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Vijay Boyapati | Ultimate Bull Case for Bitcoin | Simply Bitcoin IRL · Simply Bitcoin

0:00
Yo welcome to another episode of Simply Bitcoin IRL.
0:04
We have a very special guest today.
0:07
He is the writer of something that all bitcoiners should read.
0:11
It's called the bullish case for Bitcoin.
0:15
It's a core eclipse in one of his favorite articles.
0:18
Michael sailor has mentioned in Cynthia, lummis, Jack, Dorsey,
0:22
Adam back. All of them and it's amazing.
0:25
And so many people have talked about all this stuff for so
0:28
long. But what I want to do today with
0:31
Vijay is kind of have an update based on the recent events that
0:37
that are happening. So you know kind of movements
0:39
from the White House, things like that and it looks like a
0:42
lot of the predictions that Vijay made.
0:44
I think you wrote this back in 2018.
0:46
Is that correct? I started writing it in 2017
0:50
early 2017. Yeah.
0:52
So a lot of the things that you said I think are happening a lot
0:56
faster than perhaps, we all anticipated but there was this
1:01
one passage that I kind of want to start the conversation with
1:05
that. I think we're heading into that.
1:08
I think we're entering the then they fight you stage.
1:11
So if you don't mind, I'm going to read the passage and then
1:13
we'll go from there. So it says only with a
1:15
coordinated Global shutdown of Bitcoin exchanges.
1:17
With the process of monetization beholds, it completely the race
1:21
is on for Bitcoin to become so widely adopted that it complete
1:25
shutdown becomes as politically unfeasible as a complete
1:29
shutdown of the internet. The possibility of such as
1:32
shutdown is still real. However, it must be factored
1:35
into the risks of investing in Bitcoin as we discussed in the
1:38
prior section of the entrance of nation.
1:40
States, national governments are finally Awakening to the threat
1:43
that he National that a non-sovereign censorship.
1:47
Here at lost, its censorship resistant digital currency poses
1:51
to their monetary policies. It's an open question, whether
1:55
they will act on this Strat before Bitcoin becomes so
1:58
entrenched the political action against it proves ineffectual.
2:03
So that being said, we've seen tremendous amount of hostility
2:09
coming out, specifically out the US Treasury, that's knows does
2:15
not my words. Those are Cynthia.
2:17
Lummis as It's right. Treasury is the most hostile and
2:22
then, of course, we have the recent actions by the the US
2:25
Treasury. The office of foreign assets.
2:27
Control, sanctioning open source software for the first time in
2:31
American history that usually, they sanction individuals or the
2:35
sanction government's. Right?
2:37
So clearly BJ, I think we're here.
2:40
I think we're definitely in the then they fight you stage.
2:43
What are your, what are your thoughts on everything that's
2:45
happening? And I'm sure it's not a Rise to
2:48
you, either. Yeah, II do think governments
2:54
have finally gotten that inkling that Bitcoin does pose an
2:59
existential threat. There were a few people who
3:01
talked about it a few years ago but I don't think the Deep
3:05
State, the internal bureaucracy really paid much attention to
3:09
bitcoin and I think now they've been awakened to the fact that
3:12
Bitcoin does pose a threat to the banking industry.
3:16
I think it's also important to think of the state not as this
3:19
monolithic. Entity which makes decisions on
3:21
its own. It's really more of a tool for
3:25
special interests the state, or the government has some people
3:28
call, it is better. Thought of as a weapon, like a
3:33
sword and various people pick up the sword and they use it
3:36
against their enemies. So when you say the treasury
3:40
Department, I think a better way of thinking about it is the
3:43
banking industry doesn't like Bitcoin, it's a threat to the
3:47
banking industry so they pick up.
3:50
The sword. That is the treasury Department.
3:52
They Lobby the treasury Department and they say, you
3:56
need to regulate this industry because it's Disick
3:59
disintermediation us, it's allowing people to do what we
4:04
provide, the services, we provide cheaper better faster,
4:09
with less fees and and so I think what you're seeing is that
4:15
those entrenched interests are now waking up to the threat of
4:18
Bitcoin. And now you Their political
4:21
power that influence through lobbying to try and fight back
4:24
against Bitcoin. I've never, I never saw it from
4:30
that perspective. The way that I saw Vijay was,
4:34
you know, you have this, you know, some people called the
4:37
bureaucracy, some people called The Deep save, some people
4:39
called the administrative state, right?
4:41
The definitely my benefits from having this Monopoly, on the
4:44
creation of money that funds, all of them, the deficit
4:47
spending. But I never, I never saw it from
4:50
the aspect of the entrenched interest so you believe that
4:56
more so it's coming. From outside government
5:00
influence. It's not coming from the
5:02
bureaucracy itself. I think so, and I think that's
5:06
the right model to think about the state.
5:08
I mean, consider the Federal Reserve, it's a part of the,
5:12
it's part of the US government. It's meant to be a sort of
5:16
independent institution, within the US government.
5:19
But who created the Federal Reserve, where did the Federal
5:21
Reserve come from? It wasn't a creation of a of the
5:25
state. It was a creation of the banking
5:27
industry. They lobbied, the state to
5:29
create this institution that would bail them out whenever
5:32
they will Bank runs, they were Concerned that Banks were going
5:36
under all the time and the way to stop that is to have a
5:40
central bank which backstops the banks and guarantees deposits of
5:44
Banks and that's how the Federal Reserve came about in the
5:47
Federal Reserve Act in 1913. So that's an example where you
5:53
have an institution within the state being created specifically
5:57
for the benefit of a special interest, which is the banking
6:00
industry. So yeah, I thats the way I think
6:04
about it. I sort of think about it in
6:07
terms of like there's this bad person behind the curtain in the
6:10
government whose like I hate Bitcoin, I think about it.
6:13
In terms of who will be disintermediated, buy Bitcoin,
6:17
whose business might suffer. Because Bitcoin comes about and
6:22
one of their interest in, they're going to go to
6:23
government and what is their political power as well.
6:26
And probably among the most powerful lobbies within the
6:30
government is the banking industry.
