The Pomp Podcast - #689 Bitcoin Mining Deep Dive w/ Nic Carter

Episode Date: October 15, 2021

Nic Carter is a Partner at Castle Island Ventures and a Co-Founder of CoinMetrics. In this conversation, we discuss bitcoin mining, renewable energy, Texas, inflation, and debunking FUD. ======================= If you haven’t started building your crypto portfolio on Okcoin, there’s no better time. They’re one of the fastest growing global exchanges around and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in BTC with a friend when you invite them to sign up for Okcoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more BTC you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on Okcoin until November 1. That’s no fees at all on your purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp  =======================

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. Nick Carter is a partner at Castle Island Ventures and a co-founder of Coinmetrics. In this conversation, we discuss Bitcoin mining, renewable energy, Texas, inflation, and debunking FUD. I really enjoyed this conversation with Nick, as always, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. If you haven't started building your crypto portfolio on OKCoin, there's no better time. They're one of the fastest growing global exchanges around, and they have some promotions happening right now to help even more people be part of the future of finance.

If you have an account already, you can split $100 in Bitcoin with a friend when you invite them to sign up for OKCoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more Bitcoin you get. And I always recommend dollar cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar cost averaging with completely fee-free daily, weekly, or monthly recurring buys on OKCoin until November 1st. That's no fees at all on all your purchases until the holidays. Get started on the web or on their new easy-to-use app at OKCoin.com slash Pomp. Again, OKCoin.com slash Pomp. All right, let's get this episode with Nick. I hope you guys enjoyed 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. All right, we're going to talk mining first you gave a presentation at the texas blockchain summit i think it was called that's right um and you uh one gave a like a state of the union on mining then you explained texas and the u.s energy grid and then you talked a little bit about what makes texas so special uh you don't

know this but we already pulled some of your slides and we're just gonna go through them oh yeah a couple of them uh the first slide that we have are the easy ones i think we're gonna pull up here in a second and basically what uh you highlight is just how much electricity is actually used so just maybe help us understand like it's not nearly as much electricity as most people think it is i mean it you know it's all relative really you know and so this is taken from a paper i wrote with night egg called bitcoin net zero um and so we set out to sort of really robustly quantify the electricity consumption and also allow people to sort of give them the tools to predict the future electricity consumption because the only people that have done that

historically have been like wacky academics that get the numbers wrong by like a factor of a thousand so like there's this one paper from the university of hawaii in 2018 that said bitcoin was going to warm the earth by two degrees we appreciate your confidence in us but we're not that i know they really like really bitcoin maximalist to the core, right? And their model was premised on Bitcoin having this per transaction electricity cost, which is not how it works. And also on Bitcoin transactions scaling up to hundreds and hundreds of billions per year. Also not really possible. So we want to present alternative models that actually make sense. Okay. So we have that first one that if we

pull it up here, it's simply just explaining that it's only 0.2% of all global electricity generation and it's 0.04% of global primary energy consumption. What's the difference between global primary energy consumption and global electricity generation? So the world produces a lot more energy than it does electricity because there are non-electric sources of energy like combusting fuels for transport and heating stoves that you might be burning firewood or coal or something like that uh and so the amount of energy we produce actually outstrips electricity so i don't know you know it's sort of up to you what you want to compare it to whether you want to compare it to the electricity that's produced on grid or like the total you know energy this

world is producing which is a lot uh but either way it's it you know i i think it's relatively minimal for you know a monetary system that stores you know trillion dollars as of today and settles you know tens of billions of dollars a day so really it's small regardless it just depends what you want to compare it to and i don't think the country level comparisons make any sense because most of the countries bitcoin is typically compared to are like small like pretty agrarian countries that have like exported their industrial sector to places like china and so given that we live in a globalized economy no one country if you look within their their geographic borders, like emissions factor of their GDP, a lot of that's going to be

externalized to like industrial centers like China, right? So what you should be doing is just looking at the industrial impact of like whole industries. And so that's another thing we did in the paper is we compared Bitcoin to certain industries, certain sources of load, certain metal extraction. So we found that it was kind of in the same universe as zinc extraction. We have that slide. Next slide. Yeah, look at this. Yeah, I think we got that one. I came prepared. You know, finally, once anyone ever protested over like the, you know, electricity associated with the zinc extraction, somebody somewhere probably once, but that's it.

You know, it's a stupid question. I'm sure someone's upset about it. Stop the zinc manufacturers. I mean, to be clear, zinc is a great metal. Like, you know, supplementing zinc is like a good idea in my opinion. But, you know, I don't see anyone getting like apoplectically upset about it. um and then of course bitcoin is actually generally less than gold um kind of probably less than copper the emissions and then of course aluminum and steel are like massive uh but yeah so

like it compares with kind of like niche metal extraction so it kind of is what it is okay if we go to the next slide here we have this idea that uh it's not digital gold your opinion digital aluminum so explain this yeah so i don't know if uh have you guys visited any of the big bitcoin plants no there's this so there's one in rockdale texas which is a really big one um and then there's this other one i have a picture here is in messina new york on the st lawrence river upstate new york it just it's hard to get to we like charted a little plane to get there um those are former alcoa smelting plants and aluminum you know has the highest embodied energy in the refining of the product of any metal. So for whatever reason, smelting bauxite and turning

it into aluminum takes a ton of electricity. And so because of that, you had the smelters would actually go to locations with really abundant energy. So they would kind of chase the energy. And so that's why you'd end up with plants in like upstate New York and things like that with abundant hydropower. And the aluminum ended up being this way to export energy through the commodity and now the amazing historical parallels the bitcoin is kind of like that uh bitcoin mines are now taking up residence in these old smelting plants um and so you know i just really like that historical parallel like aluminum used to be this way to soak up excess energy now bitcoin does that yeah and bitcoin does it better much more efficiently because

bitcoin's modular you can have one shipping container with 500 asics out there on the oil field you know soaking up excess wasted gas you can obviously do with hydro you can you know and you can interrupt the process which is very important we'll get into that um so yeah it's just as a synthetic metal basically it does it in this sort of like highly efficient you know highly granular way next slide and then it's big like people don't realize how big it is and actually i think this number has been growing uh pretty rapidly right in terms of how much people are actually being paid to secure the network right now it's bigger than this already i made these slides uh you know uh ten thousand dollars ago yeah it's a big industry though for sure so

right now uh if i just look quickly approximately 51 52 million dollars over the last couple of days is the mining reward that globally is being paid out uh for those that don't understand or don't know what that means uh the bitcoin block subsidy the thing that is given to miners every 10 minutes or so in exchange for them helping to secure the network. There's ads up to 900 Bitcoin per day. You take 900 Bitcoin per day and you multiply it by the price. And so over the last 24 hours, that's fifty two point six million dollars, according to CaseBitcoin.com. All right. Let's go to the next slide. By the way, your title today on the show is the most violent man in Bitcoin. That's apt. I really need to live up to that. Do it when you leave here. Don't be violent right

now other than with your words. All right. So with this, I've now seen multiple differences in this chart. We don't have the other one, but there's a chart that just came out that shows that the U.S. took majority of the market share and China has zero. We can talk about why maybe China doesn't have zero, but definitely U.S. has gained a ton of market share. China has lost a ton. I know. And my regret is that I gave this presentation a week before the new Cambridge data dropped. So I have the old chart on here. But yeah, suffice to say, the U.S. is 35% of the network today. According to Cambridge, China is apparently zero, not actually zero. Cambridge couldn't wait to wipe them out.

