The Wolf Of All Streets - The Definitive Case For Bitcoin with Dan Held, Growth Lead at Kraken

Episode Date: December 22, 2020

Dan Held, a renowned builder and OG in the Bitcoin space, has invested over 80% of his net worth in Bitcoin and has held through multiple cycles. He still believes the asset is in its infancy. As a HODLer and Bitcoin Bull, Dan sees potential for Bitcoin to surpass gold, achieve a market cap in the trillions, and drastically change finance as we know it today. In this episode, Dan made the definitive case for Bitcoin, which can be understood by everyone from the casual investor to the most die hard maximalist.  Scott Melker and Dan Held discuss million-dollar Bitcoin, holding your net worth in Bitcoin, the many advantages of Bitcoin, including, fungibility, scarcity, immutability, and privacy, depreciating cash reserves, the power of HODLers, cascading liquidations, borrowing against Bitcoin, timing the next top, investing with goals in mind and more. --- CELSIUS With the Celsius app you can earn up to 15% APY rewards on over 30 cryptocurrencies. Have crypto but want cash? Celsius also offers the lowest cost loans against your crypto with interest rates starting at just 1% APR. Enter promo code WOLF when you sign up and get $20 in BTC! Users must transfer and hold at least $200 of any coin for 30 days to be eligible for the reward. --- VOYAGER This episode is brought to you by Voyager, your new favorite crypto broker. Trade crypto fast and commission-free the easy way. Earn up to 9.5% interest on top coins with no lockups and no limits. Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account. --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe.This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

I'd like to thank my sponsors, Celsius, for making this episode possible. Stay tuned later in the episode for more info. What is up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast. Today's guest is the growth lead at Kraken, the fourth largest cryptocurrency exchange in the world. So I guess it's safe to say that he's doing a good job. Dan has been part of the Bitcoin space since the very beginning and has made some serious

moves building some of the earliest and most popular crypto products. There's one thing Dan Held knows, it's growth and his conviction in Bitcoin makes him the perfect person to explain on today's episode how Bitcoin will continue to grow and what the bullish case is for this asset. Dan Held, man, thank you so much for coming on the show. Scott, thanks for having me and always happy to talk Bitcoin. Yeah, man, I know. So before we get into the questions, once again, you're listening to the Wolf of Wall Street's podcast for twice a week. I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports and politics. The show is powered by Blockworks Group, a media company with over 20 podcasts in their network. Check them out at blockworksgroup.io.

So let's start at the beginning, man. As I said to you before, we could probably talk about a lot of things, but I think that you're the perfect person to sort of make the case for Bitcoin for those who are listening and still haven't quite gotten the message. So let's start here. Explain Bitcoin to me as if you were talking to a child, which might not be that hard because you somewhat are, if you ask my wife. I'm like, I'm five, right? I actually love doing that. I think to distill a narrative, to distill it completely down to its essence in a simplistic way means you understand it completely.

You look at it in a single way. It's very easy to use a bunch of jargon and jam it all together in a very lengthy explanation, but to compress it requires an immense amount of focus and a laser focus on keeping that narrative intact as you make it tighter and smaller. It's something that we do internally at Kraken, something I did internally at Uber. For example, Uber required a TLDR written on every single email that had multiple stakeholders. You always had to compress that narrative. And I think that was foundational for how I was able to start explaining Bitcoin simply. So why Bitcoin?

Why should we care? What does it mean? And I think to answer this, you first have to look at what currently is our financial system. There's a movie that I'm sure a lot of people have seen called Inception. There's a moment in Inception where Leo DiCaprio is trying to recruit Tom Hardy to join the team and they're in the Moroccan cafe. And Leo goes to Tom, you know, he goes, I think I have this crazy idea and it's called Inception.

And Tom Hardy goes, it's not that crazy, but you have to start with the most primitive version of the idea. And he continues on and he says, in the, you know, in the movie, they're trying to convince that billionaire son to break up his father's empire. Right. Tom says, we don't start with the relationship with his father. That's not the idea that we go after. We don't start with breaking up his father's empire.

We start with the relationship with his father. That's the inception of the moment of changing someone's mind. So with Bitcoin, we don't start with Bitcoin. We start with the relationship with their government. That is truly where the understanding of Bitcoin lies. So currently what happens with the existing financial system is the central banks and treasury work together to essentially create money and control that money through monetary policy. Now, that money underlies all economic activity. It's what different contracts are settled in.

It's what we store value in. It's what we use as a medium of exchange. For 4,000 years of all recorded human financial history, the outcome of these types of currencies is the same. Governments inevitably spend too much money because the politicians are incentivized to spend more money to gain voters. However, they have to pay for that. And over time, that becomes too bulky to pay for. So governments resort to inflation. One of the earliest examples of this is the Roman denarius. And if you look at the silver content in the Roman denarius over time, it has this long, slow decline through the different political regimes that come in.

The US dollar is no different. Just like that, and the euro and the yen, everything that is fiat in this existing world, and fiat means your local government currency, follows the same path. And if we look at our recorded financial history, we've never seen governments print as much money as we've seen now. What does that mean? Well, it means that those local currency values in your bank account aren't likely going to be able to purchase much in the future. Satoshi saw this coming. He saw this happening and started working on Bitcoin in 2006. And by the time the 2008 financial crisis happened, Satoshi had Bitcoin ready and that's when he planted Bitcoin. What Bitcoin solves is that problem of trust with your government. And it solves the problem of trust with your banks. So instead of having to trust the treasury and the central banks to

have a monetary policy that doesn't penalize savers, and also oppressive tax regimes, and you also don't have to trust big banks that take on too much risk and can become too big to fail where they get bailed out. With Bitcoin, it changes all that. You now only have to trust yourself. You can hold on and self-custody your own funds. And that's why people call it digital gold. It's like gold. When you own it, you are the bearer asset. You own that bearer asset. You own that gold in your hand, and no one can take that away from you if you store it properly. Same with Bitcoin. Bitcoin in your hand is a bearer asset, and no one can take that away from you if you store it properly.

But this is a digital gold. It's much easier to transfer, and it's divisible. You can verify it's legitimate instantly. It's got many more properties that make it a much better gold. So, you know, we have this problem with our existing financial system. I think everyone remembers 2008, if you're old enough. And then Bitcoin is adopted as the solution for that. And in 2020, with COVID, we're seeing governments start to print a ton of money again, which brings Bitcoin's use case to the center and makes us all focus on it and understand.

And that's why we've seen Bitcoin start to approach all time highs again, as the world collectively comes together and realizes, oh, wow, this new money, this new gold 2.0 is a great way to preserve wealth against oppressive inflation regimes by governments. Right. And it's not only that the world is seeing it, but more importantly, institutions, billionaires, and people who truly need a store of value to protect their wealth. It's interesting because people, I think, sort of use the term store of value incorrectly sometime, right? You don't really need to store value if you're poor or you don't have savings, right? A true store of value is for the wealthy to protect the value, like you said, their purchasing power.

It's really to make sure you don't lose, not to make sure you gain, right? And so it's interesting now to see the true store of value narrative playing out, which is that people with billions of dollars are looking for ways not to be inflated away. Yeah, I think the kind of digging in a little deeper there is that people who have lots of money have more time to think about how to preserve that money. If you're kind of in the grinding day-to-day struggle, you have less time to think about tax strategies or different asset allocations. You are focusing on paying the

electricity bill. So certainly Bitcoin, I think, is advantageous for all savers, whether you save a little or save a lot. And then also it changes the dynamic of governments and their citizens. When governments can no longer print money again, because everyone holds Bitcoin, things are much more efficiently allocated to where we don't have these gigantic bloated government programs. And ultimately, that's a good thing for everyone in terms of lifestyle and cost of living, etc. But you're right. Yeah, I think the unpopular opinion that I have, and that I think you just echoed, is that right now, Bitcoin's most stark use case for a customer segment is the wealthy customer segment. As socialism rises, Bitcoin is incredibly attractive to the trillions of dollars across the world that would prefer not to be taken from them through taxes or other mechanisms. So Bitcoin offers a very compelling use case there.

