The Pomp Podcast - #1494 Adam Back | How Bitcoin Hits $1,000,000

Episode Date: February 27, 2025

Adam Back is the Co-Founder & CEO of Blocksteam, and has been involved with bitcoin since the very early days. In this conversation we discuss what is going on with bitcoin, how institutional adoption is going, the potential bitcoin strategic reserve, Satoshi, and much more. =====================BitcoinIRA: Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Take 3 minutes to open your account & get connected to a team of IRA specialists that will guide you through every step of the process. Go to https://bitcoinira.com/pomp/ to earn up to $500 in rewards.=====================Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more. Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.=====================Xapo Bank, the world’s first fully licensed Bitcoin-enabled bank, offers military-grade security with an unmatched blend of physical and digital security, as well as pioneering regulatory oversight, so your funds are always protected. Beyond secure storage, they enable you to grow and use your Bitcoin. Earn daily interest in Bitcoin, spend with zero FX fees using a global card, and make instant payments via the Lightning Network for unrivalled access and convenience. Visit https://www.xapobank.com/pomp to join.=======================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. What's going on, guys? Today, we've got a great episode with Adam Bakke. Adam is the co-founder and CEO of Blockstream. He's been in Bitcoin since the very, very early days. He was one of the first people, if not the first, to get

an email from Satoshi Nakamoto. We talk about what's going on with Bitcoin, how institutional adoption is going, whether the strategic Bitcoin reserve will occur. Is he Satoshi? Does he know who Satoshi is? All of these questions and many more are answered in this episode. If you watch the whole thing, you're going to come away with some unique insights, and I promise you're going to learn a thing or three. So make sure you watch till the end and let us know what you agree with or what you disagree with. Adam and I really enjoyed the conversation. We look forward to doing it again. Here's my latest conversation with Adam back. 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 Bitcoin IRA. Are you a crypto investor with a retirement account, but don't have any crypto in your retirement account? Then listen up. This is for you. Bitcoin IRA is revolutionizing the way Americans save for retirement by helping smart investors diversify their savings with access to over 75 cryptocurrencies. With world-class customer service, military-grade encryption, and a vertically integrated licensed trust company,

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Bitwise P-O-M-P dot com. As always, remember investing is risky and carefully consider the extreme risks associated with crypto before you invest. Today's episode is brought to you by Zappo. Picture this. Every time you trade Bitcoin, the spread determines how much value stays with you. That's why securing top-tier Bitcoin trading fees is key to growing your Bitcoin wealth. But what if I told you that there's a platform that lets you save up to 90% on your Bitcoin trading fees?

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competitive spreads more of your bitcoin stays where it belongs in your pocket whether you're trading big or small every move you make is designed to boost your gains and fuel your financial future head to zappobank.com forward slash pomp to join that's x-a-p-o-b-a-n-k.com slash pump. All right, Adam, I thought the first place to start is most people know you were early to Bitcoin, but early can mean a lot of different things. You actually got the very first email from Satoshi Nakamoto. That's right. It was in August 2008. And I have some software and papers online. And so once in a while, you'll get a researcher or developer email you. So I just thought it was another researcher and that was his real name, right? Satoshi Nakamoto. But yeah, so it was a

of exchange and then some more email exchanges in january 2009 when he kicked off the network what was he asking or was he uh so it was like fairly brief exchange so basically you know i'm i'm using your hashcash work what's the correct citation for it and you know because it's not published in the journal it's just published on my own website it's a kind of tech report and uh then i sent him some suggestions of other things to look at including way dies be money, which you promptly turn around, contacted way die and added a reference to that too, to the paper. So, uh, and then, yeah, just, just some general email about like related systems.

Yeah. Did you go and look at what he was actually building or was it just email communication, but you actually didn't go look at like what? Uh, so it's when I looked at the, the outline, I don't seem to, I think it was like a link to some kind of download site. so I couldn't really get the original paper back later because that site wasn't there anymore. And then in 2009, Hal Finney was one of the early users

and he wrote a kind of report, like an experimental report about this is how it works, this is what I think it's doing, that kind of thing. So I read that. And what did you think when you read that? Well, I thought it was pretty interesting because I was involved with early electronic cache systems like DigiCache in the mid-90s.

