The Pomp Podcast - #669 Bitcoin Solves Inflation w/ Dylan LeClair

Episode Date: September 23, 2021

Dylan LeClair is the Head of Market Research at Bitcoin Magazine.    In this conversation, we discuss bitcoin, central banks, inflation, negative yielding debt, portfolio construction of a 20 year old, dropping out of college, energy value, bitcoin hash rate, and illiquid supply. ======================= With 10M+ users, Crypto.com is the easiest place to buy, and sell 100+ cryptocurrencies. The Crypto.com Visa Card gives you up to 8% back instantly, and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn up to 8.5% p.a. on BTC, and 14% p.a. on stablecoins. Get $25 when you download the Crypto.com App with code "pomp". Download the App now: http://www.crypto.com  =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan LeClaire is the head of market research at Bitcoin Magazine. In this conversation, we discuss Bitcoin, central banks, inflation, negative yielding debt, portfolio construction of a 20-year-old, dropping out of college, energy value of Bitcoin, the Bitcoin hash rate and the illiquid supply. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Crypto.com. Crypto.com is helping mainstream the crypto industry by signing major

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on most purchases. And it comes with amazing perks like 100% rebate on Netflix, Spotify, and Amazon Prime. You'll get $25 when you download the crypto.com app today and use the code POMP. Again, 25 bucks for free after you download the crypto.com app today and use code POMP. Go check them out in the app store or click on the link in the description and download it today. All right, let's get in this episode with Dylan. I hope you guys enjoy this one. 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. What's going on, man? How's it going, guys? Thanks for having me on. Of course. All right, let's start off first, just kind of introducing you to everyone. You work at Bitcoin Magazine. Explain a little bit about what you do there and kind of what you're personally interested in terms of Bitcoin and macro environment? Yeah. So, um, I work at Bitcoin magazine, um, and I lead off their, their premium markets products. So, um, we cover, it's called the deep dive and we cover global macro economics on chain analytics, uh, and Bitcoin

derivative markets. Um, and really just kind of combining like the, the day-to-day week to week, month to month moves in the Bitcoin markets or just financial markets more broadly. Um, you know, and combine that with this, you know, 10 year, um, or like really this, this kind of monetization process of Bitcoin and combining both of those views, keeping that sort of zoomed out view as well as just kind of giving some context about what's happening and why. Yeah. And I think that's part of what is so fascinating about the way that you cover this is you always keep the macro environment in mind as you look at the Bitcoin market. So we've got a bunch of charts that we're going to run through here. Let's start first with the major central bank's total assets as they

continue to rise and help us understand just kind of contextually, like why is this chart important And what does it really tell you as you look at it? Yeah. So, I mean, there's a couple of things. Like, one, we have this new technology, right? We have Bitcoin. And so many people are trying to figure this out. And there's a lot of noise in the so-called crypto space, right?

We all know this. But really, I think what's happening and what's forcing people to adopt this technology, this monetary technology, is we're kind of at the end of this long-term debt cycle. And most people don't really understand this, especially if they're, you know, not studying macroeconomics or, you know, have a have a like in-depth history of of monetary assets and debt cycles. Right. But, you know, starting in 08 and in 2020, we kind of hit the zero lower bound. And so central banks kind of ran out of their main option, the firepower, which is interest rate policy. And so, you know, what they went to is quantitative easing. It's essentially just stuffing a bunch of cash in the bond market or really, I mean, simplified as printing money. Right. But it's really just just lowering the discount rate of of or the cost of capital everywhere on the planet.

And so these are all, you know, the global major central banks. And what this is just showing is that they're trying to keep the system glued together. But it's it's you know, it's it's cracking. It's cracking at the seams. And so this is actively forcing people into Bitcoin or to seek shelter elsewhere. And so when we look at the total assets, obviously every major central bank just absolutely took off in 2020 for obvious reasons. But also in the United States, we've got this debt chart that shows a very similar type of growth there at the end in 2020. So explain what's going on here. Yeah, so this is looking at just like total debt to GDP, non-financial, financial.

And right now, total debt to GDP is at 400%. And so my good buddy, Greg Foss, he was on your show. he likes to always talk about how it's a mathematical certainty that fiat will debase because of basically this chart. With debt to GDP at 400%, given that all debt has to be repaid plus interest, unless the economy is growing at 12%, 15% a year in real terms, then we're in a debt spiral. And there's really no way out unless it's default, which is politically not feasible, or to basically debase the currency. And so that's the game we're playing. And really, a lot of people get upset with the puppets of the game, but it's more systematic than that.

