We Study Billionaires - The Investor’s Podcast Network - BTC043: How to Value Bitcoin Mining with Mike Alfred (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone. Welcome to this week's episode of the podcast where I'm talking about Bitcoin. Today's guest is Mr. Mike Alfred, who's an entrepreneur of multiple successful businesses over the past two decades. His recent company was sold to Ross Stevenson's multi-billion dollar New York Digital Investment Group, or NIDIG, for an undisclosed amount. On today's show, Mike and I cover a range of topics, but what I think people might enjoy

Starting point is 00:00:26 most is Mike's analysis on the valuation of publicly traded Bitcoin mining companies. So without further delay, here's my chat with Mike Alfred. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. All right. So like I said in the introduction, I'm here with Mike, Alfred, Mike. What a pleasure to have you on the show. I've participated in like, I don't know if it would be, if I would call it Clubhouse, but Spaces on Twitter a few times with you. And you're just a total wealth and knowledge. I'm excited to get into some of these topics because like myself, you come with this value background, you have been an investor for multiple decades and have started two very

Starting point is 00:01:23 successful businesses and sold two very successful businesses. And welcome to the show. Awesome to have you here. Yeah, thank you so much. It's been fun interacting with you, just bits and pieces here and there. I remember, you know, Lynn Alden would come on to some of my spaces and then all of a sudden I would see you on there as well. And I feel like we're all just watching the people that we like to listen to show up in these spaces and then we magically show up in the room too. It's kind of opt in and just kind of magical who shows up. So I've been enjoying the serendipity of it all. It is fun. We were talking, and I'm sure we're going to get into this, but you and I were talking valuations and just kind of owning equity in this Bitcoin space.

Starting point is 00:02:01 But before we go there, let's just give the listener a little bit of a background on you, is you just right out of the gate, right out of college, you went to Stanford. While you were there, you started your own business. Talk to us about this startup process and how it all unfolded. So I didn't really start my first business until after I graduated from Stanford, but I did get into trading stocks in the late 90s, right, with my own capital. So I did cut coat knives. I sold the cut coat knife.

Starting point is 00:02:30 You cut the penny with the scissors and you do the presentation, people's houses, and you ask for referrals. People always say, isn't that door-to-door sales? I'm like, no, there's a big difference between door-to-door sales and referral-based sales where you're asking Mrs. Jones to refer you to 10 of her best friends, right? And so I learned the value of always asking for the next intro, the next meeting, which has been super helpful over the last 20 years in all different types of business context. But the most important thing about that was I made $14,000 in seven weeks.

Starting point is 00:02:56 And my mom wanted me to go work at the fairground, shilling cinnamon rolls to people walking by and, you know, work in the fair rides and all that. I said, no way, got to do something more interesting. So I'm 17 years old. I got 14K. And I'm like, well, what should I do with this? A lot of my friends were buying, you know, laptops and cell phones and cars and stuff. And I opened an e-trade account and I just started trading stocks.

Starting point is 00:03:16 And I started with like more of a conservative, like, hey, I want to own Vanguard funds, whatever. And then I woke up what in my Stanford dorm room, this freshman year, it's like 1999. And I'm like, no, I want to actually learn how to invest in companies. I actually want to know what these companies do. I actually want to understand them from a first principal standpoint. I want to understand how accounting works. I want to understand how you build things. And you just can't do that as an index investor. So like, no offense to the 95% of people that Warren Buffett says should be an investor. But for me, that was absolutely the wrong path because it would mean that I would have to

Starting point is 00:03:45 basically stick my head in the ground and be an ostrich about the business building process, right, and investing in real companies, right? And so I started trading stocks and I started trading everything. I traded penny stocks. I traded tech stocks. I made a lot of money. I lost a lot of money, but more importantly than anything, it's sort of imbued in me the sense that I should be an investor. And that's something I should do for 50 or 70 years from that point going forward. That said, you know, when I graduated, I had to make some money. So I did start multiple businesses. I was briefly a financial advisor. I managed money for wealthy people. I started a company called Brightscope, which I raised about $5.4 million for. I sold it for about 30 in 2016.

Starting point is 00:04:22 That was a ratings business for 401k plan. So Preston, you know, Morningstar. I was inspired by Morningstar. and I said, why isn't there a rating system for every 401k in America? If you work at Amgen or Google or Microsoft in 2008, there was no way to find out how good your 401k plan. I was like, I can solve this. So I raised a million bucks from investors. I hopped on a plane. I went to Washington, D.C., and I got them to release previously unreleased, so-called public

Starting point is 00:04:46 data, but actually we needed to FOIA, send a Freedom of Information Act request to the government more than a hundred times, I think, to get all the data we needed to build our rating. And so we launched that in 2009. Almost instantly it was a... success in the sense that like CNN and CNBC wanted to talk about who has the best 401k plan in America, Tiro Price and Fidelity wanted to buy the data, and financial advisors wanted to know how they could prospect plans. And so we got it up to about 10 million in revenue in 2016 when I took it to market and sold it. Shortly after that, these guys from distributed

Starting point is 00:05:16 global, I don't know if you've heard about these guys yet, but this is a hedge fund, crypto hedge fund, my brother is one of the three partners, started with about 60 million. I think today it's well over a billion. And they were recognizing early on in 2017, late 2017, that there were all these new crypto hedge funds, Pantara and Polly Chain and right, multi-coin and paradigm and all these folks were coming to the market. And there was no institutional grade data. So I said, hey, Mike, we saw what you did at Brightscope, building a data business. Why don't you come build a Bloomberg for the crypto space? And so I set out doing that. And they ended up raising about 10 million for that company, hired over 30 people at one point at the peak, signed a bunch of the biggest

Starting point is 00:05:52 firms in crypto. I had some of the biggest investors in crypto, but ultimately, you know, wasn't a huge success. I think the market was just a little bit too early. And so I was able to engineer an exit to Nighting last November. And I actually worked for Nighting for about eight months doing strategy in M&A. So that's kind of the high-level timeline, Preston, but I'm sure you want to potentially go another direction with it. I don't know if you noticed the smirk and the grin on my face when you were talking about your time in college and just kind of the valuation process because like you, I just wasn't satisfied with buying like a mutual fund or an index. I was just like, well, there's these other people out here that are able to buy individual companies

Starting point is 00:06:31 and do it in a way that they outperform the market significantly. And it seems like you had the exact same opinion. So for me, I just started studying Buffett. I'm curious like your approach was to kind of crack, to crack that nut of like, how do I outperform the market by buying individual companies? So early on, what were you doing? I'm very tactile, right? I'm a very, like, I just have to do things in order to learn, right? That's how I learned guitar. I had a few teachers, but I quickly would outgrow them. And the same thing happened in markets. I would just trade, I would buy stocks and then read for 10 hours a day about the companies, right, and then move on to the next industry.