Right. So the store of value narrative is primarily for the wealthy, but that doesn't really take away from the narrative that it's people's money. You can see in places like Venezuela, Argentina or Lebanon, Iran, you know, where we really have that hyperinflationary environment where there is absolutely no trust in the government, that people are using it every single day. And it's quite literally saving their lives, right? And, you know, we sit here sort of, I guess, in our little cloud castle talking about how institutional wealth and price going up, but that's not the narrative in those places. I mean, look, I'm in California, I pay essentially like 35% to 40% of my money in taxes. Like, like that is, you know, slavery is 100% ownership of all of your output, your time and energy that you spent to earn something. I'm technically like 40% slavery

mode already. United States, United States indentured servitude, some form of indentured servitude. Indentured servitude might be a better way of putting it. We didn't have an income tax in the US until 1900. And the founding fathers of the United States were tax frauds. Right. So, here, I think that, obviously, I pay all my taxes. I wish to be on the compliance side. But when the Bitcoin changes that dynamic with the world, you know, we'll find that people become less and less tolerant of like crazy tax regimes. Like, again, in California, it's just nuts. And so I think it's finally a check and balance over the overreach of the government, which right now the government could call up Bank of America and go freeze everyone's money.

You know, so it's more of a check and balance system. And gold never really operated as that check and balance, right? As much as people sort of viewed it that way, we've seen times in history, in the United States, where basically the government said, sell me your gold at a discount and you don't have a choice, right? Yeah, there's very low compliance with the 6102 order. Gold is a very popular store of value instruments. And what are they going to go do knocking every farm door in every single apartment and go seize people's gold? Take it in the backyard, right? Yeah. Very rare. A seizure shift during that period is very rare.

So, yeah, it's certainly a check and balance mechanism. Gold served that function previously. However, gold is very hard to transport. Also, if I want to buy $5 of gold, it's hard to shave off a little gold flake from my gold bar. And then we have to both assume that the scale hasn't been altered, which is a big if. Right. With Bitcoin, it's much easier to move around divisible, verifiable. And then Bitcoin is this really cool property of absolute scarcity, where with gold, we don't know if there's a whole new gold mine to be found in Antarctica or something, or as we very

much well know, on asteroids. It is well known that there is a huge amount of gold on asteroids. Gold is relatively plentiful in our universe. And because of that, we know that gold's lifetime is finite. As soon as we can harness an asteroid, bring it close to Earth, and bring that gold down, the gold markets would collapse. So Bitcoin is mathematically secure in terms of its scarcity, where it's 21 million and it'll only be 21 million, and we can all trust and validate exactly what percentage of ownership

we have. You can think of it kind of like a measuring stick. If a meter was constantly variable or constantly growing, and we're trying to measure the economy against it, it'd be really tough to do. It'd be hard to run scientific experiments, aka entrepreneurial endeavors, if that ruler keeps changing. With Bitcoin, we have an extremely precise ruler. And so that's when folks see that they see the price of Bitcoin go up and down, they go, oh, it's volatile. Actually, the world is volatile. Bitcoin's protocol is very concrete, definite and fixed. And the world moves around Bitcoin and it moves into Bitcoin and adds and flows. And that's what we perceive as price volatility.

Right. And price and value are two very different things that a lot of, I guess, amateur investors don't really understand that differentiation. But just because the price is volatile doesn't mean it's not a secure asset. Exactly. It's interesting you talked about shaving off gold and trying to make $5 out of gold, which is always sort of a laughable thing to imagine. That also actually, you know, comes down to the other use case I was talking about in foreign countries. If you want to give somebody $5 from bank to bank or cross-border, that's effectively impossible as well without Bitcoin. Or, I mean, you know, stablecoins, other cryptocurrency, we can get into that later. But try wiring someone in the Congo $5.

Exactly. These legacy financial, I mean, we're moving from whenever the telephone came out, you know, we wired America and European countries with telephone lines. Then in some regions like South America and Africa, when phones came, those phones came with mobile phones where cell phone towers popped up and boom, everyone had mobile phones, and they didn't even need the landlines. It's kind of like a 2.0 integration. Bitcoin's like that with the legacy financial system where there's those old phone lines, and now we have 2.0. Now, Bitcoin's purpose is being that gold 2.0. Unfortunately, with any sort of system that's created, there's always trade-off to how Bitcoin was built.

It enables it to be a gold 2.0, but it also limits Bitcoin's functionality in other areas. Early on, people hypothesized Bitcoin might be useful as a PayPal or a PayPal 2.0. Unfortunately, due to how Bitcoin is constructed, it's very unlikely that you'll use it for day-to-day payments on the base layer due to high transaction fees. Transaction fees aren't a bad thing. People are paying transaction fees because Bitcoin provides immense value. That value being able to store your wealth in a very hard to seize asset and that when I send it, it's immutable. It'll never be censored and it's final. So that's where we pay that transaction fee for it. And a lot of people around the world really find that valuable.

That's why the transaction fee goes higher. It's not a bad thing. It's just a marketplace. It's how it all works for any sort of asset. With Bitcoin, it's the same thing. So transacting for day-to-day purchases on Bitcoin isn't super useful now. That can occur on layer two,

which is like Lightning and other mechanisms. However, those are still, I would say, they have some user experience, things they need to figure out. So I'm not under a halo effect of that. There's perfect systems here. Everything comes with trade-offs. Base layer, one layer, first layer blockchains aren't really meant to scale for every day-to-day payments.

If you want to do that, you don't need a ledger permanently recorded across 100,000 computers in the world for your coffee purchase. You don't need to use that tool for that purpose. Now, there are some really cool things with remittances. If you want to send higher values,

like $2,000, then that makes sense a little bit. Or you work with a company that bundles up those transactions into a very large value and then moves that across the border. That's a great way to do it. So just like any other tool, Bitcoin is better or is better for some things and a little clunkier for others. And on the payment side, it can facilitate a more efficient financial infrastructure, even if you don't interface with it directly.

So the cup of coffee is like the universal example used with Bitcoin. Every time I have a conversation, someone brings up the cup of coffee, but usually in the context of taxes, right? And it's so funny. I mean, you're giving one example why it's very difficult to spend for microtransactions or something like that. But to me, the huge elephant in the room is why am I going to buy coffee and have a taxable sale of Bitcoin as a result? Yeah, there's other complications as well. One is tax slots, like keeping all those tax slots in mind and how the coins have been moved around. I've been, again, reporting my taxes since the beginning. I also advise a company called LibraTax. My friend created

it at their actual Luca. Now they sold the Libra brand to Facebook. But yeah, you know, it was really difficult in the beginning because a lot of the software was really poor. So, you know, you'd have to do some manual parsing of it and put it together. But yeah, it's really, it's really tricky because when you know, some people go, Oh, don't worry about that. You can just spend and replace. Well, it doesn't work like that. Cause you have to identify a tax law that you want to sell off. And if you incur a taxable gain,

now you've got, you know, now you've got essentially, you have like a 30% surcharge or X percent surcharge depending on your local taxes on that transaction, because now you have to pay taxes on that. And, you know, people are like, oh, you just spend and replace. Well, when you replace it, so first of all, when you spent it, you know, people are like, oh, you just spend and replace. Well, when you replace it, so first of all, when you spent it, you also spent an on-chain transaction. That slowly eroded your Bitcoin stack. And then when you buy back in, if you go trade, for example, on Kraken and buy Bitcoin there, well, it depends on how much you're buying. But if you're at the lowest fee tier, you might pay 20 bips or 50 bips, right? So it depends on what feature you're in, but

you're going to pay a transaction cost to buy Bitcoin. It's not free to buy Bitcoin. So it's pretty clear that even though it was sort of defined as a peer-to-peer, you know, payment system that it was really built to hold. Well, yeah. So people like to quote that from the white paper. That's the title of the white paper. It's a technical paper that Satoshi wrote for a very specific audience, the cypherpunks. Cypherpunks are a bunch of cryptographer nerds, I think is the best way to put it. I have deep respect for them and what they developed. Bitcoin wouldn't be here today without them. But for the layman audience, I Satoshi wanted to do was harness their imagination. And, and so whenever you're a marketer, you try to create content that resonates with your audience. Satoshi was a marketer and he was marketing to the cypherpunks. If you came in and he said,

here's digital gold and he waxes on poetically about monetary policy. These guys don't care about that. What they care about is finality and privacy. And that's what the word cash is used for. The word cash is used to designate that it's a one-way payment. When you push the cash to the other side of the table and that person takes it, you can't go, hey, I want my cash back. They've got the cash. It's a barrier instrument. And then it also meant privacy because the cypherpunks were very, you know, the encryption and the new encryption could unlock economic transactions that could be final and private. So for them, that's what Satoshi wrote the paper. And that's why he titled it that way. The paper doesn't include a lot of functional elements. In fact, Satoshi says that he goes, the white paper doesn't have anything functional in it.

