so on the one hand, that can create you know, perverse
9:31
negative dynamics and externalities when it comes to a one off coal plant or several
9:35
one off coal plants that are getting shuttered, whether regulatorily or financially, and
9:41
can breathe a second life into assets that maybe, you know, we as
9:45
a species would argue against. I think that's true, and I think that's
9:48
negative. I think that the positive tailwind that bitcoin mining as a totally orthogonal
9:56
purchaser of energy actually carries the positive day because there's an enormous amount of opportunity.
10:03
You know, if you look at the you know, the Interconnect pipeline
10:07
in the US, for example, you know, there are wind and solar
10:09
farms that are waiting multiple years just to connect to the power grids to be
10:13
able to enter their renewable energies into our markets, and they're unable to,
10:18
whether for regulatory reasons or system engineering reasons. And so you're able to bring
10:22
a bitcoin mind to that generation asset and start clicking revenue much earlier. It
10:28
means that the ability to finance these projects is significantly expanded. It means that
10:33
the infrastructure costs that get passed back to rate payers get to be lowered because
10:37
those revenues get brought to market much sooner. And it does a lot less
10:41
from an eminent domain. You know, where do you bring the lines that
10:45
you know, those types of environmental and regional issues, those all get diminished
10:48
as well. The only other thing I just want to add and shout out
10:52
is just that this is not a US story. This is a global story.
10:56
And there are places all over the world that desperately need a normal lead
11:00
more electricity, and so we believe and there are companies out there like Eric
11:05
Hurstman and Gridless Compute who are bringing new electricity on a clean hydro electric basis
11:11
to communities that desperately need it. They're taking kerosene offline, they're taking hydro
11:16
electric online, and they're doing so on the back of work in bitcoin.
11:18
And so we're enormously excited about what coin means as a bootstrapping mechanism for more
11:24
clean electricity for more people on the planet. Can I just say for a
11:28
second that I think Elon's points should be taken very seriously. You know,
11:31
the electricity argument is a detailed argument there. But the existence of bitcoin,
11:37
the limitations of bitcoin, the programming of bitcoin, are the really with the
11:39
wonders of this coin and really will be served the whole monetary system of the
11:45
world. Now, the trans and nature of a bitcoin is also true,
11:48
but it's the same thing in gold. You know, what you had here
11:52
is the bitcoin will be the reserves if you will, of a transactional system
11:56
that will include other entities with bitcoin, like reserves in the bank. That's
12:01
where it's really going to go. Elon, and I think you're totally correct
12:03
that the electricity is a side show to this and the transactional developments that will
12:09
occur are really where we'll get a new world money. But the bitcoin is
12:13
the monetary base, if you will, of that, just like gold used
12:16
to be. ARC actually wrote a really great research paper a number of years
12:20
ago and around bit quiet ability to fund clean energy like Harry was talking to,
12:24
but that I would encourage people to go look up. In fact,
12:28
Tesla was a part of helping bring pilot plant to demonstrate that and how bitcoin
12:33
can help fund solar energy using some of their battery technology. Who wrote that
12:39
mat Arc did? In fact, we did with block oh Arc oh the
12:43
one we did. Oh yes, yes, yes, and Elan this was
12:48
on we did. Remember with Jack Dorsey we did the B word. It
12:54
was called the B Word. It was a five hour seminar that you Jack
12:58
and I think Steve Lee kicked off and we spent a lot of time talking
13:05
about this use case. I actually have one question. I don't know how
13:09
much time you have, Elon, but I do. I would love to
13:11
know you've been clear about the need for us to be an interplanetary species.
13:20
What money would you use on Mars? It probably would make sense to use
13:26
some kind of cryptocurrency on Mars. Now, you couldn't use bitcoin because the
13:30
reconciliation time is too long. Like the Bars at times is Mars can be
13:35
like twenty light minutes away, not as easy that you can difficult. There
13:39
had to be some localized thing on Mos. Yeah, so I know some
13:43
very important movers and shakers in the community are here. I'm sure they are
13:48
already thinking about ways to make sure that bitcoin makes its way to Mars.
13:54
I'm positive. Yeah, it's just like I said, you know, at
13:56
times you're well, and when you was on the other side of the Sun,
14:01
I mean reasonable. There's a rough way to think about it is there's
14:05
eight lightnunits from the Sun. Mars is roughly one and a half times as
14:09
far away from the Sun as you you know as the Earth, and so
14:13
at times you're on the order of twenty minutes. But sometimes even like you
14:18
can't go right through the Sun, so that you have to be a backshuttered
14:22
past the sun chap probably I think might be like twenty three minutes. That's
14:26
max speed of light anyway, So I just think you could perhaps but points
14:31
sun degree. But you know, it'd be difficult to use it a lot.
14:35
Luckily, some of the other technologies, like lightning, it would work
14:39
totally great. Without latens, you'd have to have a localized lightning network like
14:43
you were talking about now. You wouldn't be able to mine on market.
14:46
You can't split mining across the Earth in Mars. But correct, I think
14:52
the Mars have some sunsets something like well, I mean that I hope we
14:56
have that problem to deal with it. If you have that problem deal with
14:58
then really civilizations advanced dramatically, so right now we've not yet been able to
15:03
put a single person on Mars just a few robots at extremely high prices.
15:09
So in order to have any you know, to in order to pass one
15:13
of the Fermi great filters, which is are you a one planet species or
15:16
a multi planet species, we have to have a self sustaining civilization on Mars,
15:22
where the acid test being if the reply shifts stopped coming for any reason
15:26
whatsoever, that the city on Mars does not die out. Well, I
15:31
want to thank you, Elon. I know if you want to hang out
15:33
and here continue with the coin conversation where you could, Yes, Kathy,
15:41
you're back. Yeah that did I get cut out? I don't know what
15:43
happened there for just a second. Okay. What I was saying is I
15:48
don't know how much time. I mean, I'd love to keep that back
15:52
and forth Bitcoin. I know your time was short, but I want I
15:56
wanted to thank you for joining us. This has been awesome. Spaces is
16:02
awesome, and we're going to be doing a lot more on spaces, so
16:07
so thank you. Those good good, just great great, thank you.