Starting point is 00:07:07 I mean, I've cycled through pretty much every industry. I've made money in energy. I've made money in internet stocks. I've made money in biotech. I've made money in traditional technology. Right now I'm really long consumer staples, grocery stocks, like, but value guys. So I tend to tilt towards spaces that everybody hates that I assume will come back, like healthcare and grocery stores, which are sort of inevitable. Like, people are not going to stop needing healthcare. It's one of the best demographic bets of the next 50 years. And so if you're fishing in that space with low multiple stocks, you probably do okay over 10 years, right? And so a lot of it's just, I went in and I did it, right?

Starting point is 00:07:38 I read a lot of, I discovered the SEC website and I realized all the documents were on there. I could read through 10 queues and I could read through all kinds of updates. I could read the quarterly conference call notes. I was following the Raging Bull message boards. I mean, today we have read it, but back then it was Raging Bull. And I've since befriended the founder of Raging Bull. He's got, he had a hedge fund for a while that did really well. And he's also an advisor to another hedge fund that I'm an advisor to.

Starting point is 00:08:01 And so that was it. That was the source of information. It was like, I don't know if you remember this person, but real time quotes in 1999, 2000 was something you paid for, right? So if you were trading stocks in the late 90s, something we take for granted today that like everything's real time, it was 20 minutes delay. And when you wanted to trade on e-trade, it was 1999 each direction. So you had to make 40 bucks on a trade in order to make money, right? Because you were going to spend 1999 on the

Starting point is 00:08:24 entry and 1999 on the exit. So so many things have changed since then, but fundamentally, the game is still the same. Like, find the most undervalued companies that you have an edge and understanding over anyone else in the world, buy them in a reasonable size that doesn't jeopardize your whole portfolio, and then hold them long enough to generate that excess alpha. and I've been doing it for 20 years, and it surprises me that the opportunity still exists because with all these high-frequency traders and all the liquidity that's active in the market today relative to like the 99-2000 tech bubble, it's just totally different game. It's just a harder game if you're trying to play short-term games.

Starting point is 00:08:57 But if you're trying to play long-term games, I think it's actually never been a better time to be an individual company investor or value investor because the alpha comes back when everybody decides there's no alpha in doing that. What attracted you to this? Because I think people that would be hearing this from the outside, they'd be like, oh, Mike just wants to make a lot of money. But I don't think that that's what it is. You often find people that like love this stuff that are pouring through a 10K or a 10Q. They like the complexity. They're just kind of wired in a certain way that they're trying to piece together a puzzle. So like how would you describe it? Why were you attracted to this kind of stuff? I think the main thing I realized as I was working as an investor, as a young investor, right, in training in a sense, is that I had entered the most interesting intellectual game that exist. Yes. Anywhere. Anywhere. It's multi-level. It's multi-dimensional. It's constantly evolving. It's like the ocean. It's like the difference between surfing and snowboarding, right? Like the conditions change in snowboarding. So it's kind of interesting, right? Like sometimes there's more powder, sometimes there's less powder, whatever. But in surfing, the entire ocean is moving all the time. Literally, the wave your writing didn't exist in that space before, five minutes before you rode

Starting point is 00:10:08 that wave. And investing is the same way. Like, everything you think is cyclical, there are cycles in markets, but there are also things that you've never seen before. There are things like the mobile phone, there are things like the internet, there are things like Bitcoin that are basically impossible to model. And once I realized it was a game with no bounds, right? Poker is a solvable game now.

Starting point is 00:10:25 No limit hold them has been solved by machines more or less. Like it's very hard even for the best players in the world to beat a game theory optimized a robot. Chess was obviously solved years ago. Go is more recently sort of being solved by Google, right? And so all of these games, they're finite. There's a limit to how many different variations. It might be more than all the atoms in the universe, but there's still at least some sort of real limit. And investing, it felt like the most limitless intellectual game that I could possibly play. As I dug into it more and more, I said, this is something I could spend 50 or 75 years on. And I just haven't seen anything else in life that looks like that.

Starting point is 00:11:00 I have the exact same passion and just intellectual curiosity. That's why I've been in the space for all these years. I just find it so exciting to try to understand and kind of piece together the complexity. But the way you just described it helped me understand in a way that I'd never thought of it like that. I loved how you just described that. So Mike, let's talk a little bit about your first business. So you're trying to do this data analytics.

Starting point is 00:11:28 you're standing it up. Talk to us about some of the trials and tribulations, things that you learn that you just have no clue until you start your own company. Like if you're going back and kind of reassessing yourself, what would you tell yourself right now if you could go back in time? Prest, there's so many things on the micro level, but at the macro level, like the very, very top end for an entrepreneur and starting a business today. The guys at Sequoia, some of the partners there, like Brian Schreier and Alfred Len, who I've spent a little bit of time with, they told me this years ago and it didn't make sense at the time because when you're in a young entrepreneur and your nose is just in your own business, you don't want to hear those big picture ideas

Starting point is 00:12:05 because maybe it conflicts with what you're actually trying to do. But they said, look, here at Sequoia, what we focus on first and foremost is the team, of course. But secondly, it's just the market and the size of that market. Because if you start a business, even as the best business in the world, but you start in a small market, it's going to be a small business. if you start even a mediocre business in a huge and growing market, it has a potential to be a very large business. You don't even have to be that smart. I can think of a few companies in crypto that would qualify for that second one. And so early on, I wish somebody had taken me aside at 22 years old and said, hey, you could save a lot of time by just waiting until you see a fat pitch in a market

Starting point is 00:12:42 that actually justify spending 10 years of your life on it. Because I spent eight and a half years on Brightscope. I think we changed the 413 industry forever. We lowered fees. We worked directly with Obama's CTO. We wrote reports for the GAO. We worked with the Senate Aging Committee. We worked with the House Educational Labor Committee. I was close with executives across most of the largest financial services companies in the U.S. There were a lot of really interesting impacts personally and professionally from building the company. But ultimately, it was a $30 million outcome. And with the same amount of effort, I've seen $300 million companies and $3 billion companies with the same amount of effort. And no sort of dramatic differences of management

Starting point is 00:13:16 quality, execution capabilities, capital raise, et cetera. I'm noticing now it's just as easy to raise a $30 million series A as it is to raise a five or even a two million dollar around. And as you dig deeper into these businesses, you realize a lot of it's just market. And you're fundamentally, you're writing these tail ones. So why I'm so excited about investing in Bitcoin and crypto business in particular is that I think you have 100x plus tail one. And as a lot of great value investors like to say, right, like you can take a great

Starting point is 00:13:44 management team, you're going to find out that the management's reputation doesn't survive the experience, right? And in the same way, you could flip that around and say, look, you could take an idiot, put them in a crypto business, and they might look like a genius. And so at the very macro level, I could talk about a lot of very detailed things from being a CEO for 10 years and now sitting on boards for another five or 10 years of experience kind of on top of that. But none of them are going to be as important as just choosing the right market. I love that. So tell us your Bitcoin story. When did it first come onto the radar for you? What time frame are we talking? And then how did you act as this entered the marketplace or your stream of thoughts and your ideas as you're looking at it? Yeah. So I said this before a couple times and I still regret it to some degree. But I wish I had more of a beginner's mindset with Bitcoin. I used historical analogies from markets rather than starting from the, hey, understand Bitcoin in context of other monies, which I think.