It's not about Trump or Biden or Powell or whoever you want to call shots at. And I get it. I do it too sometimes. But it's really, it's systematic. We're in a debt spiral. And mathematically, there's no way out of this except to continue printing and attempting to kick the can down the road. But more and more people are waking up and saying, I don't want to play this game. Yeah, I think that's a great way to describe it. We've got a chart here of the real 10-year treasury bond yield. Describe what's going on with the 10-year yield, but also what the relationship between the 10-year yield and inflation is. Yeah. So the Fed or the government's way of measuring inflation, I believe, is kind of flawed. And I think most people that are paying

attention do as well. But just for the sake of the argument, we'll use it. There's PCE or CPI, but it's basically just consumer price inflation. And we're indexing that against what a treasury bond could get you, what a lot of people in financial markets, they use as their risk-free rate then what you're looking at is essentially in this chart when you break that zero lower bound the cost of capital is negative right so when you're evaluating stocks real estate any any asset um when the cost of capital is negative how what's the fair value and the answer is uh it doesn't compute it breaks um so if you're holding a bond or if you're sitting on a you know 60 40 portfolio if you're you know in your pension or your your 401k you're you're losing uh in real

terms and even if nominally you're you're making out okay um you're basically getting pillaged if you're if you're holding bonds or a lot of these financial assets because the cost of capital is so distorted and that's because it's a it's a centrally planned market and so i think these are like the the broad macro trends here um and this is why you know i think bitcoin would be important regardless um and you know satoshi literally uh released bitcoin because of these problems. I think he chose to release Bitcoin kind of strategically. But this is why Bitcoin is especially so important. And when we look at this idea of global aggregate negative yielding debt, it just is nuts, right? To see that now there's about $14 trillion total of this. How

does this fit into the macro picture? Yeah, so this is kind of similar to the past charts. But basically, you know, a lot of people like to call Bitcoin a bubble. I think it's about $900 billion today in total market cap. But just for context, there's $14 trillion, or I think this was from last month, but around $14, $15 trillion of debt today that is guaranteed to lose money. It's people signing up, giving $100 to receive $99 back. I know that's simplified, but essentially that's what's going on. There's $14 trillion in that bucket. So when you're calling Bitcoin a bubble, this new global monetary asset that no one can mess with, I think you really need some context here about just how big of an everything bubble there is. And this great monetary experiment

that central banks are conducting with global fiat currencies everywhere, we've never seen anything like it. Bitcoin at 900 billion is an absolute drop in the bucket. And so think about 14 trillion dollars it's it's something that you know a million millions is a trillion um you know just for some context like it's it's mind-boggling um and so yeah bitcoin is extremely cheap now when we think about a potential solution uh i think most people who are watching this think bitcoin could serve as a a solution or a part of the solution and we look at this chart here of Bitcoin hash rate. Uh, and you so eloquently put, uh, it's going up forever, Laura, maybe describe the, uh, it's going up forever, Laura, uh, joke first, and then we can talk about the

chart. Yeah. So that's a, I stole that from Michael Saylor. Um, I think he had a, he had an interview with Laura. Um, I forget her last name, but I'm talking about the price. Laura said, yeah, uh, talking about the price, but, uh, in this case, I'm talking about the hash rate and essentially, um, you know, for, for those who are not aware, hash rate is essentially just this, this you know darwinistic capitalistic competition uh to mine bitcoin and and this is in log scale so if you're looking at you know at this chart it's it's going up in factors of 10 or i'm sorry 100 not 10 um and so you know if in linear terms it's it's it's looks absolutely ridiculous it looks like it just it's hockey sticking up um but what this is showing is that you know the

competition to sell energy to the bitcoin network um and you know and basically all are mostly wasted energy or underutilized energy, right? This is this free market thing. There's no one being coerced into mining Bitcoin. And oftentimes the energy, the cost is zero or negative, right? Like these oil producers are literally, you know, they have to pay because they're emitting this methane into the atmosphere. And so Bitcoin mining is a solution to, hey, I'm going to turn this wasted energy into global money, global decentralized money. And so, you know, what this is is you're seeing just this this new monetary asset um born and the energy cost is what the free market is is willing to pay to secure this monetary network and so um you know hash rate

it's something that is it's not something that's like easy to explain to someone that's just you know falling down the the bitcoin uh rabbit hole or the path but um it's it's one of the most important aspects related to the hash rate is this idea of mining difficulty and kind of this every two weeks there's an adjustment to the network based on how much computing power is on there Uh, we've got a chart that shows that actual mining difficulty describe, uh, kind of how you think about this and, you know, is it one of the most beautifully designed, uh, technical systems in the world? Yeah. Um, so, so mining difficulty is essentially, um, you know, as more as the price of Bitcoin rises or think about any commodity, right. When, when a commodity becomes more

valuable, gold, oil, copper, silver, there's, there's a larger economic incentive to go produce that thing naturally. Um, that's just, that's supply and demand. Um, but with Bitcoin difficulty, um there's over two week periods or technically two every 2016 blocks but you know for the sake of this every two weeks um difficulty adjusts upwards or downwards depending on how much hash rate has fallen or risen so if if the price of bitcoin is ripping and there's this huge economic incentive to go produce more of it just like say say if the price of gold was was increasing um you know if the price of gold doubled well all of these people are going to go try to go mine gold But with Bitcoin, difficulty adjusts to make it incrementally that much harder to produce the thing.

