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Language: en
In this moment looking at the landscape,
where are you? You like 100% deployed in
Bitcoin? Do you spread things out
broadly? Do you holding bonds? Like what
where how are you approaching this
moment from an investing standpoint?
>> Yeah, good question. I mean, I
fortunately I have better answers there
than on what public policy makers uh
should do because that's always the hard
part. The way the way that I've
approached uh investing uh for myself
and my clients is I generally say uh a
three-pillar portfolio. So most people
are are you know they think of the 60/40
portfolio. So 60% stocks 40% bonds. The
problem is that in fiscal dominance
bonds don't do very well. Uh they they
generally lose a lot of purchasing
power. Um and so my approach is instead
of three-pillar portfolio. So one pillar
is is high quality equities. So that
part's still the same. Uh one part uh is
um hard money's commodity producers kind
of these the more art asset uh type of
of uh approach. And then the final
pillar uh is cash equivalents. So that
is a section that does get debased uh
but it can be used to kind of protect
against volatility and rebalance into
the other portions. And that of course
will depend on how old the investor is.
Another way of kind of thinking about it
is you take the 60/40 portfolio, you
take out some of the bonds and put
something like gold in the place. Maybe
not for all of it, but some of it and
you take the equity side and you take a
little bit of the equities out and put
in some Bitcoin. That's kind of how I've
I've tailored a portfolio. Um because in
that physically dominant environment, uh
those types of of monies, those those
types of more hard assets tend to be
winners.
>> Okay. And how do you conceptualize
Bitcoin? Do you think of it as gold? Do
you think of it as uh money? Um how do
you categorize it in your mind?
>> In some ways bigger than that, I I view
it as money. Uh it's also portable
capital. I I think more fundamentally
what it does is it solves the problem of
fast settlements. Uh and so it kind of
solves a century and a half problem that
that humanity's had. So you know for for
all of human history uh transactions and
settlements were roughly at the same
speed. Uh you couldn't really transact
any faster than you could move around
the world. So transactions happened at
the speed of of foot and horses and
ships. Um but ever since we invented the
the telegraph and specifically when we
deployed the telegraph over long
distances by the 1860s, we reached kind
of this new era where people could uh
communicate uh around the world at
roughly the speed of light and therefore
could transact uh roughly at the speed
of light. But we had no fast settlement.
So we settlements still took the form of
literally sending and auditing gold for
example. And so we became reliant for
about a century and a half on very
centralized ledgers to try to bridge
that whole gap between trans fast
transaction speeds and yet still very
slow material settlement speeds any sort
of like final delivery. Uh and what what
is interesting about Bitcoin is that
it's basically the invention of fast
settlements. It finally allows value to
be sent long distances in a way that's
that's practically irreversible in a
similar way that you chip gold and it it
gets audited and therefore uh that
transactions done. It's not it's not
resting on a centralized ledger's
ongoing maintenance. Uh and so um that's
basically what that problem solves. Uh
but then it's up against very large
network effects. So it it's you know it
starts in 2009. It's tiny. uh it's up
against you know the the the hundred
trillion dollar fiat currency system and
so it's slowly growing into that right
now even at a two plus trillion dollar
market cap it seems big but it's
something like 02% of global assets uh
gold gold at something like a 20
trillion uh network size estimated uh is
around 2% of global assets so I I I
think bitcoin is going to grow into you
know kind of the role that gold fills to
some extent uh but then potentially has
a avenue to grow further still because
it's able to solve things that even gold
itself as a as a money can't solve. So
there's certain things obviously gold
can do that Bitcoin can't do. You can
use it in industry. It has all these
kind of practical purposes. But as a
money um Bitcoin is is is in many ways
more powerful. It's able to beam around
the world in you know 10 minutes uh even
faster by using some higher layers. Uh
and I think another way of kind of
thinking about it is because especially
uh you know with your audience and in
general anyone who's technologically
minded our first thought is well the
first technology is going to be the one
that gets displaced. It's going to be
some later thing that comes and
displaces it. Uh and the one the the way
that I've kind of conceptualized this is
that the really big exception for that
is communication protocols. Those so far
uh tend to have a very long life cycle
of lasting. So whether it's Ethernet,
whether it's simple mail transfer
protocol, whether it's um you know TCP
IP, whether it's USB,
once these things kind of become
dominant in their fields, uh they tend
to uh one they update over time. So what
place what displays is USB is the next
USB rather than literally a competitor.
Um and two uh the complexity and the
fastm moving parts that tends to happen
at the periphery or on higher layers
whereas the core of the system itself is
kind of very simple. Uh and I think that
bitcoin is kind of following a similar
approach which is it's this new
communication protocol that exists and
this in this case it's a communication
of value uh and it's achieved basically
network effect dominance. So it it it
becomes increasingly less likely that
something within its own field will
displace it in a similar way that
Ethernet and USB and others have kind of
achieved dominance and therefore it's
going to grow into whatever total
addressable market it has. Uh which I
think is is north of gold's current 2%
of global assets.