Starting point is 00:14:42 is the correct way to get to a real understanding of Bitcoin. So 2012, 2011, I'm reading an article, one of the magazine articles talking about Bitcoin going from $5 to $20 or $20 bucks to $100. And I see it in right away, I think dot-com bubble, right? Because those of us who live through the dot-com bubble investing our own money still have scars around what happens at the end of a bubble, right? I actually think it would be something good for most of these Robin Hood Pachama traders today to go through is one cycle, one full cycle, just one.

Starting point is 00:15:10 The Fed probably won't even allow it, right? most of the traders that are in Robinhood today, obviously, I've never lived through a single cycle, right? Because they came onto the market in the last decade. And we really haven't had a full business cycle. But having lived through that, what I saw Bitcoin initially, and I saw how bubbly and frothy had traded, it looked a lot like the stocks I traded in my Stanford dorm room in 1990.

Starting point is 00:15:29 And so I made a mistake. I made a logical mistake. I made an intellectual mistake in writing it off. And so I called the top at Thanksgiving dinner. I think it was 2013 or 2014. There was that $1,000 top. And I said, this is nuts. Like, this is going to collapse.

Starting point is 00:15:42 it's a bit of a bubble. So short term, I was right, long term, completely wrong, because I didn't even know what I was talking about. I was talking about a ticker. I was talking about a thing that was trading, like things that I had seen before that blew up, rather than asking, huh, what is this thing that went from basically no market price to $1,000, right, in three or four years? That was the more interesting intellectual conversation.

Starting point is 00:16:03 The other thing that caused me to make that mistake, though, is that the people who were recommending Bitcoin to me at that time were all venture capitalists. And I had a personal disdain for some of these people because, Frank, some of them are personally obnoxious. And I found their behavior obnoxious, you know, showing 25 minutes late for meetings, right, telling you they're going to have a partner meeting and they disappearing for three weeks, digging you around as an entrepreneur. So some of the people that I personally disliked were also big fans of Bitcoin. And again, another mistake, it's, I'm actually getting better of this as I age more and more. I pay more attention now when somebody I personally

Starting point is 00:16:35 just like likes an asset. I tend to actually do more work on it because I've found when somebody really distasteful to me, like something almost always that's a good investment. And so my story is that I waited until 2017 to actually do the work. So it's spring of 2017. I finally started reading. I finally said, okay, I'm actually going to understand what this is. And I started buying Bitcoin. That was the beginning of a process. What really got me to where I'm today was working at the space, working with crypto hedge funds, working with Bitcoiners, looking at the data, helping hedge funds understand the data, right? That really gave me a better fundamental understanding what was going on. Let's take a quick break and hear from today's sponsors.

Starting point is 00:17:10 All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses,

Starting point is 00:17:50 and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at osloof freedomform.com with patron passes

Starting point is 00:18:36 offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs

Starting point is 00:19:24 while making fast AI-powered decisions with confidence. And now with the Netsuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, Netsuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, demystifying AI at Nessuite.com slash study. They guide is free to you at netsuite.com slash study.

Starting point is 00:19:57 NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household

Starting point is 00:20:28 names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB.

Starting point is 00:21:10 That's Shopify.com slash WSB. All right. Back to the show. So your comment there. I love it. that you actually dig in deeper when somebody that you don't particularly like maybe on a personal level is recommending something or you know that they're buying it. Do you think that this is because you're just running in circles with people that kind of have a little bit of a midas

Starting point is 00:21:37 touch to things? And if they're just continuing to crush it time and time again, that you might look at them because of whatever ego they might have as a personal level of why you dislike them, but at the same time, you intellectually have respect for their ability to be right through the years. Is that what's going on? There's a few things. One is that the smartest people in the world are often not the most fun people in the world. And often, in my experience, some sisters in the world are both difficult and stubborn. And so they're going to be the people that when you're having dinner with them and you want them to just let something go, because maybe you made them a misstatement

Starting point is 00:22:13 or maybe they're calling you out on something you did five years ago. They'll just won't let it go. They're tenacious, right? They're going to beat you up. They're going to punch you in the face intellectually. They're going to tell you you're wrong. They're not going to let you off the hook. And they're not going to change the subject until they're done. And so that can be painful.

Starting point is 00:22:27 Right. Now, if you're intellectually honest and you recognize you made a mistake, then maybe you can use it as an opportunity for growth. Right. But in general, like some of these world-class investors are just not, they're not going to be your best friend. They're not the person necessarily you want to have a beer with every Friday night. But if you get the opportunity to sit down with people like this,

Starting point is 00:22:45 it can change your life because you will be exposed. to ideas that 99.99% of society haven't even heard about yet. In 2012, 2013, that was Bitcoin. Anybody talking about Bitcoin with real conviction at that time was somebody that was thinking deeply. Generally, they're going to have a contrary event. Often these times are surly, you know, aggressive, sometimes nasty, even people. But ultimately, they're right. And being right and being right big requires that kind of stubbornness, requires you not to care so much what other people think. Talk to us about just how you think about a portfolio specifically today in 2021. Portfolio construction, how much equity you're thinking relative to just owning Bitcoin itself.

Starting point is 00:23:27 Talk to us about your ideas on this. Obviously, they've evolved quite a bit over the last three, four years. I spent a lot of time with Rick Edelman, who's one of the kind of top financial advisors in the world, right? He put together Edelman Financial Inns. It's a publicly traded, I don't know, $6, $7 billion company. He just exited. He was very wealthy, very successful guy. He had a radio show for 30, 40 years. He was like the original well-marketed financial advisor and the public guy. When we talked about this in 2018, it was like, oh, maybe one to five percent,

Starting point is 00:23:55 right? For the average person who's 60 or seven years old, they're retired, they can't afford to have an 80 percent drawdown on 100 percent of their portfolio. I think that's evolved a bit. I'm now up to 20 percent for retired people. I think 20 percent of a portfolio should be in Bitcoin. Like, when you run the numbers and you really backtest the numbers with, with with other assets included, right? You're not going to have a significant change or at least a significant enough change to kind of ruin someone's portfolio with 20% Bitcoin. For me personally, like I've gone much higher, but a lot of that's just because I don't rebalance. So my view today is you should buy the amount of Bitcoin that you think you can buy and hold for 10 years,

Starting point is 00:24:32 whatever that amount is, and then simply don't rebalance it. So if it becomes 80% of your portfolio because it outperforms everything, so be it. But I think rebalancing is sort of counterproductive in Bitcoin because if Bitcoin's right, it's 100x or 300x. If it's wrong, it's a zero. It's a rebalancing is just under exposing you to the thing that's likely to perform the best. So I'm actually going to probably put together a fund next year, right? And it's going to be basically a reflection of my own personal philosophy on investing. So it'll be an ultra-long-duration vehicle. Initially, it'll start with just $5 or $10 million of my own money, right? So I'm not going to take any outside LPs, at least initially, although I have a couple of sort of soft commitments

Starting point is 00:25:09 to put in $20 or $30 million. The way I'm thinking about portfolio construction for my fund, which I'm calling Alpine Fox, can talk about what Alpine Fox means to me, but it's going to be a forever, long duration, 30, 40, 50 year type of fund. Initially, I imagine about a third of the portfolio will be in just pure Bitcoin, spot Bitcoin, probably cold storage, never to be touched, just sitting there riding for 20, 30 years. About a third will be in small cap activism.