And that one, that was an experiment to try and bootstrap value in it because they made a promise that they weren't going to issue more than a million units. So some of the people on the Cypherpunks list, including myself, started selling stuff. Pretend it's worth a dollar, sell things for it. We can bootstrap it. And then it went bankrupt and it was a central database. So that was the end of that. And so the lesson people took from that is centralized systems can fail. We need a decentralized way to get electronic cash. So people try to figure out how to do that. Nobody quite managed to crack it. Proof of work was part of that kind of 1998, 1997 discussion after I published Hashcash that, you know, mining was

part of it, but nobody had figured out how to control inflation and put it all together. So Satoshi put it together. And so I was immediately seeing that it looks like he's solved the missing problem. And, you know, next question was, well, will it bootstrap? You know, because you release a bit of tech, no telling if people adopt it, if it develops a market price, that kind of thing, And so I thought, well, I'll wait and see. This is exciting. Let's watch, right? It took a few years before there was an exchange or a market price and so on.

So you'd see it pop up in the news once in a while. So I remember it crossing a dollar and then $100. And I was like, okay, the total market cap's not so big at that level, but that's clearly something. Like psychological milestones. Yeah, something's happening. And so then I did the usual Bitcoin rabbit hole and read the next level, ran out of things to read, went and found the developers hanging out in IRC to ask them more questions, which are not documented anywhere at that point.

And then I developed some ideas to improve privacy in it, which was confidential transactions. And then I tried to see if there was a way to integrate that into Bitcoin and realized actually it's pretty hard. We've seen that more recently, that it's hard to make changes to Bitcoin. You've got this consensus process. So I developed a sidechain idea, it's like, okay, let's make it more modular, say. And then that's what I started Blockstream to do in 2014. So what's fascinating to me is most people who hear about Bitcoin today, right?

If you've been sleeping under a rock, you hear about it, they really think about it from a investment opportunity. It's let me go buy some. You obviously had been working on this for a very long time in terms of different technical architectures this kind of double spin problem uh proof of work like just all these different components when you first see this i don't get the sense that you were like let me go buy some it was more of like what could i build on top of bitcoin is that accurate yeah i mean you have to bear in mind the earlier e-cash systems were more like what we would call stable coin today

they didn't really have an investment aspect to them right now clearly bitcoin did because the way that satoshi actually solved it is the hot part what was partly hard is to create a stable us dollar value uh with with no you know reference to any central price fees and things like that and so what he did is he just fixed the rate supply and let the market figure out the price right and so then that that indirectly creates the uh you know a hard money with with the digital gold kind of phenomena but you know i was somebody that was managing my own investments and aware of you know the inflation hurdle rate the manipulation of official inflation statistics going back you know before but before uh you know hash cash and so in the same kind of time frame

while i was at university even and so you know those kind of things made a lot of sense to me so after bitcoin you know uh got markets that became you know more actively used then i did get into you know mining and buying and trading and that kind of thing later now um i know people some people think that you're satoshi uh i'm gonna assume that you're gonna say no so uh who do you think it is i don't know i mean i think people have a kind of rough idea of what the skill sets are needed we know about cryptography some understanding about monetary economics um and you can see some of the things satoshi's writing about right so he's got the genesis quote and all this kind of thing but you know there are a lot of clever people in the

world so you know i know i know some people who were implementing you know encryption and privacy tech and digital signature things and previous electronic cash systems but you know i think probably you know whoever it was they kept it themselves so we're probably never going to know who it was just just because you know so many people have been fascinated by this you know the concept of this mysterious career that they've looked through any kind of digital data they can find and you know so much time has passed now and nothing's been found and he hasn't been active since i don't know when he stepped away like 2011 or something so yeah then i think there's there's nothing new to research i think we're never going to know unless there's some

kind of you know inheritance in event or something perhaps i mean i don't know you know it's all speculative at that point could you imagine if you you know your father dies and all of a sudden you're like here's 800 000 bitcoin or whatever it is right that'd be a news story yeah big surprise um there's a recent rumor that i saw somebody put together a whole you know kind of theory that jack dorsey is uh i'm not buying it because coincidentally a friend of mine sent me a chat gpt generated uh like backfield story full of ai hallucinations about how a mutual friend of ours could be satoshi and you know i was reading it i was like but that's not true that's not really everything was false but it looked like consistent with the hints he'd given it and so

So I was like, you know, that looks remarkably like the Jack Dorsey thing. It's full of very specific things. Now, I don't know Jack Dorsey, you know, on a personal level, so I don't know. But probably you could check many of those claims and they're probably all going to be false, right? Yeah, it's fascinating. So you say you started Blockstream in 2014. It's one of the longest standing Bitcoin companies. Talk a little bit about the evolution of Blockstream to what you guys are doing today.

