We Study Billionaires - The Investor’s Podcast Network - BTC131: Positioning For the Bitcoin Boom w/ Tuur Demeester (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. We're back for part two of my discussion with the super thoughtful Tur de Meester. In this second part interview, we pick up where we left off last week and we go deep into TIR's latest report on why right now in particular is a great time to be a Bitcoin bull. He talks about numerous on-chain metrics and circumstances happening in the macro backdrop that only contribute to the bullish narrative. And TUR is pretty good at making calls like this in the past. He's been in the space for a very long time and has made these bullish calls at bare market bottoms.

Starting point is 00:00:39 And so right now he's doing that again. So without further delay, here's the rest of my chat with Tertamister. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Okay, let's talk about this next one here. I think this is a really important one. You say collaborative custody is a good option for novice investors. And you get into the – this is near the end of your report. You're talking about the various ways that people can custody Bitcoin. And you do such a great job kind of talking about the different types of people

Starting point is 00:01:26 and how they need to think about their technical competence in order to custody Bitcoin. So talk to us a little bit about these ideas. Yeah, thanks. And I appreciate that you, I value your opinion. I'm glad you liked it because it's really important. I wrote this report with like my own friends and family in mind. I've been doing this for 12 years now, Bitcoin analysis. And a lot of things can go wrong and it's tricky. There are a lot of different ways to think about storing Bitcoin. And they each have tradeoffs, but I feel like like you're saying, the most positive tradeoffs or the best balance is that collaborative custody model because basically you can store your Bitcoin's yourself with one key,

Starting point is 00:02:11 which is kind of vulnerable because if one person sees your private key, then they're gone. That's called the evil made attack. Somebody just glances at the wrong piece of paper and they're gone. It's not 100% like that, but that's roughly the risk factor. And then you can also just say, oh, I'm not going to bother doing it myself. I'm a beginner. I'm just going to give it to an exchange, a Bitcoin bank. But then of course, since 21, we've seen a lot of things can go wrong. We've seen these Bitcoin banks can go belly up. They don't have FDIC insurance. And you're kind of looking at a black box. Like, you don't really know

Starting point is 00:02:47 how they handle things inside. And then you can also do multi-sig storage, which is better, but it's more involved, like having multiple keys. And then those work together to secure your Bitcoin and Maybe you give some to a friend and you give another one to, you know. But that's like, that's the kind of more thing that hardcore bitcoins tend to do because you have a network of people that are literate in the same way. And so collaborative custody is that same technology of multi-sig, basically multiple key storage, but you have a company that assists you in doing it. And I think that's really powerful because like I said earlier, I was talking about

Starting point is 00:03:22 miniscript. Like this technology keeps improving. Like we're starting to have delay mechanisms built in. And it's just so powerful what you can do now. And so these companies are going to compete with each other and going to keep, you know, kind of helping you upgrade your system, right? You're going to have someone that's going to upgrade it. The moment that it's stable and safe enough, they're going to, you know, just ask you,

Starting point is 00:03:44 like, hey, do you want to upgrade and you'll do it together and be very simple. And so the nice thing is you don't even have to trust them, right? Because they are only storing one key of yours. Maybe there's another key in another company and then you have one key. or you have one key who's with a family member. And soon there will probably be like, I've seen some demos that are so powerful where you,

Starting point is 00:04:04 if you're all part, you're all customers of the same company. The company doesn't know the private keys, by the way. They don't know it, but they just built an interface where you and I can communicate with each other. And so I can ask you like,

Starting point is 00:04:16 hey, Preston, I know you're a customer with the same company. Would you be willing to store a key for me? And you're like, sure. And I just send you with one click of the button, a request. And you see this. And you're like,

Starting point is 00:04:26 accept requests. So that kind of collaboration is going to become so much easier than fiddling with some kind of obscure open source interface that is hard to understand. So this is so exciting. And yeah, it's a long-winded answer. Just to say yes, I think collaborative custody is probably the best solution for 95% of new adopters of Bitcoin. I love this point. And I think that in the coming two to three years, this is going to be a major shift, technical shift that we have not seen to date. And I think a lot of it comes down to the Fedement protocol. I don't know how well-versed you are on the Fedement protocol and some of the work that's happening there. But exactly like you say, so I look at my personal family, right? And I look at my grandparents and their ability

Starting point is 00:05:16 or just other family members and their technical competence to wrap their head around, storing their own keys and doing it in a multi-sig kind of way. And I'm saying to myself, there's just no way. There's no way they're going to be able to wrap their head around some of this. And when I... You can just remember the passwords, things like that, right? Yeah. And just out of the mindset that, oh, there's some type of central entity that can kind of

Starting point is 00:05:41 unlock my account, right? Like, I think we are still very much in that line of thinking. in the world is aggressively moving out in a different way, but it's going to be really hard for most to kind of overcome that way of thinking that they're so used to. Yeah, I guess from Fetamint, by the way, this is how Bitcoin becomes unconfiscatable, because if you have an external party who's trying to get hold of your Bitcoin, say, you know, say a government who's trying to confiscate your Bitcoin, you can have it be that if Bitcoin, the Bitcoin's in a certain account don't move because they've confiscated your key, right? One of the keys and you cannot sign.