Starting point is 00:25:34 So I've done a little bit of small cap activism over the last couple years, partnering with a hedge fund out in New York called Outerbridge Capital. I work very closely with the partner, Rory Wallace there. We did a campaign last summer at Barnes & Noble Education. That's a New York Stock Exchange listed company. The tickers BNED. We were buying the stock at $1.50. We proposed four new board members. We got up to about 13 and a half percent of the stock. The stock was very cheap last year, partially due to COVID. I was on the four member board slate. So I was one of the four board members we proposed. We ultimately settled for two, took two board seats. I think the stock today is at like $10.30. Something like a seven,

Starting point is 00:26:07 8X in a year. We just announced today. We proposed three new board members for a company called Comtech, which is a publicly traded NASDAQ listed company. So somewhere that kind of $100 million to billion dollar range is where I think small cap activism can have the most impact because Dan Loeb and Paul Singer and those guys are not there. But guys like Rory and I, Rory's about three years younger than me. He's also a Stanford history major. His wife was Stanford freshman roommates with my sister. So there's a lot of family connections there now. And so we just have built trust and we love to do these activist campaigns. So I want to have my own dedicated vehicle where I can do these small cap activists. This is very idiosyncratic investing. It's one company at a time.

Starting point is 00:26:44 It's understanding that company's exact story, like who the management is, where the opportunities are, the levers to pull to create value. So you pair this sort of idiosyncratic small cap investing style with Bitcoin. And then the third component will be classic traditional value. And so that'll be things like the grocery stores and the Bristol-Myers Squibbs that, you know, Lynn Alden and I have been talking a lot about over the last six months, things that are low multiple, good businesses, but misunderstood or sort of undervalued at the time. And I think when you pair those three return strings together in one vehicle, you'll get some performance and risk characteristics like you've never seen in a single fund before. So Mike, take us back to in 2017 when it clicked for you

Starting point is 00:27:22 with Bitcoin. What was the thing that kind of put you over the top and just like the light bulb went off? I think it was really, it's along the lines of like what is in the Bitcoin standard, right? So when you think about like what is the best money and how is money worked historic, when I really, I'm a historian, right? I was a Stanford history major. So I always think in the historical context. And when I think back at all the monies in human history and the fact that, you know, fiat currencies have only really been a thing for 50 years, right? And even though I, you know, I'm 40 years old, so like 10 years before I was born, fiat currencies were really sort of becoming a big thing and going off the gold standard, it just dawned on me that my entire paradigm for the future

Starting point is 00:28:03 was probably wrong, right? Because it was based on like a very, very short time period in the past, but when you actually just build up from what makes good money, Bitcoin is clearly the best money in human history, period. I think that's very clear once you've done the work. But maybe more importantly from the investor standpoint for me was that I think Bitcoin is maybe one of the best investments in human history. And I tend to agree with the like hardcore toxic maximalists to say stuff like, Bitcoin is the best savings technology. It's not an investment. So, yeah, Pierre Rochard, if you're listening, like, you know, I agree with you, buddy. But like, in terms of like my background and what I'm doing as investor, I also think it's probably the best investment

Starting point is 00:28:39 opportunity to history because I think Bitcoin has the biggest tam in human history. I think it has the biggest total addressable market of any asset, any company, and maybe any idea in human history. And I'm comparing it with other ideas, other companies, right, other religion. So I would even compare it to things like capitalism and democracy and religion. But I think Bitcoin is unique amongst those things because it really has no competition. If you're Buddhist, you're probably not going to be Mormon. You're probably not going to be Muslim. You're probably not going to be Christian.

Starting point is 00:29:08 There's always an alternative. Once you understand Bitcoin at scale, there really is no alternative as base money. And so I think Bitcoin has an uninterrupted path to significantly higher values, whether you want to reflect that in traditional existing fiat currencies or you want to reflect it in terms of real world assets. So however you want to express that, I think Bitcoin's path is so clear in terms of becoming the most widely used money in the world that from an investment use case and an investment standpoint, it's probably one of the best value investments in history.

Starting point is 00:29:39 So it has this weird paradox where once you deeply understand it, right, you want to put all your money into it. But from an investor standpoint, you know, you also recognize that like in order for Bitcoin to succeed, it also is going to need other pieces of the stack to work, right? It's going to need infrastructure. It's going to need ways to exchange. It's going to need ways to transfer it. It's going to need Bitcoin mining, CAPEX, to support the hash rate, which is going

Starting point is 00:30:04 to allow it to scale over time. So a lot of people like to just imagine Bitcoin's price going up in the metaverse infinitely with no constraints. That's a wonderful vision. But the reality is a lot of infrastructure has to be built in order for us to see those prices. I think Bitcoin incentivizes in a sort of an organic way, all those things to happen in such a way that because it's decentralized and because nobody can stop it and nobody

Starting point is 00:30:25 you can turn it off, that it's sort of invariably, you get something like a 30 to 100% kegher over the next 10, 20, 30 years. And I think you get that with a much lower risk than you get with a company. So like, I'm thinking of companies like Amazon, right, that if you held over the last two decades, you would get similar kegher, right? If you're thinking about companies like Tesla over the last 10 years, the problem with Amazon and Tesla was there's so many things that could have gone wrong. Tesla could have blown up so many times, whether through fraudulent accounting or fraudulent tweets about funding secured and just the behavior of the senior executive team or mismanagement or failed execution or too many stock options,

Starting point is 00:30:59 Bitcoin can't fail like that because so much of what's going to happen with Bitcoin is programmatic. It's algorithmic. It's sort of predetermined. And so what a great investment. If I can get an Amazon type return string over 20 years without all of the company-specific risk that you get within individual equity. So for me, Bitcoin's one of the greatest investments in history. I'm pretty confident if you just buy and hold it over the next 20 years, you're going to

Starting point is 00:31:20 beat almost any equity investor straight up. Is that risk reducing over time? Is that market cap of Bitcoin goes higher and higher? The risk is going down. Is that a linear reduction of risk or is that a like a parabolic type reduction in risk that's taking place like a nonlinear reduction? I think it depends on what dimension you're thinking about. In terms of the network adoption, I think it's exponential. It's parabolic because money becomes more valuable the more people that used it. I like to talk about the telephone. Like imagine, I imagine you could buy AT&T stock 100 years ago or imagine you could buy a telephone that represents the adoption of the telephone.

