We Study Billionaires - The Investor’s Podcast Network - BTC047: Bitcoin, Supply Chains, Debt Ceilings and More w/ Parker Lewis (Bitcoin Podcast)

Episode Date: October 13, 2021

IN THIS EPISODE, YOU’LL LEARN: 02:20 - What's happening at the state level with Bitcoin legislation? 08:34 - Why Parker encourages people to delete Facebook. 10:39 - Parker's thoughts on the current supply chain issues. 29:55 - Parker's thoughts on the debt ceiling. 55:53 - Whether a Bitcoin ETF will impact things much. 01:03:19 - Does the typical person have the capacity to self-custody? 01:12:06 - Tax planning for people with sizable Bitcoin gains. 01:16:06 - Parker's thoughts on Bitcoin lending. *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Parker Lewis's article: Bitcoin is the Great Definancialization. Parker's company Unchained Capital. Read the 9 Key Steps to Effective Personal Financial Management. Browse through all our episodes (complete with transcripts) here. SPONSORS Support our free podcast by supporting our sponsors: Bluehost Fintool PrizePicks Vanta Onramp SimpleMining Fundrise TurboTax Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the podcast where we're talking about Bitcoin. Today's guest is backed by popular demand and his name is Parker Lewis. Parker is a noted thought leader in the Bitcoin space for some of his outstanding writings and he's also an executive at Unchained Capital. On the show today, we cover his thoughts on supply chains, debt ceilings, trillion dollar fed coins, how the political environment is changing at the state level and much, much more. So without further delay, here's my discussion with the thoughtful Parker Lewis.

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 Parker Lewis. Parker, welcome back to the show. Preston, good to be on. Look forward to catching up. So you're a really busy guy.

And so what in the world's happening in your neck of the woods? Well, we had an event here in Austin over the last few days. Technically, the Texas blockchain summit, I refer to it as the Texas Bitcoin Summit. But we had Senator Cornyn and Senator Cruz from the state of Texas in town. And then we also had Senator Lumas all speak at the same event on Friday. And then it was a great host of people, a lot of people from the Big. Bitcoin community were in town talking about being kind of really centric to everything that's happening around Bitcoin in Texas.

So that was fun. And then after that on Friday, I actually made it down to College Station last night to to see Texas A&M, which I'm actually, even though I didn't go to Texas University of Texas, I'm not an Aggie. I'm a lifelong Longhorn. But I went down to college station last night. It was first time to see an Aggie game in Aggie land. And so that was pretty fun.

They knocked off Alabama. You just had to point that out. Hey. Actually, I knew you were in Alabama. I actually didn't know if you were a Bamma fan or Auburn. I don't know where they draw the lines. Yeah, I'll tell you what. It's a pretty big rivalry between those two here in Alabama.

But if I had the pick, I'd say Alabama. Hey, so answer this for me. So when I think about the various states, I automatically Wyoming comes the forefront as just being kind of out there and leading the charge when it comes to the legislation, the state legislation. Texas is obviously vying for that similar spot. So how do you view it, how do you view Texas in contention across all 50 states and where can they improve? What are they doing right? I'm curious to hear your point of view as somebody who's intimately familiar with this in the state of Texas? Yeah, I think one distinction, and I love the state of

Wyoming. I think that not only just being welcoming and forward thinking about crafting legislation, but then also having Senator Loemis there in Wyoming, a big advocate in the U.S. Senate, which I think is just for the broader Bitcoin movement, it's a really important voice. and it sounds like someone like Senator Cruz is coming along there as well, the more the better. But I think one distinction between a state like Wyoming and a state like Texas is they really led from a legislative perspective first. There wasn't a big Bitcoin community. I think there's a lot of things about Wyoming, why Wyoming and Bitcoin will be a perfect match. But they really started with the legislative side.

And really in Texas, I think it's been the reverse, which is that there are a lot of natural, non-legislative, non-regulatory reasons why Bitcoin, Bitcoiners and the Bitcoin industry will flourish here. And I would really probably, if I was to summarize it, the energy, the deregulated, so natural resources, the deregulat, the deregulated. energy grid, which, and then the fact that mineral rights are almost 100% privately owned in the state of Texas, which is not the case in a state like Wyoming. But then on top of that, Austin is really it has become over the last decade, a tech hub, you know, in a broader speaking sense than just Bitcoin.

And then when you add on top a fairly favorable tax climate and with no state income tax and strong property rights, that's really it's the combination of those three, the energy dynamic, the tech dynamic, and then the tax and regulatory environment here. When you add those three things together, it really becomes a gravitational force that's bringing the Bitcoin industry to Texas. And I don't think that when, you know, ultimately, Bitcoin's going to be everywhere, but kind of in terms of leading the charge over the next several years, decades, that I do expect Texas to be a leader for, you know, I don't know if you've ever read the book. It's not necessarily one of my favorite books, but there's a book called The Accidental Superpower, and that book's about America. But in Texas and as a release of Bitcoin, that there are strategic advantages that you can't recreate that already exist here that will allow it to leave. When you talk about the tech hub there in Austin, I've often wondered like what's driving that? What is created?

Because it seems like just in the last five to ten years, that's really kind of emerged as a tech hub where you go back 20 years. I don't remember that ever being really the case. So what's driving that? Is it just the tax incentives that are doing that? Or is there something else? I think, and while I'm not a student of this history, I did grow up in Austin, Texas. I'm a native here. And growing up, Austin was really a kind of sleepy college town.

The Capitol was here, so it was more than just the University of Texas. But Michael Dell, I think, if you trace back to, the history of Austin becoming a tech hub, it would be the founding of Dell and Michael Dell. That started to, you know, kind of that was on the wave of, you know, really before personal computers, you know, before there was a home in every house, Michael Dell and Dell were core to that. And then there was, you know, kind of all the ancillary industries that built up around Dell. And then and then kind of once that flywheel started, then you also, I'd say probably add to it the what's the political and regulatory climate in other areas, right? So when come, you know, it's not just tax, but I think just two days ago, Tesla announced that they were moving that things might seem to be accelerating, but those same underlying trends that once there was a tech flywheel that, that.

probably would be traced back to Dell. Realistically, the same things that are causing businesses to move to Texas today existed 10 years ago. It's just becoming more obvious to more people. And so Apple has their second largest campus here. But so there's also just a lot of developers, a lot of engineers. The university has a big computer science program. So that also drives a lot of people that go to UT, stay in UT. And so there's just a lot of computer engineers.

years that are here as well. So it's a and then it attracts a certain type of people that generally prefer kind of a more individualistic, you know, kind of individual freedom-based movement. So, you know, probably a combination of a number of reasons. Hey, so on your profile, I've noticed this for a while, but I've never asked you about it. Your profile says, buy Bitcoin, delete Facebook. What's the background or what's the story on the second part there? I deleted Facebook a long time ago. I think Facebook is the social network.

