April 2, 2025 • 61 mins
James Lavish has over 25 years of institutional investing experience and serves as the Managing Partner of the Bitcoin Opportunity Fund, which strategically invests in both public and private Bitcoin-related ventures. He is also the author of The Informationist, a newsletter with over 35,000 subscribers that simplifies complex financial concepts weekly. In our conversation, James breaks down how inflation is manipulated, why wages aren’t keeping up with the real cost of living, and the massive wealth transfer happening right now. He explains why owning assets is no longer optional, how Bitcoin is positioned to outpace traditional investments, and what happens if investors ignore these shifting financial realities. If you’re still relying on old investing strategies, this conversation is your wake-up call.
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Speaker 1 (00:00):
Don't own assets, then you're being left behind because your
wages are not keeping up. You are falling behind and
even being able to buy those assets. That's the greatest
challenge for this next generation.
Speaker 2 (00:11):
But the reality is if you're not making at least
ten percent, you're actually falling behind, not even keeping even.
Speaker 1 (00:16):
And that's the frustration that people are starting to feel it.
The wages are going up, they're like, God, I got
a five percent raise, but I still can't afford the
things I used to be able to afford. Why, Well,
it's because those numbers are manipulated. It's evil, it's demeaning.
And the young kids in their mid thirties, they're struggling
to even buy a house because it takes so much
more income now to buy a house than it used to.
(00:37):
And the election cycles bring a lot of uncertainty. And
once you get certainty in the market, when you had
certainty that Trump was going to be elected and that
he is elected, well bitcoin ripped. Why is that? Well,
there's a few reasons.
Speaker 2 (00:48):
What's the one thing happening right now that most people
don't understand but absolutely should if they want to survive financially.
Speaker 1 (00:57):
A lot of people in just the normal world, don't
understand how the money is being debased right underneath them,
the numbers of inflation being manipulated, and now they're really
just being stolen from every day. They're being told that
if you buy a bond, if you buy t bills
or treasuries, then you can keep up with it.
Speaker 2 (01:14):
It's not true, all right, James. You spent the year
analyzing global markets, and like, let's be honest, right, the
financial system is barely hanging by a thread. So what's
the one thing happening right now that most people don't
understand but absolutely should if they want to survive financially.
Speaker 1 (01:35):
A lot of people in just the normal world don't
understand how the money is being debased right underneath them.
They just assume that inflation is a natural thing, and
they don't see just how badly it's being manipulated, the
numbers of inflation being manipulated, and now they're really just
being stolen from every day. So the system forces people
(02:00):
to take risk to keep up with that in debasement,
so they have to buy risk ads. So I have
to invest in real estate. They have to invest in things,
you know, stocks and gold and whatnot. In order to
try to keep up with that inflation. They're being told
that if you buy a bond, if you buy t
bills or treasuries, then you can keep up with it.
(02:21):
It's not true. So the money supply is expanding, it's
to rate that they can't keep up, and they're getting
a negative return on whatever dollars they've even invested there,
so they go further out. And then some people are
realizing that, so they go further out on the risk
curve in order to try to catch up, and a
lot of times it just doesn't work.
Speaker 2 (02:43):
So would you say they don't understand mechanically what's happening.
So I think most people know they should probably be investing,
but that's because they think they want their money to
grow so they have more money in the future. But
maybe they don't realize as much that it's not just
you want your money grow so you have more in
the future, but you actually have to out grow the
rate of what you're losing.
Speaker 1 (03:02):
Is that what you're saying, Yeah, exactly, And so you know,
it's like you're just trying to pick a horse that
will keep up with with all the prices around us.
You know, I mean, I just went down the street.
Great place here, San Clement. They love it here. But
to get a taco and a breakfast taco is like
it is like nine dollars and eighty cents for a taco.
(03:23):
I mean, it's just insane. Right, So yeah, the reality
is that people feel it. They feel like the prices
are going up. But what they don't and they and
they think they buy something and it's rising in value.
What is actually happening, and this is what's misunderstood, is
that it's just it's holding its value better than what
(03:45):
the underlying currency that it's being priced in. So if
you get a piece of real estate that rises in
value faster than the base the debasement of the dollar,
the dollar meaning inflation. So if it rises fast an
inflation call inflation today three and a half percent. And
if your beach front property is rising at ten percent,
(04:08):
well you've made a good call. You bought the right horse.
It's highly desirable. There's not you know, there's only so
many of them, so it's limited in supply being beach
front property. All right, good call, you know. But if
you bought a stock that was a high flyer and
you thought, oh, this is going to keep going up
(04:28):
and it crashes. That's a bad call. And now you've
taken that risk to try to outpace that inflation, and
you've missed it, and now you're starting at a place
that's even further behind.
Speaker 2 (04:40):
You said that inflation's three percent, that's a government reported
number of CPI. I don't think that's the real inflation number.
The number we have to beat. Is that the number
we need to beat?
Speaker 1 (04:54):
Well, that's the number of the people are told they
need to bet. But they're told two things. They're told
that inflation is natural and you need it for the
economy to grow. It's not true. It's uh. And you
and I talk about this quite a bit about how
technology should actually make your life better with cheaper things.
You know, the more the technology advances, the cheaper things
(05:17):
should become, right, But it doesn't happen that way. Why
is that because they manipulate the money supply. So let's
talk about that three percent. Well, that three three and
a half percent that we're talking about that is way
above the two percent inflationary that is supposed to be
the target. Well, that's what they've been reporting, but we
well know that the actual inflationary is much more closely
(05:41):
tied to the expansion of the money supply. And then
if you look back to nineteen seventy one, when we
got off the gold standard, money has been expanding by
over seven percent. There are slightly different measures, but between
six point nine seven point one percent since nineteen seventy
one annually, right.
Speaker 2 (06:01):
And even faster in a shorter time period, so ten
ten percent since twenty nineteen. So do you think back
to sort of what you said. What they don't understand
what's happening right now, but they should if they want
to survive. Is also that the number you need to
beat is a lot higher than you think it is.
You've been told it's three percent. Your financial advisor's telling
you you're making four or five percent, you're doing pretty good.
(06:24):
But the reality is if you're not making at least
ten percent, you're actually falling behind, not even keeping even exactly.
Speaker 1 (06:31):
And that's the frustration that people are starting to feel.
Speaker 2 (06:33):
It.
Speaker 1 (06:33):
Yeah, they're feeling that frustration. They don't understand. They see that,
you know, their wages are going up, They're like, oh,
I got a five percent raise, but I still can't
afford the things that used to be able to afford. Why, Well,
it's because those numbers are manipulated. Yeah, and it's because
certain things are moved in and out of baskets of
the CPI basket to make those numbers look a certain way.
(06:55):
I mean, you know, it's it can get political and
all that, but the reality is, and insurance costs are
going up or auto repair.
Speaker 2 (07:03):
Or supposedly the CPI number that came out the other
day showed the insurance was dropping. I haven't seen that.
Speaker 1 (07:10):
I've seen that. Yeah, yeah, so and that's the problem.
And so people are frustrated. And this all goes into that,
you know, the the propensity for people to take on
more and more risk to try to keep up. And
if you think about it, it's a you know, it's evil,
(07:30):
it's it's demeaning. You're working so hard, you're trying to
keep up, You're you're getting your raises and you're falling
behind and you can't you can't afford things that you
used to be able to afford. And the young kids,
you know, the kids who are just getting out of
college twenty thirty and in their in their mid thirties,
they're struggling to even buy a house because it takes
so much more income now to buy a house than
(07:53):
it used to, and and that all is, this has
all been feeding into that.
Speaker 2 (07:59):
Yeah, so I know you talk a lot about what
feeds into that and debt and you know, the macro
cycle and things like that. So how bad does this
actually get and then what happens to the people who
don't shift their investment strategy and time?
Speaker 1 (08:15):
Yeah, well, I think it just continues the way it
is for a while. This can it's just perpetual high
inflation for a long period of time. You know, we
were seeing now some really uh, in my opinion, good things,
excellent things are going on in DC now where you've
(08:35):
got the DOGE Commission, Department of Government Efficiency with Elon
and UH and Vivac. But they're cutting expenses left and right.
They're they're finding just in insane expenses that they're they're
cutting out. That's good and that will that will help.
Speaker 2 (08:54):
And I think so far they're finding them.
Speaker 1 (08:55):
They're finding them.
Speaker 2 (08:56):
We'll see if they cut them out.
Speaker 1 (08:57):
I agree, I agree, And there's gonna there's gonna be
a lot of fighting on that. But the reality is
the math is so bad that it doesn't really matter
that the dead is going to keep expanding. It's we're
going to continue to operate in deficits and we're going
to have to continue to borrow money, which is inflationary,
and that feeds into this whole, you know cycle. So
(09:19):
your question is how bad does it get? Well, it
can get pretty bad. It can get We can if
you look at the inflation rate over the over the
nineteen seventies into the eighties, you saw inflation went up,
it came down, it kind of stabilized, and then it
went up again, had the other spike, and it kind
of another humping the camel's back, and we're following that
(09:42):
trajectory almost to the t in this same cycle where
the Fed raised they pumped a bunch of money and
they realized they made a policy mistake there and so
they raised rates and so inflation ran. It's come all
the way back down. But we have such massive deficit
spending coming out of DC, you know that we have
(10:05):
fiscally driven inflation, you know, and that's just continuing and
so it's kind of picking up again. So it could
get really bad here, meaning that we hit ten, fifteen,
even twenty percent inflation for a short period of time,
it's possible. Do I expect that, No, but I do
(10:25):
expect us to just continue to have this high perpetual inflation,
whether it's five, five, whatever the number they're they're measuring
and communicating. The reality is it's probably closer to seven
to twelve percent. So yeah, it's it. It's it just
(10:46):
means that over that period of time. Though. This is
another thing that people don't realize is that seven percent
annual inflation compounded over years will eat into your uh,
eat into your earnings and your discripce income. You know,
it can eat into a forty fifty, sixty, seventy percent
(11:06):
in a decade. So that's the problem.
Speaker 2 (11:08):
Yeah, where you're buying fifty percent less goods and services
in a decade from now because because of the way
it compounds like that. At the same time, I mean,
all of that deficit spending, all that money printing, all
that debt, we're also seeing like the largest gap in
income and equality we've ever seen. So then it does
(11:30):
seem like some people are getting rich and some people
are getting poorer from this. So I mean, looking at
charts that show this wealth inequality gap growing faster and
faster and faster bigger and bigger and bigger. I mean,
is this the big wealth transfer that's happening right now.
Speaker 1 (11:46):
Yeah, it's the people who own assets. You know, you
hear about the boomers have made out so well. Uh,
they're living large, They're living these huge homes, They're worth
so much money. And the reality is, you know, the
older demograph is typically the demographic that owns assets, and
the one to own assets have done well because you've
had a massive amount of asset inflation as we continue
(12:09):
to print money. And so that's it. That's the crux
right there. If you don't own assets, then you're being
left behind because your wages are not keeping up and
so you are falling behind and even being able to
buy those assets. And so that's the greatest challenge for
this next generation is how do you get some assets
(12:30):
that you can hold for a long period of time
that will outpace that expansion the money supply, Which leads
us exactly to why we do what we do and
why we're so focused on bitcoin.
Speaker 2 (12:44):
So if you look at like that real rate of
monetary debasement as being inflation ten percent, twelve fourteen percent,
and then you look at all the different asset classes.
So then you go, Okay, what asset classes do I
have to invest in that could beat that. I just
saw this video the other day of Radi Alio talking about, well,
the way that you want to build wealth is you
want to invest across fifteen different asset classes. There's just
(13:06):
a couple of days ago, so you're still pushing this
all weather portfolio. Problem is that all other portfolio doesn't
make any money if they've had over seventy billion dollars
in redemptions in the last several years, because it just
doesn't make any money. And I think it goes back
to why would I invest through fifteen different assets if
none of those assets are keeping up with or beating
the rate of monetary debasement. And so when you look
(13:28):
at it from that type of a lens, which is
sort of how I look from it, then you see
that the only things that have beat it are tech
stocks in the NASDAC and bitcoin and that's it. So
what we see is that different assets soak up that
extra licuity at different rates, and I think that's what
separates the winners and loser. And it seems like it
doesn't seem like factually in history, bitcoin has soaked that
(13:51):
up at the fastest rate. So why is that.
Speaker 1 (13:53):
Yeah, I mean, well, obviously to you and me, bitcoin
is it sounds money. It's hard money. It's something that
cannot be debased. There's only going to be twenty one
million bitcoin ever minted, ever created, and so it can't
be manipulated like fiat money supplies and even like gold.
(14:18):
You know, we've seen the madness out in London this
last week, last few weeks and what's happening there. And
this is kind of an important thing because people think, oh, yeah,
but I buy gold, then I'm protected. But gold, I mean,
if gold was not so manipulated, it would be at
a much higher price. It would be you know, in
the tens of thousands. It's not wouldn't be just hovering
(14:39):
around three. And so the issue there is that you
have sovereigns buying gold. You have some worries about Trump
tariffs and bringing your gold back into the States and
having a sudden tariff on it. So you've got the
comics is bringing gold back into New York and into
(15:00):
the United States, and so you have players around the
world that are buying gold, like the bricks countries to
try to avoid having to buy US treasuries in order
to have dollars because everybody still needs dollars around the world.