It just describes it. And so, you know, I think when folks look at like that using the word cash in that context as like, oh, this is a cash in your pocket, it's not a good interpretation of what Satoshi meant. And also, Satoshi has hundreds of other posts. And all of those posts are equally valued, including his only message he ever etched into the Bitcoin blockchain. UK chintz are on the verge of second bailout for banks, not Visa on the verge of raising processing fees. So I don't think it's a deviation from the original narrative. I think Satoshi wanted to be welcoming of all types of ideas. And in his writing, he was very open with that,

where he's like, try it for micro-opinions, try it for all these things. I don't think he wanted to be discouraging because he wanted the developers to feel appreciated and open-minded. So he let them do anything they liked. However, the technical parameters of how Bitcoin works, and then also how Satoshi later describes Bitcoin as like a precious metal, very much demonstrate that longer term, there was never going to be a good, you know, cheap PayPal on the base layer.

Now, you can certainly do that in the years above, but just the technical parameters of blockchain's work, it makes it very difficult. I mean, in our echo chamber, I think it's very easy to scream gold 2.0 and to understand that. But as far as market cap and the size of what we're talking about, it's still very nascent, right? I mean, we're still very, very small. What does it take for us to legitimately surpass gold by the standards of the rest of the world? Larger market cap, higher volume, whatever metric you want to utilize? Yeah, that's a great question. So typically, my background is in product and growth. So that's product management, product marketing management, and growth marketing. And the way that we think about both marketing and product is that we define KPIs to determine success.

KPIs stand for key performance indicators. If you can't measure it, you can't manage it, right? So Bitcoin's KPIs are around, I would say, a couple different factors. One would be on-chain volume moved. Bitcoin is ultimately a settlement mechanism for folks who want to use it to, you know, sell or buy Bitcoin and then to move it. So settlement on-chain, I think, is a great way to think about it. Nick Carter also puts this in the context of container ships, not containers. You know, so a container ship, a Bitcoin transaction could include a lot of small containers.

Ultimately, it's used for moving larger value. So, you know, with that, I think when we look at how Bitcoin gets adopted, it's one, it's volume traded, volume moved on chain, and number of price and number of hodlers. Number of hodlers, of course, is a very hard thing to calculate as no one can put together a concrete list of hodlers based on every single exchange account that they have and every single on-chain address. But we can estimate it's a banded range based on surveys and all that data combined. So I would say number of hodlers represents the number of daily active users. By storing value in Bitcoin, you are using that on a daily basis to store value. Just like if you hold gold, you're using gold because you're storing gold and you're using it to preserve value. And that's not the conventional way people would think of using. But the very fact that you're holding it is you are actually, that is its use case, correct?

Product managers have to be ruthless with how they think through what is the utility of my product and how do I measure that? For Facebook or Instagram, you might think time spent in the app, which means I could deliver ads to them. If it's crack it, it might be trading volume, right? With Bitcoin, we have to think what is it useful for and what is that measurement and storing values that use. And so hodling by definition is the KPI that would indicate how many folks are utilizing Bitcoin's blockchain for that. And obviously, you work at an exchange. You've touched on it a few times. You work at Kraken. Some would argue that Bitcoin's best use case is trading. People are free to speculate. I'm a libertarian. People are free to buy and sell whatever they'd like. I have my personal opinions and I have a great relationship with Jesse and the executive team on both when I'm working at Kraken, I've got my Kraken hat on. And then when I speak publicly about my personal views,

I have my personal views. Those are my personal views on, for example, just Bitcoin. And I would say like in this conversation, you can think about it that way. All the views expressed here are for myself as Dan Held rather than Kraken. Of course. I mean, there's people who are trading just to make quote unquote money, you know, whatever we want to call money, but dollars or whatever. But there are people who, you know, believe that the purpose of trading is to make more Bitcoin. I think trading is fundamental, like super fascinating at a fundamental level. Prices reflect the compression of all market knowledge. Now, some of you might have heard of this called efficient market hypothesis. I don't think EMH describes a future state. EMH describes the present. And that's objective, because if the present represented any other information, the price would have been different. For example, all of us came together to buy and sell shares of Apple today. And we all agreed upon that price.

If the market felt differently and had different information, the price would be different. So I think that EMH basically describes the existing prices for all assets. In the more technical sense, Bitcoin and every other price out there, different commodities and equities, it's a one-way hash function. That price is the compression of all market knowledge of what that asset is worth into that singular price in that moment, which is super fascinating to think about. And the way that Kraken operates with our spot exchange and futures is we enable efficient price discovery through the ability to go and be able to trade against other counterparties who have different ideas of what Bitcoin's worth. You know, for me, I'm personally also fascinated with options.

I think options are super interesting, especially Bitcoin options, due to how the implied volatility of Bitcoin is really high. That makes, for example, selling covered calls an attractive opportunity for folks who might want to sell someday. We all are humans. Eventually, a human might need to sell a coin or two to buy a house or car. Certainly, folks have partners who may feel less informed. We all hodl as well as we can. I've hodled for a long time.

For me, I don't have a family or a house that I own. So I didn't need to have that life event where I had to sell some. But for others, it's nothing to be ashamed of. And there are different financial instruments that can allow for a more elegant exit from Bitcoin if you need to do that for a certain market. And I mean, yeah, go ahead. Sorry. Yes. I think the markets are fascinating, especially the rise of options in 2020. I mean, that was basically that wasn't really a popular type of financial instrument until now, but now it's really thriving and the volumes are huge. I think there's really cool stuff there. You've got the lending and borrowing markets that are exploding where like, I think this bull run might

be completely different than the last one, because if I'm a Bitcoin hodler before, and I have a life event at the end of 2017 where I need to buy a house, the only thing you can do is sell Bitcoin. What you can do now is you can borrow dollars to go buy that house against your Bitcoin as collateral so you don't have to sell your coin. Now, of course, you're paying an interest rate to be determined on if that's worth it for you or not, or you could lend out your Bitcoin and earn a return on that. And you could live off of that yield or take that yield and go invest it into a home. So I think the dynamic is going to be much different

than the previous bull runs. We could see really huge supply scarcity as Bitcoin's price continues to increase. People are like, well, I'm not going to sell. I'm just going to borrow against it or lend it. And that could lead to a really crazy spike at the very end. Or maybe this isn't the end. Maybe there is no bear market. It goes up and goes horizontal for a while. Well, I mean, if you zoom out on any market, there's really no bear market, right? I mean, the Great Depression is just a small dip if you zoom

out on the Dow Jones for 100 years, right? So I think it's all about your timeframe and level of patience. But what you said is so interesting because I've answered this question a lot too. I think in 2017, we had this retail speculative FOMO. I know the foremost dangerous words in investing are this time it's different. But in 2020, I think we have legitimate hodl FOMO, which is that people are FOMOing in not to sell. They're not FOMOing in because they want to make money. They're FOMOing in because they're saying, fuck you to the world, right? For lack of a better term, they're saying, this is ridiculous. I need to hold something that has a fighting chance to have idiosyncratic risk in this global economic

environment. Yeah, you bring up a great point where Bitcoin was planted in the 2008 financial crisis. It first had a price in 2010. And then until then, there hasn't really been a big recession. So Bitcoin has grown up. It has grown as a new species of money has grown in this environment that was largely bull run, like a macro bull run. And we had all hypothesized a long time ago that as digital gold, it would shine during another 2008-esque era. And with 2020, we're seeing that.