Starting point is 00:06:21 This is smart contracts, by the way. This is a smart contract where after a certain amount of time, those Bitcoin automatically move to another address that's controlled by a company who might be abroad somewhere who specialize in this kind of stuff. And there may be the custody insurer or something like that. And this is not just pie in the sky. You can build this stuff today. I was talking to Obie, who's the CEO founder of FedEti, which is using the Fedement protocol to do some of these things. And he used to run an exchange. And he was telling me just like how exchanges manage their treasury of Bitcoin and having multiple people handle various keys. So it's a multi-sig solution.

Starting point is 00:07:03 And then other people don't know who the other participants are that are holding keys. You know, you used to do this physically with gold vaults and things like that with multiple keys in order to unlock a vault and you didn't know who the people were that were holding it. And he showed me a demo on their app and how they're basically able to do this for, you know, let's say you set it up for your family. And you're able to provide one key. The person can accept it all through the app. The person doesn't actually know what the key says because the key's encrypted. Right. And they're distributing it across however, you know, they want it three or five or whatever and how many how many keys they want to hold versus the ones that they're providing the family members. And he's showing this to me on the app. And I looked at it when I was like, is this a better solution than what you were doing like when you were running in exchange? Is this more turnkey but yet almost at the same security level or better than the security level? And he just kind of smiled and looked at me and nodded like, yep. And I was just like, oh, this is going to be huge. This is going to be crazy. And I have to, I have to disclose something.

Starting point is 00:08:05 So I'm a part of advisor on ego death and that's one of their investments. So all of that aside, but I'm bringing it up because I completely agree with your point that I think technically this is something that the world needs in order to continue to take self custody, but also bridge the technical gap that so many people in the world just cannot even begin to bridge based off of their expertise and them just not having any type of technical competence in this area. Right. And if we think about the internet, like what created the 1995 moment where all of a sudden, regular people were just going to the store, buying a box, putting in their house, and going online is because all these parts had been developed to a maturity that was just enough to provide for a seamless, pretty seamless customer experience. And I think that is where we're at with Bitcoin, 2023, 2024 is going to be the 995. moment, I believe. Yeah, as far as channel management, so when we go into layer two and you're talking about channel management, do you have any type of centralization concerns when we talk about, you know, I'll provide an example. So like wallet of Satoshi, when I'm using that with Noster and just looking at the ease of sending five SATs to somebody or 20,000 SATs to somebody, it just works. It's super fast. The app immediately pulls.

Starting point is 00:09:35 up. I click send and like, boom, the screen turns green, but I'm not self-custodying it. When I do my own self-custody, I just don't get the speed. And maybe that's, again, going back to technical competence, it might be on my end. I'm sure there's some really smart technical people that get the immediate feedback. But whenever I was doing it on my own, it just wasn't as fast as using wallet of Satoshi. So I'm like, all right, well, I'll throw $300 on wallet of Satoshi and kind of use that to zap some stats around in a really fast and effective way. I just don't have to think about channel management. But is that a centralization concern is really kind of the question, TUR.

Starting point is 00:10:13 I think there are, yeah, there are for sure some concerns. And I think there's always going to be that friction where if you run your own node, you can't really provide the same, have the same nice experience as a company that does nothing but that and has lots of users. Kind of like maybe there's an analogy with email, right? In the beginning, people thought everybody would run their, run their own email server and then it's like, no, no, no. What happened is certain companies specialized and those became the dominant email providers.

Starting point is 00:10:44 I think it's likely we're going to head that way. But I don't know enough about it seems to be that because Bitcoin is an open protocol, that you can really build things, build infrastructure for people who don't want that, who are willing to. And also it's different, you know, changing email might be, there might be more friction involved than changing your lightning provider. So maybe the competition is just going to be more fierce, which is good for the consumer.

Starting point is 00:11:10 And also fundamentally, it doesn't really work me even if there are issues because, you know, the base layer is decentralized. The base layer is not going to be, you know, attacked. And so, yeah, of course, if basically your wallet can get stolen, right, it's like 200 bucks in your wallet, it's just a risk. That's, that's cash for you. That's just what happens with cash.

Starting point is 00:11:28 But if your money is safe in the bank, that that's the main thing that we got to worry about. So, and I think people are going to, be just less concerned about lightning stuff for a long time because it's only a small part of their Bitcoin experience or their Bitcoin portfolio, so to speak. And it's becoming so seamless. It's becoming so seamless. Right.

Starting point is 00:11:48 Yeah. Yeah. And then you can be like, oh, I have $2,000 worth of Bitcoin in my lightning wall. Let's sweep some in cold storage. You just move it to a safer place. Yeah, it's funny. We were talking about fees when we started off and like all this like layer one fees. And it's like, I could send you 10,000 sats right now.