But if you have gold, then you're supposedly protected. Well,
the issue in last week, in the last few weeks
(15:21):
out in London is that the Bank of England realized,
we don't have all the gold in our vaults. We
can't just send it out, so it's going to take
us four to eight weeks to get you your gold. Okay,
So then think about that. You've got four to eight
weeks before you can get your hard asset that is
supposed supposedly hard and being held in a vault for you. Okay,
(15:43):
that's number one. Then you've got to transfer it. You've
got to transport it, which you've got to put it
on You've got to put on a truck and a
plane or a boat or something on rail to get
it to wherever you need to be. And it's got
to be protected, so you have to pay for security
for it. It's very heavy stuff and they even like
this is heavy. Bank of England was on stage and
(16:04):
at a press conferenceation, well, it's really heavy, so it
takes a while to move. Yeah, you know, so if
you want to move a billion dollars of gold, think
about all that would take to do that, to get
it from London to New York. Then think about something
like bitcoin, where you have verifiable addresses and it's immutable
(16:24):
and you know that you look at that address and
you see exactly how much bitcoin is in that and
that part of the block chain. Right, it's it's very
easily auditible. You don't have to worry that it might
be just gold plated nickel like you saw in the
JP Morgan vaults they had fifty million dollars a gold
(16:45):
plated nickel by accident that they didn't know about. Well that,
you know, that's not going to happen. You can move it.
You can move a billion dollars a bitcoin in less
than ten minutes for a few bucks. It's I mean,
it's just it's staggering and people are starting to catch
on to this, and it's the younger generation is very
comfortable with that digital asset. Uh you know that concept.
(17:07):
The older generation not so much. They love the gold
typically you know, my mom loves a bitgoing but it
but you have you have the younger generation now is
looking at things like digital assets and bitcoin is one
of those digital assets that is starting to bring people
over to that to a new a new asset class,
(17:29):
and it's emerging and it's growing rapidly, and that's the
that's the point.
Speaker 2 (17:34):
Do you see sort of like this bifurcation happened in
the market where you mentioned that the older generation the
younger generation. I'm not sure if I see it that way,
but I do see a bifurcation happening where you see
massive demand for gold through central banks. Their demand for
gold is at all time highs the last couple of years.
You mentioned bricks nations China try and divest from treasuries,
things like that. So you see the governments of the
(17:56):
central banks sort of clamoring for the gold. But when
you look at a little bit lower down, when you
look at the institutions, even when you look at like
government sovereign wealth funds and then down to institutions in
Wall Street, it seems they're more into buying bitcoin right now.
So I don't hear I see announcements almost every day
of new public traded companies adding bitcoin to their balance sheet.
I haven't heard of any that are adding gold to
(18:17):
their balance sheet. We hear about sovereign wealth funds. I
think just today was it Saudi Arabia or was it
Abu Dhabi? Anow say, four hundred and sixty million dollars
worth of bitcoin added, but you didn't hear about them
adding gold. So it's almost like this bifurcation where the
governments and essential banks seem to be acquiring goal at
a rapid rate, but then everyone just below that sovereign
(18:37):
wealth down to institutions and banks are going into bitcoin.
Is that what you're seeing?
Speaker 1 (18:42):
Yeah, I mean it's fair exactly. And just going back
to what we're talking about. You know that the inflation
keep up, inflation and demographics, you know, that's one side
of it, but what you just hit on is that
it's probably the most This is the key development of
for bitcoin in In this last eighteen months, you've had
(19:03):
massive tailwinds for this asset class, and we can talk
through each of those, but just like you said, you
have these sovereign wealth funds, institutions, very large high net
worth individuals coming into this new asset class because they
know that this is all game. Theory now is that
I need to get some of this before the price
(19:25):
gets away from me, and then people look at it
and say, oh god, it's one hundred thousand dollars. It's
too late. I can't afford a bitcoin now, Whereas you
know you and I know that that's just a number.
Like the debasement's not going to stop. This is going
to continue to go up in value, meaning the dollar
is going to go down in value against it. So
(19:47):
they're not sensitive to price like retail is. Like you
know some of some of the smaller players are who
only have so much money, they're very sensitive to the
price of bitcoin. Whereas you have Abu Dhabi come in,
they can buy half a billion dollars of bitcoin and
it is and just hey, just go along in the market,
(20:08):
like I'm I'm not priced sense of don't wait for
I'm not waiting for it to get back to seventy. Yeah,
just participate and go along in the market. And that's
what they did. And what's interesting about that is they
bought the ETFs. Apparently from the report, they bought ETFs,
and so people would now say, wow, but that's just
paper bitcoin. It's not. The ETFs have a legal obligation
(20:30):
to own the underlying bitcoin. If you're a spot ETF
like ibit or like you know, FBTC or bit wise
you have to own those the corresponding amount of bitcoin
to the nav okay. So, but that is an easy
way for any player to get in. Sovereign funds, governments, institutions, endowments,
(20:57):
pension funds, they can just buy the ETF. Now it'ld say,
it's that that's a super highway that's been built. Yeah,
it's so easy for them to get on. That's institutional
adoption is happening. It's happening quietly. You do see companies
coming in buying bitcoin. You do hear about companies buying
actual bitcoin on their treasuries. But this is kind of
like it's all now forming and taking shape and exactly
(21:19):
what you just said. It's it's becoming adopted as a
new asset class.
Speaker 2 (21:23):
Yeah, right before our eyes. You mentioned earlier like sort
of like the Bank of England and well the LBMA
Lendon boil Market and as well as the as the
BOE Bank of England both running out of gold. The
world's clamoring for gold, trying to get it from wherever
they can. I think the LBMA had three hundred and
twenty million ounces on paper, but like four hundred ounces
(21:47):
of claims against that but only thirty available or something
like that. It's crazy. But what we're seeing now everyone's
climbing for gold. We're starting to see that a lot
of these ETFs have leased out their gold right So
that's like that rehypothecation. So when you go when you
talk about like the bitcoin fund, they're legally required to
buy it, but are they are they allowed to? Are
(22:10):
they are they restricted from leasing it out and rehypothecating
it like we see in the gold market.
Speaker 1 (22:16):
They're not supposed to be rehypothicating the bitcoin so gold, Yeah,
I mean, they they have ways to do that, clearly,
And that has been the problem. That's been the fear
of people who own these ETFs. Do they actually have
the gold and the vaults like they say they do?
And that's and it's hard to audit that. But again,
(22:36):
with bitcoin, you can audit in minutes just put you know,
you can just have your spreadsheets and audit it. It's
not it won't be difficult.
Speaker 2 (22:43):
So yeah, now most people think that, well I don't
know about most people. I get asked the question all
the time, like how do you invest in the bitcoin?
It's like you can just buy it and like you
just hold it, right, And so I think maybe most
people that then think about that way would go, well,
I guess I just buy it and I hold it.
But like you worked in the big hedge funds, you
(23:03):
worked with the institutional capital allocators. Like what's the difference
between how retail thinks about bitcoin and like institutional allocators
and like headd hedge funds would approach bitcoin.
Speaker 1 (23:17):
That's a good question. You know, it depends on the
type of hedge fund. And so if you're if you're
an active hedge fund, like really actively managing your your
capital and you're trading a lot, then you'll be trading
bitcoin and you'll be going along, you'll be going short.
You have all kinds of strategies around it, put call strategies.
(23:37):
You know, you might be doing derivatives with it. You
might be doing hedge trades against or pairs trades with
other currencies. You know, there's all kinds of stuff the
hedge funds will do with the base currency, with the
base asset. That's one type. Another type is you know
you'll be buying companies that are either involved with or
(23:59):
are investing in bitcoin themselves. You know, things like strategy
former micro strategy. Yeah, uh, you know, met a planet
and uh and other ones. Bitcoin minors obviously, so that's
another strategy. Uh. And then you've got you know, so
that's kind of like the hedge fund world, the and
(24:21):
non non endowment or pension funds, they would just be
buying bitcoin. Like, they're not going to be doing all
this stuff. They might buy some of these stocks, but
probably through through some other agent, through a hedge fund
or through another money manager probably. But then on the
other side, so it's got kind of like you know,
just the regular hedge fund side, you've got your you
(24:43):
get your VC side, which is the venture capitalist are
buying super super early stage, highly speculative, very young companies
not typically just not revenue generating and so u. But
they have a they have a basket or a portfolio
these investments, and they hope that one or two of
(25:03):
them become unicorns to make the returns for the whole portfolio,
because the reality is that most of those companies don't
really make it after ten or fifteen years. That's just
the reality of VC investing. On the other side of
the spectrum, you've got companies like investment companies or hedge
funds that will invest in revenue generating companies that are
(25:25):
a little bit there longer in the tooth that are
revenue generating. They're up and running and have this window
of five or ten years with a really grow rapidly
along with Bitcoin, and that's kind of a in my mind,
that's kind of a sweet spot of this industry right now.
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com slash podcasts. So the way that I kind of
think about that is like, so you have this whole stack,
as you're sort of describing it to it, so you
can buy the base asset, you can buy the bitcoin,
and then there's other ways to play companies that are
exposed to bitcoin building on around bitcoin things like that.
So if you think about like oil is a commodity,
Oil as an asset maybe the last fifty years, so
(26:56):
just fortiflation, it hasn't really moved anywhere sixty eighty bucks
a barrel or something like that. But then you have
the oil industry. It's like the eighth artists industry in
the world, worth about five trillion dollars four point seven.
I think, so you sort of are seeing the same thing. Then,
so you st bitcoin the asset, the commodity, but now
you have this industry being built around bitcoin. And then
I think what you're saying is just to kind of
(27:17):
reiterate to the audience, is that you have, just like
traditional tech, you have like early early stage like breaking
you know, breaking ground, and that would typically be like
friends and family, angel rounds, super high risk, high reward,
and then you go up the stack to higher level
companies that are further along, they need bigger amounts of money,
(27:38):
They maybe don't have those potential rewards, but also they
don't have that risk as well because they found market
fit and they're producing profits. So you're basically seeing that
exact same scenario tech now coming over to the sort
of this biccoin ecosystem or maybe bcoin. The bitcoin companies
are moving over to the tech ecosystem.
Speaker 1 (27:54):
Yeah, and that's and that's exactly what we're seeing. And
so it's I mean, the the hard part about investing
in this in this space is, like you just said,
people are like, why do not I just buy bitcoin?
Why not just buy bitcoin to hold it? And that
would be you know, we I think people should. That's
(28:15):
your that's your first core investment. But then you're trying
to find those companies that are well managed, that are
that are disciplined, and are actually uh that that give
you a better risk reward, right, So that risk reward
is what you just said. Is it very very very
(28:36):
early stage where it's a super high reward but a
super high risk, or is it kind of in the
middle where it's it's a high reward but a lower risk,
or is it a little bit further along, where it's
it's a solid reward but a much lower risk. So
that risk reward here could be much better than over here,
(29:00):
you know, especially when you put it into an entire portfolio.
Speaker 2 (29:04):
Let's talk about breaking down that risk and reward. I've
done venture deals for a decade, so like again, right,
like I could decide which stage I wanted to invest
into based off of where I wanted that risk reward
profile to be. But like typically if I was thinking
of Uber, for example, I would say, well, you know,
how'd you come up with this valuation. Well, we're going
(29:26):
to disrupt taxis, we're going to disrupt tax limos, we're
going to disrupt vans, we're going to disrupt write all
these things, and combined the TAM the total adjustable market
is you know, one hundred million or whatever billion. If
we capture five percent of each of those markets, we'll
have that valuation. Right, So there's like a math equation
I can sort of see, well, I think it's realistic
that it could take a little bit from each of
(29:47):
those industries could disrupt that. Okay, you know, yeah, we
can get to one hundred hundred million or whatever. That
valuation is. But when I think about it from like,
it's easy to sort of understand disruptive tech in a
world that we live in today, But when you have
something like bitcoin that's like building a world that we
don't even know what that world looks like, it's really
hard to it's really hard to imagine this new world
(30:07):
when we're living in this world that we have now.
So then we have these new early stage bitcoin companies
that are going to go disrupt markets, But how do
we measure the future value if there's not a market
they're disrupting today? So how do we know if it's
going to be five million, ten million, twenty million, fifty million,
hundred million.
Speaker 1 (30:26):
You just hit on exactly why we are extraordinarily picky
in my fund, the Bigcoin Opportunity Fund, an opportunity fund
where you're a GP, and also we're super super choosy
and discipline on what we invest in early stage and
(30:48):
that's because it's very difficult to put evaluation on something
like that, and often the valuations are just pulled out
of thin air. You know exactly what you just said, Well,
the addressabile market is.
Speaker 2 (31:00):
This or the reality they even know what the undressful
market is because there's no market, they're disrupting.
Speaker 1 (31:04):
Markets to disrupt exactly. So the reality is, you know
you're you're typically then mostly putting your You're mostly putting
your trust and your your risk capital on the what
you believe to be the best operator with the best idea.
(31:27):
So you so you're trying to lower execution risk. But
the reality is an execution risk is massive when you're
in an early stage. I mean, you've started companies, you
know what it's like. It's it's so easy to get
tripped up in a plethora of different ways.