Now, earlier in the year, we saw trade-offs with everything else. That was a liquidity crunch. Everyone was getting margin called and even gold, the quintessential 4,000-year-old store of value, it dipped as well. So it dipped very intensely. But in later 2020, that's where gold and Bitcoin started to rise and really demonstrate that store of value characteristic. So I've waited eight years for this moment to see Bitcoin's performance in a moment when its true utility,, storing value becomes a critical need.

It's hard to pitch Bitcoin, right? If you're marketing Bitcoin, like imagine going to someone in 20... It's the biggest problem. Yeah, it's the biggest problem. Yeah, you know, you can't be like, hey, have you ever questioned the nature of your reality? Like, have you ever questioned like your relationship with your government and money? And they're like, what are you talking about?

Like, aren't we still backed by the gold standard? Most people still think that, you know, so, and most people won't encounter or want to encounter that conversation unless for two reasons. FOMO, based on the, you know, Bitcoin's previous market cycles drew in people just because of pure speculation. And then the need to is number two, where they go, oh shit. And that's where we are. and that's where we are and that's where we are and i mean over the last month and a half it's been breathtaking to see all the institutional

interest i mean eight years ago we were largely a group of lunatics which and this is nuts i mean this isn't like oh we were people didn't think we were right about ride sharing or Google. This is the fucking foundation of all value in the world. This isn't a sector of the economy. This is the entire economy. So for us to feel validated with that is an incredible feeling. It's also really weird. It's a little bit uncomfortable because it is a very dismal sort of premise,

right? That everyone else is right. I didn't want to be right. I didn't want, I mean, we'd ideally be in a world where Bitcoin wasn't needed, right? That the world, like governments would spend efficiently and that these governance systems would be very minimal and people would be free and be able to do whatever they want with their bodies and their money. But that's not how the world works. So that's why we need Bitcoin. Yeah, it's always that trade-off between wanting to be right and the dystopian future where you are right, correct? It's funny though, last time I talked to Jameson Lopp, he said to me, the best part about this whole thing is the vindication of people calling me crazy. He's like, you know, I've been the crazy guy for a decade and they all thought I was a lunatic. I don't even care about the price. I'm just glad that people aren't

calling me crazy anymore and that it's come to play. But in that regard, there was this time you touched on in March, in February, in April, they were calling us really crazy. And everyone was like, it's systematic risk. It's a correlated asset. Look, it dove even before the market and it died with everything else. Where's your narrative?

But look where we are now. That's where the hodlers come in. The only reason why Bitcoin has value is that we all agree that it has value and believe in it. And that's where the hodlers come in if the only reason why bitcoin has value is that we all agree that it has value and believe in it and that's where the hodlers play such a good good role in the bitcoin economy is because we create the price floors we're the ones who are the bids when the price goes all the way down otherwise it would go to zero and uh you know in that moment too i think like some people were like oh what if it goes to a thousand dollars I'm like, that's actually a really bad omen because you don't want to breach those previous lows.

If you do, you unravel Lindy. The Lindy effect is essentially we all look at Bitcoin's price curve over time. If Bitcoin had kept going to zero every three years, then it never would have manifested. What those floors mean is that aggregate hodler belief in Bitcoin to be the bidder of last resort exists and that they'll buy up Bitcoin and create those floors. Without that, it means that the aggregate belief in Bitcoin has died if it goes to zero, because it means that no one would choose to put their wealth at risk to buy it from going lower. I guess an interesting take on that is that if they hadn't shut BitMEX off, it would have gone to zero regardless of what the spot market was doing or thinking. So we do have this risk created by not saying all exchanges, but obviously trading and speculative risk. I mean, we all saw it on

March 13th. It's my belief and talked to a lot of people that price would have gone to like $6,000. And then it was the cascading liquidations that sent it down into the three thousands. And then they turned it off and it immediately, it was 6,000 again, when I woke up and it was 6,000 when I went to sleep, but somewhere in that time it was 38, $3,800. But you know, we do have unregulated platforms that affect the price. And in that case, it was pretty scary. Yeah, certainly. I'm not going to say it wasn't, didn't feel my heartbeat a little faster in that moment. Yeah, it was a weird moment

where you had the cascading liquidations occurring on BitMEX where there wasn't enough, the servers were being overloaded and they weren't able to pull in enough. You weren't able to get Bitcoin deposited enough to take advantage of that. This all goes to the point of like like is that a real print or not um the other exchanges never dipped that low right you know have a weird print right and it's a very momentary print and it was

due to a cascading liquidation order effect rather than like true market just like price discovery however it did print so technically it happened and it happened and it cleared and then settled with whoever was trading at that value. For me, I think like who knows what would have happened if they hadn't turned it on or turned it off. Right. We can hypothesize. We could also hypothesize that like other the price could have totally decoupled. For example, that happened with Mt. Gox back in 2013. Sure. Mt. Gox traded at a 10% to 15% premium for months. And the market largely

just ignored that as like the price isn't a real price. And that was due to because you couldn't withdraw fiat cash. So the only way to get your money out was to buy a Bitcoin and then withdraw it. So is that the true price? Whatever prints is technically the price, but if there's structural issues at the exchange, then can we use that price as a reasonable calculation for what's real? It's a subjective question or subjective answer to that. Unless you've been living under a rock, you've heard about the DeFi craze in crypto. By far the safest and simplest way to passively earn in the space is to hold your coins on Celsius. You can earn your rewards in the

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other people in the community were arguing that it hadn't hit an all-time high and then maybe hit an all-time high a day later and this exchange hit an all-time high. And there's just no other market like that where there's such a variation among the platforms, exchanges, and geographic areas that creates that sort of indecision as to what's actually happening with the price. The reason why that occurs is because in the real world, we typically have very few venues where price is discovered. So for example, if I'm trading Apple, I believe that's the NASDAQ. If I'm trading Apple, there's only one order book. And then you trade through a broker that eventually has a seat on the exchange to go make that trade on the order book. But with Bitcoin, the price is being discovered

as an order book prices, like the bid and ask orders are eventually cross and the price is discovered on multiple venues all across the world because there is no central venue. And that's where we see that price discrepancy. Now, traders try to arbitrage that away and a lot of their Kraken customers perform that function, right? They're moving lots of money between Kraken and other exchanges to go arbitrage those price differentials between any sort of crypto asset. I think that it's a fascinating thing to think about because eventually you could, maybe in the future, depending on local the, the Delta could represent risk of like the local jurisdiction or something. Right. Right. As remember, information's incorporated

to the price. So we might see something like that. Futures curves actually work the same way. Some people hypothesize that you can actually back into exchange, um, exchange counterparty risk calculations by looking at the spread between like the, the, is it in contango where the current spot price is lower than the future price? Lower than the future's price. Yeah. Yeah. And you can actually use that as a measure of going concern risk for the exchange. So there, there's been some interesting thoughts around that too. So yeah, eventually everything levels out and you know, it's funny with the alltime high price, people forget that like 19,600

or whatever metric you want to choose is all-time high. It only printed that for like a second, right? It prints it. And like how many people actually traded a Bitcoin at that? Nobody. 5,000 people or something. Yeah. And so we look at days above a price,

I think is a great metric. And Dan McArdle on his website, The Case for Bitcoin, has a really brilliant mechanism where he's like, look, it's the amount of days above a certain price. And it's just sort of like the open and close. Like we entered a time period, left a time period, a certain amount of time. And like, we like barely touched 19.5, went down bear market.

And coming back now, we're like, it's a much stronger base. Yeah, it was like 10 to 20 back to 10 to 17 the monthly has never closed higher than the mid-13s and now i mean now as you just touched on we're seeing you know weekly candles close and monthly candles close above levels where price was only for 5 10 minutes ever in. So it's a much more stable base at this price and in a much more efficient market with better platforms. So one of the biggest news events of this entire year, which is kind of crazy because 2020 is 2020, but you work at Kraken, you guys are a bank. Could you talk about that a little bit? Because I mean, maybe it went a bit unnoticed because this year has been so nuts. But to me,

that was like such an incredible and epic event. It's kind of like the meme, you know, I'm the captain now. That's Jesse, right? There's a funny meme of Jesse doing that. Like, I'm the banker now. That was circulating online, not internally. Oh, I saw it. Yeah, it was pretty funny. And it represents, I think, like the maturity of Bitcoin as an asset. Bitcoin was always meant to be incorporated into the existing financial system.

