The Pomp Podcast - #1331 Solo Episode | Bitcoin Supercycle Incoming?

Episode Date: March 21, 2024

Anthony Pompliano records a solo episode breaking down the question, "is this time different?" Topics include historical bitcoin cycles, bitcoin halving, bitcoin drawdowns, interest rates, global liquidity, gold, volatility, El Salvador, Microstrategy, and more. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you.  ======================= BetOnline.ag is a proud sponsor of the the Pomp Podcast. Use crypto to bet on sports, play poker and enjoy casino games at BetOnline. Visit https://promotions.betonline.ag/pomp and use promo code POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline boasts no crypto transaction fees, and processing is anonymous, instantaneous and secure. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is a solo episode. I wanted to answer the question, is this time different? It's a little bit shorter than normal, but I enjoy doing these solo episodes and the

feedback has been fantastic from past ones. So I'll continue to do them periodically, maybe every other week or so. I hope that you enjoy it. I've put as much data and information in here as possible. Once you get done listening, jump on Twitter and let me know what you think. Let me know what you agree with, what you disagree with, and if there's anything that I missed. I always enjoy learning from you just as much as you enjoy listening to me. Here is this solo episode answering the question, is this time different? Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a

specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your desk. I got a gazillion tabs open and different windows for different activities. There's my web browser, my text messages, I've Slack open, and I got a notes app. I normally work on a desktop and it can be very, very productive, but everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work or just want to

work from the kitchen table, my laptop doesn't have enough screen space. I lose my command center and my productivity falls off a cliff. It's a major problem. But this is where Espresso comes in. They have a portable screen that is so beautiful that you think Steve Jobs came back from the dead to create it. The thing is incredibly light. It comes with a nice stand and the user interface is so easy that I figured it out how to do it in less than three minutes. If you listen to this podcast, you know that's not an easy feat. So the Espresso team and I, we became friends. I got to know them because I really like the product. And those screens, they now want to offer them to any fan of the podcast. So we struck a little deal. Here's how it works. Anyone who listens

to this podcast can go to us.espresso. Or that's too confusing. Just go click the link in the description. If you go to Espresso's website, they've got a brand new offer there sitting for you. You get a little discount and you'll get a beautiful screen. Trust me, I use mine every day. You'll love the Espresso screen and I think it'll make you more productive. Go check them out today by clicking on the link in the description. This episode is brought to you by BetOnline. Do you like making a profit from sports betting? Well, set yourself up to take home the most profit possible using crypto to fund your sports betting, casino, and poker account at BetOnline.ag. You can avoid costly transaction fees, get your payouts lightning fast, and do it all securely and anonymously with the highest deposit and withdrawal limits in the industry.

If you want to get in on the action, do it the smart way with crypto at BetOnline.ag. Head to the website, sign up with promo code POMP100 to get a 100% bonus on your crypto deposit today. If you go and you deposit, they'll give you 100% bonus if you use promo code POMP100. BetOnline. The game starts here. BetOnline.ag. Go check them out today. What's up, guys? Everyone keeps asking me the question, is this time different? Is this Bitcoin cycle different than Bass Cycles? In order to answer that question, we've got to go backwards to understand what's already happened.

Every single time that we've had a Bitcoin halving, within the next 18 months, we get all-time high prices, and Bitcoin has gone up hundreds, if not thousands of percent. It's really exciting. It makes people think that it could happen again. Well, one of the things that we also have to understand is during those past bull markets, there have been major drawdowns along the way. We have seen, for example, that there will be multiple 20 plus drawdowns in a single bull market. If we go back to and look at the 2017 bull market, there was 10 or 12 of these drawdowns

of more than 10%. If we go and we look at 2020, same thing. On the way up, there's lots of volatility to the upside, but you also get these corrections of 10, 20, 30%. And so naturally, when we get into the drawdowns like we are in right now, people ask, is this different? Should we expect that to have been the top of $72,000? Well, the short answer is no. The current drawdown that we're experiencing in Bitcoin is only about 15%. Historically, we've seen the average drawdown in the last two bull markets be closer to 20 plus percent.

Sometimes it can go up to 30%. And so naturally a 15% drawdown actually means that we've had less volatility, not more during this current bull market. Now, one of the other questions that comes up is that we have violated some of the past rules. Historically, when people talked about bull markets, they would say to themselves,

okay, well, in the drawdown or the bear market, we never went below the previous all-time high price. As you know, in 2022, though, we violated it. We went below 20,000, which was the past cycle's all-time high. And so does that mean this cycle is different? Well, then on the way back up, we also violated a second rule, which was that we never get to an all-time high in Bitcoin's price before the halving. We just hit a new all-time high, and the halving is still a couple of weeks away.