I view money and Bitcoin as a social network as well. It's a social consensus as to what the new form of money is going to be. But I don't think that there could be a greater contrast between Bitcoin and the social good that it will drive. and I don't think that there's a worse company in America than Facebook. It's just, you know, kind of the vitriol. It's like it's a place for people to go and, you know, scream at all of the people that they don't like. And ultimately, Facebook monetizes that. And so I think it's a really, it's very divisive.

I think, you know, there was, I don't know how many years ago, but they did, they basically did an experiment on some of their users to see if they could affect their emotions. where if they put negative news in their feed, if that could, you know, trigger certain actions, obviously it could. And so, and then I think people started posting basically just the, the filter of the 10% of how they wanted to portray themselves to the rest of the world. And so just for a number of reasons. And then I think about people sitting on their phones and, you know,

getting into spats about politics and for four or five hours a day, rather than doing something productive. So if there kind of comes back to them, both being social networks, Bitcoin, not in terms of like Bitcoin, Twitter and socializing, but that money actually is a social consensus. It's a social network. And that it will lead to social good and that Facebook basically does the opposite. So if there's a company that's not going to survive the Bitcoin standard,

I would say it's Facebook. I love it. I'm not a fan of Facebook either. What are your thoughts on all the supply chain issues that are happening right now? What's driving it? What's going to be the long-term impact of it? Just some of your thoughts. I think that it would be impossible to point to any one thing that is driving the supply chain issues.

I think that this is one of the things that a lot of macro investors will make an error. I believe it's a fool's errand. Well, they'll point to the Evergrand situation or they'll point to COVID or they'll point to the response to COVID with the vaccine mandates. And we're seeing today that there's 1,000 cancellations

on Southwest Airline flights. But then some of it's driven by the fact that planes aren't right, places. And so the reality is that the U.S. economy and the global economy are extremely complex. And that the U.S. financial system and the global financial system are incredibly fragile. So to point to any one thing, I think it isn't any one thing. It is the culmination of 30 to 40 years of fiscal and monetary irresponsibility combined with, you know, in more recent time, a government that thinks that they can take a highly complex system, more complex, you know, maybe rivaling the complexity of the human. body and and just stop it and then think that things aren't going to go back to normal.

And you know, they never were, but it was an accelerant to the disruption. And so I think that when you basically take that combination of complex economic system, highly complex supply chains, just on time delivery type with with, you know i don't know how many vendors would be in a car or would be in a computer but but hundreds that as soon as there's a problem with one then it causes delays of others and then solvency you know of different parts of solvency issues and different parts of the supply chain that it just starts to have a ripple effect and so to to then be able to zoom back out and say well was it because the government shut down well i was like well no because the u.s financial

system was already incredibly fragile. Why was it fragile? Well, that's a story of 30 to 40 years every time the economic system tried to eliminate imbalance, the Federal Reserve created an environment where imbalance could be sustained and then grow, and that then when you have shocks, you know, ultimately everything comes home to roost. So I do think that it's, you know, it's like a Pandora's box that it's out. I don't see how it gets better before. things get a lot worse. And I think that it ultimately will be, you know, kind of going through a restructuring of the entire system. So this is not temporary. What we're seeing right now in supply chains is just getting started. Is that what you're saying? I believe so. I'm not an

expert on supply chains, but I do have an understanding of the U.S. financial system and the and the complexity of the broader economic system. And so when I, you know, kind of anecdotally, when I hear about a car dealership here in Austin that typically sells 11,000 cars a year and have been told that they're only going to get 1,800 deliveries next year, that that has, there is a whole host of inputs that could create that dynamic as well as consequences. People that are going to have to be fired, car prices having to be increased, the, you know, kind of more parts becoming, you know, more businesses that are in the supply chain of cars becoming impacted by that. And so, yeah, I don't, I don't know

how given the landscape and the U.S. financial system, the imbalance that exists, within the broader economy, at the rate at which they're printing money and kind of the talk around tapering, that this is something that has to play out, that you don't just magically, you know, you can't turn, you know, a lot of people, a lot of, I'd say,

people, whether it's in the government or the central banks, that think this is like turning on a light switch and that you can turn it off and turn it back up, It just expresses a, you know, I guess a large degree of naivity, but then also just a, you know, kind of a lack of understanding of the stakes at play. Let's take a quick break and hear from today's sponsors. 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.

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That's Shopify.com slash WSB. All right. Back to the show. You know what I find interesting about this one, Parker, is when you look at all the action that's been done by central banks over the last decade, it's almost like they always had a lever to pool to reflate things. So like the market was kind of throwing a tantrum back in 2015. Then it did it again in the 2018, 2019. Then we had the COVID. And each time it did this, and we're talking about, you know, a 20% plus. correction on the S&P 500, the central bankers would step in. They would exercise more QE. They would drop interest rates. They would play all those games with the levers that they had the pool and it would reflate the stock market, right? The rest of the economy in the U.S. I think got more unstable and more unstable as all this was going on. And we're really starting

to see that now here in 2021. But right now with the supply chain piece, This isn't something that they're able to pull a lever to. So we've had a CPI print, which is the gauge that they're forcing everybody to look down and say this is what inflation is at 5% for the last, I don't know, five months. We've had CPI at 5%. And based on everything that you just described and everything that we've been seeing, it seems like it's not going to go away. And so, like, they're going to keep doing this. They're going to keep playing these games, but they can't make that CPI disappear. or they can't make these supply chains get better by doing more quantitative easing.

And so I'm just kind of interested, you know, like what's the strategy? What does this look like moving forward in the next six months? You had implied that, you know, you don't think it's going away. Does it amplify? Does it get worse? What are some of your thoughts on it? So, yeah, I think that, you know, the way that I look at this, you know, especially if you talk to investors in the hedge fund community, you know,

wherever it might be built, but traditional financial markets, they will look at 2008 and 9, which was very similar to March to June and into this year of printing money. They will say something very consistent, as if they are all just parroting each other's lines, which they'll say that as to the Fed printing trillions of dollars,

they'll say, it was crazy. It's not going to end well, but they had to do it. It was like almost verbatim, you will hear a bunch of macro investors and high finance types aired that line. And that they don't actually provide any logic between it's not going to end well and they had to do. And that it really just ends that it's not going to end well.

but that once you start to understand what actually happens through the function of the Fed printing money via quantitative easing, it is that there is economic imbalance that exists and the market is trying to heal and eliminate in that imbalance. And the function of central banks printing money to sum it up in my mind does two things. It allows imbalance to continue to exist and grow, but that it also causes the deterioration of the monetary unit that coordinates economic activity. And that is the really destructive piece because one of the things I talk about a lot as it relates to Bitcoin is this idea that that money and economic systems converge to a single. single monetary medium, very naturally to the function of money. But more realistically, what happens is that economic systems emerge from one money, that an economic system actually derives from a particular form of money.

