Unchained - Why Bitcoin Now: Mike Novogratz and Raoul Pal on 'the Single Greatest Brand' of the Last 10 Years - Ep.179

Episode Date: June 30, 2020

This episode is the first in a series, Why Bitcoin Now, that takes a deeper dive into Bitcoin and the history of money in the macroeconomic environment of the coronavirus. Mike Novogratz, founder, CEO and chairman of Galaxy Digital, and Raoul Pal, founder and CEO of Global Macro Investor and Real Vision Group, tell us where they think Bitcoin is going amidst this macro uncertainty and the global crisis due to the coronavirus. We discuss:  why Bitcoin’s price hasn't risen in price due to the global turmoil, and instead fell with the rest of the market on Black Thursday  why quantitative easing is the catalyst for institutional investors to turn to Bitcoin, but why that takes time, and why registered investment advisors may be on the cusp why they think retail investors will continue to buy Bitcoin despite record unemployment why Bitcoin will benefit from social unrest why any particular country's success in dealing with the coronavirus won’t really lessen the economic impact there whether China's first-mover advantage with the DCEP and its comprehensive enterprise blockchain initiatives will undermine the global dominance of the US dollar  why they believe there will ultimately be a dollar-based stablecoin  why they believe Libra will be a strong player in the future of stablecoins  how election outcomes, and in particular a potential movement to break up Big Tech, could affect Bitcoin and the vision for Web3 whether Ethereum, and staking, will see more adoption from institutional investors  why they believe yield farming is ultimately not sustainable, but still profitable the impact the Bitcoin halving will have in this macroeconomic environment Unchained is hiring!  Check out our job listing for a remote editorial assistant here! Thank you to our sponsors!  Crypto.com: https://crypto.com Kelman Law: https://crypto.law  Stellar: https://www.stellar.org  Episode links:  Mike Novogratz: https://twitter.com/novogratz Galaxy Digital: https://www.galaxydigital.io Raoul Pal: https://twitter.com/RaoulGMI Real Vision: https://www.realvision.com Unchained interview with Kyle Samani on what happened in the crypto markets on Black Thursday: https://unchainedpodcast.com/teetering-on-the-edge-how-black-thursday-exposed-the-flaws-in-the-crypto-markets/ Unconfirmed interview with Antoine Le Calvez on what happened on BitMEX during Black thursday: https://unchainedpodcast.com/what-happened-on-bitmex-during-black-thursday/ Unchained interview with Chamath Palihapitiya on Bitcoin: https://unchainedpodcast.com/chamath-palihapitiya-why-bitcoin-will-be-the-category-winner/ Brian Armstrong tweet about deposits to Coinbase the same size as the $1,200 stimulus check: https://twitter.com/brian_armstrong/status/1250907110730170370?s=20 China's DCEP and blockchain initiative: https://unchainedpodcast.com/why-china-aims-to-replace-cash-with-the-digital-yuan/ Unchained interview on Libra: https://unchainedpodcast.com/a-libra-co-creator-on-how-facebook-will-make-money-from-calibra/ Unconfirmed interview with the Libra Association's Dante Disparte: https://unchainedpodcast.com/libras-dante-disparte-on-why-we-should-trust-a-financial-system-designed-by-facebook/ Unconfirmed interview with Michael Casey on why it would it would be good if Libra rivaled the USD: https://unchainedpodcast.com/why-it-would-be-good-if-libra-rivaled-the-us-dollar/ Christopher Giancarlo's digital dollar project: https://unchainedpodcast.com/christopher-giancarlo-why-the-us-needs-to-have-a-digital-dollar/ Ethereum 2.0 staking: https://www.coindesk.com/3-ways-staking-will-upend-the-economics-of-ethereum Unconfirmed with Kain Warwick on COMP's launch: https://unchainedpodcast.com/why-comp-5xed-on-day-1-and-what-this-means-for-a-defi-bull-market/ Unconfirmed interview with Tony Sheng on yield farming: https://unchainedpodcast.com/how-you-can-double-your-money-or-lose-everything/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, all. Before we get into today's episode, a few quick notes. First, this is the inaugural show in a series I'm doing called Why Bitcoin Now, which looks more closely at Bitcoin in this macroeconomic environment. We'll do a little dive into the history of money, the history of Bitcoin, and also look more closely at the first cryptocurrency's monetary policy, among other things. And we kick the whole thing off today with a discussion with Raul Pal and Mike Novagrads. on the overall macro environment for Bitcoin. Plus, we touch on other related initiatives like the digital dollar, Libra, Ethereum, and Web3. While the series won't be consecutive episodes in a row, I will flag each one for you with the rubric Why Bitcoin Now, because I think the macroeconomic conditions are especially conducive to understanding Bitcoin, especially from a monetary perspective. One more note. This is the last Unchained episode with my sound engineer Chris at Fractored.

recording. He's been with me since day one of Unchained, which launched more than four years ago. He's been my rock for these shows, beyond professional and dependable, and just an all-around pleasure to work with. Plus, he likes fractals like me, which makes him really cool in my book. Chris, I'm going to miss you tremendously. Thank you for all the work you've done for me and my shows. I really wish you all the best. Now, on to the show. Did you invest in a crypto project ICO that promised innovation but deliberate nothing? You might have recourse, but statutes of limitations are quickly approaching. Kelmian, run by some of the first lawyers to enter crypto in 2013, is here to help. Go to www.com.com to www.com or email that met info at kelman.com.

In response to the challenging times, crypto.com is waiving the 3.5% credit card fee for all crypto purchases for the next three months. Download the crypto.com app today. The Stellar Network connects your business to the global financial infrastructure, whether you're looking to power a payment application or issue digital assets like stablecoins or digital dollars. Stellar is easy to learn and fast to implement. Start your journey today at unchained. com.com. My guests for today are Mike Novigratz, founder, CEO, and chairman of Galaxy Digital, and Raul Pal, founder and CEO of Global Macro Investor and Real Vision Group. Welcome, Mike and Roel.

Ever since the coronavirus started, I've been thinking that between the pandemic and all the economic uncertainty is created, as well as the recent Bitcoin having, Bitcoin might be about to have a moment. But right now, the price is basically just about where it was before the crisis hit. So maybe it was wrong. Why do you guys think that is? Well, I think it is having a moment. I think it's having a big moment. You know, quite frankly, I was more confused early in the year while it was going up in January. In December, I was kind of depressed thinking there was not a whole lot of energy in the space. And then we had this kind of mystery rally, not just Bitcoin, but all the crypto is going up. And I didn't have a great understanding of why. Lots of leverage, mostly out of Asia that piled into the market.

And then we had a big de-leveraging, right, all the way down to, sub 5,000, you know, when Corona hit and you had the globally leveraging. And since then, you know, the tenor of the buyer has changed. The amount of phone calls that we're getting has changed. The overall excitement in the space has changed, mostly because we now have a perfect macro backdrop to sell people on the scarcity story, on the hard asset story on Bitcoin is digital gold. And we're seeing new buyers in new, and not just new buyers, but new buyers and new asset in investor classes. So Paul Tudor Jones buying it, really the first major hedge fund that's bought it in his fund. I got a call last night from one of the biggest hedge funds in the world looking to hire a crypto trader.