And I think a lot of it really maps to the evolution of Bitcoin. Bitcoin started off as this thing completely outside the system, definitely had this anti-government or anti-central bank component to it. We now have a central bank where they're talking about Bitcoin. We have a pro-Bitcoin president. We have politicians that hold this, large financial organizations, public companies. It kind of feels like the mainstream adoption that everyone sought in Bitcoin has come with some trade-offs where maybe some of the kind of ethos or early beliefs in Bitcoin are kind of changing based on that adoption. Yeah, I mean, blockchain has always had a very straight line approach, which is, you know, we want to help Bitcoin reach hyper-Bitcoinization, reach full adoption, reach its full potential. And for myself, I was, you know, as I mentioned, somebody interested in managing my savings investments and trying to understand inflation and, you know, the struggle to overcome the hurdle rate of inflation is actually quite hard, right?

And so I think, you know, with the Blockstream Layer 2, the main technology was the liquid Bitcoin Layer 2 focused on trading. So actually, that was already contemplating, you know, Bitcoin as an asset class and putting sort of tokenized securities and using Bitcoin as a trading mechanism. So for me, it's more kind of straight line in the sense that I think of Bitcoin both as electronic cash for the Internet as part of the value thesis as that continues adoption, but also digital gold and savings technology and something people would invest in. mean with with the internet you could invest in internet stocks but with bitcoin you can invest you know directly in the protocol in the network in in buying bitcoin the asset class so yeah it's uh and of course you know as as we've both been in it for a long time it's fascinating to see how at the in in the moment it feels like things are moving slowly but actually it's moved very quickly and sort of surpassed expectations where people would say oh you know maybe a

government you know a company would pay attention or a bank would pay attention in 10 years and you know within five years you know every bank has got blockchain r d elaborate and it's just kind of moved on from there and swung to you know they're all uh bringing bitcoin related products to market you know um etfs and uh different types of futures and structured products now uh bitcoin secured lending and it's all happening right and then the institutional wave so we've been talking about that as the third wave if you like so if the first wave was the general users buying or mining on spot exchanges and the second wave being the etfs providing access to a wider audience and the third wave being the actual genuine large-scale institutional

uh adoption so you know we we brought sean bill in who's who's quite well known uh for in bitcoin circles for being a manager of the first uh pension fund in the us to bring bitcoin onto the balance sheet. And I think you had some history there and given in to advise that fund in 2020 or so. So we're excited to have Sean Bill join us and try to replicate that, bring Bitcoin to that audience and bring different products that surround Bitcoin that are easier for them to start and get a toe in the water with. Talk a little bit about, you run a business where there's mining, you have the side chain, liquid and kind of all that. But then also asset management how do you think about the structure of the business is it you're building a bitcoin

conglomerate you are just got different business lines like how do you kind of visualize what you're you're ultimately trying to accomplish yeah so it's very straight line any anything that is slowing down bitcoin adoption or that connects with the next step of what we want to see happen it's not happening in the market we'll do it ourselves and you know so the mining is a bit a kind of separate company and we got involved in that sort of trying to centralize the hash rate we bought our first financial product to market which is a three-year term product tokenized licensed security based on luxembourg securitization vehicles the second version of that in market now from the mining company and a couple years ago we acquired demister's hedge fund

admin capital and so now we're really you know with with a couple of things in the market which make it good timing obviously the sport etfs and the trump presidency kind of streaming streamline in the way for you know sensible regulations and kind of the end of friction in the way of bitcoin adoption i think you know the only thing that bitcoin really needs is for uh people to get out of the way i think you know it drives itself in terms of people adopting it and uh you know they develop their own thesis for buying into bitcoin um so yeah that's that's the next step right which is to help institutions get into bitcoin the asset class and you know down the road potentially extend that to different types of investors for the moment it's focused on qualified purchasers

institutional investors stretching down to accredited investors but for longer term because it's interesting but a lot more complicated to make financial products available to a wider audience when um when you think about this push into the institutional world um you mentioned that you've brought sean on board uh but the products that you're building are not necessarily let me you know help you buy bitcoin uh they're kind of unique ways to have uh the product fit into the frameworks that these large institutional uh investors have already created but also give them that exposure to bitcoin can you give us an example of what one of those looks like yeah so we have three products that we're launching with the one that is simplest and

