The Wolf Of All Streets - Bitcoin Will Hit $288,000 | PlanB, Creator Of Stock-To-Flow Model Explains Why

Episode Date: May 20, 2021

With over 25 years of experience in institutional investing, PlanB migrated his skills over to the world of cryptocurrencies, creating Bitcoin’s famous Stock-to-Flow price predictive model. Praised around the world for its stellar accuracy, PlanB predicts that Bitcoin will hit $288K or even higher during the current cycle. PlanB’s confidence in the model is so strong that he believes the leading cryptocurrency is more likely to reach $250K or $300K than it is to plateau around $100k during this cycle. In this episode, PlanB explores: Market predictability Supply-side shock The Stock-to-Flow model $288k Bitcoin The fall of the dollar A one hundred trillion dollar note The cash and carry trade The S2FX model Being halfway through the cycle A million-dollar Bitcoin --- Nexo Try Nexo’s full-suite, instant crypto banking service, featuring: savings accounts with up to 12% interest on crypto, stablecoins & fiat; flexible crypto-backed credit lines at just 5.9% APR; an exchange with 75+ crypto and fiat pairs and best-price guarantee. All this and more wrapped up in a single Nexo Wallet. Start banking at https://thewolfofallstreets.link/nexo or download the app on Google Play or the App Store. --- Cosmos Visit https://thewolfofallstreets.link/cosmos to learn about the Cosmos Hub and how the $ATOM can connect every blockchain. Cosmos is the port city connecting chains like Bitcoin and Ethereum to ensure your liquidity on any chain can be used anywhere. Find new staking opportunities, applications, or build your own parachain at https://thewolfofallstreets.link/cosmos --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast. We are all fiercely passionate about holding Bitcoin, but it is an undeniable fact that almost all of us still ponder in the back of our heads where the price is really going. Some traders prefer to come up with their own predictions. Others seemingly enjoy reading crystal balls or using astrology charts. Arguably, most popular model ever is stock to flow created by Plan B, today's guest. This famous predictive model has been utilized by analysts worldwide and has become one of the most famous tools for interpreting Bitcoin's price action. I can't wait to learn more about his models and where he thinks we are at in the current cycle. Plan B, thank you so much for

coming on. Scott, thank you for having me. So before we get into the questions, you are listening to the Wolf of Wall Street's podcast, which airs twice a week. I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics. This podcast is powered by Blockworks, the fastest growing media company in the digital asset space. Blockworks has 20 Bitcoin and crypto podcasts. I'm excited to be a part of the network. You can visit them at blockworks.co to check them out. And you can find everything else about me at thewolfofallstreets.io. Now to get in today's episode. Listen, one of the most common questions I get asked and asked us is where we are at in this cycle. You probably know better than anyone else. So I know this is a tough question, but would you mind sharing what your current thoughts are on this? Sure. Yeah. Short

answer. I think we're somewhere halfway and I'm, you know, I'm very data driven, so I don't make that up, but I read it in the data. Of course, data can be read and interpreted in different ways, but I look, of course, to my stock to flow-flow models, the stock-to-flow model and the stock-to-flow X model, which was the later model, as most of you probably know. And both models actually show that we're certainly not at the end of the cycle, that we still have some room to go until 100,000 on average or 288,000 on average if you if you follow the stock to flow x model but it's not only the stock to flow models that I look at I also look at on-chain data and

I make my own on-chain indicators so I don't't use the Glassnode or Coinmetrics data, which is awesome, by the way, but I extract all the data from my node and crunch it. And if you look at the on-chain data, which is a treasure for making signals and picking up patterns, if you look at that unchained data, it is very clear that we're somewhere halfway with a shortage in coins building up until levels that was, yeah, well, exactly, actually exactly half of the levels and the shortage levels in 2017 and 2013. So I'm, from those two angles, pretty sure that we haven't seen the top yet. Although, of course, I have to put in a disclaimer,

it's all crystal ball here. Markets should not be predictable. So, yeah, either this on-chain data and the model gives some insights or I could be wrong, of course. But, yeah, no, for me, it's pretty clear. When you're talking about on-chain data that you're comparing to previous cycles, are you talking about exchange outflows? Are you talking about how many whale wallets there

are holding a certain amount of Bitcoin? What kind of data are you looking at on-chain? Yeah, it's exactly what you say what you can see online of course are all the transactions and all the utxos so i look at the stock of utxos that's out that's out there so how is these uh 80.7 million bitcoins that are out there how are they distributed over the years? Are there old coins? How many new coins? Are they big coins or small addresses? Is it from known addresses like miners, for example? You know, all the miner addresses. Exchanges, you know, the addresses.

And there's lots more addresses that you know. Whole libraries of entities that we know the addresses from. So yeah, you can also from with algorithms, you can cluster certain transactions in a way. For example, if there's lots of inputs and only one output, that's a certain kind of transaction. If there are lots of inputs and lots of outputs, say 1,000 inputs, 1,000 outputs in a transaction, that's a certain kind of transaction.

So you can categorize transactions as well, even if you don't know exactly what they are. And, well, from all those patterns, you can see, well, you can, for example, see who's selling, if they're altcoins or new coins, and what kind of entity they come from. So yeah, that's basically what I do. I count transactions from a certain kind in the stock of the UTXOs that's out there now, but also in the flow of the outputs that are spent last month. So you can look at all the outputs that are spent and see, hey, who was selling? And I'm particularly interested in that. So who's selling?