I told him I wasn't for sale. But you're seeing this shift of new participants. And the macro story is so powerful. I think it's a very different story. And Role, what about you? I mean, I totally agree. I think it is the gift of the macro story that Bitcoin has always been after. But not only that, I mean, I totally agree with what Mike's saying.

But on top of that, I think the whole space and Mike operates in a much larger space with Galaxy is that whole disruption of a financial system is becoming much more obvious to people now because you're seeing the fragilities of what exists. So I think, you know, it's a perfect time and a place. It's interesting to me, it's not broken out yet. But, you know, if anything, it teaches you patience within the Bitcoin world. And, like Mike, I didn't really understand why it was up beforehand. I was not really heavily involved, but now it's got, you know, a lot of focus for me. And same thing, I'm getting emails, phone calls every day from hedge funds saying, okay, how do I buy it for my PA?

How do I get it into my fund? What do I need to do? how do I get involved? So yeah, it's definitely growing in importance across the spectrum. Well, so then two questions. I mean, first of all, why did Bitcoin fall with the larger market on March 12th? Like, if what you're saying is, you know, that it is this safe haven, that it is this hedge, then why was it correlated, rather, you know? But the second part of the question is then also you guys didn't answer, like, why is the price basically the same as it was before? Like, why isn't it higher? Well, so it fell as it's very easy to understand why it fell.

We had kind of max uncertainty, right? The VIX's over 80 for five, six, seven, eight days in a row. That's happened once in my whole career. And so when you have max uncertainty, people run for cash. Cash is your first instinct as a safe haven. And leverage goes from here to here. And so because, you know, listen, you could buy Bitcoin. on Arthur Hayes' exchange with 100 to one leverage.

I don't think many people do, because it wouldn't last very long at 100 to one leverage. But crypto, because it's unregulated and because a lot of the big futures exchanges are offshore provides so much more leverage than traditional equities or fixed income. If you think about it, if I wanted to buy Goldman Sachs shares and I'm a retail participant, the most I can get is 2 to 1 leverage.

And in crypto 30 to 1, 20 to 1, 50 to 1. And so when you have a lot of leverage and you have uncertainty, usually the price gets the shit kicked out of it. I think that's what happened. Yeah. And because it's in retail hands, that leverage works very quickly against it. The other mechanism why I think Bitcoin's not really rising from here is there's another new development that's gone on over the last few years, particularly in the last year,

is this kind of yield enhancement stuff. So everyone's getting positive yields out of storing Bitcoin. And one of the strategies, as ever, the same financial markets is selling upside volatility. So there's a lot of calls selling that's been up there and this kind of gamma hedging stops it breaking out. But most of us have been around for a while in this stuff knows that once you start breaking levels, everybody ends up liquidating these short call positions and it creates a huge run upwards. But I think it's that. It's very heavy in delta hedging and gamma hedging.

When it breaks 10,000 or 10,200, it will get to 14,000 much faster than people expect. So you consolidate it in a range. And listen, this is an adoption story. And if Bitcoin was easy to buy, it would be a lot higher. And so we've dealt with a few hedge funds that are buying it, right? They've got to go through all the due diligence for their funds. And, you know, it's a two to four-week process for their back office to feel comfortable. And so it's not like pick up the phone and call.

Then they've got to usually talk to their board, hey, we're going to buy crypto for the first time. the other, I think, new group of buyers that are coming, they're not here yet, the financial advisor community is giant, right? If you think the bulk of the wealth in America and in Europe is not owned by Gen Zier millennials, though they'd like it, it's owned by, you know, Gen X and baby boomers and older, you know, the 50 to 80 year olds. They don't have bread wallets or coin-based wallets or Venmo apps. And so getting the financial advisors to feel comfortable to then sell it to them is a process at Galaxy that we're really working hard on.

That's being amped up in a big way, not just with us, with others as well. And so I think in the next few months, you're going to see a lot of FAs putting their clients into this. And also, Mike, as you know, is the whole, the structure of this is everyone's got their eye on it. and if the price moves up, everyone gets FOMO and has to get involved. And that's at institutional level now. Yes.

So if it goes up further, the more it goes up, the more the market cap goes up, the more they can justify it to their trustees and the more people get involved. So I think we're at that tipping point of a virtuous cycle that can continue for a while, but we just need to get through these levels first. But I think essentially every institution, every RAA is almost kind of short the upside calls. Not really. I mean, obviously there's a bunch of people who are, but really what it's all about is people don't have it and they need to get it, but they wait for the price for confirmation. So it sort of sounds like you're saying the decision makers have made the decision.

It's just kind of a matter of time to let those decisions play out in the market and we should see the price rise. But I'm wondering, like, so what is it that's driving those decision makers? Like, what is it about Bitcoin that makes them think that this is the investment to make now during the time of the coronavirus. Is it just as simple as like Bitcoin is scarce and we're about to see unlimited quantitative easing or is there anything kind of more?

It's just that simple. So people ask me all the time, I bought more gold yesterday even. And so I own gold and silver as well. But why Bitcoin versus gold? If you want to buy gold, there's 16 different ways to do it. It's very easy.

I need to pick up and you buy an ETF. And so there's no adoption curve in gold. where Bitcoin, there's still an adoption curve, right? A small portion of the institutional world has participated yet. And so as that adoption grows, you've just got a jacked-up upside versus gold. It's the exact same macro story. And listen, you know, it's funny, Bitcoin really is going to disrupt one thing, right? The crypto universe is going to disrupt everything.

Bitcoin really right now is being bet on to disrupt central banks. And so the fact that, you know, backed or fidelity or real institutions are going to hold it for you and custody it, some of the crypto junkies would be like, dude, that's not even the whole spirit of crypto, right? The spirit of crypto was to get away from those institutions. Well, in a meta sense, yes, but in a specific sense, the bet on Bitcoin is a hedge versus fiat. So it's disrupting one piece. And so I think having those trusted names in and around, keeping someone's Bitcoin. coin safe. I mean, it's shocking. You know, like, it's because it's almost comical when you originally started telling the

story of this is going to be a disruption for the banking system, but can I keep it at JP Morgan? But if you think about it, the first leg here is disrupting central banks. It's this fiat that's being printed like it's toilet paper. Yeah, because if you think about it in the terms of, right, we've never gone through such central bank uncertainty. None of us have lived through monetary printing of this kind of magnitude. In fact, none of us even believed it would ever happen. So when you've got something that is so large and it continues, I mean, it doesn't go away.

It gets worse and worse and worse. Everybody has to ask the question, well, what could it mean? And Bitcoin is the call option on the what could it mean? And it's as simple as that. So in a big portfolio, a very little bet could end up being a very big thing if something at the central bank level, i.e. fiat currency, come into a larger problem. Yeah. So it sounds like you two actually have kind of like two theories that propel your interest in Bitcoin. Because Chimoth, Pala Hapatia was on my show last week and basically said he didn't think that COVID was going to be Bitcoin's moment.

