You're listening to Teip. Hey, everyone, welcome to our Wednesday release of the Investors podcast, where we're talking about Bitcoin fundamentals. On today's show, we're talking to a veteran in the space, Mr. Vijay Boya party. Like our guest last week, Vijay has written some prolific pieces on Bitcoin and why it's a vital store of value right now is great at making complex topics. Simple to understand. So sit back, get ready and enjoy the discussion.

You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Christine Cash.

Hey, everyone, welcome to the Investors podcast, I'm Preston Pish, and I'm here with Vijay Boya party. Vijay, welcome to the show. Super pumped to talk to you. I've been following you on Twitter for quite a while. Big fan of your writing and I know everyone's going to really enjoy this conversation. So thanks for taking time.

Well, thanks, Preston. It's really good to be on the show with you and I've been a fan of yours for a while. Really enjoy your show, actually. I was introduced to your show by my cousin in Australia. He's a huge fan of yours and he told me that I need to speak with you and I'm glad to get the chance. Man, I'm thrilled to have you I tell your cousin I said hello and we're the ones that reached out to you.

So we're excited to have you here. Let's go ahead and dive into this first question. So you've been in the space since twenty eleven. I mean, there's not too many people that can say they've been in the Bitcoin space since that long. So what I want to do you've seen so much volatility. My God, you've seen a lot of volatility. What is your pro tip for people that are just coming into this? Because there's so many new people coming into this space right now.

They're concerned. They don't know what to think. They've watched their investment go one hundred percent in the last six months or whatever. What's your advice for for people that are just coming in? You need patience.

And Bitcoin will teach you patience because the gains that are there that appear to be had, I think this is the most important innovation to money in a thousand years and I think are tremendous gains ahead. But you're only going to get these gains if you have patience. And I think that the people who have seen this is sort of just a trading opportunity have been the ones who have missed out on these huge gains in 2010. When you look at people in the early years who got hold of Bitcoin at a few cents and then sold it a dollar and they were like, oh, wow, that was great.

I made five 10x on my money, but they missed out on this massive bull run. And what you'll see is that people who made the biggest gains over that period of time were the ones who had deep conviction in the importance of this technology. And in the early days, it started out as ideological conviction. This is something that can change the world. This is something that can make the world more free. And I believe in that. I'm not going to let go of that.

So I would say if you're going to get into Bitcoin and you believe that you're doing it for financial gains into the future, you really need to have a lot of patience and conviction. So I think that it's so important for a person who doesn't have the conviction and I've had this conversation with a lot of family members, friends, I tell them if you don't have a lot of conviction, you really need to manage this emotional rollercoaster with your position size and keep it very small up front.

What are some of your thoughts on that? Yeah, that's great advice, and there's this famous story about an investor who spoke with a very experienced older investor and said, I've got this position, it's doing really well, but I can't sleep at night. What do I do? And I think the older, wiser investors story goes with JPMorgan. I'm not sure I remember the exact story, but I think with JP Morgan and and if that's correct, JPMorgan said sell down to the sleeping point selldown to the point at which you can handle it.

If you can only handle one percent of your portfolio in Bitcoin, that's fine. There's nothing wrong with that. I don't think your position should be zero, though. I don't think that makes any sense in this day. After 10 years and everything, we've learned to have a position of zero in the most important innovation to our financial system, to money in a long, long time. But one percent could make sense for a lot of people. And again, it depends on your age, your risk tolerance and various factors like that.

If you're feeling sick, if you can't sleep, settle down to where you can sleep. Yeah, I think that's great advice when a person looks at this space. I think that the immediate reaction is there's just so many points, like I think your typical person is going to log on to market cap and just look at all the coins that are there. And they're saying, how do I know Bitcoin versus these thousand other coins that are out there?

And then they're talking to their friends and they're one of these thousand other coins out there, in there in there's a lot of noise in the space. So how would you address that for somebody who's who's just coming in and looking at that situation? Great question, and it's a very natural issue if you come in and you're not familiar with the space, you haven't really thought about network effects, you haven't thought about winner take all technologies. You haven't thought about these issues.

You come in and you're like, wow, I could buy the cheap one in the cheap one is Ivano. Name one of the all points that are out there. I think with Bitcoin, I sort of see it as this unique innovation or revolution to money. And it's something that happens once every thousand years by the minting of coins or the development of promissory notes or something like that. And when it came about, Satoshi solve the critical problem in computer science, which is to invent digital scarcity before Cistercians invention.

We all sort of understand the idea that when you put a picture online, it's really easy to copy. When you write words online, it's easy to copy. Someone writes a book, it can get pirated easily or music can be pirated. Satoshi figured this out that you can create something that's scarce and digital, which is a profound, profound innovation. And then other people came along. They said, hey, he solved this problem. I can just copy his solution.

Copying doesn't give you the same thing. I think that's a really important idea. All copying does in my mind is illustrate what the original is, where the real innovation is. And I think of it kind of like the Mona Lisa. There's tens of thousands of copies of the Mona Lisa. But all of these copies just illustrate that there's only one real Mona Lisa or cause, for instance, you can copy a Ferrari and make a cheap facsimile of a Ferrari.

But there is only one brand for your cheap facsimile isn't a Ferrari, and people are not going to treat it like Ferrari. And Bitcoin is the Ferrari of crypto currencies. There's only one. And I think this is a winner take all market. You don't see that right now because it's going to take time for the market to figure that out. But I think in time the market will figure it out and I think it'll figure it out as institutional money comes in.