Yeah. Well, the difficulty is that I have two main indicators and they are proprietary, so I can't tell you anything about those but yeah of course the weak hands are selling right yeah and people taking profit so i see both especially the people that are that have entered the market a couple of months ago they're looking at three four five x profits and well if you're in the Bitcoin market for a couple of years, that might seem like an obvious normal thing. But for a normal investor,

a traditional investor that got in in Q4 2020, that is an amazing thing to see, to see five X returns. So they will, you know, they're human. They take the profit. They want to see if it's real. the money and run so to speak so do you think that we are seeing supply side shock on exchanges and do you think that that's increasing yes yeah i don't particularly follow the exchanges that much although although i follow the work that Willy, Wu, and Clementa are doing there, of course.

But I always have that feeling that they have other addresses as well, like a cold storage or addresses that are not known to the algorithms. So I don't find them very, very reliable enough for trading. But I do see the shortage on-chain as well, not only on the exchanges, but also on-chain. So the shortage is real, and it's building and building and building. It has been building for months now and accelerating since December.

So I would love to hear, I'm sure you've told the story many times before, but how you initially developed the stock-to-flow model. Like I said, it's become universally known. Everybody in the Bitcoin space refers to it, uses it. I'm sure there's people who tell you it's terrible because we all know that it's never one-sided, but how did you develop it in the first place? Yeah. So because my background is institutional investor, and as an institutional investor, you always need a fundamental model. And of course, for stocks, we have it, discounted cashflow models, the same for fixed income instruments or derivatives. It's all based on cash flows. But as soon as you go to commodities, for example,

gold has the same problem as Bitcoin. There is no cash flow and there is not a, how do you value such an asset? And for Bitcoin, there wasn't really much out there. A lot of technical analysis, of course, which I'm very familiar with, but not fundamental valuation models. the ratios metrics that I knew from the commodities investing world. So stock to flow ratio, the amount that's out there above ground for gold divided by the supply of

gold, which is about 60. So the stock to flow ratio of gold is 60 years of production above ground. That is a very well-known measure to measure the scarcity, in fact, of a commodity. You can do it for platinum and palladium, silver, etc. So that was my first thing to look at because I thought the one thing that makes Bitcoin attractive for me as an investor at the time, and still, by the way, is its scarcity. The fact that there is only 21 million coins ever, and nobody, really nobody can change that, can increase the supply. So the scarcity is the key thing that drives the value.

And how do you measure scarcity? Well, stock-to-flow ratio was a well-known measure. So from there, I just did one and one is two. I got the stock-to-flow ratio over time from Bitcoin and plotted it against the market value of Bitcoin or the price. And if you do that on a logarithmic scale, which is very important if you have prices like Bitcoin and look at a long horizon. I mean, for trading on a daily or monthly, it's not important. But if you look at it over years, very important.

And well, if you plot stock-to-flow ratio and market value on a log-log scale, you see a straight line. And that's amazing. So I formalized that with a regression analysis, plotted a liner through the data, and that was the model, basically, which is interesting, by the way, because it's not about the levels. The mathematical way to interpret the model

is that a change in stock-to-flow leads to a proportional change in the value of Bitcoin. So a doubling of stock-to-flow leads to 10x, for example, in value. And that is proportional, that ratio between the changes. And how does the halving play into the model? Yeah, the halving is crucially important because that's the moment where the stock-to-flow doubles. So the stock-to-flow increases every day, every 10 minutes, every moment there's a block, there is more stock.

And the supply is sort of the same between the flow, sort of the same between the halvings. But at the halving, yeah, the stock-to-flow doubles. So that delta is crucially important in the stock-to-flow model. And that's exactly what you see in the data, of course, because the price jumps, the big price jumps in Bitcoin are always a half to one and a half years after the halving. And that could be a coincidence, right? That's what the critics of my model are saying. They could be right. I think they're wrong. I think it's a very distinct pattern that the halvings push this supply shortage and accelerate this trend and then lead to a relatively high price increase shortly after the halving.

How accurate has stock-to-flow been looking back? More accurate than I could ever dream a dream really to be honest yeah and i think maybe we we take it to um literally because it it could be way more off to make it still um valid uh currently it's tracking like a train. It's really unbelievable. But the most important thing that the stock-to-flow model is predicting is that mean, that average value after a halving, which is $100,000 for the stock-to-flow model and $288,000 for the stock-to-flow cross-asset model. But it's really that jump to those levels and the four years after that halving that are, for me, the most important. So the fact that it's tracking like a clock right now, yeah, I don't think it's a coincidence either, but whoa, whoa, whoa.

It really is pretty incredible. So what made you then, I mean, stock-to-flow has obviously been scary accurate. What made you then, I mean, stock to flow has obviously been scary accurate. What made you develop stock to flow X, adding all these other assets into the model? Yeah, there was a discussion at the time, which was very interesting about the stock to flow model being a time series model. And time series model means that it's only based on the time series of the stock to flow and the time series of the price of Bitcoin. And the problem with time series models is that they can be spurious. They can be nonsense.