And he said it's only going to take off of there's some fundamental breakdown of the system. But you seem – and he basically was like, yeah, I don't believe. even the digital gold thesis and stuff like that. But you guys seem to see it both ways. But one thing that I was curious about is, you know, so far we've seen that retail investors have really led these different bull markets in Bitcoin. But, you know, with the fallout of the virus, I don't know if a lot of retail investors are going to have a lot of extra disposable income to, you know, place on speculative investments. So do you think right now we're going to see that flip? Because you guys are talking about institutional investors.

Well, but both. Here's a staff that'll blow your mind. 2020, disposable income in the United States is going to be up 4 to 5% from 2019. That's kind of crazy with 30% unemployment or whatever we have 20% unemployment, right? Think about what I just said. Disposable income for Americans is going to be up 5% this year. Why? Because the government's giving everyone a ton of money.

They gave stimulus checks, and you saw today, you know, Trump's losing on the polls. He says, I'm going to give more stimulus checks, right? It's an election year. This guy's not going to be cheap. He wants to get reelected, right? We took unemployment insurance up $600, you know, from basically used to get paid about $12 an hour unemployment insurance, and now it's $25 an hour. And so, you know, unemployment insurance all of a sudden is $50,000 a year, so it's not

that bad to be on unemployment. And so we're pumping the money full of liquidity. A lot of that's finding its way to the U.S. stock market. If you see the Robin Hood accounts are jamming stock. up and we're seeing kind of bubble-like behavior and lots of stocks. Some of this finding its way in the crypto markets. Brian Armstrong had a very funny post the day the $1,200, was it $1,200, checks, how many $1,200 Bitcoin orders he had versus a normal day? And it's a graph that goes, right? Right. Don't buy $1,200 of anything. On that day, there were a ton of $1,200 buys.

And so, you know, shockingly, there's a lot of liquidity in the system, and I think it finds its way in. The other thing I would mention is, you know, Bitcoin and crypto has always been about systems change. COVID exposed the kind of raw inequities of our country, which I think is creating this tension. Uh-oh, I just lost you. No, we're here. We've got you. Oh, I can't see you that. I'm sorry.

It's creating this tension. And now we're seeing riots in the streets, right? The Black Lives Matter movement. it's not just the Black Life Matter movement. It is a revolution of spirit of saying we've got financial inequality, racial inequality, health care and equality, we want systems change, right? People are protesting the strength for system change. And so while it's not a direct correlation with the price of crypto or Bitcoin,

it's the same macro spirit, right? And so we're going to go into one of the most difficult elections of our recent history in our country. that is going to keep more, I think, tension, dislocation in possible really wacky outcomes, which also is a tailwind from Bitcoin. Yeah, and also, if you think of the narrative that Mike's talking about, it's a narrative of fear, right, because people don't know. We don't understand what is happening.

And that narrative of fear, whether it's fear of money or systemic social change or whatever it may be, people automatically start to gravitate towards understanding things like Bitcoin because they're looking for answers and Bitcoin appears to be the answer that many people have come up with. And so, you know, I see it even at the office from the people we employ at Real Vision. I mean, today my chief of staff is like, okay, so I've set up my accounts and I'm now doing my due diligence to get my KYC. And I'm like, why are you buying Bitcoin? She goes, well, I just don't understand really what's going on. and I feel like it's an insurance policy. And so it's really getting to that tipping point where people are understanding it's something

they need to do. Well, I just, oh, go ahead, Mike. Well, I was going to say the other last thing to mention is, so we had 2008 where Bitcoin was, you know, first brought into the world by Satoshi and his merry pranksters. And, you know, we had a financial crisis. The global financial crisis is something we never thought we'd see. JP Morgan might go out of business. Morgan Stanley might go out of business.

We don't trust the banks. We don't trust anybody. So here comes crypto. And there was a lot of, when I bought crypto in 2012 at 100 Bitcoin, you know, we had just done QE2. Europe was in crises. There was a lot of fear of inflation, yet we didn't get any, right? And one of the reasons we didn't get any and things kind of got put back, the genie got put back in the bottle, was that the political movement that can.

came out of that chaos was the Tea Party. It was this fringe Republican group that said, stop spending our goddamn money. No more Mr. Obama. And so we had this stalemate between the central bank having to feel like they had to do everything because the Treasury wouldn't do anything, right? The Tea Party got eaten up, swallowed out and thrown to the side of the road by Donald Trump, right? He came into this with a 5% fiscal deficit, spend, spend, spend. Now the political movement that's coming out of this is the radical left. You know, it's AOC. I shouldn't call it the radical left.

It's the, it's the, but it was radical versus the center. And so there's no chance in hell that either party is going to say, oh, it's time to be fiscally conservative now. Let's stop spending, right? They're going to say, let's pay for kids college. Let's wipe out student debt. Let's have universal health care. Let's make this world more fair and just. All of that costs a shackle of money.

And so the printing press goes burr is one of these crypto memes. I can't imagine the printing press slows down any time soon. I don't see a political scenario that puts us back into adults running the show. Well, I guess the one thing that I just wonder is, like, if we're talking about retail investors buying Bitcoin and having the disposable income to do that, like I totally understand that I think it's like, two-thirds of people who receive stimulus were getting more money than their normal salary. But that's also kind of the group of people who like tend to have debt. And I just don't know how many of them are going to be like, oh, I'm going to put some of this in Bitcoin.

I think there's a really important thing here is if you are a millennial, so you're under the age of, what, 35, and you look at your 401K and your investment opportunities for your retirement savings, you have equity valuations. all-time highs, bond yields at all-time lows, credit yields at all-time lows. You have, and property prices pretty much at highs, you have almost zero opportunity to have an expected positive return over the next 10 or 20 years. That's the reality here. So how do you do? What do you do? How do you save for your future? You can save in cash. Okay, that's fine. The reality is as crypto offers an opportunity. It is the thing that the baby boomers got with the equity market and the bond market. They

got the double and the property markets, all three, they got a record low valuations, gifted to them in their 30s. And they got rich on the back of it. And millennials are going to accumulate overtime in their 401ks into crypto or think about saving because it gives them something that has the 50 to 100 for one upside. And if we were landing here 150 years from now, and we were anthropologists and historians, and we looked at, we'd look at the baby boomers, and, you know, unfortunately, I'm 34 days of baby boomer, though I always tell my kids I identify as Gen Z. The baby boomer generation will look back as the most selfish generation in the history of the planet. If you look at what they have taken and the debt they're leaving versus what they put in, right?

And so this is generational theft on a gargantuan scale, right? The baby boomers are running up a debt that's astronomical that, you know, my poor son and his, kids are going to have to pay back one day and they're not going to be able to pay it back. And so in some ways, logic would say the only way you pay it back is inflate to shit it away of your deficit. If you just look at the scale of the debt and how fast it's growing, right? You've got a positive first and second derivative of the growth of debt. That doesn't make you feel good if you're 20 years old or 24 years old or 16 years old.

Now, most of those guys don't have economics degrees yet. They haven't actually figured out how to connect the dots, but they intuitively feel it. And so when I really think about it, like, we're going to come back as, you know, these future anthropologists, you're like, dude, of course they were buying something else. And there's more of them to know that the dollar's not going to work that much. And key to the point is the millennial generation, and particularly Gen Z, grew up understanding that digital assets have value. Right. Mike and I had to take that leap. We didn't know this.