And what that means is that the supply chains only exist because a broader and broader set of people with a broader, broader set of capabilities all use the same money. And that when the Fed does that combination of two things allow imbalance to continue to exist and grow as well as cause the underlying unit monetary unit to not just depreciate, but to become less reliable, that when we see these supply chain issues, it's basically a a ship where water is leaking from all parts of the boat and it's about to go under and what they were essentially doing was whack-a-mole, but just like we all know that it's not going to end well when they print trillions of dollars, it really isn't.

And it's not to say that this is necessarily the last cycle. I don't operate, I think timing and part of the recognition that economic systems are incredibly complex. It's not worth necessarily predicting. It's worth being prepared for all interim weathers, but also knowing what the end state is. That is core to surviving all weathers. And that, you know, the thing that I try to articulate, and I have one of the articles I've written is Bitcoin is common sense. I try to visualize for people or get them to at least get this train and thought of like how when the Fed prints you know they've printed 1.1 trillion just this year they've printed I believe like 4.5 trillion since March of 2020 that if you actually think

about the operation of like they just literally click a button on a screen and that's how the money gets created there's probably a few people that have to you know there's probably some financial for drill to ensure that not one person can just print trillions of dollars by clicking one button on the screen. But that is functionally how money is created in this system. And that through that operation, nothing, like at the moment when the Fed puts a trillion dollars and nothing economically changed, all that happens is the balance of who gets to allocate the monetary capital in the system has now been altered by the Federal Reserve. you know, imagine there's X amount of money and then there's X plus one trillion.

Well, the distribution of that money is different. Now that economic system is fundamentally different in this case existing in a world where there's greater and greater imbalance. And so once the, you know, kind of once the boasts starts to burst at the seam, you know, it's like you can pull on the thread, you can't push it back in. And that's essentially what's happening. Once the system is obviously structurally broken and people are losing their jobs and people and more people are dependent on government checks, it only can accelerate.

Right. So can they rescue it like they did in 2008 and 9 and can they rescue it like they did in March of 2019? it would seem, you know, it's like never say never, but we also didn't see those type of supply chains. And the thing that I articulate for people as well is that hyperinflation is not just a function of, and I don't like to use that term in a dystopian or fear-driven way. But when I just explain it as a natural function, it's the way every Fiat currency will ultimately end. There's an idea that I think it's just something that is true that is inarguable, that the value of any good will trend towards its marginal cost to produce.

And the cost to produce a dollar is zero. The cost to produce $3 trillion is zero. The cost to produce 15 trillion in Venezuela Boulevard is zero. That this is a logical end game, that people understand that, that dollars are becoming more and more abundant, but hyperinflation doesn't just occur because governments print money. What is actually happening is the monetary unit is becoming less and less effective at its exclusive purpose, which is coordinating economic activity, facilitating trade and exchange.

And that as those supply chains break down, then you've got more and more money at the same time that you have less and less real goods. And you have a lot of people that will have a lot of the money and a lot of people that won't have any at all. And that has a very negative feedback loop. And then once it becomes apparent that there aren't real goods and services or that more, you know, more, you know, that there are fewer and fewer of those. And you have a dynamic where there's fewer and fewer real goods and services and at a time where there's more and more money, that is the combination of those two things. But what would actually happen in, on the lowest level was that the printing of money actually created the imbalance and created

the environment where the supply chains would break down because the system was so fragile. Talk to us about the debt ceiling. So recently there was a lot of concern whether this was going to get passed. Everyone started talking about minting a trillion dollar coin. What is going on here? What are some of your ideas on this one? So I mean, I think this this discussion is the, you know, it's the perfect jumping off point for that last part about, you know, the Fed prints money, but the U.S. government is in a scenario where the Fed has to print money. Essentially the Fed and when I say has to, it's not, I mean, there is a reality that, that they shouldn't.

But we also have to operate in the reality of understanding not only what their psychology is, but what their economic worldview is, as well as the degree of leverage in the system that dictates that if they're going to continue their charade on, that they must print money. They would all have to forget everything that they thought they knew for the last 40 years to reverse course and not do that. but the the dynamic that's happening is there is a

because there's such a high degree of leverage in the financial system that when there's a shock to the system like what happened with COVID but I also do like to reiterate for people that the imbalance was already existing the repo markets broke in September of 2019 there was a massive imbalance

in the oil markets that had already appeared in January and February of 2020 and then COVID happened. But but COVID wasn't accelerant that with it with a financial system as leveraged as it is and then the economic system shutting down like it that it was that the Fed system needs credit expansion. Otherwise the credit system will collapse. I don't the Fed does not understand that, but that is that is that is the dynamic at play. because the financial system is so highly leveraged that if it's not growing, if it starts, if growth slows or growth contracts, the entire system implodes.

One default actually causes the next. It's a very negative feedback loop. And so, but when we're in a period like we are today where growth is slowing and confidence is at potentially all-time lows, that private, there's a natural, there's a natural function to want to contract credit. The credit impulse is impaired in those scenarios, in the current scenario,

and that the Fed really needs the public system credit to expand because it needs the overall credit system to expand. So it, one way or the other, no, not only will fund the federal government in its pursuits of, you know, trillion and a half and $3.5 trillion, whatever the budget might turn out to be. But there's effectively a partnership there. You know, there's a constitutional separation of those powers. And the Fed is technically private entity. But at this point that, you know, the bed is made in their web. And so there's, you know, for for my entire, I'd say, professional career, I can't remember how many of these instances there have been. But they all end the exact same way.

That the debt seal, there will be political gamesmanship, but they're all just doing it to get what they want. You know, they all have different motivations, but they all want something. and they derive a lot of power by the government actually running. And that's true of both sides. And so right now there's a lot of nerves in the market. There's the Fed talking about tapering. And there's the federal government, you know, kind of debating a trillion and a half to $3.5 trillion dollar budget.

And there's a debt ceiling looming. And the reality is they're like, if you think that this time is different, like that is the foolish position. their entire system collapses and they're highly motivated to to not have that happen from a power structure standpoint. And so right now, you know, kind of my view is the same thing will happen as it always does, which is they'll get to the last minute. They might even shut down the government for a period of time and then they'll increase the debt ceiling. And all the while the debt in the entire system will continue to grow and the Fed will be the one finances it.

Like you mentioned, there was the reference of the trillion dollar coin. And my understanding of that, while it is not highly technical, is that, you know, in the current system, the Fed is actually the one that creates dollars. And it's the Treasury that prints dollars. So that when a bank wants to convert a digital reserve to a physical note, the Fed doesn't print that, the Treasury does. but the Fed puts in essentially a request. And then that digital reserve is converted to a physical bill, protected by the Treasury. And so in this case, the Treasury would mint a trillion dollar coin.