Cambridge's like, oh, China's zero. Yeah, you're out of here. Yeah, so China's not actually zero. But yeah, as I was pointing out here, look, Bitcoin mining, U.S. is the number one country in the world. We knew this even before the Cambridge data dropped. Now we know it for sure. Number one country in world for Bitcoin mining. That's a good thing. Before the China ban of miners in May, I think it was, what was the split between the U.S. and China? Do we remember in terms of what the U.S. market share was at that time? I mean, it's on here, the historicals. I mean, the U.S. was single digits for a long time, right? So very, very much not material. China just dominated.

They had, you know, 60, 70 percent, you know, market share. And the U.S. was for a long time under 10%. Okay. Today, U.S. has 35%, which is the most out of anyone. So it doesn't mean that the United States has majority. It just means that no other country has more than the United States. U.S. has 35%. Now, the two things that you call out here that I think is really interesting. One is the new ASIC deliveries. And what I want you to explain is I don't think people understand the lead time for the machines and how basically when somebody makes an order, you know where those machines are going. And so you can start to forecast out a little bit of where hash rate's going to come online, you know, three, four, six months, whatever it takes for them to actually

plug the machines in. Yeah. So knowing a little bit about what the miners are doing, you can forecast the hash rate of the Bitcoin network in 12 months time. And you can forecast where mining will occur because you, the miners like to, you know, announce that they've bought X many units and that's promotional for them. So you just have to stitch all those little pieces of data together and you get a sense for where the where the bitcoin network will be in 12 24 months time obviously there's some uncertainty in there so basically um you know a lot of the i think the best projections i've seen have the bitcoin network being at 300 exa hashes by the end of next year by the end of next year and right now we're like what one 150 yeah so doubling at least

but north of 300. um if you looked at where the you know new machines were going they were all been bought by us buyers and a lot of the buyers are public companies so they're providing those disclosures on an ongoing basis we also know what installations they're building in terms of megawatts so we can get a pretty good sense of where you know the industry is going to be in a year's time uh and you know it's the build out is happening in the us where are they buying most of the machines from is it still bitmain or are there other players that are now big suppliers bitmain and what's minor micro bt are the two big ones okay and of those neither one are based in the united states do we have concerns that there is no actual like fabrication done in the united

states for the machines yeah i think that's a concern um the foundries are in i want to say korea and taiwan obviously that's a big geopolitical question if taiwan is going to stay independent uh there is a foundry being built by tsmc in austin i believe and so they're trying to diversify away i think they understand the writings on the wall with taiwan they want to kind of ship a lot of that over it's going to take a while though yeah and i guess part of this is if you can get a fabrication facility built in the united states you can one serve u.s customers there's all kinds of logistics uh that get solved there uh but really it's probably the geopolitical risk that they're solving for yeah i mean there's a lot more important things than uh than making

bitcoin chips um you know like gpus i mean it just like it's a critical industry um the us just doesn't have a homegrown one right now okay let's go to the next slide this is uh the united states and in texas now i'll let you defend yourself but i don't want you pandering to texas because you're not in texas anymore if you were given this presentation at the texas blockchain summit but I'm assuming that they were expecting you to say nice things about Texas. But explain why Texas is so interesting. Well, yeah, this is a Texas.

That was the topic they asked me to talk about. So I wasn't going to talk about Bitcoin mining in Florida. There isn't a lot. When I saw this, I literally saw somebody responded online and they were like, oh, Dan, Texas is going to be huge. I was like, well, yes, but this is also a Texas specific conference. Look, let's not write Miami and Florida off.

We can still win this. We have currently approximately zero amount of mining here in the great state of Florida. And Texas has a lot. They have a huge amount. I mean, I think it's probably close to one gigawatt. Keep in mind, the whole Bitcoin network is approximately 10 gigawatts of power. So one tenth of the entire network is in Texas right now. Now, that might be an aggressive assumption, but there's a huge amount of buildup happening in Texas right now, in particular West Texas, where there's an enormous amount of renewables.

And like the amount of renewables that are coming on to the grid in the coming years in Texas is unbelievable. I mean, unbelievable. The Texas grid, I think, is around 80 gigawatts ERCOT. And you're looking at, you know, maybe 20, 30 gigawatts of wind and solar just in the next two years. You think that 25 to let's call it 40 percent of the Texas grid is going to be used for Bitcoin mining? Oh, no. Or is this net new addition? Those are new renewables.

my projection is like two to three gigs uh for bitcoin mining in texas by the end of next year got it which i think is is actually reasonably conservative based on what's happening but yeah i mean so that would be you know five-ish percent of the grid maybe wow that's still a lot it's helpful though it's it's you know it's a very interesting source of load uh it's a very kind of unique and different source of load so there's you know there's nuances there okay all right let's go to the next one i feel like we're playing a game of like what's next because i forget what we put in here okay all right so it's becoming the uh heartland of us mining let's go to maybe the next one and then this is uh how they're aggressively expanding now

most of this is coming from publicly traded uh disclosures yeah a lot of these are public companies not all of them are block streams not public um but yeah core size about to go public will spack probably the biggest they'll be the biggest publicly traded miner in the u.s uh riot is active in texas they're you know pretty big um you know compute north is building down there in texas i mean like there's just a huge amount of activity in the us right now you know if you're using you know modern hardware you're mining your coins at so like five to ten thousand dollars right now you sell the coin at fifty eight thousand dollars so so you think that's the price of sophisticated miners is five to ten thousand dollars depending on the energy cost and labor

cost and what you bought your machines at. Yeah. But keep in mind, you have to depreciate the value of the hardware. I mean, you have to include the amortization of buying the S-19s and things like that. But yeah, like just on the pure, you know, I mean, if that doubles the price of the Bitcoin, you know, including every single thing you possibly could. And now you're mining at twenty twenty five thousand. You're still selling it at fifty eight thousand. Yeah. The margins are obscene for miners right now. It's unreal. And, you know, the China crackdown created a huge kind surplus for the u.s miners china gave a subsidy to u.s miners because it was a big it's a single market yeah you know it's not like some commodities where they sell for different prices like natural

gas in the us is much cheaper than natural gas in japan but bitcoin sells for a single global price and so if one country bans the mining activity that's a subsidy to the miners elsewhere it's incredible so this is really interesting to me what you're explicitly talking about is that china shut down mining in their country and that kicked off i don't know let's say 90 to 95 of all the miners in the country when they did that we saw hash rate go down uh i think more than 50 is when it bottomed yeah uh and they had to literally unplug their machines move elsewhere we at that time saw a bunch flow to the united states also elsewhere but the united states was definitely the biggest winner from that when you get that drop in hash rate the difficulty adjustment was