It didn't make sense to us, right? And we were still fighting for our vinyl records. and it was all going to Apple. You know, all of this digital stuff was not a natural thing that we grew up with. What these guys grew up with is digital assets have value. So they don't have to take any leap of understanding at all.

In fact, it's ludicrous to imagine that cash is an easier thing to have than a digital asset. So, you know, the adoption rate from younger people is always going to be faster in this. So I think just naturally they will gravitate towards it and they'll just understand it intuitively. Yeah, I guess, you know, when I asked that question, though, I was thinking more about

like furloughed workers, like people who just don't have money coming in. I think, Laura, what you're doing here is worrying about a small point in time and the group of people. So there's a number of participants in this space. So we're looking at either the structural flows or who is the next person in? The next person in, I think, is probably the hedge funds because I think they understand it. The institutions are slower, but they will get there. And I think that flow will offset anything from a few millennials who is furloughed, or even if it's 10 million millennials furloughed,

because the relative amounts of savings that they have versus the large pools of capital. So if we're looking in that short term, i.e. what breaks 10,000, well, it's probably the shift towards more institutions coming into the space, because a few people can drive this massively. And as we said, once it starts going through, there's a few structural issues. Once it starts going through the upside, it actually quite probably accelerates. But so just to summarize to make sure I fully understood.

So, you know, it sounds like you think institutions will lead. But like I guess where I was also going with my question was, you know, we have this like record high unemployment. And but yet you still think that retail is going to also drive the next Bitcoin bull market. Is that the case? Well, I think I agree with. I think that, again, prices are set on the margin, right? So it's where the new buyers, I think the new buyers are coming from 50 to 80-year-olds. It doesn't mean, you know, 15 to 50-year-olds stop buying completely,

but it's that, you know, Bitcoin is a social construct. It's how many people can you get to believe in it? And there's a whole new group that are starting to believe in it, right? Again, if you go on Robin Hood's app, Bitcoin is a big part of it because they've got all young people who already believe in. And so we're converting new people. And the key point is if you take, and the key point here is if you take one person aged 30 and one person aged 60, their relative wealth differential has never been larger in all the history of the United States. So you bring in one of those 60-year-olds, it has an outsized impact because they have much more savings because they're later in their careers and the relative earning gap has been ridiculous for a period of time.

So, you know, as those people come in, but yes, sure, a bunch of those are furloughed too. But if you look at the unemployment statistics, the actual predominance of people who have been laid off are actually the under 35s. Okay. Yeah. But so I actually still want to ask a little bit more about how the coronavirus will impact things because just I was wondering, like, will we see kind of different impacts based on like how well a certain country handles the coronavirus? Like, for instance, would we see, like, less of economic fallout in a place like New Zealand or Australia or Taiwan where they've kept the virus down? Whereas obviously in the U.S., since, you know, we're at this level of about 30,000 new cases a day. And it's actually just, frankly, increasing, at least at the time of this recording. So in that sense, will the impact, will the economic impact in the U.S. be, you know, worse? You know, when the U.S. sneezes, the world gets a cold.

I mean, we're still the dominant engine of global growth. And U.S. sets monetary policy in lots of ways for the world. We're still the reserve currency. And so I think even if you're a country, if you're Tahiti and you've got no cases, the economic impact because of tourism and all kinds of other things is still pretty severe. If you look at China is doing its biggest stimulus ever, Japan is doing its biggest stimulus ever, the U.S. is doing its biggest stimulus. ever. Europe is doing its biggest stimulus ever. And so you add it all up and it's it doesn't really

matter if you've done a little bit better in COVID or a little bit worse. It's the collective psychological shift amongst central bankers, you know, about people believing in in modern monetary economics are preying it works, right? I mean, you know, to me it's worse shit, right? Money doesn't grow in treaties. At one point, you got to pay it back. And this hope that, yeah, can just keep doing this and then put the genie back in the bottle, you know, it's going to be really hard to get the genie back in the bottle. He ain't going back in. And so, you know, the best you can hope for is a long period of three and a half percent inflation to start inflating away some of the debt, but not going higher. But markets usually don't work that way.

And, you know, looking at the coronavirus in particular as well is if everybody had acted like South Korea, Japan, and some of Europe, it gets contained faster. It doesn't mean people get all their full freedoms back and the economy gets back to normal. The problem is, is we've got the US which kind of reopened at peak virus. So that's now become a problem. And then you add Brazil and India on top. And you've got a world that is now impossible to reopen. Because you've got 1.7 billion people who are now at peak virus.

So it's game over for the year and game over for everybody else. So New Zealand, great job. People in New Zealand can move around freely and it's all good. Problem is they can't travel and they can't have anybody in and world trade takes a big hit. So it's really hard. So people are getting penalized. So if you think of the structure of society, what's happened is people have been penalized now for taking the pain. So countries that took a lot of pain to control the virus are now being penalized because others didn't do it. and so therefore they can't reopen the world economy takes longer to heal. It's an issue. Now, could New Zealand's domestic economy or here and Cayman where we've pretty got rid of it, can our domestic economy recover faster possible? I don't know. That bar doesn't look very crowded. Well, I guess Raoul could still have parties, even if it's not necessarily.

140 people live on this island that I'm on right now. So it's not much of a party. All right. Well, so we're going to talk a lot more about how other macro factors are going to affect Bitcoin and the crypto space. But first, a quick word from the sponsors who make this show possible. The Stellar Network connects people to global currencies and assets. Stellar lets you make near instant payments in any currency with anyone, anywhere. It's an open blockchain network that access payment rails for applications. and institutions around the world and designs so that existing financial systems can work together on a single platform. Transactions powered by Stellar are low-cost, transparent, and fast,

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Kelman. Law. That's K-E-L-M-A-N-D-L. Kelman with 1-L, not two. Or just go to their website at www.common.common. Kelman.com, when you think crypto, think Kelman. Back to my conversation with Mike Novogratz and Raoul Pal. So, like, you guys have, in a way, you painted quite a rosy picture. And I just wondered, oh, sorry, for Bitcoin, not necessarily for the, economic recovery. But I wondered, will, you know, will that actually be more positive for Bitcoin to have the economic fallout kind of be dragged out the way that it looks like it's going to be

since the virus cases are, you know, not decreasing? Well, my view is that my fear at the end of this is there's two camps that go on in macro land and everyone will fight all day until it's proven one way the other and then they'll claim victory either way. But it's the inflation camp and the deflation camp. So the inflation camp and is not only about the excess printing and what it does to monetary policy, but it's the excess stimulation and can it create a general rise in prices. I don't believe in that. I believe that the Fiat currency value will devalue versus gold and Bitcoin, things that have perceived longer-term stores of value.

