Transcription
The long-term thesis I have for Bitcoin is that it is going to be a reserve asset, actually more so than it will be used for day-to-day payment processing and transactions. The trustless nature of Bitcoin really makes it very anti-fragile in the sense that I have to adhere to the rules of Bitcoin, and only then can I benefit from what Bitcoin brings me, and the same goes for you.
So, how do you measure the throughput of Bitcoin's success in history? One version might be its standing as a reserve asset; the other might be actual people using it for payments and settlement.
What do you think is the most important thing for younger people to understand about Bitcoin?
Yeah, so young people have the incredible privilege of time. If you think about time, it is actually a function of liquidity and energy in the ways that they are manipulated in the financial system. I think Bitcoin plays a very big role in helping us understand that there’s another outlet beyond fixed income that lets you store money without disregard for this time.
[Music]
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All right, Jeff Park, welcome to Bitcoin for Millennials!
Hello, hello! BR, nice to be here. Thanks for having me.
Well, thanks so much for coming on. I think we tried to schedule something for some time, and I'm happy that we're here. I really love your takes, and I think we'll have an interesting conversation.
I was thinking maybe to start with, you know, people have used the term "digital gold" for Bitcoin. I think that has been a nice analogy to help people explain kind of where Bitcoin sits. But as you would probably agree, Bitcoin is an asset class by itself. How do you see this narrative of digital gold evolving with the increasing adoption of Bitcoin?
Like, is there a better term?
I would say digital gold is still very good. It's still very good; it's not perfect. But I do think it captures the mind share of a whole new class of investors, especially older investors. Bitcoin is really a store of value and is really more of a reserve asset than perhaps it might have originally been pitched as a payment scheme or component to which it facilitates trade in a meaningful way.
The idea of gold really captures that more soundly than anything else about the moneyness that comes behind these concepts. So, I think that's good, and that's important.
Actually, the long-term thesis I have for Bitcoin is that it is going to be a reserve asset, actually more so than it will be used for day-to-day payment processing and transactions. We can touch upon some of this in the context of the dollar later if you'd like, in the macro construct.
The part that is not serviced well is that gold is also an inanimate object. It's an element in the periodic table, and it is empirically what it is. It's an element. Bitcoin is actually not that fundamentally static or immutable; it's actually a living, breathing code.
It is serviced by a bunch of people in the developer community, and so it's an asset that needs to be shepherded and cared for with stewards that have great intention about the vision for Bitcoin. In that sense, it's not like gold.
As you may know, Bitcoin has actually had many forks over the years since its inception. We've had hard forks, we've had soft forks. Some of the hard forks have left us with other Bitcoin assets like Bitcoin Cash and Satoshi Vision and other things.
But this shows you a fundamental truth about the digital aspect of it, which is that it is a living, breathing thing, and it can change. It can change by the will of some of the ways in which the people support it or don't support it.
So, those who have been familiar with the block size war in the past, the battle between big blocks and small blocks, these things have all shaped the narrative and history of Bitcoin in a way that gold is maybe a little bit too simple, which makes it sound like this inanimate thing. But the reality is that it's not; it's a living, breathing thing that needs to be supported as it is also a store of value.
That's a very interesting take. I never looked at it that way, but I agree. I'm thinking about what would be the characteristic of Bitcoin that actually keeps us going in the same direction.
Or, like, I don't want to say the right direction, but I think now that I'm thinking about it, it's kind of like there's this almost social contract, I would say, to all the people that have adopted Bitcoin.
The trustless nature of Bitcoin really makes it very anti-fragile in the sense that I have to adhere to the rules of Bitcoin, and only then can I benefit from what Bitcoin brings me, and the same goes for you.
So, you don't have to trust me; you just understand the rules and then trust yourself in following the rules, which is very different compared to, you know, fiat money or any other financial asset.
While you were talking, I was thinking about what would be the thing that keeps us in that same direction. Comparing it to gold or saying it's a store of value asset, and perhaps less a medium of exchange, I think is already interesting because there are people that have different ideas around that, right?
Yeah, it even actually goes to how people talk about the role of the dollar in the macro environment that we are living in today. You will meet both people who think that the dollar is as strong as it's ever been now, and then you'll meet people who will actually say, "No, the dollar has been losing its clout as a hegemon over the past 10 years," and really, actually, maybe right after Russia was sanctioned precipitously.
Why are these two conflicting narratives happening? Well, the first group who thinks that the dollar is still the leading currency in the world will often look at settlement volume and tell everybody that most of the global trade is still settled in dollars. The percentage of share settled in dollars has been growing, and that is proof that the dollar is actually leading.
But then the other group of people will say, "Actually, that's not the right way to think about the role of the dollar and the strength of the dollar." What you actually should be looking at is how many countries are holding on to dollars and dollar-based assets like U.S. Treasuries as a component of their treasury for reserve assets next to JGBs or Euro bonds or gold and other commodities.