pretty sick it was i mean it was pretty breathtaking just how quickly uh it recovered and was able to kind of withstand what many people would think of a normal computer system could potentially be fatal, right? If 50 to 70% of all of your computing power went offline in pretty much a moment's notice, there's not many systems that are just chilling, right? And so the mining difficulty, what did that do to the profit margins of US miners? Like how severe was the impact to the profitability? Well, it just made it much easier to create a unit of Bitcoin, I mean, 50% easier. And so that drove up their margins enormously. And so that was like a truly exogenous shock. Like people weren't really expecting that. And of course,

it resulted in the destruction of property, you know, tens of billions of dollars of Chinese miners, because frankly, not all of them could get their monies out of the country. A lot of them are just sitting fallow in warehouses in Malaysia and places like that. So, you know, they weren't necessarily as a cohort able to plug them in elsewhere. I mean, you know, many, like the capacity in the US is pretty tight in terms of hosting capacity. So there just wasn't that much ability to absorb, you know, miners from Sichuan into the US. And so there was a destruction of their property. And that's unfortunately the nature of living in a, you know, command and control economy where things can change like that. But, you know, it benefited the US miners

enormously like a huge huge amount let's go to the next slide uh so why texas is it just that hey they love oil and gas and they've built it out no i mean texas has some like pretty unique features so the governor is pro-bitcoin uh both senators are now pro-bitcoin uh so we learned uh ted cruz is incredibly smart about this stuff um i don't know how he gained so much expertise in the energy grid but he did and it was very impressive okay so hold on before you go on from that most people i think have this view of ted cruz which we got a sense during the infrastructure bill stuff he started to say some stuff that people were like wait a minute like i agree with ted cruz like that's not what i thought he would be his position then this

conference i read you transcribed some of his uh um his comments he sounds like he's actually more informed than some people in the bitcoin community like he was pretty legit do we know where that came from i don't know frankly i mean i haven't been in contact with him to be clear uh but his expertise his level of command of the nature of urquhart and uh the texan grid and the specific interactions miners have with the grid which i guess we can get into was like phd level really and this guy has to have a position on like hundreds of different issues so i'm like sitting there wondering like wait how did he like get to that the thing that most people would say doesn't really matter that much but obviously he thinks is a really big thing for texas in the energy

yeah i mean it's striking that he's put so much time and effort into like really deeply understanding this like what's a demand response program what's a controllable load resource like how does the supply demand balancing operate on a grid how do the miners you know come into that he understands all that stuff um and so i was pretty shocked by that i spent years trying to figure it out and ted you know just like coasts to the front of the pack all right so deregulated grid with real-time spot pricing it kind of walk us through like why is texas so suitable yeah so urquhart's actually pretty capacious well you keep saying urquhart people don't know what that is sorry urquhart is shorthand for like the texas grid basically um they have a ton of access

renewables um and i have a few slides i don't know if we're going to do the whole presentation we're not it's 30 slides i i uh so i i pump faked you like we go to like slide 13 and then i just skipped like three other ones this is an important one okay you see that wind corridor going from west texas north to up to canada yep that's the best area in the u.s to uh you know mine your wind power right why because it's windy okay uh shocking that that is that is an amazing insight i know it's really key don't forget that that comes that'll be on the test um so then we have the southwest of uh america has the best solar resources right and when in solar like you know the capacity factor is in the the uptime is like kind of low for both those resources but in west

texas you have this conjugation of it's very windy and it's very sunny and that means wow amazing like suitability for renewables that's why 30 of the texas grid today is renewable and that's grown from like five percent ten years ago uh and so the problem is you've got 35 gigawatts of renewable presence on the texan grid and it's all in the northwest corner of texas but all the load all the demand for energy is in kind of the southeast yep austin houston uh dallas and energy doesn't travel that well that's the thing people don't get about electricity you can't teleport it you have to put it in these high voltage transmission lines right and they only have 12 gigawatts of high voltage transmission lines from west texas to the load centers so

those are full and then what happens the rest of the time and there's only five gigawatts of load locally in west texas which is mostly associated with oil extraction so what do you do with the remaining like 15 gigs so time out for a second i just want to uh say this so that people at home understand oil or uh wind and solar they suck in most places because you can't do it 100 of the time not remotely close to 100 percent of time 25 to 40 percent okay in the west part of texas very specifically it's hot and sunny and it's windy so you basically can do wind and solar much more than you can do other places but the problem is that the people who need the electricity are far away in the other part of the state and so the ability to transport it there you basically

can't put any more through that transportation because it's already full and then we say well why don't you just use it right there on site? All of the normal uses for electricity, that's also spoken for. And so now you basically have created all this additional energy, but you don't know what to do with it. And keep in mind, they're going to be doubling the quantity of renewable energy produced mainly in West Texas in the coming years. This is the part of the conversation where like Bitcoin shows up with like a Superman cape and is like here to save the day because it can do what i mean it can it can absorb that excess of stranded energy um and like if you don't use the energy it just gets pumped into the ground you know um and actually you see this if you look at a

map of prices in texas the left you know the western half is often negatively priced the energy producers will pay people to take the energy away from them and the right half that you know is where it's actually expensive. So Bitcoin is kind of this sponge, which soaks up the excess. And, you know, that's incredibly useful for these renewable producers, because now they have a second buyer of energy. Initially, they just had one buyer, which was the grid, and the grid would only buy it on its own terms. Now there's a second independent, you know, uncorrelated buyer, which means they can monetize these assets at, you know, interesting times, and they have the choice who they're going to sell to. So that makes the economics of their core business much,

much better. And so, you know, some people say like, OK, well, Bitcoin is not an incentive to build new renewables. You know, maybe that's that's fine. But like it's certainly a way to monetize existing renewables and make their payback cycles much faster. And that really matters in the energy landscape. And it feels like we're just talking about renewables and there's persistent demand from Bitcoin, which is a huge piece of this. And that's where you're getting into, well, sometimes I actually want to sell to the Bitcoin network because I know what I'm going to get paid there. But also there may be a spike in need on the energy grid or ERCOT, and I may get paid more than I would even make with Bitcoin. And so I may offload,

but I now have choice. And when I have choice, it allows me to better optimize my business based on the current factors. Absolutely. And what's more is the miners opt into these programs where the grid operator tells them, hey, you want to turn off your machines for a little bit so that all power can go to households that need it the most so when you have scarcity on the grid the miners turn themselves off they actually get paid to do this and so they are not depriving anyone of energy they are actually monetizing the energy assets most of the time and during an energy crisis or period of scarcity they're off and so all of that energy goes to households and hospitals you know to whatever run air conditioning so you know that's a really important thing there are

formal programs on the texas grid that miners are perfectly suitable for and other industrial centers of load are not because virtually nothing else can turn itself off at short notice like that bitcoin miners can turn themselves down or off within seconds so they can deal with the interruptibility uh aluminum smelting you know factory can't or uh you know a grain processing facility can't turn itself off. Uh, you know, commercial real estate can't just turn itself off like that. So miners are this unique, flexible load. That's really suitable for a grid like that, where if the grid's really in high demand, there's energy scarcity, they can just be off. Okay. Let's go to the gas flare capture. Uh, if we keep going, Matt, to, uh, next one