And there's lots of correlations out there. There's lots of fun websites also with examples of correlations that are there that can be measured, but that are not very useful for predictions because it's nonsense. For example, the Bitcoin price goes up on average every year and the beer consumption in the world or the population in the world goes up every year. So there will be a nice correlation between those two as well. And yeah, well, of course, you don't have anything that's not very useful for prediction. But anyway, so the time series model was heavily debated. Co-integration was one of the terms because co-integration is a test

that you can do on time series and if it's present then the chance that a time series correlation in time series is spurious is a lot less and indeed the cointegration tests were positive so there was cointegration but the discussion continued that,

well, one of the time series, the stock-to-flow time series was deterministic. It was not random, not stochastic. So we cannot use the test. That was a bummer. But another, so cointegration was one way to solve it or to circumvent it, to make sure it's not spurious. Another way is to abandon the time series world altogether.

So not look at the historical Bitcoin stock-to-flow ratios and prices, but also look at other assets. For example, gold, silver, and later diamonds and real estate. And amazingly, what you see is that if you put the stock to flow of all those other assets and of Bitcoin, and I took four clusters of Bitcoin that I interpreted as different assets. Bitcoin evolved as a proof of concept asset to a sort of value asset, to a e-gold asset, if you will. But if you look at those four Bitcoin clusters combined with gold, silver, diamonds, and real estate, those are also on a straight line. So I was very

amazed to find that. And so the stock-to-flow cross-asset model has one more big advantage over the stock-to-flow model next to the fact that it has less chance of being spurious. And that is that you can interpolate because we have an asset that has a stock-to-flow value of 60, that's gold, and we have an asset that has a stock-to-flow value of 100, and that's real estate.

So we can predict the value of Bitcoin to be within that range of values, so above 50, without extrapolating. We have those assets and those data points in our data. So we can just interpolate from the data that we have in there. And that makes it so much more reliable because a time series model, well, we cannot see in the future. So we always have to extrapolate those lines

and that is less reliable. So yeah, I saw that question on your Twitter, on your tweet. So which one does Plan B prefer? And that's, of course, the Stock-to-Flow X model, the $288,000. That makes a lot of sense. So I guess the big question for people is the model's been exceptionally accurate. Like you said, it's tracking like a train.

Let's say we get to $285,000, then what happens? Yeah. Well, if it goes to that levels, and by the way, I also think it's more likely that it goes to 250 or 300K levels than 100K because it is consistent with thinking that we're halfway into this cycle. We did 5x from when Bitcoin was 10k. We're now at 50k plus something. So that's 5x. So the jump to 100k is so small compared to what we already have. So another 5x takes us there, right?

Right. compared to what we already have. So another 5X takes us there, right? So, yeah, well, one thing, the $288,000 is an average. So to have that average over the four-year period, we have to be far above that, because right now we're far below that. So I think, actually, if this scenario plays out, that we could see prices of 400,000, 500,000. And then after that, yeah, a bear market that could go as low as, well, maybe 100,000 to 200,000 again.

So maybe even a little bit below that. But yeah. So you could see a repeated 80 to 90 or 80, 85% retracement like previous cycles, because obviously in market euphoria, we start to see the, it can never go down sort of mentality, the idea of super cycles, the concept that we have an institutional floors, they would never let it drop more than 30 or 40%. But cycles are cycles, right? That's Yeah, that's exactly how I see it. I know it's a big debate at the moment that we were going to see a super cycle and that now the institutions are in. We will break all models and there will not be cycles anymore, no bear market, or at least a less deep bear market. But I don't think that's true.

Like you said, I think there will be FOMO at the top and there will be fear after it because something happens and the new people that FOMOed in, they will be scared and they will sell. And of course, the minus 80% drops are always measured from the very top, right? Correct. The very top is also an outlier basically in my world. So both the very top and the very bottom are, well, I think less interesting. And it's the average level that's very interesting.

What's interesting is that my team actually took the top 20 or 30 price predictions that they could find. This was months ago and averaged them all the way from the bearish people who said 3,000 to the full on moon boys up to a million. And the average was about 235,000. And there's the old parable of the ox, which says that, you know, humans are very bad at making predictions, but in a group, if you average all of the predictions, you actually get very close. And we got to 235. Wisdom of the crowds. I used to work at a dealing room in my early days of my careers, and there were 400 traders there, mostly foreign exchange. And that's what we did as well. We were just polling everybody and see what the average was. And most of the times,

that's a pretty useful indicator. So you talked about the idea that when you started looking at Bitcoin, scarcity was the most compelling property for you. It's what attracted you to the asset and what made you use the stock to flow model. Now we're seeing the mainstream adoption of the idea of digital gold, e-gold, gold 2.0, however you want to skin it. What made you so interested in it that early and really lock in on that attribute of Bitcoin? Yeah, because it's the one thing that Satoshi Nakamoto always mentioned. And basically the reason why he invented Bitcoin and all the people before him were trying to make something like Bitcoin. It was the debasement of currencies, the debasement of the dollar now.

That was the main cause of, yeah, the main problem that Satoshi Nakamoto saw and that Bitcoin was the solution for. Because as long as there has been fiat money and governments, even as far back as the Romans, the governments debased their money and stole money from the population, basically. So the denarius had a silver content of 95% or 90%, but it went down all the way to 10% or something. And that coincided with the decline and fall of the Roman Empire, of course. So the birth of Bitcoin in 2008, October 2008,

when the white paper appeared, that was, of course, the top of the global financial crisis, 45 days after Lehman Brothers default, and the exact week when it was published by the US government, that they would save all the banks and would be engaged in quantitative easing, which is short for debasement.