And, you know, easiest for a conservative institution like a pension fund to digest is actually a US dollar yield fund, which is an asset loan, asset backed loan type of credit fund, where in this case, the asset is Bitcoin, which is a very good, you know, highly liquid asset. So you're lending dollars against Bitcoin to people who want to borrow against their Bitcoin. Right. And that's something they're going to be familiar with because they will have allocations to other forms of asset backed loans. Now, in this case, after they've got their foot in the door, placed some dollars into that, seen the interest accrue in for some period of time, we can offer the option of rolling the interest only into Bitcoin. They're dollar-cost averaging. Pension funds are very long-term institutions who place money into vehicles for five years, 15 years, that kind of timeframe. If Bitcoin continues to do what it does, as the adoption curve follows, it's entirely

possible that the interest could add additional return above the principal, like a multiple of the principal potential rate. So in effect, it kind of backdoors into a sort of form of principal protected note, which is the dollars they've lent with the asset back in are still there generating the interest. And unlike a typical principal protected note, which is using zero coupon bonds, the upside can get from that is muted because you're relying on low risk uh like treasuries or something like that right so you're looking at four or five percent in the current market whereas with the

uh asset-backed loans those loans are a bit higher like high single or low double-digit kind of returns the other thing blockstream and myself personally have always done is focused on a very low-risk approach. One of the other products we have is a low-risk, low-return Bitcoin yield strategy. That's staying very far away from staking and protocol and platform risk, using some other strategies, which I've been doing personally to make Bitcoin capital work for me. These I've been looking at and modeling and actually running on a personal basis You know, long before the FTX and the, you know, the yield strategies that blew up, you know, as part of the lost bear market, right?

So you can see if you're involved in these markets that the low risk achievable Bitcoin yield is probably something in the 2% to 4% range. So when you see multiple companies in market offering, you know, 6%, 7%, 8%, 9% of Bitcoin, you can just tell that there's got to be some risk burden there. And surely enough, that happened, right? The 2% to 4%, that is in Bitcoin terms or dollar terms? Yeah, Bitcoin terms, actually. So it's attractive.

That target audience for that is more the Bitcoin holder who might put an allocation into it. Of course, there are many Bitcoin treasury companies, both private and public at this point, Blockstream being one of the earliest ones. We had Bitcoin on a balance sheet since 2014. Of course, you have the MicroStrategy phenomena, a number of other companies in that space, MetaPlanet, Blockchain Group in France, Fold, a public company now. So there are lots of companies with Bitcoin as treasury who would be in market for a low-risk targeted Bitcoin yield fund. And then the third fund is Bitcoin Alpha Fund.

So it's really taking a bit more risk. It might have a down month, whereas the yield fund is really more like a money market type of situation. What is the response so far from that institutional world? Obviously, we have the ETFs that got approved, big boom for Bitcoin in general. There's a pro-Bitcoin president. It looks like, you know, between Coinbase, Robinhood, many of these kind of retail type platforms, the SEC and regulators are pulling back a little bit and they're not going to be as onerous towards them.

Do you see the institutional world getting more excited and kind of leaning into this stuff? Or is it still, you know, kind of a number of years of work ahead of us? Well, I mean, it depends on the audience. So we went to the Sean and I attended the iConnections conference in Miami a few weeks back, and actually the reception was really, you know, very strong, much more than we expected for a new fund. We actually had to stop taking meetings because we got our calendar full split

into two teams to even take it in and talking to, you know, family offices, multifamily offices and different pension funds. And of course, the interest varies, right? so the family offices are more interested in Bitcoin alpha or Bitcoin yield and the pension funds as predicted, because from his experience getting the pension fund into Bitcoin in 2021, Sean had seen what types of products would likely appeal to them. They are actually more interested in this US dollar yield fund. And the people you're talking to, the proposer, they've got to get that past an investment committee and so forth, which as if you've seen yourself from

your prior involvement with that, we've shown that that process can take a while. So I think the family offices are able to move. They're more agile. They can move faster. They have more risk appetite and the pension months are a bit slower, but I think the environment has definitely improved now as compared to where it was already back in 2021. So in the spot ETFs helped with the kind of legitimization from a traditional finance perspective of Bitcoin, the asset class and a regulatory clarity, I think that helps as well. It's this fascinating thing where the family offices are investing their money, pension funds are investing somebody else's money, right? And so I do think that that plays

into some of that risk appetite, but also many family offices I know, there's kind of a sole decision maker, even if they have an investment committee, it's kind of like, hey, who made the money, right? They have a huge impact. Whereas obviously pension funds, and for good reason, have these very large investment committees, this very kind of onerous process and a huge piece is like, don't mess up more so than, you know, let's hit a home run every once in a while. Yeah. I mean, I think with the Santa Clara VTA that Sean got into Bitcoin, which was actually the first US pension fund to put Bitcoin on the balance sheet, part of the argument was that actually having, you know, one to three percent Bitcoin allocation in their pension pot would