On the other side of the equation is what I worry about, which is solvency. Because if you drag a crisis on for a long period of time and everybody's in a lot of debt, well, if their cash flows are impaired, i.e. the economy's slow, you end up with a solvency crisis. And we haven't had that since the 1930s. And my fear is that is the risk here. And I think we would have had had a better chance if the US economy had shut down, stayed shut down long enough to get the RO down below one and then reopened. And you wouldn't have had a potential prolonged event. I could be dead wrong, right? Everything could go fine. And so I don't have a crystal ball. But the problem. of this being a longer event is higher. And if it's a longer event and cash flows are impaired,

there's two answers. Either people go bust or government spend more money and print more money, right? Both of those are extremely positive for Bitcoin and gold, which is why both of us own Bitcoin and gold, because it's almost, it's very rare in macro, which probably means we're both going to be wrong, but it's very rare in macro where both extreme outcomes lead to exactly the same trade. What's interesting is it's hard to see government's not putting more money. Like the psychology shifted. It's funny, you know, the minimum wage in America is anywhere from $750 to $15 depending what state you're in. The living wage in our country is about $14.50. I'm sorry, $16. The average wage that you get paid working at Walmart, Home Depot, lows, all the big box retail is about $14.

So $2 below the living wage. Same thing with working at any of the fast food restaurants, right? 1350 is the average wage. So now at $25, what's interesting, people are kind of feeling like that feels more fair. That feels more right. It's a staggering difference, right? It's making $20,000 a year to $50,000 a year. But there's this social construct.

That's why people are marching in the streets of saying, we've been slaves for too long. And so there's literally this social upheaval, breaking windows, painting, you know, eat the rich was all over L.A., you know, besides Black Lives Matter, of saying the way society was functioning doesn't really work. And so I have a real.

really hard time seeing, you know, I think the Trump and his gang of Republican senators and congressmen are going to get wiped out of these elections. It's going to be a historical beatdown, that's my first prediction. But even if I'm wrong, even if Trump wins, he's not going to, like, then tighten the bell. Look at he's been the most profit we get president we've had in years, in generations. He came in and run a 5% budget deficit when he claimed we had the greatest economy of all time. Well, when you're having the greatest economy all time, you're not supposed to be having a 5% budget deficit. And so you've got a Republican spendaholic, and now you've got the Democrats who are ready to go. And so I just don't see the case for not wanting to make people's

lives better with free money. And also the other side of this is even if within that, these things are deflationary, the outcome from that, and I think real rates will end up going up in the United States because bond yields are at zero and I think we go to deflation. So real rates go up, and the Federal Reserve have two tricks in their sleeve. One, let's go to negative rates. Two, print more money. Or three is both of the above. And again, so that's another situation where it massively plays into this whole thesis about societal unrest, the unfairness, the feeling that you've been screwed.

And then the printing by central banks, the feeling that the value of your currency is going down, the feeling that your own personal value within the economy has gone down. All of this plays into this big, larger, secular thematic that's playing out in front of our eyes. And Laura, what's important to talk about is like, listen, I don't want chaos in the streets. I don't want the dollar to hyperinflate and our currency to become toilet paper. Like, you know, I don't want that at all. And I guess where I will probably doesn't want it either, even though it would be great for our Bitcoin position. As the possibility of that increases, as the probability of that increases, people want more hedge, people want more diversity.

And so this trade can work and it can work in a big way without the world falling apart. It just has to feel like the chances of it falling apart are a little higher. Is the dollar going to lose its reserve currency status in the next five years? Most likely not. And also for me, it's not just about that endgame for the dollar. It's about, you know, Bitcoin stands, for me, stands for a whole bunch of different things. And for me, it's a call option in the future of the whole financial architecture, the whole rise of the digital assets, the blockchain, tokenization, and all this stuff.

And it is an option on that too. So we could be wrong and we don't get to some, as Mike saying, maybe we don't get to some sort of endgame. but we do know that there is a massive progress. So this other endgame which is going on, which is a whole new architecture of how we operate digitally and digital store of value. So Bitcoin is that too. And that's what makes it incredibly attractive.

China came out like two nights ago. I don't know if it was public. At least I saw the paper. It said, okay, we're going to go to Japan and Hong Kong and Korea and see if we can do an Asian stable coin for trade, a crypto, you know, backed by those four currencies. If you're sitting in Steve Mnuchin, see, you've got to start scratchy and say, we've got to get the dollar stable plane out there pretty soon before China takes over the goddamn world. We're going into a Cold War with China.

I wish we weren't. I spent seven years of my life over there. And so it's frustrating to see, but we are. We're going into a Cold War. Trump killed the H-1B visas yesterday. Stupidest thing I think the president's done a long time. But it just tells you where that tension is. And so right now in the U.S.

We've got Venmo and a few other cash, you know, cash app to the Apple pay. And we don't have the crypto alternative yet. It's coming. Libra is coming soon. Hopefully by the end of the year. That'll be a stable coin. I'm guessing their dollar stable coin becomes the dominant Libra stable coin, even though they'll have other currencies you can participate in with 2.4 billion users.

And so the payments game is going to be a monster game. And why that's interesting for Bitcoin is the moment you've got a Novi wallet, you know, it used to be called Calibra now. It's called Novi. There's some rumor they named it after me. Not really. I like those guys. The moment you've got your Novi wallet, it's really easy to flip between your digital dollar and Bitcoin, right?

That's going to be part of it. And so as we move to digital dollars, as everything is in your phone as opposed to, you know, I was on CNN, CNNC yesterday, and the guy before me was from some, literally from some change company. And I said, you couldn't have set me up better. And he was talked about, we got a shortage of quarters, and it's because of COVID, and they can't print as many quarters. And I was like, dude, it's 20 fucking 20.

Like, what are we talking about how much change you have in your pocket? First of all, it breaks your pocket. You know, it breaks your pocket. Too much change in there. You know, China already 90 plus percent is all done digital. That's the direction of the future. And as the U.S. and Europe digitalizes their financial structure, our bet is it's going to be a blockchain based. That's not 100% certainty, right?

You know, the centralized apps like Benmore are pretty popular. Their business model doesn't work real well with interest rates at zero. But, you know, listen, you'd be arrogant to think it's got to be a decentralized. You've seen what India did, right? they rolled out this massive digitization. I mean, you can go and buy a pint of milk in India with a fingerprint now. You don't need a phone. You don't need a wallet.

You don't need anything. You don't need money. Just a fingerprint. And you can have all your case, K.C. And you can have all sorts of stuff. Problem is it's not decentralized. There's a number of fragilities potentially with it. But the point being is actually the United States and Europe is so far behind where

everybody else is. If not the India can buy milk with a fingerprint, we're a long way behind. Yeah. Well, there, so you guys, I mean, I know you guys could talk all day. And yeah, I have so many questions about all the things that you guys just talked about. But let's start kind of with maybe what is, to my mind, the biggest question around all this because it's the most global and it really affects the global balance of power. But, you know, I think a lot of people would agree that China wants to make the Redmond be more dominant and also reduce the dominance of the U.S. dollars, the global reserve currency. and obviously, you know, as you mentioned, they're piloting their own central bank digital currency, the DCEP.