There, it's been on a decline. Actually, most of the world is no longer looking at U.S. Treasuries as the singular source of capital preservation, and in fact, they have been slowly changing and diversifying the mix of their reserve assets.
So, gold is increasing; that has happened since COVID, and U.S. Treasuries have been declining. Actually, I think it is now down to even in the 60% range, when once upon a time at the peak it could have been as high as 70-75%.
So, those are the two conflicting narratives that you hear about the role of the dollar, and the same can be said about Bitcoin. You know, how do you measure the throughput of Bitcoin's success in history? One version might be its standing as a reserve asset; the other might be actual people using it for payments and settlement.
Yeah, is that also what Michael Saylor then means with capital versus currency? That's what you're talking about, right? Like the storage of economic energy or using it as a tool to exchange with each other, right? That would be the difference that could also change over time, right?
Like, I don't know if this holds up, but I kind of think like store of value or the capital part kind of comes before the medium of exchange part, as in like if I cannot save it towards the future, then why would I want it as a reward right now in a value exchange?
But then again, I also kind of think like time will tell what's the biggest use case that people currently see that is probably store of value before medium of exchange.
Now, yeah, so what do you think is the most important thing for younger people, for our generation and younger than us, to understand about Bitcoin?
I saw one tweet of yours that I really liked that said young people can revolt against the status quo by dismantling the 60/40. The 40 that you also just alluded to, right? Like the bonds only perpetuate enslavement to the leverage of the old. Instead, allocate the 40 to radical resistance: Bitcoin, IP, and professional degeneracy give the young a fighting chance.
Is it just as easy as moving to a better asset and stopping paying for the old?
Yeah, so young people have the incredible privilege of recognizing that they have time, right? If you think about time, it is actually a function of liquidity and energy in the ways that they are manipulated in the financial system.
So much of what we know about the way the global banking system and economies work is actually through the management of the interest rates that affect the pull forward and the push back of time. Young people actually have a lot more time than they know, and this is something that maybe no one teaches them to think about it this way.
But it also manifests itself in the sense that you don't really have a lot of obligations for funding the future at this moment in time, right? You're going to make income; you're actually going to be able to take risks. Your life is still very much in the shape in which you don't have a lot of liabilities, hopefully.
So, you can invest for the moment of now. If you are older, let's say in your 70s or 80s, you don't actually have that luxury.
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You have a lot of liabilities that you're actually trying to manage now, and there you're kind of more forced to play asset-liability matching of your income management to those expenses.
That's, I think, at the core of what I'm trying to espouse when I ask young folks to take a little bit more risk about thinking about their future. The social contract that we have in the 60/40 model is this idea that you should invest in equities as a big chunk of your portfolio because that drives growth. Growth drives productivity, and everyone should participate in that productivity to adjust for inflation.
Then the 40% is meant to be like a hedge, right? So, bonds are supposed to outperform when equities are underperforming because then it probably means that interest rates will come down as they enter accommodative cycles.
So, there's a way to pair these things into a negative correlation strategy. Well, what you've seen over the last many years, and most particularly pronounced in the last three years, is that correlation has completely broken. Bonds and equities have the highest correlation in ways that probably were not meant to be if you were to espouse 60/40 today.
So, actually, the 60/40 is not 60/40; it's 100% of something. Yes, and this is the moment I think young people can realize if 60/40 is 100% of something, what are the other alternative assets that are out there that give me true diversification, true resistance to the ways that the correlation for equities and bonds seems a little bit unbecoming?
I think Bitcoin plays a very big role in helping us understand that there's another outlet beyond fixed income that lets you store money without disregard for this time value and the social contract of abstracting to the long future.
Yeah, I love that. It feels like the 60/40 narrative is kind of needed in order to keep that thing going, basically, right? So, it's kind of like the instruction to keep the thing that they want you to do to keep that going.
I don't want to use the word "hypothesis," but I think once we compare it to Bitcoin, which is just in general a way more transparent asset in itself, it's easier for people. I mean, it takes work and challenging certain preconceptions, etc., but it's easier for people to verify what Bitcoin is, how it works, what it does, and why it exists.
For example, you know, 60/40—why does 60/40 exist? For example, when you start earning money, wanting to save towards the future, etc.
Sometimes I'm on the Reddit Millennials subreddit, for example, or on like the FIRE or finance subreddits, just to see what people are doing, and people are just following the classic narrative. So, I think it's very interesting what you're pointing out.
Yeah, if you really squint your eyes hard enough and think about the idea of what a 30-year bond means, you're basically locking up your money for 30 years at a rate that you're provided for at this moment in time.
30 years is a generation. Actually, in the old times, that's a generation of humans. It's actually not a reasonable thing to do at all if you're trying to hedge and live for your own life today.
It's actually a very profound concept to think that we want to lock up our money in these even hundred-year bonds that have hit the market in ways that are essentially pulling forward the value of time.