16:11
Okay, the guest appearance, he's pretty amazing. But I actually I think
16:18
we scored a few bitcoin points there guys. I think we're bringing him back
16:22
into the fold. So I think this is very similar pattern as to what
16:27
happened over the last ten years. We'll probably repeat itself. A huge reason
16:32
of why we've been able to list these in other jurisdictions with other skeptical regulators,
16:38
and the same reason that we've been able to do it in the United
16:41
States is it's becoming way too big to ignore. I think if you just
16:45
look at ownership levels anywhere to the estimates I've seen, there are anywhere between
16:51
fifteen and twenty five percent of American adult there's one hundred million or more coin
16:56
base accounts and so on, and so I think of considerable part of this
17:00
is that it's just becoming much larger to impossible to ignore, and that's going
17:06
to continue to push adoption. In my opinion, I'm going to go pre
17:07
soon. Yeah, we should obviously a lot of people have joined us just
17:11
recently, and we should just say, obviously we want to thank the guests
17:15
we've had so far. You know, we're gathered here today and they're on
17:18
with us to really highlight the fact that at the monumental day with the approval
17:22
of the Bitcoin ETFs and ARKB for the R twenty one shares Bitcoin ETF launching
17:29
tomorrow, and he's become very relevant conversations very fast for so many. It's
17:33
the reason that the tagline for the R twenty one shares Bitcoin EATF is aren't
17:38
you a little serious? There's so much to be curious about for so many
17:45
who, as I think Brett said earlier, previously had almost excuses not to
17:49
pay attention, and so we want to bring high quality content. We thank
17:53
Elon certainly and many others because curiosity will lead to so much knowledge, and
17:57
there's still so much debate and so much innovation to go. Thank you,
18:03
Tom. I wanted to just get quickly back to finishing up something that I
18:08
think we started talking about using the gold ETF. And I know that a
18:15
lot of people on this call think about inflation and as I do all the
18:19
time, risks and so forth. But back then it was Russian default,
18:26
long term capital Y two K, then the tech and telecom bus. The
18:30
FED just kept easing, even though that recession was very narrowly focused, and
18:34
I think that's what greased the skids for gold and all other commodity prices in
18:41
the early two thousands, so you know, when people do use gold,
18:45
the gold ETF as a guide. I just I think gold actually might have
18:49
gone down as a you know, relative to other commodities. And then we
18:56
were going to go somewhere with that. Yeah, see, and I've forgotten
18:59
where, Kathy, I'm going to have to take off our labber here.
19:02
Thanks you very much. Congratulations again on all you've done. You're amazing all
19:07
of you the whole time. Thank you Lafe so much for joining. I
19:11
think that the context was basically trying to find analogies to how call it momentous
19:17
of an occasion and ETAP approval is to an asset like bitcoin and whether we've
19:22
seen you know, similar tipping points in the past. Well, your research,
19:26
yes, seen, is I think very powerful in terms of you know,
19:32
getting us to And people think this is crazy to say that we think
19:37
bitcoin could hit one point five million by I think twenty thirty or I think
19:42
it's twenty thirty, which is a sixty percent annualized increase. But I think
19:49
our research is sound, and again it's sound big ideas for those of you
19:55
who haven't seen it. The building blocks of getting to that price are not
19:59
crazy. They're not quite there, and in some cases they're quite conservative.
20:03
That's right. I mean, I think without even going into the building blocks,
20:07
if you just apply simple heuristics, like taking what the market cap of
20:11
gold is, which is around twelve trillion dollars, in the market cap of
20:15
bitcoin, which is just under trillion dollars, if you really compare, how
20:18
much better of a version bitcoin is too, Gold as this store of valuable
20:23
that's portable through Yeah, seeing we lost you. Oh sorry, I don't
20:29
know where it's I think it just muted. I don't know where I value
20:33
store of value. And just to think about bitcoin as being that better version,
20:37
you know, to think that bitcoin is not going to reach parity with
20:41
gold then perhaps even exceeded over the next ten years. You know, that's
20:45
an order of magnitude increase from where we are today. So just alone reaching
20:49
parity with gold brings it to you know, that five hundred thousand dollars price
20:53
per bitcoin, and then you talk you add on top of that all the
20:56
use cases, Kathy that you mentioned as an insurance Paul against arbitrary asset seizure,
21:02
as this hedge against counterparty risk, really as a remittance network, an
21:07
economic settlement network and then you know, really as an institutional now allocation,
21:11
as a legitimate asset, that getting to that one point five million dollars you
21:17
know, over the next ten years is seems quite plausible in our view.
21:22
Can I just I want to make sure this We had people popping in so
21:26
I had meant to do this before, but I mentioned we have Matt with
21:30
us. Matt Corolum and Adam Back. I met them at a bitcoin confab
21:38
in twenty nineteen in Uruguay, and you know, here we were getting a
21:45
lot of flax still for owning bitpoint. You know, there were some wirehouses,
21:51
some of the brokers who brokerage houses that you know, made us take
21:56
GBTC out of some of our funds otherwise they were going to fire us.
22:00
And you know we held firm where we could aarkw But my confidence at the
22:07
after reading Matt and Adam shot up dramatically. Core developers, you know,
22:15
monetary experts, you know, at this conference really comparing notes you know,
22:22
from you know, young in age to more seasoned in age. I certainly
22:26
was there so but that was for me, like the crowning cap on so
22:32
much of our research. It just brought it to life, and I wanted
22:37
to well thank Matt and Adam. And for those who don't know, Adam
22:41
just joined he is an og cipherpunk and invented I wish he was on to
22:48
talk about proof of work with Elon, but invented hashcash, which is really
22:52
the first proof of work system that was used as that to prevent that attack.
22:56
So Adam's great to have you on. I know that you tweeted a
23:00
few questions about the ETF approval, and I think that this is actually a
23:03
platform that we can use to maybe answer those questions and get your thoughts here
23:08
broadly. So actually a technologist is going to put the ETFX personal questions any
23:14
of the direction, right. Yeah. What I was wondering about is the
23:18
mechanism by which inflows get into the market and if the usual t plos two
23:23
kind of sumtment delays mean that market makers or aps run out of capital,
23:29
which tends to happen from time to time. And Bitcoin in the big share
23:32
space good. Yeah, So Athelia and Ham are partners at twenty one shares
23:38
have built out the infrastructure are experted ups. So a Feilia or HENI yeah,
23:45
sure, look I think one of the things that's really been critical over
23:49
the last couple of years running this company has been how we build out this
23:53
infrastructure. The infrastructure is so core to running these products. I think there's
24:00
been a lot of speculation over the last couple of weeks, well, you
24:02
know, all these big names and finance are coming in and that's not you
24:06
know, and they're going to know what they're doing. And maybe, but
24:08
at the end of the day, there's a certain element of this which is
24:11
technical and does require an actual understanding of how blockchains work. But to the
24:15
correct question, I will say, well, Adam, in terms of our
24:21
own experience with active equity ETFs, and many people thought this was a ridiculous
24:26
concept, that you know, the ETFs, the ETFs wrapper, and the
24:32
infrastructure surround surrounding it would not be able to handle us. The opposite was
24:37
true, that there were the market makers, the authorized participants. They all
24:42
do very well with our volatile strategies, and of course pitcoins are very volatile
24:48
as well, and there are other there are lots of arbitrage opportunities popping up
24:53
now around the world. I mean, twenty one shares has forty funds well
24:57
now forty six with this one, and you've also got the underlying assets.