They also have this, you know, vast enterprise blockchain effort that consists of like hundreds of different individual initiatives. So I wonder, like, do you think that they will effectively parlay these efforts into leverage to reduce the dominance of the US dollar? And if so, how would that work? They can't do it via trade alone, right? The R&B is not a currency yet that everybody wants to use. The issue is, is the dollar is 25% of the world economy, yet it's 79.5% of all world currency transactions. So the dollar is outsized. And really what the Chinese and the Bank of England have talked about this and the ECB, and Mike was just talking about it before, people are looking at baskets of digital currencies as trading blocks. And there you could have a dollar waiting that's not 79.5%, but something more reasonable, like 40%. It's not the death rate.

the dollar or the abandonment, it's something that allows the system to function because there's not enough dollars around, it's just complicated architecture. So I think all of that is coming, and I think it's going to move towards a regionalization of currencies and this kind of basket world where you have a much more stable environment where you can, Libra was genius because it had dollar, the original Libre concept, that had dollars, yen, pounds, euros, yuan, and so therefore it kind of basically moved up and down with global GDP, and that's brilliant for world trade. So I think all of this is coming. I don't think it's a mass abandonment of the dollar.

I think it's a de-emphasis. But it's interesting. You know, it's systems change. Again, I always go back to that word. So how do you get to become the reserve currency? You spend 5% of your GDP on the military, right? Whoever's got the most powerful Navy in the world has been the reserve currency from a long, long period of time.

We spent 5.5% of GDP on the military. The next biggest country was like 2%. And so in a lot of ways, the U.S. paid to be the reserve currency. You get a huge amount of benefits from it. You know, Trump in this, you know, kind of post-globalization era, let's make America great again, let's be nationalists, let's, you know, turn our back on globalization. You can't blame in some ways the other countries to say, wait a minute, we're letting these guys control the payment system of the world, where money gets wired because of the SWIF system. You know, it exposes

is the moment we're not nice actors, it exposes just how powerful the reserve currency is. And so people don't want it anymore. You know, hey, if we're not going to overpay for NATO and keep everybody safe with our 5% GDP military, but we're going to look much more hawkish, people are going to be less prone to want the dollar as their reserve currency. And I think China's a real threat. And I don't, you know, I hate thinking it that way because I'm like such a global. I'm a lovelist in my core. But certainly, you know, the U.S. is seeing, and now both parties, which

is frustrating, but both parties are seeing China more as a threat than an ally. Yeah. And actually, just to go back to a comment that Raul made at the very beginning about how he didn't think that China could use trade only to, you know, to kind of make the R&B more dominant. I did wonder, though, like with all the, with the sort of like belt in road version of these blockchain, initiatives that they're doing and, you know, the fact that they're kind of going into these countries that are developing and have very young populations and that are really going to be the source of global growth probably for the next couple decades. Like that combination alone, I think, makes me wonder a little bit, especially when you look

at how the U.S. is kind of dragging its feet with its own. I mean, you're dead right. The problem is, is the U.S. is still the largest economy in the world, and it's huge, and it has a large share of world's wealth. So it doesn't go away. Dead right. All of those countries, particularly all the Islamic countries across the Middle East around the Indian Ocean, fantastic demographics, low debt. They're all starting to trade with China. There's a new world being built in front of our eyes without question. But you can't ignore the US and you can't ignore Europe within that equation. And that's still there. And what do you guys think about Christopher, John Carlos, John Carlos, digital dollar project? Do you think that that is something the US might actually do? And if so, do you think that would help the U.S. kind of, you know, kind of keep up with this competition going on with China, even if the U.S. doesn't recognize it's a net competition? I think you're going to see one or more dollar-based stable coins really grow in the next, you know, six to 24 months.

You know, will the Fed, you know, the question is, does the, do the assets get held at, you know, Bank of New York or do they get held on the Fed balance sheet? And that, I think, is still up for grabs. You know, right now it's not the Fed balance sheet. It's, you know, assets being held at some bank. And so that keeps fractional banking align in some weird way. If the assets are all held at some balance sheet one for one, you know, you kind of lose fractional banking. So the Fed has to kind of think about how do I really expand money supply when I want to? Yeah, I think it changes banking dynamics.

Yeah. And in his proposal, he would keep the structure that we have now using. in commercial banks in addition to the central bank. Although in general terms, give the central bank the power to be the bank and be able to put money in and out of people's pockets directly, it becomes too much of a prize. I know when you mean too much of a prize, I don't know what you're saying. Well, because for governments, the ability to control, incentivize, penalize people directly by owning the banking system direct, if you're issuing digital currency, you don't actually need

the middleman. The dirty truth is you don't need a bank, apart from leverage and a few other bits and pieces. Now, can that be solved by a different layer? Probably. But the fact being, if governments are the people who directly pay you, take the money away, tax you at source and all of this, that's an incredibly powerful thing. Once you put that little trophy in front of them, they're going to go straight towards it regardless of what we think. Because that is the new world we're going into. Well, you look at what China's doing. China's system scares the shit out of me, right?

They've got social responsibility scores based on all kinds of factors. They're moving from a digital remandb to a crypto remandb. Like it's bad enough digital remandb. They know what you spend your money on. A crypto remandb, listen, if they don't like you, if you're a weaker sympathizer, or if you're gay and they don't decide to like gays that week, they can freeze your money. Like, because they know who you are because they've already seen what you shopped

and they can figure who you are. And so this combination of machine-based learning, learning, you know, facial recognition and having a, having a programmable currency control by the state that's not decentralized is one of the scariest, you know, it makes 1984 look like kids not. Yeah, so one of the big developments going on is the rise of behavioral economics. So, yes, it's been around for a long time. But once you apply big data to behavioral economics, what you can do and Facebook have been masters at it, as have Google, is you can influence.

behavior. Now, what makes it powerful is we've also learned that from the gaming system, and again, it's behavioral economics, is incentive-based systems based around some sort of perceived benefit and money being the great driver in humans generally, as long as we don't need food and water, if you can attach a token credit system, i.e. a digital currency, to a behavioral economic system, i.e., a reward an incentivization or punishment system, then you can control more people. That is terrifying, but that is the world we're going into. Yeah, actually, just a few comments. I did have Christopher, John Carlo, on my show a couple weeks ago to talk about his proposal.

And he was saying, like, you know, in the U.S., we tend to do public-private partnerships. And so he's really envisioning that his digital dollar proposal would be that. And I think he seems quite allergic to the idea of a central bank currency where... It's not his choice, because when the market take it, it's like when Libra came out, right? That was the... Everyone knew it. We was like, okay, well, there we go. Private currency will exist now, and it's not in the, you know, everything changes once an idea is unleashed.