Starting point is 00:32:01 And then imagine somebody came to you when there were only two telephones in existence and said, hey, Preston, I want to sell you a telephone token for 0.00001 cent. I want to sell you 0.001 of these things. Sure. Right? And you're like, okay, I don't really know what that means. But then four of your friends get telephones. And all of a sudden, you wake up, now the price is a dollar.

Starting point is 00:32:23 But now four of your friends have telephones, and they start trying to call you on that phone. Now you recognize the value. And of course, when everybody has a telephone, it becomes indispensable. And that's how I view Bitcoin. So I think along that vector of user adoption and the network becoming more anti-fragile, I think that's exponential. Some of the other pieces, like the halving cycles and the difficulty adjustments are more programmatic and like stat functions.

Starting point is 00:32:45 So I know we're going to talk about this a little bit, but like when you think about companies like Marathon and HUD-8 right now, like they're just going to get bigger. They're going to get bigger. The challenges every four years, the amount of Bitcoin they're going to be able to mine is going to get cut in half, right? And so there are different parts of the Bitcoin stack that do different things. And so I try to understand as many pieces of them. And I think when you put it all together, though, you do get a network overall.

Starting point is 00:33:09 It's like a flywheel, right? But overall, what you get is a network that de-risk itself organically over time. As more users come on, as more miners come on, as hash rate goes. up as more infrastructure gets built, as more exchanges and fiat on ramps and off ramps and payment services are built, the entire network de-risk as it scale. So I would agree generally with the idea that as the price goes up, unlike an equity, Bitcoin actually gets safer from an investment standpoint. Let's talk about Marathon and HUD-8, just two miners. Is equity that you own, correct?

Starting point is 00:33:41 Those are my two top picks for publicly traded miners today, just because I've spent more time with those management teams, I'm more familiar with their operations. I can tell you more about them and why I think they're going to win. Talk to us about the valuation. So how are you thinking about this? Because there's people ask me all the time. Preston, I want to own equity. In addition to owning Bitcoin in this space, I'm having a hard time figuring out how to value it. Maybe start at the highest level, which is, in my view, there's kind of four legs to the Bitcoin ecosystem stool, right? So there's users, right, which includes people just buy and and hold Bitcoin, people who use it in Nigeria to transact with each other, people who run nodes

Starting point is 00:34:21 to confirm their own transactions. So they're important. Obviously, without users, there's no Bitcoin. There's no need to have it. They're also investors, right, who are attracted by all the user activity who want to invest in the ecosystem. They're also software and infrastructure providers. So I'm thinking of companies like Coinbase and BitGo and Lightning and Strike and Lightning Labs and strike and other folks that are building really interesting components. But maybe one of the most important, but most misunderstood components of the stool for Bitcoin for me is the Bitcoin mining part of the stack. And so your Bitcoin miners serve so many different roles, but obviously at the very front end there, they're providing the hash rate that keeps the network

Starting point is 00:34:59 secure. So without Bitcoin miners, proof of work just doesn't actually work. And so you need them to be there. But they're also, when you think about it, they're the only people in the ecosystem who can create new Bitcoin. Everybody else is interacting with Bitcoin that they already owned or that already existed. Bitcoin miners are creating new Bitcoin. every day. And so they're like central bankers in a sense. I hate to use that nomenclature just because it's not going to go over well with this community, but in a sense, they're like bankers. And so when you're thinking about a Bitcoin miner, like I like to start with a balance sheet. I think it's a good way as a value investor to make sure you don't lose money. And so let's just

Starting point is 00:35:33 start with the high level. So HUDAid and Marathon are my two favorites, right? But HUDAid and Marathon are slightly different companies. HUDAid is Canadian, Marathon's based primarily in the U.S. HUD-8's about a $1.5 billion company. Marathon's about 3.7, let's call 3.5. So together, they're about $5 billion companies. So when you look at their most recent production ports, you see some really interesting things, though. So HUD8 actually mined 362 Bitcoin in the month of August.

Starting point is 00:35:58 Marathon mined 460 for the month of August. So you can build that up to kind of like an annual run rate. So the way I think about it right now is approximately that HUDAid and Marathon should be able to mine about 10,000 Bitcoin. over the next 12 months. Think about that, 10,000 Bitcoin. That's incredible. What do you think about it?

Starting point is 00:36:15 And their current Bitcoin and their balance sheet right now for HUD-8, it's about $205 million, right? So it's 4450 BC for a marathon. It's 6695, so about $6,700. So they have about $11,000, collectively. It's a sum total about $500 million of Bitcoin. But they're actually over the next 12 months, just given the current assumptions we have about hash rate and the price or whatever, they're probably going to be able to

Starting point is 00:36:38 mine $10,000 Bitcoin. And remember, that should continue for the next about two years and eight months until the next half. Two years, seven months, two years, eight months, something like that. And so I think they should be able to mine collectively about 28,000 Bitcoin to add to the 11,000 they already have in balance sheet. Remember, both Marathon and HUD-Aid have come out publicly and said, our strategy is to huddle Bitcoin. We do not sell Bitcoin. And this is a new thing, by the way.

Starting point is 00:37:01 This is part of the falling cost of capital we're seeing across the mining space. Like four or five years ago, it was so hard to raise equity or debt for a minor. Now all of a sudden, there are a lot of people active. And some of the biggest mining deals that happened, by the way, the spring were never even announced, right? Like $100 million plus equity in debt deals that were never really even talked about. And so because of that, the cost of capital is falling. And so now Marathon and Huddian are able to just stack Bitcoin.

Starting point is 00:37:23 So they're effectively industrial-scale hoddlers. And my current forecast over the next decade, they should be able to add about 60, so they'll have about 60,000 Bitcoin collectively, just these two miners, right, which today have a sum total of a $5 billion market cap, right? So remember those number, $5 billion market cap, about 11,000 BTC on the balance sheet today, probably something like 60,000 BTC within, say, six years between the end of this having cycle and the end of the next having cycle. So 2026, 2007, six years approximately. Let's say we get to 60,000. Now, humor me for a second and assume that we see a million

Starting point is 00:37:52 dollar Bitcoin price. Now you're talking about $60 billion of balance sheet Bitcoin in six years collectively on two companies that today are worth $5 billion. So you've got something like a 12x just on the balance sheet. Now, remember today that these companies are trading at collectively a $5 billion market cap, but they only have $500 million of BTC. So they're effectively trading at 10x, their balance sheet BTC. But I'm talking about their balance sheets growing 12x over the next six years. That's just the balance sheet side. Now think about all the business lines that you can build on top of Bitcoin mining. So hint and the big secret for Bitcoin mining is that base layer of Bitcoin mining is just like step one of building a platform

