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Sam Chwarzynski, Preston Pysh, Matt D'Souza, Robert Breedlove, Plan B
[00:00:00] Sam Chwarzynski: Welcome everybody. Happy, happy halving, great to have everyone on discuss the fundamental bullishness of Bitcoin. We got some, some of the leaders and leading Bitcoin analysts and personalities on board. We've got Robert Breedlove here, founder and CEO of parallax digital.
Preston pysh- am I saying your last name right?
Preston Pysh: Oh yeah, you got it, Sam.
Sam Chwarzynski: Beautiful. Thank you. Co-founder of the investors podcast, and Plan B, creator of the Bitcoin stock to flow model that has been going viral for several, several months now, many months now. Great. Glad to have you on. Really like really enjoyed your insights. And, Matt, we also got Matt D'Souza, co-founder blockware solutions co-founder, blockchain opportunity fund, co-founder blockware mining.
How's it going? Everybody
Matt D'Souza: happy halving, cheers, guys
Sam Chwarzynski: not that, not that it needs any introduction based on the panel title, but I [00:01:00] thought we'd start by, everyone kind of going into what their outlook is for Bitcoin and specifically why, why you're so bullish. Matt, if you'd like to start, let's get the ball rolling.
Matt D'Souza: yeah, sure. I'm bullish bitcoin, you know, of course going into halving. The supply side economics improve significantly. So that's, that's a positive catalyst for it. and then just kind of what's developed over the past three or four months with, with, you know, central bankers, federal reserve, how, how there's discretionary undisciplined spending or, or manipulation, really, the ability to create your own artificial
monetary policies. I think these, these radically impact the demand side. So, we kind of, we're getting it on both sides, demand and supply side improvements for Bitcoin. and, and that, I think that really is brewing kind of the perfect storm for, for the next cycle in Bitcoin. So, I'll keep it high [00:02:00] level for now.
We can go into more detail.
Sam Chwarzynski: Preston, how about, how about yourself? What, what, what are you most excited about?
Preston Pysh: I'm just excited I stumbled across all this. yeah, I mean, for me, a big realization happened for me on the model. Obviously when Plan B published his article, that was huge. And it helped me from a mathematical standpoint, really kind of have an appreciation for what kind of seemed a little bit like intuition as to what was going on.
But whenever I saw the math kind of behind it, it, it helped me out significantly. And then I'd say the other thing that, was a big breakthrough for me on understanding just the mechanics of how the protocol executes Fiat. Was, when I kind of stumbled across this idea that the Moore's law piece is kind of built into the incentive structure.
I'm a firm believer in that. And so what I, what I mean by that is if you're a person who purchased a mining [00:03:00] rig in the past year versus somebody who purchased the mining rig four years ago, your ability to capture margin in your business as a miner is significantly different. And I know Matt can get into this in a whole lot more detail than I can, but in general, a person who recently purchased hardware is capturing a significant portion of, of margin when they're doing it, when they're mining today.
And so, when you go through these halving events, you know, in the past, the last halving event that happened. And then definitely the one before that. Everyone was stepping into the halving saying, oh my God, it's going to be this miner death spiral kind of event. And I think today it's, for me personally, I'm just looking at a kind of smiling and with a smirk on my face because it's, it is not going to be that, in my humble opinion, it's not going to be that at all because you have these miners that have, that are so deep in the money with their new equipment.
They're the ones that are, that are really [00:04:00] salivating at this type of event. Meanwhile, the ones that are, that aren't running efficient hardware and that might not have the best electrical costs there, they're the one crying at the party when everyone else is, is celebrating. So, I think they're the ones that keep the whole system moving forward.
They're the ones that drive that incentive structure as we go through. this next, I call it orbit. And I think that that's a really exciting time to be participating in the market, especially for people that are just stepping into it for the first time. Your timing is impeccable, in my very humble opinion,
Sam Chwarzynski: how about, how about you, Robert?
Robert Breedlove: Yeah, so I think timing is very fortuitous for this halving. Because you know, Bitcoin was born in the ashes of the last financial crisis, and these conditions are exactly what it was purposefully designed for. and so, the fact that we have this quantitative hardening
going into this, you know, huge round of quantitative easing globally. I think it's this really going to [00:05:00] prove the value prop over the next 24 months. And, you know, here in the U S alone, we're forecasting a $3.6 trillion deficit for 2020. I mean, we're literally scalping that off the taxpayers just printing that money.
and the, you know, those are massive numbers. So, I think the timing of all this lines up could barely line up more perfectly and that we're going to see the inflationary pressures from this money printing in about 18 to 24 months. And historically, Bitcoin's all-time high price tends to come in about 510 days post having, so those two things line up nearly perfectly.
So, I really. The term Supercycle has been thrown around a lot, but I don't think it's, I don't think it's hyperbolic. I do think we're going to see a big one. And then two, the fact that the stock to flow ratio of Bitcoin is now equal to gold or on the same footing, I think that is a really big deal. and if we see Bitcoin, you know,
assuming this bull run does manifest itself over the next 24 months and the backdrop of an economic recession, I [00:06:00] think, you know, the world's going to really wake up to Bitcoin in a big way, which puts the 2024 having on an even stronger footing. And so, just to give you a little idea, a couple of numbers I looked at this morning.