Who knows what it was actually made out of, maybe gold, just for, you know, to maximize whatever value you get back into a trillion dollar coin. But then they would deposit that at the Federal Reserve, and then the Federal Reserve would credit it to the Treasury's general. account and then the federal government could circumvent the legislative need to increase the debt signal. What it only signals for everybody else who has any lick of common sense is that the charade is almost over, that we're getting to this point where the...

It's desperation. Yeah. that, you know, it's very clear to a lot of people that the inmates are running the asylum right now. And the inmates are the congressmen and women who throw around words like trillions and trillion dollar deficits and that it's going to be a $3.5 trillion bill, but that it's going to cost zero. That when they start getting to the point where they will say we will print a trillion dollar coin and that there's a guy like Joe Weizenthal who's on Bloomberg that goes out. and says that there's sound economic and legal theory behind it. Like these people to the actual adults are children. And it's becoming more and more evident.

Will Cole, who's a colleague of mine at Unchain Capital, also lifelong friend of mine from here in Austin, he was interviewing his mother-in-law, Senator Lomas at this Texas Bitcoin event two days ago. And he asked her about the trillion dollar coin. and she had a really funny response. It was like, well, I would say that if you gave me six trillion dollar coins and I gave you six egg rolls, that would sound like a fair deal. I mean, it is a total breakdown in trust and very concerning that you have these entities trying to circumnavigate elected officials through desperate means of. minting a coin that's worth a trillion. I mean, it's just, it's a little unfathomable, to be quite

honest with you, just hearing it and being so publicly talked about. And then like you said, you have journalists that are covering it with this lens. Well, do we call Joe a journalist? I don't know at this point. I mean, he's covering it in a way that is suggesting that it's common sense, that it makes sense that this is what should happen. And it's like, what are you talking about. Like, this is crazy talk. Yeah. And I think that the beautiful thing about it is that when the Fed affects quantitative easing, like most people when they say that Bitcoin is complicated, they have no understanding of the U.S. financial system. The plumbing of it and how it works. But that's also why they can get away with quantitative easing. Like, yeah, it's complicated.

Like we, you know, the people that, you know, that, that explain like, oh, it's not really printing money. It's, they're swapping one liability for another. And then you start using swapping liabilities for another. And you've lost somebody at the door. And that what ends up ultimately happening is in the last, you know, in the last year and a half, they've printed 4.5 or 4.7 trillion. And, you know, kind of effectively, they doubled the money. supply they went when people don't immediately see you know 100% inflation the next day they're like well they've printed money before and and quote nothing happened it just

happened slowly you know and it ultimately will come to the logical endpoint but when they get to the point of doing things so ridiculous as we're going to mint a coin that realistically it's not going to be made on gold probably even made on nickel or copper that's you know worth the the equivalent of 15 cents and say that that is worth a trillion dollars, that the QE thing didn't make sense to people, but it was complicated. This just articulates in very simple terms. Like something is incredibly wrong here at multiple different layers. Do they think that we're idiots object?

That becomes a thought process. It really distills it down for people. I love this point because let's say that they do keep raising the debt ceiling and they keep doing what they have been doing, which is QE. What they're effectively doing is minting the trillion dollar 15 cent coin is just in these different terms and much more confusing and much more difficult for the common person, the grasp. But all they're doing is they're bidding interest rates or they're bidding the price pushing interest rates lower. And then I think the thing that so few talk about is the capitalization rate of the equity market because interest rates keep getting compressed more and more down to zero because there's there's a premium, a 2% premium above that risk-free rate that's being bid into the equity markets. And so the market cap of all that stock, anything that's equity-based, is going to the moon as they continue to do these QE policies down to 0%. And that's not talked about.

It's not even discussed. And I can't even imagine how many trillions that adds up to just based off of the QE of the manipulation in the federal funds rate and in the bond market. But you have all that other spillover effects that go into the equity markets because of those risk-free rate premiums. Yeah. I mean, that is a reality. The other way that I, the other, I'd say, framework that I think about it as in the decade

following the great financial crisis. The Fed printed $3.6 trillion, or digitally created. However, again, people like Wisenthal will be pedantic and say they didn't print. They digitally create, created $3.6 trillion. From 2007, beginning of 2008, to the, let's see, I guess,

over the next decade, I'm trying to get my frame of reference right to 2017, 2018. The credit system grew from about 50 trillion to about 73 trillion. So for $3.6 trillion added to the system, it created, you know, it basically got lent out more and more and $23 trillion of credit was created. Well, that $23 trillion of credit that's created on top of $3.6 trillion in new base money that exists that ultimately finds its way to financial assets. And that so for every dollar that essentially enters the system, it's those dollars that are entering the system, which manipulate the cost of credit, both Fed funds as well as all other interest rates, all other dollar interest rates.

The supply of dollars, you know, what drives dollar interest rates is supply and demand for dollars. How do you drive interest rates to zero, flood the market with more dollars on the supply side. But then once those new dollars exist in terms of base money, more and more credits created on top of it, and those deposits find their way ultimately the financial assets. So not only does the actual, on a first order effect, does the leverage increase, but that the flow of funds, because ultimately if people are looking, whether it's a pension fund, looking at, you know, kind of unfunded liabilities and, you know, needing to find return in different parts of the market, then it pushes them into the equity markets. But, but ultimately there's a,

you know, those are more, you know, I'd say third order effects. There's actually first order and second order effects directly tied to the base money, then to tied to the new credit that is created as a function of that base money that spells into the equity markets as well. But everything will go down in Bitcoin terms, you know, despite all of the all of the money printing. But that's also because there when the market is looking for real economic growth and activity, there's more and more dollars slushing around kind of less productivity gains, more zombie companies, everything from a valuation perspective at any historical valuation metric, whether it's PE, EBDA, whatever it might be, or EVD, EBDA, however somebody looks at value, everything's ridiculous.

And so as more and more dollars slush around find their way to the equity market because formerly credit investors are now equity investors, which creates, you know, kind of malinvestment itself. They're all looking around for water like they've been starved in a desert for 40 years and slowly people find Bitcoin and they realize that the gig is soon up. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why Vantza 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 2 or running an enterprise

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slash income. This is a paid advertisement. All right. Back to the show. All right. So the ETF discussion seems to be getting hot and heavy these days. Many saying that they expect something to actually get clear. cleared through the SEC here pretty shortly.