I think if Satoshi would see today what the government is doing after the COVID crisis with the trillions and trillions of dollars in stimulus and quantitative easing, he would have laughed and seen, yeah, well, this is exactly what Bitcoin is made for. And you see it playing out beautifully. So yeah, for me, it was clear from the start. And Satoshi talked about it oftenly. So listeners who don't know this, all Satoshi's emails and forum posts

are available in a book, but also on nakamotoinstitute.org. You can read it. It's like a thriller. It's amazing. That's crazy. That guy was so smart. Yeah, really incredible.

So speaking of printing trillions and trillions and trillions, your Twitter name is not actually Plan B, your handle, right? It's 100 trillion USD. Can you talk about why you named yourself 100 trillion USD? Absolutely. It was exactly to point towards the debasement

that the Zimbabwe government, of course, did also in 2008, by the way. So a one Zimbabwe dollar was, well, approximately a US dollar one day. But then the Zimbabwe government, for whatever they wanted to do, they set the printing presses on. And the hyperinflation in that country destroyed the country. And the notes from that time, the 100 trillion US or Zimbabwe dollar notes are still a collector's item. So I always have one in my wallet, a physical one, to remind me of why Bitcoin is here, what the main reason is why Satoshi made this

invention, basically. And yeah, so that's why I made the Twitter handle. And I'm assuming that that gives a very obvious answer to why your name is Plan B. Yeah, yeah. You know, because I quit my job in March 1. But before that, I've been 25 years into institutional investing. So I've seen quantitative easing and central banks printing money from very close. And yeah, I basically dealt with that every day. So I not only saw Bitcoin and what Satoshi and the whole group of programmers and people before Bitcoin did with that. But I also saw the macroeconomic context that was deteriorating very fast. And yeah, the quantitative easing is not a good thing.

Of course, central bankers will say the exact opposite, but printing money through the ages has been has has one one outcome and that's clear winners for the the ones who get the money first that's the governments and the banks and the rich people and clear losers and those are the normal people that that get left with hyperinflation basically guys it's time to wake up and go earn some money. One of the most exciting use cases of crypto is both to earn yield and take low interest credit loans, especially since your actual bank is giving you Nathan Nada, nothing in interest. Necto is leading the charge in this arena with 360 degree crypto banking services. If you're just looking to park

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sponsoring the podcast and newsletter, a grassroots community is doing it. The Cosmos community is extremely passionate and active. And because of that, cool things like this sponsorship can happen. Their Atom token has been absolutely on fire and solidified itself as a top 50 coin by market cap. And the Cosmos platform has so much in store. Now, if you don't know about them, Cosmos is effectively the port city connecting chains like Bitcoin and Ethereum to ensure your liquidity on any chain can be used anywhere. One of the things I'm most excited about is their new DEX, which is coming out, which will connect to any blockchain.

So you can swap ETH, ERC20, BSC, or any other token with Atom. Plus, this DEX will have order books just like any centralized exchange. So it'll feel familiar trading just like you do anywhere that you've traded before. This is a first. It's never existed until now. You need to absolutely check them out at thewolfofallstreets.link slash Cosmos, C-O-S-M-O-S, and see everything they have going on. Do you think that people just don't understand that and that's why they play into these fiatiat based systems. I mean, you touched on it. There's never effectively been a successful fiat based system, correct? I mean, it's literally built on debase security and debt and screwing over the little guy in favor of the big guy. So why is that the system that's been adopted everywhere when only 40 years ago,

we were on a gold standard in my country? Yeah, absolutely. I think that's a game that has been played for hundreds and thousands of years. And it works because people, most people don't know and are not interested in money. I mean, we're traders, investors. It's our job. It's our interest. It's our passion. But most people don't like to talk about it, don't know much about it. And it also takes a level of interest and curiosity and intellect to really understand it. And that in a world where a lot of people can't read, for example,

and also a lot of people are not very good in numbers. So, for example, in Europe, about 50, and I think in America it's not different, half of the people don't have savings. So they have like 500 bucks or something. But if the car breaks, if the freezer or the dryer breaks, they're in big problems. So they live paycheck by paycheck.

That's half of the people. So they're not busy with saving money, let alone investing money. And then also half of the people do not really know what a percentage is. So that might amaze you, but all the institutional institutions, the banks and the insurance companies, they have to put marketing material out and they have to test that from the regulators, that everybody can read it and understand it. And there's not the small print. And one of the things that we have to keep in mind is that indeed, half of the people does not know what a percentage is. So,

well, good luck talking about interest rates. Right. Yeah, that makes perfect sense. But it can't be a coincidence that they also don't bother to teach us about our money. Right. And you would think that money being at the center of literally everything we do. I spoke with Robert Breedlove. He had amazing points about it. But he said, you know, we even think in money and we dream in money and all of our thoughts are denominated in money. But you don't go to school and learn about your monetary system why is that yeah it's amazing i don't know i don't even even when you study economics you get very not much about money not much about money maybe

if you do financial economics and investing you get cash flows and stuff but but what money really is and how it's made and how the central banks work that is a very exotic part of finance and even that exotic part is um focused on uh on kane's uh ideas about um and maybe fisher but but not hayek and not uh nash and not Nash and not all the others, Mises and Rothbard. It's very focused on just a few guys and just a few ideas. It's interesting, though, because we love the meme statement in our community, Bitcoin fixes this, right? And people apply that statement to basically everything. But to play devil's advocate, we know that Bitcoin is a perfect hard money and a store of value. But if you're one of those 50%

who can't afford to fix their car and lives paycheck to paycheck, what can Bitcoin do for you? Yeah, good question. I mean, it doesn't fix your cash flow problems. So you have to earn more than first. You have to have this emergency savings account that you can use if the car breaks. And you have to have that before you go into Bitcoin because, of course, Bitcoin is not for everyone.