And so it's essentially, the difficulty adjustment continues to kind of ratchet up production costs as more and more energy expenditure and people want to go produce this thing or mine it. And so if you could, I actually arranged the charts in a little bit of a different order, but if you could go down to the energy cost chart, it's two things down. I think this is one of the most beautiful things. This is by Charles Edwards at Capriol Investments. He kind of put an estimate for the Bitcoin energy value using inputs like hash rate and, you know, ASIC estimates. But what this shows, right, so if you're just looking at 2021, the price tanked. A bunch of miners were basically, you know, for political reasons, were kicked out of China. And what happened to the energy value? The energy value tanked.

Well, difficulty ratcheted downwards multiple times. At one point, there was a negative 29% difficulty adjustment. And what did that do? It increased the economic incentive to go mine Bitcoin, to go sell your energy to the Bitcoin network. So, Dylan, in this chart, walk us through real quick what everyone's looking at here. So, the green, the blue, and the red, what exactly are they looking at so that everyone can make sure they're paying attention? Yeah. So, the green is the hash rate.

That's above. And the blue is the Bitcoin price, right? Yeah. And so the red is using various inputs such as such hashrate as well as some assumptions. But it's basically giving you a production cost, how much miners are basically paying for every one Bitcoin to produce one Bitcoin. And so right now that's about, you know, twenty four thousand in May. That was about fourteen thousand. But but say right tomorrow, the price of Bitcoin tanks, you know, minus 50 percent like happened in March of 2021 or March of 2020. There's this huge liquidity crisis. You know, now all of a sudden it's not economical to mine Bitcoin.

Well, what happens? Miners unplug, hash rate plummets. Well, two weeks from now, difficulty is going to downwards adjust and it's going to incentivize all of these miners to come back and secure the network and to mine Bitcoin again. And it's going to lower that production cost and it's going to limit that sell pressure on the market. And so it's just kind of this beautiful, almost like it's an engineering discovery, almost, I would say, not even an invention. And Satoshi discovered Bitcoin is this decentralized monetary network that runs just on economic incentives and nothing else. And it's, you know, when you when you dig into it, it's one of the most beautiful engineering machines ever. So when we go and we look at this chart around the liquid and illiquid supply, we've had Will, I know you and Will are very close and talk almost daily, from what I understand. We've had him talking a bunch about this illiquid supply and supply shocks. The chart that you've got here around the liquid and illiquid supply, explain kind of how you look at this.

And what are you looking for in the chart as you look at it on a daily basis? Yeah. So, you know, most of this, you know, most of these charts are kind of covering like, you know, broad trends. So this is the Bitcoin liquid and illiquid supply. And so the total supply of Bitcoin is I think it's like 18.8 million. But over time, what you see is an increasingly large amount of Bitcoin is becoming illiquid. It's basically being locked away and not hitting the market again. And that free flow, despite the issuance kind of increasing, well, the amount of Bitcoin in circulation increasing while the issuance on a percentage basis is decreasing, that free flow to Bitcoin available to the market continues to kind of chip away. And especially since market 2020, we've seen, you know, that a liquid supply hockey stick upwards when you're looking at like in a ratio sense.

So over time, what's the trend, right? There's manipulated cost of capital globally. Everybody and more and more people are kind of waking up to say, hey, this game's rigged. I don't want to play this anymore. And here we have this monetary asset that no one controls, that no one can debase, that no one can manipulate, that is just on economic incentives, having people adopt it, having institutions adopt it, having nation states adopt it. And so this is just basic supply and demand.

There's less and less Bitcoin that are hitting the market every single day as you have more and more people kind of hoarding this new asset saying, I don't want to sell for dollars ever. I don't have an incentive to ever sell, right? And I think more and more people like the Michael Saylors of the world, the billionaires of the world, and even just like the average pleb or someone in Nigeria, right? This is the global phenomenon or saying, hey, I just want to store my value in this thing. And so that illiquid supply is just kind of showing this trend and showing really people just waking up to this. When you look at the realized cap versus the

market cap uh how bullish does this make you feel when you actually see uh just the constant um long-term trend of appreciation yeah so i think uh realized price is something that i really like to look at because um when you're talking about you know market cap or um or just the price price can get bit at the margin really easily but because we have this transparent ledger right we have the bitcoin network the bitcoin blockchain has has a ledger of every you know every coin in existence and when was the last time it moved, right? So Satoshi's coins, which he mined back in the early days, they never moved. In this metric, they're worth zero. And coins that were acquired in April and haven't moved since are worth about $60,000 per coin. And so when you