So when you said it's the Ferrari, what attributes make it the Ferrari? I think because Bitcoin is a new form of money, it's superiority is not related to its technological attributes. That's one of the big mistakes that people make when they come into the space, is that, hey, there's this new one out there and it has these new bells and whistles as a monetary good. Bitcoin competes on its monetary attributes and it competes against all the monetary goods like gold and fiat currencies on the attributes that we know make for good money.

And we've known for thousands of years since the days of Aristotle, scarcity, fungibility, portability, verifiability and bitcoin excels across all of these attributes. And really, I think the most important of these attributes is scarcity isn't scarce or is it not something that's abundant, doesn't make good money. So sand is not good money. For instance, you can find Standard Abeche, the super, super abundant commodity. And this has been known for hundreds of years as well.

Good money is always scarce. And really what matters is can I believe in the scarcity of Bitcoin? This is a new digital good that's being created through the invention of Satoshi Nakamoto. Does the monetary policy of Bitcoin, it's finite supply, which we know is at most twenty one million bitcoins doesn't have credibility. That is the key aspect that I don't think any other cryptocurrency has or is even close to. They're not even in the same ballpark. I don't think they have any credibility.

And would you say that that's the case because of the security that Bitcoin offers relative to all the other alt coins, the decentralization and the security? It's a combination of factors, certainly the decentralization, the balance in which different powers within the Bitcoin ecosystem sort of trade off against each other. No one really controls Bitcoin. There isn't the same sense that you have in all the crypto currencies. If we step back, the vast majority of crypto currencies could be turned off by one or two people.

They are not decentralized at all. They're really no different to someone running a computer on Amazon Web Services that issues tokens. It's kind of decentralization theater. It's not real. I mean, if you look at the second largest cryptocurrency, Ethereum, it's credibility or whether it's decentralized or not has being completely shattered from the beginning. They they had a problem with one of the contracts that was issued on Ethereum, which allowed someone to hack the contract and steal hundreds of millions of dollars.

And they said, hey, let's just roll this back. Let's make it so this never happened. That's not something you can do in a truly decentralized system. And if you want to aspire to a monetary good, you really want to aspire to be something like gold. Do you imagine that if someone stole some gold from a bank, there is no central authority that can say we're going to win back that theft and that theft no longer happen because if that was the case, you would no longer trust.

Gold is something that if you had it, you really had it. There would be someone else who could take it from you. That's the problem I see with the theory. I think it's sort of theater that it's decentralized. I think it has a huge problem and it has a founder. It's another issue. It's a computer and has enormous influence. Whether he says he has no influence or not, he clearly has enormous influence in shaping priorities for theory.

And where development happens, decisions that are made in that community. That's an that's another thing I think Bitcoin excels at is it had this immaculate conception. It was invented with this brilliant insight from Satoshi Nakamoto and then he disappeared. And it's very likely we are never going to know who Satoshi Nakamoto is. He left us with this gift of a new monetary good that can change the world. And then he left. Having a founder or group of founders around is a pressure point.

It's a point at which states can come along and say, we don't like how this is going. Can you change it a little bit or could you add in a back door that reverses certain payments that we don't like? And perhaps in some cases those kind of illicit payments are bad, but the power that you give a government is a very, very slippery slope. And I think Ethereum is already well down that slippery slope and there's no way to get back from it.

You know, it's interesting that you talk about not being able to roll back a transaction, because I think for somebody to be entering the space for the very first time and getting interested in it, they're looking at, well, somebody stole my credit card and I was able to get the bank roll back the payment and I was able to get my funds back in that situation. That's that's pretty much what any person would want. But when you're talking about Bitcoin and you're talking about something that's at the foundational level of measuring all monetary transactions around the globe at a foundational level, I think you're exactly right where you say it needs to perform just like gold, where either you have it or you don't have it.

And if you don't have it, it's not like you can reverse that transaction, at least at a foundational level. Now, when you get into the second, third, whatever layer you want to talk about, that would be put on top of this, where we're talking about transactions going and buying coffee and whatever unit of account that you're using in order to conduct that type of purchase. I can see how a person would want something like that, that small level purchase to be rolled back.

But when you're talking about something like this and we're talking about billions of dollars that would be exchanged maybe between central banks someday or whatever it might be, it needs to be finalized. It needs to be complete. I see you nodding your head. I'm assuming that you agree with with what I'm saying there. I'm curious if you have any additional points on that. Yeah, I think what you say is absolutely correct, and I think this sort of stems from modern misunderstanding of money, which is people primarily associate money with payments and it's transactional use, the medium of exchange role of money.

Money also has historically a store of value. People keep their savings in money. And and when you think of payments, there is some utility to be able to roll that transaction if someone's scamming you. But with savings, you really don't want people to roll back your savings. You don't want people to roll back your savings to inflation or through confiscation, which are the primary ways that nation states have rolled back savings from people. The idea that you can have savings that cannot be debased and that you can transport without anyone's permission is the pillar of Bitcoin's value proposition.

It's a great the best, in my opinion, savings technology that has ever been invented. So, yeah, this is this is a problem that's existed since the beginning of Bitcoin, where people really focused on the payment and medium of exchange of money and completely forgot the the savings aspect. And I sort of link that to a failure of economics in the last century where the economics profession really got in bed with governments and said what governments wanted, which is get print away.

It's good for everyone. No, it's not. It's terrible. It's terrible for savers. And so economists, the modern economic establishment has focused on the medium of exchange role and they've completely ignored and debased the savings aspect of money, which is why modern economists always prefer gold. And if you ask them why is gold still so valuable? They don't have an explanation. They don't have a coherent explanation for why gold is valuable. No one's using it to buy anything but why Bitcoin is valuable.