Starting point is 00:38:29 play in this space. You're going to obviously run your miners. You're going to run them cheap. You're going to keep your cost of power low. You're going to acquire miners when they're going to plug them in. You're going to be smart about keeping them cool, keeping them clean, not overclocking them, but overclocking them maybe just a little bit to get to maximize your yield. But at the end of the day, some of this business gets commoditized over years. But I do think the best operators will continue to be able to maintain market share. Right now, HUDA to's about 1% of network cash rate, maybe a little more. Marathons closer to 2%. But they're forecasting, Marathon is forecasting explosive growth. They're forecasting 133,000 ant miners, S-19s plugged in in July

Starting point is 00:39:06 of next year with something like 13X a hash, right? Something crazy like that. And assuming the network hash rate goes back up to kind of over 150 towards 200, I think Marathons headed to sort of like 5 to 8% market share and HUD's going to probably be able to maintain 1%. So the numbers I just gave you, 60,000 BTC in six years at a million dollar price, which would be $60 billion a balance sheet. That's assuming that they just maintain their current kind of 1 and 2% shares. I actually think the best companies will actually increase their market share over the next five years. Because what's happening as the business gets bigger, it's harder and harder for people that don't have scale to negotiate for the lowest power costs, to negotiate with Kanaun and MicroBt and

Starting point is 00:39:46 BitMane and Bitfury, right, and all these companies that make the chips. If you don't have leverage, you don't scale, you're probably going to pay more. And so you're not going to be competitive relative to a marathon or a HUD. And so that $60,000 could be $80,000. I have no idea. But I think $60,000 is a reasonable assumption for next five. So when you look at it just from that perspective alone, Preston, I think what you see is that like Bitcoin miners are probably a pretty good way to make 20 or 60x your money over the next

Starting point is 00:40:11 decade conservatively. And Bitcoin may do better, may do worse, but assuming Bitcoin does go to a million dollar Bitcoin price, you're talking about a kind of a 20x return in Bitcoin and probably at least double that in the best performing Bitcoin miners. And for that reason, I tend to think the best idea is to own both. So when you're thinking about owning one minor over the other, you had mentioned that the operational execution is paramount probably as far as a consideration. First of all, what kind of metric would you look at on the income statement or the balance sheet to kind of understand

Starting point is 00:40:45 whether that operational excellence is there? I'm assuming you're going to say you've got to really take a close look at the operators and the executives within the organization. But for somebody that maybe doesn't have that access, what would you tell them as a good metrics to maybe look at? I mean, I think the best way with any investment, not just Bitcoin miners, is a look at management forecast and then look at actual results over any reasonable period of time, like a year or two, saying, hey, management said we'd have 133,000 machines. Well, guess what? If Marathon has 64,000 machines plugged in July, I'm not going to sell the stock necessarily in July of next year, but I will at least re-underwrite it. If they have 133,000 machines plugged in, then that's

Starting point is 00:41:24 probably a pretty good sign, right? And they have 13X hash on the network, and you could track that, then that's probably a pretty good sign that management's doing what they say they're going to do. But I actually think operational expertise is important. But at scale, I think capital market's expertise is maybe even more important. Because fundamentally, they're not differentiated by their operating metrics so much as they're differentiated by their access to capital, right? And their ability to procure machines. Those are the two biggest things. So if you can get a billion dollars of low-cast capital right now, like Preston, if you and I could get a billion dollars, we could spend up an industrial scale minor.

Starting point is 00:41:57 if we could get somebody at Bitmain to return our phone calls or return our emails. That's actually the biggest problem. You could get a billion dollars right now. It doesn't mean you can get the machines orders done. And it doesn't mean those machines will actually show up. Then once they show up, yes, you have to plug them in. You need to make sure your source of power is available at a reasonable cost. You know, three cents per kilowatt hour, sort of like that kind of industrial scale metric. Like if you're over that, it's okay as long as you're sustainable, right? Like if you use wind and you use a hydro, like four or five cents, investors seem to be okay with. If you use coal, it better be two cents or two and a half cents because nobody thinks that's going to be

Starting point is 00:42:30 sustainable in the long run. And so source of power matters, right? Like the biggest thing that could actually disrupt these companies is that the government of the municipalities that they operate in comes in one day and says, you know what, we're not allowing coal in Montana anymore, right? Or we're not allowing this other power source in this other jurisdiction, right? And, you know, people who followed Greenwich, the support.com, SPAC, that just went public and became a meme stock recently.

Starting point is 00:42:53 You know, all the talk was about the Seneca Lake issues, the environmentalist, talking about them heating up the lake. There was a very real risk, actually, a few months ago that New York would pass legislation that would make it hard to be a Bitcoin miners. That would have been a material risk to being an investor in that particular company. So I try to obviously underrate the management teams. A lot of it's following their forecast versus what they do. A lot of it is following their ethos and their philosophy. So HUD actually says in their August production report that they are following their strategy of hoddling. I can't make this up. There's a public company that trades on NASDAQ that's telling you that they're hoddling Bitcoin. I think that's

Starting point is 00:43:26 fantastic because somebody says they're hoddling Bitcoin at scale is probably not going to stop hodeling Bitcoin tomorrow next quarter next week. I have no idea what another miner is going to do if they have a tradition of liquidating Bitcoin to buy more machines. That's not what I want out of my miners. I want my miners to keep their cost to capital so low that they can grow their business in sort of a frictionless way and keep stacking Bitcoin at scale. I want them to add that 5,000 or 10,000 of Bitcoin over the next remaining halving cycle, right? Or over the next 12 months, with them not at 25 or 30 over the remaining halving cycle, right? Like, if they could do that, I'm confident these are winning investments.

Starting point is 00:43:59 If they can't do that for some reason, then something else is broken in the model, right? Bitcoin's price didn't do what we thought. Ash rate did something we didn't expect, et cetera. But assuming some of these baseline assumptions are correct, you will make money if management does what they say they're going to do. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up.

Starting point is 00:44:21 And customers now expect proof of security. just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and writer spend 82% less time on audits with Vantta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform

Starting point is 00:45:06 I'd won in place. Get started at Vanta.com slash billionaires. That's vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try? The futures market is more active now than ever before, and Plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trade. you've been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks

Starting point is 00:45:56 once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. Billion dollar investors don't typically park their cash in high-yield savings accounts.

Starting point is 00:46:31 Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes, thanks to the Fundrise income fund, which has more than $600 million invested in a 7.97% district With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise Income Fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution

Starting point is 00:47:17 rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show.