The, since the last having the price has gone from high 600s to 9,000 so it's up 1200% the realized cap of Bitcoin, which, it's a, it's an adjusted market cap figure that's a little more accurate has gone from 5.5 billion to 104 billion. So it's up 1800%. Hash rate is up from 1.5 million terahashes per second to
122.2, that's up 8000%. It's a massive number, and then the wallet counts up from 7.7 to 48 million, which is a little over 500%. So, I mean, it's, it's difficult to find a reason not to be bullish with everything that's happening.
Sam Chwarzynski: No, I totally agree. Plan B, we heard, we heard a couple of the panelists already mentioned, the stock to flow and how it's starting to, get out not to be on similar footing to gold.
Would you like to [00:07:00] elaborate a little bit on that?
Plan B: Yeah, absolutely. the halving is, it's just a big celebration for me. to be honest, I've been waiting one and a half years since the article came out in March last year for this event. So, yeah, big celebration. we're entering a new phase.
and of course, the price doesn't go up immediately. there will be some volatility around the halving of, of, people that sell the news and bought the rumor. There Will be some, pumping and dumping, but no real action. It's, it's mainly a big celebration that we made it this far. And, I'm, I'm, I'm really honored to, to, to celebrate it with you guys.
Preston, you as a value investor, one of the first, few that, that recognized the value of Bitcoin. And Matt, you with your excellent piece on mining and how that could affect, yeah, brilliant article. and, Robert, with your zero article that opened, a new world for me to the [00:08:00] absolute scarcity.
So, you guys have to promise me that as soon as this, this virus thing is over, we, yeah, we do this chat again, face to face with some beers and old fashions.
Matt D'Souza: Absolutely.
We'll rendezvous somewhere around the world. I know you're, different time zone. So, we'll get together somewhere, have a great time.
Plan B: for me, the biggest thing is the digital scarcity, right? It's, it's all about the scarcity. the 21 million cap that Satoshi implemented, and that's going to, that, that, that's going to be played out today as well.
it will be around nine my time, but minors are, really, pushing all the equipment and the hash rate is, is at enormous height. So maybe it will be earlier, but the fact that it goes automatically to a 6.25 Bitcoins per block, that that keeps the, the cap there that keeps the digital scarcity there.
And that is a source of all the value, as I see it, or one of the major sources, at least in my view.
[00:09:00] Preston Pysh: Hey Sam, you don't mind if I ask Matt a question? Do you?
Sam Chwarzynski: No, of course not. Jump in, jump in,
Preston Pysh: so, so Matt, my question. For you is just, you know, post having, how much hashing do you think is going to come offline it percentage wise?
Matt D'Souza: So, you know, I think. It's really difficulty and hash have net effects, you know, with, with our companies, blockware solutions and blockware mining, we're, we're buying a lot of rigs we’re, getting rigs in the hands of us miners. So, we see the deal flow. and a lot of, a lot of S19 pros have sold out so.
Miners are in this phase of, of, you know, they're in the hardware upgrade cycle and, and a lot of the old gen, S9's are coming offline. The mid gen will blow out as well. If, if a Bitcoin's not above 10,000 above 9,000, but you're getting new gen coming in and it kind of counterbalances, The counterbalances, the hash rates.
So [00:10:00] I think right after halving, a lot of mining rigs, probably what's left of the old gen I, there might be 25 to 30% left of old gen, and I think that's going to be under a significant pressure. and, and I know a lot of the S 19 pros, they're just not going to arrive to get plugged in until late May, early June.
So we're gonna, we're gonna capture a good 20 days. 25 days of, probably favorable difficulty adjustments. and I think the hash rate could potentially go down at least 15%, 15, 20% in that, in that, you know, 20-day window as old gen come off. and we're waiting for new gen to ship in. cause it's about, you know, it's about not just buying rigs, but plugging them in and, and contributing to the network.
Preston Pysh: Have you seen any covid 19 impacts on the supply chain for the new rigs?
Matt D'Souza: Yeah, absolutely. I mean the not only, not only new rigs, but you look at, you look at some of the [00:11:00] next gen, there's been defection rates of 10 to 15% and miners need to send those back to China. and since everything has been locked down, you know, we in the U S we can't send it to the California side because California has been shut down.
So, I mean, our, our operation has had rigs since January. That's an RMA. That's, that's when a rig is dysfunctional and you're sending it back. It's been about four months and we still haven't gotten it. So, so yeah, those are the implications of COVID. Overall, you know, China seems to be back, manufacturing and hitting, their, hitting their, close to a hundred percent capacities, so, so there isn't really any more supply
bottlenecks. and logistics has been an issue cause it's significantly more expensive. Right? global logistics is probably down about 70%, especially air cargo. On top of that, of what's left, that 30%, they're focusing on medical supplies and masks. so, it's difficult. And, and two or two or three times [00:12:00] more expensive.
To ship from China to the U S so that kind of has, miners pausing on, do I want to deploy now, or do I want to deploy it? Like in July or August?
Sam Chwarzynski: Very well said. And just kind of segue into the whole Covid dynamic, adding to this perfect storm of bullishness for Bitcoin. As Matt, I think mentioned a little bit earlier, obviously we've got the supply side economics, improving with the, having, COVID, bringing about not only QE, infinity with all these central banks, but also, but also accelerating the rate of digitization payments and everything else that we're already in a digital world.