Speaker 2 (31:43):
So, but that's the operational risk of if I can
achieve what I say I'm gonna achieve. But at least
I'm able to quantify if you even if you do
overcome the operational risk, and you do achieve it, then
how much would it be worth. So if you do
get five percent from taxis okay, I could see how
you're worth that much if you can get over the
operational risk hazard. But in a case where there's no
(32:03):
market that I'm disrupting, so I have the risk of
the operational risk, But then how do I know even
how much value we might have?
Speaker 1 (32:11):
Right?
Speaker 2 (32:11):
So for example, you know, in the VC space and bitcoin,
you might see a bunch of wallets, a whole bunch
of wallets. We're going to integrate lightning into it or whatever, right,
but like what market is that really disrupting? I mean,
how much value could that really create, you know, for example?
And that might be a too simple of a version,
but yeah, I just don't understand these values because like,
(32:35):
as an investor, like we're trying to discount the future exactly,
but you don't know what to discount, right, I don't
know it's a discount.
Speaker 1 (32:42):
And that's that's what makes it so difficult.
Speaker 2 (32:45):
Do you think It's also like like where we're at
in the cycle as well, right where it's like I
think both of us obviously believe in that future, but
is it going to come in two years or five
years or ten years or fifteen years is a question.
And I think you want to kind of find the
answer to that out first because then it helps you
decide at which level you want to invest into.
Speaker 1 (33:07):
Yeah, yeah, that's a that's and that's the point is
that the duration of those investments might not match the fund, right,
So the duration of a super early stage investment a
company that's just starting out with an idea on an
appkin that might be a fifteen year runway on a
ten year fund, So that doesn't really work. That math
(33:29):
doesn't work right. So that's a problem that it's a
mismatch of duration. So that is one of the advantages
of you know, of investing in companies that you know
what they're doing, like they have revenue generation that you
can see that you've got a little bit clearer vision
of that runway in a five or ten year window,
(33:53):
you know, or even three to five year window in
some of them. So that's a it's just a different
way of investing for sure.
Speaker 2 (34:00):
So with these you know, typical VC funds that are
investing at the early stages, the real early stages, and
they have a ten year timeframe you mentioned sort of
like this mismatch if you will, or maybe these companies
aren't going to be profitable for fifteen years, but the
funds only ten years. I'm curious in that model, not
that you run that, but I know you've been in
this space for a long time. In that model, how
(34:21):
are they showing like profitability and growth to attract new
capital through those stages? If those businesses don't really have
like a liquidity event.
Speaker 1 (34:30):
Right, Well, this is uh, it's difficult, it's challenging. So
what they what typical vcs will do is you know,
you'll have your your angel funding or a Series A,
and then it'll be at one valuation. So let's say
that you you wanted you bought ten percent of a
(34:53):
company that you valued at ten million dollars. Then you
do a Series B and the companies further down the
road and they say, wow, we've created this value. We're
worth more money now because of the things that you like,
we've just been talking about that you know, now we
can do this, or we've got more We've got ip
that might be valuable or something. So now we think
(35:14):
we're worth twenty million dollars. So for that same ten
percent position of Series B, now you've got to pay
two million dollars. Okay, So but Series A has now
had one hundred percent markup to twenty million dollars. I'm
using very simple you know ath here that is not
(35:34):
exactly like it, but this is close enough that now
you've had one hundred percent markup. So now your first
position is up one one hundred percent. And so However,
if it's fifty percent of your portfolio, and now your
portfolio is up fifty percent, right, Or if it's twenty
five percent, your portfolio, portfolio is up twenty five percent.
So that's kind of that's how they're they're showing returns
(35:54):
along with their IRRs along the way, and that's until
you have an actual exit, which may or may not
happen for a while.
Speaker 2 (36:02):
I mean, I suppose on one side, it shows that
there's demand, so like maybe someone will pay that price
if they're paying that number today, but not if I'm
leading that round right, exactly right, because it shows I'm
paying more than I paid before, which is typically done
in the VC space anyway, right, I mean they typically
invests through multiple tranches.
Speaker 1 (36:22):
Yeah, and they'll go invest in the same company over
a period of years and yeah, use fund one, fund two,
fund three, fund four to do a series B.
Speaker 2 (36:30):
Yeah. Yeah, But I guess it's just important for investors
looking at that to sort of understand the mechanics of
that it's typically done. So it's not like it's like
a shady thing, but it's just understanding, like it's not
like real revenues and real profits. It's more of just
like sort of like a back of the napkin or
inside math type of situation.
Speaker 1 (36:50):
Yeah, I mean that's why, I mean, I sleep well
at night knowing that if I liquidate my portfolio, if
I liquidate the Bitcoin Opportunity Fund right now, I give
back the investors exactly what's on their investment statement, because
it's it's marketable securities plus some of those privates that
are marked at cost.
Speaker 2 (37:11):
So where do you think some of the biggest asymmetric
bets And maybe that's even the wrong word just because
that just thinks fully on reward and not enough on
the risk. But where we're at in the cycle and
the maturity and sort of as you said, sort of
the timeframe of the fund, where do you think some
of the best kind of areas in the bigwin ecosystem
are sort of the best to return money over the
(37:32):
next five years or so, let's say.
Speaker 1 (37:34):
Yeah, I mean, the obviously answer will be in the
public space. Miners, certain miners, not all of them. We
don't own all the miners. We own certain miners in
specifically because of their energy assets, their ability to leverage
off those assets. They have optionality with them, especially with
this really really fast growing AI space, the hyperscalers, and
(37:57):
so you know, the companies that control like scalable power assets,
you know they have and they have the ability to
secure those long term contracts from AI hyperscalers, the AI
companies that are going to need massive amounts of computing
power like those are very interesting to us for two reasons.
(38:20):
Number One, that can be high high generating company, high
revenue generating companies for years, and you could see kind
of that window and you're starting to see these contracts
come forward being pulled forward, and so that's one thing.
And the second thing is they become M and A
targets themselves. So it's kind of an event driven play
as well. And you can have a basket of those
that are event driven that could be takeout targets in
(38:42):
the future, likely will be takeout targets in the future
from either larger players in space, larger miners or larger
power companies or some of you know, like the data
center reats for instance, that they might want to take
them out like. So that's a really interesting space for
us on the public side. And then there's a lot
(39:02):
of things that are in the private side that are
bricks and mortar but have some sort of bitcoin element
to them. So they're already mature, they're already doing they're
already revenue generating their successful companies. But then now they're
adding this element of bitcoin to them that can that
(39:25):
they can leverage off of that base platform and do
really well from Yeah.
Speaker 2 (39:30):
You know, I love to study the cycles and I
look at like these like fifty year cycles that happen,
and each one of them is it's not represented by
just one single piece of technology, but it's always a cluster.
And the reason why it's a cluster of technologies is
that together combined, the sum is greater than the parts.
Right together they're combined, they give you like these new
sets of building blocks to build things that you just
(39:51):
didn't imagine before. And so like we have like bitcoin.
I've been calling it the decentralized revolution for like four
or five years because of where I think we're at,
and I think we're starting to see that now.
Speaker 1 (40:02):
Right.
Speaker 2 (40:02):
So you have like bitcoin, which is a decentralized technology,
but then you have AI. So you just mentioned like
AI AI hosting, AI processing going to like bitcoin mining facilities.
We're also seeing a shake up in the AI market
the tech market, the NASDAC if you will. We're like,
and it's almost kind of going the same thing the
(40:23):
Internet did, same thing that crypto and bitcoin did as well,
where like you almost had like value accruing at these
like monopolistic llm. So you had open ai and Google,
Gemini and et cetera. But now all of a sudden,
you have all these open source ones. Facebook Meta launched Loamo,
which is open source, maybe just to just to sort
(40:44):
of blunt what opening I did now of China's dropping
a new one it seems like every week, and so
it's kind of pushing that down to almost more like
a decentralized level. And so I think that's kind of interesting.
But I guess the question I was gonna ask is like,
so the clusters, So now we have like AI and
bitcoin sort of working together like synergistically, and it seems
(41:04):
like that's going to be really valuable. We're not exactly
sure where that's going to be. I did see recently,
like these AI agents that people are buying, they're able
to get them to start transacting autonomously using bitcoin lightning crazy. Yeah, Yeah,
someone ran one where they literally had the AI agent
go research a domain name, find the domain name, and
go buy it with bitcoin lightning. The whole thing was
pretty cool. So I think about that. So one you
(41:27):
mentioned the data centers like being able to use bitcoin
mining and the high compute for AI being a really
big thing, but also some of these cutting edge ones
that are like just starting to pop up. I mean,
do you think that's an area that you'll be focused on.
Speaker 1 (41:41):
Oh? Yeah, absolutely, And that's exactly what we're looking for.
We're looking for those opportunities where there's there's those two
those two technologies that are successful in and of themselves
can be merged and and create more value being you know,
together than they would set And obviously that's that's exactly
(42:02):
what we're looking forward those that that's kind of like
a Nirvana thing. Yeah, you know, for instance, one of
the things that we're working on for the for the
second fund, it'll be in the first fund too, but uh,
one of the things that we're working on is is
what we're calling is the first uh you know, bitcoin
leverage buyout. And so what we're doing is we're we've
been in deep due diligence with UH with a successful
(42:26):
and experienced operator who's had success in other businesses and
what we're working on rolling up a non cyclical industry
like an industrial industrial service business. I can't really say
too much because we're in in NDA, but uh, it's
solid cash flow, and we would leverage a business right,
(42:48):
utilize a treasury bitcoin treasury strategy and uh and then
we would be providing equity capital along the way and
UH and then obviously advise on debt structuring for the
different acquisitions and its assists in the bitcoin treasury. But
you know, these are businesses you can buy at three
(43:10):
to four times multiple on their eba dah their earnings
and then turn around once it's all rolled up and
sell it for like an eight or nine or even
ten times ebadah later down the road. So that's kind
of a strategy. It's really late stage. It's like it's
private and it's late stage, but it's something where we
can leverage both our experience and exactly what you just said.
(43:33):
You're taking a bricks and mortar business and something that
is that's stable and cash generating and then adding that
bitcoin element to it and then you get this tremendous
valuation on the backside of it.
Speaker 2 (43:47):
Yeah, now let's jump into some fun stuff with the
crystal ball that neither of us have. We love this
part you mentioned earlier. You know, some people maybe thinking
it was too late, or maybe it's too late. You know,
bitcoin hit one hundred thousand. First of all, I would
just say to anybody just to kind of throw this out.
(44:08):
The first of all, you can buy a dollar worth
of bitcoin, and really you can sort of dealt with anything,
So I mean, certainly not a house. You can't buy
a dollar worth of house. I mean, I guess there
are some crowdfunding ways you could do that and tokenized house,
but for the most part, you know, a home to
live in, you don't. But for the most part, the
key that you laid out for us in the beginning
is that you're being debased faster than you think. You
need to buy some assets to keep you ahead, and
(44:29):
so you should do that. And you said that the
rich are getting richer and the poor getting poor because
the rich buy assets. So everyone should just buy assets.
And I know that sounds super simple and maybe insensitive
to some people who are living paycheck to paycheck, but
put it dollar in, put five dollars in, put ten
dollars in. Build that discipline, but specifically back to the
point of view saying, you know, some people think it's
too late because they hit a hundred thousand. You know,
(44:50):
in my opinion, those people are living life in the
rearview mirror. I remember, you know, I started my career
in real estate. Two thousand and eight wiped me out
and everyone else that I was working with at the time.
And I remember like around twenty twelve was when the
real estate market really bottomed out, and then Florida got
hit super hard, and I remember like twenty fourteen twenty fifteen,
(45:14):
Florida was roaring back, and a bunch of my real
estate friends were like, oh, it's just too expensive. It's
too expensive. It's too expensive, because they were comparing it
with being too expensive to twenty twelve at the bottom,
not compared to the rest of the US real estate,
and not compared to the terms and all these things,
and it went on a tear. So when you look
at a one hundred thousand dollars bitcoin, that's like looking
in the rear view mirror as opposed to like, where
(45:35):
is it going in the future, So you know.
Speaker 1 (45:39):
Right there, right go to where the puck is going.
Speaker 2 (45:41):
Go to where the puck is going right, So what
are what's a way or a couple of ways that
you think about how you sort of measure where bitcoin's going.
Speaker 1 (45:50):
Yeah, I mean we talk about this a lot, you
and I have. We just pulled up the chart before
the show, taking peak at it the global assets, you know,
the total global assets. Just Myers puts us out and
that that chart and kind of it's funny. I made
the same exact chart and then he put I saw
his in Sailors presentation a couple days later. We were like,
(46:11):
maybe ten trillion dollars off here and there on the
on the big pieces, and but they're look almost exactly like.
So the reality is it's it's a pretty definable set
of investible assets in the world that doesn't include the derivatives.
So just if you just look at the investment assets,
(46:32):
it's nine hundred trillion dollars and uh, you know the
but in that Bitcoin is now two trillion. So it's
a really easy way to visualize these big blocks that
Bitcoin can start taking market share away from. So you've
got gold is about eighteen trillion. Then you've got your
(46:52):
money supply and your you know, your real estate over
three hundred trillion, you get your bonds three indred trillion,
you've got your stocks one hundred and here in thirty trillion.