have this realized cap, which is like basically the price paid for every single coin, you can kind of think of it like that. And over time, I think the day-to-day volatility of the BTC USD price, it's volatile and it whips up and down and there's derivatives and all this. But when you're looking at realized price it's essentially you can it's like a more pure you know view of the monetization process of this network it's like hey the value of every coin the value of this entire network continues to tick up and up and up and up and it's basically going up forever um and so you know i i love to look at realized cap as more of like a or realized price it's like kind of a fair value of bitcoin i mean very rarely do you see the price dip under that how old are

you. I'm 20. You're 20. When you think about you and your friends, explain, my brother here is 24, 25 now, 25, 25, 25. And we talk a lot about the psychological difference of how 20, 24, 25 year olds think about financial markets than the older generation. Even me at 33, I'm kind of in the middle of some of those folks. How do you think about equities, bonds, crypto, Bitcoin versus anything else? Like, are you and all of your friends all in on Bitcoin? Or do they have diversified portfolios? Like, how do you guys think through investing? Yeah, so I mean, I had kind of quite the orange pill moment, I would say over the last couple years. And I've, I think I've gotten most of my friends there as well. But I kind of think of it like, you know, going back

to the manipulated cost of capital and legacy finance, that there's just no way that I'm ever going to buy a bond, at least in today's environment. There's just no way in hell I'm ever going to fund the US government for 1% a year in nominal terms. When you're thinking about equities, there's also, because of this broken, manipulated cost of capital, you're looking at sky-high P-E ratios, all-time high corporate debt to GDP. I just think from a risk-reward standpoint, it's not too attractive. And honestly, I firmly believe that over the next 10 years, equities will rip in nominal terms. I think they'll do very well. But when you're looking at this on a real basis, I think they might not do too great, especially when you're calculating

the opportunity costs in Bitcoin terms. Because I mean, if you couldn't tell, I've come to this conclusion or I have this thesis that the risk-free rate of everything, the opportunity cost of everything is Bitcoin. And people will say like, are you kidding me? It drew down 50% in a couple of months. But I'm not thinking on that timeframe. I'm thinking, you know, years, decades. And so I know one thing for sure is that the cost of producing Bitcoin will continue to go up forever, essentially, because of the economic incentives and because of basically how this protocol works, the halvings, the difficulty adjustment, you know, everything we've covered. And so when I think about how do I want to allocate my wealth, how do I want to

save my time and energy into the future. With Bitcoin priced under a trillion dollars, there's basically no other place that I would think about allocating capital at the moment. And I think diversification in this sense is not something that I'm really too interested in. I mean, I do own some Bitcoin related equities with, you know, a few basis points in my portfolio, but for the most part, stacking straight to cold storage and, you know, that's it because, you know, I can handle a 50% drawdown. A volatility at 20 years old is not something I'm too concerned with. You know, it's a different story for someone that's 65 and, you know, needs to, you know, draw from that capital every day, but that's just not the case for me. So, you know, stacking sats

and just chilling. What I think is so fascinating about this is one, I agree with you and think that the investment strategy is incredibly compelling given the macro environment, the asset itself, and then kind of your age risk profile and just the long time horizon. But it's no different than some of the timeless investing advice that others have heard. So like Warren Buffett, for example, talks all the time about if you buy a great asset, the best time to sell is never, right? Just hold it literally forever. And so stacking sats may not be the same vernacular that he would use. A digital decentralized currency may not be the thing he's interested in. But if it ends up in hindsight being a great asset and people buy it and they hold it forever, it's no different than

that timeless investment advice that he's been telling his shareholders and kind of the public markets forever, right? Yeah. I mean, in a Warren Buffett style approach, like the markets are overpriced and what I'm what I'm using as my, you know, as my currency or my savings. So so I'm not investing at the moment. I'm just I'm just simply saving because because, you know, I'll wait for the market to correct. Well, in Bitcoin terms, you know, when looking at everything, look at any chart over the last five years or the last three years in Bitcoin terms. And I think that's that's the truth that's what's occurring and obviously um you're not going to see a 200 compounded annual growth rate like forever that's not that's just not sustainable um but i think um you know bitcoin

is going to see this decade at least 100x you know appreciation maybe you know maybe a little less maybe a little more but um we're just getting started with this thing um you know in terms of global adoption if you look at global wealth it's it's so it's extremely early and you know you know i respect people that that can can make it trading in and out every day Um, but ultimately that's just something that, um, I, for the most part stay away from, and I just, you know, I'm going to produce value and I'm going to store that value in what I think is going to protect the best. I've got my brother, John here with me, John, what questions you got? Yeah. Thanks for doing this Dylan. Um, I love how you talk about your 20 years old so you can

withstand the volatility and, uh, look for that future growth. But a lot of our followers are also similar to you as, uh, the younger demographic and everything. Can you talk about your joint, your journey to Bitcoin and how you found it and then how you found your, um, and how you go about working at Bitcoin magazine? Yeah, um, totally. Honestly, part of my journey was, uh, basically like podcasts like this, um, and just like the free education that was available online. You know, I, I went to college for one year, uh, studied business economics, but I dropped out because I was learning more on Twitter, uh, and reading books that people recommended. Um, and so I think for anyone that's kind of interested in this space, but more broadly, you know, um, in