The young people are essentially being pre-bored against by pulling forward all the labor and productivity and the interest that could accrue in the future to the moment of now.
It's actually, you know, "Ponzi scheme" is not maybe a strong enough word for what that means between the generational. I mean, at some level, I think it's a criminal thing between a generational gap to be able to do it at a level where it is beyond what the system can afford.
I think the global debt today across all economies is in the hundreds of trillions. I believe the last time I checked it was like 250 trillion. These are numbers that actually are modern times. This is not the way that most of human civilization has been financed for future growth and current production.
This is a very recent kind of experiment, if you will, from the moment that we were able to move off of currencies based on actual trade flows and off of fiat lending.
Yeah, I think this is—I wanted to talk with you about what's the most important thing younger people should understand about the problems that fiat money has brought us, but I think it's this, right?
It's basically like you are expending your time and energy in the now, which anyone does, you know, taking the risk that's whatever, you know, that's associated with the thing you choose to spend your time and energy on.
Then you get this reward; the time and energy is gone forever, basically. And now you have to think about, okay, how do I save this towards the future?
Following this classic way, you're not really saving it towards the future; you're actually paying the promise for someone else. You, now, is the future of someone else in the past that, you know, bought a certain type of product, and you're actually paying for it and then locking yourself up again towards the future, which totally bypasses the entire goal of saving or just holding the same energy or hopefully increasing something with the eventual goal to lower the uncertainty towards the future.
So you can actually create time and space to, I don't know, start a family or another career or whatever, build something, or, you know, create that time that you mentioned. So, I'd say this is probably the biggest thing that people need to understand.
Yeah, another recent trend worth highlighting is that inflation is not a single-dimension thing, right? Inflation occurs in many aspects of goods and services offered in your life.
What you see, actually, is that there is a range of inflation spread between products and services too. This is the other thing that hints at the same problem. Services are becoming very expensive.
So, education, for example, is growing at a pace higher than inflation, and how expensive these services are to be rendered. Healthcare services, same thing. Things are also getting cheaper on the other side to offset some of this, right?
So, generally, computing goods are getting cheaper. A computer now is cheaper than it would have been 20 years ago. And there's Moore's Law there; that's true. Clothes are not that expensive. In fact, clothes are as cheap as they've ever been, probably versus the hundreds of years when they were actually not as abundant.
So, goods in general are getting cheaper while services are increasing in cost. Well, why is that? It's because people are living longer, so they need to service longevity. Also, because they're living longer, they're investing in themselves.
So, education is one kind of way to invest in yourself, but there are other kinds of ways humans invest in themselves that reflect the same trends within service inflation.
The whole social contract of really the 60/40 is this understanding that if you increase the longevity of the human population, it actually doesn't have enough duration in your investment portfolio that can outlive your own productivity for the years of your contribution.
This idea that you can retire at 55 or 60 to live until you're 100 doesn't actually work. Exactly. You see what I'm saying? You have to die, unfortunately, at 75 or something to kind of make that math work.
This is why I think this problem here is not an American one; it's a global problem. Every country in the world is facing this exact generational warfare almost between the young and the old.
Fixed income as an asset class is really underpinning this battle because the yield curve controls a lot of the goods and services we pay for. It actually indexes to the house that you would like to buy one day, and all of these things in ways that Bitcoin is an outlet to remove yourself from that particular risk.
Yeah, I love this topic and this point of view about understanding why Bitcoin exists, right? Before we can even talk about Bitcoin with our fellow Millennials, we have to make them understand what is the problem that we're seeing here.
What really struck me is that, like you said, 200-plus trillion global debt, right? So, I mean, just by that number, we should say minus 200, right? It's not working.
But I think it's hard to really feel that or integrate that when, you know, as us, we live in a Western country. A lot of stuff is working; a lot of stuff is working better than in other parts of the world, right?
So, I think conceding to the fact that it's minus 200 trillion in debt, you know, energy stolen from the future expended in the now, that gives us a certain life where we are at, luckily, randomly, geographically.
That's just a hard thing to reconcile with yourself, I'd say, right? Because then you would also kind of admit that you've been profiting off something on one side, and on the other side, that you have a huge problem towards your future because what has been sold to you basically doesn't exist anymore.
What you said, like, you know, do you want to retire at 60 and live through 100? You know, that's never going to happen. And like Social Security or whatever, like that's not there.
Or just pension in general is not like you can contribute in the now, but that will probably be spent on someone else that is actually 65 right now.
Yeah, and I think this actually is a reflection of the broader trend we're seeing in how young investors approach the marketplace.
So, I don't think all young people are irrational and, you know, stupid and crazy to want to take risks in the ways that some folks are thinking that it's apparently reckless.
I don't know if you followed this concept called the "degenerate economy," but it's an incredible idea in which there's a bunch of companies you can track as an index to show young people's interest in the degeneracy of an economy in the ways that it is manifesting itself into casino-like behavior.