6:32
I mean, maybe the only other lat Are you as powerful as the
6:36
banking industry? Is the military industrial
6:40
complex, which is the companies that benefit when the United
6:44
States goes to war and have these very lucrative, military
6:48
contracts. Lockheed Martin is an example of
6:51
this, for instance. So people have this idea of the
6:55
government, they learn in their civics class in elementary
6:58
school or High School. That is his independent thing
7:02
and then you have the Private Industry and then you have
7:04
government and then you have people of the population which
7:08
votes in the government. But really, there's a spectrum.
7:12
Right? There are a lot of private
7:13
institutions including companies, which could be
7:16
thought of, as really being kind of part of the state and that's
7:21
in both directions because they Lobby the government to do
7:24
certain things in their benefit but also because the government
7:27
in the other direction deputizes those Corporations to, to
7:33
enforce its legislation. So there are a lot of banking
7:36
rules created by the government in the government can't enforce,
7:39
it doesn't have the people to enforce it.
7:41
So it asks the banking industry to enforce it and one of these
7:45
rules that they're trying to apply to bitcoin is called the
7:48
travel Rule and they're trying to apply something that applies
7:52
to the banking industry to the Bitcoin space and what they're
7:56
saying is if you buy Bitcoin on an exchange and You withdraw it
8:00
to an address, the address has no identity.
8:03
They want you to identify that address.
8:05
They want you to associate it with a particular person that
8:09
means provide identification of proof that they own that
8:12
address. It's a very onerous regulation
8:15
from the banking industry, that doesn't really make sense for
8:19
Bitcoin is. Certainly hamper the companies
8:22
working in the space and make their product much Messier and
8:26
harder for people to use, but of course, Banks like that, right?
8:30
If you can do something that cripples your competition,
8:33
that's good for you. So that's, that's really the way
8:36
I think about it Banks. Probably almost certainly
8:40
lobbying the treasury Department and the Federal Reserve to apply
8:45
all the regulations. However, you know, however,
8:49
little it makes sense that these very old regulations that come
8:52
from the 1930s should be applied to bitcoin.
8:55
They're going to say, you should apply this to bitcoin because
8:58
it's not fair to us that The Bitcoin space gets away without
9:02
doing these things. So I do see that as a growing
9:06
threat. Not not for Bitcoin necessarily
9:10
but for the companies that are in the space that are, you know,
9:13
allowing their customers to buy and sell Bitcoin.
9:17
So, it's interesting that you mentioned that because the, the
9:21
travel rules interesting because it was recommended by the
9:23
financial action task force, which is an unelected
9:26
bureaucracy. And they've actually had quite
9:30
They've had some success in Europe and implementing these
9:34
things. It came out not too long ago in
9:37
Europe, it was in the text right?
9:39
That they wanted software. They wanted the wallets itself
9:43
to kyc its users and specifically, if you're using a
9:48
Bitcoin wallet on an iPhone or, you know, an Android.
9:54
You most likely download your apps through this gated.
10:00
App store, right? That, you know, it's extremely
10:02
easy and vulnerable for governments to co-opt for
10:05
governments to. So regulate, maybe on a, you
10:08
know, dedicated computer, you know, a Mac, a PC, right?
10:11
It's going to be a lot easier for you to download software,
10:14
but does that worry you at all in the long term, or is this
10:18
just slowing down the inevitable?
10:20
What are your thoughts? I'm one of the people who as
10:24
bullish as I am about Bitcoin. I'm not in the camp that thinks
10:27
it's inevitable. I think it's in this.
10:30
Very precarious place where it's certainly gotten critical mass.
10:35
It's a macro asset, which people across the world invest in,
10:39
because they think it's a good alternative to other forms of
10:42
money like gold and us. Treasuries, but I do think that
10:48
it's still vulnerable to a concerted nation-state attack.
10:51
I don't think it has full political capture and I think
10:55
the question of whether it will get to full political capture
10:57
will be answered in the next five years.
10:59
So I think the next Five years are really critical to seeing if
11:03
Bitcoin gets to a place where it is, essentially like the
11:05
internet, no one's going to shut down the internet because the
11:08
cost certainly not in Western liberal.
11:11
Democracies is the the political backlash from shutting down
11:16
something like the internet would be enormous because
11:20
people's lives depend on it and their businesses depend on it.
11:25
I don't think Bitcoin is quite there yet.
11:26
I think adoption in the u.s. is somewhere around, you know five
11:33
to ten percent maybe on the high-end 15%.
11:36
I think we need to get closer to 30 or 40 percent before.
11:39
I feel like we have enough political capture that Bitcoin
11:43
is essentially in vulnerable to political attack.
11:49
So let's speak a little bit about these.
11:52
You know, these political attack And I'm, you know what, I kind
11:56
of started with that idea where it's like, this is an
12:00
inevitability but to do a good job for simply you have to cover
12:04
the news every day and you see the moves specifically by the
12:08
treasury. Look at what they did to
12:10
etherium. Now we know that the vast
12:12
majority of the mass majority of a, theorem validators are
12:15
actively censoring for the office of foreign assets.
12:18
Control, what? Political attack, vectors D you
12:22
do? Does it worry you?
12:24
You is it the minor the Hatchery concentration in the u.s. just
12:29
give us some examples? I think it's the problem with a
12:34
theorem just to speak to that briefly, is that it was?
12:36
It's in inherently centralized. It's it was those way too much
12:41
power in the hands of the developers in, in the etherium
12:46
ecosystem. And and that's really been
12:48
proven by the fact that they could tamper with the inflation
12:51
schedule. And if you can change the
12:53
inflation schedule, you can really change anything.
12:55
And the move to proof of stake has made this even clearer.
12:58
That the theorem is a completely centralized. so, I think it's
13:06
What makes Bitcoin unique and precious is that it's immutable.
13:11
It's no one can change it. No one can come along and say,
13:15
you know, I don't like the inflation schedule of Bitcoin.
13:17
So I need to fix it because I'm a Kinsey, an economist.
13:20
I think this is bad for the economy.
13:22
You have a deflationary money, no one has that power and it has
13:25
been tested and proven in Bitcoin.
13:28
And we saw this in the block size Wars, when the most
13:31
powerful companies in the ecosystem and some of the most
13:34
powerful miners trapped, To change Bitcoin and they failed.