So where does bitcoin start taking market share away from?
Meaning where does it where do people start taking their
allocations from and putting it to bitcoin instead reallocating their capital.
(47:13):
That's one part of it, right, really important part of
it though, is that where's the puck going. Where's that
nine hundred trillion dollars going to be in ten years?
Is it going to be nine and twenty trillion? Where's
it going to be closer to quadrillion? Which you thought
it's going to be.
Speaker 2 (47:32):
One point six quadrillion by twenty thirty.
Speaker 1 (47:36):
Yeah, so we're talking about five years from now. Yeah,
it's a massive move, but that that's probably that's I mean,
I would say it's that's right in the range.
Speaker 2 (47:45):
It's not that big, it's thirty or forty percent.
Speaker 1 (47:47):
It's it which is money supply seven or eight percent
between now and then there? You are, right, So that's it.
Speaker 2 (47:56):
So if the money, if the money supply goes up
by eight percent a year for the next five years,
where we're at where.
Speaker 1 (48:02):
We at exactly that's exactly right. So, and that's so
that's pretty base case. It could go up a lot
faster than that. Yeah, the might spot could expand a
lot faster than that, especially if we have another market shock,
right like we had in twenty twenty. So if they print,
you know, if they print fifty percent of the money again,
I mean yeah, I mean it'll that'll shoot up really quickly.
(48:23):
You better own some assets, you better own some bitcoins.
So so where's where's bitcoin going to take market share
away from? Well, it's obvious that it takes market share
away from gold and from stocks. Well, you've got people
who feel like it's hard money and it's it's digital
gold and two point zero, you know, and you've got
people who feel like it's just a risk asset and
they're speculating with it. So it's taking kind of market
(48:45):
share from both of those. So gold isn't growing as
fast as I think it would if bitcoin wasn't there, right,
And then you've got the the institutions that are suddenly
waking up and seeing that, Well, the Fed lowers interest
rates by a full percentage point over the fall, and
the ten year bond yield goes up a full percentage point.
(49:05):
Why is that because bond investors want to be compensated
properly for the risks they're taking and holding those bonds,
and they want to hire yield down the road because
they know that the money supply is going to be
expanded a little bit faster than people are expecting, and
because they know that the Treasury is just going to
keep dumping bonds on the market. There's gonna be massive
(49:26):
amounts of bonds. So that's a really easy, clear bucket
for bitcoin to start taking market share away from as well,
because institutions, and we're seeing it in the different companies
establishing a bitcoin treasury, they want bitcoin in their treasury.
Why why wouldn't you just hold ten year bonds. Why
wouldn't you just hold thirty year bonds or T bills? Well,
(49:49):
you know T bills have reinvestment risk once you get
paid back where the interest rate's going to be. Number one.
We saw what happened the twenty year thirty year treasury
holders during during the last cycle in twenty twenty, they
got obliterated. Yeah, had the worst bond losses in the
history of the bond market. So that's a risk, that's
(50:10):
duration risk. Well, if you own Bitcoin. Yeah, it's volatile,
but it's volatile.
Speaker 2 (50:16):
To the upside, right, So the big difference, it's a
big difference.
Speaker 1 (50:20):
So it's okay. The volatility is okay because over a
longer period of time, it's going to appreciate faster than
the dollar depreciates, basically, and that's the trust and so
it's easy to take market share from that bucket. So
you can see that the pie is growing and Bitcoin's
share of that pie is growing at the same time.
Speaker 2 (50:39):
So, yeah, I want to ask you about a recent
conversation you had with Michael Howell. Yeah, who was Who's
I don't know, maybe the king of global liquidity, I
don't know, prey smart guy, I'll call him that. I
don't know if he is. He's the one that has
been talking about the longest in my opinion from what
I've been watching, But you know, he makes a strong
k that that global equity moves in cycles, and that
(51:06):
it's the it moved the denominator, which then moves the nominator. Right,
So it's like the price of the S and P
five hundred and the price of homes and the price
of bitcoin all go up when you continue to increase
the denominator Inc. Increase the fee up. So he talked about,
like I said, these these liquidity cycles. I didn't hear
the conversation, but I'm just curious if you guys talked
(51:28):
about where you know, bitcoin has these four year cycles.
And what's interesting is a lot of people today are
saying that the cycles are broken. We're not going to
the four year cycles over, It's not gonna happen anymore.
I remember Sailor's saying all your cycles were broken last cycle,
and that all the models are broken. That didn't seem
to stop it. People are now saying that because now
(51:49):
we have the ets buying, we have the sovereigns buying,
they're not going to be selling that you mentioned earlier.
They're not price sensitive, so they're buying, they're holding. They're
not like the hedge funds that will be trading around
it most likely away. A lot of people call it
for that. I tend to think that maybe it's not
the four year cycle, the having cycle that drives the
prices up and down like that, but the global liquidity
(52:09):
cycles that's doing it. So regardless of what's happened in
the bitcoin ecosystem, if long term holders hold it and
don't sell it. I think it's kind of captured by
this liquidity cycle. I'm curious after talking with Michael how
what your opinion is on that.
Speaker 1 (52:22):
Yeah, it's a good question, and I think, you know,
also could be funny enough, it could also be centered
a little bit around the election cycles, because the election
cycles could also drive the liquidity cycles.
Speaker 2 (52:33):
Yea.
Speaker 1 (52:33):
And the election cycles bring a lot of uncertainty, and
once you get certainty in the market, just like we
saw in this past fall, when you had certainty that
Trump was going to be elected and that he is elected,
well bitcoin ripped, you know, it went from sixty to
ninety one hundred plus at thousand and So why is that, Well,
there's a few reasons. You take uncertainty out of them,
(52:54):
out of the market, which market hates uncertainty, and then
you actually inject optimy because you had such a terrible
administration prior to this. Yeah, you know, the Biden administration
was abysmal for the digital assets and for cryptocurrencies and
business overall, and business overall, so they now you have this,
you have that's positive, right. The other thing that we
(53:17):
that what Michael and I talked about though, is exactly
what you said is that cycle, right. So the liquidity cycle,
actually it dipped down and bottomed out in about October
of twenty two, and since then it's been rising again slowly.
You had you have periods like we had in December
and January where the quidey was kind of it was
(53:40):
kind of rolled over, or in November November December kind
of rolled over. Well, you know, central banks were not
expanding their the liquidity at the rate that they were before,
so you do have these blips in between, but overall
we're on the upswing and we you know, and I
agree with Michael, he expects that liquidity cycle to go
(54:02):
on the upswing and top out in mid twenty twenty six.
So that's funny that you say that, because I would say,
not even thinking about just Michael Howell's chart, but thinking
about that bitcoin liquidity cycle, that seems to fit exactly
with what people are thinking that we'll really hit the
top here at the end of twenty twenty five into
(54:24):
the middle of twenty twenty six, and that would kind
of dovetail nicely. The only the only stipulation there and
the only kind of hesitation I have with it with
it moving exactly with that cycle is Bitcoin tends to lag.
So Bitcoin lags six to eight weeks, maybe even longer,
maybe eight to twelve weeks on that liquidity. So liquidy
(54:48):
has to come into the market and then it finds
its way into bitcoin. And so when you put Bitcoin
up against say something like M two or Michael Howell
has a chart where he shows it up against UH
and he's got it lagging, so he shows it right
up against her. It it really does follow that liquidity pretty.
Speaker 2 (55:04):
But it seems like the pump, the upswing on bitcoin
has that lag, but then the drop almost front runs it.
Speaker 1 (55:12):
Yeah, the drop is precipitous, Right, You've got to be
really careful and understand what you're doing.
Speaker 2 (55:17):
If you looked at when when Powell Jerme Powell announced
that they were going to start raising rates, was that
October November of twenty one, I believe, I think that's yes, right,
and the twenty two they were and it was like
January or March and they started raising it, but they
announced it right in their four guidance telling you what
(55:38):
was going to happen, and bitcoin sold off immediately. Yeah,
and then the Nasdaq was like a week or two later,
but the hat P five hundred didn't sell off for
like until January. Right.
Speaker 1 (55:48):
Well, bitcoin has been the tip of the risk spear,
so people, And what I mean by that is that
it has been it has been a the point of
vision and like the point of view of and the
visibility forward looking liquidity. And so it's exactly what you
(56:08):
just said. And so yeah, you can't wait for Michael
Holliw's chart to come out to say that liquidity is top.
It's coming back down. You're going to see it in bitcoin. Yeah. Now,
I don't believe that bitcoin remains as volatile as it
is today in the future. I think it's that volatility
is going to dampen. You're not We're not going to
(56:30):
see eighty percent draw downs.
Speaker 2 (56:32):
But is that a bad thing or a good thing?
Speaker 1 (56:35):
Well, uh, it's a good thing for the store of
long term value, right And because it shortens that it
shortens that length that you have to hold it to
be sure that you'll get your your store of value.
And so that's a good thing and that will but
it's just a natural thing. You know, when you have
institutions that are investing trillions of dollars into this protocol,
(56:55):
now not just millions, hundreds of millions, but trillions of dollars.
Now you've got this liquidity in this in this asset
that it's it. It kind of puts bumpers on it. Right.
So what I mean by that is that an institution
will own a position, they'll get their percentage position. Say
you're you know, a very large endowment, and you've got
(57:17):
a billion dollar let's call it one hundred million dollar
position in bitcoin, and so you've got your hundred million
dollars and that's it's a percentage of your portfolio. Well,
bitcoin is in its cycle and it goes up to
two three hundred million dollars. Well, now it's not just
one percent of your portfolio, but it's two three percent. Now,
if you're supposed to only have one percent in your portfolio,
(57:40):
you're gonna pair back. So it's going to kind of
clip that euphoria foam all high, and that you'll have
these institutions selling into that. Yeah, and then when it
comes back down, the rest of your portfolio will catch
up and it'll come back down. And then you'll now.
Speaker 2 (57:53):
Who sells their winners and holds their losers?
Speaker 1 (57:55):
What kind of world is that these institutions, they pair
it back just to manage their exposure in their portfolios.
It's almost algorithmic, and so then when it comes back,
they'll add to it to you know, top it back
up and get it into that right percentage of exposure
they want their portfolio. And so that'll dampen the downside,
so it'll kind of put some bumpers on it. That's
a little ways off. I don't think it's going to
(58:17):
happen in this cycle, but I do believe the next
cycle we're really going to see the impact of that.
Speaker 2 (58:21):
I was always told to let your winners run long,
cut your losers short. All right, James, last question. We've
been talking in sort of like these five year cycles.
Let's start there. So if we fast forward five years,
if someone listening here ignores everything we talked about today
and just keeps investing in the way they always have,
what happens to.
Speaker 1 (58:41):
Them in five years and just well, it depends on
how are they investing.
Speaker 2 (58:46):
Let's ask that their dollar cost averaging into their mutual funds.
Speaker 1 (58:52):
Yeah, I mean, I I think that they'll be okay,
you know, they'll mean, they'll they'll probably keep up mostly
with the expanse of money supply. But the problem is
in these cycles, you'll have these massive draw downs and
and you know, you'll you don't you don't have the
(59:15):
ability to move around your capital swiftly. You know, I
would say that bitcoin is that. That's why we're focused
on bitcoin in particular, because I believe that it's going
to grow faster than any other asset class in the world.
(59:37):
And uh, and it's going to continue to do that
for for a while. And so if you're not exposed
to it, I think that you are, you're at a
disadvantage in your portfolio. And this is what I tell institutions,
in particular family offices and which you know, this is
funny because they're starting to realize this. They're coming to
(59:59):
us and and saying, hey, do you have capacity in
that first fund? No, the first fund's closed. That's why
one of the reasons we're open to the second fund
is because we have people coming to us and saying,
you know, I need to have some exposure. I don't
really know exactly how to get exposure in the space myself,
and I want to do more than just buy bitcoin,
so you know, and so what's really important about this
is that when you have exposure to bitcoin in your portfolio,
(01:00:23):
then it actually it not only raises your returns mark,
but you know this, you've seen the numbers. It raises
your sharp ratio, which means that it provides a better
risk adjusted to return to your portfolio, which is what
we just talked about, because bitcoin will become uncorrelated to
the other assets and be growing faster than them at
(01:00:44):
the same time. I mean, what a great way to
you know, enhance your portfolio. Right, So the people who
do that, I believe are going to be much better
off in ten years than the people five or ten
years than the people who.
Speaker 2 (01:00:58):
Don't, especially if for my calculation, I won't put you
on the spot. For my calculation, I think bitcoin has
a ten X in front of it over the next
five years.
Speaker 1 (01:01:07):
So yeah, mine is mine's the next seven. Yeah, so
if you ten X to the next seven.
Speaker 2 (01:01:13):
You know the problem with the mutual funds is that
even if they do keep up with the rate of
debasement and they average seven percent over the next period, One,
that's not the real number. Two the fees. I mean
most people, most people only get about a third of
the profits. About two thirds of those profits go to
the to the administrators and the managers. So cool. Well,
(01:01:36):
let's let's wrap it up with that. The Bitcoin Opportunity
Fund James fun number two. We talked about that. We're
going to link to that in the show notes down below.