the in the you know digital economy um it's you don't need a degree you don't need like the credentialism of the past um and and there's so many ways to just kind of make it out there today on the internet um and to learn and to reach out to people um you know like i i learned a lot about bitcoin from watching the and listening to the podcast while i worked a day job right so um and like you know various other ones but um it was something i stumbled upon bitcoin late high school um while i was just trying to figure out investing um and i just logged onto twitter and just read what I thought smart people had to say about it. And so, um, that was more valuable for me than listening to my, to my boomer professor over, over zoom call when they sent us home from COVID. So,

you know, it was a no brainer for me to be like, Hey, like, I'm just going to drop out. And, and I, uh, I just worked a regular job for, for like six, six months and, uh, you know, got a DM basically for a, for a job opportunity, which was, you know, maybe a stroke of luck, maybe not, but you know, it turned into something, something that I, that I hope will last. nice so is it true that bitcoin made you drop out of college yeah i yeah i for sure um i i mean i tweeted about it and told my friends and stuff like hey like i'm dropping out and they're like just to work a job to stack sats and they're like what's sats and why are you dropping out like what are you crazy um and like i honestly did it like that i read i read a couple books that kind of

melted my brain like like the sovereign individual i read and then price is tomorrow by jeff booth um basically like how the internet was basically putting the cost of of education and learning things to zero um and that you know the credentialism of the industrial age was was dissipating with the internet and so for me i was like okay why am i studying finance and economics uh learning keynesian economics stuff i don't believe like they're telling me hey inflation's two percent and i was like no it's not and they're like yeah cpi says so and it was like that was the answer i was like okay well i don't think this is too valuable for me so um yeah it just there's something like i i'm gonna drop um this is and i got a lot of pushback from it um initially my

parents were a little skeptical but now they're i think they're fully orange-pilled and they're stacking themselves and and you know they agree with my decision now but um i definitely was was not like the traditional path per se you you may not know that i used to say this i don't want to go ahead and say it i feel like we're safe now the virus is spreading that's what happens it is uh basically like bitcoin used to be described as this mind virus right like once you learn about it. You just can't stop thinking about it. You can't start, stop seeing the world in a different way. Then you start to tell people and explain it. And it just spreads through a, uh, a group of people in terms of, uh, the education and the knowledge, um, and kind of that, that red pill,

that orange pill, uh, type thing. Talk a little bit about you, you mentioned, uh, kind of like not getting the formal education and the Kenzian economics. And I actually think it's a really interesting point that most older people, uh, probably don't think, uh, from this perspective, But if you go to college and they teach you something that either was true about the world in the past but no longer is true, or two, is a way to look at the world that you don't agree with, in some weird way, not only are you wasting your time or money, but on top of that, you're actually having information put into your brain that ends up being inaccurate and therefore could be incredibly detrimental. And so dropping out in some weird way is a better way to pursue knowledge than actually staying there and getting that information, right? Yeah, totally. I mean, they were, they were teaching me, they were, they were bringing up, you know, textbooks from, I don't even know when the 70s or 80s. And they're saying, hey, this is the Phillips curve. And this is inflation. And this is employment. And they have this relationship. And I was like, no, they don't look at that. Like, I mean, look at the data. And it was like, it was just weird things like that. It was just like, you know, that was anecdotal. But it was like, you know, maybe if I was an engineer or something or something where I needed to go to school, it would be different. but i was studying like finance and economics and and i was i was literally listening to podcasts more than i was that i was attending in classes and doing homework and so i was like all right

screw this like and i dropped out and i literally picked up a manual labor job it's like it wasn't too fun but i listened to i literally listened to eight hours of bitcoin podcasts a day for like six seven months um and i got i think i got the best education in my life like it turned into a legit job opportunity i get to hang on twitter all day and write about bitcoin and financial markets um you know it's it's something that like and that's completely self-taught over the internet and like i'm not not like bragging or anything i'm just like trying to say that it's you know the cost of a lot of this information um and the access to it and you have some of the smartest people in the world sharing their thoughts for free on these platforms like it that's something

that you know college i don't think i don't think can keep up with right like i was i was sitting at home in march april may after they sent everyone home for for covid and i was i was paying to to to have these boomers on a zoom call, explain things to me that I knew factually were just incorrect. Um, and so, you know, there's, there's, I think this is a gradual change, but I think we're, we're more of like the, at the suddenly point of things for sure. What was going on in the economic or finance classes in college?