I think you should invest in Bitcoin what you can afford and you're happy to lose because otherwise the volatility will shake you out so if you're really poor i think i don't know if bitcoin is is of much help certainly not in the first world you know i don't think if you're poor in the united states i do think that you should buy your five dollars worth ten dollars worth try. But if you're living paycheck to paycheck, inevitably, you'll need the money. But if you live somewhere like Argentina or Zimbabwe, Iran, Lebanon, Venezuela, I think that when you literally can't use your own money or even access your own money, that maybe

that's a case where people with lesser means can actually use and see the value of Bitcoin. Yeah, absolutely. Yeah. And also people with a lot of means in those countries. So if you have a lot of means in Turkey, for example, or Zimbabwe at the time, or all the countries you mentioned, Bitcoin is the solution. So even if you get 80 cents on the dollar, you're saved because you have it in hard money. You can take it with you. You can leave the country.

And yeah, that's a big, big solution for people with means in countries with predatory governments and also in countries with capital controls like China, South Africa, even Turkey, for example, where you cannot, even if you have the means, you cannot move the money outside the country. That's a big problem.

And Bitcoin is a big solution. It's a big solution, but you have to wonder what they're going to do to try to prevent that from happening. Yes, it's a rat race since 2008, I would say. It has been a rat race. And I think it will eventually accumulate into one big battle that is still to come. I don't think governments will roll over and surrender to Bitcoin. I'm pretty sure.

Yeah, it's just such an interesting conversation for me, that sort of dichotomy between wealthy people who need a store of value and the poor people who could probably benefit from Bitcoin, but they don't need a store of value because they have no value to store. Yeah. Right? And then it leads to that sort of cognitive dissonance where maybe there's an argument that Bitcoin is for wealthy people,

which is not what we want to hear, right? No no and i can imagine a use case for remittance for uh for getting money into the country uh on on a on a better in a better way in a cheaper way more efficient way than through the official channels that all take their their peas and cut and uh so bitcoin you can just send money from even if you even have access to those channels right i mean we know that most people are unbanked or underbanked and i think that a really important use case maybe for stable coins as well obviously but you know micro payments it's one some people literally want to send a family member ten dollars in a foreign country right and you literally cannot do that with fiat.

Yeah, and that's where Bitcoin can be a big solution. Absolutely, yeah. It's even, yeah, the poor countries are poor for a reason, right? They're kept poor by the rich countries as well. So, you know, one of the first things that that the imf does if it if it's going to restructure a country is is put a lot of debt in there a huge loan that you can never pay back yes it's the same playbook everywhere we've had the united states has ever gone well excuse me the imf not the united states yeah we all do it. We all do it. World Bank, right, yeah. So yeah, so governments

could maybe, yeah, take another scenario by taking the Bitcoin route instead of the certain death IMF route. But yeah, I think that's a big, big step to take for governments also in those countries. Okay, so then the next question there is, when do we see these smaller governments, oppressed governments, third world, whatever you want to call them, we've obviously seen it with some countries trying to avoid sanctions.

When do we see Bitcoin starting to hit the balance sheets of these central banks? Yeah, that question bothers me every day. That's a key question. I think it's too early now, although I wouldn't be surprised if some countries are already doing it in secret. But it's such a logical thing to do for countries.

So I guess it would be maybe after the next halving in the sixth phase, 2024, 2028. But it would be such a logical thing to do for countries that already have monetary bases that are much smaller than Bitcoin right now. If your monetary base of your country is less than $1 trillion, which is, I think, 130 countries in that.

We can print that in a day here, no sweat. Yeah, yeah, yeah. But those countries, it would be very beneficial to them if they adopt the Bitcoin standard, especially if they cooperate. For example, Africa. I mean, in the United States,

there's more than 50 states cooperating with a single currency and trade zone. Same in Europe with more than 25 countries, Euro, trade zone. Why don't you do that? Why would African countries or South American countries not

do that kind of cooperation, adopt a hard money like Bitcoin and you would be laughing at Europe and US within a couple of years. So I'm sure there's people thinking about that in those countries. Yeah, I think in a lot of places,

obviously it would be culturally difficult just because of longstanding rivalries and wars and things like that. But yes, logically that makes a ton of sense if they wanted to compete to adopt the Bitcoin standard and do it amongst many, many countries. I'm curious, though, knowing that central banks will continue to misbehave, that they'll continue to print money, quantitative easing.

What is the endgame for the dollar specifically? Because it's still the global reserve currency. There still seems to be endless demand for dollars. And we love the narrative, or people seem to love the narrative that it will explode and go to zero and Bitcoin will become the global reserve currency. But do you really see a time when the United States looks like Venezuela? Well, maybe not that, but I certainly see a time where the US dollar is not the reserve currency anymore. It may be worth much less than it is today. And in fact, that's very logical too,

because maybe for non-Americans and especially for Europeans, it's a much easier thought than for Americans themselves, because we just went through a loss of all national currencies and adoption of the euro in the year 2000. And that was, well, not unthinkable, but a very weird thought at the time. And I know it very well because I was in a financial function at the time. Right.