From what I understand, it's going to be a cash-settled ETF-type vehicle, not a physically settled Bitcoin. What are your thoughts on the ETF in general, then maybe some of your thoughts on cash-s settled versus physically settled ETFs? Well, I think that the ETF, if I go back to 20, I think it was 2017, when the when gemini submitted for an etf and they got rejected from the SEC there were my reading of that response was and that that was asking for a physically settled ETF that there were nine there were there were like nine or ten reasons why they said they were rejecting it and i read it though as

this is i was at i was at haman at the time so it might have been 2016 or it might have been early 2017 but I read it as if you fix these nine things, I'll come up with another nine things. Now we're, that it was basically a signal of under no circumstance do we want a Bitcoin ETF. Now, you know, that was at a time where I think Bitcoin had a, I don't like to think about as marketing cap or of market cap, not marketing cap, but a purchasing power of probably 15 to 20 billion, now it's in excess of a trillion. Now much larger institutions are at least publicly, whether there were some then or not, that there are very large institutions that are involved in Bitcoin that have power and influence. And so I think that the same though

is true now as it was then, that really the SEC has no interest in a physically settled Bitcoin ETF, I think realistically, they don't have an interest in any ETF, but that there are interests now involved that make that untow-and- and that the best cop-out is an ETF that is an ETF that is based on the CME futures or whether it's a CME combination of CME back, however they look at it. I guess that's really up to the issuer. Each one will present, you know, kind of their plan. I ultimately think that it's a side show, truthfully.

I think that the only thing that is positive to come of it is that it will legitimize Bitcoin in the eyes of some, and it will make it more difficult for the federal government to reverse course and take really onerous actions against Bitcoin. They're going to, nothing good for Bitcoin is going to come out of D.C. a lot of good is going to come out of the states, you know, on the state legislative side or governor's side. But my point is that that Washington, D.C. and Bitcoin are not, you know, are not friendly. And so, but I do think that if it, even if a cash settled ETF were approved, that that would, you know, in certain ways kind of create an opening that would make it more difficult for somebody at, come out and say we must ban Bitcoin, you know, whether it's Brad Sherman or some other clown that exists in Congress. And so, so I think that that is a positive. Realistically, an ETF is,

you know, a small step better than GBTC as a way to own Bitcoin. But practically speaking, it also has everything that is negative about GBTC involved. And so, you know, the more people that, you know, kind of think of Bitcoin as a financial asset rather than a monetary asset. Like there's a reason why, be a Pizza Hut and Starbucks and there's another large company. What's the one in the other stuff? But there's three large companies, Pizza Hut, Starbucks, and McDonald's are accepting Bitcoin for payment and they're not taking Facebook stock. That there is a fundamental difference between or even a U.S. Treasury for that same way. there's a fundamental difference between a monetary asset and a financial asset.

An ETF is effectively treating a monetary asset like Bitcoin as if it was a financial asset. And what have you done as a result if you buy it through an ETF? You've taken on unnecessary counterparty risk. And you've basically opted in to an inferior way to own Bitcoin when you could have owned it in a superior way. And so the example that I use is GBTC, even though GBTC, even though GB, GPC is a trust structure and not an ETF, the reality is that GBTC is custody to Coinbase custody based on my understanding. So if you decide to buy GBTC, you have Coinbase's counterparty risk, you have Gray Scales counterparty risk, you've got Grayscale's parent company, and then you've got whoever your broker is

whose name it is held in, you likely have four layers of counterparty risk. And so if you could just go to Coinbase and own it at Coinbase and have one layer of counterparty risk rather than adding unnecessarily on three additional layers of counterparty risk. So an ETF might be better

because you can they'll be structured to manage to nav, but from a way to hold Bitcoin, you know, there's, you can hold your own keys eliminate counterparty risk you can hold it with coinbase or you can do a coinbase route and add on four layers of counterparty risk like why would you ever do that so i think that the only the only true benefit is yes more money will flow in um but but that the true benefit is that it gives

credibility and that really cuts out a leg it's like when when people were worried about china oh bitcoin mining's you know concentrated in china well now it's not so you no longer have that complaint. As soon as the ETF is approved of any fashion in the United States, that then the argument the U.S. is going to be, and Bitcoin is going to become more ridiculous to pair it. Do you think that it's going to have any type of price impacts because now more people have access, despite all the arguments that you make, which are clearly, you know, all valid? Do you think it's I think that realistically, I think that it would be more fooled by randomness than actually having an impact. You know, that what's also happening at the same time is that what is happening beyond just an ETF is that Bitcoin, more plumbing is being built every day.

Yeah. More, you know, kind of different institutions opening up rails, right? Like NIDIG working with FISERV to turn on the ability to buy Bitcoin at your local regional banks, you don't have to go over to Coinbase, basically lighting up that plumbing without you having to onboard with another financial institution. Something like that to me would be more impactful than an ETF. But, but if I think about it in that context, It is more ways with more partner institutions are lighting up the little button that says buy Bitcoin. And that is happening as a function of knowledge distributing. More and more people are finding out about Bitcoin. Bitcoin every time that somebody on the periphery believes that Bitcoin died, it didn't.

And then it comes back into their conscious at or near an all-time high. And so, yes, you know, certain pools of capital will open up and they will, you know, buy an ETF when they wouldn't otherwise. But to me, that it doesn't like, doesn't change the adoption curve. You know, that that is not something that fundamentally shifts it. And it would be one small kind of one small thing that would happen alongside of other even larger macro shifts. but it would be a single thing where people would be like, oh, the price went up because of an

ETF. We're like, no, no, the price went up because more billionaires and 100 millionaires and millionaires and, you know, every worker in the country figured out that the Federal Reserve is printing trillions of dollars and that this thing, Bitcoin isn't just magical internet money, that there's real innovation in digital scarcity and that it's the foundation of a future monetary system, maybe I need that. And so I think that the E.T.F will be a good headline, but it would be more of a fooled by randomness. Yeah, I agree with you on that. I definitely agree with you in the short term here. If it does roll out and we see that and if the price would go up, I don't think that

it would necessarily be because the ETF was approved. Where I could see it having an impact is further out in the timeline when, let's say, the price just really starts to rip. Let's say the price blows through 100,000 and it gets to 110 or 120,000 in short order. And you have people who don't have a Coinbase account, don't have a crack in account, or whatever exchange you're talking about. But they do have their TD Ameritrade or whatever they use, and they just now type in the ticker, and they smash by for that ticker that they all have access to in retirement accounts or whatever. And I think that that could have an impact just because you have access to so many more people

in the hurdle, the frictional hurdle of them having to open an account at an exchange has been removed. I think that that could have an impact. Yeah. Look, I mean, I think that if I was, if I was thinking about it from a fundamentals perspective. It's like, does it change the fundamentals? No. Obviously not. Yeah. You know, doesn't, the reason to own Bitcoin has not changed because an ETF exists. Yeah. Is it a better product than GBT? Yes, absolutely. You know, kind of ETF are superior to GBT's product. It creates competition in the market. It will actually be managed by people that that know how to manage an ETF. So the product itself will be better. So there will be some

marginal demand for that because what you just described, most people can go do with GPTC. That's what's happened, right? Like a bunch of RIAs have plowed their clients into truthfully a bad product because it's the only thing available. So those people that that want to buy it be that mechanism, practically speaking, have something. It's like as flawed as it is that if they want dollar exposure to Bitcoin rather than the Bitcoin itself, there is something in the market and that what we also see is that you know the way i describe it is that price is an output it's a it's an output and that monetary properties are the input and that when you know the scenario that you describe when bitcoin gets back through it's all-time high and is grieving and double and

people are phomoing and buying it because they have no idea what's going on um it's because there was actually a fundamental signal that was sent that more and more people stared at the equation of Bitcoin, the Fed, the ECB, the BOJ, the insanity that's going around saying, no, actually Bitcoin makes sense to me. I'll adopt that because more and more people are going to adopt it because it actually has sound incredible monetary properties. And so I always like to come back to a fundamental incentive is because the only reason that Bitcoin will be higher than its prior all-time high as denominated in dollars or euros or any other cross of currency is because somebody evaluated the fundamentals and accumulated when everybody else was panic selling.

