The Breakdown - The Most Bullish Bitcoin Arguments for Your Thanksgiving Table

Episode Date: November 26, 2020

Today’s Breakdown is a prep kit for the inevitable conversations about bitcoin as friends and family sit down at the Thanksgiving table this year.  NLW discusses arguments ranging from price action to who is buying to why they’re buying to good old-fashioned supply and demand. He leaves with one big conclusion: If there was ever a year to discuss bitcoin, this is it. 

I think Bitcoin is actually a really great starting point for a lot of deeper conversations about the future we're headed into, the world that we're leaving behind, and what we might make of it all. So I would encourage you to not be scared of that, but to let it come. Especially with the people we care most about, we might be a little bit better off. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. The breakdown is sponsored by crypto.com and nexo.io and produced and distributed by CoinDest. What's going on, guys? It is Wednesday, November 25th, and man, this week is the best week because it's full of Thanksgiving family and joy and awesome numbers going up.

But it's also the roughest week because since I'm recording ahead, I'm so worried that I'm not going to be able to capture the intensity and the excitement. of Bitcoin hitting its new all-time high. Maybe it'll happen before this and I'll be able to do a special supplement or something. But anyways, I'm recording this on Tuesday for it to go out on Wednesday. So forgive me if I've missed something huge or it sounds like that.

But regardless, I wanted to do a fun episode because Thanksgiving has some historical analogy for us in this space. Last time we had the bull run up to Bitcoin's previous all-time high, hopefully previous all-time high by the time you're hearing this, Thanksgiving was a big moment. Bitcoin had been going up pretty significantly over the course of the second half of 2017, but it was really those conversations with friends and family at the Thanksgiving table that sent it

rocketing to the moon. This year, I thought it would be fun to give my take on the most bullish arguments for Bitcoin for your Thanksgiving table. So what I'm going to do is I'm going to go through price, who's holding it, why they're holding it, simple supply and demand, and then end on a few of my personal thoughts around do's and don'ts. First up, let's talk price. I'm constantly reminded of a tweet from Mr. Hoddle on Twitter that said, none of you fuckers would be here without number go up. And obviously, this is a crass way to put it, but I think it's kind of true. As much as we can talk about the deeper meanings, and we're going to, for sure, price really is the hook that brings people into it,

particularly when you put it in the context of having heard so many times before that it was a bubble and Bitcoin was dead this time, when the price just keeps going up, coming back, resurfacing, it's not just price, but the resilience of price. At the time of recording, like I said, Bitcoin is hovering around $19,300. So it's entirely possible that the price is broken through to a new all-time high by the time you're hearing this. And even if it hasn't, you just have to look at cable news or cable business channels to see that the price has already attracted attention again. So people will be thinking about it.

What's more is that Bitcoin's resilience this year has been particularly impressive. In addition to its longest streak above 10K ever, the previous record was in that 2017-2018 period and was 50, something days. Meanwhile, we've been there since effectively late July, I think just one closed since then that was under 10K. The total gains since that Black Thursday March crash are somewhere between 250% and 350% depending on how you choose to locate the low. Honestly, though, if you want to make the price-based argument, the best thing that I can tell you is head on over to casebitcoin.com. It's Case for Bitcoin. That's Dan McArdle, one of the co-founder of Masari's new projects. and just look at that beautiful chart right on top. It says Bitcoin and traditional assets return on

investment versus USD. The one year has S&P 500 at 16%, gold at 23%, and Bitcoin at 171%. The two year, S&P 500, a very reasonable 36%. Gold, 47%. Bitcoin, 362%. Three years a little rough. We were coming off those all-time highs. S&P 500 was 39%, gold was 40%, and even though it was rough, Bitcoin is still 137%. However, if you go to that four-year, 63% for S&P 500, 53% for gold, a staggering 2,526% for Bitcoin. It is just crushing everything else. But let's move now to my second part of the most bullish arguments for your Thanksgiving table, which is who is. holding it. This year has represented a serious change in terms of ownership, and I want to talk about two categories specifically. First are the billionaires slash financiers. Paul Tudor Jones was obviously

the first of these two out himself in May. He's one of the most storied hedge funders of all time. He called the 1987 crash, among other things, has made a huge amount of money and is an extremely respected voice and came out with his great monetary inflation theory and his bullish Bitcoin. position pretty soon after that crash in the March lows. This episode is brought to you by Crypto.com, the Crypto super app that lets you buy, earn, and spend crypto all in one place, and earn up to 8.5% per year on your Bitcoin. Download the Crypto.com app now to see the interest rates you could be earning on BTC and more than 20 other coins. Once in the app, you can apply for the Crypto.com metal card,