But it can happen overnight. And it takes a cooperation between a lot of countries, some clear rules. And then, well, tomorrow you'll have a new currency, whatever its name. It could be the SDR that the IMF has or the Bancor or whatever. There's also the Chinese, of course, that are looking at the U.S. with their reserve currencies and all the perks that go with it, and they're not happy with it. So I guess in the logical scheme of things,

there would be a world currency at one day where all the, well, now big countries will have a seat at the table, especially including China. So I think all the global, all the central banks are talking about this particular issue, about a new Bretton Woods moment, as they call it. I think Mark Carnegie, the UK central banker, talked about it first a couple of years back. But now everybody is talking about this new Bretton Woods moment. And that sort of implies a new world currency, a new reserve currency with a lot of, yeah, winners and losers. Let's call it that way. Yeah.

I mean, I can't imagine them actually successfully pulling that off, but let's live in a world where all the countries of the world come together and come to an agreement on that. What does that mean for Bitcoin in a future like that i don't know really yeah i don't think bitcoin i don't think in the first stage bitcoin will have a role in that i think they'll they'll the central banks and the governments will try to keep the control of the money supply of Of course. Because that's their... That's what they do. Yeah, that's their source of income. And so Bitcoin will not be a part of that. But all the losers in those systems, when a move like that happens,

all the losers will fly to Bitcoin. And the losers are always the people with money, right? The people without money cannot lose anything. So in this kind of transitions, for example, you saw that we saw that with the Euro, all the money is in Germany and the Netherlands also, but a lot of purchasing power, about 20% was lost overnight in such a move and people will see that coming months or maybe years beforehand, and they will start hedging, which I think they're doing right now, because everybody knows this is coming.

And the current debt mountain is not sustainable. So the owners of the debt will, of course, be the losers. Do you think that central banks right now have another option? I mean, I've heard a lot of arguments that, yes, money printing is bad, but what's the other choice, right? You allow deflation, you go into a depression, everybody loses their jobs. So is there an argument, I mean, based on the current system without changing it, do they have another option? Yeah, yeah, yeah. They just invent a new money the new currency so they they die off the old currency with all the debts and um and then introduce a new currency they do that over and over and over so debt's meaningless that there

is the argument people say why not just uh keep increasing the debt because it's meaningless well that's mostly government people and poor people saying that. And not so much the banks and the insurance companies and the rich people that own those debts. Our debts don't disappear. I always say for every debt,

someone's debt is another one's asset. It's so true. And the ones who own the debt, they're not happy. And for example, the US debt is owned by Chinese government, of course, for a very big part.

And pension funds, the pensioners are the holders of almost every asset in the world. On average, the young people are poor and the old people are rich. So the losers in those kind of moves are always the pensioners. Well, speaking of pensioners, that's sort of pensions, endowments. That's sort of the wall of money that hasn't entered Bitcoin yet.

There's a lot of arguments for why. Obviously, maybe they don't want to secure the assets. It doesn't get past the risk management department to have to custody the asset or they're not comfortable with GBTC. Do you think that we will see endowments and particularly pensions entering Bitcoin with, say, an ETF or some sort of other asset or some sort of catalyst? Yeah, for sure. For sure.

And there are different kinds of pensioners, of course. So if you're very rich and you have your own pension, you can just do it yourself, right? You can buy Bitcoin. And most millionaires and billionaires are, I think, already a little bit in. I agree. But if you're a pension fund that runs the pension fund of the police or the teachers or a big bank or something, then, of course, you're very heavily regulated with capital regimes that are forcing you to buy government debt instruments because you have zero capital charge. And they punish you when you buy, well, I don't want to say good assets and performing

assets, but for sure they punish you with large capital charges if you buy Bitcoin, if they even allow it. So with that respect, there was one pension company, one big insurance company in the US that lately... Mass Mutual maybe. Yeah, Mass Mutual. That was the one that actually pulled it off. So I don't know if they had the permission of the regulators or they just did it and were reprimanded before or how the regulators look at that it's a bit quiet at that front but uh yeah that was a very very interesting move towards a um well normal uh pension fund or institution that would uh go into bitcoin but you know i I worked at one for almost all my professional life. And there is so much compliance, legal restrictions, regulators and central banks that are trying to stop this, that I don't see that happening anytime soon, at least not in my country.

So are the regulators, do you think, certainly we think about it all the time in the United States, do you think that they're the biggest threat to Bitcoin? And do you think that it's within their power to trigger a black swan event that could really end Bitcoin? Or do you think that now we're outside of their jurisdiction to some degree? No, I think, and most people think this, I know that from the polls that I did, I think the government and the central bankers are the number one risk for Bitcoin. I don't think they can outright ban it, of course. And certainly we see regulation instead of banning at the moment in most countries, also in the US, with regulated future exchanges and regulated funds and banks going into this.

I see a lot of good moves in the right direction, but I think they could, well, if they wanted, they could tax it like 80%. There was some scary uh news flash the other day about that uh which was fake it was janet yellen wants to tax bitcoin uh 80 she never even said yeah yeah yeah exactly so but it's small it's it's it's small enough to to uh still be um they'll still be able to kill it if they really want it. But the good news is I don't think they're awake yet. They think it's too small.