13:38
That was a really test of resilience for Bitcoin to
13:41
bitcoin has immutability and it gets this because it's really
13:46
decentralized. And that's the that's the aspect
13:48
that I'm most concerned about and decentralization is most
13:53
easily attacked at points of physical weakness, but the parts
13:59
of the system that exists in the physical world and concentration
14:04
of mining resources, Sources into say large data centers is
14:08
certainly certainly a vulnerability of Bitcoin.
14:12
Any think that can further decentralized?
14:15
Mining is a good thing but there are also economies of scale.
14:19
It does. It is cheaper to get a big data
14:22
center in a cheap in a location with cheap power and and by
14:27
thousands of mining Rigs and hook them all up and call them
14:31
all together. There is an economy of scale
14:32
which is why this happens. I'm Les Concerned about minors,
14:39
moving to a place like Texas though.
14:41
I think it's a good thing that those large Exodus of mining out
14:46
of China. I think China can be trusted.
14:51
A lot less to be friendly towards Bitcoin than a place
14:54
like Texas. And I think it was good that
14:57
when they banned mining in China, you had this large
15:00
decentralization, decentralization of that
15:03
Hardware moved all around the world to places that were Were
15:07
friendly jurisdictions. And so, that increases the
15:11
decentralization of the network. And I think it also taught
15:14
miners a really important lesson that the friendliness of the
15:20
jurisdiction you're in is, is it cost?
15:24
If you have an unfriendly jurisdiction, that is a cost and
15:28
they just weren't paying attention to that cost.
15:30
They were just thinking, okay, this is a zero risk, environment
15:34
in China. I will just stay here.
15:36
There's no cost to us to get, are we getting super cheap
15:39
electricity? But then they found out that
15:41
there is a huge cost when you're in a jurisdiction, which is
15:44
unfriendly at any moment in time.
15:46
You could be completely kicked out and then your mind is a turn
15:49
off for months on end and you lose a lot of Revenue so they
15:52
had to internalize that cost and that's really good for the
15:56
mining ecosystem. Now, people who are - pay
15:59
attention to that and one of their considerations is, is this
16:02
jurisdiction that I'm setting up my mining file?
16:05
In Friendly to bitcoin. If it's not, then I'm going to
16:08
look for a jurisdiction, which is friendly and maybe the energy
16:12
costs a slightly higher, but that's worth it to me because I
16:14
don't want to have to pack up all my hardware and move to
16:17
another country. So do you think the judicial
16:21
Arbitrage is is that enough to I guess ensure Bitcoins?
16:29
Is that because the I think, in my opinion Vijay, the I think
16:35
two things in Bitcoins history or very significant the first
16:39
thing. Obviously the for course 2017 I
16:42
lived through that it was terrifying, they artificially
16:45
made Bitcoin, caches hash rate, overcome Bitcoins twice and I'm
16:48
looking at that I'm looking at it from a perspective of minor
16:51
and I'm like holy crap and it was terrifying to experience.
16:55
But one of the things that people missed was when China
17:00
made Bitcoin mining illegal The fact that without any Central
17:05
party with just the profit incentive alone, Bitcoin miners,
17:10
just decentralized across the poorest, the planet just out of
17:14
pure profit incentive without a CEO without telling him anybody
17:19
just people looking for profit and of course, the ingenious
17:23
difficulty adjustment, that's in Bitcoin, right?
17:26
So and then I think the CCP really shot itself in the foot
17:30
there. What they did is they just made
17:32
Bitcoin stronger. So couldn't you make the
17:35
argument that this thing is meant to be attacked and every
17:38
attack that it survives it just gets it just becomes Unstoppable
17:43
and then it kind of becomes this self-fulfilling prophecy.
17:47
Yeah, I really agree with what you're saying and to me that
17:50
really proved the resilience of the Bitcoin Network.
17:53
When that happened, there are two really, you know, I've been
17:56
interested in Bitcoin for over a decade.
17:58
Now, I got interested in 2011 but there are two critical
18:02
moments when my bullishness increased a lot.
18:06
And one of them was the resolution of the block size
18:08
Wars, when it became really clear that Bitcoin couldn't be
18:11
changed regardless of the fact that these powerful companies
18:14
and miners wanted to increase the block size.
18:16
I thought, okay, this is a good sign that Bitcoins inflation
18:20
schedule. Can't be changed.
18:22
And the other one was the Chinese mining band.
18:24
Ironically, I mean, I think it showed exactly what you're
18:27
saying which is the resilience of the network.
18:29
You have a nation-state, literally attacking the Bitcoin
18:33
Network. And just through the incentive
18:36
structure, created by Satoshi that's baked into the Bitcoin
18:39
protocol the network just fixed itself.
18:42
It the hardware found a way to find you know, friendly.
18:46
Jurisdictions around the world flew to various parts of the
18:49
world where they were welcomed. And, you know, no block was
18:55
missed. There was never a, you know, a
18:57
long delay of block confirmations.
19:00
So it really is an incredible. Incredibly resilient network is
19:04
something like this has never been seen before.
19:09
And, you know, I don't think there's been any real downtime
19:12
in the Bitcoin Network, for almost a decade, and there, Many
19:17
networks that have facilitated so much movement of value and
19:23
commerce without breaking at all ever.
19:26
So it is a, you know, an incredible thing to see.
19:29
And those are the two moments which took me from being just,
19:34
you know, Average. Joe bullish to being like
19:37
over-the-top crazy. Michael sailor, bullish.
19:41
I'm, I'm at the level of bullishness.
19:44
So now that we've talked about, About, you know, the potential
19:47
risks, the, you know, the obviously, the the what I say,
19:52
the inevitable clash between the nation-state in this new
19:56
technology that's going to free individuals.
19:59
The likes of which has never been seen before.
20:02
I agree with. I agree with you a hundred
20:04
percent. I think it's going to happen in
20:05
the next five to ten years and it's going to go either one way
20:08
or the other. That being said, I want to use
20:11
through the rest of our time to talk about where we are in the
20:16
adoptions. Go.
20:16
And I'm actually going to pull up an image from your article
20:21
that became so popular. It actually became a book.
20:25
You could actually go to you, go to vijay's Twitter and you
20:30
could, you could bite there. I highly.
20:31
Highly recommend it. I bought the book just because I
20:35
wanted to find the book even though I read the article
20:37
anyways. Um, so he's actually just
20:41
mentioned. There is a, quite a bit of new
20:42
stuff in the book. The okay nautical is the
20:45
Articles fairly The old and there's a lot of things had
20:48
changed. I thought needed to be updated.