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no fees whatsoever, no credit checks, and flexible repayment. Not to mention the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, Your credit, your choice. Get started at nexo.io. Second, more recently we've had Stan Druckenmiller come out. Again, another one of the most respected money managers of the day he ran money for Soros.

He's made billions on his own. He has recently been on CNBC talking again about inflation and about why Bitcoin makes sense to him as a hedge, particularly based on the affiliation that Bitcoin has for West Coast tech money and for millennials. The second category that I want to call out is the corporate treasuries. When the story of 2020 is written in Bitcoin terms, the standout, I think, will be Michael Saylor, of micro-strategy, of course. Micro-strategy moved at the time $425 million of its cash treasury into Bitcoin, which has had an incredible ROI since that move was made.

And moreover, Michael Saylor has been an absolute evangelist for the story. space. In not only this decision to put money into a treasury, but also that evangelism, Sailor and MicroStrategy have really opened the floodgates on the idea, at least, of a publicly traded corporate treasury deciding to put reserve assets into Bitcoin. Now, this, of course, was reinforced by Square's subsequent move, putting something like 1.8% of their treasury or 50 million into Bitcoin as well. I think something that's interesting about this is that they actually represent two extremes that give people who want to mirror this strategy very different approaches while still being part of it. On the one hand, you have the Sailor All In approach, which very few

companies and corporations would actually be able to get aboard to get clear and happy about. But on the other side, you have Square, which is creating a model that's much more imitatable in some ways, which is much more imitatable and much more potentially influential for CFOs who are looking for something that they can go and share and show their boards that they'd like to do. And while I don't necessarily think that we're going to see a race of companies doing similar things, even a tiny number of similar institutional moves could make a big difference in the demand profile for Bitcoin. It's not just who is holding it and the new people who are holding it, however, that's such a bullish argument for Bitcoin. It's also why they're holding it, the shift in the popular narrative.

This literally cannot be overstated. The narratives around the 2017 run-up were not about the things that this narrative is around. Those were about fast money, about crazy ICOs, and maybe some of the seeds, the embers for what has gone on subsequently were there, but really it was about these fundamentally different things and a lot of get-rich quickism. The people who are coming out as Bitcoin advocates in 2020 are holding it as a digital gold. They're holding it as a credible hedge to inflation. They're holding it as a hedge against a likely deepening of monetary policy experiments like modern monetary theory and negative interest rate policy. Why this matters is that as other investors who look up to these folks see it, they're not just getting what the investment is. They're getting a why, and that

why is actually aligned with the broader Bitcoin community. It's about the world that everyone's living in and has big questions about, not just some newfangled technology era. And I believe this is part of why, anecdotally at least, it seemed like these moves by Saylor and Paul Tudor Jones have been incredibly influential. In my conversation with Robbie Gutman a couple weeks ago, who is the CEO and founder of Nidig and Ston Ridge, who are Nidig, a huge custodian, another institutional service provider for Bitcoin Services and Stone Ridge, a $10 billion asset manager. In his estimation, there has been a total 180 of institutional investors over the last six months, and he pointed explicitly to some of these influences as really key in that shift. So we've talked about price

as a bullish argument. We've talked about who is holding it as a bullish argument, and we've talked about why they're holding it as a bullish argument. But then let's talk about simple supply and demand. The thing that you're seeing here over and over across all of these is that this run-up is being caused by a different class of investor, a different class of investor that has much deeper pockets and is trying to start getting exposure while there's still some liquidity. But on top of that, there is also retail brewing. Cash app has seen a growing Bitcoin business. Its quarter three Bitcoin revenue soared 1,000% to 1.63B. billion, and perhaps inspired by this, or fearful of it, PayPal launched a crypto service to all of its