Starting point is 00:12:06 And there's basically no fees associated with any of it, right? And so people that are maybe new in showing up to these conversations and hearing us talk about that, they're like, well, how old is that possible? They just said the fees were really high, right? It's incredible. It's crazy. Somebody, do you remember that there was a little competition? They had a prize for whoever managed to send the smallest lightning transaction in terms of amount.

Starting point is 00:12:31 Yeah. And I forget that the Bitcoin amount, it was like fractions of a Satoshi, which is like, you know, a billionth of a Bitcoin or something. And somebody calculated that that amount was less than the price you'd have to pay for one grain of sand if you order like a bulk amount of sand. So anyway, it's just like mind-blowing to think like these are the quantities that Bitcoin can facilitate the Bitcoin network. For people that don't run their own node or open their own channels, the fees. So you are collecting fees on layer two lightning, but they're fractions of a Satoshi. They are so small that you truly don't even notice it, right, because they're so small. Okay.

Starting point is 00:13:14 So when I was down at the Microstrategy Conference last week, we sat on a panel. It was Jeff Booth, Lynn Alden. It was awesome. The panel discussion was in reference to the future and kind of where we see things going on the Lightning Network specifically on Layer 2. And the comment that I had was I was really excited about the potential for the cost of capital, the risk-free, the quote-unquote risk-free rate, really materializing on the Lightning Network. I believe you and I have been talking about this for a few years. Now there's this thing called Magma Marketplace. This is on the AmBoss website,

Starting point is 00:13:53 where literally there's a free and open market for people to purchase liquidity on Layer 2. do you think that with enough time, five, ten years, that this really kind of materializes into a free and open market for a risk-free rate? And if so, what do you think that number goes to? Yeah, I think Nick Batia first, you know, came up with the concept because he came from the bond market from that kind of world. I think it's valid. I think that, of course, technically, there's never total freedom of risk, but there are certain risks that become very manageable over time because they're based on such robust mechanisms that they're basically just creating a price for however low your time preferences, like you're going to get a reward for that.

Starting point is 00:14:42 And so basically you can lend to lightning providers and they can kind of almost guarantee you that you're going to get your loan back. I don't really know. Honestly, I don't know in terms of numbers what that's going to be. But I do think that it's not going to be just lightning where you can lend Bitcoin to reliably. I think there's also going to be a growing market. I think it's going to be a huge market for Bitcoin insurance, Bitcoin custody insurance in the first place. And then eventually it'll go into other areas.

Starting point is 00:15:13 But because of these, we were talking about Fettiment and Mnisccript and these very sophisticated, almost like three-dimensional custody models, you can make custody extremely secure, which means that to ensure the custody of Bitcoins can also become very, very reliable. But investors still need a pool of money to pay out in the case of a loss. So you can invest in that pool. And the nice thing is with these new mechanisms is you don't even need to trust the insurance company. Like they don't actually hold the Bitcoin in the sense that Coinbase holds your

Starting point is 00:15:49 Bitcoin, the stuff that they're insuring, they can, they just have the power, the veto power to prevent the bitcoins from being spent for the period of the insurance. So you're insuring for three months, that period, they can lock it up. But they don't have the power to send it wherever they want. They can just prevent it from being spent. So, so I think that is going to be a huge area of potential investment where you can generate Bitcoin Alpha for Bitcoin savers. Hmm. That is really a fascinating idea. I never thought of it from a multisig where maybe, so they're, which you're suggesting is they're holding a key. The insurance company is holding a key and they have an ability for that particular wallet that it's three of three?

Starting point is 00:16:32 Or like how would that technically work, Tur? Yeah, technically the demo I've seen is basically you have a regular multi-sig wallet that's, who knows, three out of five or something. And then it's almost like there's an, it's almost like you're building a logical circuit. And so you add an end. So it's like, we need this condition. first three out of five, and we need an additional signature at the end. And that can also be a multi-sig within the insurance company. It's just they also need a quorum to then finally release the Bitcoin. And then that and has a, yeah, and the end would have a time duration that after so many

Starting point is 00:17:07 blocks, it's not valid anymore. And it verifiably, verifiably expires. So you know that if this insurance company goes bust or whatever, the Bitcoin are going to get unlocked again after that. period of time. Wow. So it's like, imagine, like not having to trust your insurance company is huge. Do you have any other, like, from an innovation standpoint in the coming five years that you think maybe the rest of the market isn't necessarily seeing or that you think is going to play a major role moving forward? Yeah, that's a good question. I keep hammering on insurance. It just, it feels like people are not seeing it still. Like, you know, you and I have talked, I think, about Bitcoin-based life insurance, those kind of ideas.