Very few people are using Bitcoin to buy anything right now because they don't understand savings. So I want to pull on this thread a little bit because this has been a really popular topic lately. This Bitcoin versus gold and gold did really well at the start at twenty twenty. And then in the last quarter it has just fallen apart. And coincidentally, the last quarter Bitcoin has gone on an absolute tear. And so there's there's quite a bit of emotion in the community because you find there's a lot of people that are Bitcoin owners that are also gold bugs.

And you can see some some infighting amongst the two. So I'm kind of curious to hear veejays opinion on gold versus Bitcoin. Well, I have to confess, in that battle that is happening in my own heart, A, I'm a reformed goldbug myself and I do own goals and it's it's a really nice thing to hold. And perhaps it's part of my Indian heritage that I it's in my DNA that I loved all. But I definitely recognize Bitcoin's superiority.

And I think one thing that's interesting is that in the family of global financial assets, Bitcoin and gold are actually very close cousins, that both non sovereign monetary goods that are valued for their monetary properties. And this is something that I've written about on Twitter. Despite this similarity, they're very, very different distributions of ownership. You look at the ownership, distribution of gold, and I think this is quite ironic that central banks are in a very, very large fraction.

A large fraction is owned by Indians as jewelry, which is kind of a store of value, use of goals like keeping your savings on your neck or on your as a bracelet on your hands. And then there is some investment use which is dominated by ETFs like Gilardi and various other funds which invest in gold Bitcoin. On the other hand, the ownership distribution is it's skewed much younger and much more technologically savvy. And quite a lot of the bitcoin out there is still owned by relatively few people.

I'd say maybe tens of thousands of people over like 30 or 40 percent of the supply. And those people who decide to cryptographers, people with an ideological affinity for Bitcoin, who are libertarians and so forth, and they're all much younger. I'd say the average age is probably in the 30s or something like that to me raises a question as Bitcoin is going through this process of monetization and the total pool of world savings moves into Bitcoin. Is this going to affect gold that we're going to see some of the savings that are in gold drain out and ran into Bitcoin and especially in this next coming bull market, as Bitcoin really gets into geopolitical significance in size, which to me is beyond a trillion in market cap.

And I think that gold whole source of demand from central banks and from people who use it as a store of wealth and jewelry in various parts of the world is not going to move into Bitcoin in this cycle. I think the all the third major source of demand family offices and rich individuals and so forth, I think you will see some movement from them. So some of the savings will move from family offices, for instance, into Bitcoin, out of gold, because I see Bitcoin as a much better asymmetric bet that the core foundation of gold standard I don't think will change for I think quite a while.

It may be subsequent cycles once it really is established that Bitcoin is here to stay permanently. In my mind, that's something that takes a couple of decades. It started going a little tangent here, but if you think of the Internet after the Internet had been used for about ten years, which was the early 2000s, by my reckoning, people were like, OK, this is cool. This might be important, but they didn't really understand in the early 2000s how profoundly important it was going to be to take another decade and go into 2010, 11, 12.

It's obvious the Internet was transforming the world and I sort of see the same thing for Bitcoin. It's a decade old. People are starting to get an inkling, hey, this is kind of important. It might change the financial system. We don't really understand how, but it's important given another decade, if this thing is still around and I strongly believe it will be, people are going to think this is a permanent institution of the modern world. That's when you get massive flows of savings moving into it, nation states and sovereign wealth funds and things like that.

That's when you going to see movement from from the big boys.

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All right, back to the show. You know, last week on Squawk Box, they had I don't remember the gentleman's name, but I know he was the CEO for fixed income at BlackRock. Seven trillion dollar assets under management organization, which is a number that's so big it's unfathomable for the most part for an organization, a centralized organization to have so much capital under management. And his comment on Squawk Box was, yeah, this is this is a thing that could replace gold in your portfolio.

I'm kind of curious if you think that maybe this is happening faster and will that narrative that we're already seeing playing, we haven't even hit a new all time high yet. And you're already seeing people of that level. They are having these conversations on Squawk Box. And I mean, it's the last two weeks these conversations have been happening just prevalent on every single hour of programming. So I'm kind of curious, do you think that the news cycle could blow this into a level that maybe we're not even expecting or that's way more bullish than we're expecting?

Yes, and I am honestly, personally surprised that it's happening as quickly as it is. I thought this cycle might take longer to play out, but I'm I'm getting inbound requests from funds, managing money to speak to the senior partners to give them an explanation of Bitcoin because there's internal interest. I thought this cycle might take a couple more years. There are models out there which say we're moving exactly according to schedule. I've always been cautious about those kind of things because I am extremely bullish about Bitcoin in the long term.

I sort of look at a time horizon for how what's the world going to look like for my posterity and my kids, my grandkids, whatever that kind of time horizon, I'm very, very bullish. But I don't make strong predictions in the short term because I honestly don't know. But I am surprised how quickly things are moving and how quickly large and influential investors are getting interested even before we make new all time high, as you say, which I think is critical because we've seen these cycles play out before.

They they really look like a fractal pattern of increasing magnitude. So we've seen this exact pattern happened in 2011 to 2013 and from 2016 to the end of 2017, this exact almost superimpose them and they look very, very eerily similar. So the point I'm trying to make is I don't believe the real frenzy of interest begins until we make an all time high, because once when we do make an all new all time high, that's when the media gets interested and that's when everyone starts to talk about it.