20:51
So there is there is value. I should say anyone you can.
20:54
Obviously anyone can read the article for free and that's
20:57
totally fine. But there is, if you want a
20:59
little bit of motivation to go, check out the book, there is new
21:03
stuff and I for instance, I cover the history prehistory of
21:06
Bitcoin which I didn't in the article which I think is really
21:08
important and they also cover the block size War, which I
21:11
think is in incredibly important to understanding why Bitcoin is
21:16
decentralized. Eyes and immutable and different
21:18
from, for example, Theory, mm. I think that's a really
21:21
important topic that needed to be covered as well.
21:24
Absolutely. I'm just a big believer in proof
21:26
of work and, you know, it just I didn't need to buy it, but I
21:30
bought it because I really appreciated the value that that
21:33
article gave me and what it gave to the community.
21:36
But anyways, Vijay everyone wants to know.
21:41
I'm gonna put you on the spot. Where are we in the adoption
21:45
cycle? For our dear listeners.
21:48
This have a chart pulled up. It's called the penetration of
21:51
target market and there's a line.
21:55
There's an s-curve it goes from early adopters, early majority
21:58
late, majority, and laggards, right?
22:01
And then this as time progresses.
22:03
So where do you think we are? Can I tell you where?
22:07
I think we are and then I would love to get your answer as well.
22:11
Yeah, of course, I think we are in between.
22:13
I think we have left. We've definitely left.
22:16
Early adopter stage and I think we're in the very beginning or
22:21
somewhat beginning of the early majority stage.
22:24
What about yourself? I think.
22:27
I would agree. I was going to, you know, use my
22:29
finger to point on the picture that I see on my screen.
22:31
And but I would have pointed at the, the exact point where it
22:34
crosses early adopters to early. Majority, I do think we're still
22:38
close to early adopters because if you just look at the numbers,
22:42
like, Global adoption, how many people own Bitcoin it is in that
22:46
ballpark Park, it's not like 30 or 40 percent of people around
22:49
the world own Bitcoin or even 20%, it's closer to 10%.
22:52
So I do think just numerically, we're closer to the early
22:59
adopter stage. I also believe though in the
23:02
next two cycles we're going to move very squarely into the
23:06
early majority phase of Bitcoins adoption.
23:10
And that's when I think Bitcoin is going to start feeling more
23:14
like gold in terms of being Established store value.
23:18
And what I mean by that, is that people's perception of Bitcoins
23:22
permanence will change. People will start to think, bit
23:26
of Bitcoin as a permanent institution in the world, just
23:28
in the same way that they do about the internet, right?
23:32
And that, that process took for the internet.
23:34
I, in my view, it took about two decades.
23:37
If you go to the foot, end of the first decade of the
23:39
internet, it was the early 2000s.
23:41
And most people will still not really sure what the value
23:44
proposition of the internet was and It is this into, what is
23:47
this email thing? And why is it useful?
23:50
But if you skip ahead, another decade to 2010, then you had
23:54
things like Facebook, YouTube Google Maps, the iPhone.
23:59
I mean, it was incredibly clear that the internet was a profound
24:03
change to the world to the global economy.
24:06
The way we do everything and then it would affect every
24:08
industry. So Bitcoins only existed for
24:13
about a decade. I think it'll take another
24:15
decade before people like oh, this isn't going going to go
24:18
away and you'll have a whole generation of people who are
24:20
just starting to enter. The workforce will be in their
24:22
20s, for whom Bitcoin, has existed their whole life.
24:26
And so they for them. Be coin really will be a
24:28
permanent institution. They've never known a world
24:30
without their coin, but I think this is, this is the decade
24:35
where Bitcoin will really be. The real test will come.
24:41
Is it going to get to the point where it gets full political
24:45
capture? Does it become a permanent
24:47
institution in the world and how our nation states?
24:50
Going to react when they lose control of monetary policy?
24:54
All of these things I think are going to play out in the next
24:57
decade. So it's going to be a really
24:58
first decade of Bitcoin was really exciting and crazy and so
25:02
many like every week there's another crazy story but I The
25:07
next decade is going to be even more interesting than the last.
25:11
I under percent agree and the we had this benefit though in the
25:15
first, you know? And I guess I'm privileged
25:18
enough I was lucky enough to, you know, get in the first
25:21
decade. We were flying under the radar
25:25
man. They just left us alone.
25:28
Is this? Yep, I didn't care.
25:30
Did it matter right. And now you you're seeing these
25:34
reports man, the the White House report on digital assets
25:38
framework Vijay. Could you believe that the
25:40
treasury released a report called the future of money?
25:44
And that it entire report? They did not mention Bitcoin one
25:48
time in the eyes of the US Treasury.
25:51
The future of money is Central Bank, digital currencies, and
25:56
they mentioned stable coins, the Bitcoin was not mentioned, and I
25:59
think the signal in that report Vijay was there always making an
26:04
argument people want more efficient payments but they
26:07
never mention That people just are tired of being debased, its
26:13
inflation. That's the problem and I thought
26:15
that was fascinating. Yeah.
26:18
And now I think we've finally gotten to the point where people
26:20
are sick and tired of inflation, and it's really affecting their
26:23
lives and people are starting to understand the value of a store
26:27
of value that can't be debased. Now, it people criticize that
26:33
claim and say, you know, Bitcoin has dropped a lot since its
26:37
all-time high, but it's in the process of monetization.
26:40
This process of monetization is not a smooth linear, right?
26:44
That, you know, takes you from 0 to a multitrillion-dollar.
26:47
Asset without bumps, along the way eventually.
26:50
It will smooth out eventually, it will have volatility closer
26:54
to gold and I think, you know, in the decades to come even less
26:57
than gold, but it is interesting that I think that's a, that's a
27:04
problem. I mentioned this in.
27:05
The article, one of the biggest failures of modern monetary
27:09
economics is to view. Money is primarily a medium of
27:12
exchange rather than as a store of value.
27:15
And these are both functions that money.
27:17
Plays. It's a medium of Exchange in a
27:19
store of value. But governments have essentially
27:21
destroyed the store of value, use case of money.