So could continue to see this adoption accelerate more, you know, not just out of this speculative increase. But obviously in the news lately, Paul Tudor Jones came out. He's buying it as an inflationary hedge.
what other drivers other than the broad stroke, you know, anti QE [00:13:00] movement. Would you
Matt D'Souza: Who is the question asked to?
Sam Chwarzynski: I'm sorry. Open, open question.
Preston Pysh: I've got a-
I've got a kind of maybe a contrarian point of view. I don't know with this crowd of whether it be contrarian or not, but I'm of the opinion that you're, you're mining selling pressure sets the floor of what we're seeing. So as this difficulty or as the four year having takes place, it's bumping that that price premium that the stock to flow valuation puts that in the 90,000 range.
I'm sure Plan B knows the exact figure, but it's around that price point. So as we transition to that, the miners are stepping in and the ones that are mining for at a large profit because they got new hardware are the ones that are driving that price higher and higher and higher. Right? And so as we get through that transition, a lot of people can say, Oh, it's because of all the printing and everything else.
And I think that that has a [00:14:00] huge impact on the price. But I think at the end of the day, the price floors is being set by those miners that are running the newer hardware that demand a higher price premium for them to sell there, to sell their treasury of coins that they're sitting on, on their balance sheet.
So, you know, as I look at the, at the having event, this is huge. This is, this is a massive event that is going to drive the price just through simple supply and demand. The other side, the other side of this that I think is important, not only with the minor selling, is the, the fact that you have people that are sitting on Bitcoins that they, that they acquired years ago, they're so deep in the money, in the position that they continue to, to hold them.
I mean, there, there are no rush to sell that position. They don't need to sell that position. It's like a billionaire and Fiat today. Like they don't have to go out there and, and sell that position for, for anything because they have so much of the position. And you have the same dynamic [00:15:00] playing out in BTC, with some of the people that have been in the space for five to 10 years.
that's where they're at. And so that supply is off the market. And so you're reliant on the miners that are mining these coins to put more onto the market in order to pay their electrical expenses.
Matt D'Souza: Couple of great points there. conceptually I think he, Preston explained it really well. what drives it from a, from a miner and metrics perspective is as more miners come online, the difficulty increases and therefore everyone's break-even is going up.
So, so that's what's pushing up the price of a Bitcoin. when the network hash increases, everyone's break even goes up. So because everyone's getting allocated less Bitcoin and therefore breakeven price increases. So that that's really what's happening behind the scenes to push cost of production up for everyone.
And, and that continues over the long-term. And, and you know. Preston explained it well. [00:16:00] Difficulty and increased network hash is what drives that. and then you made another great point at the end. What were you...?
Preston Pysh: just about the people that are deep in the money that are holding their coins, they're not selling them and putting them on the market for people to buy.
Matt D'Souza: There's that. And also, and also, they become, they become so important. Because it's, when you think about our society from a, from a game theory and human psychology perspective, I think about like the Koch brothers or the oil and gas industry, they will, they have a honeypot to protect, right? So, they donate millions and millions to, to politicians or lobbyists to protect their honeypot.
And that's what's, that's what we have going on in the Bitcoin space. I know of significant individuals who have accumulated mass amounts of Bitcoin in 2012 2013. and they're looking to, to essentially protect the network and bring hash to the U S and invest in mining because they want to decentralize and [00:17:00] network and protect their massive stake, right?
So, yes, the supply's off, the supply comes offline and they're there a quantity of Bitcoin. But on top of that, now you're developing some significant players who will expend money to, to improve the network, to protect that honeypot that they have, that, that massive stake. so I think that's really interesting too.
Plan B: I also think it's funny that we don't actually --- are very sure about why the price will go up. Of course, it will be demand and supply, but, even with the stock, to flow model in the hand, we don't know exactly why it is. It could be the re the, the, less selling pressure by minors. Right. That's one, one thing, but the counter argument would be that the, the, the number of coins that are mined per day, it's 1800.
Today, and, and, we'll be a 900, in a couple of hours. it's really a low amount compared to [00:18:00] the daily flow of Bitcoin. So, maybe less than 1%. So it's less selling power. Selling pressure from miners could be one thing. But the other thing, and I think the, Paul Tudor Jones a thing, illustrates that well is that there's mining perspective, but there's also an investor perspective that more and more investors are going to look at Bitcoin as
a real asset, a thing that's as scarce as gold. You see the headlines already so that that could be the narrative of the next phase. And so there will be a lot of more money flowing into this, this market. And that could also be, the cause of why the prices go up. And if there's one thing, I hope we learn this, this, next few months after the halving, is that we get to some better.
Insight into why, the prices are up and, and the, the dynamics behind it.
[00:19:00] Robert Breedlove: Yeah. I think, you know, at a very high level, something I see playing out and it's not talked about often, is it, you know, Bitcoin is the first incarnation or the closest thing we have to perfect economic information. Like we know it's supplied perfectly forever.
And you know, you can't say that for any physical commodity on earth. And again, another product of that is its absolute scarcity that we've all talked about. And you know, as Mark Twain said, I think I'm paraphrasing, it is like to make something valuable, you just have to make it scarce. And Bitcoin sort of perfects that once and for all for money.