Starting point is 00:47:37 I would think that another key consideration, Mike, would be just the regional part that you're talking about. But if you could find, like, let's say up in Canada, they have dams that are already instructed there, the cost of energy is extremely slow relative to everybody else. I would think that this is maybe even a bigger advantage or right up there with the operational execution advantage that a company might have because they have strong operators. But I mean, if you're able to get the energy for nothing, or you have some type of government that actually is facilitating this or really getting behind Bitcoin, like in El Salvador is a perfect example, if the government's

Starting point is 00:48:16 actually trying to provide cheap energy costs to promote more and more miners to come into their country. This has to be like the golden egg of finding the right company that's situated to do that. So how are you looking for some of that kind of stuff? Luckily, I had a lot of direct experience talking with miners in both Western Canada and Eastern Canada. There's some really great sustainable miners in both of those geographies. I don't want to docks any particular companies because they're all private, but they're literally companies that, yeah, you're right. They have essentially free or close to free power. They're in very, very remote areas where they're tapping into rivers in some cases, right? And I think those models are incredible. I think those are

Starting point is 00:48:59 companies that, in a lot of cases, those municipalities are actually trying to attract people to those places, right? Whereas, you know, in China, like, you know, the problem with China is like, if you ever been to Beijing, like, they're just days where, like, you can't see your neighbor because there was so much smog, right? The last time I went. there. It was just, it was an odd, eerie, I think I was there like six or seven years ago. I was in Beijing, and I was just like, they're just going to have environmental problems here. There's mudslides and there's smog and the kind of under-talked about thing, in my opinion, about what happened to China is just that, like, Chinese government may not be the nicest people in the world, but they're

Starting point is 00:49:30 not idiots, right? And they recognize that, like, at the scale of a billion plus people, they actually can't afford to allow the environmental degradation to happen at the scale and the speed that it was sort of happening there. And it's just very visible. Like, if you just walk outside in Beijing, you can't make up another reason why that happened. Like, that's just that that's what happens when you don't take care of the environment. In other geographies, it's less obvious, right? And so it may be a slower process. Like Kazakhstan may take a lot longer to decide they don't want coal miners there than China took

Starting point is 00:49:58 to decide that. Canada, especially like the far north and the far eastern part of Canada, seems to me like one of the best geographies because you have so many places where you can mine that are either cheap or basically free and also where the power source is really clean. So I'm extremely bullish on Canada. I think Canada is going to be one of the best places to look for miners. I expect a whole bunch of other publicly traded miners to come out behind HUDAid and the

Starting point is 00:50:23 others that are already out there on the market. So let's shift gears just a little bit. So you're dialed into the way Wall Street thinks. You have contacts there. How are they looking at Bitcoin today? Because I know what it was like back in 2017. It was almost a little bit of a joke for them to kind of look at it. But now it seems like they're taking it way more serious.

Starting point is 00:50:42 But what are your thoughts on some of the things? that. Obviously, I worked at Nighting for eight months. So I was seeing the kind of institutional business evolving at scale. And it seems to me the conversations have completely shifted, particularly in the last year or so. There's obviously going to be a lot of institutional inertia. There's a lot of committees. There's a lot of fear, right? There's a lot of risk management processes. There's a lot of compliance, particularly in like the wealth management, RAA space where I've been spending a lot of time recently. But what I've seen happening now is like a lot of the current crop of new investors are able to underwrite Coinbase, right? As an investment,

Starting point is 00:51:16 they're able to underwrite Marathon as an investment because they understand how the traditional exchange business works, right? They understand how NASDAQ works. They understand how the NYSE works and ICE, right? They understand how traditional mining works. So they're able to use these analogies from other spaces that they've been successful in and then apply it to Bitcoin and crypto. And what ends up happening, though, is they end up guiding themselves into underwriting Bitcoin itself because you can't own Coinbase for too long before you start to ask, well, okay, what's the real value of Bitcoin? What's the real value of Ethereum? And so I think the fact that there are more publicly traded equities, like this is where people say, why do you own equities

Starting point is 00:51:54 and why do you invest in equities versus just Bitcoin? And it's like, well, I actually think these equities being public is like advertising for Bitcoin. These companies being publicly traded means everybody can own them, whether they understand how to run a hardware wallet and use cold storage or not, they can buy Coinbase. And that's what a lot of institutions are doing. As it relates to specific use cases, insurance companies have been really interesting. And I do credit the NIDIG folks because they were all over this early. They recognize that these insurance companies have long-dated Fiat liabilities. So like 20 and 30 and 50-year type of things that they want to pay off for policyholders.

Starting point is 00:52:27 And in a low-interest environment, like what better thing to own than Bitcoin in your general account to make sure you'll be able to have the power to pay off those obligations far on the future. So I think that's a really interesting use case. I think eventually Bitcoin lives, and I've been saying this for long time, it lives inside of insurance companies, right? It lives inside of insurance products, right? So variable universal life policies, universal life policy. Why would I want to own some index funds or whatever in my universal life or variable universal life policy when I can own Bitcoin? Bitcoin's going to go up and value much more than equities on average. And so if I wanted

Starting point is 00:52:59 to pre-fund an insurance policy, I wanted to put 10,000 a year into my million-dollar VUL. Even if I was buying an annuity, I'd want Bitcoin to be powering that. For asset managers, I think allocation funds is a really interesting entry point. So I've talked to a few asset managers about putting a Bitcoin allocation into their target date funds. So these target date funds are like the 2030, 2040, 2050 fund that you see in a 401K plan. You probably haven't had a 401K plan in so long. You're not as familiar with these. But the average American worker, this is what they're seeing.

Starting point is 00:53:26 They sign up with their Fidelity 401K plan and they get the Fidelity 2050 retirement fund. Well, what if that fund just had Bitcoin in the fund? Then you don't have to make an active decision to allocate to Bitcoin. It's just there already. You just opt into your 4NK, you defer 3% pre-tax, and it shows up in Bitcoin, right? Our percentage of Bitcoin based on your age and risk tolerance. So I think that's a really interesting entry point. And then the bank channel, right, the traditional bank channel, all the research

Starting point is 00:53:51 Nighting and others have done has basically said that most customers would prefer to buy Bitcoin through the bank, believe it or not. So even though all of us in the Bitcoin community want banks to become irrelevant and be obsolete tomorrow, the reality is like as an entry point for getting Bitcoin in more people's hands, the bank channel is a good way to do that. Nightig's publicly announced in June, they partnered with FIS. I think that was actually a much bigger deal than most people realize. And I think everybody will have access to Bitcoin through these kind of more institutionalized

Starting point is 00:54:17 channels over the next couple of years. How many years out do you think we are with the 401k where people are going to be able to allocate a couple percent to it? It depends, right? There'll be early adopters in the next probably call it 12 months. And then they'll be kind of almost everybody will be able to access in three years. And then like in five to seven years, everybody will. So I still think there's a timeline.

Starting point is 00:54:38 The ERISA code and just the way 4K plans work, they're highly regulated. There's a lot of eyes on that space, right? And so I think you have to be thoughtful about how you do it, but there are plenty forward thinking executives in the retirement channel that understand Bitcoin. I've talked to many of them in the last couple months. And so they're thinking about talking about underwriting Bitcoin right now internally. And so it just takes time to get it approved. El Salvador.