here. Explain what gas flare capture is and why this is so powerful for the miners and also from an environment standpoint. So this is truly off grid mining. So in the case of mitigating flared gas, you're actually just not on the grid at all. And so the way oil extraction works is whenever you get oil out of the well, it comes up in a mixture of oil and gas. So you're actually not just getting oil, you're getting oil and gas, oil is the thing you want. Gas is generally treated as kind of a waste product. And oftentimes, with a lot of these wells, you're not connected to pipelines. So you don't have a way to take the gas away. There's no economic use for it. So what they actually do is, because methane is pretty bad for the environment, they combust it, which

has the output of carbon dioxide. And the carbon dioxide is what is released post combustion. So that's the flaring. Like, you know, if you look at an image of like oil derricks, like you'll see the flares, right? The flaring is like pretty inefficient, doesn't burn that well. Some of the methane isn't combusted. So what the miners do instead is they take this waste product, natural gas, they put it in a generator, and they burn it in a more complete combustion process. And they mine Bitcoin with the electricity. And so like that is a dramatic improvement over the status quo and so people look at this they don't like it because you know they see miners that are using natural gas but the thing to understand is the natural gas was going to be combusted anyway

there was no economic use for it on site there was no way to get it to a market right it just wasn't worth it natural gas is pretty cheap in the us really really cheap so it's not worth building a pipeline infrastructure to take it away and i guess the other last thing to note is like when When you do what's called initial production on an oil well, so you sort of initially start it up, there's oftentimes like a six-month burst of natural gas. And there typically wouldn't be the ability to accommodate that gas and get it to market. So the Bitcoin miners in this case come in, take advantage of that, and they might leave in six months' time. So it's a remarkably flexible and potentially short-term relationship.

Most of the companies I know that are doing this are Bitcoin mining companies going to the gas flare companies, the companies that are flaring gas. Have we seen the reverse? Have we seen any of those companies say, hey, why don't we just become the X person and vertically integrate? Yeah, so I believe Upstream Data do not actually do the mining themselves. They create the gen sets and the units for energy asset owners to mine themselves on a proprietary basis. So I think you'll see more of this, too, frankly. I think we're going to see in the next few months energy companies actually get into this space on a primary basis as opposed to contracting out with miners. Agreed.

And if we go to this slide right here, we're talking about the gas flare, carbon negative. This, to me, puts us into the realm of Bitcoin is preventing climate change. Is it solving climate change? Is it having a hand in presenting a solution or a potential solution? How do you think about Bitcoin, gas flare capture, and then this whole climate change debate and kind of effort that's underway? I mean, it's certainly in the context of the flare gas mitigation is making climate change no worse.

OK, so it's not contributing more to the problem at a minimum. Because the gas is flared regardless. That's just a byproduct of hydrocarbon extraction. And we still need oil for cars and airplanes and boats and things like that. So we're not going to be able to wean ourselves off of that anytime soon. So during this transition phase where we still use hydrocarbons, there's going to be this externality of natural gas that's unquestionable. The miners can deal with it in a way that has a lighter climate impact than the default

way, which is flaring or venting, frankly. And if you're flaring on a windy day, most of it's vented anyway. So by controlling the reaction, by coming and piping the oil into a generator and, you know, combusting in a more controlled way, you're mitigating the emissions. That's the chart I have here with Crusoe Energy. And so, you know, that's a net improvement. For sure. I'm going to let my brothers ask questions about mining in a second. But if you have to think about how important this is for the United States moving forward, what we see going on in Texas, obviously, is pretty impactful.

Is this something where other states and cities will start to replicate this in a material way? Or is it specific to that environment because Texas has the renewables, it has the kind of energy grid aspects that we've been talking about? No, I mean, I think we're going to see it being relevant for nuclear. we're already seeing nuclear providers partnering up with Bitcoin miners. Because again, just having an uncorrelated buyer improves your core economics. And, you know, nuclear runs all the time. But the grid demand is like a sine wave, right? And so at night, you know, energy might be really cheaply priced. And so what if you could monetize your nuclear output at night by selling to Bitcoin instead of selling to the grid? And, you know, that would improve your economics and improve

your payback periods you know that might give you better incentive to build more nuclear so uh it goes far beyond just wind and solar uh we know bitcoin is mined with hydro as well um but yeah it's a pressure it's an economic pressure on the grid which i think uh you know liberates some of these like stranded or underutilized assets what questions you guys got about bitcoin mining mining uh just where it's going to go right like the u.s overtook and kind of has the largest percentage now. Like, how do you think this trends over time? Is it good for us to have a large percentage? Should it get larger? Should it stay kind of relative to where it is now? Like, say, five, 10 years from now, where do you think it should be?

So I think the Middle East is going to get more important in Bitcoin mining, because they actually have a ton of flared gas, which is a waste resource. And so it's one way to turn your natural resources into like a sovereign wealth asset, right? And so I think we're going to see that. I wouldn't be surprised to see UAE or the Saudis start to mine. And they don't really have much of a footprint today. If we got over 50%, some people are going to start to worry. They're going to say, oh, well, the US is too big. The US could commandeer all the miners and change something about Bitcoin. I'm not really as worried about that. China, I was a bit worried. i mean china is a one-party state it's authoritarian in the us we have a rule of law

and we also you know segment we have local governance like the states have some power energy policies made at the state level so the us government would not have the legal ability or really the authority to you know commandeer everyone's minors and then initiate some sort of government driven hard fork it's just not possible um so you know i i do expect the us us to keep growing because we have the cheapest cost of capital. The U.S. is something like 25% of the world's GDP, but 40% of the world's publicly traded equity. So we punch above our weight when it comes to capital markets. And all these miners go public and then they subsidize themselves by effectively issuing stock to the public markets. And so far, the markets have

accepted that. So as long as the miners in the U.S. are able to do that, they're going to keep growing. They're going to keep growing their footprint. Uh, and you know, the U S is an energy rich country. So, um, we're going to keep, you know, keep growing our, uh, our share of the mining network. John, what do you got? I'm glad you brought up all these issues there. Uh, they're crazy. I am curious. How does an individual like myself, I own no mining equipment. How do I get involved in this? How can I make money off of, uh, off this mining going on in Texas and around the United States? I think we should plug one in, in the studio. We could do The problem is we might have to do it in the other room because they're very loud.

They sound like a hornet's nest. I don't know if you guys have ever visited. You got to use some like ear probe because they are very, very loud and they get hot too. So actually maybe we reconsider that. We'll put it in another part of the building so that we don't have to deal with it or hear it or see it. But we can get the money from it, John. But there are hosted mining providers that can give you an allocated unit at a host. I think Compass Mining is probably the best known one.

um and so like you can absolutely start mining today as a regular individual if you wanted can i get involved in the texas situation at all i'm probably i mean uh i'm sure there's hosts there's hosting in texas and i think i read a while ago like compass is demand picked up a lot right over the last six or twelve months they've had a blockbuster year turns out everybody wants to mine themselves yeah i think it's a good feeling it's cool are you want to go to texas john no we go check out a facility we'll send you from there you guys should visit rockdale that's like the biggest facility in texas i think will they let us film a show from there yeah well yeah it's loud but it's a little loud but i'll set it up joe joe what'd you say that's fine yeah but you might have

to ask them to turn off a couple hundred do you want to be part of our union by the way we unionized yeah we're recruiting oh yeah i missed the first part of the show yeah no we unionized john and i and we're recruiting so if you want in you're in i'm in i'm in there we go uh they're mad because I told them I was going to bust their union and now they're recruiting for more. We want higher pay, better medical care, we want vacation days. Well, see, I don't even get paid. We're going to work that in. You're going to be part of the union.