27:24
They destroy it by constantly debating and, and they think
27:28
that's a good thing, because they think that makes people
27:30
want to spend more money and people spending money is the
27:33
health of the economy. That's a very keen Z and
27:36
economics take on on what makes for healthy economy.
27:40
The Austrian economics take, is that?
27:42
It is savings. It's the accumulation of capital
27:46
and the deployment of capital. Into productive Enterprises
27:50
which is the health of the economy that building a new
27:52
Factory is what makes us all richer.
27:55
Not spending money like crazy and going out and buying, you
27:59
know, fast cars and granite, countertops.
28:01
It's the increase in production in an economy and you only get
28:04
an increase in production with an increase in savings.
28:07
So, what I think we need is a money that encourages savings
28:11
and that's precisely what Bitcoin is and anyone who has
28:15
owned Bitcoin for the last A few years knows that it can have a
28:19
transformative. It can be transformative on
28:25
individuals as well. Like people start saving your
28:28
Bitcoin and they realize, well, there's a fixed supply of this
28:31
and because there's a fixed Supply.
28:32
I want to get as many of these as possible.
28:34
So I'm going to stop spending as much as I usually do.
28:36
I'm going to put away some more money and use that to accumulate
28:40
more Bitcoin because in the long term there's only 21 million and
28:45
eventually when it becomes money as I think it Will as more
28:48
people recognize this, the power of this truth, then the fraction
28:54
that I have is going to grow in value.
28:56
And this is turned so many people, I know in to Savers who
28:59
are never Savers. So I think it has a
29:01
transformative effect on both the individual and the economy
29:06
as a whole. Yeah.
29:09
And look at the different and it will forget you think it was
29:15
Jeff Booth, right? But the, the immediate effect of
29:20
having people save more, rather than spend more, it is a little
29:25
bit painful, right? And I think that not that many
29:29
people talk about that, so I was a wasn't sure.
29:37
You wanted to comment on that. I agree with that.
29:40
Oh no, I'm just, I'm just getting your thoughts like like
29:43
is that true? Like, because it is a decrease
29:46
in spending. I'll certainly be it decreases
29:51
spending. I think, you know, one of the
29:52
criticisms that Cain's Ian's have of deflationary money is
29:55
that all this would send us into a depression because no one
29:59
would say, in any more money. That's what I mean.
30:01
Is, why why why, yeah, why would you spend money?
30:03
If the value of the money goes up?
30:05
And this is a really terrible criticism.
30:07
I mean, you could apply this criticism to any aspect of the
30:12
economy where you do see deflation.
30:14
And one of the aspects of the economy where you do see
30:16
deflation is in technology. The price because there is so
30:20
much productivity and so much Innovation and because of
30:26
Moore's law, where CPUs, get faster and faster.
30:28
Every year there is a lot of deflation in technology.
30:32
So for instance, you can every year you've been able to buy a
30:35
better iPhone for either cheaper or or the same price, you get
30:39
more iPhone. And so, by this Keynesian logic,
30:42
you should expect no one to ever ever buy a new phone because
30:45
they're constantly going to be thinking, I just need to wait
30:47
longer. Wait longer and I'll get a
30:49
better phone. I'm going to get a better phone,
30:51
but the truth is yet it's you know, exchanging your money for
30:57
a good now. Confers benefit now.
31:01
And that benefit now may be more valuable to you than the
31:04
increase in what you can get in the future.
31:08
So having a money that improves in value over time, doesn't mean
31:13
that you're going to be sleeping in the gutter and not have a
31:16
house because you're just waiting to buy a bigger house.
31:18
You give a spend your money because it improves your life.
31:22
This is the one of the biggest most ridiculous misconceptions
31:25
that comes out of Keynesian economics and I just can't.
31:27
It's one of those things which makes me roll my eyes when
31:29
people use it as an argument against deflationary money.
31:33
It's just a it's a ridiculous argument.
31:36
I appreciate you. I'm grateful that you that.
31:40
You knew what I was talking about with my terrible
31:42
reference. So I really appreciate that.
31:46
So Z logic someone in the Actually asked a really
31:50
interesting question before I get to some more of my
31:52
questions. He said, can you go over some of
31:55
the things that you expect to happen during this this next
31:58
decade and just to preface that a little bit?
32:01
I think it's even more than Bitcoin.
32:04
I think we're I really am a big believer in this.
32:06
Fourth turning Theory. I really believe that we're in
32:12
My Hope, right. We are in the Crux or in the
32:16
very beginnings. Of this human civilization that
32:21
we've never experienced before. And I don't think people have
32:25
ever had this amount of freedom. And I think that's all due to
32:29
the internet and of course, Bitcoin, on top of the internet,
32:32
and I think that's all starting to culminate.
32:35
You're starting to see it Legacy Media, starting to lose, you
32:38
know, viewers the most popular people.
32:40
The most popular broadcasters a podcaster, Joe Rogan, right?
32:44
So you're starting to see it, they're starting to react.
32:46
Oh it's misinformation unless it comes from Official sources.
32:49
So you're seeing the internet already, kind of
32:51
disintermediating, The Gatekeepers of information, and
32:54
at the same time, I think we're witnessing the disintermediation
32:57
of money at the same time and that's really what I believe.
33:01
But, what are your, what are your thoughts on Z Logics
33:05
question Vijay? I'll pull it up once again.
33:08
Yeah, I think the example of Joe Rogan is a good one, what you're
33:11
seeing with the attacks on people like Joe Rogan is the
33:14
sort of death throes of dying institutions and I think we'll
33:19
see similar stuff happened with Bitcoin and then we'll be in the
33:22
banking and finance industry where some of those functions
33:26
will be replaced by Bitcoin. I do think some of the banking
33:29
institutions Will Survive though because they'll realize that
33:32
they need to start building on top of Bitcoin.
33:35
And I think what we will see is one of the things Expect to see
33:39
over the next decades, the financialization of Bitcoin that
33:42
is becoming increasingly becoming the third, the
33:49
collateral asset of choice amongst financial institutions
33:52
because Bitcoin is a really ideal collateral asset.
33:57
It's something that you know, has values.