actually reduce their risk. It's a decorrelated asset, has an asymmetric upside. And so I think that, you know, the argument still applies. How do you look at the cycles? Right. So one of the things that Bitcoin has historically been is non-correlated. It's been asymmetric. It has been fairly predictable in these kind of four year cycles, at least in timing, maybe less than severity. But the volatility, the 80% drawdowns, all these things, I think people have said, I get that if I put Bitcoin into my portfolio, my Sharpe ratio will increase. I get that it is non-correlated. I just can't hold on 80% down, right? Because I might get fired or it hurts from a volatility standpoint. Do you think that those cycles are over? Do you

think the volatility is more muted? How do you look out as we are in a bull market, what maybe next you know 18 to 24 months looks like yeah i mean the volatility is has reduced a bit uh i presume the cycle timing will continue because there are some fundamentals around the mining harbing um some people have the theory that the halving should have a lower effect over time but actually i believe it's sort of offset by uh reduction you know by more and more coins getting cold stored and people adapting to the way that they're going to interact with Bitcoin to kind of accumulate rather than speculate. And so the proportion of mined coins that halving reduces is more constant than people

would think with the amount of coins that are available to trade on exchanges or something like that. So that's shrinking and the halving shrinking. So as a percentage change, it's more constant. So continue to see a big halving effect. I think one theory which is going to be tested this cycle is the diminishing return theory. And so people are drawing extrapolations from the last bull market being a bit muted. But I think there are lots of overhangs on that, the COVID, supply chain, all the economic

effects around that, plus the DeFi failures and so on. And I think the other thing is, you know, technology typically goes through an S curve and I think we're still early, you know, we're in the industry, so we feel we're, we're at late stage, but it's actually still early. And so I think there is scope for kind of more rapid adoption phase. And if that happens, the, you know, this kind of inferred slowdown may be reversed. you know if we if we see this cycle having a much higher cycle to cycle increase than prior cycles that would kind of invalidate that possibly invalidate the power law or even stop to flow so

you know i think a you know sort of 500 000 to 1 million cycle top in this cycle is within you know within bounds so you think that this cycle top could be between 500 000 and a million yeah that's pretty high number yeah do you think that that is predicated on the us having to buy bitcoin for the strategic reserve or that could happen i think if that happens all bets are off because you get kind of you know country level i think other countries have to react when they if and when they see that right talk me through this more hold on this is a big number 500k to a million i'm not you're i don't think you're saying it's gonna do that i think you're saying it's possible right right um what are the assumptions that go into us driving a price that high well i mean

lot of things going on at the moment right in terms of ongoing buying demand so the etfs have absorbed about two times the mind supply since launch uh micro strategy in the treasury companies absorbed another two times the supply you know there are active traders absorbing another time so you know there's retail dollar cost averaging so there's somewhere between like five and seven times the mind supply being bought and we're in some kind of you know short-term consolidation where short-term investors or medium-term investors are taking taking profit but i think you know they can only sell once once they're gone you know then there's a kind of supply shock situation and you get a lot of reflexivity in bitcoin markets where you know the price is up

because the price is up it's how we get kind of exuberance and then the blow off top um and it's also still fairly early in the cycle in terms of you know six months after the halving until 18 months, two years after for the cycle. So there's a lot of time to run. And other metrics are shrinking, like coins on exchange and that kind of thing. Another thing which is helpful, which wasn't necessarily predicted, is the ETF holders seem to be sticky. So they're what Warren Buffett would call good investors. They buy and hold. They're not shaken out by a small move. They're there to hold a position. I think the other thing that could help this phenomena is you've got to think that when the people buying the ETFs, so about 30% apparently is institutional.