We can change that, Nick. We can change that. I get summoned here like on short notice. This was the longest notice I've ever given you. It was like two days. I know. It was great. Power numbers, Nick.

All right. Let's talk inflation. The official numbers came in 5.4%. Core's at 4%. I don't think anyone believes the official numbers. and then on top of that uh they keep saying it's transitory you and i have talked in the past in march april may june july august and probably into september of last year they kept saying don't worry about inflation we're not worried about inflation inflation's not coming etc

maybe somewhere in the like august september october november december time frame they started to say well maybe there might be inflation but we're still not worried about it then like in q1 it turned into like oh there's going to be a little bit of inflation but it's going to be transitory. Actually, our goal is to run hot for a couple of months. And then we got 5% CPI. And it's been four months of CPI above 5% that the last time it happened was in the 08 crisis. Before that was in the mid 1990s. What's your read on the inflation that we have? Should we be worried? Or does this fit in like the transitory camp? I mean, we should definitely be worried. And to be clear, like transitory doesn't mean your purchasing power is going to

go back to what it was. Correct. If it were truly transitory, we'd have deflation to compensate for the burst of inflation. We will never have compensatory deflation. We did in the 1800s. If you had an inflationary period, you would actually then have a period of sustained deflation, healthy deflation. That was actually really... So you had a 100-year period where prices started and ended the same in the US. That's never going to happen in the modern fiat economy. it's just that the rate of you losing purchasing power is accelerating that's what they mean by transitory it's not very comforting um yeah i mean obviously they're trying to massage the narrative and uh you know the fed kind of tends to believe that uh expectations drive inflation

so consumer and employer expectations are key drivers of inflation that's sort of the orthodox view and so that's why they expend so much effort giving speeches all the time trying to manage our expectations. And if we, you know, poke a hole in the narrative, we're actually altering expectations and thus making inflation more likely. So that's why they are constantly in the press, like trying to say, you know, talk us down and be like, no, no, no, you know, don't worry about it. It's, it's going to, you know, abate. But I don't think it will. I mean, look, we're on the cusp of a bit of a global energy crisis. There's a lot of headlines about energy scarcity. If you have scarce energy prices go up and energy is the key input into everything. So, you know, fundamentally

energy is like the main sort of unit of account. If the world is short on energy, everything is impacted. So notwithstanding, you know, the supply, the supply side issues, which all the commentators are now blaming for inflation. We've embarked on this energy policy, whereby, you know, fracking has been banned in much of the world, leading to much more structurally more expensive natural gas. You know, for better or for worse, you know, we can debate the merits of the policy, but we're going to have an energy shortage situation. ESG mandates and attacking, you know, the oil majors, you know, the way Exxon's been attacked, Royal Dutch Shell has been attacked through the corporate governance lens. That just means that the world is less

adept at producing actual effective energy than it was kind of 10 years ago. So that's going to, you know, continually cause pressure. Um, yeah. And there's, there's a lot more to cover. I mean, there's the base effects thing that we can talk about. Um, so let's do, let's do base effects first. And then I want to talk about like the normalization of it in the public conversation, but the base effect argument was basically, Hey, we had a global pandemic and everyone was ordered to go sit inside their home. Of course, everything comes down. And so, yes, we will see a high rate of change over a 12-month period, but that's simply because we were coming off of that lower base. I think you believe that now we're back to where we were before the pandemic from

a base effect standpoint 12 months ago, but we saw a really high rate of inflation. Yeah. So we had disinflation during the early days of the pandemic because demand dropped off a cliff. And so the rate of, yeah. So effectively, we didn't have deflation, but we had disinflation. So inflation was low. And then there are all these articles written in sort of April 2021 saying, well, actually, 12 months ago, because we had disinflation, that's going to make inflation look really high today. But don't worry about it. That's just a mathematical quirk. That's because you're looking at year over year data. And a year ago, the inflation rate was really low, which makes today look really high. However, the base effects, in my view, expired in July of this year. So that's no longer a plausible explanation. Lo and behold, we're still running really, really hot. So this whole story that was cooked up for us about why inflation looks hot, all these

economists explaining to us, oh, yeah, this is just because you suck at interpreting the data. They were wrong, OK? And they're not acknowledging that. Now, like inflation, you know, now they've pivoted to saying, OK, no, there's supply chain reasons. But what are they not mentioning when they talk about the supply chain? It's like just this abstract thing. Why is the supply chain stressed? Because the government printed trillions and trillions of dollars and handed it out directly to households for them to go on a spending spree. right during the depths of the pandemic and they started buying tons of consumer electronics and everything else and so the supply chain became taxed because of that injection of cash right and so like that is a big part of the explanation um you know because consumers change their

spending patterns because all of a sudden they had thousands and thousands of dollars just deposited in their bank account from the government so you know that is the government injection of cash into the economy causing inflationary effects is just processed through the lens of the supply chain, but it's still ultimately inflationary. I don't think I've ever heard a monetary policy related position. So a central banker, one of somebody from the treasury, even I think globally, but definitely in the United States. I don't think I've heard a single one of them say that the monetary policy had an impact on the inflation. Of course not. I I mean, I don't think I've heard one time somebody say that.

And, you know, it's the same thing during Weimar. They steadfastly refuse to acknowledge that the rate of money issuance might have an effect on inflation. So they refuse to admit that the quantity of money might affect the price of money. That's every government going through an inflationary episode ever. But, you know, I believe that central bankers actually do understand what's going on. I do believe that. And I believe that, you know, Congress understands as well.

it's just right now inflation is actually politically convenient that's what doesn't get talked about because we have such a high debt load as a country the only way to reduce our debt to gdp barring some sort of productivity miracle where our gdp grows um you know through some exogenous shock maybe we discover nuclear fusion or something uh barring that the only way we're going to reset our debt to gdp level and get our debt service down is through inflation and so we're going to have a soft default. So inflation is actually really politically convenient. So when policymakers say they want to inhibit inflation, they want to ratchet it down, don't believe them. Because it's politically necessary now to actually have an inflationary

burst, which was the exact same thing we had in the 1940s after the wartime expenditure. So when that occurs, we're at 5.4%, give or take over the last couple of months. Do we go higher from here? Do we stay at around 5%? Or do you think that we come back down to like a 2%, let's say, next year or so? So the thing about inflation is that it's not just a structurally high rate of inflation. It's just that the loss of purchasing power is also volatile. So if you look at other inflationary episodes, whether it's the 40s, the 70s, it's very volatile. And that's actually the worst part, because it means businesses cannot project what resources they're going to need a year from now or two years from now. And we saw this in the construction industry when like