And that that is why Bitcoin doesn't die. And so when that happens, though, that's when Coinbase goes down because literally their user-based 10xs. When people are motivated to do something, they will go through the pain and do it. And what exists today is that it's not just Coinbase, but there's River, there's Swan, Unchain, and more and more places popping up to buy Bitcoin, that it's all of the different possible network connections where people can make it easier and easier that causes that. So it's like people will actually go through a lot of pain if they're particularly motivated.

I do agree that on the margin there will be some universe of people that now if, you know, iShares has a Bitcoin, ETF, they'll buy that when they wouldn't otherwise buy GPTC. But I do challenge that more so it will be driven by, you know, somebody might not have gone to open up a coin base, you know, when the price of Bitcoin was going from 60,000 to 30,000. And they were about to, you know, dance on its grave before it rose like a phoenix from the ashes, as it always does. But that then when Bitcoin is 120K, that got the same person that was like, no, I'm not buying it. it's dying, that they'll be motivated to open up a coin base account and not tell their friends and buy some. Michael Barry just blocked you, Parker.

Yeah, he might or Mike Green. I don't know. Hey, do you think that the typical person has the capacity to self-custody Bitcoin? When you just think about your common person that knows nothing about any of this, do you think that they have the capacity to take ownership of this? or do they need to outsource something like that? I think that the normal person, yes, will self-custody. I think that it is actually easier to do

than securing funds on Coinbase. And that is for technical reasons. There's two things that happen with self-custy. And we're talking about people's life. It's right in many cases. Again, a lot of people, Michael Saylor has a quote that is, you know, if you actually understand Bitcoin, there's no way that you only own 1% of it. And that's true. That if you actually understand what Bitcoin is and why it exists and how fundamental it will be to our entire economic system being viable and then flourishing into the future, that Bitcoin will be the solution to that.

You don't just have 1% of your wealth because you have 99% of exposure. That's what you figure out along that path. And that if you have an amount of money that represents your life savings, or a large share of it, because when you do truly, like when Bitcoin clicks for you at a fundamental level, like you're going to have more than 50% of your assets in Bitcoin. This isn't like, you know, RIA portfolio theory. We're like, oh, we should have 1% of this and 2% of that. It's like, no, this is the best more money that's ever existed.

It's not too volatile. It's going to be adopted by 7 billion people. And I'm going to own a lot of that. That if you're in that world and you have them, whether it's 50% of your portfolio or something that you just can't afford to lose, we saw a week or two ago about how 6,000 Coinbase accounts that had 2FA setup were hacked and drained. Imagine that was your life save. Like, would you ever put yourself in a scenario where even if it happens to 0.5% of people or 0.1% of people, that is too high of a probability to put yourself into a ruin event type scenario.

Now, in that case, because there was some error on Coinbase's side, that Coinbase made those folks hold. But before Coinbase, it's any number, if there have been any number of scenarios, there was the Canadian Exchange, There's a South African exchange. There was Mount Gox before it. There is a reality that people believe that holding Bitcoin, the keys to your Bitcoin, is daunting because there's permanence to private keys. But once you actually hold private keys, and generally people that are used to storing things that are valuable, understand that things don't get up and walk away, there's high degree of redundancy such that if you lose a key or even lose a

a key and a backup or multiple parts of your security setup that there are ways. And that's what we focus on and on chain capital, helping people self-custody in ways that are highly fault-tolerant and eliminate single points of failure so you can make numbers of mistakes and still have your Bitcoin. The difference between self-custody and cold storage and working with an exchange or a third-party custodian is that when you work with a third-party custodian, you 100% in all scenarios have a single point of failure. that you have a single point of failure because first and foremost is permissioned.

And, you know, if you see what's happening in Lebanon, people can't get their money out of the banks because it's an abject disaster. Bitcoin, you can't hold on a permissionless basis and that gives you and grants you an incredible amount of power. But more from a technical perspective, why I say that self-custody is actually easy and why more and more people do it, if it represents material amount of their wealth, from a technical perspective, it is much more difficult. to secure a password and to avoid the consequences of living in a permission system where someone could just say, no, I'm not going to give you access to your money, that being your single point of failure, then it is in a world where you actually sever, Bitcoin is a digital bearer asset. And when you have your own keys and you have cold storage, you actually sever the internet connection. That it is, you massively reduce your attack surface when the, you're, you massively reduce your attack surface when

And the way for somebody to get a hold of your Bitcoin is no longer accessing your account on a remote basis at an exchange like Coinbase, like hackers did to 6,000 people. But when your keys live in a combination of safes and safe deposit boxes geographically distributed when you need for them one key to move any Bitcoin. And so the analogy that I used to simplify it for people is that when think about or envision how many times you access your money. in the dollar world. Maybe you affect five or six transactions in a day, maybe fewer. But you're accessing your funds about 0.1% of the time or maybe less 0.01%, but there's an internet connection around the clock that is there to access your funds. You're actually spending, at least in this day, your Bitcoin less frequently.

So you're generally just checking on it to check balances and that it's there. But think about in the Bitcoin world when you have a Coinbase account, like you only ever move Bitcoin, maybe once a week, maybe once a month. Realistically, it's probably fewer than that, once every three months, once every six months. But when you're sleeping 24 hours a day, you're connected to the only way that you have to access your Bitcoin. In that world, you have massively increased your surface area. And so what we do, and that's why the longer that somebody holds Bitcoin, the more likely they are to self-custy because they understand that that dynamic, it is actually harder to secure a password to an account that your only way to access is remote. It's actually easier to take a physical key and put it in a physical location and physically is secure.

That somebody, and this is also not saying everyone has to have guns, but when somebody can hack you remotely versus have to come into your house. house or also get to a safe deposit box, but they're less likely to do that because they're going to have a higher probability of having physical harm. So as we develop solutions, which we are today, we onboard a lot of people who are first time Bitcoin buyers directly to holding their own keys. Because we use multi-sig, because it's collaborative because we're there as a partner, I think that that will be the standard. That in four years when people own Bitcoin, the idea of going to Coinbase will sound for that it will be flipped because the solutions will get better, but that the market will also have more and more education about, you know, trial and error.