I think like there's a group of older Bitcoiners who are just very resistant against Bitcoin becoming financialized. And that's just something you can't stop. Speculators and traders and the mainstream financial system are going to want exposure to Bitcoin and they want exposure in a certain way. We can't stop that. We can't be like, oh, big banks can't buy Bitcoin or big banks. We don't want to have anything to do with the existing system. It's cool. Bitcoin won't be moved or changed by them, but they're going to incorporate it into their product offering. And that's a good thing for Bitcoin. It means more people are using it in

the document. And that's great. For the Kraken Bank, what that offers Kraken is one, we have less reliance on different regulatory agencies and banking infrastructure. By being able to be a bank, we can now bank directly, for example, like the Fed. And that would be awesome. So we reduce our settlement risk, we reduce a big bank shutting down our bank account. We also reduce the number of regulators that we have to work with. And we are very compliant across a wide variety of different regulatory agencies. But we just want to make sure that less is better if we don't have to do certain things. And that's why, for example, Kraken Bank is a full reserve bank. So it's not

fractional reserve. They're positives one-to-one. So if you have a dollar in there, there's a dollar there. That's one aspect. And the other one is it can enable us to offer different services. For example, like lending and borrowing. That would be really cool for us to do where you can borrow dollars against your Bitcoin as collateral. I currently do that at Unchained Capital. I think they're great. And eventually over time, those rates should go down really cheaply. I mean, Bitcoin is a pristine piece of collateral. Your home, you can borrow against your home for 2% to 3% a year. And that's a non-fungible asset. That home is different than every other home and it has maintenance costs. There's also other huge issues with it.

Bitcoin is a pristine piece of collateral that can be instantly liquidated on an order book if it goes below a certain reserve ratio. So I would expect the interest rates on Bitcoin collateralized loans to drop like 1% over time. That's a similar rate to what you see on, for example, interactive brokers or Fidelity when you borrow against your securities. Or sorry, your equities. So I think that Bitcoin as collateral is a huge... That is a huge thing that we can utilize at Kraken to help our customers unlock more value. And then the same with lending. For example, we have a margin pool

and folks can lend to our margin pool. So that enables people to earn yield. Same thing with like BitMEX. BitMEX has a similar system and Binance too. So I think that's a really attractive opportunity, especially since like when you get deep into the lending side of things, if you're using BlockFi or Gen, which in London, which I do currently,

they have many counterparties that I don't exactly know about, I can't evaluate that risk. When you lend your coins to a margin pool, all that risk is internalized within the exchange. So it's a much different risk dynamic. And I think things like that would be really, really cool for us to do. And really, really cool for us to lean into because that's, I think hodlers love to, they want to hold on to their coin. They don't want to sell, right? Right. If they don't want to sell, it's able to earn a yield on it or let them borrow against it. And they probably have that like two-face arguing with themselves thing where they're like, short the bankers, buy Bitcoin.

Wait, actually, I want to take, you know, use my Bitcoin as collateral and make money. So, but I mean, there still is that huge short the bankers, you know, that we should be no part of the system sort of underlying, I guess, feeling with that toddler or, you know, the older community, maximalist community. But I mean, Bitcoin doesn't get there without the real money and the real systems in place, right? I mean, we're seeing it now. So I mean, go ahead. It changes things. So it's not exactly like Bitcoin is just being subsumed by the existing financial system. Bitcoin changes how settlement works between institutions and it changes how

the bearer asset works. So like things like custody become a really interesting question. So I think it fundamentally, Bitcoin being incorporated into the existing financial system changes that system at a very root level. Some things will remain the same, but some things have to be changed due to how unique Bitcoin is as an asset. I mean, at the end of the day, the government wants their taxes and it's another thing to lend, right? Like you said, it's a superior collateral. So why wouldn't they want to custody it and lend it? Exactly. And look, I think there's two different ways that Bitcoin wins. One is like a very intense struggle against governments. I think there's a lot of Bitcoiners, we talk about citadels, you know, as like, oh, we're going to create citadels because the world is going to be such a

chaotic place. Or there could be a situation where like, if Bitcoin replaces gold and government's reserves, I still wouldn't believe or trust in my government because why would you just hold Bitcoin, right? Like, why would I care if they have X amount of Bitcoin now? For some of the population that might suffice as an answer. So, you know, they could delay the inevitable of the Bitcoin standard, not by a lot, but just make it maybe make it a more gradual adjustment where, you know, central banks start to opt into it. They still have local fiat currencies. And over time, as trust erodes with those fiat currencies, because they never will have as much trust as Bitcoin, then eventually those go away and it's just Bitcoin, right? So who knows which way it is,

or it could be the hard adjustment, right? Where does no one wants local fiat and they just want Bitcoin, kind of TBD. But yeah, it doesn't necessarily have to be a long, or it doesn't necessarily have to be a short, really intense process. It could be a much longer one. Well, I definitely want to circle back on something you said before, because obviously we talked about the huge drop and then the huge bounce this year. And as you mentioned, the last few months, we're seeing some clarity on why that's happening, which is all of these sort of billionaires institutions, companies coming out and saying that they're viewing it as a treasury asset. They're putting their cash reserves into it. The Paul Tudor Jones, Druckenmillers, Bill Merrill, these guys are saying, oh yeah, I already owned it, right?

Or that they view it as gold. So we've had the narrative now that they view it as a hedge against inflation. They view it as a reserve asset. But what happens when they sell? I mean, are they really going to hold it forever? Or is this going to lead to a whole bunch of hedge funds coming in that once again see it as a speculative asset, want to ride on the back of those whales, and then eventually dump it aggressively? That's a great question. So every single purchaser of an asset has a unique sort of behavior. I can't tell you how you should huddle on or what you should sell. For example, like we brought up before, you have different life events. If you want to buy a house, car, you have kids or something

like that. So each individual institutional investor and individual investor have different time preferences. Some have a very low time preference, which means that they can huddle for a very long time. Some are looking for a quick buck and some will enter an exit. I think the market is probably a combination of all of those, right? I don't think there's a unique, these institutional traders are just looking for a quick pump and dump or a quick exit. It doesn't work that way. A lot of these are very serious because, so my inclination is to say that these are longer term investors. And the reason why is that it's not just about the return that they're making, it's the reputational risk that they're taking and recommending or saying that we're buying Bitcoin. I mean, this is an incredible moment where, I mean, they are agreeing with a bunch of us lunatics who

thought this eight years ago. And largely, we were scolded and scorned for a long time. And now they're saying, we think you're right. And we're willing to bet our reputation, which means more to us than our money. And that I think is testament to a longer term holding period. I think that very much reflects that they believe in this asset for the long term. And to add to that, and you know, I had Michael Saylor on the podcast, I had this conversation at length, and he echoed exactly what you just said. We all know that seven or eight years ago, he thought Bitcoin was a joke. A year ago, he thought Bitcoin was a joke, you know, and the pandemic and the global uncertainty sort of changed his mind and he's gone all in in the other direction. But, you know, I don't think that you buy something as

an inflation hedge to sell it next year. And more importantly, what I was thinking to say is that, you know, their cash reserve is losing value every minute, you know, and so that's not going to change by selling their Bitcoin that they're buying for that reason. Totally. Yeah, they're not your typical retail trader who has a very emotional response to the markets. Sure, humans operate these companies

and they will have emotional responses to how markets move in terms of these hedge funds that are referencing those companies. But they're not, you know, I think they come in with a much, they create an investment thesis. They go to an investment committee. They have a lot bigger process. They're sticking to reputation when they talk about these assets. So I think with that, it represents a whole different type of investor. And that's where I think people go, Oh, well, what I'll do to trade this market is I'll wait till Bitcoin hits a hundred K I'll sell some, wait for it to dip down back to 30, and then I'll buy it. Buy some, right.