And people at these major funds are like, well, I might look bad if I'm the last one on this ship. So maybe, maybe I should start looking into this thing. And that's really accelerated by media interest because you don't want to be the fool who didn't get your fund invested in Bitcoin. When all your buddies are making 30 or 40 percent in a year and your returns are like S&P, which is like maybe five percent, maybe it's a bad year and it's negative five percent.

So I was having a conversation with Raul Powell, and he made that exact point that you just said, which is now you've got all these fund managers that are green lighted to put this in our portfolio because you have the pulpit or Jones, you now have Stan Druckenmiller saying that they've got positions in it, amongst others. Ray D'Alessio as well. He's got a position that I think is a critical turning point, you can see in him that he's curious and that's that's a very important point when someone goes from being skeptical to curious and you are seeing that in a lot of prominent fund managers.

And so all the fund managers that would be classified underneath of all these literally celebrity level fund managers, you're going to start to look a little silly if you don't have some of this in your portfolio. So then it starts compounding on itself that everyone has to have, you know, a one percent exposure or whatever the case might be. That porking narrative that runs around Wall Street that we all know runs prevalent at some interesting stuff. I'm kind of curious about your framework for for valuation.

Talk to us through your how you think through that. I've been interested in Bitcoin a long time, as you mentioned at the start, but it was mostly from interest as an economist, which is how does this have a price at all? How does it have a market price? And I recently started thinking a little bit more about valuation frameworks and how institutional investors might come and look at this thing. And I wanted to think about what all the valuation frameworks that are out there and be kind of agnostic to which ones.

Correct. Just descriptively say what they are. And I came up with four main valuation frameworks that I've observed over the last nine or 10 years looking at Bitcoin. The first one is the most obvious one that everyone comes up with, which is this is a chocolate mania. This is this is a crazy bubble. It has no value, has no comparative advantage to any monetary good that exists or to the current financial system. If you were to believe this valuation framework, you decide on a long term target of zero Bitcoin.

That's kind of the Peter Schiff, Paul Krugman, Nouriel Roubini, valuation premo. If you've never been able to detach themselves from that initial skepticism, turning into curiosity as it does for people who are a little more open minded, the second valuation framework is that, hey, yeah, this is cool. This is a new technology. We haven't seen anything like this, but it really has limited interest. It's it's for people who are ideologically minded like libertarians or people who are very technologically savvy.

They they want to have some savings in a digital goods, but it's not for the average person. There are still a lot of savings held by those kind of people like you look at Silicon Valley is a tremendous amount of savings in Silicon Valley. If would believe this valuation framework, you'd also believe that Bitcoin is going to be inherently volatile because it's still a small base of users. And as funds flow in and out, it's going to go up and down in price quite a lot.

If you believe this valuation framework, I think you would assign a price target to Bitcoin somewhere between ten thousand and one hundred thousand. It's interesting, but it's not it's never going to be geopolitically significant. The third valuation framework is that this is a direct competitor to gold. It is doing the same thing that gold does, but in a much, much better way. And and the market is eventually going to recognize that the properties, monetary properties that make gold good for savings, make Bitcoin great for savings.

And if you believe this valuation framework and you look at the market capitalization of gold and you probably assign a price target on Bitcoin, somewhere between three hundred thousand is kind of comparable, bit lower than gold to about a million, which is OK. This is gold, but it's kind of better than gold. And the final valuation framework, I think, is that this is going to be the world's reserve currency eventually, and it's going to take the role that gold had in the 19th century, which is it is the dominant means of savings used by nation states around the world and large savers around the world.

It's the final means of settlement between banks, large bank banks and financial institutions around the world. And everyone will price everything in Bitcoin. You'll go to the local grocery store and loaf of bread will be one hundred cities. If you were to give this valuation framework, you would assign a price target to Bitcoin somewhere. I think between 10 million and more than that, up to maybe one hundred million, because if it becomes the world's reserve currency, I think it's going to drain monetary premiums out of all of the goods that are being used as a store of value.

I'll give you one example. You think about real estate in Vancouver, B.C. In Canada, there are a lot of people in China who have some level of concern about big government and they want to have savings outside of China. And so they they buy houses in Vancouver. It's a place which is kind of welcoming to Chinese capital. And you have all these houses in Vancouver which are empty, being used as a store of value if you have something like Bitcoin.

So it's role and is far superior to owning a house in Vancouver because you can go anywhere on Earth with all your money in your head. Just need to remember your sidewards that's going to drain the monetary premium out of things like real estate in Vancouver. It's going to drain it out of rare art. You're not going to use real as a store of value unless you really value it for the artistic purpose, for the store value roll. It's going to at that premium is going to be drained out.

And there are a lot of different goods like that which have a store of value premium and they're all going to be trained in Bitcoin. So it's a price level could get really, really high. If you believe that framework. I think we're currently somewhere the dominant narrative is somewhere between two and three. We probably have narratives, too, but it's moving towards three. That is OK. This is this could potentially disrupt golf. It's not just a technology limited to people who are interested in Silicon Valley.

This looks like it's going to disrupt golf. So I think we're in a kind of transition period. And Bitcoin's Bitcoin's market capitalization is a reflection of how that transition is happening, how quickly that transition is happening. Earlier, you were talking about fractals and you were talking about the price looking like a near comparison of a fractal from years previous. What do you think is driving that and what are some more thoughts that you have on that idea? I think it's one of the most interesting things I've seen as an economist, as an Austrian economists, we sort of believe that price levels are determined by human action and there's no inherent statistical pattern.