And the beautiful thing about Bitcoin is that it eliminates moral hazard. It pushes ultimate accountability to the user. That if 6,000 Coinbase users get hacked as bad as I feel about that, Again, in that case they got that made it hold, but usually when Coinbase accounts get hacked and money gets drained, they don't. That doesn't impact. I've got my Bitcoin. There's no socialized losses. There's no counterparty risk.

And for people that actually understand Bitcoin, understand that it is a finitely scarce resource. And there is a reality that markets do have no memory. But for listeners of your podcast, that remember 2008 and 2009, counterparty risk. is a thing. And that when you find out that it's a thing, it's probably too late. And so those that are smart and that actually understand Bitcoin and understand its value will start to realize that the power that you gain from having permissionless access to your money and by eliminating counterparty risk and eliminating single points of failure, that that is the smartest and best way and it's actually achievable. They're just as an honest.

knowledge gap that needs to be rich. And there's more and more companies that are helping to do that. Ours at Uncheng Capital being one of them, but there's other good companies out there too. Talk to us about your ideas on tax planning because a lot of people that listen to the show have a decent net worth. They might have substantial gains on their hands. How do you think about tax planning for those people with that situation and particularly for anybody holding Bitcoin? So first I will say that I'm not a tax attorney. This is not a tax advice.

But that it is definitely true that as more people accumulate a non-immaterial amount of money and as Bitcoin exists into the future, that people start to think about, passing on wealth to their to their family, but, but that also thinking about, you know, kind of the technical aspects of inheritance planning. So, you know, I think there's a technical aspect of actually physically how does this get passed down. And then there's the tax side of, you know, there's nothing new about it in the sense of everyone always wants to maximize the amount that they can, you know, allocate how they, they choose, whether it's to family or whether it's to

charities rather than the federal government. You know, and I think it's important that the people kind of understand that frame of mind. I think that one of the things that we're doing it unchained is we recently brought on Jeff Andrew, who is our head of retirement and inheritance. That the first thing that Jeff is working on is an IRA product where people have hold their own keys. With that, where we've actually started to pilot, there would be a broader launch. in the coming weeks, but that he's also focused on the question of inheritance. And that there's the aspect of holding Bitcoin in such a way with actually with a plan

so that it doesn't get caught up in a court process and whether it's held in trust. A lot of people are evaluating whether to hold it in trust where they can avoid painful probate processes. But that also, you know, in order for people to actually have credible plans, that their confidence in not just for our estate planning purposes, but for tax planning purposes, that more of the people that actually have the knowledge and expertise to plan need to get involved. What we've seen is that more attorneys are getting focused in this area and that there will be more and more services coming out from Unchained and others.

I don't have, you know, kind of particular strategies that I would say other than, you know, when I talk to talk to my parents or talk to older folks, they generally think about retirement or kind of, you know, kind of tax planning. Ultimately, before you get to that point, you need to understand kind of the fundamentals of Bitcoin, which I think, you know, is still a 99% problem and that you're going to need Bitcoin to buy groceries in the future. I think at some point in the future, and this isn't necessarily specific to your question, but it is pertinent to the tax question. I think at some point that the federal government will change the tax tree. of Bitcoin to whether they make it legal tender to treat it as currency.

And through that, they will likely accelerate capital gains because they're going to need the federal government to be capitalized with a form of money that actually functions. And so I think that the most important kind of order of effects is understanding Bitcoin why you should own it, understanding then how to secure it so that in the future you have access to it and then figuring out how to minimize your taxes. but I also operate with the reality that a whole lot of things are going to change because of Bitcoin. And I focus a lot more time and energy on the first two and never selling my Bitcoin so I don't incur taxes. Last question I got for you is on the Bitcoin lending side.

I think I had this conversation with you privately where we were talking about the various risks that many of these lending platforms have, inherently because of their institutional books versus their retail books. Talk to us a little bit about your ideas or your opinions on the lending space as it exists today. And then how do you see this evolving into the future so that it becomes a little bit more secure and not as risky as maybe it is right now? Yeah. I think that I can't remember when we came on, but I believe it was either six months ago or like 18 months ago. Yeah. I can't, I can't remember. It was probably about six months ago, yeah. Okay. I knew that it was like April-May time frame, but yeah, you know, the last year and a half feels like an eternity. But so we have a pilot that we've

contemplated and worked on with an exchange that would essentially hold Bitcoin in collaborative custody while Bitcoin is on low. I had an exchange of and effectively able to trade. And the idea behind it is that kind of how certain goods or stocks trade on an exchange can be, and oftentimes is and should be different than how those assets are custody. An example being that in the, you know, kind of today in the Bitcoin exchange world, all Bitcoin is generally held on exchange rather than in third-party custodians. that is very different than the world's of stocks and bonds.

New York stock exchange is not at custody any stocks, but it trades a lot of stock and that the stock is oftentimes actually at the DTC. And so this idea that maybe if all Bitcoin lending that happens today, like no one's lending Bitcoin to go build a building. So that's an important thing because there is, there's a reality in the dollar-based world, that everyone kind of was trained to earn interest.

It's like, oh, if you're not making your money work or earn interest, you're doing something wrong. And they don't think about the risk that they're actually taking when they do that. So yield doesn't, like, and this is going to sound crazy, but it might not sound crazy to do a few people who doesn't do it because it might actually describe them. There's some people that just think that interest magically shows that you put your money in and they pay you some money out and how that happens, they don't know, but it just does. And I say that kind of jokingly, but it's also true that people think that when they put money in a company that pays them Bitcoin yield, that like money is, like I've talked to people where they think that when they deposit Bitcoin to BlockFi, that the money is just, the Bitcoin is just sitting in BlockFi and

they're earning interest. But what really happens, because it's not specific to BlockFi, It's the only way that any Bitcoin lending works is you deposit your Bitcoin in, they take your Bitcoin and move it out, or if it's at the same Cosodian, it's at a different account, transfers out of the account of the person you gave it to. And it's not there, and it's at risk. And so that's the first thing, that you're taking something that is a finitely scarce asset that, in my view, represents the greatest asymmetry that's ever existed in the entire world. And you fundamentally change the new. nature of what it is you own. You had that and now you have counterparty risk of multiple institutions, essentially, and that if you're lending into a black box and you can't evaluate the nature of those counterparties and you're trusting institutions that are ultimately very young and you're doing that in a world where what they're lending is a finitely scarce asset in which there are no bailouts, like you're making a decision with an amount of information that that you need more of. And so what we were contemplating, our contemplating is an arrangement where you have a known

counterparty, you have a known way of how that Bitcoin is actually custody and that no single party would be in control. And that there'd be an idea that if all Bitcoin that is lent, kind of getting back to the point where I started was that the only way that they're able to pay yields in Bitcoin, is that the returns are generated via sub-trading activity. You're lending Bitcoin oftentimes for someone shorting Bitcoin, and they're trying to make income based on volatility. And they're not necessarily just directionally short Bitcoin.