the lumber prices all exploded. Literally, people just said, hey, we're not agreeing to build anything because we know that there's a three to six month lead time and we can't project what the price of lumber is going to be. And therefore, we can't tell you what the house is going to cost because we may be underwater or we may make a bunch of money. But that uncertainty doesn't allow us to do it. You're not talking. It's not just one specific commodity and one industry. You're saying across an entire economy. That's true. It's the allocation of resources in the economy. So that's why Bitcoiners talk about time preference. There's a very real connection to inflation and time preference. As inflation cranks up, you lose the ability to plan for the

future. A great example of this would be Venezuela. You can't get a mortgage in Venezuela because the thing would be denominated in bolivars. It's completely impossible to know would it be worth 30 years from now. And so you can't engage in long-term acquisition of capital assets uh you can't really debt doesn't work right so you know obviously less extreme version of that now it's hard to know where recent what your cost of capital is going to be um you know if if you're in an inflationary burst where you don't really know what the rate of change of purchasing power is going to be 12 24 months from now and so your time horizon comes in and that's why you know a lot of people connected to, you know, the ability to build longer term projects when we were on the

gold standard, which was because the money supply growth was always sort of one to 2%. And interest rates were generally pretty stable. Whereas now, we have structural instability. Yeah, when you think about what this does to an individual, we know that 45% of Americans have no investable assets, 55% have some assets, but really, it's the top, you know, one, maybe 10% that are kind of benefiting from this. Is it as simple as, hey, people should just go invest regardless of the market and they're going to end up benefiting? Or are there other things that you think folks who understand what's happening are doing to protect themselves, whether it's changing their consumer purchase behavior or something else? The problem is you do have to change your behavior

when faced with inflation because it affects everything. It actually affects equities too. periods of rising inflation very negative for equity prices, by the way. So, you know, if you look at the, you know, the different sort of how they trade during different epochs of disinflation versus high inflation, the problem is you've just spent an increasing amount of your time being tactical and determining your asset allocation. Of course, it's possible to escape inflationary bursts with your assets intact. You know, if you go to commodities or, you know, precious metals or things like that but it's just a lot of work right it's a drag and normal folks should not be apportioning too much of their mental energy to like determining how to you

know allocate their assets right they would just love to be able to save normally and just live their lives but the problem is you get forced into becoming a speculator right and that's why we see with all these inflationary episodes speculative surges every single one you see a speculative surge. And so regular folks have to start thinking, OK, well, do I want to own big tech here? Do I want to cyclicals? Am I going to own currency? Am I going to hold cash? I can't hold cash. What am I going to hold now? And it just becomes this whole thing. And so that's one of the worst things about high inflation is that it forces everyone to question the value of their savings and plow into potentially higher yield assets. Yeah. And how does it end? Is it that

inflation just naturally kind of tapers off. And yes, we don't get a return back to normal prices. So Chipotle puts their menu prices up four percent. We're not going back, but we just stop the rate of change going up so aggressively. And so it goes back to kind of like a two percent rate of change. Or does there have to be some sort of external force? Is it a policy decision change? What drives the kind of end, if you will, of higher inflation? I mean, inflation ended in the 70s, when the 80s, when Paul Volcker cranked up interest rates to like 20%. And that was called the Volcker shock. And that sent the economy into a very steep recession. But so the government had to do that to prove that, you know, they could take short term pain and effectively destroy

some of the quantity of money, certainly inhibit the rate of growth of money by cranking up interest rates because when you increase interest rates, lending declines. And so that was like their nuclear weapon against the sustained high inflation that we saw in the 70s was the willingness to take that medicine. Now, what would Paul Volcker do if he was in charge of the Fed today? He would quit. He would resign because he cannot raise interest rates because our debt to GDP is so much higher. When he did the Volcker shock in the 80s, debt to GDP was like 30%. But today, it's like 120, 130%. So if you raise interest rates to that level today, the government would default, the corporate sector would default. No one can stand debt

becoming expensive like that. And so I think really the only way this ends is after a sustained long period of very low interest rates and high inflation, you know, we ratchet down the size of the debt, generally speaking, and then we can sort of get to a new equilibrium. But it's going to be a damaging and difficult sort of couple decades, probably. And if you look at what happened in the 40s, if you held government debt, you know, you held dollars, you lost in real terms. And so So that's sort of what has to happen here. But the question is, how does a central bank regain credibility after they've lost it? Because an inflation is a loss of credibility for the central bank.

I don't know if they're ever going to get their credibility back. I tend to think that's going to be hard. I don't know if we know yet, will they get it back or will they not? But it's definitely in question. What do you think about the Bitcoin ETF? Is it likely to get approved, not get approved? Do you think it matters? Well, the ETF that Gensler has signaled he wants would be the futures-based ETF,

which would be an inferior product in my mind. It might have an additional 10% drag in there because of the cost of rolling futures. Spot ETFs work fine. We've seen them work in Canada. We've seen them work in Europe. There's nothing unexpected or complicated about them. You're just literally holding Bitcoin. Then you have daily liquidity, and it equilibrates, so it tracks the price really closely.

A futures-based ETF is an inferior product. It's just less efficient, right? But that looks like what we're going to get. I wouldn't be surprised. I think the first deadline is the 18th of this month, and there's a whole bunch of pending applications. I think we probably will get a futures-based ETF, and I think we're going to continue to be stonewalled on the spot ETF side, which is what we all really want.

And that would be the blockbuster product that would see hundreds of billions in inflows. That would have more inflows than GLD did within its first week, which I think was the hottest EDF launch ever. So we're on the 14th now. So Monday basically is when they have to give an answer on the futures. Can they kick the can down the road or do they have to make a decision? That's a great question. I think that might have to be like a resubmit your application type thing. It's a reject or accept.

It's not a, hey, we postponed our decision. Yeah, I mean, they've had like six months already to kind of say something about it. So, OK, so if you had to guess now, you think it gets approved was the futures. Yeah. And it's just, you know, ultimately not a very compelling product. You might see a couple of billion in inflows, but that's just not what investors deserve. I mean, and the weird thing is you're allowed to have like a Forex inverse levered, you know, natural gas tracking ETF that like mathematically will decline by 95 percent a year. And that's permissible. And a spot ETF tracking one of the largest commodity markets in the world traded in hundreds

of jurisdictions, very sophisticated market infrastructure is not allowed. Why do you think that is? Politically, I'm certain at this point. I mean, like most of you, like ETF analysts at Bloomberg will say the same thing, that there's a political gating factor for the ETF, which is simply that they don't want Bitcoin to gain the sort of authority and the blessing of the SEC, because like all of the challenges the SEC has made to the sponsors of those ETFs have been met. There's no question about that. And if you look at the standards being applied to other commodity markets where price

manipulation does happen, I mean, hell, the biggest market in the world, LIBOR, was manipulated, right? But that doesn't mean you can't have financial products tracking interest rates, right? Silver had an infamous episode of price fixing. That doesn't mean there isn't a silver ETF, right? So writing off Bitcoin by saying, oh, we don't like the market structure. There's episodes of manipulation. That doesn't make sense. That's not the standard. So they're applying some sort of uneven standard Bitcoin versus all other commodities. What do you think happens to the bitcoin price by the end of the year we're at 58 000 or so if the etf gets approved it takes off if it doesn't get approved it doesn't or like what's your thought process on like end of year