You know, Satoshi's idea has grown into this huge ecosystem. And so if you're thinking of trying to launch a digital central bank currency and assume that it's going to be a nice fluffy thing that everybody thinks, oh, isn't that lovely? We just say, it's never going to happen because the behavioral incentives are aligned for governments to use it. much like the data that's within Google and Apple gets used by governments because they want that data. The state and Alibaba have a very good relationship because they need that collection of data. You know, then it's not going to, they're not going to take that part. Every single financial transaction goes to the same clearinghouse. I think what I just said, every single penny spent goes to a goddamn government clearinghouse,

that they then can hook their AI engines to and figure out who's who. I just think the U.S. is fundamentally very, very different from a place like China. So I don't know if our government is going to go in the same direction. Look at the way we're dealing with COVID. We like our freedom. I ain't wearing no mask. Well, my opinion on that is that we're just somehow we politicize science and that's really frustrating. And so we did mention Libra briefly, but I did want to ask.

just about that a little bit more because the U.S. is dragging its feet on a digital dollar and China's really coming out of the gate with this. I mean, you know, Lever's had quite a lot of just, I would say, regulatory difficulties. Yet despite that, do you feel like this is sort of the best bet as a counterweight to the DCEP being sort of the first mover? You know, I think Libra is very, they're very aggressively hoping to launch and they're persistent and I think they're going to try to launch and I think they will launch. I think, you know, Congress, the U.S. public has a big skepticism around Mark Zuckerberg. And, you know, if Libra was not a Facebook project, I think it would have a much better chance of success. That said, I'm not going to short him

because he's, you know, you look at Facebook and stock trades on the highs. It makes a fortune. anything he does that they do seems to work. And they have 2.3 billion customers. I do think if you think at Libra they're going to do the Euro Libra and all these different Libras, I think offshore the dominant Libra will be the dollar Libra. In the same way, you know, if you're in Venezuela, you want $100 bills. You'll take Bitcoin because you can't get the $100 bills. You'll take the dollar Libra if you can get it.

And so I think it probably has the most chance of success just because it's got the customers to start. And they can do things on scale, right? All these other places, it's harder. Like, how do you get people from fiat into currency into digital the first time? So those ramps are the hardest thing to figure out how to do. And, you know, they've got an army of people that can work on that. And they own WhatsApp, which is gigantic. So, you know, the ability to just instantly transfer payments around using WhatsApp is the killer app.

I mean, they've never monetized WhatsApp. They paid $19 billion for, what, 24 people or however many? It was 19-3. It was crazy. But in the end, the killer app is coming, and they know exactly what it is. It's going to be being a global payments platform. So let's also now just talk a little bit more about the election, because we touched on that earlier. And it sort of Mike kind of, you know, was talking about the different parties and stuff like that. But I just wondered, like, if a Democratic president or Congress comes in, how would you think that will affect Bitcoin?

I feel like the Democrats have sort of broadly been more skeptical of cryptocurrencies, and I wondered if a blue wave would kind of hurt the industry in any way or what you guys thought. Personally, I don't think it hurts the industry. I think, as Novo said, is they're going to spend money. Yeah, we look at it. We're very simple macro guys here. We keep telling you the same thing is they're going to print more money and they're going to spend more money, and that's only good for Bitcoin.

And I don't see a world that that doesn't happen yet. sure, three, four years out, maybe things change. Maybe there's some austerity. But, you know, we're looking at that window between here and there is I don't see that. And I don't see that they're not going to change the regulation that exists now so we can all buy it and trade it. So what's the risk? I also think right now Bitcoin's biggest competitor isn't gold. It's NASDAQ or story stocks.

It's what's, you know, it's beyond meat. It's Tesla. You're making a whole lot of money buying Tesla. It's going up even though it trades at some spectacular multiple. It's a lot like a crypto. It's a story that people can buy into. It's a store of value because people say it's worth something. I think if Biden gets elected, he's going to take the capital gains tax right up to where the income tax is.

So also you're going to take capital gains from 15 to 40. And the stock market is going to choke on that. And you're going to see a major sell-off in stocks. the Democrats win. That I think perversely, it might hit crypto for a little bit, just the correlations, but then all of a sudden people are going to say, shit, now I can't buy stocks, but I can still buy Bitcoin because Bitcoin's not going to get taxed like that. Well, it'll get taxed like that. And also, those same story stocks are likely to get regulated. Yes. So there is a risk that Facebook, I think Google gets broken apart. I think Facebook,

if they get Libre off the ground, there's almost zero chance they can stay together as one company. You can't have all the world's data and the world's currency and the large messaging application in the world. It's just impossible. So they're going to get broken up. The Democrats are coming after Silicon Valley. Yeah. And so in that case, and I love that. I hadn't thought about it before.

In the world of story stocks, because when you're bringing people into markets that weren't traditionally involved, the story is the driver. and Bitcoin has a really great story. And I understand that Tesla had a great story, but it got kind of crazy, and they're all going to get regulated. So, Lord, I was on stage in Abu Dhabi and right before there's all things started.

And I was on with the guy, Mohammed al-Shayyad, who owns 70 brands. Like every major Western brand that's sold in the Mideast, he owns, richest man in Kuwait. And, you know, they put me on stage to talk about brands. And I'm like, what the hell do I know about brands? And I sat there trying to think quick on my feet. And I was like, aha, Bitcoin might be the single greatest brand created in the last 10 years. There's no other brand that came out of nowhere that creates $180 billion.

It's known globally in every country. In every village, someone talks about Bitcoin. It's got a $190 billion market cap, and I hope soon $200 billion and higher. And so it's interesting. I was thinking, what a powerful brand that's been created. That's a great observation, I think. It is a brand. I mean, everybody knows it. They kind of know what it stands for now. They don't fully understand it, but you don't understand how your Apple phone works.

So why do you care? The point being is it stands for something, and great brands stand for something that you believe in. When it breaks 10,000, I'm going to get a big diamond shape with the Bitcoin here so I can show off my brand link. Yeah, I actually also feel like the Bitcoin story is sort of perfect for the moment. terms of, you know, all these populist uprisings that we're seeing and this movement, frankly, also against big tech. But I just love you guys because you went right for what my next question was, which was, you know, if a Democratic president would try to break up big tech. But so in that vein, as you know, there are a lot of people in Silicon Valley, a lot of

these VCs who say that Web 3 is the antidote to how big tech is so dominant. So do you feel like if that happens, that if the Dems do break up big tech, that we will also see. Yeah, I mean, we're seeing it, and no one know this as well, people like Brave Browser, we've seen that Block 1 launching voice, you know, all of this social stuff, the whole economics of this world are going to shift, right? The economic power is all with Google right now, and the economic power is going to go back to the individual. That is the rebellion that's going on everywhere. So you will charge for your time and your attention span, as opposed to you getting a product for free and then monetising your attention span. So I think that whole entire shift is coming,

and that's going to be driven by blockchain technology for sure. So I think there's a whole disruption to Silicon Valley that has to happen. We need to own our security. I cannot trust, we talked about it before. I don't want to trust Google with my security. Has anybody asked you, how do Google keep their stuff secure? There's the largest repository of privately stored information on Earth and not one person asks, where the servers kept? What is their security protocols? I want my data and I want it on a secure blockchain. So, Laura, I think, listen, I, you know, part of the reason I got into crypto, first it was speculative. And then I, you know, my college roommate, Joe Lubin is a real firm religious zealot around Web 3 and how the, you know, the Ethereum blockchain

or any blockchain can kind of fundamentally change how we structure businesses. and our data and everything else. I still think Web3 is coming. I think the gap between where we are and where we need to be on the technology is wider than people want it to be. And so it's not happened in the next year or two or three, but I think in the next three to ten years,

you're going to see more and more of this, the architecture being robust enough to take a real shot at things. And listen, it will be a wrestling match. you know, will Bitcoin disrupt gold? I think so, or at least it'll add to gold. Will it disrupt the dollar? We'll see.