Like, did they have any clue about Bitcoin? Did you ever ask them about Bitcoin? Were they just dismissive of it? Like what was going on? Yeah, I did. I did ask a couple of guys, a couple of my economics professors. Um, I shared like some, some of the stuff from plan B like stock to flow. Uh, And I did ask a couple of my computer science professors. I was like, hey, what do you think about this?

And I got a business call from a blockchain company, which, you know, say what you want about blockchain. But I didn't really think they understood what was occurring. Right. It was like, oh, yeah, blockchain technology is very interesting. And without realizing that I don't even like blockchain, to be honest, I prefer time chain. when talking about Bitcoin, like, you know, Satoshi solved the Byzantines general's problem. And so I think like the rabbit hole goes very, very deep with Bitcoin and what it solves and, and how big, you know,

the, the, of a problem Bitcoin solves. It's literally the total addressable market for Bitcoin is the biggest in the world. And so, you know, I don't think any of my professors grasped that. It was something that took me months or years even of, of just like intense, intense studying, intense learning, obsessive learning, right? The virus is literally spreading. And so, yeah, I think that it was something that they didn't really grasp at all, which was just why it was another reason to kind of leave and pursue something else. What do you think about other non-Bitcoin

crypto assets? Are you interested in any of that? Do you think they have any viability? How do you look at kind of the non-Bitcoin part of the industry? Yeah, I don't own any other cryptos. And it's not because I'm not willing to look into them. I actually have have done a lot of research to try to understand ethereum um you know any any other smart contract thing platform nfts i've i've done my digging um and and ultimately um what i've kind of come to the conclusion of is that proof of work and and and what satoshi kind of you know airdropped on the world um proof of work basically linked the digital and the physical realm um and it's this zero to one invention. And so, you know, and, and it's the biggest, you know,

it solves the biggest problem in the world, which is, which is basically the money's broken. And so, you know, that with basically Bitcoin is the first and only really thermodynamically secured monetary network in the sense that you have this, this link of this, this ledger is essentially proof of, of energy expenditure. And, and it's this immutable thing that nobody can change or alter. And so I think the genie's out of the bottle in that sense. And that's something that is extremely compelling for me. Like in terms of crypto, NFTs, if you want to speculate on all these other things, proof of stake, that's great. And I think it's more of like a computer science experiment slash tech startup kind of thing. But I think fundamentally Bitcoin is here

and then crypto, anything else is separate, right? And then it's tough because there's so much nuance there um in terms of decentralization as a spectrum like you know how decentralized is is enough um all these things but ultimately i think it's it's clear to me at least um there's bitcoin and then there's cryptos and and whatever else you want to build and and again like i'm gary gensler coming in and saying like these are securities like you know let the free market do its work like i i don't want any of these things to be shut down or killed or whatever But ultimately, I think, you know, 20 years from now, Bitcoin is a sure bet. And some people might think I'm crazy for saying that.

But I think from a game theoretic standpoint, Bitcoin's won. It's already won. But all these other things, you know, build fast and break things. Great. Like, you know, go ahead. But I'm not interested in really speculating. I just want to save my value and have it be a sure bet. For sure.

And then through the end of this year, obviously, I think most of the data that you post on Twitter or talk about shows that were still in a bull market. What's your kind of price thoughts or price predictions for the end of 2021? Yeah. Um, I think, you know, something I'm watching closely is, is the Evergrande thing. Um, you know, there's been a lot of talk about that recently on Twitter, but, um, there's, there's potential for there, you know, kind of be some sort of spillover contagion effects, um, with that, but ultimately the supply dynamics. I mean, I do talk with, with Will every day and I'm looking at that same data. Um, it's extremely bullish like you know the most bullish i've ever been um and so you know these supply dynamics it

doesn't lie and a lot of times derivatives whipsaw price back and forth but i think ultimately um we're i'm pretty confident in all-time highs breaking by 2021 and at that point it's off to the races um bitcoin trades reflexively um you know once all-time highs are broken or um you know essentially people just stop selling price gets gets bid uh really hard at the margin and you're gonna have a ton of new capital kind of flowing in um there's a lot of talk behind the scenes of big money um you know buying buying in this range and so you know i think that's only going to you know kind of pick up from here and i think you know once 60 64k 65k is broken it's off to the races and so you know i'm pretty confident in that occurring uh in 2021 um and you know depending on

how fast a rip to 100k is is in the cards um and so price predictions are kind of hard but you know supply dynamics are extremely bullish and especially if china or you know the fed broadly kind of respond to any sort of credit contagion or, you know, anything happening in the, in the legacy markets, you know, that's just rocket fuel for Bitcoin. And when you think about this, are you a subscriber to this like super cycle theory that once we break the all-time high, we go up, you know, hundreds of thousands of dollars, or is it something where maybe Will is in more of the thought process of like 180, $185,000 based on some of the models he's looking at? Like how severe is that reflexivity once we break the all-time highs in your opinion?