Starting point is 00:17:49 I think it's going to be in the realm of financialization that we'll see these innovations where it's like, oh, but I thought this is how it's done. And it turns out we can do it way more reliably with Bitcoin. I think that that'll be a theme over and over. I also think that derivatives are a valuable thing, are important for people to manage risk and those kind of things. So that'll happen. I mean, just financially speaking, a lot of assets can be shorted against Bitcoin. That's kind of cool. where like if you see things you don't like, you can just kind of build some short exposure against your Bitcoin position. And in a way, you're pushing the market to where it needs to go or where fraud is being stamped out and things like that. In the 80s,

Starting point is 00:18:33 there were a lot of short hedge funds because the money was strong and it made sense to short against the dollar. So now we're entering a new era where we have another strong money. And so some of these excesses that we've seen, part of why they're there is because they can just proliferate and they're not being punished. Like we need a,

Starting point is 00:18:49 financial predator to be able to like kind of call the the population of so to speak of these you know fraudulent organisms 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 and every conversation you have is with people who are actually shaping the future that's what the oslo freedom form is from june First through the third, 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.

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Starting point is 00:23:07 All right. Back to the show. What are your thoughts on? So AI has just been nuts in the past year. It's gotten a little crazy. How does this, it almost seems like these two worlds are about to collide between Bitcoin, immediate settlement, lightning, and all the resourcing that's required from a computation standpoint for AI. What are your thoughts around that? Maybe this goes back to like reading Ray Kurtzweil back in 2005, I think, where he was talking about, you know, the singularity and kind of just that organic evolution towards hyperintelligence that has gone on for many hundreds of years, thousands of years in his opinion. So I don't have that fear of like, oh my God, like what is this?

Starting point is 00:23:53 And I also always think in markets, like even when you're thinking about governments, like governments compete with each other. Like there is that political market. We don't have a world government. I don't think we'll ever have one. And so, It doesn't make sense to me to make an abstraction of AI and be like, the AI is going to take over. Like, no, they're going to compete with each other. There's going to be a multitude of AIs. And I was talking to Drew Bonsal about this. He's the CTO at Unchained.

Starting point is 00:24:20 And he and I are actually doing a panel at the in Miami. So I'm kind of like spilling the beans a little bit because he has such a fascinating take on this. His take is that the AI world is an ecosystem. It's going to be an ecosystem. them and the way that you see boundaries between organisms. Like how do you, because they're going to interface with each other. And in the real world, well, there's, you know, you have cells and cells have walls. And then that's how, of course, physical animals have, you know, they have skin.

Starting point is 00:24:50 And so, like, what is going to be the boundary between AI's, like, to prevent them from just being a blob that doesn't know how to allocate resources? And he's saying that the food that they need is CPU. they need to have that electricity to run the machines and also the machines need to be replaced. So they need to interface with the real world somehow. They need to be able to basically bargain for more electricity or more CPUs.

Starting point is 00:25:17 They're going to have to trade with us, basically. And we cannot outthink them. They're probably going to become smarter than us, but we could trade with them. And the most likely currency is going to be Bitcoin because they can, how do you know the difference between one AI organism from the other is that one knows the private key and the other one doesn't.

Starting point is 00:25:38 So you can always, they can even check for themselves. Like, are you a part of me or not? It's like, hey, can you sign this message? And then if they can, it means they don't have access to the consciousness that you do as an AI. So it's just this, he has this fascinating take. It's much more elaborate than that. But that, yeah, basically Bitcoin could be this peaceful technology that allows us to

Starting point is 00:25:59 coexist and thrive together as an AI slash human society. We talked about this a little bit earlier about how it's changing from being an expert of borrowing to being an expert of not borrowing and having already settled monetary value and retaining that. And when I think about what you're talking about, AIs bargaining, working with each other in harmony to become smarter, they're going to have to settle with something immediately. They're not going to want to accept some coupon for future payment. They're going to want to, hey, I want to task you with doing something and it only costs seven cents. And I don't want a high fee on paying that seven cents for you to solve whatever this small processing is.

Starting point is 00:26:47 They want to immediately settle that. Right. And so like. Yeah. And also because if you trust, if you trust one party to provide something to you in the future, you don't have the option of opting out. And an AI is going to know that it's better to have optionality than to be. stuck with one provider. Yeah, so it almost seems like it's going to force AI to settle in Lightning because they can do it for two points, really, because it can immediately settle. It's going to

Starting point is 00:27:15 receive that buying power right now. And it can do it in a very low cost where there's effectively no fee kind of way. And you can't do that in traditional rails where I can send you seven cents or I can send you 15 cents and there's no fee associated with such a small settlement, but yet I can still collect the resourcing of the processing of such a small micro-payment that's immediately settled. And then you get that symbiosis between two very different species, like you see in nature, between like mushrooms and trees and the mushrooms, they gather the minerals. And then the tree provides the, through photosynthesis, provides that, I believe it's the glucose and things like that. And so then you have that, you know, they both become better because of it, even though they're totally different species.