So now we have violated two of the rules that everyone said never happens. So yes, in one hand, this is different. We don't know what the future holds. We have violated things that we're serving as these kind of guardrails or these guidance paths. And so we are in uncharted territory in that sense. At the same time, usually what we have seen is that Bitcoin has been this great index for what many people thought were interest rate environments.

They've said, oh, when interest rates are low, Bitcoin went up in price. When interest rates got raised, Bitcoin crashed. But now we sit here and Bitcoin is near all time highs and interest rates are still five and a half percent or higher in the United States. And so is this time different? Well, Bitcoin has violated the narrative saying that Bitcoin was only a zero interest rate phenomenon. Bitcoin continues to be resilient regardless of the interest rate environment.

And so then you can say, well, what exactly is Bitcoin? From all of the data that I've looked at, it appears that Bitcoin is actually an index for global liquidity. Now, what does that mean? In the United States, in Europe and Japan, over the last two years or so, we have seen them trying to drain liquidity from the system. They've been selling assets off their balance sheet. They've been raising interest rates, and they're trying to create these tighter financial

conditions. But China and a couple other central banks around the world, they continue to pump liquidity into the market. And so global liquidity has actually been increasing, even though the major central banks in the United States, Europe, and Japan have been trying to drain liquidity. And so these countries are actually competing with each other in terms of how much liquidity is going in or out of the system. But global liquidity has continued to increase over the last 12 months or so.

And so what has happened? Bitcoin's price has continued to increase. And so naturally, as we are watching global liquidity increasing and interest rates remaining high, it then begs the question, well, what happens if global liquidity continues to increase and interest rates get cut? Now, that may seem like something that isn't going to happen. Jerome Powell and others are saying, no, we need to stay the course. We need to keep interest rates higher. At the start of 2024, it was estimated that there would be seven or eight different interest rate cuts. Probably seven was what the market was saying. Now, the market is saying

only three. And even that level of confidence around three cuts is waning. And so if they are going to keep interest rates high, then Bitcoin will simply trade off of that global liquidity. Obviously, we've also seen ETFs, which now give all kinds of exposure and accessibility to investors who previously were boxed out of the market. And so these ETFs were the single best ETF launch in history. We have seen over $60 billion now in these ETFs. Some of it came from Grayscale, which already had a lot of money. Some of it came from net new inflows into the 11 different ETFs that were all approved. But also some of it has come from Bitcoin's price simply appreciating. So if $1 went in when Bitcoin was at $42,000, and now Bitcoin is trading at $60,000,

you'd have closer to $1.50 in these ETFs. And so naturally, Bitcoin continues to be something that people want. It continues to be something that people want to put in their portfolios. And it continues to be something that Larry Fink at BlackRock has called a flight to safety, a flight to quality. Now, why would somebody like that say those comments? Well, the reason is because ultimately, many of the other assets that investors historically would go to, let's say gold in times of either increasing global liquidity or cheap money, low interest rates or high inflation, they have been doing their job. They have been going up in price. But gold at all-time highs is actually not up that much.

We're talking about 10% moves. When in the Bitcoin world, we're talking about hundreds of percent move. And so naturally, when you have an asset that just has more volatility to it, if both gold and Bitcoin go up in price, but Bitcoin is going to go up more, it will naturally take some degree of the capital flows and bring them into Bitcoin. And so to answer the question, is this time different? Yes and no. It is different this cycle in the sense of who some of the players are, where some of

the capital is coming from, in terms of hitting an all-time high before the Bitcoin halving, and also in terms of the macroeconomic regime. All of those things are different than what they have been in the last two cycles. But on the other hand, you still have a high degree of Bitcoin that is being held illiquid by long-term holders with strong hands. You still have an asset that is producing block after block after block of transactions. You still have a Bitcoin halving that is going to execute exactly as designed. You still have the application of supply and demand from Economics 101, where if demand stays constant and the daily incoming supply gets cut in half, you're going to have to readjust the price upwards in order to accommodate for everyone.

And you still have the human nature and psychology of greed and fear. And so it's likely that we will get an exuberant kind of frothy market on the way up. At some point, the market will get ahead of the technology, ahead of adoption, and ahead of the actual capital allocation. And then we will see fear set in, and the price will begin to crash. People will begin to sell, and Bitcoin will actually extend itself back down into a bear market. So some of those things are not different.