If anybody wants to get a better risk adjested return
added to their bitcoin profile and doesn't want to be
regretful in five years, check it out.
Speaker 1 (01:01:52):
I appreciate it, Mark look forward to the next time
I thinks
Don't own assets, then you're being left behind because your
wages are not keeping up. You are falling behind and
even being able to buy those assets. That's the greatest
challenge for this next generation.
Speaker 2 (00:11):
But the reality is if you're not making at least
ten percent, you're actually falling behind, not even keeping even.
Speaker 1 (00:16):
And that's the frustration that people are starting to feel it.
The wages are going up, they're like, God, I got
a five percent raise, but I still can't afford the
things I used to be able to afford. Why, Well,
it's because those numbers are manipulated. It's evil, it's demeaning.
And the young kids in their mid thirties, they're struggling
to even buy a house because it takes so much
more income now to buy a house than it used to.
(00:37):
And the election cycles bring a lot of uncertainty. And
once you get certainty in the market, when you had
certainty that Trump was going to be elected and that
he is elected, well bitcoin ripped. Why is that? Well,
there's a few reasons.
Speaker 2 (00:48):
What's the one thing happening right now that most people
don't understand but absolutely should if they want to survive financially.
Speaker 1 (00:57):
A lot of people in just the normal world, don't
understand how the money is being debased right underneath them,
the numbers of inflation being manipulated, and now they're really
just being stolen from every day. They're being told that
if you buy a bond, if you buy t bills
or treasuries, then you can keep up with it.
Speaker 2 (01:14):
It's not true, all right, James. You spent the year
analyzing global markets, and like, let's be honest, right, the
financial system is barely hanging by a thread. So what's
the one thing happening right now that most people don't
understand but absolutely should if they want to survive financially.
Speaker 1 (01:35):
A lot of people in just the normal world don't
understand how the money is being debased right underneath them.
They just assume that inflation is a natural thing, and
they don't see just how badly it's being manipulated, the
numbers of inflation being manipulated, and now they're really just
being stolen from every day. So the system forces people
(02:00):
to take risk to keep up with that in debasement,
so they have to buy risk ads. So I have
to invest in real estate. They have to invest in things,
you know, stocks and gold and whatnot. In order to
try to keep up with that inflation. They're being told
that if you buy a bond, if you buy t
bills or treasuries, then you can keep up with it.
(02:21):
It's not true. So the money supply is expanding, it's
to rate that they can't keep up, and they're getting
a negative return on whatever dollars they've even invested there,
so they go further out. And then some people are
realizing that, so they go further out on the risk
curve in order to try to catch up, and a
lot of times it just doesn't work.
Speaker 2 (02:43):
So would you say they don't understand mechanically what's happening.
So I think most people know they should probably be investing,
but that's because they think they want their money to
grow so they have more money in the future. But
maybe they don't realize as much that it's not just
you want your money grow so you have more in
the future, but you actually have to out grow the
rate of what you're losing.
Speaker 1 (03:02):
Is that what you're saying, Yeah, exactly, And so you know,
it's like you're just trying to pick a horse that
will keep up with with all the prices around us.
You know, I mean, I just went down the street.
Great place here, San Clement. They love it here. But
to get a taco and a breakfast taco is like
it is like nine dollars and eighty cents for a taco.
(03:23):
I mean, it's just insane. Right, So yeah, the reality
is that people feel it. They feel like the prices
are going up. But what they don't and they and
they think they buy something and it's rising in value.
What is actually happening, and this is what's misunderstood, is
that it's just it's holding its value better than what
(03:45):
the underlying currency that it's being priced in. So if
you get a piece of real estate that rises in
value faster than the base the debasement of the dollar,
the dollar meaning inflation. So if it rises fast an
inflation call inflation today three and a half percent. And
if your beach front property is rising at ten percent,
(04:08):
well you've made a good call. You bought the right horse.
It's highly desirable. There's not you know, there's only so
many of them, so it's limited in supply being beach
front property. All right, good call, you know. But if
you bought a stock that was a high flyer and
you thought, oh, this is going to keep going up
(04:28):
and it crashes. That's a bad call. And now you've
taken that risk to try to outpace that inflation, and
you've missed it, and now you're starting at a place
that's even further behind.
Speaker 2 (04:40):
You said that inflation's three percent, that's a government reported
number of CPI. I don't think that's the real inflation number.
The number we have to beat. Is that the number
we need to beat?
Speaker 1 (04:54):
Well, that's the number of the people are told they
need to bet. But they're told two things. They're told
that inflation is natural and you need it for the
economy to grow. It's not true. It's uh. And you
and I talk about this quite a bit about how
technology should actually make your life better with cheaper things.
You know, the more the technology advances, the cheaper things
(05:17):
should become, right, But it doesn't happen that way. Why
is that because they manipulate the money supply. So let's
talk about that three percent. Well, that three three and
a half percent that we're talking about that is way
above the two percent inflationary that is supposed to be
the target. Well, that's what they've been reporting, but we
well know that the actual inflationary is much more closely
(05:41):
tied to the expansion of the money supply. And then
if you look back to nineteen seventy one, when we
got off the gold standard, money has been expanding by
over seven percent. There are slightly different measures, but between
six point nine seven point one percent since nineteen seventy
one annually, right.
Speaker 2 (06:01):
And even faster in a shorter time period, so ten
ten percent since twenty nineteen. So do you think back
to sort of what you said. What they don't understand
what's happening right now, but they should if they want
to survive. Is also that the number you need to
beat is a lot higher than you think it is.
You've been told it's three percent. Your financial advisor's telling
you you're making four or five percent, you're doing pretty good.
(06:24):
But the reality is if you're not making at least
ten percent, you're actually falling behind, not even keeping even exactly.
Speaker 1 (06:31):
And that's the frustration that people are starting to feel.
Speaker 2 (06:33):
It.
Speaker 1 (06:33):
Yeah, they're feeling that frustration. They don't understand. They see that,
you know, their wages are going up, They're like, oh,
I got a five percent raise, but I still can't
afford the things that used to be able to afford. Why, Well,
it's because those numbers are manipulated. Yeah, and it's because
certain things are moved in and out of baskets of
the CPI basket to make those numbers look a certain way.
(06:55):
I mean, you know, it's it can get political and
all that, but the reality is, and insurance costs are
going up or auto repair.
Speaker 2 (07:03):
Or supposedly the CPI number that came out the other
day showed the insurance was dropping. I haven't seen that.
Speaker 1 (07:10):
I've seen that. Yeah, yeah, so and that's the problem.
And so people are frustrated. And this all goes into that,
you know, the the propensity for people to take on
more and more risk to try to keep up. And
if you think about it, it's a you know, it's evil,
(07:30):
it's it's demeaning. You're working so hard, you're trying to
keep up, You're you're getting your raises and you're falling
behind and you can't you can't afford things that you
used to be able to afford. And the young kids,
you know, the kids who are just getting out of
college twenty thirty and in their in their mid thirties,
they're struggling to even buy a house because it takes
so much more income now to buy a house than
(07:53):
it used to, and and that all is, this has
all been feeding into that.
Speaker 2 (07:59):
Yeah, so I know you talk a lot about what
feeds into that and debt and you know, the macro
cycle and things like that. So how bad does this
actually get and then what happens to the people who
don't shift their investment strategy and time?
Speaker 1 (08:15):
Yeah, well, I think it just continues the way it
is for a while. This can it's just perpetual high
inflation for a long period of time. You know, we
were seeing now some really uh, in my opinion, good things,
excellent things are going on in DC now where you've
(08:35):
got the DOGE Commission, Department of Government Efficiency with Elon
and UH and Vivac. But they're cutting expenses left and right.
They're they're finding just in insane expenses that they're they're
cutting out. That's good and that will that will help.
Speaker 2 (08:54):
And I think so far they're finding them.
Speaker 1 (08:55):
They're finding them.
Speaker 2 (08:56):
We'll see if they cut them out.
Speaker 1 (08:57):
I agree, I agree, And there's gonna there's gonna be
a lot of fighting on that. But the reality is
the math is so bad that it doesn't really matter
that the dead is going to keep expanding. It's we're
going to continue to operate in deficits and we're going
to have to continue to borrow money, which is inflationary,
and that feeds into this whole, you know cycle. So
(09:19):
your question is how bad does it get? Well, it
can get pretty bad. It can get We can if
you look at the inflation rate over the over the
nineteen seventies into the eighties, you saw inflation went up,
it came down, it kind of stabilized, and then it
went up again, had the other spike, and it kind
of another humping the camel's back, and we're following that
(09:42):
trajectory almost to the t in this same cycle where
the Fed raised they pumped a bunch of money and
they realized they made a policy mistake there and so
they raised rates and so inflation ran. It's come all
the way back down. But we have such massive deficit
spending coming out of DC, you know that we have
(10:05):
fiscally driven inflation, you know, and that's just continuing and
so it's kind of picking up again. So it could
get really bad here, meaning that we hit ten, fifteen,
even twenty percent inflation for a short period of time,
it's possible. Do I expect that, No, but I do
(10:25):
expect us to just continue to have this high perpetual inflation,
whether it's five, five, whatever the number they're they're measuring
and communicating. The reality is it's probably closer to seven
to twelve percent. So yeah, it's it. It's it just
(10:46):
means that over that period of time. Though. This is
another thing that people don't realize is that seven percent
annual inflation compounded over years will eat into your uh,
eat into your earnings and your discripce income. You know,
it can eat into a forty fifty, sixty, seventy percent
(11:06):
in a decade. So that's the problem.
Speaker 2 (11:08):
Yeah, where you're buying fifty percent less goods and services
in a decade from now because because of the way
it compounds like that. At the same time, I mean,
all of that deficit spending, all that money printing, all
that debt, we're also seeing like the largest gap in
income and equality we've ever seen. So then it does
(11:30):
seem like some people are getting rich and some people
are getting poorer from this. So I mean, looking at
charts that show this wealth inequality gap growing faster and
faster and faster bigger and bigger and bigger. I mean,
is this the big wealth transfer that's happening right now.
Speaker 1 (11:46):
Yeah, it's the people who own assets. You know, you
hear about the boomers have made out so well. Uh,
they're living large, They're living these huge homes, They're worth
so much money. And the reality is, you know, the
older demograph is typically the demographic that owns assets, and
the one to own assets have done well because you've
had a massive amount of asset inflation as we continue
(12:09):
to print money. And so that's it. That's the crux
right there. If you don't own assets, then you're being
left behind because your wages are not keeping up and
so you are falling behind and even being able to
buy those assets. And so that's the greatest challenge for
this next generation is how do you get some assets
(12:30):
that you can hold for a long period of time
that will outpace that expansion the money supply, Which leads
us exactly to why we do what we do and
why we're so focused on bitcoin.
Speaker 2 (12:44):
So if you look at like that real rate of
monetary debasement as being inflation ten percent, twelve fourteen percent,
and then you look at all the different asset classes.
So then you go, Okay, what asset classes do I
have to invest in that could beat that. I just
saw this video the other day of Radi Alio talking about, well,
the way that you want to build wealth is you
want to invest across fifteen different asset classes. There's just
(13:06):
a couple of days ago, so you're still pushing this
all weather portfolio. Problem is that all other portfolio doesn't
make any money if they've had over seventy billion dollars
in redemptions in the last several years, because it just
doesn't make any money. And I think it goes back
to why would I invest through fifteen different assets if
none of those assets are keeping up with or beating
the rate of monetary debasement. And so when you look
(13:28):
at it from that type of a lens, which is
sort of how I look from it, then you see
that the only things that have beat it are tech
stocks in the NASDAC and bitcoin and that's it. So
what we see is that different assets soak up that
extra licuity at different rates, and I think that's what
separates the winners and loser. And it seems like it
doesn't seem like factually in history, bitcoin has soaked that
(13:51):
up at the fastest rate. So why is that.
Speaker 1 (13:53):
Yeah, I mean, well, obviously to you and me, bitcoin
is it sounds money. It's hard money. It's something that
cannot be debased. There's only going to be twenty one
million bitcoin ever minted, ever created, and so it can't
be manipulated like fiat money supplies and even like gold.
(14:18):
You know, we've seen the madness out in London this
last week, last few weeks and what's happening there. And
this is kind of an important thing because people think, oh, yeah,
but I buy gold, then I'm protected. But gold, I mean,
if gold was not so manipulated, it would be at
a much higher price. It would be you know, in
the tens of thousands. It's not wouldn't be just hovering
(14:39):
around three. And so the issue there is that you
have sovereigns buying gold. You have some worries about Trump
tariffs and bringing your gold back into the States and
having a sudden tariff on it. So you've got the
comics is bringing gold back into New York and into
(15:00):
the United States, and so you have players around the
world that are buying gold, like the bricks countries to
try to avoid having to buy US treasuries in order
to have dollars because everybody still needs dollars around the world.