Starting point is 00:28:04 Well, and we're already seeing this. So the AI is going to work for us, right? The AI is going to provide us with services that we're going to pay them stats for. And then they use that to then purchase electricity and CPU. Well, in Tur, you're already seeing. So like Elon Musk is saying, oh, chat GPT is too left-leaning or too liberal. We need one that's more conservative. And so like when I think of, so now we have these two different AIs, let's say they're total powerhouses.

Starting point is 00:28:31 They're going to be smarter if you mix them, right? They're going to be there. And this is to your point. Yeah, if they can talk to each other and settle to just see a more holistic viewpoint. So how are they going to pay for that energy expense from one to the other? I don't know. I think it's going there. It's interesting.

Starting point is 00:28:49 I had a chat again last week with some really smart folks. and we were talking about how there's going to be huge demand potentially in the global south for immediate settlement because so many of these currencies are a disaster. And the one person looked at me and just kind of like smart, kind of like, okay, that's a cool story. That's a cool narrative that people are sharing. But his opinion was the bigger use for immediate settlement and lightning is AI. And yeah, it's had my mind kind of, had my mind kind of racing ever since he said that to me. But, well, yeah. I spoke to someone who's at Microsoft recently, and I mean, he's saying they're just buying

Starting point is 00:29:29 these insane amounts of CPU. Like, it's like a, I mean, not just really a weapon. It's a technological race. You know, really, it's a race. And so that's why these political statements, I just don't listen to like, oh, we should pause development and blah. It's just no. The world is an anarchy on a global level.

Starting point is 00:29:49 And so if you're, if the good guys are like, ooh, we're going to pause it. some other guys are going to keep developing it. It doesn't make sense to me to do that. But it is going to be a big change, yeah, for sure. We didn't even talk about this yet, but this is huge. All the banking fiasco that's going on right now. In your report, you say a global macro predicament is a powerful tailwind for Bitcoin. And I would say at the center of all of this is this looming debt ceiling, which, you know,

Starting point is 00:30:17 if it's not resolved politically, could really express itself through all the these bank failure and just enhance all these bank failures that we're seeing because their ability to step in and just provide liquidity on a whim is the only thing that's kind of keeping things somewhat stable at this point. So how do you see this kind of playing out into the next, I think, the coming two quarters and where does this end? I remember back in 20, this is back around when we had the sovereign debt crisis in Europe back in, I believe it was 2012-ish. So kind of like in the wake of the 2008, I was like, oh, I lived in Europe back then in Belgium. And so the general feeling was like, oh, we had this big crisis across the pond.

Starting point is 00:31:06 And, you know, they're in trouble. And of course, yeah, we had some banking problems, but we fixed it. And then we had the pigs countries like Portugal and Italy and the southern European countries who all of a sudden got really in trouble because the interest rates are going up. on their debt. So anyway, in that period, you saw on the level of the BIS and then there was this new entity called the Financial Stability Board was started and then the IMF as well, they were starting to really think about, okay, what are we going to do with 2008 hits again and people call our bluff, right? We're like, they just assume we're going to bail everything out. We can't keep doing this.

Starting point is 00:31:44 And they started working on these bail-in regimes. And I've been keeping track of that over the years. It's been 10 years now. And a lot of these, a lot of the stuff has basically been codified. And then Baylain just means that instead of rescuing the bank from the outside, we're going to apply haircuts and we're going to decide, you know, we're going to do a controlled bankruptcy. And that's what we saw with, of course, when the Cyprus crisis happened, that was a test. That was back in 2013, which surged. It was a contributing factor to a Bitcoin rally as well. But so this is now happening on a very large scale with Silicon Valley. Bank, First Republic, and these other banks were, yes, they are rescuing the deposit holders

Starting point is 00:32:24 so far. We'll have to see because I think the next step is going to be more like Argentina, where they corral the money for a certain amount of time. They won't let you pull it out. If you look at M2, the decline, which is, by the way, I got this from Hugh Hendry, I think he's right. But when you see the decline in M2, it's like, that's mostly deposits. So you're seeing deposits fleeing, it's like, I don't know.

Starting point is 00:32:46 I don't know and draw the Ethereum analogy. But it's like basically deposits are fleeing and people are investing in short-dated bonds and money markets and stuff like that. And so they're going to want to stem that flow. So they're going to want to hold the cash somehow in the banking system. So anyway, long story short, I think for shareholders of banks, for people that have bonds that are in banks or that have lent money to banks or people that have deposits in banks, all that stuff is going to become toxic. It's just a matter of time. I mean, I guess, sorry, you were talking about the next two quarters. I think the bank runs are going to continue.

Starting point is 00:33:20 And I think the interventionism is going to get heavier and heavy-handeder. And I think the Fed is going to turn around. Once this crisis, we have a few more bank runs. I think Silicon Valley Bank had like a $42 billion bank run in one day. Like this is the iPhone era. You can just be like, boom, I'm out of here. I don't want it anymore. That's different from 1930s.