25:04
So I have witnessed the liquidity in our utfs is far greater than I would
25:11
have ever imagined, so a feeling maybe you can leverage off of that in
25:15
terms of what we expect for this bitcoin et. Yeah. So look,
25:19
I think one of the things that we can expect to see, and I
25:22
think this has been a little confusing. So the way these products start trading
25:29
is you convert these the seed numbers you've seen into bitcoin, and those exist
25:33
in the products prior to the first day of listing. After you list,
25:37
you've got market makers who are coming in with orders. Those orders are going
25:41
to need to be routed typically like through OTC trading desks, partially in order
25:47
to support some liquidity and also frankly virtually so that you don't have to take
25:49
the coins out of cold storage to trade by putting them on an exchange.
25:53
So we're actually going to be trading out of cold which is far safer,
25:57
just purely at an infrastructural level. That's actually true of all of our products.
26:02
We don't ever have assets that aren't in actual cold wallets. Essentially,
26:07
the way this is going to end up working is you're going to have these
26:10
market makers that are making markets public markets in the security itself, and then
26:15
on the back of that, they're going to come in and check what their
26:18
inventory is. If they're short, they're going to create, If they're long,
26:22
they're going to redeem, so that they're managing their inventory against that creation
26:26
redemption process, and that's really where you're going to see that trading come in
26:30
on the crypto side. And fundamentally, the way we approach to this is
26:33
a little bit different. We've taken a very intent approach to custody and security,
26:41
and why we have approached it this way and the kind of technology that
26:45
we've built over the last five years to support it is quite significant. It's
26:48
not that easy to make an asset like bitcoin play nicely within traditional financial infrastructure.
26:56
In order to do that, you need to actually build a bridge between
26:57
these two asset classes that you know, they don't share that many features in
27:03
common. They don't tread on the same rails, they don't settle on the
27:06
same rails. It's not the same counterparties, it's completely different infrastructure. For
27:10
all the reasons that advisors and investors need the ETF in the first place.
27:14
That's why it's so difficult to build one. Did that answer the question or
27:18
I want to make sure that we answer the question precisely, so if we
27:21
missed the question, please we asked it and yeah, yeah. Let me
27:25
make a kind of extremists example. Right, So I don't know what people
27:29
are affecting the plus stay volume to be, but let's say it's ten times
27:33
what's expected. What does that do? Does that mean that, you know,
27:37
the marketmakers and aps run out of us all liquidity and it becomes difficult
27:41
to arbitrage and they trade above spot or something like that, kind of kind
27:47
of like the GPDC when it was in a premium, but in that case
27:49
because it's closed. Ended here just because the market participants run out of liquidity
27:53
to arbitragic in smaller doses, that's what's happened in the past. That Quinn
27:57
exchange is. Yes, you can see things like that in an ETS,
28:02
but the difference here is balance sheets are a lot bigger, and fundamentally you're
28:07
running on a essentially T plus one to T plus two structure, and there's
28:14
a little bit of a gap between when an AP is going our market maker
28:18
is actually making that market in the public markets and seeing that demand and when
28:22
they're going to be able to have those shares on the back end, Unlike
28:26
GBTC. Part of the problem with GBTC is you couldn't create any new units
28:30
of this product, right, whereas something like ARKB from the get go you're
28:33
going to be able to do that. That makes the arbitrage mechanism significantly more
28:37
effective. You got that there's a delta between the creation redemption process running on
28:44
a T plus one basis versus the actual public markets running on that T plus
28:48
two basis, and so there is a little bit of time in there in
28:52
terms of how they're managing inventory and balance sheet. Balance sheets are also quite
28:56
bluntly, just a lot bigger, very big. I mean, James R.
29:00
Put out it Financials or maybe they leaked. I don't know why they
29:03
got out. You know, it's an enormous company. Enormous companies all right.
29:08
Just always amusing to see if that going break things because all taile and
29:12
larger than people expect, and trades over the weekend and stuff like that,
29:17
so it'll be fun to exite. We've actually seen a bunch of that in
29:19
Europe, over the years. You're right, it requires a certain degree of
29:25
supports for aps and market makers that's way beyond what the what you would expect
29:30
in an equity market. It also means that you know, for example,
29:33
there are a lot of people who might you know, after hours trade product.
29:37
And this is a sun little quirk of these et apps is that you
29:40
know, there's this concept of market hours in the US, but there are
29:42
there is facility, there are facilities for after market hours trading. And one
29:48
of the really interesting things is that, unlike an equity product, where in
29:52
your after hours trading you're kind of guessing at what that price is really going
29:55
to be based on futures and based on demand in other markets, with this
29:59
product or actually going to be able to trice effectively off of an entitlement basis
30:03
because there's a fixed amount of bitcoin per share, so they can actually get
30:07
real pricing and provide actually competitive facilities for after hours trading. And I think
30:12
that's something we're going to see a lot more of. It's one of the
30:15
reasons why you know, you see a lot of the big market makers that
30:18
do work in crypto ETPs and ets actually operate on a global basis, and
30:25
so there's one desk that's globally distributed, and so that will likely also help
30:30
mitigate some of the things you're talking about. But I do think it's going
30:33
to be very interesting to see what happens as you start to have, you
30:37
know, the full course of that demand hit bitcoin markets, although I do
30:41
think it's likely going to take a couple more months than people think to see
30:47
the full picture in terms of demand. Does anybody on a kind of analysis
30:52
site of opinions about the multiple for inflows versus impact on market cap? And
30:59
a few years ago bikro America that some analysis indicating it was over one hundred
31:03
I think they had one hundred and nineteen. So it's kind of curious about
31:07
what the inflas will tend out to be the multi tuch that we'll have on
31:10
bitcoin price spectively have done this some estimates. Actually that's the power on channed
31:15
analysis. You can kind of see which of the bitcoin is readily available to
31:19
be absorbed by marginal demand and which one is kind of locked up. And
31:23
I don't think people fully appreciate kind of the price multiplier effect and that you're
31:27
not simply just dividing by twenty one million, and that a dollar inflow doesn't
31:33
necessarily translate to a dollar of market cap in our estimates. You know,
31:37
when you think about just broader long term versus short term holder supply dynamics,
31:42
about seventy six percent of bitcoin's supply is held by you know, what we
31:48
consider to be long term holders, so holders that haven't moved their bitcoin in
31:52
at least six months. And then there's kind of an additional half of that
31:56
which is considered short term holder supply that isn't sort of rarely available on liquidity
32:02
and exchanges. It's kind of just being overturned or turned over at the wallet
32:07
level. And so if you kind of call it, say a one to
32:10
two million bitcoint of total circul league supply is readily available, there could be
32:16
to one hundred to your point, there's one hundred x multiplier. We've estimated
32:20
it's between a twenty five to fifty x multiplier for every dollar in flow.