Starting point is 00:55:05 Is this big news? Is this noise? Is it a smaller deal than people were making it out to be on Twitter? What are your thoughts on it? You know, I'm conflicted a little bit. I think from a geopolitical game theory and kind of domino's standpoint, it's an incredibly bullish thing. I think it's a great experiment.

Starting point is 00:55:25 I think we're going to learn a lot from doing it. I think it will encourage other countries. I think you probably saw today that Ukraine legalized Bitcoin and crypto. I kind of chuckle a little bit at that because if it wasn't illegal before and then you legalize it, does it mean as much as if it was illegal before and then you legalize it? Don't answer that because I don't think there's an answer, but I kind of chuckled a little bit when Ukraine says they legalize crypto. But I do think there will be more.

Starting point is 00:55:50 And I think El Salvador are doing it and taking the blows, like the body blows for everybody else makes it easier for other countries to come along behind them. So in terms of easing the path, I'm bullish. I mean, El Salvador is a poor country. a lot of the people there are hand to mouth and like you give them $30 in Bitcoin, it's not going to make an incredible immediate impact on their lives. And I also just generally don't support people that manage their countries in a way that I think could potentially be harmful down the line.

Starting point is 00:56:15 I have no idea what Bukali ends up being right as a leader. He may end up being one of the greatest leaders in Latin American history. We may look back in time and say, wow, this is like a Simone Bolivar moment for Latin America. We also may look back and say, man, what a ill-fated experiment by, somebody who ended up becoming a dictator. I have no idea how that plays out. So I want to be cognizant of history and I want to be thoughtful and saying that I'm bullish, I'm hopeful, right? But at the same time, I think it would be foolish to just put the blinders on and

Starting point is 00:56:45 assume everything's going to go well. So since the spring, there's been some really hard lessons for people using leverage in this space. What kind of tips can you give people as to whether they should, whether they shouldn't, anything relating to leverage. Well, I would step back a step and just say that Bitcoin is, in my view, the only remaining large-scale, truly free market in the world. Almost every other market is either directly or indirectly influenced by government actors. Like in the U.S., for example, on my street, these homes just keep going up and up and up and it's because they're holding the interest rates down near zero, right, and they're pumping all this liquidity into the economy. And so,

Starting point is 00:57:25 When you first look at the Bitcoin chart, you think, what the hell is going on with this asset? Why does it trade like this? And I think the reason why it looks like that is you're comparing the Bitcoin chart to the chart of a whole bunch of manipulated assets. And so, yeah, equities and bonds and real estate in the U.S. tend to just like go up and to the right with very limited volatility. But a lot of that is manipulation. And so because of that, because Bitcoin is so volatile, it's allowed to kind of correct

Starting point is 00:57:51 80% and correct 50% very quickly, I generally are. argue that most people shouldn't be using leverage at all. If you can make 20 or 50 or 100 times your money in a decade, I don't see why you need to use leverage. And so my general advice to my friends and the people ask me is just like I said earlier, buy the amount of Bitcoin that you're comfortable buying today, whether it's 1% or 5% or 20% unlevered spot. If you want to hold it in a segregated casino, I'm not like these hardline Bitcoin toxic maximalists. I think if you're able to do that successfully, you should consider doing that. But you can also use services like Unchained Capital to do a more collaborative approach where you hold a key,

Starting point is 00:58:28 someone else holds a key, they hold a key that way, and also helps for estate planning. Like this is one thing that people don't talk about enough. A lot of people are going to die with Bitcoin and most people don't have a plan for that. Unchained Capital is one way that you can actually plan for your estate plan, right? Because you can make sure the administrator, the trustee, has access to the Bitcoin. Leverage to me is a double-edged sword. Like, yes, you can get rich really quickly, but most people I don't think are. I think are. I think most people are blowing themselves up.

Starting point is 00:58:52 And so I advise people to avoid it. All right. So for the person who listened to this conversation, and they're still very skeptical about Bitcoin in general, which there's a lot out there, what would be the thing that you would tell them that for you just makes this a no-brainer? I've successfully Orange Build, I don't know, several hundred people over the last four years, including serious investors, hedge fund folks, et cetera, right, that like have a long history of investing. And the thing that I feel like honestly resonates the most is to find the Republicans,

Starting point is 00:59:26 right, and find the conservatives and basically define Bitcoin as this anti-MMT thing. It's the only way to actually counteract the pure insanity that you're seeing. And not just American monetary policy, but basically global monetary policy at this point. It's everybody, right? Everybody's in a rush to print as much money, to borrow as much money to basically inflate asset prices. And so if you find that distasteful for any reason, whether just because you're a fiscal conservative or because you're a Republican or because you're just anti-democrats or whatever, I'm an independent voter, right? So like I sit on both sides. I don't personally care. I will support a politician if they are pro-Bitcoin, generally agree with Dennis Porter and others who have said that this is the

Starting point is 01:00:05 single biggest voting block maybe in human history because it unites so many different people. And so, you know, I think anybody who is sort of supportive of Bitcoin is a friend of mine. And so the way I relate this to people who are negative on it is I just say, hey, would you agree with me that the government's spending too much money? Would you agree with me that the government's borrowing too much money? Do you agree with me the government's incentivizing too many poor behaviors? Do you agree that too many people made money off of COVID, right, that shouldn't have made money? Those companies should have gone bankrupt, right?

Starting point is 01:00:35 A lot of the high yield debt that got purchased saved companies where the people were being irresponsible. They had levered up to six, seven, eight times EBITDA. These are wealthy people, but they knew that they were. they'd be bailed out. And I say to them, do you want to defund that type of behavior? And they say, yeah. And I say, well, guess what? I'm just going to keep telling you this over and over again until you get it. Buying Bitcoin is the one way to do that. I love it. Mike, if people want to learn more about you, I know you're active on Twitter. And like we said at the beginning there, I know you do Twitter spaces, which is very beneficial where people can, you know, just ask you questions when you're in that

Starting point is 01:01:09 setting. But give people a handoff where they can learn more about you and anything else that you want to highlight. I appreciate that. I'm just at Mike Alfred at Twitter. I didn't even use the platform much previously, but three months ago upon becoming a free agent, I decided for the first time, okay, I'm actually going to use this thing and really understand. And it's been incredible. I've learned so much from the folks in the community. I've also been able to add value back because I have a unique set of perspectives having worked deep inside of crypto and having kind of more of a traditional investing background. I'm able to explain some of these concepts around Bitcoin to the

Starting point is 01:01:45 average person in a way that's different than the way it's usually explained. And so I've really been enjoying. So just find me on Twitter at Mike Alfred. And I engage with everybody there. Mike, thanks so much for making time and coming on the show. Thank you, Preston. Appreciate it. Hey, so thanks for everybody listening to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you're using. We really appreciate that. And if you have time, leave us a review. So thanks for joining us this week. And we'll catch you next Wednesday. Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com.

Starting point is 01:02:22 This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC043: How to Value Bitcoin Mining with Mike Alfred (Bitcoin Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.