And another thing I see that will drive, so, so to that end and perfect information, as the correlation continues to hold to say the stock to flow model, you're creating more of an incentive for people to front run this thing. You know, Satoshi said when he launched Bitcoin that it may make sense to get some just in case it catches on and becomes a self-fulfilling prophecy.
[00:20:00] Like that's what the perfect information of Bitcoin is effectively doing in my opinion. and the other interesting thing about the mining side is, as the financial services aspect of Bitcoin becomes more mature and miners can gain access to liquidity by means, other than selling the Bitcoin, say, doing Bitcoin collateralized loans, that's going to reduce selling pressure as well.
so that floor is going to get pushed up even harder. and you know, with
Paul Tudor Jones thing, I think is, you know, huge seal of legitimacy from mainstream macro. And as you know, we all know, speculators tend to become holders over time. You know, where they put their money, their mind follows, they'll fall down the rabbit hole, and see some of these deeper aspects of the value prop.
in Bitcoin and you know, I think still Bitcoin's, it's sort of getting adopted at the fringes. It's, it's the billionaires, seeking the kind of insure themselves against, on a nascent financial system, which Bitcoin sort of represents. [00:21:00] And then we have the victims of inflation on the other end that are just seeking to protect their, their wealth and live another day.
So, yeah, it's just, it's a really big deal from a lot of angles.
Matt D'Souza: Yeah. And from, you know, from a market's perspective, it's, it's absolutely the demand side is what really -- the sell pressure report, you know, we put that together in, in December of, 2019 back when the price of Bitcoin was at 10,000. And we expected kind of the sell off because there wasn't much
stimulating the demand side. and the cell pressure and stock to flow, to me, those are guardrails. they indicate, what the environment is like. So, when sell pressure comes off, it provides an environment for... where it's easier for Bitcoins to rally, but the demand side has to come in. And the demand side is really driven by the fundamentals, right?
What's going to bring retail and what's going to bring [00:22:00] hodlers to bring more Fiat? What's going to make investment funds bring more money in. So, I think stock to flow is an excellent analysis, but it's a guardrail what you, what you really need is the demand side to fuel Bitcoin higher in price. and Plan B had mentioned, well, the amount of coins that are getting released.
Percentage wise, it's small. percentage wise it's small compared to daily volume. Well a majority of that volume is just it's day traders, it's people taking both sides of the trade. It's you know, it's really churn that's short-term volatility, but what really is going to move price over the intermediate and long term is net cash in and out and the miners that sell pressure is significant from that perspective.
but what creates a bull cycle. Is the demand side. you know, a lot of, a lot of new Fiat coming in, and that's what has made me so bullish over the past three months. Because what at the fed is doing what's happening with the economy. QE, what QE does, I [00:23:00] hear people say it exacerbates income inequality.
It doesn't really exacerbate income inequality. It's really net worth inequality that gets exacerbated. The lower, the lower middle class and the lower class. They don't own assets, right? They, they rent their house. They don't have discretionary income to buy stock. they don't have, they just don't, they don't have property and other assets.
QE just pushes up the price of all assets. Right? So, the net worth, the high net worth, the upper middle-class individuals with jobs where they're putting some of their money in, no 401k and the company's contributing. They're the ones who really benefit from QE because QE pushes up the price of equity markets, real estate and, and so you get this
exacerbation in net worth inequality. and people are gonna point to that and say, this is caused by the fed, and we don't want a system where there's an individual who can [00:24:00] discretionary discretionarily and recklessly print money. And it's creating, more, more net worth inequality in the US and then people start to look elsewhere.
And I think what we're going to have in 2020 is that looking elsewhere is going to be Bitcoin. and that's what's going to fuel the demand side. And that's really what kicks off that next bull cycle and fuels it.
Preston Pysh: So, Matt, I have to piggyback on this because I flipping love that point. Here's where I think it's gonna really get fascinating.
So, you look at these high net worth individuals and how they were able to buy these massive bond tranches since 1981 you could have literally just sat on your hands and done nothing and murdered, absolutely murdered the bond market. as far as the price, just constantly getting bid interest rates going down, the prices go up, right.
That dynamic has played out since 1981. For any high net worth individual. You look at how, [00:25:00] I mean, Warren Buffett is a perfect example. He always had a massive bond position until this recent cycle. he was in, he was investing the float of, of Geico, right. Made tons and tons of money. Now you've got interest rates pegged at 0% not just in the U S all over the globe, right?
And where it's really getting fascinating as you're looking at the, at the curve of where those interest rates are going, and everyone's saying by November, December, you're going to have interest rates in the U S negative. So now if you're a high net worth individual and you're being offered negative interest rates on the thing, you're your sweetheart investment that's paid you billions and billions of dollars for decades.
And now all of a sudden that that trade is going nowhere. And when you look at the timing of what the stock, to flow model is, is demonstrating that we should be around 20,000 we should be passing the previous all-time high. Around Christmas, call it January or somewhere around in that timeframe, right?
When this same dynamic [00:26:00] where bonds in the entire globe, you can't find yield anywhere, and now all of a sudden you have this thing that goes beyond its previous all-time high, and they're looking at it from the lens of any long time holder who has bought Bitcoin in the last 10 years. Not a single one has lost a penny.