The degenerate economy index is a very strong performing index relative to other sector indexes you'll find. What it means is products—what type of companies there are—there's a bunch in there. I'd have to refresh the list, but it is an actively managed index by the former founder of StockTwits.com.
It reflects kind of the GameStop phenomenon that I think young people are being thrust into. They're taking these kinds of risks because they know that the amount of investing they can do with their net worth will help them secure their future.
So, you have to take incredible risks to have a chance at it, and that is not a good place to be. So, there's something I think very wrong with most of the way that the financial economy operates for most people.
Bitcoin is one of those things, amongst many others, that I think gives you a standing chance to have a little bit of a radical resistance towards the system.
Yeah, I think that's what gives people—you know, when you talk about that, I just think about the word "anxiety." I love how Safedine talks about it. The future is uncertain for everyone; it doesn't really matter.
Well, for younger people, it's more than for older people, but just in general, like you don't know what's going to happen in the future. Understanding that extra factor of the broken money gives you actually more anxiety, which gives you a high time preference and makes you do degenerate stuff, basically.
I'm looking at the description of that index, and they say it combines gambling and all these new types of assets. I think Bitcoin is in there; DraftKings is in there; I see Coinbase is in there; Robinhood is in there.
And year-to-date return is 32%, so that's doing pretty well, actually. I've talked to Howard about whether this needs to be productized to the broader audience so that it's more freely tradable. It's not today, but you know, this is the kind of thing that is succeeding today as a financial product.
Products that have a lot of volatility, products that have a cultural alignment to what the young people want in their portfolio, and it's almost like maybe a little bit of the anti-ESG.
If there was like an ESG movement, the degeneracy movement is the other side of that same coin, which is fascinating to see unfold.
So, when thinking about new types of assets, we saw the introduction of the Bitcoin ETFs. That's now one year ago—the most successful ETF launch ever. Bitwise, the company that you're with, is also one of the companies that offers this Bitcoin ETF.
What are the implications of this product now being introduced to help Bitcoin become more of a real accepted mainstream financial asset? And maybe kind of combine that with MicroStrategy, for example, kind of the outlook that we have on them perhaps included in the S&P 500, which would, I'd say, really solidify also, you know, the Bitcoin-minded thinking or approach.
Great question! The Bitcoin ETF is a monumental moment for Bitcoin because not only does it allow new flows from traditional investors to access the token in ways that they were never going to open a non-custodial account to trade digital assets, but the other big driver is that traditional systems have an incredible amount of existing financialization that can support new assets.
What I mean by that is the Bitcoin ETF can be bought now by somebody who can actually pledge a bunch of their non-crypto assets in a brokerage account.
This is the beautiful thing about having a Bitcoin ETF inside, let's say, a Robinhood account, then having Bitcoin spot in a Coinbase exchange. You can't really post your Microsoft, your Amazon, your Meta stock to get margin to trade the Bitcoin ETF on Coinbase because Coinbase is a crypto-only exchange.
But on Robinhood, you can, and then you can cross-collateralize, and you can get financing in ways that bring risk reduction to the totality of a portfolio that is not just a crypto-only portfolio.
This is actually a pretty important piece, which I think a lot of people miss about why it's important that Bitcoin plays nicely with other existing traditional assets because diversification is one of the empirical ways in which risk reduction happens for portfolio construction management, margining, and all the ways that modern finance is just built off of.
So, that's an incredibly important thing. Likewise, when you buy a Bitcoin ETF, you don't have counterparty risks the way that sometimes you would have to worry about with Bitcoin spot, depending on where you're custodian those assets on an exchange, for example, or some unknown custodial services.
On top of that, if you believe the derivatives market is actually going to be a meaningful component of the underlying market, which it tends to be for most traditional assets, then having it in a Bitcoin ETF wrapper allows you to have Bitcoin ETF options that can scale appropriately that are not done offshore in ways that are inscrutable with counterparty risk.
This is why I think yesterday, VX posted that IBIT has now surpassed more than 50% of terabits options trading volume, and that's only in less than two months since the ETF options have launched.
So, it is not surprising to me that people are interested in trading derivatives on Bitcoin, and the way they would do that is actually through the ETF wrapper and not doing it offshore on derivatives.
Now, how does this relate to MicroStrategy? There are some people who still can't buy the Bitcoin ETF in their brokerage, believe it or not. It is still a restricted security for some, and funnily enough, MicroStrategy is not.
So, for some of those investors who want Bitcoin exposure in their 401k or their Roth account, IRAs, maybe even just your traditional brokerage account, MicroStrategy is the next best thing.
So, MicroStrategy becomes a proxy asset for Bitcoin exposure. Of course, you and I both know that MicroStrategy is not a perfect Bitcoin tracker. There's a lot of other aspects to the valuation methodology of MicroStrategy that introduces different kinds of risks, but it is directionally correct.
So, MicroStrategy, I think, has found a fit for a product. That being said, I think that MicroStrategy is one version of what Bitcoin can do to a company.