They have their hopes on their own central bank digital currencies, which will, of course, fail. But yeah, so maybe after that, they will wake up and be more aggressive towards Bitcoin. Do you think that CBDCs will inevitably fail because they're just more fiat currencies in a digital form? Yeah, the supply is not capped. It's not scarce. It's not a good store of value.

They will control the supply and they will debase it as hard, if not harder than the growth. Yeah, they'll actually have better control of the supplier. It's kind of their wet dream, right? I mean, isn't it a central bank's ideal scenario is digital money? Yeah, so I understand it from their point of view. And the added benefit is also they bypass governments altogether, right? Because they're now complaining about fiscal policy. They do the monetary policy and do QE and print trillions and trillions. But the government is fighting to get the money to the people because they keep it themselves, of course.

They do that all the time. So the central banks are urging the governments to do their part and do the fiscal policies, to implement fiscal policies to get the money with the people. But with every stimulus check, you see only 10 or 20% of the QE goes to people, and the rest they give to their friends and they hold them to themselves. So with central bank digital currencies, central banks can bypass the governments and you can just open a wallet with the central bank digital currencies, central banks can bypass the governments and you can

just open a wallet with the central bank and they say, well, I'll use your $1,200 or $12,000 and success with it. Yeah. They can also say, we want your taxes and just remove it. Yeah. Yeah. And they can say, well, you get the money, but you don't. Yeah. Right. It's very interesting. Something I'm actually very curious about. Stock-to-flow obviously works because of the scarcity we've seen. We've talked about how scary accurate it's been and what the predictions are. You just mentioned regulating futures, so bringing futures into the conversation. Derivatives are a massive part of the market. market, where do they play into that model? Because obviously there's not necessarily an exchange of the underlying assets. So the scarcity is a little less important, you would think, with the derivatives market. Yeah. So that, yeah, the model is very simple and deliberately so, right? It's a very simple model. Scarcity is the only input. All the other factors that obviously do impact the price, news items, central bank policies, futures markets, liquidations, foam,

everything that has an impact on price but is not in the model is sort of the error of the model, right? The price is not tracking the model 100%. So the error of the model is caused by all those factors that are not models, that are not stock-to-flow. And that is, in a way, a bit amazing, because stock-to-flow is explaining so much of the price already

that all the other factors seem to sort of level out, right? So there's positive factors and negative factors. And I think the scarcity, you can sort of argue that the scarcity or the Bitcoin price, no, let's say the 21 million, the fact that it's fixed supply, which has never happened before, not even with gold, right? The supply of gold increased three X the last hundred years with the increasing price. But it's the first time we have a constant in finance, like we have a speed of light in physics. And that constant is very important, I think, that turns the supply and demand game on its head, because the supply is fixed and the demand, yeah, well, maybe then

price is demand, demand is price so in a way the stock-to-flow model predicts the price but it also predicts demand and um and and then you go you go to the theory of of uh veblen goods so if veblen good like gu bags or Lamborghinis. It's like a luxury good, a very high quality good, something that everybody wants to have. Everybody wants to have it. Why? Because it's scarce. It's scarce. And when the price goes up, the demand increases.

Well, that's different than what we've been learned at school. But there are those goods. And I think Bitcoin is one of those goods. So the scarcity and the fact that the price itself is maybe very much correlated to, much more correlated to demand than with other goods, and positively correlated instead of negatively correlated with the price. That is, I think, the reason why it works so well, the stock-to-flow model.

That's a really interesting idea because then you think about it, sort of all of this derivative trading, all of that is sort of trading around the asset. But when you zoom out the news and derivatives and liquidations, and none of that really affects the sort of long-term fundamental model. So basically, if you zoom out far enough, it all just becomes noise. Yeah. And in a way, the derivatives markets are very interesting, right? Because, for example, for big institutional investors, if an asset doesn't have a deep liquid derivatives market, like futures and options swaps, then they will not enter the market. Right. No efficiency, right?

Yeah, yeah. No efficiency and no entries, no exit points. So for example, I would never buy an asset in large amounts, like billions, if I only have one exit, like an exchange where I can sell the asset and that exchange can be down, like some exchanges are at critical moments. So it's very nice to have some other exits, right? If you can buy a put option or sell a future and get rid of your exposure in that way.

And in another way, I think derivatives markets, for example, future markets are broadening the markets. So they're attracting more investors than just the buy and hold investors and the spot market investors. Of course, all the investors that really like to have leverage are on the one side. And there is a small group, well, an equally large group at the other side of that trade that accepts less risk

and less return against those leverage traders. And those are very distinct groups. You could say those are the institutional investors that are okay with only 20% return against the 10x, 20x leverage long players. And that's a very different market from the normal spot market. And in that way, the derivatives marketus marks makes the total market bigger. Yeah.

And we also have this unique situation sort of in Bitcoin where it's still somewhat inefficient and there's still these opportunities with everybody with the assumption that price will only go up. You have this cash and carry trade where you could just buy the underlying asset and just short basically any of the futures. You take your pick and as it decays, it's effectively free money. It is.

It's amazing. I do that trade myself, just like the comfort call writing strategy, which even adds some more upside from the volatility. But yeah, it's amazing. Especially that, by the way, the cash and carry strategy is a very well-known. Yeah, it's not unique to Bitcoin.