32:24
But it would be interesting to do some fallout analysis now that an ETF has
32:29
been approved. Yeah, I wonder if the profile of the ETF unit buyers
32:36
will be different than the active bitcoin traders. They might be lower polosity on
32:40
hold, whereas the two million or soap packet or you know, the laboration
32:45
there's eighth stay chun Whereas I think with ETFs, people are not generally looking
32:50
to day trade then looking see put it in their units. Some of the
32:52
fond we'll hold it for some years. So maybe that way. Yeah,
32:55
that's that's it. I think that's a great point part of of what our
33:00
thesis is that this really opens up or broadens the spectrum of the market for
33:07
individuals who are looking to buy a bitcoin. I know Tom rco is on
33:10
the line, but I'd love for Tom if you want to jump in on
33:14
just broader advisor market and kind of demand for something like a bitcoin ETF relative
33:21
to traditional spot and how those dynamics are evolving now that we have this approval.
33:25
I think some of the discussion has been so binary as an either or,
33:30
and I think what we're going to find is that's the wrong way to
33:34
think about it. It's really going to be the percentage of the total allocation
33:37
exposure that really is allocated between you know, the to date what it's been
33:43
the traditional way of doing it and that part. And that's other part that's
33:46
coming online. This quin eat and I think, you know, there are
33:51
numerous reasons, depending on what the buyer's profile looks like. I think one
33:54
that maybe is something for people to think about, and it depends on unique
33:59
And then the visual circumstances is that while there may be some ways to post
34:06
the bitcoin as collateral against alone to gain personal liquidity, they're not easy for
34:13
the average person. And so as we get into a regulated, audited security
34:19
that's custodies at a traditional financial institution, and mostly bang, you know,
34:24
these securities are going to be able to post as collateral to, you know,
34:30
to basically to borrow against. And that borrowing against could be used for
34:34
any purposes. It could be just increased individual liquidity, It could be reinvested,
34:37
could be a number of things, again very individual and specific circuits.
34:43
But I know there are people on this call already who have had exposure to
34:47
European et ass and the twenty one shares line in Europe who were able to
34:52
suddenly gain great personal equity without losing the exposure to the invest And that might
34:59
not be all of your allocations to Big One. In fact, I would
35:01
expect perhaps just a small portion, and yet bringing that inside the existing rails
35:08
of the financial system offer pultional benefits as well as potential investment benefits, you
35:15
know, to continue across the space. And you know that's also like realize
35:19
when we talk about that liquidity you're talking about like standard margin from your bank,
35:24
it doesn't cost anywhere near as much as what we've seen in terms of
35:29
some structured loans where maybe you're putting it coin up in order to get cash.
35:31
Right, it looks structurally very different, and it's also just from a
35:36
cost perspective quite different. I think Kathy made this point earlier and we really
35:40
agree with it at twenty one shares, which is we have nothing against physical
35:45
holding of bitcoin. It just so happens that the ETF rapper enables a certain
35:51
set of investors to be able to allocate more in the space or come in
35:57
at all. And from our perspective, as it increases the pie, we're
36:01
all in and so it doesn't take away from holding it physically at all.
36:07
It doesn't take away from any of that. But the ETF does come with
36:10
very real structural benefits, especially for more institutional investors and more traditional investors.
36:17
But I think Bret Whitten earlier said it very well, there's both of the
36:20
incentive structure around allocation to the asset class that the reality is just different when
36:27
you have an ETF structure than when you've had the coins in traditional wallets or
36:32
for self custody. And that's because brillions of dollars are tied up in intermediated
36:37
assets in this country alone. Those intermediaries are certainly not incentivized to lose the
36:44
fees or even if it's not fees, lose the oversight and the influence that
36:50
they have previously. With the case if you had clients leave the closed walled
36:54
ecosystem, and certainly, you know, those who are deeply invested in the
36:59
space correctly will point out that has not stopped them, and and they're right
37:04
and that and that's great, but it's also a reality that it has stopped
37:07
a significant pool of assets. And so you know, I think it's a
37:13
very clear different use case. I also think, you know, I've heard
37:15
a lot. We talked a lot about the inclusion in fact fact. We
37:20
didn't just had Elon Muskat on this faces if you're disjorting us, but we
37:23
saw what happens in the inclusion of fact when managers have to pay attention to
37:28
an asset. Tesla famously was not part of the S and P five hundred
37:32
until it was a huge thock in terms of market cap value. The imagers
37:39
five hundred billion dollars. A lot of managers conveniently, and you heard it
37:44
on CNBC and Bloomberg and Box Business and all of the different places, conveniently
37:49
got to not have an opinion on a stock that was quite literally changing the
37:52
world because it wasn't in the index that they been sparked against. Suddenly,
37:57
when it was included, they not only had to have an opinion, but
38:00
they were judged and held accountable for that opinion. And I think that again
38:06
that is not binary. It's not either or. But advisors now have access
38:10
where they're gatekeepers at their custodians or their home offices or their investment had perfect
38:17
cover to keep it out. They're now going to be accountable as wealth managers
38:22
for what they say and what they do around this asset. And they know
38:29
that they're bringing frankly, their incentiviz because even for some of them, they're
38:31
going to bring some of those assets back under their tent where it's packaged in
38:37
the same financial statements, the same tax documents, you know, overall correlations,
38:42
and they're going to put it to work instead. But with these benefits
38:45
for the clients, certainly the costs and of course they air KP is twenty
38:49
one basis points. I think compared to what somebody opening a brand new account
38:52
coming into this sasset class for the first time, that's lower than the trading
38:57
fees. And remember what he wanted the fees all in everything. Whereas you
39:01
know people talk about custody, they sometimes forget about the trading costs. We
39:06
have to have total costs, the total costs when we look at this,
39:09
and so things like liquidity, things like able the ability to post as collateral
39:15
are all cherries on top. So that I'm not even talking about the institutions
39:20
in this country that use about four layers as consulting for DYA reasons to protect
39:27
themselves in a latigious society, who now also have access and are held accountable.
39:34
And those are obviously massive allocations. Even if a small fraction of them
39:37
do a small percentage, we're talking about a meaningful amount of total capital suddenly
39:44
coming. So even if you don't believe what I just said for all of
39:49
it, but you believed one part of it talking about a significant chunk of
39:53
institutionalized intermediate wealth, and I understand that's not where the original eco cuperfcoin.
40:00
But I would also say these don't have to fight each other. They can
40:04
be complimentary, and I would be surprised if even those who are the most
40:07
focused on maintaining their autonomy don't find benefit from at least a small portion of
40:14
that within the traditional finance system. Well also, I mean not just them,
40:20
right, I can confidently say it was orange pilled by my mother,
40:23
which is a shocking thing for most people to realize. That's kind of supposed
40:27
to go the other way, and that happened in twenty like early twenty fourteen,
40:30
late twenty thirteen. My mom came to me and was like, hey,
40:34
listen, you know merk spends too much money hedging and governments running monetary
40:39
policy based on geopolitics is stupid. We should have an alternative. Have you
40:45
heard about a thing called bitcoin? Twenty fourteen from my mother, and she
40:49
missed the trade because of the infrastructure. She didn't feel comfortable setting up an
40:52
account that was new that was outside of her financial infrastructure. She totally got
40:58
the vision there just wasn't really rails for her to be comfortable with that.