MicroStrategy has made its goal singularly to be a Bitcoin holding company, but there is now actually a long tail of other companies that have bought Bitcoin on their balance sheet but actually are doing other things as a main operating business too.
The thing that I'm really excited about is that if 2024 was the year of the Bitcoin spot ETF being approved, I think 2025 is going to be the year when Bitcoin is going to be financialized in all the ways that the regulatory environment did not support last year that will now be supported this year.
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One example of that is the accounting rule has changed or will change in January, such that you don't necessarily have to only take markdowns on Bitcoin holdings on your balance sheet. You can now also mark up your Bitcoin market to market.
That means companies and corporates for the first time can actually reclassify for accounting reasons their Bitcoin assets as not just intangible assets and realize gains if Bitcoin goes up.
It actually means that they are now incentivized to potentially buy Bitcoin. Until 2020, no sound company would ever buy Bitcoin on their balance sheet if you could only mark it down but never mark it up.
So now we have the chance to introduce companies coming into the arena just the way we have thought retail investors and wealth management platforms are going to come in by Bitcoin.
I know there's a lot of conversation about nation-states buying Bitcoin and a lot of attention paid to those types of news flows, but the reality is that's a very complex subject matter.
It's more likely than not that companies are actually going to be able to do this much sooner and much more transparently and credibly without interfering political guidance to enact it.
So, I think in 2025, we're going to see a bunch of companies buy Bitcoin on their balance sheet. It's also why Bitwise is launching the Bitcoin Standard ETF, which is going to track the public listed equities that have Bitcoin on their balance sheet.
The cool thing we're doing there, actually, Bam, is we're market-cap weighting it by Bitcoin holdings. So, the more Bitcoin you own, the higher your weighting will be in the ETF.
Oh, that's very interesting! My previous episode was with Ben Workman, and we talked deeply about MicroStrategy. I wanted to talk about one thing that we discussed, which I think fits into what you are saying.
I think the conviction of MicroStrategy, which of course is a very unique thing in terms of how Michael Saylor is able to actually make decisions and, you know, was able to start this early, will get more companies to adopt it.
But as opposed to Saylor's situation with MicroStrategy in the beginning, kind of like using Bitcoin to save his slowly dying company and now finding a new opportunity, actually doing a business model pivot and moving towards something bigger in the future, which we can talk about.
What I want to mention is not every company that adopts Bitcoin has to become like a Bitcoin treasury company, right? They can actually—and this is what I talked about with Ben, for example—how can this adoption by institutions or like, you know, as a treasury asset for corporations, that's what I mean, lead to a paradigm shift in how companies view their balance sheet?
For example, we talked about dividends, and Ben, as also Michael Saylor talks about, says, "Yeah, if you pay dividends, you're really kind of like out of ideas on how to grow your company."
It sounds great for the people that just want dividends, but they don't really care about your company. Do you think something like that might perhaps dry up just the dividend part of stocks?
Because adopting Bitcoin would actually contribute to a company's longer-term growth because it will strengthen their balance sheet, you know, also with these accounting rules, and actually give them more—well, lower uncertainty towards the future, just as with individuals that we talked about.
Could that create a shift in the more traditional approach of, for example, dividends?
Well, dividends are a subjective measure of a company's growth trajectory, in my opinion. Some people will say issuing dividends implies that there is slowness and therefore is becoming more utility-like and therefore is a value-oriented stock.
If otherwise, you're a growth company, you shouldn't really be distributing at this point in your time. But the reality is market breadth is actually very poor today; it's ever been.
Even though the S&P 500 was really strong last year, if you actually take out kind of the biggest winners, the MAG 78, you actually see pretty clearly that most of the laggards were the long tail of non-tech assets.
There's a huge spread between the high-performing tech companies versus your regular company that's in the S&P. It also happens that the large tech companies actually have the most amount of cash, so it's a little of a paradox.
Are these growth companies, or are these actually companies sitting on a lot of cash, or are they both? That's why I don't think it's that clear to say dividend policies actually imply one thing or the other.
That being said, what dividends do allow is it gives investors one more degree of freedom to buy into their strategy and portfolio that they might not have considered before.
So, it does open a new class of investors who are attracted to the idea of a yield and therefore might not have considered Facebook, but now that Facebook is giving dividends, now I'm going to buy Facebook.
So, it does open a new class of investors. I think what you're saying is Bitcoin may do the same, and that it opens an avenue for new capital in the ways that people are going to be interested in buying the company for that purpose.
I think that's not just a financial one, but it's also a cultural one. So, on the financial side, right, Michael Saylor talks about all the time where Bitcoin is a growing asset, and therefore it's more productive than having USD cash and treasuries that are losing money.
So, you should instead have a financially productive asset like Bitcoin. Some people will believe it; some people will not believe it, right? Some people will say, "Actually, the volatility is too much, and that to me is a net negative EV exercise, and I don't want that."