33:58
Deeply liquid can be sold at any point in time, on any day of the
34:02
week and is easy to receive in custody, it's much easier to
34:08
read. Receive Bitcoin in custody than
34:10
it is to receive gold. So what I think you'll see is a
34:14
lot of financial products being built on top of this where
34:17
financial institutions say stuff.
34:19
Like do you want to make a bet on the US Stock Market?
34:23
But you don't have access to the US Stock Market.
34:26
You're in say Bangladesh, well then just post some Bitcoin as
34:30
collateral and then we'll use some derivatives to give you
34:32
exposure to the US Stock Market. So you can, you can invest in
34:35
Apple without Having a u.s. brokerage account.
34:40
I think the financialization of Bitcoin is something that we're
34:42
going to see in the next decade. I do think we're going to see
34:46
more nation-state attacks more attempts at regulation.
34:52
I expect I'm very hopeful, I'm not certain, but I'm very
34:56
hopeful that Bitcoin will achieve the same market
35:00
capitalization of gold and eventually surpass called that's
35:04
something I see happening in the next decade. and I also expect
35:10
it much greater development of the lightning Network, I think
35:15
One of the big things that holds back lightning Network, the
35:19
lightning network is that there's an opportunity cost to
35:22
spending Bitcoin. Most people have learnt, most
35:25
people have been in Bitcoin for a while.
35:27
Have learnt the lesson of don't spend my Bitcoin because it's
35:32
going to be more valuable in the future.
35:33
And, you know, I made a mistake, I bought a Bitcoin ATM in 2014
35:37
for three Bitcoin, has about a thousand dollars at the time.
35:40
It could never get the stupid thing to work.
35:42
And it's like, it's a doorstop in my house.
35:44
Now, I learned my lesson, don't spend Bitcoin, just spend
35:48
dollars and accumulate Bitcoin, but eventually become will
35:53
become large enough. That that opportunity cost will
35:56
shrink and be coin, won't have another say 100 X in it that I
36:01
still think it does have. And when that opportunity costs
36:05
shrinks enough, then people will be much more willing to spend
36:08
Bitcoin. I think they'll be huge,
36:10
flourishing of businesses built around the lightning Network.
36:13
I think we're just seeing the very early stages of that.
36:16
So that's something I expect to happen over the next decade.
36:20
Yeah. And there's a part in your book
36:24
that you mentioned that as well and I just want to read us as
36:26
Bitcoin is currently transitioning from the first
36:28
stage of monetization. To the second stage, it will
36:31
likely be several years before Bitcoin transitions from being
36:34
an incept store of value to being a true medium of exchange
36:37
and the path. It takes to get there is still
36:39
fraught with risks and uncertainty.
36:42
So but I think a lot of people are Bummed out when when you say
36:47
that because it's like you know what is sailors, say it goes up
36:51
forever Laura or something, like something along those lines.
36:54
So it is it is it kind of like the diminishing returns theory
36:58
was a law of big numbers. It's a lot harder for Bitcoin to
37:01
go from 100,000 to 200,000. Then it was from Bitcoin to go
37:05
from a dollar to two dollars. You know I agree with seller.
37:08
I think it will go up forever. I think it will just go up some
37:10
more slowly because part of Bitcoins appreciation in In
37:15
value, in purchasing power is just people coming into the
37:18
Bitcoin Network and keeping their Savings in Bitcoin.
37:20
But eventually you run out of people right when everyone on
37:23
Earth owns Bitcoin and is using it as their preferred means of
37:26
savings is not new people to come in and then the
37:29
appreciation of Bitcoin will be basically equivalent to the
37:33
productivity of the global economy.
37:35
So be coin, when appreciate, you know, 100 x, it will appreciate
37:39
say 5% per year or whatever the productivity of the global
37:42
economy is. That-that-that's.
37:46
Well in the future. Would you say a decade?
37:49
Would you say two decades? Of course?
37:51
No one knows just, you know, throwing it out there spec.
37:55
Yeah. My my time line to bitcoin
38:00
becoming the world's Reserve currency is multiple decades.
38:03
I and I wrote in my book 50 years from now, Bitcoin will be
38:06
the global Reserve currency. I believe that I'm optimistic
38:10
about that. My more short term time Horizon.
38:13
Is that Bitcoin eclipse is gold? And achieves the same market
38:16
capitalization of gold and my time Horizon for that is about
38:19
decade. I think it's Bitcoin.
38:21
Second decade of existence, people think this is going to be
38:25
around forever and it's clearly Superior to Gold.
38:27
So I need to I really should be owning this instead of gold and
38:31
that would get Bitcoin probably somewhere between 20 and 20 and
38:37
50 x from here which would be somewhere between like 500,000 a
38:41
million that that's what I'm thinking, but that would be my
38:44
rock. Guesstimate of a price Target in
38:46
the next decade. I know people like to have, you
38:49
know, monthly and I don't pretend to be someone who I
38:53
don't like models. Let me let me say that.
38:55
I you know a lot of people I think in this life cycle got
38:59
caught up with models and believing that it's going to get
39:01
to a specific price number. And I've never wanted to put too
39:07
much weight on models because I think people can get
39:10
disappointed and then they believe they lose, you know?
39:15
Hope in Bitcoin entirely, but the fundamental reasons for
39:18
Bitcoin, not based on charts and lines and stuff like that.
39:22
The fundamental reasons for why you should be bullish from
39:25
Bitcoin, have not changed, but it has attributes that make it
39:28
Superior to its competitors. Those aren't going away.
39:32
It's it has the best scarcity of any monetary good on Earth.
39:36
It is far more visible than gold.
39:39
It's much more portable than gold.
39:42
It's much easier to assay or Then then gold or Fiat money.
39:48
It has these attributes that make it an ideal form of money
39:51
and those have not changed. So don't worry about the models.
39:54
Don't worry that their failed, some of them have failed.
39:59
It always makes me sad that people get dejected about the
40:03
fact that Bitcoin didn't achieve some price Target in the time
40:06
frame that they want in that timeframe was like two or three
40:08
months. I'm here I've been around and
40:11
I've been excited about Bitcoin for decade and I'll still be
40:14
excited about A coin a decade from now.
40:16
So I always try to encourage people if you want to if you see
40:19
the value in Bitcoin and once you start using it and you know,
40:23
you go to another country and you take your able to take your
40:25
wealth without anyone stopping you.