price of bitcoin well i i earlier this year i thought well we're going to see whether the base effect story plays out by the fall uh we're going to see whether the transitory story is real um i think it's become clear now that the whole developed world not just the u.s is engineering kind of a soft default of their currencies. They are in synchrony, devaluing them all together. And it's kind of like swimming downstream, you know, like, no one currency is going to swim against the current, so they won't appreciate relative to the others, they're all going to devalue at the same rate, or, you know, roughly the same rate. So people won't necessarily notice it if you're looking at DXY, the dollar index. But yeah, I mean, you'll notice it if you go to

the gas station or, you know, buy a steak. And so I think there is this realization setting in, oh, wow, like the government is going to hold interest rates down and they're going to crank up inflation and they're going to engineer a soft default. How tactically do I, an asset allocator, deal with that? I don't want to hold treasuries. I probably don't actually want to hold equities because they generally do bad during periods of rising inflation. What am I looking at? And, you know, some of those allocators looking at Bitcoin. How many how much of the portfolio do you think they can put it right because i always go to if you reach that conclusion then the natural end state is i have to get allocated but if i'm buying it because i'm scared of

inflation i think inflation is going to continue i think it's going to be persistently higher and i really don't have that many other places to put it then the question almost becomes not should i do this it's how much can i do it within my uh kind of investment mandate right like what's the upper bound and so is that like a two percent a five percent a ten can people do 20 like what what do you see is kind of that upper bound i mean it just depends on like the nature of the allocator and you know you talk to institutionalists all the time like i would say family offices can do like a really material amount uh we see like you know some dgen family offices out there for sure they just have full discretion um you know pension funds i've generally found are like less

willing to consider it because sometimes they don't even have a commodities allocation um hedge funds, of course, can kind of do whatever they want within their mandate. I'd be interested to see sovereign wealths. And I think, you know, maybe this will be the year or next year without that, you know, they start to dip their toes in, whether indirectly through mining, expect that or directly through exposure. So it really just depends on sort of the nature of the allocator. Yeah. And if they do start to allocate similar to what we saw in October, November, December of 2020 into the Q1, it felt like people who started to open their eyes to inflation. We saw Paul Tudor Jones come out publicly and say, hey, you know, I want to own the fastest horse,

et cetera. They all kind of front ran the inflation, right? We didn't get the 5% prints until the summer, but they had all pretty much allocated to the asset. It was an asset that at the time had 80 to 90% of the circulating supply was held by long term holders. A bunch of new demand shows up. Price exploded upwards. It feels like now we back are from a market structure standpoint, 85% of Bitcoin hasn't moved in 90 days. And so that component of like the supply constraint is back. If demand kind of gets a second leg here, do you expect there to be like a very material kind of price increase again? Or is this something where we're more in this like grinding up and you'll just kind of every day get more and more people capitulating and buying?

Yeah. So like on the one hand, you know, it seems similar in some ways to the double bubble in 2013, where the second leg up was completely explosive. On the other hand, you know, you have to think about who owns Bitcoin. And so there's a lot of firms that own Bitcoin as part of a target allocation. And as Bitcoin appreciates, they rebalance. And so that actually eliminates some of the volatility on both the downside and the upside volatility uh you know because you see this sort of just uh targeted selling as bitcoin you know into the rally and also dip buying activity because if you if you want a five percent target

allocation uh you have to be you know strategic like that so i think that will attenuate some of the volatility um all that said i'm very optimistic about where bitcoin is i mean ultimately you know know, I think the modern central banks have lost their authority. And, you know, that even more so than inflation is the main thing that's going to drive people into the asset class. Yeah, I tend to tend to think that's right. What about the regulatory regime in the US? So we've got the SEC with Bitcoin. It's a weird thing, because they've said it's not a security, which kind of de-teeths, I think, a lot of the regulatory concerns. At the same time, all of the corporations and some individuals that support Bitcoin specifically also support

other assets. And so they have regulatory pressures that might not be directly because of Bitcoin, but because of the industry. Is that a concern in terms of like serving as like a headwind for Bitcoin? Or do you think that some of that other stuff, it'll kind of get a bifurcation or like a decoupling and Bitcoin will kind of be blessed in terms of that'll continue on. But some other stuff may get caught up i mean bitcoin is definitely present in you know industry sectors like d5 like there's definitely bitcoin that circulates there uh generally speaking i think would be largely insulated from a crackdown on you know on your d5s that where the sec has kind of uh suggested they would really go after it um there's you know strong regulatory clarity as

to what bitcoin is it's kind of considered a commodity depending on the regulator property um so there's no questions there uh it's pretty institutionalized um so i mean you know the worst that could happen is the occ uh you know puts us a step back says banks can't touch bitcoin which you know i kind of expect to happen uh but you know regardless like the sec they have a real big bark and the question is like how big will the bite be and it appears to me that they'll need fundamentally more resources to actually fulfill their ambitions uh that they're openly stating to crack down on the long tail because you're you're basically making the argument that uh if there's thousands of uh various coins that are out there and they're

saying hey you're not allowed to do this at some point it's like jaywalking right like you're not allowed to jaywalk but can we actually stop everybody no so in some weird way it's almost decriminalized by lack of enforcement and so they have to pick their spots in terms of where they do based on the resource they have today? Well, that's certainly the dominant view, I would say, is that there's kind of like a DDoS on their ability. There's just so much out there, it's hard for them to tackle things. I think they could go after choke points with the exchanges probably being primary

and then maybe even the operators of some of these DeFi protocols. They could probably try to find a way to coerce them. So I think they probably do have the ability to find leverage in their enforcement. But regardless, you know, they will need more resources to do that. And that might require Congress, you know, increasing their budget or something like that. So a lot of this, I think, does come down to Congress and their ability to act. The midterms are coming up.

I don't know if we're going to have a fully blue government after the midterms. You know, it could be split. So I think it's quite possible we get gridlock, which inhibits a lot of the government's plans to sort of tackle the crypto industry. What's fascinating to me is we have Senator Lummis, we have Congressman Davidson, we now have Ted Cruz kind of raising his hand and saying, hey, I'm really educated on this stuff. There's a number of other congressmen or senators who appear to be either one very educated on this stuff or two are being supportive and kind of saying, hey, look, we need this in the United States. but there's also a lot that aren't right and we've seen everyone from the brad shermans of the world etc who are even elizabeth warren they're just outright against it and they would love to see

the industry go away is that just politics as normal or do you think that there is uh competing agendas like i read a lot online and people are like oh you know the uh brad sherman's biggest donors are the credit card companies and i'm like maybe or like are they really that smart like it like is there really this big kind of conspiracy or is it literally just no some people are open minded about innovation, other people aren't. And so that's where they kind of fall in line. Yeah, what's funny is, I think the banks are going to eventually be big supporters of Bitcoin. Because, you know, it ends up bringing more vibrancy to their business model, there's more things they can do. You know, they're, you know, they'd like to get active in the industry,

it's like an interesting way to earn new sources of revenue. So I don't think the bank lobby would really ultimately be that hostile to the industry. I think where the where the split actually does fall is in terms of the ideology of how much authority and insight the government should have into our transactions. And so we kind of see a split developing between people that think, well, maybe like, you know, the Bank Secrecy Act was an overreach. And maybe we ended up with a structurally unconstitutional level of surveillance. That's obviously my stance.