Yeah, I don't think it's going to do that. I think it's going to be, I don't know what it's going to do, to be frank. It's not going to do what we thought it did before. Yeah, it's different. It's different. So, yeah, I think these institutional traders represent a new hand in the market. And then also on the retail side, we've got not only like kraken coinbase and your traditional crypto exchanges but now you can buy it on fidelity cash app or not yeah yeah i mean imagine when the world

fomo's into bitcoin that's essentially you know what what this isn't going to be a normal cycle and that's where i turn that to be i mean i'm super bullish on bitcoin but i don't going to be a normal cycle and that's where i turn out to be i mean i'm super bullish on bitcoin but i don't try to make time gated sort of price predictions no no better way to look like an idiot than to make a grand prediction that doesn't come true i'm super bullish on bitcoin so i think it'll achieve a much higher price than we have now over some duration in the next short term not not decades away but sooner than that, much sooner than that. And when we look at it, I mean, it could be a super cycle, right? Like if the world realizes, holy shit, there's a massive amount of money printing going on and institutions come in and the infrastructure and user experience is really great and retail

traders can buy it everywhere. And then eventually like with GBTC, they can have access to it with their retirement account. But let's say like an ETF comes out. I mean, it will. Yeah. Why would it do a normal cycle? We're going to see a super cycle. It could look like, you know, Bitcoin's price charts to this, like up and down, up and down. What if it on a log chart goes straight? It does two cycles at once and then just levels out. Like it goes to a million dollars a coin and then levels out over time because the whole world has recognized Bitcoin's use case and all coming at the same time.

You know, so that's where I think I'm not predicting that in the short term. Yeah, of course. No, but it's completely possible. And that seemed like a crazy notion before. Actually, my assistant put together a research report internally where he basically took all of the models that exist at the moment for like the grand price predictions, all these great, you know, the 300,000 Citibank, the stock to flow, whatever. But even down to the most sort of reasonable of them, on average, the predictions are about $235,000 for the

top of this cycle. And I don't think that's crazy at all. Yeah. I mean, especially... It's only 10x. I mean, you know, 12, whatever, you know, if we're counting at 20, obviously, that's not where we are today is around 18. But Bitcoin doing a 10 to 12x is like...

That's what it does. That's what it does. You don't buy Bitcoin for a 50% gain, you buy it for a 10x gain. And so I think investors all looked at Bitcoin's previous cycles, and I don't think anyone's going to be inclined to sell. Also, there's this momentum in this interesting market psychology of like, as the price increases, you become less inclined to sell, because you hope it goes higher. this momentum and this interesting market psychology of like, as the price increases, you become less inclined to sell because you hope it goes higher. And so the supply gets more scarce, the FOMO builds and pushes the price higher. It's a fascinating discovery in terms of human psychology and how humans think.

I can't tell you how many people I told to buy Bitcoin at $6,000 who are buying it at 19. Yeah. It's like the Kanye gif, right? The Kanye meme where he's like, no, but I'm into it. Yeah. It's like, I've seen this since Bitcoin was $10. It's crazy. It's always too expensive. It's always like, well, I don't know. And I'm like, okay, well, how much is this share of Berkshire Hathaway? You know, the company that Warren Buffett runs. And they're like, oh, I don't know. And I'm like, it's $300,000. And I'm like, is that expensive or cheap? And most people will be like, oh, that's really expensive. And I'm

like, the answer is it's neither. Yeah. Neither expensive or cheap. It's that times the number of shares. And that represents the market cap. Like that's it. It's not expensive or cheap. It's what the market price does. And it also, we don't know if $300,000 is a large market cap unless we know how many units there are. So, you know, one share of Dan Held coin, if I had a trillion Dan H held coins, I'm a trillionaire. If one person

with me, yeah. So, you know, if I had Dan coin for one share, but if I had $1,000 per share, Dan coin, and there's only a hundred shares, it's only a hundred thousand dollars. So a lot of people, you know, they think the equities are kind of messed up their thinking where they have to buy in whole units. And those are constantly split for investor psychology, whereas Berkshire Hathaway never did a split. So I think that definitely messes with investor psychology, but I think people get over it pretty quickly. As soon as you spend time in the space and you buy Bitcoin for the first time, you're like, oh, I can buy a little bit. And that's something I'd love to explore more and crack. And I think, of course, for us,

we want folks to have a great user experience when they buy crypto for the first time. I think with Bitcoin, it'd be a really interesting dynamic to see if, you know, if we better explain that Bitcoin can be bought in smaller chunks, would that increase the number of trades that occur? I think this would be really something exciting for us to explore in the future. I'm not going to say if we're doing it or not, but I think any exchange has probably thought about that before. Like, let's figure out the unit problem. Well, in 2000, I mean, and I know the bits for sets and simple things like that, but I still laugh about 2017 when people just bought Ripple and Litecoin

because they can afford it. I can afford one of those. I can't afford a Bitcoin. It's too expensive. And it's that there really is a retraining that's required for people to understand that even still in 2020, I think. Yeah, we want to allow people to buy whatever they'd like, but ideally, they would understand the asset as concretely as they could. So I think we're always going to strive to provide more education and especially around the domination, which is such a basic

thing because domination is a very minor thing that shouldn't really weigh in too heavily on the decision at all. Again, people don't think in fractional shares, so it's hard for them to rock buying a fraction of a coin. But let's put it this way. It hasn't stopped Bitcoin from going to 20,000. No, it's a minor problem, a sputter in the engine. I think it's affecting the performance. I think, talking about the institution, I think that Saylor and MicroStrategy are the very far end of the spectrum on one side. I mean, they have a couple billion dollar market cap and now they're going to be almost at a billion dollars worth of Bitcoin. And then you have Jack at Square and they're like almost a hundred billion dollar market cap and they bought 50 million bucks. I think that's what they're going to be almost at a billion dollars worth of Bitcoin. Right. And then you have Jack at Square and they're like almost a hundred billion

dollar market cap and they bought 50 million bucks. I think that's what we're going to see more likely as companies and billionaires try to get exposure, which they've talked about forever. The one to five percent, maybe even half a percent to one percent exposure in case the Chamath, you know, the Chamath narrative. Yeah, I think people are going to dip their toes in the water. And then as negatively yielding sovereign debt becomes more and more negatively yielding, like, I mean, it was an $18 trillion of sovereign debt is negatively yielding now. I mean,

why would I want to hold that asset? So when we look at Bitcoin's price, I just look at that gold, real estate, and how Bitcoin's competitive with those other stores of value. And it's hard not to be bullish. I agree. And I mean, micro strategy could do that. Apple can't yet. Right. Facebook can't yet. We love to have that sort of like a wet dream where Apple puts five percent of their, you know, of their of their cash reserve into Bitcoin, but it's not big enough, right? Which is extremely bullish. That's not a bad thing. It means that the price needs to be 50 grand or 100 grand before they can even do it if they want to.

Right. Yeah. Bitcoin, as it grows, and this is where the network effect piles in, and that's what I think some folks don't really drop with Bitcoin as an asset. As it gets bigger, it's a self-fulfilling prophecy. Like, even if an investor likes Dogecoin, there's no way they could pitch it to their board. And then there's investment committee or the board. And there's no way that Dogecoin could even take a billion dollar purchase. It might be greater than the market cap of Doge. Or it would take four months to buy that much.

Bitcoin, as it grows larger and its digital gold narrative is extremely attractive in this time period, then it's a self-fulfilling mechanism where it grows larger than sovereign wealth funds and central banks at the highest level. That's like the final boss in a video game. At that level, they're looking to allocate in tens or hundreds of billions. At at that level, it gets insane. And that's where Bitcoin would have to have a market cap of the trillions or tens of trillions to facilitate that, which I believe it will. And by the way, that's priced in billions of dollars.

I agree. It's interesting. We've always had sort of the narrative that governments were going to ruin it. I mean, even recently, you know, Brian Armstrong came out and talked about Mnookin potentially, you know, pushing for some legislation before they get out of office. But on the flip side of that, I have to think that these billionaires know something. It's not like they don't have friends at the government, right, in the government. I don't think that these guys are exposing themselves in the hundreds of millions and billions to something that's going to be legislated away in the coming months. And I

think that that notion is almost absurd when you think about it. These guys don't make bets, right? They're not just like throwing it on black. Buffett called the treasury before he bought Goldman Sachs. It was a Goldman Sachs convertible note in the peak of the 2007 2008 financial crisis like he had a phone call with the treasury before he did that yeah i mean he he knew what was going to happen um and i think where there's two different sets of bitcoiners and they're starting to be a little bit of a division for him i don't think it's like that big of a deal but it's a small division of like the privacy minded folks which which I totally agree that privacy is incredibly important. And it's a human rights issue. And then there's the financialization of Bitcoin.