Starting point is 00:33:41 You know, these things can happen really fast. And I think the Fed is going to pivot. And then people are going to understand, like, It's QE forever. I think inflation could be back by the end of the year. And I think that could very well coincide with a huge rally in Bitcoin. Because people are going to remember 2020. We had big inflation in 2020.

Starting point is 00:33:59 They're turning on the spigot. Is that how you say it? Turning on the spigas. Like you, you like, yeah, open the faucet and the next thing is going to be inflation again. That's a really contrarian take that you think we could see inflation ramping up by the end of this year. I think so. I mean, this is the thing that I just, I cannot. Sorry, just to kind of like, just to make sure I say it right. I mean, inflation in the stuff people need, not in the stuff they want, right? We can see flatline stocks or terribly performing stocks while corn and oil and all that is spiking and copper.

Starting point is 00:34:33 Yeah, I think that's such an important point to make that delineation between things that people actually desire, which goes back to that quote that I recently or that I said earlier in the show. So something I think that Elsa that's lost on people is the sheer size of the bank bailouts that have happened just this year in 2023 exceed the amount of the 2008 crisis. Even corrected for CPR inflation. Yes. That's nuts. Because you're not, you have no. Oh, I don't want to say no. But I think if you talk to 100 people on the street, they wouldn't even know any of it really has even happened.

Starting point is 00:35:12 where I think back in 2009, everybody knew. Every single person that you'd talk to was talking about this. And now today, it's even larger. And the only people talking about it are the people creating media around it like us, right? Like, I don't know. I think it's a really big deal. And I think that nothing has been solved. Like you saw the Jamie Diamond, Jim Kramer, that the system's very, very stable as they bailed out.

Starting point is 00:35:36 What was the one that they just recently bailed out? First Bank, I think it was. And JP Morgan goes in there and buys it. huge boon for them. And it just seems like disasters right around the corner. But I also have an appreciation for how it always can kind of seem like disasters right around the corner. And I don't really know like where we're at in space and time. Yeah, there were people who were calling for $5,000 gold way back in 1980, right? Yeah, it's true. Like the inertia is something that you kind of have to learn to deal with as an investor. Like, it's not because you're seeing that there's a problem

Starting point is 00:36:11 that everybody is seeing the same thing. But at the same time, like the jerkiness, to me, that is a big sign that the wheels are starting to fly off. There's kind of panicky, these panicky interventions. And also the cohesion politically, like within Europe and within these like multinational organizations, the cohesion is not there anymore. Like you're starting to see a lot of shifting alliances pretty quickly. I don't know.

Starting point is 00:36:40 It's the same with predicting what was going to be the top of the Bitcoin rally in 2021. How do you know? How do you predict the top of exuberance, right? And it's kind of the same with this. Like, how do you predict when the inertia is going to break? I don't know. How do you know when the forest is going to light on fire and it's going to go from manageable to uncontrollable?

Starting point is 00:37:02 But yeah, at the same time, you kind of have to try at least for your own psychological preparedness. You have to do these exercises, I find. at least. There was a person on Twitter that was asking about hyper-bitcoinsization. And so when we're talking about this, you know, when does the forest light on fire? When does the avalanche actually fall in this very complex setup, right? When you think about a hyper-bitonized world, are you thinking of it as so much of the population has been orange-peeled and they're now using Bitcoin? Or do you think of it from like what, I guess the real question is, is what's the framework you're using to think through, all right, now we're in the hockey stick part of the curve and

Starting point is 00:37:44 things are taking off. To me, the main thing that I look at or think about is just big pools of money converting to Bitcoin. And that usually means kind of a small percentage of the population. It doesn't mean that everybody has kind of like, if you think about Argentina, there is, back in the day, the number was like $50 billion worth of physical dollar bills circulating in the country. I think the last number I heard was maybe two or $300 billion. So that kind of thing where you have like an underground store of value that is maybe not even officially recognized, but that, you know, that's the people used to talk about the offshore, like the offshore industry. And even President Obama identified Bitcoin as like an offshore bank account, right? And so there's trillions of offshore money. And they have tried to crack down on this. But with Bitcoin, it's not even going to be in a physical location. It's not even going to be in a bank. It's going to be multi-sense. over multiple continents.

Starting point is 00:38:41 So it's kind of going to go to the cloud. It's going to, in a way, evaporate from the regulator's point of view. And I think institutional money has the know-how to do this, to manage this to, and then pensions funds will buy into it and insurance companies. And so, yeah, I mean, it'll be this gradual process where the world Bitcoinizes, I think, yeah, there's going to be grassroots bitcoinization. But I think the big ones is going to be once we have that big blowup, of the good old trusted fiat currencies, like the British pound and the euro and the dollar,

Starting point is 00:39:15 like once they become, we get over, say over 50% inflation in a year, who wants to store money in that? Even if it's a derivative, like, oh, it's a bond. It's like, yeah, but it pays out in a shit coin. Like, I don't want that. So I don't know. It's hard to predict, but that's more what I look at. It's like, where's the big money going?