But if you have gold, then you're supposedly protected. Well,
the issue in last week, in the last few weeks
(15:21):
out in London is that the Bank of England realized,
we don't have all the gold in our vaults. We
can't just send it out, so it's going to take
us four to eight weeks to get you your gold. Okay,
So then think about that. You've got four to eight
weeks before you can get your hard asset that is
supposed supposedly hard and being held in a vault for you. Okay,
(15:43):
that's number one. Then you've got to transfer it. You've
got to transport it, which you've got to put it
on You've got to put on a truck and a
plane or a boat or something on rail to get
it to wherever you need to be. And it's got
to be protected, so you have to pay for security
for it. It's very heavy stuff and they even like
this is heavy. Bank of England was on stage and
(16:04):
at a press conferenceation, well, it's really heavy, so it
takes a while to move. Yeah, you know, so if
you want to move a billion dollars of gold, think
about all that would take to do that, to get
it from London to New York. Then think about something
like bitcoin, where you have verifiable addresses and it's immutable
(16:24):
and you know that you look at that address and
you see exactly how much bitcoin is in that and
that part of the block chain. Right, it's it's very
easily auditible. You don't have to worry that it might
be just gold plated nickel like you saw in the
JP Morgan vaults they had fifty million dollars a gold
(16:45):
plated nickel by accident that they didn't know about. Well that,
you know, that's not going to happen. You can move it.
You can move a billion dollars a bitcoin in less
than ten minutes for a few bucks. It's I mean,
it's just it's staggering and people are starting to catch
on to this, and it's the younger generation is very
comfortable with that digital asset. Uh you know that concept.
(17:07):
The older generation not so much. They love the gold
typically you know, my mom loves a bitgoing but it
but you have you have the younger generation now is
looking at things like digital assets and bitcoin is one
of those digital assets that is starting to bring people
over to that to a new a new asset class,
(17:29):
and it's emerging and it's growing rapidly, and that's the
that's the point.
Speaker 2 (17:34):
Do you see sort of like this bifurcation happened in
the market where you mentioned that the older generation the
younger generation. I'm not sure if I see it that way,
but I do see a bifurcation happening where you see
massive demand for gold through central banks. Their demand for
gold is at all time highs the last couple of years.
You mentioned bricks nations China try and divest from treasuries,
things like that. So you see the governments of the
(17:56):
central banks sort of clamoring for the gold. But when
you look at a little bit lower down, when you
look at the institutions, even when you look at like
government sovereign wealth funds and then down to institutions in
Wall Street, it seems they're more into buying bitcoin right now.
So I don't hear I see announcements almost every day
of new public traded companies adding bitcoin to their balance sheet.
I haven't heard of any that are adding gold to
(18:17):
their balance sheet. We hear about sovereign wealth funds. I
think just today was it Saudi Arabia or was it
Abu Dhabi? Anow say, four hundred and sixty million dollars
worth of bitcoin added, but you didn't hear about them
adding gold. So it's almost like this bifurcation where the
governments and essential banks seem to be acquiring goal at
a rapid rate, but then everyone just below that sovereign
(18:37):
wealth down to institutions and banks are going into bitcoin.
Is that what you're seeing?
Speaker 1 (18:42):
Yeah, I mean it's fair exactly. And just going back
to what we're talking about. You know that the inflation
keep up, inflation and demographics, you know, that's one side
of it, but what you just hit on is that
it's probably the most This is the key development of
for bitcoin in In this last eighteen months, you've had
(19:03):
massive tailwinds for this asset class, and we can talk
through each of those, but just like you said, you
have these sovereign wealth funds, institutions, very large high net
worth individuals coming into this new asset class because they
know that this is all game. Theory now is that
I need to get some of this before the price
(19:25):
gets away from me, and then people look at it
and say, oh god, it's one hundred thousand dollars. It's
too late. I can't afford a bitcoin now, Whereas you
know you and I know that that's just a number.
Like the debasement's not going to stop. This is going
to continue to go up in value, meaning the dollar
is going to go down in value against it. So
(19:47):
they're not sensitive to price like retail is. Like you
know some of some of the smaller players are who
only have so much money, they're very sensitive to the
price of bitcoin. Whereas you have Abu Dhabi come in,
they can buy half a billion dollars of bitcoin and
it is and just hey, just go along in the market,
(20:08):
like I'm I'm not priced sense of don't wait for
I'm not waiting for it to get back to seventy. Yeah,
just participate and go along in the market. And that's
what they did. And what's interesting about that is they
bought the ETFs. Apparently from the report, they bought ETFs,
and so people would now say, wow, but that's just
paper bitcoin. It's not. The ETFs have a legal obligation
(20:30):
to own the underlying bitcoin. If you're a spot ETF
like ibit or like you know, FBTC or bit wise
you have to own those the corresponding amount of bitcoin
to the nav okay. So, but that is an easy
way for any player to get in. Sovereign funds, governments, institutions, endowments,
(20:57):
pension funds, they can just buy the ETF. Now it'ld say,
it's that that's a super highway that's been built. Yeah,
it's so easy for them to get on. That's institutional
adoption is happening. It's happening quietly. You do see companies
coming in buying bitcoin. You do hear about companies buying
actual bitcoin on their treasuries. But this is kind of
like it's all now forming and taking shape and exactly
(21:19):
what you just said. It's it's becoming adopted as a
new asset class.
Speaker 2 (21:23):
Yeah, right before our eyes. You mentioned earlier like sort
of like the Bank of England and well the LBMA
Lendon boil Market and as well as the as the
BOE Bank of England both running out of gold. The
world's clamoring for gold, trying to get it from wherever
they can. I think the LBMA had three hundred and
twenty million ounces on paper, but like four hundred ounces
(21:47):
of claims against that but only thirty available or something
like that. It's crazy. But what we're seeing now everyone's
climbing for gold. We're starting to see that a lot
of these ETFs have leased out their gold right So
that's like that rehypothecation. So when you go when you
talk about like the bitcoin fund, they're legally required to
buy it, but are they are they allowed to? Are
(22:10):
they are they restricted from leasing it out and rehypothecating
it like we see in the gold market.
Speaker 1 (22:16):
They're not supposed to be rehypothicating the bitcoin so gold, Yeah,
I mean, they they have ways to do that, clearly,
And that has been the problem. That's been the fear
of people who own these ETFs. Do they actually have
the gold and the vaults like they say they do?
And that's and it's hard to audit that. But again,
(22:36):
with bitcoin, you can audit in minutes just put you know,
you can just have your spreadsheets and audit it. It's
not it won't be difficult.
Speaker 2 (22:43):
So yeah, now most people think that, well I don't
know about most people. I get asked the question all
the time, like how do you invest in the bitcoin?
It's like you can just buy it and like you
just hold it, right, And so I think maybe most
people that then think about that way would go, well,
I guess I just buy it and I hold it.
But like you worked in the big hedge funds, you
(23:03):
worked with the institutional capital allocators. Like what's the difference
between how retail thinks about bitcoin and like institutional allocators
and like headd hedge funds would approach bitcoin.
Speaker 1 (23:17):
That's a good question. You know, it depends on the
type of hedge fund. And so if you're if you're
an active hedge fund, like really actively managing your your
capital and you're trading a lot, then you'll be trading
bitcoin and you'll be going along, you'll be going short.
You have all kinds of strategies around it, put call strategies.
(23:37):
You know, you might be doing derivatives with it. You
might be doing hedge trades against or pairs trades with
other currencies. You know, there's all kinds of stuff the
hedge funds will do with the base currency, with the
base asset. That's one type. Another type is you know
you'll be buying companies that are either involved with or
(23:59):
are investing in bitcoin themselves. You know, things like strategy
former micro strategy. Yeah, uh, you know, met a planet
and uh and other ones. Bitcoin minors obviously, so that's
another strategy. Uh. And then you've got you know, so
that's kind of like the hedge fund world, the and
(24:21):
non non endowment or pension funds, they would just be
buying bitcoin. Like, they're not going to be doing all
this stuff. They might buy some of these stocks, but
probably through through some other agent, through a hedge fund
or through another money manager probably. But then on the
other side, so it's got kind of like you know,
just the regular hedge fund side, you've got your you
(24:43):
get your VC side, which is the venture capitalist are
buying super super early stage, highly speculative, very young companies
not typically just not revenue generating and so u. But
they have a they have a basket or a portfolio
these investments, and they hope that one or two of
(25:03):
them become unicorns to make the returns for the whole portfolio,
because the reality is that most of those companies don't
really make it after ten or fifteen years. That's just
the reality of VC investing. On the other side of
the spectrum, you've got companies like investment companies or hedge
funds that will invest in revenue generating companies that are
(25:25):
a little bit there longer in the tooth that are
revenue generating. They're up and running and have this window
of five or ten years with a really grow rapidly
along with Bitcoin, and that's kind of a in my mind,
that's kind of a sweet spot of this industry right now.
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(26:34):
com slash podcasts. So the way that I kind of
think about that is like, so you have this whole stack,
as you're sort of describing it to it, so you
can buy the base asset, you can buy the bitcoin,
and then there's other ways to play companies that are
exposed to bitcoin building on around bitcoin things like that.
So if you think about like oil is a commodity,
Oil as an asset maybe the last fifty years, so
(26:56):
just fortiflation, it hasn't really moved anywhere sixty eighty bucks
a barrel or something like that. But then you have
the oil industry. It's like the eighth artists industry in
the world, worth about five trillion dollars four point seven.
I think, so you sort of are seeing the same thing. Then,
so you st bitcoin the asset, the commodity, but now
you have this industry being built around bitcoin. And then
I think what you're saying is just to kind of
(27:17):
reiterate to the audience, is that you have, just like
traditional tech, you have like early early stage like breaking
you know, breaking ground, and that would typically be like
friends and family, angel rounds, super high risk, high reward,
and then you go up the stack to higher level
companies that are further along, they need bigger amounts of money,
(27:38):
They maybe don't have those potential rewards, but also they
don't have that risk as well because they found market
fit and they're producing profits. So you're basically seeing that
exact same scenario tech now coming over to the sort
of this biccoin ecosystem or maybe bcoin. The bitcoin companies
are moving over to the tech ecosystem.
Speaker 1 (27:54):
Yeah, and that's and that's exactly what we're seeing. And
so it's I mean, the the hard part about investing
in this in this space is, like you just said,
people are like, why do not I just buy bitcoin?
Why not just buy bitcoin to hold it? And that
would be you know, we I think people should. That's
(28:15):
your that's your first core investment. But then you're trying
to find those companies that are well managed, that are
that are disciplined, and are actually uh that that give
you a better risk reward, right, So that risk reward
is what you just said. Is it very very very
(28:36):
early stage where it's a super high reward but a
super high risk, or is it kind of in the
middle where it's it's a high reward but a lower risk,
or is it a little bit further along, where it's
it's a solid reward but a much lower risk. So
that risk reward here could be much better than over here,
(29:00):
you know, especially when you put it into an entire portfolio.
Speaker 2 (29:04):
Let's talk about breaking down that risk and reward. I've
done venture deals for a decade, so like again, right,
like I could decide which stage I wanted to invest
into based off of where I wanted that risk reward
profile to be. But like typically if I was thinking
of Uber, for example, I would say, well, you know,
how'd you come up with this valuation. Well, we're going
(29:26):
to disrupt taxis, we're going to disrupt tax limos, we're
going to disrupt vans, we're going to disrupt write all
these things, and combined the TAM the total adjustable market
is you know, one hundred million or whatever billion. If
we capture five percent of each of those markets, we'll
have that valuation. Right, So there's like a math equation
I can sort of see, well, I think it's realistic
that it could take a little bit from each of
(29:47):
those industries could disrupt that. Okay, you know, yeah, we
can get to one hundred hundred million or whatever. That
valuation is. But when I think about it from like,
it's easy to sort of understand disruptive tech in a
world that we live in today, But when you have
something like bitcoin that's like building a world that we
don't even know what that world looks like, it's really
hard to it's really hard to imagine this new world
(30:07):
when we're living in this world that we have now.
So then we have these new early stage bitcoin companies
that are going to go disrupt markets, But how do
we measure the future value if there's not a market
they're disrupting today? So how do we know if it's
going to be five million, ten million, twenty million, fifty million,
hundred million.
Speaker 1 (30:26):
You just hit on exactly why we are extraordinarily picky
in my fund, the Bigcoin Opportunity Fund, an opportunity fund
where you're a GP, and also we're super super choosy
and discipline on what we invest in early stage and
(30:48):
that's because it's very difficult to put evaluation on something
like that, and often the valuations are just pulled out
of thin air. You know exactly what you just said, Well,
the addressabile market is.
Speaker 2 (31:00):
This or the reality they even know what the undressful
market is because there's no market, they're disrupting.
Speaker 1 (31:04):
Markets to disrupt exactly. So the reality is, you know
you're you're typically then mostly putting your You're mostly putting
your trust and your your risk capital on the what
you believe to be the best operator with the best idea.
(31:27):
So you so you're trying to lower execution risk. But
the reality is an execution risk is massive when you're
in an early stage. I mean, you've started companies, you
know what it's like. It's it's so easy to get
tripped up in a plethora of different ways.
Speaker 2 (31:43):
So, but that's the operational risk of if I can
achieve what I say I'm gonna achieve. But at least
I'm able to quantify if you even if you do
overcome the operational risk, and you do achieve it, then
how much would it be worth. So if you do
get five percent from taxis okay, I could see how
you're worth that much if you can get over the
operational risk hazard. But in a case where there's no
(32:03):
market that I'm disrupting, so I have the risk of
the operational risk, But then how do I know even
how much value we might have?