Everything is could change based on how people act and react in the current moment. But what we see here is it looks like it's part of the social dynamic of monetization, that it happens in this kind of s curve in a way where you have these early people who come in and who have conviction that this is important and it starts the price starts moving up slowly and then people get interested in it just because the price is moving up. And then eventually you get this feeding frenzy and crescendo with the price explodes and then you have the lost person then getting just because they're trying to make a quick profit and you run out of those people in a given cycle and it crashes and then it happens again.

And the thing I find most fascinating is if you look at the chart of gold from nineteen early nineteen eighties up to 2010, it has the exact same pattern as Bitcoin in any one of its hype cycles. So to me, this is an inherent part of the social dynamic of monetization. And it's interesting also because people criticize Bitcoin for being volatile and having these like booms and busts. But you can't go from something being worth zero to being a global reserve asset in a straight line.

It's just not possible. And it's interesting as an economist and a student of monetary theory, to look at this and say, hey, this happens in a pretty regular way. We never would have known this because we've never seen a good being monetized in real time. Gold was monetized over millennia, took thousands of years. But this is the first time in history we get to observe this in real time and we're learning something. We are learning that monetization happens in a particular way.

So do you buy into the idea that the four year having event is the thing that's driving the initial price surge because there's less boyens on the market? Absolutely, I absolutely do. I think that is the most important, if not the only factor that's involved here, which is that when you get a halving the supply of coins that are being that come to market, miners are the ones who are the natural sellers of Bitcoin. They have to sell it because they're marginal producers and they have electricity costs and they have to pay for those electricity costs.

When they get Bitcoin, they have to sell it. And when you get to the halving that the selling power is halved, but the demand stays about constant and the supply of bitcoins that come onto the market is slowly siphoned off, the number of bitcoins is siphoned off in the hands of people who have strong conviction. And once that supply of tradable bitcoins is siphoned off, the price can only explode higher. And I think that's what's happening right now.

You're having accumulation of the tradable bitcoins really dropping the supply a lot. I think below twenty thousand is no more than a few tens of thousands of bitcoins available to be bought. So if you think about Michael picking up thirty eight thousand bitcoins, I don't think any of the big buyers who the shocks who are in the water have the chance to pick up anywhere near that without massive slippage in the market, which is pushing the price much higher. The window of opportunity to accumulate has essentially gone.

And we are now getting close to the parabolic phase of the bull market where when you make a big purchase of Bitcoin, you're going to dramatically move the price up. So recently, we've seen an enormous amount of bitcoins being pulled off exchanges, and what's so ironic about this is if you go back to the twenty seventeen bull market, when it ran up to twenty thousand this recent one, I would classify it as not being as aggressive as the twenty seventeen because we really kind of came from a thousand up to twenty thousand.

But back then you still saw a ton of bitcoin sitting on exchanges as if people were like, OK, I'm going to potentially sell this, I might keep holding it. I haven't really decided what I want to do, but I want to have the flexibility to do it quickly for whatever reason or whatever. I come up with how I want to respond. Right now, you have the exact opposite happening. You have people it just ran up to twenty thousand people are pulling their coins off the exchange like crazy.

What's the difference? What's happening? Yeah, the coins moving onto exchanges is kind of a measure of weekends, I don't want to use that disparagingly. I want to use it more technically as people who are in Bitcoins, who have seen massive appreciation, those bitcoins, they're inherently weekends because you imagine someone who is in college or was mining Bitcoin in 2010, for example, and they have a few thousand Bitcoin. They've seen their net worth go from zero to potentially millions of dollars, life changing money for them.

And it's very, very hard to resist the temptation of selling and improving the lifestyle. And so I think what you saw in twenty seventeen, when the supply of Bitcoin was really much more concentrated in the hands of a few thousand people is you saw a lot of those people thinking, I need to cash in on this, I need my house or I need my Lambo or whatever it is that they needed. Whereas what you're seeing in this run is strong hands.

The same people come in and say, I believe in this thing now and I want to get a position and I'm patient. I'm not a retail investor. I'm a fund or someone like Marco Saleha who comes in and sees this and thinks this is the best form of savings it's ever been invented. I'm taking a position I'm not looking for 20 percent out of this. I'm looking for like a hundred X before I even consider selling this thing. A tell everyone who Michael Saylor's, because you and I know who he is.

Anybody that's on Bitcoin, Twitter knows who he is. But there's a lot of listeners of our show that are traditional value. Investors are hearing the name. They don't know who he is. Thanks for the reminder. So Michael Steele is the CEO of a public company called MicroStrategy, which has been around actually for quite a while, two decades, and the company itself isn't particularly interesting. They do data analytics and they have their niche market and they're doing well.

They're still around. But he has this history of making unconventional bets. He already had kind of an understanding or affinity of the importance of digital scarcity. Somewhere in his career, he had bought a domain name that for 50 dollars or something like that, and he sold it, eventually sold it for 30 million dollars. And so he had some understanding that you can get value from digital scarcity in the form of domain names. So he was already somewhat primed to understand Bitcoin and his company is sitting on this large pile of cash and he's thinking, well, this cash is being inflated away by the Federal Reserve, which is printing record amounts of money.

Should I be holding cash? If I'm not going to hold cash? What am I going to hold on gold? Am I going to hold all the stocks, bonds? What do I do here? And he came across Bitcoin and he really went down the rabbit hole on this. And and he decided that the best thing to do for his company was to take a large stake in Bitcoin that reserves the company reserves would be in Bitcoin. And he made this decision maybe a year ago.