Yeah, I mean, I'm a little in both camps. So I mean, one is like, I'm just going to be looking at the data. But I think there's a real chance, and I don't know if that happens in 2022, or 2024. But at some point, Bitcoin success is going to just be so, so obvious. And the narrative is not going to be between, you know, with us just kind of niche, you know, econ nerds, or, you know, hardcore Bitcoiners, like libertarian kind of thing. I think that's even shifted recently, but it's going to be, oh, my God, the legacy financial world. It's like, you know, I'm sitting on a trillion dollar bond tranche and I'm getting I'm getting a negative yield. Right. Like these guys that are basically still locked in, they can't get Bitcoin exposure yet. But if an ETF comes as it just gets more mainstreamed, intertwined with the legacy system, companies like NYDIG and all this, you know, they're going to unlock trillions and trillions of dollars of capital to access the Bitcoin markets. And the most bullish aspect is that when you're looking at a liquid supply, when you're just looking at the free flow of this thing that's trading every single day, you know, about 14, 15 million Bitcoin aren't available to be sold. And like people like me, like I'm not like I don't have a $200,000 price target where I'm selling all my Bitcoin.

I'm just like I might sell a few basis points or, you know, like, you know, obviously money is meant to be spent. But the reality is like my price target for Bitcoin is infinity. Like I don't plan on I'll spend Bitcoin when when, you know, it's legal tender and I don't pay taxes on it. And so, like, you know, I think that's that's the reality here. And you're going to have tens of trillions of dollars chasing, you know, a few million Bitcoin. And so, you know, do the math on that. But ultimately, I think at some point over the next five to 10 years, maybe I don't I don't think it gets that far. The dollar price becomes somewhat irrelevant as trust is lost. We've just we've just pushed, you know, they've kicked the can so, so far.

And, you know, what happens next time the legacy markets crash? Well, the feds, the feds use all its ammo and it's going to just, you know, it's going to, it's going to, they're going to blow the load again. And it's, it's, it's going to get, I think it's going to get kind of crazy. So, you know, super cycle, not, not entirely sure. I think, you know, naturally there's going to be boom and busts. 50% drawdowns are here to stay, especially with how over indebted the legacy system is, right? You know, you're going to see these huge cascades just because of how much debt is in the system and how much impairment that causes with, you know, with the legacy system, fiat money. Money's created through lending, but it's also destroyed through debt default, right? So when that happens, you're going to see just massive drawdowns in equities, real estate, Bitcoin, like that's just where we are in the, you know, in the system. And so they're going to have to re-inflate it all. And that's, you know, that's when Bitcoin

trades to seven figures. I, uh, I tend to think that you're more right than wrong here. Uh, before I let you go, uh, where can we send people? What do you got? You're at 45.9 thousand followers. So for sure, we're going to get you to 46,000. I don't know how high we can go. We've been, uh, been telling folks to go follow you here in the comments, other than following you on Twitter. I'll put the link in the description right now. Uh, where else do you want us to send people yeah so you can find um i do a the deep dive with bitcoin magazine so that's a daily newsletter um we're covering on kind of most of the stuff we've talked about uh if you check that out it's like go to bitcoin magazine i think it's at the top right um it's uh we got a special

discount code for today's show it's uh it's 10 bucks a month for six months discount code pomp so just so you can give it a try um i mean i think i'm i'm really happy with the work we put out we put out about 20 20 pieces a week that are pretty in-depth research um covering kind of the you know more of the like in the weeds of the on-chain and derivative market stuff um so you know those those price predictions you're asking about you know we're not giving straight up trading signals but um you know covering probabilities and various things that could happen in the market um so yeah that's where you can find me twitter i hang out a lot um you know hit my dms if you have any questions all right so before i let you go we're gonna take a couple

of questions from the uh the audience real quick uh so if anyone's got questions go ahead and leave them in the, uh, in the chat here. And John's going to pick one or two of them for us to ask, but, uh, Dylan, you obviously can't see the chat at the moment, but you have a new nickname. According to the audience, they are calling you Dylan sailor, which, and they keep saying that, uh, you dropped your crown and they are posting the, uh, the King crown in here. So they, I think they very much, uh, are in, uh, in enjoying the, uh, uh, content. Um, all right. So questions, uh here john anything that you see uh you think one person asked earlier on the show was are you looking at anything besides bitcoin for investments uh real estate like any different kind of assets

or is it just uh bitcoin yeah so um i think at this at this stage in my life right like being 20 years old i'm just trying to accumulate as much capital as possible diversification like doesn't really make sense because i'm doing things in like basically bitcoin denomination so when I'm, when I'm evaluating equities, like, right. So I love, I think Amazon is a fantastic business, just, just for example. But I don't think Amazon is worth 42 million Bitcoin or whatever, right? Like, and so just, just viewing any sort of investment through that lens is something that I try to do. I think Amazon, you know, the NASDAQ, real estate more broadly, like whatever kind of legacy investment you're talking about, it's going to go up and it's going