Will voice, you know, block one's new social experiment take out Twitter? Not a high probability, but it might, right? These big tech companies are smart and they're fast and they're well, well funded. And they all have a blockchain, you know, defense angle. They'll block chain a little bit. And so it'll be a fascinating space to watch. I think the move of what people want and where history is going is exactly what rules said.

And so, but I think that fight over what gets disrupted and what doesn't get disrupted will really be a lot of fun to watch. It'll be profitable. There'll be great money-making opportunities, both of the long and short side. I mean, just look what's going on in Defi right now, you know, which is a little bit a mini-bubble as really the first, it's really the first thing that's worked on Ethereum, really. And so now we've gone from a $500 billion ecosystem to a couple, you know, a billion and a half dollar ecosystem in five days, you know.

Well, I wanted to ask a little bit more about Ethereum because I wondered if, you know, Ethereum 2.0 would get more interest from, you know, more traditional financial people like you guys because it will sort of become more like a yield-bearing asset. You know, I think, go ahead. Well, I was going to say that each of these things have a story, right? So Bitcoin has this story, digital gold. Ethereum is trying to become the decentralized platform for D-5, for stable coins, and for lots of things.

I would value it more like I'd value Facebook, right? As the social network of Ethereum grows, as there are more programmers, as there are more businesses on it, as there are more people using it, I think the value will grow. Right now, that community is buying it speculatively in the same way, you know, the Bitcoin community buys it. It's a smaller community. It doesn't have the institutional framework yet. You might have a few speculators that will participate.

But when I think of Bitcoin, I can think of 20 billionaires that made their fortunes outside of Bitcoin that are big advocates. I was what I called with Bill Miller earlier, right? one of the great financial investors of all time, Bitcoin guy, you know, Abby Johnson, Bitcoin guy. The Ethereum committee doesn't have those outsiders. They have the Joe Lubins, the Vitalics, plenty of stupidly smart guys that are unbelievably passionate about what they're doing. And so it's a different universe, even Ripple, it's got its community, right? They're trying to become the cross-border payments remittance shop.

and they've got the Ripple Army out in Asia, and they've got a community that people continue to buy it. And so smaller community than Bitcoin. And so it's not that there could only be one of these coins. I think the other coins have to really have a purpose for that community, and they've got to grow that community. And it can start speculative, but in the long run, it's got to be used. But I'm really asking about staking in particular.

Do you think that that will become a thing that financial institutions will be interested in doing? In time, yes. I think you're going to see it first in Bitcoin with getting people to invest in mining pools, right? Getting return on your Bitcoin by taking some of your Bitcoin and putting them in a mining pool. So maybe if you have $10, you're going to put $7 in Bitcoin and three in Bitcoin mining. And I think you'll see it there. I think you're certainly seeing it already in Ethereum. And it's a good model.

I just don't think that institutions are going to be there this year. I think when you're dealing with something as complicated as Ethereum, Bitcoin, and all its potential possibilities and futures and what you can do on it, as Mike says, the most important thing to understand is the story. And there's a simple story. Bitcoin is kind of the trusted kind of reserve currency. and Ethereum is a platform with which to construct a new world. And if you think of it in those terms, it's like gold and silver.

Silver is sort of a precious metal, but it's really an industrial metal too. Bitcoin is the precious metal. Ethereum is the hybrid model. So I think they both have a place, and I think many of the other ecosystems have a place too. They will find their niches and their communities, and the whole thing will just grow from that, much like, you know, There's a Java world and there's Linux and there's all these other programming languages. All of this exists and they all talk to each other.

And I think that's fine. You know, it's like we've got all the different email protocols and they all work. You know, I can use my Apple email and you can use Gmail and somebody else can use Outlook. My wife still uses AOLA.L. Well, so actually, Mike mentioned the DFI trend and I just wanted to ask, have you guys been watching this yield farm? thing going on? Do you think that's sustainable? No. In the long run, yes.

But I think you've gotten kind of crazy levels all of a sudden. I mean, the point being, as we know, right, you see these outsized returns, right? They don't exist in the world, right? There's no such thing as a supernormal return that lasts for long. So you see this 100% a year returns that people are talking about. What he and I will know is that, well, you just haven't seen the default yet. So you don't know what the over-cycle actual yield you get. My guess is it's probably good.

Maybe you get 15, 20% yields, because not many people are in it, but it's not the 100% they're talking about. But we need to see all the things that go wrong so you can see over the cycle. So if people are building that in as an expectation, they're all going to lose a lot of money. If you don't, and you just think, okay, fine, I don't know what it's going to be. Because, you know, the day you go and buy, you know, a hundred junk bonds, they're all paying and you've got 100%, you know, some imputed return. And the reality doesn't work that way.

Some don't pay. So we've got the same thing to come. One of these stable coins won't hold value, whatever it may be, whatever mechanism it is. But that's okay. But it's really exciting to see that stuff like this is coming. Yeah. All right. Well, I appreciate that you guys went over, but I just want to ask one last piece because

I mentioned it right at the beginning. So amidst everything that we've discussed, we also had this recent Bitcoin having. And traditionally, that has driven a boom in the price. in the year or like roughly 18 months after having. But because this isn't really a normal time, I just sort of wondered how you expected the having to be effect or how you expected it to affect Bitcoin amidst everything else. So I think it's just, again, both of us are storytellers. You've got two storytellers on the same podcast. When I think of the Bitcoin story, the having is like a giant exclamation mark this year. Like, okay, the central banks are doing

quantitative easing and oh the central bank of bitcoin we're quantitative tightening right we just cut the supply the new supply in half and we'll do it again in four more years and so it's such a symbolically cool time for it to have happened it's a little bit like aha you know that central banks uh and i think that you know to me that was much more important than the technicals of yeah it's it's the lovely thing of saying quantitative easing versus quantitative tightening by algorithm. You know, it's just, it's a great story. Whether it at the margin makes all the difference or not, who the hell knows?

I'm not smart enough to figure it all out. What I do know is it probably works, whether that's because of the story and the human behavior or the reality of the less supply and an increased amount. All right, great. Well, this has been so fun chatting with you guys. I'm so glad we were able to make this happen. Where can people learn more about each of you? you and your work.

Well, we have a website for Galaxy. You know, Galaxydigital.com or dot of work, I'm not sure which one it is. I think it's dot I-O. Oh, too. And you can find me at RealVision.com or find me on Twitter at Raoul, R-A-O-U-L-G-MI. Oh, yeah, I'm on Twitter a lot, too. I had no regrets.

Great. And I will put the real link to Galaxy Digital. the show notes since Mike couldn't remember. Okay, well, thank you both so much. Thanks for coming on Unchained. Thanks very much. Thanks so much for joining us today. To learn more about Mike and Raul, check out the show notes inside your podcast player. Don't forget, you can now watch video recordings of the podcast on the Unchained YouTube channel. Go to YouTube.com slash C slash Unchained podcast and subscribe today. Unchained is produced by me, Laura Shin, Glebel from Fractual Recording, Anthony Youen, Daniel Nuss, Josh Durham, and the team at CLK transcription.

Thanks for listening.