41:02
So I mean, honestly, Tom, I would actually challenge you a little
41:05
bit there, which is it's a little different than the original ethos. But
41:08
the original ecost is about inclusion, right. We want everyone to participate,
41:12
and that's if you want a few billion users to use bitcoin, you need
41:15
to provide it to them in a package that they can actually use and feel
41:19
excited and constant about. My mom is never going to feel about. The
41:22
inaccessibility of bitcoin that Opailure is talking about is very real and it comes in
41:27
two flavors. One is how she described her mother or more traditional investors who
41:31
are just more comfortable with an etf rapper. The other thing that we haven't
41:36
discussed is if we really want this to become so ubiquitous and so world changing,
41:42
we need to get it in the hands of billions of people, and
41:45
at least on the institutional investors side. There are a lot of investors out
41:49
there who have mandate that prohibit them from investing without things like the etf rapper,
41:54
and so both worlds can exist, and if the aim is to increase
42:00
the market, a great title will lift all of our boats. We should
42:02
be working on every single one of these options. So I think that,
42:07
you know, it's interesting because on the ARC side, you know, I
42:09
sat on the other side of the table from twenty Shares when we first met
42:13
to evaluate you know, what a partnership woul book like, and I was
42:16
druck by the commonality of what the organization's state admission purpose was relative to the
42:23
democratization of assets. I mean, I look at the forty different funds that
42:29
twenty one Shares has in Europe's across assets and in the digital assets space,
42:32
much deeaper than what we're currently able to do in the United States due to
42:37
the regulatory framework, but that I have high degree of confidence that we will
42:40
get. I look at ARC and certainly democratizing using the etf rapper bringing out,
42:45
you know, a venture fund for mass retail to make private equity available.
42:51
This Bitcoin very much fits in it. But when we're keeping segments of
42:55
the potential investors out, that's not democratization. Right, to truly democratize,
43:01
it has to be indiscriminatory relative to the individual pain points in friction that any
43:07
individual may have. And I agree with Haney wholeheartedly that not everyone has the
43:13
same friction, not everyone has the same barrier. Some of them are mental,
43:16
some of them are psychological, some of them are financial, some of
43:20
them are regulatory, some of them are legal. But they're very real.
43:24
And so you know, when you think about the tagline that we put on
43:28
this product, aren't you a bit curious? We have to also destigmatize the
43:35
curiosity versus those of us who have dedicated considerably more time to learning about this
43:42
in greater depth and say this in this vehicle in part is to help overcome
43:46
the friction points so that you can gain exposure. But also once you can
43:51
gain exposure, that is one of the most powerful catalysts, you know,
43:55
no matter what we're talking about, the most powerful catalyst for you to spend
44:00
more time, to be more engaged and to overcome any real or perceived hurdles
44:07
that you've had. And I think that is truly what democratization is. I
44:10
think that the ETF is there, but the reality the cost is very regularly
44:15
a hurdle in almost anything in life. It's one of the reasons why we
44:19
wanted to have a price twenty one. Obviously twenty one. I mean the
44:22
price was always hidden in plain sight with the name of the fund, with
44:25
the partners that twenty one shares, but to have it that low is designed,
44:30
as Kathy said earlier, in this call to reduce as many, absolutely
44:35
as many barriers and fortunes as possible. We're really proud of that. There
44:38
are certainly bigger named firms that are coming with higher products. They don't necessarily
44:45
share what we're trying to do here, and that's fine, but you have
44:49
to understand that with a dedicated mission towards democratization, we're going to talk to
44:54
all sorts of people's who are in all different parts of their crypto journey,
44:59
and some of them going to recognize things that we did, specifically for those
45:02
more educated, like what the nav of this product is going to come out
45:07
as, and it's pegged directly to the bitcoin price rather than some arbitrary esoteric
45:13
price that every other filing has put on. This in a nod that it
45:16
has utility value and for the very purposes that we've said before that the existing
45:22
ecosystem will find value. But it's also in light of the research. It's
45:28
calls like this bringing experts together and for the advisors out there, if you're
45:32
listening right now. You know we intend and we can personally pledge that we
45:37
will have the greatest amount of support for advisors. If I were an advisor
45:40
right now who had not put any clients in this ATHA class ever before,
45:45
I know that tomorrow is going to be a very scary day because my clients
45:50
are going to call and I might not have all the answers. And honestly,
45:55
that's okay, And not only is it not okay, it's a good
45:59
because because that's what a new asset class is. When we're bringing people in
46:02
who are going to have difficult but exciting conversations that the positive outcomes for everybody,
46:08
and we stand behind you. Twenty one shares stand behind you. Advisors.
46:14
Know that we have were partners with Resolute investment managers for the wholesalers and
46:16
product specialists and support, and what we want is for anyone who's curious at
46:22
any part of your journey in bitcoin, we are here from you, and
46:25
we're extremely proud that AARKB is going to be here for you starting tomorrow.
46:30
And people may not realize just how ingrained this is in both of our firms.
46:37
Actually, I remember Tom, I remember that one of the One of
46:40
the things that comfort us the most, one of the things that we were
46:44
most excited about when we first started to get to know ARC is the obsession
46:47
with research that you guys have they research background that Kathy clearly has, because
46:52
we think about it the same way. I think it was John Oliver who
46:55
said bitcoin and crypto is sort of like everyone doesn't understand about encryption and technology
47:02
combined with what everyone doesn't understand about finance and economics, and they do have
47:07
a point. As transform as this technology be, it's incredibly complex, it's
47:13
challenging, it's difficult, and as a result from a research perspective, from
47:19
a learning and teaching perspective, our research team, arts research team, this
47:23
is so central to our identity and what we bring to the table. And
47:28
so I echo everything that Tom said and agree with him one hundred percent.
47:31
And we will be providing advisor specifically with the top research in the space because
47:37
this is a long term journey. Crypto is going to be transformative over the
47:43
next decade, not just over the next month or so, and we're in
47:46
it for the long haul, and that involves a lot of knowledge and education.
47:50
I think that's a good segue to maybe talk about agree our commitment to
47:54
research, but maybe dive into how important sort of paving this new framework to
48:00
understand bitcoin as an asset class, understand its fundamentals. You can't apply a
48:06
discounted cash flow model to bitcoin like you can to equities, and yet there's
48:09
so much information that is out there, given the transparency of bitcoin, given
48:15
its open source nature, given that you know, bitcoin is basically this twenty
48:20
four to seven fact sheet of economic behavior in this mini sort of monetary system.