They can be arming Bitcoin spreads, you know, long on cracking, short on Coinbase, long the futures short to spot. You know, it's not just people, you know, there are some crazy people out there that are just direction short Bitcoin, you know, those people are going to need some serious help at some point in the future. But that there's a reality that all income that is derived

and paid on yield products in Bitcoin lending is the counterparties are trading firms. That gives me a lot of pause and should give a lot of people a lot of pause. But that if you are going to structure a product, if you recognize that all Bitcoin yields are derive from firms that are pursuing some sort of trading activity, that ultimately that Bitcoin winds up on exchange for some venue where it's trading.

So our idea was to go to the exchange, enter into a collaborative custody arrangement where you could certify how the Bitcoin is held that the exchange isn't singularly in control, and that you could actually lend in a capital efficient way on a secured basis rather than today what happens is that all lending is the trading firms and on the institutional side generally on an unsecured basis, not say 100%, but given the nature of the problem that it solves, which is one of capital efficiency. It's why many firm borrow Bitcoin,

they have to have dollars in Bitcoin post-dollar for the place to pursue our strategies, that it's generally on unsecured basis. I don't think that Bitcoin should ever be lent on an unsecured basis. It's too precious of an asset and counterparty risk is too real to do that. What ultimately happened with our product

was when that, we'll likely have it out in the future, but the, when the spread of the, of the, of the GBTC trade went from a premium to a discount, which it fundamentally should trade at a discount, a fairly steep discount, given the nature of the product, that the demand for Bitcoin borrowers collapsed. And then that caused the market interest rates to collapse. And so, you know, ultimately, you know, there were, you know, there were firms that had promised a certain level of yields and they were essentially going to anybody that was remaining in the market

to borrow Bitcoin and driving interest rates down. And it got to the point where we're like, okay, well, you know, this, this market structure doesn't make sense. There's no, there's no kind of rational defense to lend Bitcoin at these nominal rates. And so we just kind of deferred it. But I do think that that still is the vision. We will have that out at some of the, point in the future, but the market structure just needs to come in a bit and rationalize. Parker, I could talk to you all night. Thoroughly enjoyed this. Every time we get a chance to talk, I just love talking.

You're so smart. I wasn't going to ask another question, but I had this one written down, and it relates to what I'm saying right now. So Sammy asked, I'd love to know how he learned to think the way he does, your ability to reduce the first person. principles is unmatched and very unique. Give us a tip. What can people do to be better at dissecting critical thinking and getting down to first principles? I think you just have to, you have to start at being really dense. You know, I don't know. I've never, I guess, consciously thought about

that. So, well, do you read a lot? Do you read a lot? It's a hard question. I think that there's a lot of noise, and I'm actually fairly risk-averse. And so, you know, as an example, when I was getting into Bitcoin, Bitcoin made no sense. And then as I, you know, I had the benefit of being able to meet Take Dina Moose before he wrote the Bitcoin standard. There were a number of people that I met that helped me understand things I didn't know before. And so it was that it was like Bitcoin clicked for me. Like it started to make sense. But I had a bunch of ideas jumbled up in my brain where I was like, you know, kind of like a lightning strike where I'm like, oh, okay, that makes sense now.

But now I have to actually get back to that same point with reason and logic to reaffirm that it that it's actually a defensible position. And so I think I try to think and that's a lot of what I've done with my writing. And then that writing once I was able to distill it down kind of like I carried that forward or at least that thought process down, which was I kind of recognized something about Bitcoin, but it was before I could describe it. And in order I, you know, but then in the process of actually distilling my thoughts, it was going down in a very logical, uh, ratcheworthy. way to say, okay, that idea that just kind of triggered in your mind of like Bitcoin makes sense that it's going to be money and the whole world is going to adopt it, like, you know, break that down into like the hundred different parts to how your mind just put that all together in one flash. And I think about it as also trying to get down to the things that you're most

certain about. And so with Bitcoin, it started with, as an example, I know, independent of Bitcoin why the federal government is going to print trillions of dollars. I have a, I have a fundamental understanding of the construction of the U.S. financial system. And I think I have an understanding of it not maybe, you know, kind of technically how they actually click buttons and print $3 trillion. But I think I understand the cause and effect better than the people of the Fed do. And so, but I also know that that system will not last. And so like I use that as example that like, that was my anchor as I was looking at Bitcoin. It was like, that is certain. And my mind. The timing is uncertain. Like when it happens, how it happens, but that it happens is true.

Okay, if that if that is true, then there has to be a solution. What is the solution? Is Bitcoin viable as a solution? You know, and as we go further out in time, more things are uncertain, but the things that you know will be certain at some point in future guide all over thinking, in my view. So it's just kind of trying to get down to always and it's not, it doesn't just apply to Bitcoin applies other things, things that I kind of way I would think about investments when I was at Hayman Capital, but that kind of going to the least common denominator, the assumption that you know to be true, and then the thing that all other assumptions build off of as a general way of thinking. So to being put on a spot like that, I don't know if that adequately thought about it,

but it probably ties back to just being risk averse and also generally a logical or rational mind to be like, okay, am I crazy with this Bitcoin thing? And the only way to prove that I'm not crazy is to get to that same kind of flash of an idea where probably 100 different ideas come together all at once in an actual reasoned way. And so with my writing, I really tried to just say, okay, I had to struggle through all of these things myself. Let me unpack the ideas that are my head of the things that I struggle. with because many other people would struggle with them as well. And actually through the process of writing, you might find that, you know, that that is the way

to to always bring things back to first principles. Because oftentimes I would write something and I'd say, well, no, that's not a logical connection. Like there's some other lot. There is a logical connection. That thing I just wrote on paper is not it. Like, let's try it again. And it's just iterative.

That's so true, especially if you're going to publish it in a public kind of way. I know when I'm writing something, I'm like, you know what, I'm going to get hammered if I would publish this or put this out into the public. And, okay, let me ask myself why five times on this particular point and see if it really kind of holds up as I kind of drill down on it. It's a great point about writing. I like that. If people want to learn more about you, Parker, where can they find you? I know you're active on Twitter. Anything else that you want to highlight?

Just let it rip. Yeah, find me on Twitter, Parker A. Lewis, read my writing. I've got a series on Bitcoin called Gradually Then Suddenly. It's on our website. I'm head of business development and Unchained Capital, based here in Austin, Texas, so you can find us on Unchained.com. And then all of my articles are on the blog. I write the Gradually Then Suddenly series, and then also we'll write a number of other things about our company,

about financial markets. So on our website, Unchained.com, you can find it on the blog and then also on Twitter, Parker, and Lewis. And if people don't know, Michael Saylor has quoted saying that some of Parker's writing, the stuff that he was referring to earlier was some of the things that convinced him to become a bitcoiner. So kudos to Parker and his contributions to the space. Love having you on. You're just a total wealth of knowledge. And thanks for making time. Preston always enjoyed.

Appreciate you having me on. 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. 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.