Speaker 1 (32:11):
Right?
Speaker 2 (32:11):
So for example, you know, in the VC space and bitcoin,
you might see a bunch of wallets, a whole bunch
of wallets. We're going to integrate lightning into it or whatever, right,
but like what market is that really disrupting? I mean,
how much value could that really create, you know, for example?
And that might be a too simple of a version,
but yeah, I just don't understand these values because like,
(32:35):
as an investor, like we're trying to discount the future exactly,
but you don't know what to discount, right, I don't
know it's a discount.
Speaker 1 (32:42):
And that's that's what makes it so difficult.
Speaker 2 (32:45):
Do you think It's also like like where we're at
in the cycle as well, right where it's like I
think both of us obviously believe in that future, but
is it going to come in two years or five
years or ten years or fifteen years is a question.
And I think you want to kind of find the
answer to that out first because then it helps you
decide at which level you want to invest into.
Speaker 1 (33:07):
Yeah, yeah, that's a that's and that's the point is
that the duration of those investments might not match the fund, right,
So the duration of a super early stage investment a
company that's just starting out with an idea on an
appkin that might be a fifteen year runway on a
ten year fund, So that doesn't really work. That math
(33:29):
doesn't work right. So that's a problem that it's a
mismatch of duration. So that is one of the advantages
of you know, of investing in companies that you know
what they're doing, like they have revenue generation that you
can see that you've got a little bit clearer vision
of that runway in a five or ten year window,
(33:53):
you know, or even three to five year window in
some of them. So that's a it's just a different
way of investing for sure.
Speaker 2 (34:00):
So with these you know, typical VC funds that are
investing at the early stages, the real early stages, and
they have a ten year timeframe you mentioned sort of
like this mismatch if you will, or maybe these companies
aren't going to be profitable for fifteen years, but the
funds only ten years. I'm curious in that model, not
that you run that, but I know you've been in
this space for a long time. In that model, how
(34:21):
are they showing like profitability and growth to attract new
capital through those stages? If those businesses don't really have
like a liquidity event.
Speaker 1 (34:30):
Right, Well, this is uh, it's difficult, it's challenging. So
what they what typical vcs will do is you know,
you'll have your your angel funding or a Series A,
and then it'll be at one valuation. So let's say
that you you wanted you bought ten percent of a
(34:53):
company that you valued at ten million dollars. Then you
do a Series B and the companies further down the
road and they say, wow, we've created this value. We're
worth more money now because of the things that you like,
we've just been talking about that you know, now we
can do this, or we've got more We've got ip
that might be valuable or something. So now we think
(35:14):
we're worth twenty million dollars. So for that same ten
percent position of Series B, now you've got to pay
two million dollars. Okay, So but Series A has now
had one hundred percent markup to twenty million dollars. I'm
using very simple you know ath here that is not
(35:34):
exactly like it, but this is close enough that now
you've had one hundred percent markup. So now your first
position is up one one hundred percent. And so However,
if it's fifty percent of your portfolio, and now your
portfolio is up fifty percent, right, Or if it's twenty
five percent, your portfolio, portfolio is up twenty five percent.
So that's kind of that's how they're they're showing returns
(35:54):
along with their IRRs along the way, and that's until
you have an actual exit, which may or may not
happen for a while.
Speaker 2 (36:02):
I mean, I suppose on one side, it shows that
there's demand, so like maybe someone will pay that price
if they're paying that number today, but not if I'm
leading that round right, exactly right, because it shows I'm
paying more than I paid before, which is typically done
in the VC space anyway, right, I mean they typically
invests through multiple tranches.
Speaker 1 (36:22):
Yeah, and they'll go invest in the same company over
a period of years and yeah, use fund one, fund two,
fund three, fund four to do a series B.
Speaker 2 (36:30):
Yeah. Yeah, But I guess it's just important for investors
looking at that to sort of understand the mechanics of
that it's typically done. So it's not like it's like
a shady thing, but it's just understanding, like it's not
like real revenues and real profits. It's more of just
like sort of like a back of the napkin or
inside math type of situation.
Speaker 1 (36:50):
Yeah, I mean that's why, I mean, I sleep well
at night knowing that if I liquidate my portfolio, if
I liquidate the Bitcoin Opportunity Fund right now, I give
back the investors exactly what's on their investment statement, because
it's it's marketable securities plus some of those privates that
are marked at cost.
Speaker 2 (37:11):
So where do you think some of the biggest asymmetric
bets And maybe that's even the wrong word just because
that just thinks fully on reward and not enough on
the risk. But where we're at in the cycle and
the maturity and sort of as you said, sort of
the timeframe of the fund, where do you think some
of the best kind of areas in the bigwin ecosystem
are sort of the best to return money over the
(37:32):
next five years or so, let's say.
Speaker 1 (37:34):
Yeah, I mean, the obviously answer will be in the
public space. Miners, certain miners, not all of them. We
don't own all the miners. We own certain miners in
specifically because of their energy assets, their ability to leverage
off those assets. They have optionality with them, especially with
this really really fast growing AI space, the hyperscalers, and
(37:57):
so you know, the companies that control like scalable power assets,
you know they have and they have the ability to
secure those long term contracts from AI hyperscalers, the AI
companies that are going to need massive amounts of computing
power like those are very interesting to us for two reasons.
(38:20):
Number One, that can be high high generating company, high
revenue generating companies for years, and you could see kind
of that window and you're starting to see these contracts
come forward being pulled forward, and so that's one thing.
And the second thing is they become M and A
targets themselves. So it's kind of an event driven play
as well. And you can have a basket of those
that are event driven that could be takeout targets in
(38:42):
the future, likely will be takeout targets in the future
from either larger players in space, larger miners or larger
power companies or some of you know, like the data
center reats for instance, that they might want to take
them out like. So that's a really interesting space for
us on the public side. And then there's a lot
(39:02):
of things that are in the private side that are
bricks and mortar but have some sort of bitcoin element
to them. So they're already mature, they're already doing they're
already revenue generating their successful companies. But then now they're
adding this element of bitcoin to them that can that
(39:25):
they can leverage off of that base platform and do
really well from Yeah.
Speaker 2 (39:30):
You know, I love to study the cycles and I
look at like these like fifty year cycles that happen,
and each one of them is it's not represented by
just one single piece of technology, but it's always a cluster.
And the reason why it's a cluster of technologies is
that together combined, the sum is greater than the parts.
Right together they're combined, they give you like these new
sets of building blocks to build things that you just
(39:51):
didn't imagine before. And so like we have like bitcoin.
I've been calling it the decentralized revolution for like four
or five years because of where I think we're at,
and I think we're starting to see that now.
Speaker 1 (40:02):
Right.
Speaker 2 (40:02):
So you have like bitcoin, which is a decentralized technology,
but then you have AI. So you just mentioned like
AI AI hosting, AI processing going to like bitcoin mining facilities.
We're also seeing a shake up in the AI market
the tech market, the NASDAC if you will. We're like,
and it's almost kind of going the same thing the
(40:23):
Internet did, same thing that crypto and bitcoin did as well,
where like you almost had like value accruing at these
like monopolistic llm. So you had open ai and Google,
Gemini and et cetera. But now all of a sudden,
you have all these open source ones. Facebook Meta launched Loamo,
which is open source, maybe just to just to sort
(40:44):
of blunt what opening I did now of China's dropping
a new one it seems like every week, and so
it's kind of pushing that down to almost more like
a decentralized level. And so I think that's kind of interesting.
But I guess the question I was gonna ask is like,
so the clusters, So now we have like AI and
bitcoin sort of working together like synergistically, and it seems
(41:04):
like that's going to be really valuable. We're not exactly
sure where that's going to be. I did see recently,
like these AI agents that people are buying, they're able
to get them to start transacting autonomously using bitcoin lightning crazy. Yeah, Yeah,
someone ran one where they literally had the AI agent
go research a domain name, find the domain name, and
go buy it with bitcoin lightning. The whole thing was
pretty cool. So I think about that. So one you
(41:27):
mentioned the data centers like being able to use bitcoin
mining and the high compute for AI being a really
big thing, but also some of these cutting edge ones
that are like just starting to pop up. I mean,
do you think that's an area that you'll be focused on.
Speaker 1 (41:41):
Oh? Yeah, absolutely, And that's exactly what we're looking for.
We're looking for those opportunities where there's there's those two
those two technologies that are successful in and of themselves
can be merged and and create more value being you know,
together than they would set And obviously that's that's exactly
(42:02):
what we're looking forward those that that's kind of like
a Nirvana thing. Yeah, you know, for instance, one of
the things that we're working on for the for the
second fund, it'll be in the first fund too, but uh,
one of the things that we're working on is is
what we're calling is the first uh you know, bitcoin
leverage buyout. And so what we're doing is we're we've
been in deep due diligence with UH with a successful
(42:26):
and experienced operator who's had success in other businesses and
what we're working on rolling up a non cyclical industry
like an industrial industrial service business. I can't really say
too much because we're in in NDA, but uh, it's
solid cash flow, and we would leverage a business right,
(42:48):
utilize a treasury bitcoin treasury strategy and uh and then
we would be providing equity capital along the way and
UH and then obviously advise on debt structuring for the
different acquisitions and its assists in the bitcoin treasury. But
you know, these are businesses you can buy at three
(43:10):
to four times multiple on their eba dah their earnings
and then turn around once it's all rolled up and
sell it for like an eight or nine or even
ten times ebadah later down the road. So that's kind
of a strategy. It's really late stage. It's like it's
private and it's late stage, but it's something where we
can leverage both our experience and exactly what you just said.
(43:33):
You're taking a bricks and mortar business and something that
is that's stable and cash generating and then adding that
bitcoin element to it and then you get this tremendous
valuation on the backside of it.
Speaker 2 (43:47):
Yeah, now let's jump into some fun stuff with the
crystal ball that neither of us have. We love this
part you mentioned earlier. You know, some people maybe thinking
it was too late, or maybe it's too late. You know,
bitcoin hit one hundred thousand. First of all, I would
just say to anybody just to kind of throw this out.
(44:08):
The first of all, you can buy a dollar worth
of bitcoin, and really you can sort of dealt with anything,
So I mean, certainly not a house. You can't buy
a dollar worth of house. I mean, I guess there
are some crowdfunding ways you could do that and tokenized house,
but for the most part, you know, a home to
live in, you don't. But for the most part, the
key that you laid out for us in the beginning
is that you're being debased faster than you think. You
need to buy some assets to keep you ahead, and
(44:29):
so you should do that. And you said that the
rich are getting richer and the poor getting poor because
the rich buy assets. So everyone should just buy assets.
And I know that sounds super simple and maybe insensitive
to some people who are living paycheck to paycheck, but
put it dollar in, put five dollars in, put ten
dollars in. Build that discipline, but specifically back to the
point of view saying, you know, some people think it's
too late because they hit a hundred thousand. You know,
(44:50):
in my opinion, those people are living life in the
rearview mirror. I remember, you know, I started my career
in real estate. Two thousand and eight wiped me out
and everyone else that I was working with at the time.
And I remember like around twenty twelve was when the
real estate market really bottomed out, and then Florida got
hit super hard, and I remember like twenty fourteen twenty fifteen,
(45:14):
Florida was roaring back, and a bunch of my real
estate friends were like, oh, it's just too expensive. It's
too expensive. It's too expensive, because they were comparing it
with being too expensive to twenty twelve at the bottom,
not compared to the rest of the US real estate,
and not compared to the terms and all these things,
and it went on a tear. So when you look
at a one hundred thousand dollars bitcoin, that's like looking
in the rear view mirror as opposed to like, where
(45:35):
is it going in the future, So you know.
Speaker 1 (45:39):
Right there, right go to where the puck is going.
Speaker 2 (45:41):
Go to where the puck is going right, So what
are what's a way or a couple of ways that
you think about how you sort of measure where bitcoin's going.
Speaker 1 (45:50):
Yeah, I mean we talk about this a lot, you
and I have. We just pulled up the chart before
the show, taking peak at it the global assets, you know,
the total global assets. Just Myers puts us out and
that that chart and kind of it's funny. I made
the same exact chart and then he put I saw
his in Sailors presentation a couple days later. We were like,
(46:11):
maybe ten trillion dollars off here and there on the
on the big pieces, and but they're look almost exactly like.
So the reality is it's it's a pretty definable set
of investible assets in the world that doesn't include the derivatives.
So just if you just look at the investment assets,
(46:32):
it's nine hundred trillion dollars and uh, you know the
but in that Bitcoin is now two trillion. So it's
a really easy way to visualize these big blocks that
Bitcoin can start taking market share away from. So you've
got gold is about eighteen trillion. Then you've got your
(46:52):
money supply and your you know, your real estate over
three hundred trillion, you get your bonds three indred trillion,
you've got your stocks one hundred and here in thirty trillion.
So where does bitcoin start taking market share away from?
Meaning where does it where do people start taking their
allocations from and putting it to bitcoin instead reallocating their capital.