It's a very simple strategy that almost all the banks and pension funds and insurance companies know. So they can understand that. And that's where I see some of the interest from institutional players start for this new asset, Bitcoin. Yeah. Okay. So we get to 285 or 300, 400, 500, retrace to 100. Is that it? Or do you see million dollar Bitcoin in the future as a real possibility? Oh yeah, for sure. That's just this cycle, right? Maybe that all-time high could be reached this year and the low the year after in 2022.

But after that, there will be another halving in 2024. So 2025 and the years after that will be actually much, much more interesting than the next two years. And yes, the stock-to-flow models predict prices ranging from $1 million from the normal stock-to-flow model to $5 million for the stock-to-flow X model. So yeah, my eyes are, by the way, on those price levels more than on the $100, $200, $88.

So I'm not selling. Maybe some to just survive the bear market. Yeah. Yeah. I mean, $5 million Bitcoin. I can't, I can imagine. I can certainly imagine it. And I can definitely hope for it.

But I'm curious, you know, we obviously have the fixed supply. We know there'll be a 21 million Bitcoin. How do we account for all the Bitcoin that's been lost? And do we ever get an accurate calculation of how many have already exited the supply side of the market? Yeah, I think there's some quite useful estimates of indeed three or four million coins lost. It's huge. It's huge. Yeah. huge, yeah, yeah. Of course, one million is Satoshi's coins, right?

The first one million coins. And how do you correct for that in analysis? Yeah, that's a super interesting question. In the first model, the Stock to Flow model, I corrected for the one million, the first one million Satoshi coins. I did some, I didn't publish, I tweeted about it at the time. I did some, I didn't publish, I tweeted about it at the time. I did

some other calculations. So adjusting for the first 1 million and then a certain percentage every year that totals the 3 or 4 million that is the estimate today of lost coins. And calculated a stock-to-flow model with that. And also, I estimated a stock-to-flow model without any adjustment for lost coins. Basically, the parameters change, but the outcome stays the same. Interesting. So the first model had a correction.

Currently, I just leave it out because it alters the model parameters a little bit, but it's not really impactful. Listen, I know we're running out of time, but I have to ask you one other thing, which is, and we're recording on May 11th for anyone listening, depending on when this comes out, but what do you make of this absolute explosion in doge and other meme coins yeah it reminds me of the ico craze in 2017 um a lot of companies were giving out those those those coins as a means of funding as sort of shares right now it's even more crazy uh i understand it from it it's it's like heaven for traders, right? Sure.

It's a number on the screen and if it's a number on the screen, you can trade it and there's stupid money so you can make profits like if you're serious in it. I really have to laugh about Elon Musk though

because with that Dogecoin, he really... He's having a good time and he's relentless. He's having a good time and He's having a good time. And in a way, if he is able to finance all his Mars missions and space programs with the money that flows into that Dogecoin, that's sort of, well, I don't want to say stupidity tax, but it's a nice way of financing those projects. Sure. I just have to say, be careful with it. Be very, very careful because a lot of projects are just started as a joke.

Yeah. But you talk about how it's reminiscent of the ICO bubble, but that was sort of the top for Bitcoin as well. Yes. Yeah. Yeah, true. I'm afraid we haven't seen the top yet. I't think so i don't think so either it's just you know if you uh take a step back and you don't understand bitcoin i could see how you could look and just see top signals left and right i don't think it's the top but like the

the behavior that we're seeing the euphoria whatever laser eyes and these coins that have a one quadrillion supply and no market cap going you know into the top 15 it's pretty insane yeah to be to be honest i i think uh it's not that i hate to see it but i don't like to see it because it's it sort of distracts and and and ums from the mission, and that is against debasement, against fiat currencies. And this makes it into a game, into a laughable, easily attackable nonsense thing, especially for mainstream media, politicians. And in that way, I also see it as an attack vector by state actors.

So I think it's confusion and distraction. It's classical psyops. Misdirection. Yeah, I'd rather see it go. And a concentration of assets is always a strategy that's better than divide and conquer. And that's what I'm seeing at the moment, divide and conquer. So I hope that goes away, but I don't think it goes away. I don't think so either.

It's such easy money for the big players, as you said. But I really do. It's unfortunate how much of a distraction it is because the narrative had really been Bitcoin for a good six months. Really ever since Michael Saylor, I think. Bitcoin has been the core narrative of crypto, and it's just not right now. Imagine if Elon Musk would have put his weight

and his influence behind Bitcoin, which is a real invention. It solved the Byz business and general problem. It combined techniques like peer-to-peer and SHA-256 proof of work and elliptic curve encryption. If he put his weight and influence behind that invention instead of this bullshit, then I think the world would be a better place. But I guess he just has his fun.

There's still hope for him. I mean, Tesla did invest and he has kind of loosely admitted that he's also invested in Bitcoin. So maybe he'll come around. I'll keep my hopes up, I guess, in this case. Absolutely. Well, thank you so much for taking the time. Absolutely. I loved it. I've been wanting to catch up with you for a really, really long time. So where can everybody follow you and keep up and keep up with the stock to flow and see how accurate it is moving forward? Yeah, yeah, I'm on Twitter. Plan B at 100 trillion USD. That's 100USD. And I wrote three articles. So if you really want to know more, you can find them through that Twitter site and on my website,

planbtc.com. And Scott, thank you very much. It was a pleasure. Well, thank you so much, ladies and gentlemen. The legend, Plan B. Thank you very much. Let's go.