Right. Has not lost that. I should say a Satoshi. they have not lost any money, right. Every single person that bought and held since inception has made money at that point in time. So that's going to be such, such a crazy narrative. I just can't even imagine what that's gonna look like in the media and how the media is going to run with that story.
I mean, you can already see CNBC. I know when I entered this back in 2015 like. Dude, this was never talked about on CNBC, and if it was, it was kind of like a joke type discussion where people are rolling their eyes and saying, these people were crazy. Now it's brought up every single [00:27:00] day, every single day on CNBC.
It's brought up, so I can just, I'm seeing the model. I'm seeing where that projection's at on, I'm seeing where the bond market's going to be, which is a hundred trillion-dollar market cap right? Globally. So, like this is, this is going to be crazy. At that point in time, I think at the start of 2021 things are just going to, it's going to be unimaginable by all these different correlated tinge...
like they're all intertwined together. It's just going to be nuts.
Plan B: Hundred trillion us dollars. I couldn't agree more Preston.
No, I think you're, you're absolutely right. The negative interest rate in the US will be a total game changer. I saw it here in a Europe. As soon as the bank accounts charged near negative interest rates, everybody's looking for, something else and that something else will be Bitcoin for a lot of people.
Matt D'Souza: And the reason [00:28:00] why the U S dollar isn't there already. I mean, and when you think about risk and yield the, you know, in Europe, in Japan there's negative interest rates. so, it's, it's lower yield. But higher risk, right? Like you should be getting, you should be getting higher yield for more risk. So, everyone is looking at the U S and going, I can get, I can get higher yield yet lower risk because people view the dollar as lower risk than, than the European currency as well as the Japanese.
So, I believe that's why. That's what's going to. Be a little bit of a drag from us going to negative interest rates and why we're not already there. Because people from Europe and around the world would rather put their money in dollars, get lower, get a lower risk, lower risk exposure yet get better yield.
Right? So that's what's keeping our yield up right now. That's, that's what's going to hold back inflation. that's what's allowing. The, you know, the QE, [00:29:00] this QE cycle, because the money is still flows into dollars. But yeah, that's a little bit of a tangent.
Preston Pysh: We haven't even seen the bailouts of municipalities.
I mean, none of that has even played out yet, which I think
Matt D'Souza: I live in Chicago, by the way,
Preston Pysh: I mean, like this is, it's not like if it's going to happen, it's when it's going to happen. And so, like, none of that is even played out yet. So I can only imagine in the backdrop of bailouts and you have, you have people that don't know anything about the economy, literally nothing about the economy, but they do know their intuition is telling them that this can't be sustainable because you just can't give this company a billion dollars and that company a billion dollars, all this municipality failed.
All this state's pension plan is in trouble. Like people know that that. Somehow, they know it's just not sustainable and that it can't persist. So, then they're starting to say, well, what? What else is out there? And they're searching and they're looking for how does, how does this [00:30:00] end? And I think all that is, is not even hit the tip of the iceberg
Matt D'Souza: It's, it's not priced in. And, and you know, I, you look at the charts. The equity market, the equity market has gone to Mars, unemployment has gone down, right? So, there's that spread. There needs to be, that spread needs to come in. You can't have, you can't have all this unemployment and all, you know, an economy that's not functioning while the, while the equity markets are going up.
And that's really driven by, QE, right? It's, it's, it's suspended. but the other thing is, when you carved down. peel back the layers of the equity markets. You look at the Russell 2000, it has lagged significantly. That's, that's your indicator of small business and small companies. All the small caps.
So, it's lagged significantly. The NASDAQ is almost at all-time highs. It's only three or 4% it's, it's up year to date. It's maybe four or 5% off [00:31:00] all-time highs. And that's driven by the mega market cap stocks, Amazon, Apple, large companies. So once again, we're seeing this dynamic in the economy where the large companies are eating the share of our economy and the small businesses and small caps
are getting blown out. That's what's happening. And that contributes to that narrative of what's going on in our society. Do we need, and that's where people start pointing to a parallel or a different, financial system, which, which I think is going to be Bitcoin. I'm looking at looking at, cause really that's driven by, by, federal reserves, printing.
And that's why people are going to look at. What asset class or what system doesn't allow that; you know? So that's it's, that's what, ah. You know, I'm really interested in.
Robert Breedlove: Yeah. And that's, that is the Cantillon effect by design, right? Scalp wealth from people at the lowest tiers reallocate it to people the highest, which in this [00:32:00] case, most of that wealth, that confiscated wealth is being frozen at the financial asset level.
And we see that in, you know, NASDAQ, S&P, but you see, the other side of it in the weak, Russell and the other small business, aspects, so I'll push back on this though, is that QE does both. It does create net income, or it does create wealth disparity, but it also creates income disparity because, you know, capital generates income.
And it also, because we erode this, this trust network through which business inter-operates you actually reduce productivity. And this is like the extreme example of this would be a country in hyperinflation, right? Its productivity drops to zero, but that is not, that's not a binary outcome. Like the higher the inflation rate increases, the more the less productive the country becomes, so less productive.
The higher the prices, the lower the take for the main street guy. The other thing that's interesting is, you know, with negative rates, especially is US treasuries, are the collateral base of the Euro dollar system, which is this [00:33:00] us dollar driven system used by offshore bankers. If you, you know, if we go into negative rates here in the U S that's going to push this hunt for alternatives even further.