So, my value proposition is different. However, on the financial side, one positive thing that comes from having Bitcoin on your balance sheet is that you become more difficult to short as a company.
Because think about it: if you are shorting a company and you find out the next day that this company has bought Bitcoin on their balance sheet that's like, I don't know, 10% of their cash assets, you may think that now there is actually something unrelated to the performance of the CEO and the operating stock that is now Bitcoin, which makes you very not confident in shorting the stock.
Because there's actually a different, unrelated orthogonal return vector. So, that's actually a pretty incredible financial tool to have as a corporate treasurer to field off short sellers.
Yes, now on the cultural side, think about how much publicity you get when you buy Bitcoin on your balance sheet today. Think about how many of these companies spend marketing dollars to just get their name out there, whether it's Google Ads or Facebook Ads.
Marketing is a huge industry that if you just buy a little Bitcoin on your balance sheet, you get free publicity. That's valuable.
The other thing that's valuable is the cultural capital. I think that young people really like Bitcoin. This is actually a demographic trend.
If you think most businesses are going to cater towards young people for the future, one way to signal that you're going to be for the young is having Bitcoin on your balance sheet.
The other day, I saw there was a distiller company that had proposed buying Bitcoin on their treasury. If you think about the impact that has, next time I'm at a liquor store and I'm deciding between, you know, which whiskey or which vodka I might want to buy, and then I know that one brand actually is a Bitcoin enthusiast, I mean, I don't care about the taste difference in the vodka.
I really don't. I'll just buy the one that supports Bitcoin. So, that cultural capital that you can get by just being in it—not the way MicroStrategy has, right? As you said, you don't have to go all in and become the Bitcoin proxy.
There's a huge gradient in how you can affect a good outcome for your corporate mission by having even just a little bit of Bitcoin on your balance sheet.
Yeah, Ben and I also talked about it being a protection against the shorts, so I like that you touched upon that as well. It could be like a tactical asset.
I also really like the marketing angle because I agree. Ben and I talked kind of about like it's kind of like a rejuvenation potion also for your company.
It also kind of signals like, "Hey, I'm looking towards the future," you know, and I'm adopting what you, the younger people, think is going to be the future.
So, yeah, I love that angle too. It's so fascinating how multifaceted Bitcoin is and how it can be applied.
The cultural angle, by the way, like just the whole idea of Bitcoin as a network state or like globally how people already are connected.
You see that with people that run for a certain political role, right? Or perhaps the upcoming presidential elections in Suriname, where we have Maya Paru, who's an ultra-bitcoiner, who's running.
I told her before, like, "You should not underestimate the network state." You have millions of potential reach behind you just because you are a Bitcoiner, and I think this applies to the corporation as well.
It's kind of, yeah, you're with the cool kids or something like that.
But yeah, nice! So, when you look at this year and you see more companies following MicroStrategy, do you think MicroStrategy will once again be kind of like the best performing asset in the world?
Because they are really kind of focused, you know, it's kind of my idea of eventually becoming like the world's first Bitcoin bank or something like that.
I also saw there's now a proposal for Facebook to vote about perhaps buying it, etc.
Yeah, like what are your thoughts around that? How will this year look? Or will we see some sort of outsider or some of the big seven get into this as well?
I would love to see it, and man, I would love to see it. I haven't given serious consideration on the probabilities whether it would happen or not.
But what I will say is that Facebook has an interesting setup. The interesting setup is really two or threefold.
One is they have spent a lot of time looking at crypto with their failed project Libra, so there is a lot of kind of existing knowledge, if you will, about crypto at a very high level, at high technical domain expertise, and the vision they have for what crypto can be for their company.
The second thing I would add is that if you listen to Joe Rogan's podcast most recently that he did with Mark Zuckerberg for two hours, you can hear in Mark's voice just how much he feels he's changed over the last four years and the amount of disbelief he has in the trust of governments and institutions that he himself experienced firsthand during the COVID years.
Now, he has chosen to basically position a revolution against it and has come out de facto saying that he is actually going to be on a different side of history.
So, the cultural energy of Facebook has changed due to Mark. The third thing that I would add is actually Mark is in a very fortunate position to be able to do whatever he wants because he has the largest voting shares of his own company.
In many ways, that cannot be reflected by the rest of the MAG 7 cohorts. So, actually, the path is there if Zuckerberg wants to do it.
There is this trifecta of the three things that are aligning that makes me think it's possible, though probably improbable, that Facebook may pull the trigger.
I also know that there has been a proposal that has been pushed through from a shareholder vote for discussion, so we'll see.
But I would ascribe it a much higher chance than Microsoft. I would describe it a much higher chance than Amazon, but it's still probably going to be relatively low.
Yeah, I just love the real internet meme or just fault or kind of like manifestation fault is like the most entertaining outcome is the most likely, you know?
Zuckerberg is, in that sense, one of us, just like an internet nerd, you know? And when you think about that rejuvenation angle, like of course Facebook, huge company; Instagram, huge; WhatsApp, huge.