48:25
And so I thought, you know, we have a new set of
48:28
speakers that I'm kind of really excited to introduce that have been pioneering a lot
48:32
of the fundamental analysis of bit boats through just sharing on chain analysis, but
48:37
also you know, providing that data for the end investor to be able to
48:42
analyze and understand. And so we actually have will Clemente Checkmate on theline and
48:49
Pomp as well, who have in some capacity helped really spearhead frameworks to understand
48:57
bitcoin fundamentally, which I think is again a really important and point we're in
49:00
the business of also bridging that education gap, and in the case of Pomp
49:06
has been a supporter of both of us for a while and at least with
49:09
twenty one. Coke is at one of our earlier investors as well. Well,
49:15
check pomp. Great, great to have you guys on. Adam actually
49:19
asked a question and maybe this one's for you checking just to introduce before you
49:22
answer the question, it would be great to introduce yourself on this almost price
49:27
multiplier effect of bitcoin flows and how bitcoin's call it liquid versus a liquid supply
49:35
plays a I'd say a big It's a big component in trying to understand that
49:37
price multiplier effect. So perhaps kind of maybe setting up what is on chain
49:44
analysis, why that's fundamental to this asset class, how heavily involved you know
49:49
you are, we've collaborated on research together, and then maybe give some kind
49:52
of statistics on just bitcoin Bitcoin's economic state would be super helpful for this audience.
49:59
Thanks a lot, Thanks for the production. Just quickly let me know
50:00
if you can hear me. Okay, we can hear excellent. We're a
50:02
business, so yeah, So I'm the lead analyst at last note, and
50:06
we really kind of pioneering this world of bitcoin on chain analysis and really looking
50:10
at the heartbeat of not only the network and the protocol itself, but also
50:15
how investors interact with it. And bitcoin is one of these fascinating and super
50:20
organic. It's a thing. It's almost like an organism, but it has
50:22
this digital footprint that it records every ten minutes, and within those blocks we
50:28
can pull out invested decisions, we can see how the network is performing on
50:30
a health perspective, but really looking at how coins move around the system,
50:35
which is just a fascinating It has been a fascinating field to really push into.
50:37
Now in terms of the multiplier effect, one of the most foundational metrics
50:43
we have in the unchained space is called the realized cap, and it's essentially
50:46
an equivalent to the market cap. Is that we value every coin at the
50:50
price when they last move. And why this is really powerful is so Toshi's
50:53
got a million or so coins, but they were moved last at a price
50:57
of zero, so we effectively discount them. They're worth, you know,
51:00
zero times a million as a zero early miners may have had a couple of
51:05
cents. But if those coins are lost and we've got this kind of pathway
51:07
of coins saved at their last move price. Now, from a capital flow
51:13
perspective, this is actually really powerful because when somebody acquires coins at a bear
51:16
market, for example, and then sells them at a ten x higher price,
51:21
somebody else has to come in with more capital than the original purchase to
51:24
actually take them off the market. And likewise, when people who buy at
51:29
the exact wrong time in the cycle have to sell coins at a lower price,
51:32
there's a capital destruction. So what we're looking at with this realized cap
51:36
is this kind of long smooth change in capital inflows and outfloats. So one
51:42
framework we can look at things is that when coins are on exchanges and they're
51:45
trading around in many ways, they're kind of one button away from a buyer
51:49
and a sell so they haven't quite entered that realized cap space. It's only
51:53
when somebody actually does the withdrawal transaction takes custody or in the event of an
51:59
ETF because they're spot denominated, and that is going to be this buying and
52:02
selling on exchanges, and there'll be coins moving between different multi sig wallets.
52:07
A lot of these transactions will get recorded into Bitcoin's database itself. So coming
52:13
back to that multiplier effect, we ran a study recently looking at how much
52:16
does the realized cap change, Essentially how much capital needs to float into the
52:21
chain itself to achieve a one dollar change in the market cap. Now,
52:24
this goes through a couple of different cycles. When we see real euphoria ball
52:30
markets, we tend to see that you need eighty cents a dollar twenty of
52:35
capital inflows to get a one dollar change in the market cap. And from
52:37
this perspective, it's starting to get into unsustainable territory. Right. We're really
52:42
in terms of physics, you've got to put more energy in to achieve a
52:45
smaller output. Now, as we go into bear markets and interest wanes a
52:49
little bit and you start seeing that there's more volatility, that number can drop
52:52
to anywhere, and sometimes it gets down to ten cents. So a ten
52:55
cent inflow or outflow works in both directions, can produce one dollar change in
53:00
the market cap, which really heightens that volatility as a result of lower liquidity.
53:05
So it's just one framework we can look at things. But the long
53:08
term medium is typically around twenty five cents thirty cents somewhere in that ballpark,
53:14
and where we are at the moment is in that range twenty cents twenty five
53:15
cent. So again it's just trying to put a bit of a figure around
53:19
things, but we're looking at somewhere on the auto about a four to five
53:22
x kind of range in terms of dollars in versus market cap change. And
53:27
again this is in both directions. It's a non directional study, just basically
53:30
looking at how much does that realize cap change per unit change in the market
53:34
cap and how do you think an ETF approval might impact that that dynamic or
53:40
what are you kind of looking at to see massive shifts in that price multiplayer
53:45
effect? Yeah, I think that's a really good question, and I think
53:47
the first thing when I just kind of take a very objective look at things,
53:51
the ETF, as we've discussed on this on this spaces is just opening
53:54
up a new level of demand vector. Right, So Bigoin's always had this,
53:58
you know, there's always been the harving and the data and how much
54:00
the harving has an impact, and that's a supply side shop and people's narratives
54:05
starts to you know, people get excited about the harving and it's kind of
54:07
a self fulfilling prophecy. Whereas with the each affort we're seeing is opening up
54:10
of the doors of just more people able to come into this space. So
54:15
for me as a non chain analyst, it's constantly this game of how much
54:19
does the on chain data Because there's obviously trade activity, there's futures markets,
54:22
there's spot markets, there's actual activity that's happening on the chain itself. How
54:27
much do these speak to each other? And what I've always enjoyed is understanding
54:30
those is almost statistically significant subsets of the market. The data we can extract
54:36
from a futures market or a spot market or on chain, it typically represents
54:40
a statistically significant subset of bitcoin investors. And whilst their data may plot differently
54:46
open interest or spot volume or realize cap, when we actually reconcile these,
54:52
we tend to see they're telling the same story, just with their data explained
54:54
differently. So it's very much about, you know, reconciling seeing how markets
54:59
move. One thing we do at Glassdows we actually label entities so we can
55:01
see, you know, these are coinbase or buyinance or ETF A, B
55:06
and C, and we can actually look at those dynamics individually. So it
55:08
may be that there's a result where we actually look at the realized cap including
55:13
or excluding ETFs. It maybe we look at only ETF flows, so we
55:16
can actually start to really dive in and build out this data layer to understand
55:21
how these flows impact that both interpretation and whether it actually does change things in
55:25
our perspective. So one of those things where it's constantly evolving, which makes
55:30
my job very exciting. Well, and I know we have you on as
55:32
well, Please introduce yourself and if you have any thoughts on it, just
55:37
the broader implications for the on chain world as it relates to this Bitcoin ETF
55:44
approval. Hey, thanks for having me up. Sorry about background noise checkway,
55:49
it was super scinct. As always, I would say it's probably the
55:52
best on channelists in the world, so definitely always pay attention to his insights.