to go up a lot in dollar terms over the next decade i'm pretty confident in that due to just the debt dynamics um but if your baseline is dollars you're doing great if your baseline is bitcoin well i think you're gonna you're gonna probably get killed um and so you know i'll buy i'll buy amazon stock when it's when the market cap is less than you know 500 000 bitcoin or whatever it is right um just just kind of doing things through a bitcoin denomination is is what i do and that's why you know that's what leads me to basically have i have over 100 of my net worth in Bitcoin because of liabilities. So a couple of people are asking, what would make you bearish or what would make you sell Bitcoin in terms of things happening in the

market? What would make me bearish is basically over a long period of time, not something just like China, but hash rate decreasing significantly and staying there. And I don't see how that happens. It would have to be, you know, maybe there's this other proof of work network that one, you know, doesn't have the liquidity of Bitcoin, doesn't have the network effect, all of these things, which leads me to be supremely confident that Bitcoin has already won. But if hashrate, you know, left the network to go somewhere else, then that would really make me kind of rethink the thesis because ultimately, you know, Bitcoin is the most secure proof of work network. And because of the network effects that come off of that, the security, the immutability

the protocol like all these things um that that leaves me supremely confident um in in you know my holdings my savings and so um the dollar price like you know if even if bitcoin went to 15k you know because of the evergrand spillover and legacy market blew up like i'm buying hand over fist and i'm gonna go to every bank i can and try to get a loan right like there's there's not there's not a dollar volatility move that makes me sell uh what makes me sell is is some fundamental flaw in the the protocol that, you know, millions of people looking at this thing every day haven't found yet, but that would make me rethink my thesis. You know, no, no dollar volatility in the, in the market. So I'm going to ask you to clarify this because, uh, I don't think people caught this

when I asked you, uh, how much of your portfolios in Bitcoin, you said over 100%, uh, which is not usually an answer people hear. So explain what you mean by that. Yeah. Um, I've taken out, um, I've basically gotten my hands on any sort of credit I could in 2020 around April, May, June timeframe. A lot of like, I actually got, you know, not financial advice. I took out like I, cause I'm, you know, I was 18, 19 at the time. Like I wasn't available to get like, you know, you know, a billion dollars at zero, like Michael Saylor. But I could get a lot of,

I got a lot of 0% credit cards for 18 months. So I stacked, I stack my butt off in that timeframe. And so I still, still I'm carrying that debt because honestly, again, not financial advice, but 15%, 12% APR, whatever it is, I'm pretty confident in Bitcoin outperforming that. So when the benchmark is Bitcoin, fiat denominated liabilities, like I have a, I have a cashflow, I work, I have a, you know, I get a paycheck. Like it's not something that I'm too worried about. So yeah, if, you know, if you're looking at a net worth basis, I have, I have over a hundred percent in Bitcoin. You understand that that is insane by boomer standards and, uh, it's par for the course in, uh, in Bitcoin world. Yeah. I told

people that, uh, back in 2020, even today and people, some people look at me like I have three heads and I'm like, no man, it's prudent. And, and, and I like, they think I'm joking. I'm like, no, it's not, it's, it's prudent for me. Um, and so, yeah, I mean, again, not financial advice, but, um, when you're like, why, if you're just looking at like, say Michael Saylor, right. Or, or anybody that's taking on dollar liabilities um you know michael saylor bitcoin has to like when he's borrowing six percent at 500 500 million to buy a 37k well what's six percent kager what's what's bitcoin have to be at in 2027 like 50k maybe um for him to break even and so like you know obviously everyone's situation is different um but if you can

service the debt if you can service this um the coupon the interest payment then I don't think that's risky. Don't over-leverage yourself and have it all blow up because you don't want to become a for-seller. But again, when you're evaluating things with this artificial cost of capital against this monetizing digital bearer asset, the math is, I think, is on your side. Yeah. It's absolutely incredible. In some weird way, I'm proud of you. Good job. Not financial advice, but it seems to be working out for you. All right. Everyone go follow Dylan on twitter i'll put his uh twitter handle one more time in the chat make sure you go follow him hopefully we can get him to uh let's see have we already uh oh yeah we already pumped you over 46

000 you're you're well on your way uh the other thing is john what do we think dylan's follower count is on twitter by the end of the year end of the year okay oh more than double look at he he's like i'll take that i'll take that that's all right john's at 50k are you are you and dylan going to raise to a hundred? We'll see what Bitcoin does. It's on. John, what do you got? You got 50? I got 50. Oh, Dylan's at 46. So he's got Bitcoin behind him. John will start tweeting a lot about Bitcoin if all of a sudden it takes off. Send me some charts. All right, buddy. Listen, thank you so much for doing this. We appreciate it. We'll definitely do it again in the future and keep going, man. You're doing a great job and I think people really enjoyed it.

Thanks for having me on, guys. It was a lot of fun. All right. See you later.