And they believe that it's some of the privacy folks are kind of the old school guys, which I'm part of those, but I'm just a little bit more practical. I believe that privacy, we need it, we should absolutely have it, despite whether it's legal or not legal is a human right. I don't think that's irreconcilable with Bitcoin becoming financialized and becoming more tightly integrated with the existing financial system. Some of them believe that it's impossible. There's also the trade-off between auditability and privacy, where they believe that, oh, we should introduce privacy on layer one,

but if you do that, we can't audit the monetary policy, which means that we undermine exactly what makes Bitcoin scarce and all the value stored in it. By the way, storing value in it increases Bitcoin security model, which makes it more viable to use and settle. So to me, that's something that I don't think most Bitcoiners would ever compromise on, the 21 million hard cap. I think that is probably the most concrete set in stone factor. Privacy folks will have to reconcile that over time with Bitcoiners being very resilient against introducing privacy in layer one. Again, privacy is very important. I think people should coin join on layer one. I think people should use other privacy mechanisms. I don't think it's irreconcilable with the financialization era that Bitcoin is going

through. But also, I don't believe it's how we survive a state-level attack. To your point, the way that it survives is 30%, 40% of the population and very wealthy people and politicians own it. We own it. And they do. And they do. Look how many, I mean, you've got to imagine how many of them who just haven't said it. Even when

I talked to Saylor, which may be five weeks ago now or something, he was the only one. Paul Tudor Jones had made his comments, but Saylor was like, all I need is for like seven more of me to come out and say, yeah, I own this. I'm going to take the risk, the security risk, whatever, of saying publicly that I support this. And within weeks, take the risk, the security risk, whatever, of saying publicly that I support this. And within weeks, we saw that laundry list of people that I mentioned. So if those people are talking about it, and this is a taboo subject, most people who own it, who are not in the community, don't want to tell you that they own it. It's a huge marketing problem. I've got to imagine that there's so many of that, but you can't tell me Elon Musk doesn't

have Bitcoin or that Mark Zuckerberg doesn't have Bitcoin. Give me a break. What happens in the next bull run? You're telling me that a huge swath of the... That's how Bitcoin survives the state level attack because it becomes integrated into everyone. And people respond to incentives. They respond to having the skin in the game boat, where if they were to do things that would hurt Bitcoin, it would hurt themselves. The other privacy-minded folks, they think that if we just make Bitcoin super private, that's how we escape a state-level attack. But I just don't see how a group of... It's also super hard to stay private. Even if you have private Bitcoin transactions on-chain,

perfectly private, you have a computer that has zero day exploits. You have an internet connection where that data flows through a bunch of other pipes. You have your own life. Have you never mentioned Bitcoin once ever to friends and family or anyone else? Have you ever checked the price of Bitcoin on your phone on a non-Bitcoin connection? Bitcoin's easier to track than cash. Yeah. Perfect privacy is important.

Even cash isn't that great. Right. Okay, cool. You can go buy some drugs. Awesome. Go buy a house with cash. Yeah. That's going to be recorded.

And so the most fungible money out there, cash, in any amounts over $10,000 automatically gets flagged. So it's not exactly like cash is this super fungible thing and Bitcoin isn't as fungible, aka like one unit equals another unit. Bitcoin is really phenomenal because on chain, it's perfectly fungible. And then when it touches the real world, yeah, you're going to have people asking questions when you buy assets for a large amount of value. So yeah, that's where I don't really believe in that. That started the argument that they have that privacy is the way that we win.

I think we should do it. We should do privacy as much as possible as long as we don't change the auditability of monetary policy. I love privacy stuff. I just don't think that's how we win the battle against states. It's people just co-opt into Bitcoin. And it's like, how many times have we heard China's banning Bitcoin? Like it seems like seven,

it seems like seven times in the last five or six years, India's banning Bitcoin, everyone's banning Bitcoin. You can't ban Bitcoin really. Like what's the worst the government can do at this point? Well, they can tax you to death of course, but like they can make it difficult to get your fiat in and out.

But like the world we're talking about is where you don't need the fiat. You don't need to go out to fiat, right? Or to some degree, maybe unlimited. They can make your on-ramps and operatives very difficult. But otherwise, what can they really do to kill Bitcoin, so to speak? And at a fundamental level, Bitcoin is free speech. The US federal courts upheld a motion with 3D printed guns, where they allowed Cody Wilson to publish 3D printed gun content online, because it is a freedom of speech issue. Bitcoin is code, you could very much argue it is the same thing. And I would find it very unlikely that the US Supreme Court or high level courts don't also consider it to be free speech. So if they do resort to that, I see it on a very shaky ground. And also at that point, if your government is banning free speech, then we've got huge, huge problems that are Bitcoin is just one component of a fight for freedom that you'll have to do in that moment. I mean, if you're fine with not being

able to speak your mind or not live your life, which we're fast approaching that, you can live under that regime. But I'm sure a vast portion of the population won't agree to that and would likely rebel. You said we're moving in that direction. I mean, how do you see the world two, three? I mean, we don't need to talk about 20 or 30 years from now. Now, at this point, things happen fast. In two, three years, and then Bitcoin in context of what you imagine could possibly be, you know, the world in a couple of years. Yeah, it's scary. I mean, look, I've seen these 10 years ago or so, like, when I got more into libertarian ideology, I started to see the structural weaknesses of our system. And then like, I saw Bitcoin, I was like, Oh, this is our

solution. It's scary to come to that realization. It's not fun to wake up and be like, I see the world for what it is. It's not an enjoyable moment. Yet, there's kind of some really cool mystery to it where you're like, whoa, I've uncovered a secret no one else knows. But then you're in this reality where you're the only one who's woken up out of the matrix, and everyone else is still plugged in. And they look at you like crazy. You know, we're talking family, friends, lovers, coworkers, y'all think you're nuts. Now we're finally being vindicated, but it's also like, it's scary that it's happening. It's scary that it's coming to coming and coming to fruition.

What we believe what was going to happen. You know, I don't think it's like a, it's not like a doomsday sort of thing. It's more of just, it's very unfortunate that it had to happen. And I think with COVID, people are finally waking up to that reality. They're waking up to like, oh, this is a whole new system. And this is a whole new way. I mean, I think a lot more other things are going to be evaluated too. Like I think schools and universities.

The COVID has changed a lot in person working and tech in California. Why would anyone go back to having an office? Why? 40% of people I know in San Francisco, and I'm likely to move in six months, have left California. I mean, the network effect is gone. And this is going to dramatically change real estate and governments. And COVID is going to change a lot of things. And Bitcoin is one of those. But yeah, it's going to dramatically change real estate and governments. And COVID is going to change a lot of things.

And Bitcoin is one of those. But yeah, like it's going to change universities. Why would I go to a university where I'm incurring all the student loan debt when you could go learn coding and become an engineer and make a ton of money? Or tech companies, which Google just started to do this, by the way. Google, you can go through Google vocational programs to become a low level, like associate level position for non-tech positions. When tech companies do this, it'll undermine the entire system of university. Because if you don't need a degree to get a tech

job, which is probably the most highly coveted job out there, you know, you can work in banking, which is a ton of like you sacrifice your life and sure you make a lot of money, but it's a terrible work environment. Or you can sacrifice your eight years of schooling for to become a doctor. Most people don't want to make that sacrifice. Tech is a good blend of work-life balance. And so I think like once that happens, all of a sudden everyone goes, why am I going to school? So COVID I think dramatically shook up the world and made everyone realize like, Oh, welcome to what the world really is. And this is something that me and others have seen for a long time.

I don't mean that in like a braggy way. I mean, in more of like a torturous way that you've woken up, but you're the only one who woke up. It's the matrix. You can shout at it and you're like, guys, look, look over here. This, this is let's see, let's go fix this. You know, I'm an optimistic person. Let's go fix it. Let's go make change happen.