The rest I presume is kind of the top 10% wealthy in the US minus the top 1%, I think they have about $30 trillion. So they have a low allocation at this point, but when they call their broker or financial advisor, they're reallocating from their portfolio. And so the question is going to be, well, what do you want to sell to put your Bitcoin position? natural answer would be, we'll sell the physical gold ETF, but a Bitcoin ETF. And the other phenomenon is that the proportion of gold that's in ETFs is a lot smaller

than proportion of Bitcoin. So I think you could see if there's some momentum on this, that the other target I like is that Bitcoin could pass gold in market cap cycle, which is around the same level but it could but that it could do that while pulling taking the shine off gold basically because you you know price is set at the margin if a lot of retail or like relatively wealthy us investors are selling gold etfs and buying bitcoin of course it's partly upset by the offset by global macro where governments in some cases are buying gold but you know i think some of the us uh politicians are talking about selling gold and buying bitcoin too so you know if we if we've seen that that will change the game do you think that'll happen the latter i'm not so sure

you know it's it's all down to politics and that can be slower than anticipated it's quite complicated and not not my area so i'm just focused on you know uh a workable regulatory environment where there's no kind of unreasonable friction and the free market doing its thing i think you know the global macro helps in a way because bitcoin is a hedge to a lot of that it It feels like the strategic Bitcoin reserve is probably the single most important thing for price. If it happens, I think to your point, all bets are off and, you know, there's countries around the world that will all buy. But I also think it, you know, every fund manager can't go to the, like the government's going to ban it. I don't know if they can really say that now, but some of them still, you know, want to believe that.

Right. Do you think that if the U.S. came out and said, actually, we're not going to buy Bitcoin, that would be a negative? like could it be a headwind and actually create issues now that people are kind of expecting i mean not too much because i think if people were you know i think sometimes things are not priced in in the way you would expect from bitcoin it's not always a very efficient market so i think there's a lot of disbelief about it happening because you know put it this way if if it was priced in you know we'd already be in seven seven digit bitcoin right so i think it's not priced in so if it doesn't happen or it happens in a kind of well let's not sell the

seized bitcoin at least you know i think that that would be in range as well yeah you've been around a long time you've seen all kinds of people show up and say i can fix bitcoin you've also seen people show up and say i can build a better bitcoin and you've seen people show up and say forget bitcoin i'm going to build something new with blockchain technology the latest iteration is the meme coins and i don't think anyone's showing up saying that that it's better than Bitcoin or it's going to improve Bitcoin or anything. I think they're just frankly saying that they're having fun trying to get rich. What's your general take on these meme coins?

Well, actually, counterintuitively, because I've been watching the market for a while and kind of shaking my head, like where's the efficient market hypothesis in repricing those, right? And I think in this cycle, we're starting to see some of it. And I think what's driving it is actually more is less. So the market's kind of got saturated and the sort of, you know, promoter trying to get attention for a token

and then selling out the promoter or the founder shares has been compressed so that it's, you know, by the minute game and it's professionally kind of front run with, you know, automated trading and stuff like that. So I think that's left investors, you know, speculators disillusioned. And so actually, what you've seen in prior cycles is this kind of alt rotation or alt season rate where altcoins will get compressed in a bear market and swing higher in a bull market. And that's not really happening now. The Bitcoin dominance ratio is up 50% in the last 30 months.

So Bitcoin's going up and the alts generally are not. So I think that's another kind of factor that's you know potentially helping and it i think the other thing that helps there is that you know even though the bitcoin dominance index is like 70 i think if you take out stable coins that's the you know the full market if you look at the institutional investment composite of it an etf buyer component the dominance index can be much higher because there aren't that many etfs and the typical you know government uh state local government uh you know fund managers it's very heavy into bitcoin versus alternatives there are a number of corporations obviously micro strategy or strategy uh being the first um in public markets but now uh metaplanet was the

single best performing stock in the world last year uh there's a whole host of these that are starting to put bitcoin in their balance sheet um how do you look at that phenomenon and do you you think that that is something where like every company eventually puts bitcoin on their balance sheet or is it something that maybe there's uh kind of a certain type of business that does it but uh the average business will refrain yeah i mean i think it's it's a phenomenon that's here to stay and now and you know of course that strategy works until bitcoin has reached type of bitcoinization and you know everybody who wants bitcoin has got the allocation they want and then you know maybe you get into some more gold-like kind of volatility after that um and so you know

the way and of course some people are skeptical about the whole phenomena right but i think it makes you know i've uh been in you know invested in a number of them personally and the way i get my you know thinking around how to price you know what is a fair market and now like the multiple of market cap to treasury to bitcoin treasury is that you know look this this company has got the ability to borrow zero percent for five or six years and buy bitcoin which has you know generally gone up in any kind of time frame of that duration and so that's a good deal you know if you could get those terms yourself you would like you would take the loan right but it's it's difficult to achieve is the operating company and so you know with the convertible notes it's even better like