But Facebook itself now has all these users, but there is a lot of competition. I mean, I think generally Millennials would joke with each other like, "Who's on Facebook anymore?" You know, and Gen Z as well.
So, I also think like there's kind of like a gap there where he could perhaps get that marketing or become more based, as they say, to actually prop up or help the Facebook brand in general, right?
So, very interesting and something that we should watch.
I want to ask something else about like the—we were thinking last week a lot about like what do all the critics say? You know, like what are their arguments?
I think a lot about like volatility. How do you look at that argument when we also think about like capital preservation or like store of value asset that we talked about in the beginning?
Many people say, "It's volatile; it goes up and down." You know, Michael Saylor says, "Volatility is vitality."
I kind of look at it from the angle that once you understand that one Bitcoin is one Bitcoin forever, then it's like the most stable thing—the most stable financial asset to ever exist.
Which, in my opinion, is also kind of like Bitcoin's output or the value that, you know, comes from that is like, yeah, the whole promise of this thing is that it stays the same.
So, for me, whenever people talk about volatility, you know, if you measure in Bitcoin, then there is literally zero volatility, and it's only about how much Bitcoin you have.
Yeah, can you share a bit about that? What are your thoughts there?
Yeah, absolutely. At a high level, Bitcoin being volatile is a blessing, and it is actually the feature of Bitcoin that it must be volatile.
The reason is simple: even from a monetary design perspective, let's just imagine you have two levers, and the only two levers you can really control are pricing and quantity in the designing of your ideal currency.
Well, on one hand, you can imagine a world where you are basically choosing to control quantity for price stability and allowing the currency to exist in the ways in which you have to manipulate quantity for price stability.
The trade-off that must be made in the store of value—that's basically kind of the modern fiat system today, right? That's why the central bank exists. They control the money velocity, the fraction reserve banking flows around it, and the leverage it applies, and actually controls the quantity so that you can maximize your chance for success in having price stability, which is your inflation mandate.
That's one way to design money. But what that means is you have a technocratic institution that is actually leading the decisions in how this is to be enacted.
The other model is actually the opposite, where you say, "Actually, the quantity will never change, so I'm going to fix the quantity." But because you do that for quantity stability, you have to get price instability.
There's no other way for this equation to be solved; one has to give. So, Bitcoin is fixing the quantity to a level that is as transparent as the emission schedule delineated by the white paper.
We know what that predictable automation of that quantity is going to be forever; that's a fact. So now you have incredible price volatility because no one can manipulate the supply of Bitcoin to actually stabilize the price of Bitcoin.
And so it's volatile. So once you understand it from that perspective, you have to actually appreciate that the volatility is a feature of its monetary design.
In fact, Bitcoin is valuable because it's volatile. Volatility is actually a necessary thing, and one that I think most commodities investors are aware of this dynamic.
That's why I find commodities traders to actually have the most intuitive understanding of Bitcoin price action than, let's say, an equities investor or a credit investor.
Because the reality is also price discovery happens on the marginal supply and the marginal demand level. So, it only takes the marginal buyers and sellers to move the price of Bitcoin at any moment in time.
That's what a commodity does. And so from that lens, Bitcoin will always be volatile to the extent that there's enough trade execution being done by reasonable size for the moment which the market can withstand.
Yeah, it's interesting to see because I'm thinking about that price kind of more as like an exchange rate. As you said, like if you look at it more from like a classical asset approach, like if you see it as an investment, then it would be really bad, right?
If you just judge it from the volatility aspect. But if you think like, "Okay, this is a better money; this is better capital," then yeah, it's just an exchange rate between Bitcoin and another money.
Like if you needed $3,000 units some years ago, and now you need almost $100,000 units for one Bitcoin unit, then you can also think about which one is trending towards being the stronger one.
I think that just also kind of changes your point of view and helps you stop seeing it kind of like as an asset or, sorry, as an investment and seeing it more like as an asset to preserve your wealth.
Yeah, in the derivatives world, we call this like a quanto or a compo option when you have the payoff of like an underlying index that is dollar-denominated, perhaps, but the payoff currency might be a foreign exchange.
It's an exotic option that I used to trade when I was at Morgan Stanley. I don't know just how diverse the demographics of the show is, but if you're an American, you do have this incredible privilege of not having to worry about the dollar denomination being your base currency.
But if you live anywhere else where you actually do have underlying volatility in your domestic reserve currency, like in Argentina or even in Asia today, where you are now seeing both Korea and Japan losing purchasing power at an incredible speed by the dollar strength, if you live with that kind of volatility of your base currency, then the relative shock is much less.
It just so happens that Americans think it's extremely volatile because they're the greatest benefactor of having the least volatile denomination currency.
Very good point!
Yeah, I'd love to wrap up this conversation with some future takes or some future ideas. One of the most important things I can ask an American probably is, yeah, we talked about the adoption by corporations.