Bitcoin still remains the same asset. It still has the same mechanisms. and humans are still human. And so we're at this very interesting time period right now, where as we look at the cycles, it is different and it is not different. But then if we expand out past the halvings, we can also see that there are many major players

to keep your eye on. The ETS we've already talked about, but there's El Salvador being the first country to go and buy thousands of Bitcoin, almost 6,000 Bitcoin that they've purchased for their country. It's worth over $400 million today. They have announced plans to take self-custody of those Bitcoin, and they're going to keep

them within their territory. So ultimately expressing what makes Bitcoin unique, understanding the value proposition and taking self-custody. El Salvador continues to buy one Bitcoin per day. And so when you have a nation state doing this and doing it publicly and talking about it, that changes the geopolitical conversation. Other countries start to ask themselves, should we be doing this? And then they begin to think about what are some of the implications, both economically

in terms of how much money they could invest, what could happen if Bitcoin's price continues to go up, how that could help their country. And then they think about what the risks are, both geopolitically, are they going to change their relationship with the United States or other countries on that geopolitical chessboard? Or what are some of the risks if Bitcoin's price goes down? and they make the evaluation as to whether to allocate or not. Should they buy the ETF in their sovereign wealth fund or should they actually buy Bitcoin directly?

On top of that, we've seen Michael Saylor and MicroStrategy. Michael Saylor and his team continue to acquire as many Bitcoin as possible. Those Bitcoin, he now owns over 1% of the entire Bitcoin network. Now, on one hand, there's people who are concerned about that. They say, wait a minute, somebody owns more than 1%. Isn't that a risk? Michael Saylor is not the first person to get 1% of the network. Cameron and Tyler Winklevoss have owned 1% for almost a decade.

MicroStrategy also is not Michael Saylor. Michael Saylor is the CEO. Michael Saylor is the leader, but there are other shareholders. There are other people involved in that business. And so it is less different or it is not the same thing as if Michael Saylor owned the Bitcoin personally. And so as we look at ETFs, countries, corporations, we have to ask ourselves, are those players also going to do something different in the market now that we have some of the changes around Bitcoin? I personally don't think so.

I think one of the things around Bitcoin that provides so much value and has created such incredible stability is the story of Bitcoin, the narrative of Bitcoin. Bitcoin is an asset that is apolitical, that is decentralized, that continues to produce the same number of Bitcoin every single day that was pre-programmed from day one, regardless of what the change in demand is. Bitcoin does not care that the ETFs were approved. Bitcoin does not care that Michael Saylor and MicroStrategy are buying up an incredible amount. Bitcoin does not care that countries are starting to acquire it.

Bitcoin does not care that it hit an all-time high before halving. And Bitcoin does not care what the regulatory environment is. Bitcoin as a system continues to execute the software exactly as designed. And so naturally, if demand is increasing and they're not going to produce more Bitcoin, then price is the variable in that equation. And so my expectation is that Bitcoin will continue to increase in price for the foreseeable future. I do believe that we are in a bull market.

I do believe that the price will increase pretty significantly from here. And I do believe that the price will get ahead of the fundamentals of the market and of the adoption curve. We then will see a crash in the price. The cycles will remain and we will continue to see people come into Bitcoin as the price rises. And then we will see some people leave when the price crashes. And so if you are somebody who is interested in Bitcoin, if you are somebody who has been

holding Bitcoin, or you are somebody who is evaluating Bitcoin in terms of whether to put it in your portfolio or not, the things that I would tell you to go do, first, go read the Bitcoin white paper. Understand what Satoshi Nakamoto was trying to accomplish, how Bitcoin is designed, and why it is so important. The second thing, if you want to understand it from an investment standpoint, is go and look at the risk reward that is provided by Bitcoin. When you see these charts, you'll see most traditional assets are all coalescing around the same risk reward kind of equation or metric. And Bitcoin is the outlier. It remains one of the most attractive assets in the world because it is so different than these other assets.

For example, Bitcoin has been the best performing asset in the major macro asset class at the start of 2024. form. Bitcoin also had a 2.1 sharp ratio, which means that that risk reward makes it an incredibly attractive for people to put even a small tiny bit into their portfolio. And the last thing that I would tell you to go look at is to go look at many of the people who have spent hours and hours studying the asset, studying the network, studying the technology and studying the regulatory environment. Go look at what they have been saying. Listen to the podcast they're on, read their writing, look at the tweets, look at the conversations. You have to do the work in order to understand the assets and the markets that you invest in. That is true of anything,

not just Bitcoin, but Bitcoin specifically, because Bitcoin is so different than other assets and other markets. And so the old adage in finance, know what you buy is just as applicable here as it is anywhere else. Do the work, spend the time, gain the knowledge, and then you'll be prepared to make decisions. Whether you like Bitcoin or you don't, it's always important to be educated. And there is no better critic than an educated one. And so my message to all of you is go and do the work, read the white paper, go study this asset, become educated, and then understand some of what we're going through right now is different. And some of it is the exact same. No one knows the future. And that is the beauty of markets is that people wager with skin in the

game on what is going to happen. Some people will be right. Some people will be wrong. And those that are right will be handsomely rewarded. And those that are wrong will be punished financially. Welcome to a free market. Welcome to Bitcoin.