55:57
I think one thing that's really interesting to me. I think it's been
56:00
pretty well circulated throughout the bitcoin it's the fact that seventy percent of the circulating
56:07
bitcoin supply hasn't moved in at least a year. So you know, if
56:09
you kind of go back where were we trading at a year ago, you
56:13
know, this is right after FTX went down and kind of the back half
56:16
of all the credit contation that took place throughout the bear market, and so
56:21
you know, not only is that pretty remarkable kind of standalone statistic, but
56:24
you know when you kind of add in the context of you know, where
56:28
we were at yer ago, I think it kind of makes it even more
56:30
remarkable. Sorry, will you cut out? But I we may have lost
56:34
you. I yeah, we brought up that status in terms of long term
56:37
vulder supply broadly, I mean the way that we think about it, and
56:42
for anyone interested in kind of learning more about on chain analysis broadly, we
56:45
publish a Bitcoin monthly spearheaded by our on chain dedicated on chane Us David Pula,
56:52
who you know. I'm hoping we can get on as well. David,
56:55
if you want to request just to kind of share a little bit of
56:59
your insight as we speak about this, that would be awesome. At a
57:02
high level, I think when you think about the fundamental framework by which to
57:08
analyze bitcoin, it's going to require an understanding of buyer and seller behavior,
57:14
and the most sort of granular and succinct way to do that is through you
57:19
know, n chain data. And so the way that you can parse this
57:22
data is you have you know, raw data that you scrape by running a
57:27
blockchain or bitcoin node that allows for you to assess the relative health of the
57:30
networks. So think things like pash rate as a proxy of network security,
57:36
you know, broader transaction volume, active addresses, and then you can sort
57:39
of further manipulate that data to checkspoint measure sort of the cost basis through time,
57:46
where you're able to basically timestamp every bitcoin based on which they were last
57:52
moved, and that allows for you to get an aggregate cost basis of the
57:54
market, and in so doing you're able to see sort of relative profits versus
58:00
losses when you compare it to the market cap. So things like realized capitalization
58:05
are a new phenomenon in understanding and analyzing bitcoin as an asset. And then
58:09
when you think about you know, one layer above that, what that does
58:14
is that it provides an entirely new framework by which you can you know,
58:16
even actively manage those assets. And that's something at ARC that we're you know,
58:21
thinking about, is we understand the the the underlying fundamentals, are you
58:25
able to translate those fundamentals into actual active management decisions and so being able to
58:31
sort of create you know, oscillators and fundamental metrics that allow for you to
58:37
understand the relative valuation for bitcoin is also a really interesting kind of dynamic that
58:44
hasn't really existed in other asset classes because of our ability to see supply and
58:50
demand. So so Granular Pump, I know that you jumped on as well.
58:53
Happy to have you on. I would love your thoughts on this long
58:57
awaited news that we finally being a Bitcoin ATF announced. You know, you've
59:01
been obviously quite vocal about bitcoin as a new asset class, sort of the
59:07
institutional demand dynamics, and your thoughts on the implications of a Bitcoin ATP I
59:13
would be greatly appreciated here. Everyone cool to see somebody so any people have
59:16
worked so hard on this, so congrats to all of you. I think
59:20
that it's the ETF is going to be a blessing and a curse, which
59:23
just kind of a unique way to look at it. But I think this
59:27
really marked kind of a moment where bitcoin has now fought for fifteen years to
59:31
be accepted, right and you kind of put that in air quotes whatever that
59:34
means a traditional finance, and now that it is accepted, there's many of
59:37
the things that maybe we're attractive about it previously that may you're not going to
59:43
go away but they may just become a little bit less important, and you
59:46
know, kind of the best example is a lot of people were attract bitcoin
59:51
because financial advisors or others weren't interested in it, right, It was kind
59:54
of a counterculture, et cetera. I think now we're going to see you
59:59
know, alas might in power. And my expectation is that this will become
1:00:04
an asset that's in everyone's portfolio. When you do that, obviously, you
1:00:08
know, returns, correlations, a lot of things change. I don't know
1:00:12
if we have enough information today to really predict exactly how that's going to change.
1:00:16
We can look at other assets, but I think that this is like
1:00:20
this really important moment where essentially, now bitcoin has you know, wall,
1:00:23
you opened its arms, hugged the asset, going to pull it in into
1:00:28
these portfolios, and that's probably great for price over the long run. But
1:00:31
I also think that investors are going to have to pay attention. Right the
1:00:35
ground is kind of shifting now. The holder base is going to expand as
1:00:38
it has in the past, and so it's going to be fun to watch.
1:00:42
Like every time that we've seen this happen and kind of gone through these
1:00:45
different paradigm shifts, if you will. I think that everyone learns something,
1:00:49
but also it's kind of what is intellectually stimulating about an asset like this palm.
1:00:53
This is Kathy. One of the things as we've been talking, we've
1:00:58
noticed, especially in the last two years, since interst rates have started going
1:01:01
up, bank deposits have been going down, money has shifted towards brokerage houses
1:01:07
and their money market funds that were yielding much higher than bank accounts, where
1:01:13
so all of this cash has built up in the system and cash levels.
1:01:19
I mean, I think money market funds are over trillion dollars now something like
1:01:23
that with this accelerated shift into them, and now it's housed in very often
1:01:30
in the brokerage houses the wirehouses as cash effectively, so and we know they
1:01:37
need to put some of this to work. There's been incredible risk aversion in
1:01:42
the markets. So that's why the equity market had such a big year last
1:01:45
year. People were stunned that it could do anything at all. So I'm
1:01:50
just throwing that out there because I think they need to do something with the
1:01:53
cash they have to earn their keep, and I do think this is going
1:01:59
to be one of the ways I could not agree more. Actually, something
1:02:04
that I will and I've talked quite a bit about, and I've written a
1:02:07
peeth and deleted it about four times because frankly, don't know if I'm good
1:02:10
enough to articulate it yet. So I acologize in advance. But if you
1:02:15
really think about dock market, maybe so forget bitcoin for a second, but
1:02:17
just equities in general, there's a pretty strong argument that past value metrics will
1:02:25
under predict or undercount the true value of a business today because of this thing
1:02:30
that you're talking about, Kathy, where there has to be some sort of
1:02:34
monetary premium, right when people are aware of inflation, when they're getting out
1:02:37
of cash and they're literally buying equities as an escape or as an installation from
1:02:43
some of these forces. That changes, right, That changes the way that
1:02:46
you think about valuations. It changes the way that you think about allocating capital.