It took some time for his company to execute on this, to win over the executives in his company. And they put on a massive position. They bought, I think at the time, five hundred million dollars worth of Bitcoin, all of the Treasury Reserves and those reserves have since doubled in value. So it's another opportunity for companies out there if they have companies like Google and Apple, which have massive reserves, if they want to allocate some of them to Bitcoin, that's going to really move the price a lot as well.

I think it's important for you to also highlight that he doubled his money, but it was in one quarter. Even before the value of those reserves increased, the value could stop just because the stock market thought it was a good bet. And eventually you could imagine that if Bitcoin goes through the bull market is significant is the lost one in terms of the multiple that's assigned to it. His company essentially becomes a Bitcoin holding company. The business, whatever their business is, becomes irrelevant and they become a stock ticker for Bitcoin.

They could change their stock to get a BTC or something like that. And I think other companies, typically the smaller companies which are nimble enough, flexible enough and don't have as much red tape, who can make these quick decisions. And in a subsequent cycle, once this gets to the level where nation states will be looking at Bitcoin, the same thing applies. It'll be the small nations which are nimble and I think somewhat unfortunately, it will be the the tin pot.

Dictatorships and autocracies in countries like North Korea will be looking at positions before the Western democracies do, because there's so much bureaucracy, there's so much dithering. It's such a difficult process to to move a democracy, to deciding something like this. It's important that unfortunately, the First Nations that are going to jump on the bandwagon are going to be the worst nations of their. So, Vijay, talk to us about this idea of psychological process of monetization. What does this mean?

This is a this is a term that you've coined. What I call it is the number of touch points, the number of times that it had to have heard about Bitcoin before you become curious about it or interesting enough that you're willing to allocate some savings to it. And I think it's part of the psychological process for an individual to get involved and to invest. And we know that Bitcoin is being monetized in a series of cycles. And what I think I've observed is that each cycle is kind of defined by a cohort of people who are reachable in that cycle.

So the first cycle was the computer scientists and the cryptographers who really understood Bitcoin significance even in the very earliest days, because they'd be thinking about this problem before for decades. But even amongst that cohort of people, there were some people who were skeptical of Bitcoin and they had to hear about it multiple times before. They were like, OK, actually this is important. This is significant. It doesn't have any holes. I'm going to invest in great Maxwells, a funny example of someone who wrote a story and said, this can't work.

And he's now one of the most prominent developers of a Bitcoin. The next cycle was people who had that ideological affinity and early investors, libertarians and people who saw the freedom potential of Bitcoin. And then the next cycle was sort of early adopters and early hedge funds and things of that nature. But the observation I make about this is that some people need to hear about something like Bitcoin multiple times before they pay attention. To me, it was twice and it was lucky for me it was twice.

I'm usually pretty slow with these kind of things, but it was two people I really trusted and they were planting ideas in fertile ground with me. I was a libertarian, I am a libertarian. And so I saw the potential of something like this that someone like my mom, she's probably going to have to hear about it from 10 or 15 of her friends saying, wow, bitcoin is really amazing before she thinks, hey, everyone around me is talking about this.

And one of the important points about this psychological process is once Bitcoin gets into the head of an influence that they have inordinate impact on the cohort of people around them. And one person I like to think of is Russell Okung, who's an NFL football player who got interested in Bitcoin a couple of years ago, and he's constantly tweeting about it, constantly tweeting about why Bitcoin is important. And he's followed by a bunch of other NFL players who are like, oh, Russell is talking about what is this thing?

What is this thing? And then maybe I hear about it from someone else or one of the wife's friends. Say something about it. For different people, it's going to take a different number of touch points before they become interested. And that's something that I find particularly interesting, that some people will pick it up really quickly and some people it'll take a lot of prodding and hearing other people doing well before they become interested. And some people want and become interested because they have an ideological problem with Bitcoin people like Paul Krugman, they don't want to see Bitcoin succeed.

So acceptance that maybe it is an important technology and a revolution to money is not something they can affect without attacking their own personal identity.

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Talk to us about your opinions on Prating, because I think you have some really valuable thoughts on this. I really am concerned about people who start trading gold coins, and I worked at a company in the 20, 16, 17 bull market and I saw it was a company with a very young average employee age. And I saw a lot of people get interested in Bitcoin and then start chasing returns in all coins. And I had seen this before and seen people lose all of their money trading gold coins.

People didn't listen to me and was really sad. I don't like seeing people get hurt coming into this space and seeing what I think is the greatest innovation to money and then losing all of their money because they get sidetracked down this dangerous path. I think when you think about trading all coins, thing that's most important to understand is that there is an opportunity cost to trading them versus just holding Bitcoin. And if you're going to trade one of these all coins, ultimately most people who are trading them take their profits and hold them in Bitcoin.

The problem with doing that is when you try to coin successfully and you make profit, that profit is taxable. So you're already losing, if you're successful, 30 or 40 percent of your gains. And then if you adjust it for risk, the risk of these coins is much, much higher. It's very, very hard to profitably trade factoring in taxes and the and adjusting for risk. It's very hard to outperform Bitcoin. And my rule of thumb is, if your trading all coins, you really need to think about it as I have to be doing Kennex five to 10 bucks better than Bitcoin for this to be worth it, because this is much riskier.

And when I make when I take my profits, I'm going to lose a big chunk of them to taxes. And I think probably of the people who are trading on coins of miniscule minority actually doing that, making five to 10 bucks, some of them may be making say, I don't know, 50 percent more than Bitcoin jumping in and out of positions at 50 percent and drops to 20 percent more than Bitcoin. When you think about it, you're trading these crazy volatile coins that may disappear and you're making 20 percent more than Bitcoin.