Change is the only constant in life. Let's go make positive change happen. And people are like, that's crazy. You shouldn't tell people they shouldn't go to university. That's crazy. I trust my government and the money. Yeah. I think that I did this, but I think the days of I'm going to get an expensive degree to find myself are pretty much over.

And I went to the University of Pennsylvania and took and took every the full gamut of the liberal arts education. I experienced the entire menu without really learning anything practical the entire time. Why would you do that anymore? The only reason to go to university now is specifically because you have to go to grad school and become a doctor, a lawyer, or some sort of professional. Otherwise, like you said, I mean, why not just learn to code? You'll make more money than those doctors anyways. Especially when all those big corporate, you know, biggest tech companies in the world are tech companies, especially when they go, we don't care anymore. Yeah. I was talking to my wife about this the other day. You don't

check people's college resumes really anymore when you're hiring. You can just look at their Instagram profile or something, I guess. Yeah. I just hired a bunch of folks from my growth team. And I can guarantee you, I don't remember which university folks went to. It doesn't matter. It doesn't matter. I mean, I look at... We go through a very vigorous process of the interview with the team. We talk through, I'm like, walk me through how you work and how you, what projects you've worked on and how you built things and throw situations at them and see how they respond to it. And then we do a project to see how, what they've

done or what they can do. And then the resume is about, it's cool. I want to see your work. That's all that matters. Can you do your job? Can you do it well? Are you going to be able to learn and grow in the role? Are you going to be able to bring very unique insight? That's what a job is about. It doesn't matter what you did eight years ago at university. So I think, yeah, it totally changes the dynamic. Especially with the velocity of information. What you learned eight years ago in college was irrelevant four years ago when you graduated college, like five minutes after you got your degree. So it really is just, I mean, I'm in my forties, so it's just such a different world and it's better in that regard. So I know

we're up against it here with time. I just want to kind of ask one more question is that we all believe we're going to see this movement know movement this absolute skyrocket in price and recognition of bitcoin but inevitably maybe there's a top like what are the signals eventually that we may be topping or that we're seeing a top and that might only be a couple years top or uh you know a one-year top like what what signals will you be looking for that you're not seeing yet or that you might already be starting to see? I would say looking for a top is a dangerous exercise. For sure. I've been looking at these charts for a long time and I grew more mature and more... It's a little bit also weird once you've gone through seeing my net worth grow up multiples and then drop 80% three times. It messes you up a little bit. I mean, you can't come out of that

with like... I mean, I've experienced more financial pain than almost every professional trader. I'm not saying I'm a trader. I'm just saying that like the mental, the investor, you know, how, you know, the, the conviction and belief in an investment, I mean, after Bitcoin. Yeah. From 20 to three is a, I mean, that's takes some real mental gymnastics at some point. Yeah. And so it changes who you are. It changes that psychology. And, and as I, and then you become less and less emotional with

it which also takes a little bit of the fun out of it because like i don't really get the foam or fear anymore it's you know sure like when you hit 3800 that wasn't a good feeling it wasn't panic though i wasn't gonna go sell or anything i was just gonna huddle but you know to see how that's changed my psychology over time you know, I think it changes how you think about peaks or a top. So for me, for any asset, whether it be Bitcoin or a share of a privately held company or a public company or whatever you'd like, most assets aren't priced correctly in the near term. They've been mispriced long term. Wall Street doesn't price assets based on a five to 10 year horizon. They've got some analysts who like does some back of the envelope

calculations on revenue growth based on current products. That's it. They don't think in exponentials. They don't think about Amazon's revenue doing this. They don't think about Uber's revenue doing this. They don't think about Bitcoin doing this. They think in linear format. So the world is thinking in linear and Bitcoin forces you to think in exponential. And when we think about tops, that's where trying to time a top on an exponentially moving market is really tricky. So, you know, for me, whenever I enter a position, whether it be Bitcoin or something else, you go in with a price that you're going to get out of it. For me, Bitcoin

doesn't really have that. That's the difference. I'm a supremely crazy big bull. I don't have a family. I don't have a house. It depends on the situation. I'm not trying to shame you if you have to. But don't enter it and just YOLO gut feel, go, okay, I'm going to hold Bitcoin. And if it goes up 10X, I want to buy a house because that's something i really want to do with 50 of my coins and then with the rest i'm gonna hodl it um you

know i i think that's a good mindset if you've got a value in mind where you're like okay i've entered that 10k i'm gonna exit at 100 to buy that house that i've always wanted they never do a little more it's like moving the stop loss down oh that's good buy that house that I've always wanted. They never do. A little more. It's like moving the stop loss down. Oh, that's good. Precisely. As the price goes higher, you want to have that conviction going in. My conviction was I'm not going to sell anything until it achieves goal 2.0 status. My original investment thesis. I enter other positions with the same idea. I'm going to hold this for five to 10 years and maybe take some off the table. But I think like you only take it off

the table if you either have a life event where you need it or you have to, or for mental health reasons, I understand holding onto Bitcoin is a- Or if your thesis is violated and it just doesn't happen. Exactly. Being principled with your trading strategy, I think is smart. For me, my strategy is HODL. And I have lent out my coins. I've done this publicly. So I've lent out 30 of my Bitcoins and earned an interest rate on that. That's something that over the next decade, my game is to preserve my principle without incurring a loss. We'll see what happens. It's a risk. And over time, I want to see if I can perpetually just earn a yield off

of that. And then I don't even have to touch anything else ever. And I'm just putting those coins at risk. So there's all sorts of ways you can approach your exit strategy. You could, you know, you can have a little bit you want to sell, never sell all of it. I'm telling you, there's so many OGs that sold all their coins. Don't perpetually regret it. Never sell all of it. If you want to sell a whole bunch of it to buy that house that you and your partner want to do, you know, you do you. I don't recommend it, but you do you. Only do what you're comfortable with. But then if you do sell a bunch of it, don't sell all of it. Like keep at least 25 or 30% or something

just so you don't, it's going to kill you. It's going to, it's going to. It will destroy you. Yeah, it will destroy you. I have the same exact approach as you. Yeah, I mean, I have, you know, some of it on lending platforms, roughly the same, probably percentage. And the rest is in multi-sig and it's for my kids.

Yeah. You can have different styles of Bitcoin, a riskier Bitcoin, and then maybe a little bit you want to sell for a life event or... Look, everyone's got a unique situation. No one goes into life in the same way. But just don't sell it all i know a guy a friend of mine sold all of his bitcoin at a thousand dollars and he had a thousand bitcoin because he just wanted to be a millionaire but he didn't have like a principled approach to it i'm like well why are you selling he's like well i don't know we because we hit a thousand then it dipped and he huddled and we waited until 2017 when it hit a thousand again, kind of like Vinnie, Vinnie Langham, where he sold it all at a thousand. And it's like, well, why are you doing that? And they're like, well, I don't know. It's back to

the all time high. It's like, well, why? I mean, Bitcoin doesn't hit all time high to stay there. It goes past it. And don't you have any conviction in the asset? Like you bought it because it's gold 2.0 and that not just to like, it seemed almost like a day trade to them. Not to make a million dollars, right? To make a million bucks. I'm like, you never really respected the asset for what it represented or what it could be. Same with any other investment. Don't just, you know, hodl it.

You see a quick 50% pump and sell it because you made 50%. Go in with a principle of, I think this asset is going to do this over X amount of time. And then set up prices you want to get out of it. I love it. Well, I mean, this is the best conversation I've definitely had just on why it's important and what Bitcoin really is or should be. And I'm glad that we managed to have that conversation as opposed to me asking you for your resume, which often is what happens on podcasts. So I really do appreciate you taking the time and offering your insight. I think that people are going to learn a lot from this conversation. And I think it's a really fresh perspective.

And from someone who has been through every possible cycle and emotional up and down with this asset. Well, Scott, I really appreciate you having me on. Glad to jam with you on these different things. Those were great questions. I find them. So it was a blast. I eventually got to a place where I was like, I'm just going to talk to people and as opposed to, you know, preparing too much.

And this was one of the instances where hopefully it worked out pretty well. So thank you once again.