1:02:50
That changes the way that you think about what sectors even to allocate to.
1:02:54
And so I've always thought of bitcoin as kind of the truest free market
1:02:59
asset that we have out and so it kind of takes that idea and really
1:03:01
brings it to the extreme. But really, you know, the ETF I
1:03:05
think now is a signal of what used to be considered an extreme idea is
1:03:08
not really that extreme. And another way that I think about it is if
1:03:13
you were to ask somebody in the nineteen eighties, nineteen nineties, even probably
1:03:17
into the you know, two thousands and early twenty tens, what is your
1:03:21
benchmark? They would point to the S and P five hundred and maybe you
1:03:23
know, the queues or something like that. Now, when I talk to
1:03:28
people in their twenties, they tell me that their benchmark is bitcoin. You
1:03:31
know, well, can I can I beat Bitcoin? Well? The fit
1:03:35
was up one hundred and fifty percent, you know, hundred seventy percent in
1:03:37
last year, and so it's just very hard to do. And so I
1:03:40
think that's another thing is like, is there something happening where people are saying,
1:03:44
I'm not going to allocate to the S and P. You know,
1:03:46
why would I only want ten percent in a world of easy money? I
1:03:50
need more? And so they start using bitcoin as that benchmark, and that
1:03:54
just again holds value for a long time. It's sticky capital. They look
1:03:58
at it as an index almost and that would be a really big tail one
1:04:00
for bitcoin. Obviously if that continued as a trend well, and the intergenerational
1:04:05
wealth transfer from baby boomers is accelerating now, so what the trend you're talking
1:04:14
about is probably going to accelerate for sure. We're also just jumping and flag
1:04:18
the central research piece that are had for twenty days rategical quointum economics developed with
1:04:25
check made. Since I have it here, perhaps check we can discuss a
1:04:29
little bit of what we implement them. Daring and the ideas were discussed on
1:04:33
that topic. I guess we already talked about about how pecoin can be price
1:04:39
timed to some extent. Perhaps we can discuss how we could be time stamped
1:04:43
as well, and we can take the holding behavior and the holding time of
1:04:47
different investors at different times get a sense of how dormant or how active the
1:04:54
network is in a general sense. Yeah. Absolutely, And cointime economics was
1:05:00
kind of an idea that just spawned off one of Dave's. Dave had an
1:05:02
idea when we're in Mexico, and it just morphed into this framework of how
1:05:06
we can actually rethink analyzing bitcoin but also understanding its heartbeat. And as they've
1:05:13
mentioned, there's kind of two real key components in the world of one chan
1:05:16
analysis that either doesn't exist or is very hard to replicate for traditional finance,
1:05:21
and that is the price stamping. So every single unit in the supply,
1:05:26
we can price stamp at the time and it moved, But as Dave mentioned,
1:05:29
we can also time stamp it. And the problem that we set out
1:05:31
to solve was that many of our valuation metrics, even in the on chan
1:05:34
analysis space, they still include all of Satoshi's and the lost coins. So
1:05:41
another way to think about this, as the market moves and is volatile and
1:05:45
we go through you know, boom and bust cycles, there's a large swathe
1:05:48
of coins that simply don't respond, can't respond their loss. The keys actually
1:05:53
cannot bring those coins back online. Now, despite that fact, most of
1:05:57
our on chain valuation metrics still dilute and they basically say that those are still
1:06:01
circulating, right, we use circulating supply. And the question we tried to
1:06:05
set out was how can we actually build a robust framework that can you know,
1:06:09
more or less discount coins based on how long they've been dormant. And
1:06:13
this comes off the back of some work we did it last night. The
1:06:15
longer that a coin is dormant on chain, the more likely it is to
1:06:17
stay dormant. Another way to think about this, if you were to withdraw
1:06:20
your coin from an exchange tomorrow and you just unfortunately lose the keys, you're
1:06:25
the only person in the world that knows those coins are lost. The market
1:06:28
cannot discount those as lost. They're going to see them as still liquid and
1:06:31
able to migrate back into the space on any volatility. But let's say those
1:06:35
coins are dormant for three years, five years, ten years. The longer
1:06:41
those coins are dormant, the higher our probability curve goes up that they may
1:06:45
in fact be lost. So what coin time economics does. It uses a
1:06:48
really foundational metric of time, which is the coin day, which is actually
1:06:54
one of the first Bitcoin on chain metrics. It's literally how many coins are
1:06:58
held and how long in days they've been held for that period of time,
1:07:02
and the probability goes up that they've lost the more coin days these coins accumulate.
1:07:08
But conversely, when a coin is spent, let's say coins accumulated in
1:07:12
the previous bear market, they sit there for three years, They've accumulated a
1:07:15
large time economic weight. They've got a lot of coin days stored within them.
1:07:19
So when that investor or that cohortive investors who've got those two three four
1:07:25
year old coins, we typically see these folks come back into the market and
1:07:29
it starts spending when it's opportune, right the market is rally, they're seeing
1:07:33
large percentage gains. So we've historically seen large expulsion of coin days, which
1:07:39
we call coin day destruction. So this is economic information we're basically looking at
1:07:44
when those coins come back into the fold and they re enter circulation and what
1:07:47
cointime economics does. It's a framework to actually create a discounting curve and it
1:07:53
biafocates the supply into vaulted and active. And the way to think about this,
1:07:57
vaulted is kind of the most dense coin that just simply don't want to
1:08:00
move. We actually don't need to measure which coins they are. It doesn't
1:08:03
matter if they're setoci's or if there's somebody else's that was lost yesterday. It's
1:08:08
a really nice simple mathematical framework. We can just say they're either lost or
1:08:13
they're mobile. And you know, one of the dave I might pass this
1:08:15
back over to you. But one of the really powerful things that we got
1:08:19
out of this we found this pricing model called the true market mean pretty much
1:08:24
exactly and always has been in the middle of bitcoin as a long term mean
1:08:29
and median of one. And this is what Dave's invention, so I'll pass
1:08:32
it over to him. But it's just these new valuation frameworks with a mathematical
1:08:36
rigor behind them that I think is just pushing the asset forward. Yeah,
1:08:40
I think that's a good segue to plugging our research. If listeners want to
1:08:45
find out a little bit more on what the true market mean, how it
1:08:47
works, it's formula, and it's mechanisms. We recommend going into our website,
1:08:55
both the cointine piece that we have publishers about six seven months ago and
1:08:59
the to but comes out every month a few days after close. Yeah,
1:09:03
that that that white paper is is available. And I think, you know,
1:09:09
the invention or the heuristic of the coin block check is is not to
1:09:13
be underestimated. You're you're you're basically implying that there's now this fungible unit of
1:09:17
measurement in Bitcoin's economy that allows us to even better assess the economic state.
1:09:24
And I think as for you know, those who are just trying to understand
1:09:28
bitcoin, and trying to understand the fundamentals. You know, these are the
1:09:31
kind of metrics that you