That is absolutely insane. You should not be doing that. I always tell people that tell me who the buyer is on the other end or tell me who the seller is that's going to give you the drop that you're going to then buy back in. And of course, there's no way that you can tell me who that is and you can't tell me how much money they've got to. So when people on this most recent run, particularly Bitcoin, it was running up and I had a couple people reach out to me and say, I think I'm going to sell right here.

I'm going to buy back again after it drops 10 or 20 percent. And I'm just like, well, who's this seller that's going to make the price move down by 10 percent that you just know is going to be there? And of course, it's just total silence. Right. And maybe there's a buyer that's going to step in tomorrow and bid the price seven percent or whatever it is. And without knowing that or having an appreciation for that's how the big moves kind of take place, is you have a whale or a group of, you know, people with very large amounts of capital moving that.

How in the world can you predict something like that? I just it just blows my mind for people to think that they can trade that or that they they think they're seeing some kind of pattern that I don't know, it just doesn't make any type of sense to me. And especially after you account for the capital gains tax that you that frictional barrier that's there. I just can't wrap my head around that thinking. I think that's a really great point, and it reminds me of a very famous bull in Wall Street called reminiscences of a stock operator, where there's a famous old investor called Mr.

Old Mr. Partridge in the early 20th century. And he gets a tip from someone who really loves giving and taking tips that have particular stock is going to draw. And Mr. Partridge, thanks for the tip. And smiles and goes on his way the next time it drop. Did you did you sell and buy back to your position? You said absolutely not. He said, why? I give you a tip? And it worked. And he said, I would have lost my position and I need my position when it's a bull market.

That is what it comes down to. You're trading in and out. You're losing a position in something that is going to give you tremendous gains. Warren Buffett did not make his billions from trading in and out of the stocks. He saw something was valuable. He got a position in it, and he held it for a very, very long time. And the world's most wealthy people all make their money that way. They hold on to something for very, very long time that becomes massively valuable.

Talk to us about people not allowing self custody of Bitcoin and how does this not lead into a rehypothecation nightmare similar to gold? It's a problem. It's definitely a problem I'm not going to deny. I think they'll be forced by pressure eventually, but I think it will come down to education, to the people who buy bitcoins on PayPal. At first, the people who buy Bitcoins and PayPal probably are not particularly savvy. They don't really understand what they're buying or what they're doing.

But some of the large buyers on PayPal are going to eventually want to get a clue about what they are. And when it doubles or triples in value, they to stop paying attention and they'll go down the rabbit hole as well and understand this is something that gives me out to be self sovereign over my savings. And I want that power and I want you PayPal to let me have that. And eventually PayPal is going to have this natural lobby of people who they use it saying, give this to me or I'm going to sue you.

And really they accustoming funds for other people. They don't own those funds. I see. The fact that they're not letting people withdraw right now is the immaturity of the technology. They're coming into a space. They don't really understand how to custody and how to handle withdrawals and deposits in that kind of thing. So they're taking the most conservative approach, which is fine for them. But in the long term, they are going to need to serve their customers interests or their customers are going to move elsewhere.

How do you see the whole loaning and rehypothecation working in the future? I don't have as much of a problem, I think, as other people in the space about that, I think it's much harder to run a fractional system on Bitcoin because it's much easier to reclaim your Bitcoin or ask for a withdrawal. So bank runs, when they happen, happened much more quickly. I think if you look at the 19th century out of what allowed banks to get away with this, it takes some time like you have to figure out that may not have the gold.

You have to run down to the bank. We live in a digital world. And if you're running a fractional reserve and if there's any hint that you're doing something dodgy, those funds are coming down immediately. Your credibility is shot within an hour. And I think that's going to keep the fractionalization well well in check. So I'm not I'm not really concerned about it. I think there's always going to be this pressure of people wanting to take the coins off exchanges and out of these services to self custody, which is going to keep this this in check.

I'm willing to say that I could be wrong about this, but it's not something I'm concerned about yet. Do you think it's something that could evolve into a company having to show some type of public proof of how much has been hypothecated, do you think that becomes like an industry standard? Yeah, absolutely, I think the standards that are going to be applied to financial institutions when they're built on honest money is going to be much, much higher than it is now.

So here's a question that we got from Twitter. Somebody asked, how do we defend against Bitcoin being required in FBAR? Tell people with FBAR is and what they're getting at here with the question. As far as a US regulation, that if you have a financial account outside of the US and you have any more than ten thousand dollars in any number of financial accounts outside of the US, then you have to disclose all of your accounts, your account number, the address of the account.

The bank name always gets very, very intrusive. And it's particularly scary, especially for anyone who has dual nationalities. They're not doing anything wrong, but they have like a bank account and I have a bank account in Australia. I'm not doing anything wrong. I'm also an American is very intrusive. And it is a concern that this is a path that governments are going to go down, which is requiring people to disclose their holdings. This I see as one potential so small scale that nation state attack the large scale ones that just outright banning Bitcoin and saying we need to shut this down.

It's bad for the nation. A small scale one would be to get people to disclose their private information about their savings. To me, this question comes down to there's a race and the race is whether Bitcoin gets a large enough group of motivated but motivated lobby of people who are willing to defend it and to to lobby for it before nation states see it as a threat and start attacking it. And the example I like to use is Uber, which is kind of goes into marketplaces and disrupts them.

And it's almost immediately attacked by an entrenched interest, which is the taxi lobby. But because of the speed it goes in and it has drivers and it has users who become a natural lobby for it. And Bitcoin has the same thing as the people who have savings in Bitcoin, who are natural lobby. And what you need in the Western democracies is you need a large enough pool of savings distributed among the population for the population to be a strong enough lobby to prevent the state attacking Bitcoin.