40:27
And you feel the power of that. Once you feel that don't worry
40:31
about short-term movements in the price, you have conviction
40:37
that Bitcoin is going to be important, a decade.
40:39
Now, because it has those properties that make it the best
40:42
money on Earth. Amen.
40:45
To that. And and so many people got
40:47
caught up in the last cycle, myself included, but we were
40:51
very lucky because we don't speculate on simply Bitcoin.
40:54
So you know, I kept my I kept my, my bias is to myself but I
40:59
was, I was on that boat. I really believed 100K Bitcoin,
41:03
but I also believe that the mine came in a very convenient time
41:12
and it's a call. It's all E-band Bitcoin mining
41:20
right on the run-up of the ball almost as if they were attacking
41:24
the price and we all know that number go up, is the great
41:28
incentive for people to look at this thing?
41:32
Do you believe that played a role and you believe that that
41:35
your do you also believe or possibly that was on purpose?
41:43
I'm not sure, I can, honestly can't speak to the motivation
41:46
for why some of those things happened?
41:48
It does certainly seem a little fishy, but also, in a bull
41:51
market, I don't think bad news even matters.
41:53
I think that's one of the characteristics of a bull market
41:56
and the same thing is true for a bear Market.
41:58
You get some amazing piece of news today and I don't think it
42:00
would matter because we're in a bear Market.
42:02
I think this is One of Bitcoins natural cycles.
42:06
And I think I think it was around mid last year.
42:09
I was maybe a month or two early, but I thought the bear
42:12
Market had started and I said that public your publicly in a
42:16
few places I think what one thing that's hurt a little bit
42:20
more this cycle as opposed to Prior ones is the macroeconomic
42:24
picture in the fact that the Federal Reserve has really
42:27
tightened monetary policy, which is created a very, very strong
42:30
US dollar, wonder that one of the strongest US dollars.
42:35
In probably the last 40 years or so.
42:39
So that's been tough for all assets.
42:41
Not just Bitcoin and it's made this bear cycle more painful
42:45
than it otherwise would have been.
42:47
But on the other hand I you know to me this bear Market is
42:51
nowhere near as painful as 2014 Bitcoin is it 20,000.
42:56
And if it's someone had told me you know four or five years ago
42:59
that Bitcoin would be at 20,000. After this brutal crash with all
43:03
these Civ liquidations, I would have been ecstatic.
43:07
Wow, we're really on the path to hyper Bitcoin ization.
43:11
So the fact that we are where we are in this bear Market more
43:14
than anything, it makes me optimistic and I know for people
43:17
who came in really late in the bull market, this is painful and
43:21
you're sitting on people losses. But I think this is the best
43:25
time right now to be interested in Bitcoin, the bear Market to
43:28
be learning about it to be accumulating Bitcoin.
43:32
Just like it was in, 14, if you're one of the people who had
43:36
the patience and didn't lose interest and you were
43:40
accumulating Bitcoin, you did amazingly, well, same thinking
43:44
for 2018, the people who stuck around didn't lose interest to
43:50
didn't lose faith in the importance of Bitcoin and their
43:53
understanding why it's Superior to other forms of money.
43:56
They did amazingly well and I think the people who are here
43:59
today in 2022 who are learning about Bitcoin or Adding a
44:04
business on bitcoin who are accumulating Bitcoin.
44:07
I think all of them are going to do really well in the coming
44:09
cycle. So I want to talk a little bit
44:13
more about the, the FED because the reality is that all of
44:20
Bitcoins, existence, it's been this bull market, right?
44:24
Just just, you know, printing of money.
44:27
Everything's going good. This is really the first time in
44:31
Bitcoins history, that the Fed is taking this hawkish stance.
44:37
Do you think that's going to affect the next cycle that I'm
44:40
anticipating, if you know the having Cycles are still?
44:42
The thing is going to happen, 2024 2025?
44:46
Yeah, I think the hogging cycle still is really a thing.
44:49
And the last time, the Federal Reserve pursued a policy like it
44:53
is today, it really hammered the price of gold.
44:59
And the reason it did that is because when the Federal Reserve
45:03
was Pursuing a policy of easy money and inflation.
45:07
There was a negative real yield on money.
45:10
And what that meant is, if you kept your money in the bank, it
45:14
lost value in real terms, it would buy less than next year.
45:18
You take your, you know, thousand dollars in your bank
45:20
account and then you go to the grocery store next year and it
45:23
wouldn't buy as much what they've done is they've flipped
45:26
that and they did the same thing in the late.
45:29
Sorry, early 80s. Paul volcker did where they
45:31
flipped it to having a positive real yield, which If you put
45:34
your money in the bank that money will grow they pay you
45:38
interest on it and the next you can buy a little bit more than
45:41
you could this year and what that does is it tends to suck
45:44
demand out of monetary assets like gold and Bitcoin which
45:49
don't have a real yield gold. Doesn't produce any interest or
45:52
dividends and so that was their way of kind of getting control
45:56
of inflation. The interesting thing though, is
45:59
the position the financial position of the United.
46:04
It's is very different today than it was in the early 80s.
46:07
The total amount of debt held by the US government.
46:10
Today is much much higher as a percentage of the economy than
46:15
it was in 1980, 1980 the percentage of the economy that
46:18
was held in debt, was about forty percent.
46:21
And today it's about 120 percent.
46:24
What that means is the Federal Reserve is much more constrained
46:27
in how far it can go. It can't go to you can't
46:30
increase interest rates to 18 percent as it did in.
46:34
Early 80s because that would bankrupt the US, you won't
46:38
wouldn't be able to service its debt.
46:41
And I think this is going to ultimately be the fact that
46:44
which stops the Federal Reserve from increasing interest rates
46:48
and eventually they will pivot when that happens is totally.
46:52
That's not fully clear. Whether that happens in 2023 or
46:56
2024, I don't know, my guess is, it happens before the next
47:00
Harvest cycle and I think you're going to have to Very strong
47:05
Tailwind behind Bitcoin in 2024. I'm very bullish for Bitcoin in
47:11
2024, one is the having cycle which is the natural cycle for
47:14
Bitcoin adoption and the second is I think that the Federal
47:17
Reserve will have pivoted, I think it will have caused a
47:20
major recession in 2023 at some point.