(47:13):
That's one part of it, right, really important part of
it though, is that where's the puck going. Where's that
nine hundred trillion dollars going to be in ten years?
Is it going to be nine and twenty trillion? Where's
it going to be closer to quadrillion? Which you thought
it's going to be.
Speaker 2 (47:32):
One point six quadrillion by twenty thirty.
Speaker 1 (47:36):
Yeah, so we're talking about five years from now. Yeah,
it's a massive move, but that that's probably that's I mean,
I would say it's that's right in the range.
Speaker 2 (47:45):
It's not that big, it's thirty or forty percent.
Speaker 1 (47:47):
It's it which is money supply seven or eight percent
between now and then there? You are, right, So that's it.
Speaker 2 (47:56):
So if the money, if the money supply goes up
by eight percent a year for the next five years,
where we're at where.
Speaker 1 (48:02):
We at exactly that's exactly right. So, and that's so
that's pretty base case. It could go up a lot
faster than that. Yeah, the might spot could expand a
lot faster than that, especially if we have another market shock,
right like we had in twenty twenty. So if they print,
you know, if they print fifty percent of the money again,
I mean yeah, I mean it'll that'll shoot up really quickly.
(48:23):
You better own some assets, you better own some bitcoins.
So so where's where's bitcoin going to take market share
away from? Well, it's obvious that it takes market share
away from gold and from stocks. Well, you've got people
who feel like it's hard money and it's it's digital
gold and two point zero, you know, and you've got
people who feel like it's just a risk asset and
they're speculating with it. So it's taking kind of market
(48:45):
share from both of those. So gold isn't growing as
fast as I think it would if bitcoin wasn't there, right,
And then you've got the the institutions that are suddenly
waking up and seeing that, Well, the Fed lowers interest
rates by a full percentage point over the fall, and
the ten year bond yield goes up a full percentage point.
(49:05):
Why is that because bond investors want to be compensated
properly for the risks they're taking and holding those bonds,
and they want to hire yield down the road because
they know that the money supply is going to be
expanded a little bit faster than people are expecting, and
because they know that the Treasury is just going to
keep dumping bonds on the market. There's gonna be massive
(49:26):
amounts of bonds. So that's a really easy, clear bucket
for bitcoin to start taking market share away from as well,
because institutions, and we're seeing it in the different companies
establishing a bitcoin treasury, they want bitcoin in their treasury.
Why why wouldn't you just hold ten year bonds. Why
wouldn't you just hold thirty year bonds or T bills? Well,
(49:49):
you know T bills have reinvestment risk once you get
paid back where the interest rate's going to be. Number one.
We saw what happened the twenty year thirty year treasury
holders during during the last cycle in twenty twenty, they
got obliterated. Yeah, had the worst bond losses in the
history of the bond market. So that's a risk, that's
(50:10):
duration risk. Well, if you own Bitcoin. Yeah, it's volatile,
but it's volatile.
Speaker 2 (50:16):
To the upside, right, So the big difference, it's a
big difference.
Speaker 1 (50:20):
So it's okay. The volatility is okay because over a
longer period of time, it's going to appreciate faster than
the dollar depreciates, basically, and that's the trust and so
it's easy to take market share from that bucket. So
you can see that the pie is growing and Bitcoin's
share of that pie is growing at the same time.
Speaker 2 (50:39):
So, yeah, I want to ask you about a recent
conversation you had with Michael Howell. Yeah, who was Who's
I don't know, maybe the king of global liquidity, I
don't know, prey smart guy, I'll call him that. I
don't know if he is. He's the one that has
been talking about the longest in my opinion from what
I've been watching, But you know, he makes a strong
k that that global equity moves in cycles, and that
(51:06):
it's the it moved the denominator, which then moves the nominator. Right,
So it's like the price of the S and P
five hundred and the price of homes and the price
of bitcoin all go up when you continue to increase
the denominator Inc. Increase the fee up. So he talked about,
like I said, these these liquidity cycles. I didn't hear
the conversation, but I'm just curious if you guys talked
(51:28):
about where you know, bitcoin has these four year cycles.
And what's interesting is a lot of people today are
saying that the cycles are broken. We're not going to
the four year cycles over, It's not gonna happen anymore.
I remember Sailor's saying all your cycles were broken last cycle,
and that all the models are broken. That didn't seem
to stop it. People are now saying that because now
(51:49):
we have the ets buying, we have the sovereigns buying,
they're not going to be selling that you mentioned earlier.
They're not price sensitive, so they're buying, they're holding. They're
not like the hedge funds that will be trading around
it most likely away. A lot of people call it
for that. I tend to think that maybe it's not
the four year cycle, the having cycle that drives the
prices up and down like that, but the global liquidity
(52:09):
cycles that's doing it. So regardless of what's happened in
the bitcoin ecosystem, if long term holders hold it and
don't sell it. I think it's kind of captured by
this liquidity cycle. I'm curious after talking with Michael how
what your opinion is on that.
Speaker 1 (52:22):
Yeah, it's a good question, and I think, you know,
also could be funny enough, it could also be centered
a little bit around the election cycles, because the election
cycles could also drive the liquidity cycles.
Speaker 2 (52:33):
Yea.
Speaker 1 (52:33):
And the election cycles bring a lot of uncertainty, and
once you get certainty in the market, just like we
saw in this past fall, when you had certainty that
Trump was going to be elected and that he is elected,
well bitcoin ripped, you know, it went from sixty to
ninety one hundred plus at thousand and So why is that, Well,
there's a few reasons. You take uncertainty out of them,
(52:54):
out of the market, which market hates uncertainty, and then
you actually inject optimy because you had such a terrible
administration prior to this. Yeah, you know, the Biden administration
was abysmal for the digital assets and for cryptocurrencies and
business overall, and business overall, so they now you have this,
you have that's positive, right. The other thing that we
(53:17):
that what Michael and I talked about though, is exactly
what you said is that cycle, right. So the liquidity cycle,
actually it dipped down and bottomed out in about October
of twenty two, and since then it's been rising again slowly.
You had you have periods like we had in December
and January where the quidey was kind of it was
(53:40):
kind of rolled over, or in November November December kind
of rolled over. Well, you know, central banks were not
expanding their the liquidity at the rate that they were before,
so you do have these blips in between, but overall
we're on the upswing and we you know, and I
agree with Michael, he expects that liquidity cycle to go
(54:02):
on the upswing and top out in mid twenty twenty six.
So that's funny that you say that, because I would say,
not even thinking about just Michael Howell's chart, but thinking
about that bitcoin liquidity cycle, that seems to fit exactly
with what people are thinking that we'll really hit the
top here at the end of twenty twenty five into
(54:24):
the middle of twenty twenty six, and that would kind
of dovetail nicely. The only the only stipulation there and
the only kind of hesitation I have with it with
it moving exactly with that cycle is Bitcoin tends to lag.
So Bitcoin lags six to eight weeks, maybe even longer,
maybe eight to twelve weeks on that liquidity. So liquidy
(54:48):
has to come into the market and then it finds
its way into bitcoin. And so when you put Bitcoin
up against say something like M two or Michael Howell
has a chart where he shows it up against UH
and he's got it lagging, so he shows it right
up against her. It it really does follow that liquidity pretty.
Speaker 2 (55:04):
But it seems like the pump, the upswing on bitcoin
has that lag, but then the drop almost front runs it.
Speaker 1 (55:12):
Yeah, the drop is precipitous, Right, You've got to be
really careful and understand what you're doing.
Speaker 2 (55:17):
If you looked at when when Powell Jerme Powell announced
that they were going to start raising rates, was that
October November of twenty one, I believe, I think that's yes, right,
and the twenty two they were and it was like
January or March and they started raising it, but they
announced it right in their four guidance telling you what
(55:38):
was going to happen, and bitcoin sold off immediately. Yeah,
and then the Nasdaq was like a week or two later,
but the hat P five hundred didn't sell off for
like until January. Right.
Speaker 1 (55:48):
Well, bitcoin has been the tip of the risk spear,
so people, And what I mean by that is that
it has been it has been a the point of
vision and like the point of view of and the
visibility forward looking liquidity. And so it's exactly what you
(56:08):
just said. And so yeah, you can't wait for Michael
Holliw's chart to come out to say that liquidity is top.
It's coming back down. You're going to see it in bitcoin. Yeah. Now,
I don't believe that bitcoin remains as volatile as it
is today in the future. I think it's that volatility
is going to dampen. You're not We're not going to
(56:30):
see eighty percent draw downs.
Speaker 2 (56:32):
But is that a bad thing or a good thing?
Speaker 1 (56:35):
Well, uh, it's a good thing for the store of
long term value, right And because it shortens that it
shortens that length that you have to hold it to
be sure that you'll get your your store of value.
And so that's a good thing and that will but
it's just a natural thing. You know, when you have
institutions that are investing trillions of dollars into this protocol,
(56:55):
now not just millions, hundreds of millions, but trillions of dollars.
Now you've got this liquidity in this in this asset
that it's it. It kind of puts bumpers on it. Right.
So what I mean by that is that an institution
will own a position, they'll get their percentage position. Say
you're you know, a very large endowment, and you've got
(57:17):
a billion dollar let's call it one hundred million dollar
position in bitcoin, and so you've got your hundred million
dollars and that's it's a percentage of your portfolio. Well,
bitcoin is in its cycle and it goes up to
two three hundred million dollars. Well, now it's not just
one percent of your portfolio, but it's two three percent. Now,
if you're supposed to only have one percent in your portfolio,
(57:40):
you're gonna pair back. So it's going to kind of
clip that euphoria foam all high, and that you'll have
these institutions selling into that. Yeah, and then when it
comes back down, the rest of your portfolio will catch
up and it'll come back down. And then you'll now.
Speaker 2 (57:53):
Who sells their winners and holds their losers?
Speaker 1 (57:55):
What kind of world is that these institutions, they pair
it back just to manage their exposure in their portfolios.
It's almost algorithmic, and so then when it comes back,
they'll add to it to you know, top it back
up and get it into that right percentage of exposure
they want their portfolio. And so that'll dampen the downside,
so it'll kind of put some bumpers on it. That's
a little ways off. I don't think it's going to
(58:17):
happen in this cycle, but I do believe the next
cycle we're really going to see the impact of that.
Speaker 2 (58:21):
I was always told to let your winners run long,
cut your losers short. All right, James, last question. We've
been talking in sort of like these five year cycles.
Let's start there. So if we fast forward five years,
if someone listening here ignores everything we talked about today
and just keeps investing in the way they always have,
what happens to.
Speaker 1 (58:41):
Them in five years and just well, it depends on
how are they investing.
Speaker 2 (58:46):
Let's ask that their dollar cost averaging into their mutual funds.
Speaker 1 (58:52):
Yeah, I mean, I I think that they'll be okay,
you know, they'll mean, they'll they'll probably keep up mostly
with the expanse of money supply. But the problem is
in these cycles, you'll have these massive draw downs and
and you know, you'll you don't you don't have the
(59:15):
ability to move around your capital swiftly. You know, I
would say that bitcoin is that. That's why we're focused
on bitcoin in particular, because I believe that it's going
to grow faster than any other asset class in the world.
(59:37):
And uh, and it's going to continue to do that
for for a while. And so if you're not exposed
to it, I think that you are, you're at a
disadvantage in your portfolio. And this is what I tell institutions,
in particular family offices and which you know, this is
funny because they're starting to realize this. They're coming to
(59:59):
us and and saying, hey, do you have capacity in
that first fund? No, the first fund's closed. That's why
one of the reasons we're open to the second fund
is because we have people coming to us and saying,
you know, I need to have some exposure. I don't
really know exactly how to get exposure in the space myself,
and I want to do more than just buy bitcoin,
so you know, and so what's really important about this
is that when you have exposure to bitcoin in your portfolio,
(01:00:23):
then it actually it not only raises your returns mark,
but you know this, you've seen the numbers. It raises
your sharp ratio, which means that it provides a better
risk adjusted to return to your portfolio, which is what
we just talked about, because bitcoin will become uncorrelated to
the other assets and be growing faster than them at
(01:00:44):
the same time. I mean, what a great way to
you know, enhance your portfolio. Right, So the people who
do that, I believe are going to be much better
off in ten years than the people five or ten
years than the people who.
Speaker 2 (01:00:58):
Don't, especially if for my calculation, I won't put you
on the spot. For my calculation, I think bitcoin has
a ten X in front of it over the next
five years.
Speaker 1 (01:01:07):
So yeah, mine is mine's the next seven. Yeah, so
if you ten X to the next seven.
Speaker 2 (01:01:13):
You know the problem with the mutual funds is that
even if they do keep up with the rate of
debasement and they average seven percent over the next period, One,
that's not the real number. Two the fees. I mean
most people, most people only get about a third of
the profits. About two thirds of those profits go to
the to the administrators and the managers. So cool. Well,
(01:01:36):
let's let's wrap it up with that. The Bitcoin Opportunity
Fund James fun number two. We talked about that. We're
going to link to that in the show notes down below.
If anybody wants to get a better risk adjested return
added to their bitcoin profile and doesn't want to be
regretful in five years, check it out.
Speaker 1 (01:01:52):
I appreciate it, Mark look forward to the next time
I thinks
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Mark Moss
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