U.S. users with the rest of the world to follow. That's 300 million potential users in a world where currently there's something like 100 million estimated crypto users worldwide. Together, these two apps already are creating demand for more than 100% of the new Bitcoin minted. Meanwhile, Grayscale's Bitcoin Trust was doing that all on its own. When you have these big buyers that represent more than 100% of new Bitcoin demand, that means only one thing. The price has to go up. It's simple supply and demand. There is clearly so much to be bullish about. Honestly, I feel a little bad doing this episode. I'm sure that if you listen to me daily or even weekly, all of these things you're familiar with, but still, I thought it'd be fun to put them together as one coherent thought

process. Maybe to close it out, what I'll do is give you my quick don'ts and do's at the Thanksgiving table, at the risk of being a mismanors for the Bitcoin space. Here are my don'ts. Don't make it overcomplicated at first. There is so much to dig into with Bitcoin. It's okay to find the tip of the iceberg that you think is going to resonate most with the people you're discussing. Are they people who are just savvy, business-minded folks who want great opportunities? Are they people who really respond to the idea of a censorship-resistant, confiscation-resistant money? Pick your spearpoint. That's where you start. A second don't, I think, is over-emphasizing the amount you've made or the gains. It's cool that you have made a bunch of money on your conviction,

and I certainly am proud of you for that. However, I do think as well that people can do the math. They can do it in their heads. They can see it. And my fear if we talk about how hilariously rich we're getting to crib that New York Times beast from the last hype cycle is it makes people feel like they're too late, right? So we don't need to overemphasize that. A third don't, which is much more tangible and practical as they get into whatever app they're using to buy their first Bitcoin, is don't let them fall for unit bias. Don't let them fall for trying to buy a coin that has less cost per coin just because our brains are hardwired to think like that. That's something that you can be assured before. So those are just a couple don'ts. Now, how about some do's? Do answer questions without

treating people like they're stupid. This is an immensely complicated space with a million rabbit holes. Be a good steward of all that information and remember when you didn't have all the answers either. Do discuss Bitcoin in relation to other financial assets. I gave you the money piece, but it's okay to talk about why you think it has superior properties to something like gold if you have that conviction. Do engage in the deep conversations that the raise on debt for Bitcoin is predicated on. And what I mean by that is that we have this idea that we're not allowed to talk about politics and polite company. And I think that that actually really hurts us as a society. I think that we have to be able to have disagreements.

We have to be able to have very contentious beliefs that still are able to find some common space with one another, or at least make space for them to be held as valid as they're debating and getting into it. I think Bitcoin is actually a really great starting point for a lot of deeper conversations about the future we're headed into, the world that we're leaving behind, and what we might make of it all. So I would encourage you to not be scared of that, but to let it come. Of course, ultimately, that's completely up to you. I have no idea what context you're walking into. But I think that if we had more of those tough conversations, especially with the people we care most about, we might be a little bit better off. Along those lines, try to find ambassadors that relate to them. And what I mean by that

is that there are now people from music, from sports, from finance, from all these different industries who are bitcoins. And by finding people who relate to your friends and family's interest, it may actually help them see themselves in that space a little bit before. Finally, take the time to help people get set up. It's one thing to just be excited about this. It's another thing to actually get into it from a practical standpoint, and it can be really technologically daunting. So take that time while you're there to help people get hooked up with the apps that you think are the best stewards for the space and figure out how to help them get into it in a way that's actually tangible and works for their life and how they're going to be able to engage with it in an ongoing way. Anyways, guys,

just talk about it. I think that at the end of the day, what makes this asset so strong is a network of people who want to have these conversations. And I'm thrilled that you decide to spend some of them with me, and I'm hoping that you're off to a great Thanksgiving where you can be an evangelist for the space in the right way for your friends and family. Happy Thanksgiving, everyone. Until tomorrow, be safe and take care of each other.

Peace.