47:23
Maybe the second half of 2023 and the cratering of the US
47:29
economy in the increase in unemployment will cause the
47:32
Federal Reserve to Blink and they will.
47:34
Think they'll start decreasing interest rates and they'll go
47:36
back to an easy monetary policy, which is their habit.
47:40
The Federal Reserve has pursued an easy monetary policy for, you
47:43
know, the best part of 40 years, it's not, it's not common for
47:48
them to do what they're doing today.
47:50
So I think those will be big, big Tailwind for Bitcoin in
47:54
2024. A, I expect that we're going to
47:56
have a huge bull cycle in that year.
48:01
I'm a big believer of that as well.
48:04
Does and that that you know you actually answered a little bit
48:07
of my second question which is are we out of the woods yet and
48:11
you said that you believe that and everyone else is also saying
48:14
this as well that the recession hasn't I mean they did change
48:21
the definition real time but let's put that aside or we're
48:26
not out of the woods yet. You think you believe that
48:29
things will get worse because Europe is already in Dire
48:33
Straits man. They they You know, the energy.
48:35
They just announced that they're going to print more money.
48:37
Even though their inflation rate is already a 10%.
48:40
I mean, like, what are we talking about here?
48:42
When you say a bad recession, we haven't really seen anything
48:49
yet. To be honest, we haven't seen
48:52
anything break, let me put it that way.
48:55
We haven't seen anything break in the Global Financial system.
48:58
We almost saw something break in the UK when they had a lot of
49:01
pension plans, which had made bets on the British government's
49:08
interest rate and that it would never get as high as it did in a
49:10
lot of them look like they were going to go under and the
49:16
British bet those sorry the bank of England intervened that that
49:20
was a case where something almost broke in the global
49:22
economy. But I think the Federal Reserve
49:24
is going to continue to increase interest rates and the reason
49:27
people might be confused about this.
49:29
Why are they increasing interest rates when they're, you know?
49:34
Slate, pursued an easy monetary policy.
49:36
The reason is because they lost their credibility with
49:39
inflation. They thought they could get away
49:41
with an easy monetary policy in that inflation was contained and
49:45
then when it started picking up that it was transitory the word
49:48
they used. But then it proved to not be
49:51
transitory and they realize that expectations about inflation.
49:55
This is the big thing that they worry about.
49:56
If they become unanchored and people start believing X.
50:00
Sorry. Inflation is a permanent feature
50:02
of the Me then, it starts getting into the labor market
50:07
where it's really hard to undo and this was one of the problems
50:10
in the 1970s is that people would go to their companies or
50:13
their boss and say, I need a raise of 10% every year because
50:18
if I didn't get that raise, then my standard of living is going
50:23
to go down and then so companies had to factor that into the cost
50:26
of the goods that they sold. And so inflation kind of fed on
50:29
itself in a way and that they're really worried about that.
50:34
Happening. And so, to prevent that from
50:37
happening, they need to get their credibility back and and
50:39
to get their credibility back, they have to be really really
50:42
hard on inflation. So my view is what they're going
50:45
to do is they're going to continue to raise interest rates
50:47
until something breaks something, you know, systemic
50:51
breaks in the financial system where they will be forced to
50:54
back off like it, you know, kind of Lehman Brothers moment in the
50:57
2008 financial crisis where they panic and they shift course, Or
51:04
it'll be that or they'll be a deep recession in 2023 or 2024
51:10
and either of those things I think are going to force the FED
51:13
to change course. And we're in, we're running a
51:16
little bit on short on time. Where is Bitcoins role in this
51:20
when this happens, because it's what you said, man, it's
51:24
recession. Something breaks.
51:26
You see it all the signs. Were there?
51:28
Where's Bitcoins role in this? We're, how do you think it's
51:31
going to perform? I think it's going to do really
51:34
well, I think, you know, I said it 2024 and I like to think of
51:38
Bitcoins history, I wrote in my book.
51:39
The Bitcoin is like a phoenix that Rose From the Ashes of the
51:43
global financial crisis in 2008, and I think it will be a
51:46
Phoenix. Again, I think it will rise in
51:49
2024, as the world faces, a huge recession, potentially a
51:54
sovereign debt crisis. There's a lot of sovereign debt
51:58
nation states, have a lot of debt and the only Only way that
52:02
they can control this inflation problems, increase interest
52:06
rates. But then that increases the
52:08
risks of a sovereign debt crisis.
52:11
So, I, you know, I think that Bitcoin will rise again as this
52:16
asset, which is immutable and permanent and has a fixed Supply
52:22
and there's predictable and a new block gets produced every 10
52:26
minutes and it will be this steady Bellwether in a crazy
52:31
increasingly SeaWorld. And I think this next decade is
52:34
going to be crazy for a lot of reasons because we've pursued a
52:40
monetary policy that's never been seen in history.
52:43
We have nation states with more debt than they've ever had.
52:47
We have the threat of World War 3.
52:48
We have all these huge global economic risks that are on the
52:52
horizon and I think Bitcoin is going to become the preeminent
52:57
store of value. In this period it's going to
52:59
overtake gold and people are going to see it as the place
53:01
too. Keep their savings and becomes,
53:04
you know, Global Safe Haven, absolutely bullish.
53:09
Well I think you made a bullish case there.
53:13
BJ, I want to respect your time. Thank you so much for coming on
53:17
simply Bitcoin IRL. Really, appreciate it.
53:21
Why don't you tell everybody where they could find you on
53:23
social media or anything that you're working on, Etc?
53:26
Yeah, you can find me on Twitter.
53:29
I'm real underscore Vijay right now.
53:32
I'm working on my kids. A lot of kids for kids at home
53:35
and just trying to take care of them and raise them and make
53:39
sure they're happy and healthy. I mean, that's like that's
53:43
wealth right there. That's true wealth family.
53:45
Family is everything. I'm a big believer in that
53:48
Vijay. It's been an honor like always
53:50
love to have you back on the show maybe in a couple months,
53:52
maybe see you around in a Bitcoin conference I'm going to
53:56
roll it out. Thank you so much for joining
53:58
us, guys. We'll see you tomorrow.
53:59
I mean sorry. Yeah we'll see you tomorrow.
54:01
The Regular Show 12:15 p.m. Eastern Standard Time.
54:05
Thanks take