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Starting point is 00:42:47 risks, charges, and expenses. This and other information can be found in the income fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. Is this something that just gradually continues to gain more and more market share? Or is it something that does have a hockey stick type event? Yeah. And there must be multiple hockey sticks. Literally, Bitcoin's melt up is because of the value transfer, right? It doesn't come out of thin air. Like, it comes from somewhere. We have a lot of mark-to-market assets in the world that are overvalued, in my opinion, but so far kind of keeping each other afloat because everybody's in denial, but once they realize that the actual

Starting point is 00:43:30 demand is way lower, well, that's when we see meltdowns. But then that money has to go somewhere, and I think concurrently you get a melt-up in Bitcoin. And it's going to go in phases because certain asset classes are going to break down before others. And, you know, like the, yeah, like the meme stocks, like they kind of broke down and the crypto, the shit coins, they kind of broke down. But there's others that people are still in denial about. So I think it'll be a series of, you know, the cyclicality is going to remain in Bitcoin, I think. Just like how even the meltdown of the German mark was cyclical.

Starting point is 00:44:02 Like it wasn't a straight line either. So you came to Bitcoin. What year and at what price was your first purchase? So 2011 is when I started studying it and then I recommended it in my newsletter to my insubscribers at five euros. technically, five euros in the first quarter of 2012, yeah. Holy moly. We have first time listeners.

Starting point is 00:44:27 We have people that are coming to Bitcoin for the first time. You've been through multiple hurricanes, right? When we think about Bitcoin price action and the volatility, what advice do you have to somebody who's maybe making their first transaction right now? We're at like 27,000. And they're buying and they're saying, hey, all this makes sense. I'm going to buy a little bit of it. I'm going to put it on my balance sheet. I'm going to let it sit there as an insurance hedge

Starting point is 00:44:52 against this chaos that they can understand is happening in the markets. But they're in for a ride. They're in for a very crazy ride. What advice do you have for these people, having lived it for a decade? What can you say to them, Tur? First of all, I know I'm speaking to an audience, so I can't do that, but what I always try to do is listen first. Like, what are people's experiences? What are their doubts? Twitter there. You know, because there's always, this is so different that there's always a particular worries that come up. And I do try to address a number of those in the report.

Starting point is 00:45:27 I think that Bitcoin is one of those things that really you benefit the more you understand it because that's why I've been studying it nonstop is because it gives me, it's so volatile, but it gives me peace of mind to have better understanding. And also like understanding Bitcoin, which you and I'm sure many other people can test. Weirdly, by understanding Bitcoin, you better understand the world as well, just by seeing that contrast of how things can be very different. But then on a more practical level, something that I've noticed resonates with people is when I speak of Bitcoin as a potential insurance policy for your financial portfolio. And if you think about, if you own a home,

Starting point is 00:46:08 you have a homeowner's insurance. Traditionally, you pay about 0.25% per year of the value of the house for the insurance against fire and other disasters. And people accept that. It's a reasonable expense to make. So you can think about your portfolios as similarly, it is subject to pretty existential threats over time. And so you could say like, okay, I'm going to insure my portfolio for 10 years.

Starting point is 00:46:33 So 2.5% of my portfolio, I'm now going to invest in Bitcoin, and that's my insurance against the proverbial house burning down. However, this is different from 10 years ago. Like in a way, the kitchen is already on fire, right? I mean, if you looked at your bond portfolio, it's down 30% something like that in real terms, corrective for inflation. So, of course, the insurance is more expensive.

Starting point is 00:46:58 So in the report, I forget the exact number I use. I think I say maybe like between 5% of your portfolio. You know, if you invest that in Bitcoin like that, that's a way to think about it as an insurance, you know, really solid insurance policy because it's not correlated with any of that stuff. And if anything, it's going to benefit from the instability of the system. Like, money is going to flow into Bitcoin, the more things start looking badly in the world of Fiat. So, yeah, there's a few other scenarios that kind of go over.

Starting point is 00:47:28 But I think it's important to understand why you're investing, right? Don't do it if you feel like you just want to place a bet. Like, just buy some weird new coin if you want to do that or, you know, buy a penny stock or something. But I would just kind of urge people, don't taint your experience. with Bitcoin by having that mentality of like, I'm going to do a five on this rally, like, try to buy it and hold it for at least five years and just kind of see. And then try to figure out the amount that would make you comfortable to do that. Right. I mean, maybe in the beginning, it's very low. And then as you learn more, it grows a little bit. But I've definitely learned to not

Starting point is 00:48:01 try to badger people into buying Bitcoin. Like people come to Bitcoin when they're ready. It's been around for 14 years, but it's also been misunderstood by the media for 14 years. It's, you know, And like, people like Preston have done incredible, like spreading the word and helping kind of educate people and introducing people to not just the technology, but also the kind of people that are deeply involved in this new paradigm. So, yeah, I would say if you listen to this podcast, you're totally on the right track. Like, good for you. Thank you, sir. Just kind of expanding on your comment, so often you find people that get really excited when they first discover it and their position size, far exceeds their competence to match the position size. And because it's so volatile, depending on