We've had China and Russia seeking for some time. an alternative to the U S centric financial system. and there, you know, due to geopolitical game theory, there'll be pushed towards a neutral money neutral settlement system, which in the world today, there is nothing better than Bitcoin for that. The other thing that's I think is interesting too, there'll be a demand driver is as we see this populous backlash of, countries looking... you know where monetary policy is failing, countries will look to enforce more, fiscal policy, more heavy, heavy handed, and the billionaires and other high net worth individuals.
They come after, they're going to seek refuge and confiscation of existing assets, right? These used to be offshore banking, physical gold, et cetera. But as we all know. Bitcoin properly stored is basically immune to confiscation. So, I think that's going to be a [00:34:00] big demand driver as well. And, you know, in a world where inflation is kind of becoming the primary means of taxation, and Bitcoin's the only money with the 0% terminal inflation rate, you can say it's, in that sense, it's kind of like the most perfectly tax resistant asset we've ever had.
And clearly there's going to be a huge demand for that. I guess in general, the high level is, it's transforming this Keynesian versus Austrian economics debate from a, from a philosophical debate, to a live market test, and we're seeing that live market test play out in real time. And it turns out the Austrians were
Matt D'Souza: Some, some, some really great points there. And I love hearing that. And I, I'll just give you some real-world examples. you know, when we went to China and we visited some of these large mines, massive mines in Chengdu, and met some really large miners, they are mining Bitcoin. A lot of them are mining Bitcoin to kind of get capital out of China.
Right. [00:35:00] Because you're, you're expending your currency their RNB on electricity and then they're acquiring Bitcoin and then they can move it to Canada or the U S and either buy real estate or or hold onto their Bitcoin. So, we're, we're seeing, we met a few large miners doing that with the purpose of accumulating Bitcoin, to get out of the RNB currency, which I think is fascinating.
it's the capital controls. You know, I, I, my fund was kind of doing, a saft trade, OTC with a Chinese fund. And we were like, yeah, send us a wire. And, and, and the wires too large, they have capital controls. So, a lot of them are holding, holding funds in either Bitcoin or tether if they don't want to deal with short term volatility.
So, we're seeing this dynamic play in play out in the second largest economy in the world. capital controls are real. Everyone like it. It's,
we're in a bubble in the U S. These things, they're just not as, [00:36:00] they're just not as like relevant to us cause we're not seeing it. But the rest of the world, that's the norm.
And Bitcoin's a global phenomenon. So, it's, you know, these are, these are really significant catalyst that will push the adoption.
Robert Breedlove: Yeah, it's an exit hatch from this panopticon that's been constructed around us, and it's, it's more visible in countries like China, but it's increasingly visible worldwide.
Right. And the more money we print, the more painful it becomes for everyone. You know, the desire for that exit will increase.
Plan B: Another major power that will accelerate all that we have been talking about is, arbitrage. I think. And, this guy, Paul Tudor Jones is, is a, is a great example. I don't know if you know him, but he has a, he has a very nice, he's goes back a long time.
So, there's a very nice, old documentary on YouTube that I recommend everybody to watch. It's from 1987. And, and there was a time, this video was, [00:37:00] forbidden. It was, it was not, not for sale. It was hard to get, but now it's on YouTube and make sure you see it. You see the younger version of him in 1987 and he's, yeah, he's doing arbitrage, fx, mainly, between all the currencies.
And, and I think that's, that's, you know, Bitcoin is also a currency. It doesn't have a, an interest rate. But there is a very strong arbitrage relationship between currencies all over the world and an interest rate. Of course, it's very tight mathematically. so that will play into, there’s a whole microenvironment, thing, and maybe the arbitrage forces are, are even stronger than the adoption forces of retail and et cetera, et cetera. For me, as an investor, I see big, big people like, like Paul moving into this space. When they see something, they see something, they, they're not going to move one or 2% of their assets in a, in Bitcoin if they don't see well.
[00:38:00] I guess what we're seeing as well. And, but more, more people will do. So I think that will be, you know, those people have money and, and, and, and 80% of the, the people on earth don't have money, so they, they can, they can adopt, but it will be a very small, impact. And I think arbitrage of, well, big funds, billionaires, et cetera, that will, that will really, make a big impact.
Matt D'Souza: I was going to say just piggybacking off Plan B, he makes a great point. Global macro investors, global macro hedge fund managers, they don't get their toe in. you know, the number one rule is cutting your losses, but number two, it's almost, it's almost a greater sin to, to hit a home run or to hit a massive trade and not have enough allocated.
So, it, you know, Stan Stanley Druckenmiller said it best. when he used to manage money for George Soros, George Soros would eat, you know, you're going to be wrong on a lot of your trades, right? But George Soros said, it's never [00:39:00] okay to be extremely right and not have enough capital in play. So, so these, these large fund managers, especially the macro ones, they understand that they're not going to just dip their toe in, they're going to get a significant position in Bitcoin.
and, and, you know, I'm just kinda mimicking on what Plan B says. You know, it's not just not okay to have to hit massive numbers and, and not have it be significant to your portfolio because you took. A tiny little position. So, expect, expect some fund managers to take significant positions, and, and also Paul Tudor Jones is just the first domino.
a lot of fund managers are, are your traditional, kind of the middle tier. They're all their followers. They, they, that's why the market operates as a herd. So, this is just the first domino, and I expect many more waves of, fund managers to start looking at Bitcoin and getting involved.