Do you think we'll see a strategic Bitcoin reserve? And if not in America, would we see a national reserve somewhere else this year?
Great question! So, I have a lot of thoughts on this. I think it's still really early to think about a national federal-level reserve system that needs coordination.
It's possible the states will enact what the states will enact because they have less constraints as an international actor. But the reality is that the adoption of a reserve asset needs coordination.
I think Twitter sometimes daydreams about waking up one day to see like a random country buying Bitcoin and therefore creating a buy storm, but it's exactly going to happen to only random countries, right?
I actually try to do my best to define what that random country parameterization is because if you have any global trading alliances, you can't actually just do things by yourself. That is against the social contract of what global trade means.
What I mean to say is if you are Japan, for example, as one of the largest trading allies of the United States, you can't actually announce that you're going to buy Bitcoin as a reserve asset and front-run everybody else without some coordination and vice versa.
The reason is because there's huge implications for what that means in the ways that the rule of the dollar would change at some level in people's perception of what that dollar is backed by.
So, the view that I have is one day we will have a real federal strategic reserve, but I don't think that it's going to be uncoordinated. It will be coordinated like a Plaza Accord would bring countries together to discuss a solution.
The other thing is that the U.S. will not be the first because the U.S. actually has just the most to lose in adopting a Bitcoin standard as a reserve asset relative to others in ways that the dollar hegemony needs to be preserved today.
So, at some point, that transition could happen, but I don't see the U.S. leading that conversation because they have the least amount of vested interest in pushing for that possibility.
Actually, there are some concerns I have on stablecoins as well in terms of whether stablecoins are long-term good or bad for the dollar system as we know it, right?
Because on one hand, it's great that more people want to buy dollars, right? But the actual problem is dollar strength is really bad at the same time we're witnessing it right now.
When DXY hits 110 or 120, things are not going to be very pretty because the whole global carry trade works at a dollar level that is neutral to the rest of the currencies.
So, if you actually introduce stablecoins so everyone can just end up buying dollars, surpassing the U.S. systems, you're basically creating more shortage of dollars.
The shortage of dollars is actually a problem. So, you can almost imagine politically stablecoins might be a net negative.
So, all to say, the U.S. has a very complex position. I think the strategic reserve Venn diagram that I shared on Twitter is such that there are three different ways to imagine what countries are going to adopt next by the intersection of all these three things.
The three things I highlighted are: one, you have to be either totally adversarial or neutral to America's agenda; that's the first thing.
So again, if you're an American trading partner, you're probably not able to do it. The other circle is you need to have a political voting block that is youth-heavy so that the political is actually going to help you win elections in the country where that's a positive thing to be doing.
So, you need to skew towards young demographics. The third thing is you kind of need to have somewhat of a capital border flow model where you would have to not worry about that disrupting your actual capital flight issues in your country.
So, it has to be open but like not too open at the same time.
Yeah, I would recommend people to go to your Twitter and look that up. It's a tweet from December 8th, and like your top countries or top countries were Argentina, Nigeria, Turkey, and El Salvador.
Then like runners-up are just kind of in the same realm, like Portugal, Mexico, China, Iran. But I love that youth-heavy part. I think that's what we talked about in the beginning, right?
Like just digital assets, Bitcoin. And it's funny; it's like the same principle, right? Like if you want to rejuvenate your political party or you want to be relevant towards the future, like you need to adopt something like Bitcoin.
But I love how in this Venn diagram you used these other elements, for example, the if you're adversarial to the U.S. or not.
Because, yeah, it could hurt your relationship with the U.S. because, yeah, if it also serves as a protector for a corporation, Bitcoin will also serve as a protector for a country and less, I almost want to say, intimidated by the U.S. dollar.
You can actually, yeah, perhaps create your own path, as I think what we're also seeing with El Salvador more and more.
So, I would love to point everyone to that thread because that was really, really good.
I'd love to wrap up because I know you have to go with my last question, and that's a question that I ask everyone, which is: what is a core belief that you will never let go?
My core belief that I'll never let go? I suppose I have a very strong core belief in that humans will always choose to pursue things freely in their own will, regardless of whatever the system it is that is born of you if you had the choice.
So, the idea to fight for independence in both economic agenda but also for privacy, I see as core human values.
Those rights to privacy and the right to freedom are ones in which I would always attest to the sovereign individual's level than the sovereign state level.
I think as globalization is taking hold across all these different politicizations we're seeing and constitutional crises that are happening all around the world, there's a very similar overlapping thread that is happening, which is the loss of trust in institutions, loss of trust in processes like election interference and misinformation campaigns.
All of these things, at some level, I think ascertaining the importance of the self-sovereign individual to think freely and independently, and I think that's a core belief that I always have.
Well, thanks for sharing, and thanks so much for your time. I really enjoyed it, and yeah, man, stay in touch!
Thank you! That was great.
Thanks! Cheers!
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