Starting point is 00:48:49 where they buy it, sometimes you can go through a downturn and you didn't match your true understanding of what this is with this oversized position. And they get shaken out of it. And so I really appreciate your comment there because people need to, when they discover it, they're all excited. They need to buy a small position, probably dollar cost average is the best way to really kind of remove that situation where you could have gotten too far over your ski tips and you don't really understand it enough to really grasp why you hold through such deep volatility. But yeah, just great advice to her. Right. Yeah, by the way, in the report, we also have a page talking about the difference between dollar cost averaging and lump sum and the different

Starting point is 00:49:32 tradeoffs that come with that because they matter in Bitcoin because it's so volatile. They have different outcomes. Usually I would say people that have a more steady income and younger people tend to do great with dollar cost averaging. And if you're more like maybe you're retired and you have more of a fixed pool of assets, I think that's when you want to look at lump sum and how that works for you. Love that. All right. This is my last question for you. Is there any pet peeve or passion topic that you would love to address right now in 2023? I would say maybe very cliche sounding or, but in a financial context,

Starting point is 00:50:13 kind of unorthodox is just this idea of slowing down and unplugging and like sitting in a chair and reading a book and kind of like doing it the way we did it before the internet. And because I find it just very kind of unnerving how being hyper online tends to destabilize me. And I tend to make worse decisions. If I do that, the ideas I come up with, both for like whatever writing project, but also investing-wise,

Starting point is 00:50:40 they tend to, they tend to be very cerebral and kind of like short-sighted in hindsight. But then when I really unplug and I sometimes go into rabbit holes that seem to have nothing to do with what I should be doing, quote unquote, weirdly there's this meandering thing that then brings me exactly where I need to be in. I commend to these things that are totally out of the box and original and invigorating and exciting. And I don't know, it's all very, I guess I'm saying it because I've been in the Bitcoin space

Starting point is 00:51:12 and this practice has helped me to like try not get stuck. Because also like when you're in your head a lot and you're hyper online, I think that's where you get that unrest. And I think sometimes people get shaken out of their positions just because of that. And then they build a story as to like, oh, no, but this influencer is fear mongering and like, oh, I need to, you know, it's like, okay, well, when you plug out, unplug and slow down, then you have, like, you allow your brain to review the fundamentals again.

Starting point is 00:51:42 Let's go back. Like, you know, let's read some of Bostia, right? Or let's read some of the old school economists or, you know, read some philosophy. So, yeah, and that's part of why I enjoy, like, podcasts and audiobooks, because you can kind of go out of nature and kind of, you know, be part of a, you know, at least in your mind, be part of a conversation that is slow. I love that point. and I need to do the same.

Starting point is 00:52:07 That is fantastic. Well, that's time I'm wherever you were at, we're happy to just go out on a walk and I'd love it. Well, I'll see you next week. I don't know how much time we're going to spend together. Yeah, yeah, let's go to the beach or something. Yeah. Yeah, for sure.

Starting point is 00:52:21 For sure. Yeah, the last year we linked up there shortly with Bill Miller, which was really an exciting picture. What was it? 2017. I was interviewing Bill Sussinger. senior and he, after the interview, he shot me a note. He was like, can you connect me with Tertamister? I was like, yes, I can. And so then we linked up and what we were with Bill Jr.

Starting point is 00:52:44 when we saw each other in Miami last week. Yeah. Honestly, the Miller plan, like, wow, they're like, they're building something for the long run. I'm really impressed with their analysis and what they're doing. Very, very, very steady. Very exciting. I was literally last week in Miami had dinner with Bill Jr. And the first thing he said is, have you talked with Turr lately? It was the first thing he said. So, no, it's really fun. And looking forward to seeing you next week, this was a lot of fun. We're going to have links in the show notes to all of the articles that you've written historically. And Turr, can't thank you enough for coming on for all these years and always just sharing your deep knowledge on this particular topic. Is there anything else that you wanted to highlight or point people towards?

Starting point is 00:53:29 Nothing other than the report is entirely free. I want you to just download it. It's perfect for printing and just sharing it on paper with whoever you want to share it with. It's really, yeah, it was a labor of love and I just wanted to be seen by a lot of people. That's exciting to me. I love it. And we will be sure to share it online and in the show notes. So thank you so much for making time, Tur.

Starting point is 00:53:54 Thanks. If you guys enjoyed this conversation, be sure to follow the show. On whatever podcast application you use, just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week.

Starting point is 00:54:28 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.

We Study Billionaires - The Investor’s Podcast Network - BTC131: Positioning For the Bitcoin Boom w/ Tuur Demeester (Bitcoin Podcast)

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