Plan B: Just to give you a number to put some number on there.
[00:40:00] $10 million is often seen as a seed capital kind of thing. I would say absolutely minimum, so.
Matt D'Souza: Exactly.
Sam Chwarzynski: I think this segues well into a point Preston made a little bit earlier about the maturity of the you know, the derivatives market for, you know, for Bitcoin, not only as it comes to miners, but to create more of those arbitrage opportunities for the, for the larger macro players to be able to move, you know, that type of size without, you know, having to go through someone, you know, some of these retail exchanges, the current channels like they do now.
what do you, what do you?
see as the biggest. Threat for, for this growing dynamic. So we've, we've seen it slowly, slowly evolve from a fringe technology, you know, using it to buy things on the dark web to now sort of a commodity in its infancy, [00:41:00] infancy to where we can see it potentially being the framework of a parallel financial system.
What do you guys think is this the biggest threat to that roadmap potentially being achieved.
I don’t know if I'm answering your question, but I want to talk about a threat that I noticed the other day, and this is the bullish, panel. So, this is Bitcoin bullish, even though I'm talking about a threat.
so, I was talking to a person who had, issued a loan to another party, in excess of a million dollars. And. I just, I looked at him, I was like, that's, that's really scary for me. If you are the person who is issuing debt in this environment, I'd be very concerned because if, if in fact we are moving to a new global currency and let's just, let's just play devil's advocate and let's just say, Hey, this thing's going all the way on the next cycle.
[00:42:00] The risk for people is going to be the speed at which they can move their positioning, the liquidity of, of how fast they can move their positioning. And when I look at all the dynamics at play from a macro standpoint, and I look at, you know, historical events and how people are trying to transition into the new currency or, or something that's going to preserve their wealth.
One day of waiting will literally feel like four months when you're going through those types of events, and since we've never experienced those types of events of events in our lifetime, it's really hard for people to envision what that is and what that is going to be like. But I think one of the biggest risks for anybody, especially people that have issued debt denominated in Fiat, I think they've got a huge, massive risk on their hands because.
To offload that they're going to have to offload it at a severe discount to the principle that that is listed [00:43:00] for. in order to expedite the movement of that. And then you have to go through traditional clearance and all this other stuff. Like, I mean, it takes a long time to get your money onto an exchange and to participate in this new emerging thing.
And so, I mean, I just don't know how the market is going to possibly. Be able to handle a news cycle that says Bitcoin goes through a hundred thousand. Like what that's going to do when you have Paul Tudor Jones buying it right now, and other people like Paul Tudor Jones buying it, that, I just can't imagine the amount of people that are going to try to fit through that pinhole of liquidity into something that is this scarce and that many coins that aren't even on the exchange anymore.
Because you got a bunch of people sitting on them that aren't selling them. that to me is, is just a crazy risk that I think very, very, very few people understand at this point.
Matt D'Souza: It's one of my, what you're bringing up is, is one of [00:44:00] the significant factors of why Bitcoin has these massive run up run ups in a short period of time.
It's, it's, it's literally a pebble, right? It's, that's how large Bitcoin is compared to other asset classes. I don't know what the market cap might be. 140 billion right now, that's, that's half the, that's a third of just Facebook stock. Forget the equity markets, we're discussing one stock, right? It's a 10th the size of gold.
So, if you get just a little right, I think there's 36 trillion in pension money. If you just get 1% of pension money involved, that's 360 billion. Now. Now you don't right, that that's twice the size of Bitcoin's market cap. That's not how market works though. if you, if you inject a billion dollars into Bitcoin, it's going up many multiples.
If I, if I went onto the exchanges right now and I hit a market order of three to 5 million, I'm going to move the price a couple of percent, right? So, so the, [00:45:00] it. Bitcoin and why we're so bullish and why we think this cycle could move so quickly and why, you know, I talk about sell pressure and stock to flow more as guardrails, you know, there, I don't really view them as much as
price targets, but more guardrails on when you're in environments for Bitcoin to succeed, for the price to increase more easily. you know, that's why I kind of view them better as guardrails and with Bitcoin, the market cap being so small, and now you have, when you have a, a technology, a disruptive technology in its infancy, yet you have this robust secondary market with liquidity.
Right? We have the secondary markets and now you infuse speculators, and now you have an environment where they're able to start envisioning the possibilities of this technology coming to fruition because of, you know, the QE and the fed spending. That's how you get these parabolic [00:46:00] bull markets. It's such a small market.
You infuse capital in there. and, and you have a secondary market. That's how you get the parabolic bull markets. It's why we're so excited over the next 18 to 24 months.
Preston Pysh: Plan B. I'm kinda curious to hear your thoughts because I think Sam was going after something much more negatively oriented towards Bitcoin.
I can't give him an answer other than the liquidity concern I have for the other side of the rest of their portfolio.
Plan B: I'll talk a bit about the futures.
Cause I know a lot of from the polls I did as well, that a lot of people see the futures market as one of the major, bad things for Bitcoin. And, one of the things that broke the, 90, or the 2017 all-time high. And I don't think that's true. I think that, futures are a very positive influence for Bitcoin market because it, it, it gives an exit for big investors.