50% conversion price on a convertible note, you're only taking two thirds of the dilution while you're getting the money to buy Bitcoin now. In a way, it's bringing forward some Bitcoin demand, accelerating Bitcoin adoption a little bit. The phenomenon where they can sell at the money shares to accelerate it or a balance of convertible notes and at the money shares is interesting, but I think it's just the market telling us that it's a dislocation between the fiat world and the hyper bitcoinized hyper bitcoinized future right so um i think it's part of that phenomena so we'll see more of it and i think it's you know it's got some longevity and you can model what you would think of as a fair price for the mnav based on you know how

many what percentage rate of bitcoin per share you can expect to achieve on an annualized basis like last year, MicroStrategy did 73% based on a 6.9% announce today, I guess. That's annualized 57%. And so you can see if they can compound at any kind of those rates, then a reasonable MNAV is quite plausible. And even if it compresses to one, let's say you say, well, it's hyper-Bitcoinized in 10 years. At that point, the MNAV drops to one, let's say, all conservative assumptions, Then you can just kind of back out while you're buying it at like 1.8 times MNAV, how fast can they accumulate Bitcoin between now and then, and assume that you back out the multiple at the end.

It's very plausible to have a reasonable MNAV in between now and then, I think. You mentioned hyper-Bitcoinization, Satoshi's white paper said peer-to-peer electronic cash. seems to become digital gold, very successful digital gold. You mentioned Bitcoin passing gold. I think that will happen at some point. Do you still think that Bitcoin will become kind of a digital currency that's used every day to buy goods and services? And do you think that it must become that in order to be successful? No, I mean, I think, you know, you can certainly see in some players that they are more focused on the gold. And I think Bitcoin can become vastly successful even just as a you know kind of etf or savings or the store value yeah um but i think

that misses some of the potential because some of the value is driven by the peer-to-peer electronic cash and i think you know if you look globally the number of proportion of the working population that is uh informal economy it's like 50 the global workforce right and so for many of those people who don't have banking relationships or maybe only via their employer or upstream reseller it gives them access global access to the you know to the markets and so i think that is actually you know has a very large target audience and there's lots of scope for adoption and you know open permissionless networks tend to innovate faster as well it's kind of a lesson from the internet right that's why the internet became such a huge thing and innovated so quickly where

previously typically state-controlled telecoms monopolies were really slow in terms of innovation. What are you most worried about? What do you think the biggest risks for Bitcoin are right now? I think most of the risks have receded. Certainly, in the early days, we were a block stream and many individuals involved, either as developers or investors, were concerned that you know a government would ban bitcoin i think that the transition has actually been quite smooth you know of course some countries ban bitcoin but you know those same countries um ban facebook and twitter and so on right so it's sort of par for the course and you know i think as safe dean says you know it's it's not really optional you know the people you know the

individuals, the countries, the companies with the harder money will win and the capital will get reallocated. So everybody will ultimately have to participate. When you see the president or others in politics talking about Bitcoin the way that they do, do you feel validated? Do you feel like we've won? Or are there other things that you feel like are milestones that Bitcoiners can't yet celebrate and say, we were right? Well, I guess we were very right so far, right? Let's say that. Directionally going pretty well.

Yeah. And I think, you know, actually it's okay if, you know, governments don't adopt too quickly or not at all even because it gives more time for individuals to buy Bitcoin. And I think, you know, part of what helps in the world is the thinking that comes with self-sovereignty. and you know even though bitcoin is a piece of sort of neutral technology ultimately it seems to prove to not be neutral like people get interested in it a number of different reasons because they've got an electronic cash need or because they made an investment and they get philosophically interested and start to change their the way they interact economically with the world so i think you know it's actually good in a way if people have you know some more years

opportunity to buy but i'm kind of feeling that it could be a gradually then suddenly moment this cycle or pretty soon but we'll see how this cycle plays out right whether we get whether diminishing returns is broken or not whether we see a kind of uh extracting value from gold via etfs at the margin phenomena coming in later in the bull cycle so when um when you look at the market today uh it feels like there are what i'll call bitcoin companies which are focused on you know layer one what bitcoin originally was there's been a rise of l2s side chains and many other uh components some of it is focused on scaling some of it is focused on bringing the r d that's happening in altcoins over to the bitcoin market what's kind of your evaluation of you know these things being

built beside or on top of bitcoin and everything from the lightning network liquid uh you know these uh nfts etc yeah i mean i think it turns out that blockchains don't scale scale very well and so layer twos are sort of inevitable to at least be able to manage the retail payments and the trading and like share transfer and share settlement kind of use cases now one thing which is not ideal but you know technology is what it is right and everybody's trying to push the envelope on this is that you get the best security assurances by holding your own UTXO and UTXO is a hard scale and you know layer two UTXOs are not as hard assurance as layer one so really ideal world everybody wants one should be able to get a layer two