And so, you know, those folks tend to be more sympathetic to Bitcoin. And then the opposing camp is, actually, we should use finance to project political ambitions into the economy at large. So use financial rails to actually impose kind of government mandates. And there's a whole other camp that believes that. They tend to be hostile to Bitcoin because Bitcoin gives you transactional freedom and some measure of privacy. And they tend to be in favor of a CBDC. And so that is kind of the split that I see, which is a genuine and non contrived ideological divide. And I don't see anyone on the CBD side, CBDC side ever, you know, crossing over to Bitcoin, regardless of how well we explain it to them. Yeah. You know, we talked yesterday about the Janet Yellen interview on CBS News, and they asked, you know, about peeking into Americans pocketbooks. She's like, that's not what we're trying to do here, whatever. And the first thing that I went to was, look, again, right now they have to ask. They either have to change the policies, right, and get like regulation here, or they have to use the courts.

And so there is some checks and balances that are in place. Now, again, you could say that it's kind of like that one video where the guy is outside as a security guard. He basically is like not really checking folks, right? There's an element of like you just go to the court like, hey, we think they're doing bad things, right? Like, okay, here you go. Get their financial information. But at least in theory, there is something. But the central bank digital currency, like it's over.

Yeah. Right. And now it's all of a sudden you operate on my system. I can see everything. And to me, that is, in some weird way, an argument that is very pro-Bitcoin from a sense of once you digitize all the currencies, there's no technology competition. Value is free to flow with very little friction or cost to kind of the soundest money. And so, you know, if I have a good currency inside of the American economy in the U.S. dollar and I want to go to Mexico to the peso, it's really hard with the switching cost. If I could just do that on my phone, now all of a sudden, where's the competition go to?

It goes to like a monetary policy competition. And I think we're all pretty much in agreement that like Bitcoin is different. Now, is it right or wrong? We'll find out in the market. But because it is different, the switching cost goes down by digitizing the other currencies. Everyone gets digital wallets. Like now you're going to just see more capital flow in some weird way. It's like that savings technology.

Whereas right now the friction is really high. Is that sound right? I buy that. Yeah. I mean, the other thing is, I think the growth and existence of a CBDC would more strongly motivate people to seek out alternatives, because at that point they're realizing, oh, we have a borderline social credit system in this country. Because it's not like the U.S. government doesn't have a history of using banks and bank policy to control what regular people can do. Um, there is a well-known operation called Operation Chokepoint, where the FDIC and the DOJ instructed banks to instruct payment processors not to service certain industries.

And, you know, it doesn't really matter what industries they were, frankly, many of them were completely legal industries. So, you know, we've seen through this kind of, you know, kind of really indirect, non-disclosed untransparent approach we've seen uh government trying to make policy through the bank sector now if they have the direct ability to do that with a cbdc uh it would just give them a huge amount of control over who can make money and how uh and so i think that'll cause a lot of people to do a bit of soul searching realize okay do i want this system or do i want like this other system actually seems more american yeah oh i don't let's not go down that path because i

completely agree like it's been hours talking to you guys got any other questions i'm all good people in the chat also continue to say uh the most violent man in bitcoin so you're uh you're living up to your uh i gotta do something about it you got some more street cred for joining the union too yeah oh yeah dude you already forgot oh yeah no no no no no no no no no no no no no no sounds like the union is doing these are ready we'll send them over is this the pitches you ask them to join then you hit them with the dues well it depends on what the benefits are sorry we'll talk but we should launch a general strike over here the first time by the way that uh they said they were going to create a union i turned to john i said hey john i'll pay you not

to join the union he goes well how much i said there might not be everyone's got a price i'll split it with you the problem is you can't bust the union because there's no substitutes for your brothers so facts well we have two other brothers but they won't come on camera so no no but they won't come on camera so we're good unless there was like a big paycheck and then they probably would immediately the union knows what we're doing don't worry who's in charge of the union by the way john and i co-heads oh yeah now we got an advisor as well before i know you guys have all-star lineup of folks all right um where can we send people let's send people to uh your twitter anywhere else that uh that you want people to go twitter is number one uh if you want the

full archive of my content that's my personal website nickcarter.info all right um that's where everything goes follow nick on twitter you've been you've been coming after some fud recently i've seen tell them what you said before you got here john if there's fud you'll find it that's a compliment he said nick he said nick carter will find fud anywhere on the internet he'll take a task i was trying to try and tackle some fud tonight actually about you know the some of the stuff i said about the texas grid you know some uh some phd environmental science came at me yesterday really you hate to see it what did they say they said that the math was wrong but his math was in fact wrong so let's go see this this is where uh the best part about the flood bus thing

is that it always goes back to like super provable things like math if you're gonna create all this FUD, just stick to things that aren't provably. It's like transitory. It's the greatest FUD in the world. Because you say transitory, nobody can measure. Yeah, it is transitory. It's not. Nobody can disprove you. Nobody gets to be the judge. There's nobody who's like, well, if it hits 5.6%, like, no, it's just transitory. And literally, if we have high inflation of over 5% for three years, the transitory camp will say, see, it went down. It was transitory. Like it's the ultimate FUD. But one of the beautiful things about Bitcoin is we can actually retire one of the fuds like the fud can be over which is the china fud yeah oh well well

actually not quite there's what there's one person that uh still is gonna hold on to it but other than him someone said uh fud busters in the chat so fud busters i mean the china fud is almost over but now we have the usa fud is there too much hash rate in america which i am not going to apologize for i'm proud of america being the number one us yeah well it always comes from very interesting people and i think ultimately if you strip away the like nuance uh micro arguments and just say hey are you just anti-bitcoin they're always going to find something yeah right and it's like oh you guys are taking renewable energy and you're acting as a sponge right and then it'll be like well we think that uh it shouldn't be windy and you're like wait what like they'll just

continue to find it yeah people actually complain that bitcoin uses renewable energy which would otherwise be used by the grid which is actually just not the case not true but you know the problem is the critics don't invest the energy in learning about how the grid works so um i can't get them to learn i can't believe i'm gonna bring this up real quick as we're ending but i'm gonna do it did you watch any of the clips of sanjay gupta going on joe rogan's podcast i saw some yeah okay so i watched three clips or each two minutes they were the ones that were going viral online and my biggest takeaway was actually a correlation back to bitcoin which is uh the people of which the media puts the most um kind of validity on their commentary

who only exist in that world become exposed when they leave the controlled environment. And like, I don't know much about Sanjay Gupta. He's always seemed like a smart guy to me, you know, very medical focused, not kind of politicized, whatever, from what I could tell. And that was my biggest takeaway was, wow, I'm watching a clip of him in like a longer form conversation, very different than the guy that you see on TV in 30 seconds. And I think that the Bitcoin critics are very similar. They're very good at what's the 30 second hit but if you get them into a nuanced conversation it's a massacre and that's why we need alternative media bbb that's why you got to keep growing the show i mean like you really do

because there's a crisis of confidence in our our media elites and our authorities we need alternatives