And that's an open question whether this race will go one way or the other. I am hopeful and optimistic that Bitcoin is going to spread faster than the people. The enemies of Bitcoin will have to recognize it's a threat. There is a slight inkling already that Bitcoin could be a threat to the status quo and to the central banking system. There was an article in The Wall Street Journal a couple of years ago which said the real threat here is not the Bitcoin crashes, but that it actually keeps going up because in central banks lose control of monetary policy.

And it looks like that's right on. That's that's a good thing. But it was that recognition that, yeah, if Bitcoin does become a dominant means of savings, it really restricts central banks ability to inflate because what they're inflating is the pool of savings in a country. And if that pool of savings flows to Bitcoin, they don't have control of monetary policy anymore. So this is a good point for us that to get into this, so talk to us about the risks that you see for Bitcoin right now.

So in the beginning, I think the first and most important risk was political risk, which is this is a new technology, new monetary good that's built on cryptography is the cryptography is a computer science that it's based on even sound. And that was an open question, honestly, for the first three or four years of Bitcoin's existence. And people would banging on it, trying to hack the network. There's never been a successful hack of Bitcoin any meaningful hack.

So it's by now, I think there's pretty much any unanimity in the amongst cryptographers that this is sound cryptography and it's not going to get broken. Another risk is competition, which is other cryptocurrency. And we've covered that already. And I think that's not something concerns me. One of the big risks that we haven't really talked about happened in twenty seventeen, which is what is the dominant narrative for what Bitcoin is. And in the early days, people were sort of confused.

Is this a payment technology or is it is it a savings technology? And there was kind of a squeeze in the community about what it was and the networks split into one split was Bitcoin and another one was something called Bitcoin cash, where a group of people who are involved in Bitcoin said, no, we think this is better as a payment technology, sort of a decentralized PayPal versus what Bitcoin is now, which is digital gold. And the market really overwhelmingly supported the digital gold narrative and that the other the other sort of split of Bitcoin has almost no market capitalization now relative to Bitcoin.

And so that was a very, very important risk to be resolved in Bitcoins history because there's no longer any contention about what Bitcoin is. It is very clear that this digital gold and this is no longer going to be any contentious folks like that, where some chunk of the community say, no, this should be something else. The primary risk that I worry about, we just talked about it is a nation state attack. And I think that is going to become a dominant issue that people worry about once Bitcoin surpasses gold's market capitalization because central banks always have gold in the side of their vision, like what's happening with gold, what's happening with gold, gold's always been an indicator that they're doing something wrong.

This is something that Greenspan actually talked about. He would set monetary policy based on gold. If gold price went up, he would tighten, the gold price went down, he would loosen or maybe it's vice versa. I'm not sure. But once it once Bitcoin reaches gold's market capitalization, central banks are going to pay attention to it as a barometer of whether they're doing the right thing with their monetary policy. And if it gets out of control and Bitcoin starts overtaking the currencies of nation states, I think that's when you're going to see conservative nation state attacks.

And we have to like I said, we have to see it's an open question whether or not we get a strong enough lobby for Bitcoin to make it unlikely for those state attacks to succeed. And I'm optimistic. We've just seen a US senator already in Wyoming elected to the US Senate, who's a strong proponent of Bitcoin. And I think that is going to accelerate in the next four years. I think if you look at the twenty, twenty four election, you're going to see a lot of people in Congress who have supported Bitcoin.

Especially when you think about how there are future funding for their next election is is paid for. Absolutely. When you have a million people in the US who have seen tremendous gains in their Bitcoin, in your constituency saying don't attack this, you're hurting my pocketbook, if you attack this, it's going to it's going to have a big impact on the message that the people who get elected to Congress bring to Congress. Who are a few people that you closely follow on Twitter, like if they deleted their handle, you you'd be very upset.

You are right. No, no, honestly, I do, I follow you closely. Well, that's a good question. I have a lot of respect for Seifeddine. His book, I think is great, the Bitcoin standard. Some of the developers out there I think is fantastic. I follow them just kind of technically interesting because of Peter Willey. I don't know if I pronounce that correctly off the top of my head. Adam, back some of the people who were early on, Nick Zalba, I think I'd be very upset who I think is incredibly deep insights about money and about block change.

And the article I wrote, the bullish case for Bitcoin, was in part inspired by his own writing on money. So I'd be I'd be pretty sad if he left Twitter as well. There are tons of people, to be honest. So this is just coming off the top of my head. That's great. All right, give people a hand off where they can learn more about you, I'm sure after listening to this, they're going to want to be able to see your posts and just kind of see your writing and all sorts of things.

So give me a hand off. Yes, so you can find me on Twitter and we'll underscore via Twitter, I have my article which I published about Bitcoin called the Bullish Case of Bitcoin, which is on medium. I'm working on turning it into a small book. I've had a number of people ask me to turn it into a book. So hopefully you'll be able to find that on Amazon relatively soon. And yeah, I think that's about it.

Well, we'll have links in the show notes to all those things if you guys want to check them out. Thank you for taking time to come on today. This was such a pleasure to chat with you.

Thanks, Chris. It was really awesome to chat with you, too. Thank you for listening to TI IP to access our show notes, courses or forums, go to the Investors podcast Dotcom. This show is for entertainment purposes only before making any decisions, consult a professional. The show is copyrighted by the Investors Podcast Network written permission must be granted before syndication or before casting.