UTXO but we don't really know how to do that right so I think that's you know that's something that is in the mind of technologists is if the active user base goes from 100 million to a billion people in the next few years, you're not really ready for it. So it always spills off into something else, right? So they end up using custodial, some of them buy ETFs, some of them store it in layer two or partly store in layer two. I've seen a phenomenon emerge where people will kind of do the dollar cost averaging into lightning and then fold some of it into liquid. and then when they've built up to a bigger amount they'll store it on the main chain so you know i think the economic forces keep people using what scalability there is in the different

technologies in in a sort of natural economically rational balance and that's the best we can do you know to sort of uh adapt and use technology that proves to work in the market when um when When you look at the entire Bitcoin ecosystem, it feels like it's probably the biggest melting pot on earth. You have people who come from different countries, different languages, religions, wealth, education, everything. And they're all united by this kind of common ethos or value of Bitcoin. Now that the Wall Street political world, et cetera, is all embracing Bitcoin,

um does that mean that the ethos and values have really kind of assumed a position of importance do you know i used to say all the time that like we'll have a bitcoin president they're not going to run on a bitcoin platform they'll just like own bitcoin like they own stocks or whatever and they'll be the president i was wrong like yeah the current u.s president literally ran his summer protect your bitcoin you know i'm gonna be the bitcoin president right and so i don't know if in particular is like a hardcore Bitcoiner and could espouse the different values and ethos that maybe somebody on X would. But it does feel like if you look around the world, whether it's Bukele in El Salvador or Malay in Argentina or name other examples, it does feel like the values

are kind of permeating into these organizations as Bitcoin rises in popularity as well. Yeah. I mean, it's fascinating, but it does... Because if you come down to it, It's a kind of inner protocol that was launched in 2009, but the values that arise from it is sort of social phenomena. And I think at root is that, you know, hard money works and incentives matter. And so, you know, being able to rely on hard money affects a lot of things about how you think about the world economically and how you interact with it. So it turns out that that phenomena scales upwards so far without limit, right?

in the sense that first of all it's enthusiast the first wave and then you know etf buyers and now institutional and looks like more governments i mean already several governments involved right and you know i think in trump's particular case um getting debanked kind of gave him a reason to understand why people would want self-sovereign store of value right so i think you know once you've learned that lesson the hard way you're not going to forget it in a hurry so i think that that brings a lot of sympathy and uh and bukele actually you know originally when that story came on the scene people's assumption was oh somebody did some business development with them but actually no it seems like it's homegrown and bukele himself you know was the bitcoiner or

the patient zero fail salvador which is pretty cool crazy right yeah i mean that that is probably the last thing you would have expected is uh that the actual president was the one who came up with the idea right and that's i mean you know that and other you know well executed uh policy changes and actions from the government actually really transformed that whole country in terms of you know do you think that they're like the next you know superpower or how do you think this plays out as bitcoin becomes well yeah i mean i think it's pretty interesting to look at countries undergoing a rapid transformation starting from a point of you know having a problem and so you can see that with singapore didn't really have a lot of natural resources they managed to turn that

into a global financial player uh maybe dubai they didn't have any oil turned into a real estate boom attracting a lot of kind of international companies to operate there became an economic success for for the region i think another country is which doesn't necessarily have a lot of natural resources of switzerland you know eventually wealthy and capitalist country typically at the top of the economic efficiency rankings globally. It shows that efficient government and the right incentives can work for regions. Let's see, but I think El Salvador is already seeing a dramatic increase in external money coming in, both through tourism and companies incorporating and operating from there employing people and the trickle-down economy so i think

it's actually a real effect so we'll see how that progresses yeah it's fascinating um where can we send people to find you on the internet or find out more about blockstream some stuff you guys are doing with the institutional world yeah if you look at blockstream.finance or just go to blockstream website and click around and at blockstream on social media and myself i'm at Adam3US on Twitter and other social media. What was the 3US? Where did that come from? It was originally a pseudonym.

And then I kind of changed it, like swapped the letters around so that it was less likely to be name-squared. Amazing. All right, so blockstream.finance or go to blockstream.com and that's where people can find everything. Yep.

Amazing. Well, thank you so much for doing this. I'm super excited to talk again in the future. Yeah, thanks for having me on.