So, for example, me as a big investor, not as a Bitcoin investor, but as a, as [00:47:00] a pension fund investor or institutional effort, I would never invest in something that there that I cannot. That I cannot get out of easily. And that means that there must be derivatives markets. There must be put options to sell, to buy.
There must be futures to sell. There must be different exits. and that's, A condition before I would enter the market. So, so futures is, is, is a, yeah, a very good thing from, from that point of view. And it's also a very natural place where, miners that know how much Bitcoin they are going to mine next month and two months from now and three months from now.
And who don't want to have that volatility, those miners can sell in the future. this bit they can hedge their, there. Get rid of the volatility and against those miners that are sellers, natural sellers of a futures. there are the funds and the Paul Tudor Joneses that, that wants to enter.
The Bitcoin market. Don't, don't [00:48:00] want to own keys yet because they don't know it. or there's funds that never want to, not, have, have keys and aren't going to be to. Paper, Bitcoin investors. So, they'll, they'll take the long side of that trade. And that's a very natural place for, for big money. Miners,
on the one hand is, funds on the other hand, to, To, to establish on the futures market. And of course, there'll be speculators that go naked, short, blah, blah, blah. But those are small players, I think, in the end. So, yeah, no, I think it's a very bullish thing that we have a fully functioning, and, and regulated, futures markets at, at both the CME and, and, and, and Bakkt in New York.
Robert Breedlove: To use, to levee analogy on that. It's kind of like we have a very crowded theater with a small and shrinking exit. We exit being Bitcoin and the theater being just, everyone's stuck in, you know, either the world of capital controls or an inflationary environment. [00:49:00] and that. The demand for the exit is basically the Bitcoin price.
So, I agree with everything that was said, which is, you know, the bullish side of the threat model, I guess. But just to speak to the negative side, I've long believed that the best attack vector on Bitcoin geopolitically was a global disinformation campaign coupled with a coordinated reversion to a gold standard.
I think that's probably the best hope a government would have. Governments would have to try and put the genie back in the bottle, so to speak. but I've been thinking more about and the IMF published something recently where they're going to. They're basically saying they're going to start looking at how to do derivatives of SDRs and push those out to consumers, and institutions on a more on, basically to digitize SDRs to make them commonly useful.
So, this would be, SDRs are special drawing rights. This would be basically world money, right? So, this would be the, for the one world [00:50:00] currency or something to that effect, which I think is a legitimate threat because they can really try to enforce the grip they already have in, in the, in the existing financial system.
So, there's, there's a threat there. I still feel like, demand squeezes out as a, as they try to, constrict people in that model. I think people still spill out, as Matt was saying about, people in China using Bitcoin to circumvent capital controls. I think you still see that. but that is a threat.
And then the last thing is just the law, right? I mean, we've seen, you know, executive order 6102 in the U S where they, confiscated gold in the past. There’s a very real chance that. Nation States can wake up to the existential threat that this poses and just flex on the law. Just saying, you have to self-report, you have to turn it in.
It's illegal to own. They can couple that with the disinformation campaign, you know, starts smearing Bitcoin is terrorist money drug, which they already kind of do drug trafficking, whatever. and that just pushes people into
to consider how much they value [00:51:00] compliance versus freedom.
Sam Chwarzynski: That's a great, great, great notes.
Robert Breedlove: And who knows? Who knows how people, where do they fall on that? On what side of that decision.
Sam Chwarzynski: I
to interrupt. I'm really, really digging this, this conversation, but I just want to get closing thoughts from everyone. we're running a little bit out of time already. so, if we want to go down the line and wrap things up, Preston, I believe you had.
You had just started in,
Preston Pysh: yeah, no, I'll, I'll transition into something else. I was just going to say, I think that, that, that, that argument gets harder by the day. I agree with Robert. I think that that risk is very real, but I think the argument gets much harder by the day when you have, you know, the Paul Tudor Jones of the world taking positions, that are very influential people.
the ramp up of this, the, the parabolic piece of this makes the speed at which it's going to happen. Very difficult for that to play out. I think so.
Matt D'Souza: Great point.
Preston Pysh: But I love the fact that Robert actually [00:52:00] brought something to the table, unlike myself.
I think this, I think this is a time of celebration.
I think this is really exciting and I think that, moving forward Plan B's thesis is going to become very valid. And I'm excited to see that play out.
Plan B: I'm as excited as you are. So, let's see. Let's see it go that way. And yeah, it is great to talk to you all, man. And, happy, happy, halving.
Matt D'Souza: I'm glad we got everyone together. I think we're, you know, these are Robert, Preston, Plan B, some of the greatest analysts talking about Bitcoin in the space. So really lucky.
Robert Breedlove: Yeah. I feel, you know, I feel very fortunate to have found what I think is my life's work in Bitcoin. And, you know, it's, to me, it's a reinforcement of that belief to be surrounded by great minds like you guys.
So, thank you a lot. And the, you know, this is the separation of money and state. [00:53:00] Which is a really big fucking deal for the rest of history, so I'm just glad to be a part of it, man.
Sam Chwarzynski: Well said. All right, guys. Well, I think that just about does it for, for the fundamental bullishness of Bitcoin. really enjoyed the talk
Matt D'Souza: Did the price go up over the past 50 minutes?