>> What do you think about people that
aren't um they they either aren't sold
or don't care about it as a a
transactable thing? uh but they think
instead of it as a store of wealth. Does
that seem um silly or because I bitcoin
is not transacted like money is right
now.
>> Yeah, I don't think it's silly. I think
that basically people solve the problem
they have and in for for most parts of
the world people when they wake up they
don't have a payments problem they have
a store value problem. um uh that's
something that people in developing
countries have and then even in
developed countries we just have a
slower version of it is where are we
going to store our value so that that's
something that basically 8 billion
people in the world have as a problem
payment problems uh while some people
have them they're way less universal you
know most people in developed countries
don't think I have all these payment
frictions all the time now certain areas
do there has been for example deep
banking um in certain countries uh
people have the issue like uh I point
out uh that There's over 40 currencies
in Africa. There's over 30 currencies in
Latin America. So we can imagine in the
United States if every state had a
currency and imagine all the crossber
frictions, not just in terms of
payments, but in terms of crossstate
lending and things like that. So if an
entity in New York wants to lend to an
entity in Michigan and you have you're
you're balancing 50 different
currencies. Um and so a lot of the world
actually kind of lives under that type
of uh frictionfilled system. Uh so they
especially in a crossber sense you're
more likely to have payment frictions.
Um so I think that that the problem that
Bitcoin is kind of filling into the
thing that it's solving is more that
portable store value problem. So it's
portable capital but then around the
margins it can also solve payment
problems for those that have it. But
then in addition that's a that's a
crowded field. So for example stable
coins uh not not for every person but
for a lot of people stable coins solve a
lot of their frictions as well. So going
back to that example about Africa, like
you'll see a lot of stable coin volumes
happening in several countries there
like Nigeria, uh because especially for
shorter term holding and paying, stable
coins are equal or or in some cases
better than Bitcoin at that specific
task. Um and where Bitcoin really shines
that over that long arc of time, it
can't really be sanctioned. It's not
centralized. It doesn't debase. uh it's
truly permissionless rather than this
kind of centralized node on top of a
blockchain. And so I think over time it
grows into more of that payments aspect.
But I think in the current time where
it's high volatility and it's growing
into uh it's total disable market, it it
more serves as that kind of portable
capital aspect.
>> Okay. Um when I whenever I think about
Bitcoin and my audience will know, but
for anybody that's encountering me for
the first time, I'm heavily invested in
Bitcoin. big believer, but I definitely
don't trust myself to be right about
Bitcoin in the way that say Michael
Sailor does. Um, what do you think about
the Bitcoin Treasury Company's master in
terms of that just massive concentrated
bet?
>> Uh, so I think it makes sense for
someone to do it. I mentioned before
that basically in this current system
where you have uh debasing currency
anytime someone can borrow or short fiat
currency and go long another asset uh as
long as they manage risk and volatility
well they get rewarded for it. So I
think it makes sense that that someone
figured that out you can do with
Bitcoin. It was actually written about
by Pierre Rashard back in 2014.
uh he he wrote an article called
Speculative Attack and he's like
someone's going to figure out that if
you can borrow fiat currency and buy
Bitcoin, you're just going to keep doing
it over and over and over again. Uh that
started happening six years later in
2020 and it's been happening ever since.
Um and we're starting to see it in other
companies as well. So MetaPlanet of
Japan um you know a bunch of others. Uh
I think that makes sense. I do think
that you know this cycle will hit a
degree of froth in it and so some of
these levered entities will get shaken
out. Uh we've also seen uh you know
altcoin treasury companies spinning up
which I think you know looking back
years from now will will probably not be
seen as very positive things to have
done to you know use leverage to to you
know kind of stick altcoins in a in a
publicly traded vehicle
>> just because they're going to wipe out
value. Why would we look back and say
bad idea?
>> Because it wipes out value. Yeah. Uh I
think basically uh there there's been a
long history of you know altcoins have
one or two good cycles under their belt
when they come out they get launched
they they get hype but then they kind of
roll over relative to Bitcoin and then
never really recover. Uh so that that's
been kind of the case over and over and
over again. I kind of expect that to
keep happening just because of that
communication network effect uh aspect
that I talked about before. So
>> do you think though that with the
altcoins that people are really fooling
themselves into thinking this one's
going to be bigger than Bitcoin? Is that
the phenomenon or is the phenomenon uh
I'm going to bet against or bet on
culture. I'm going to be smarter than
the next guy. This is PvP servers all
day and uh I'll just know when to get
out.
>> Yeah, I think that and that makes sense.
I think that a lot of that is PvP. I
think when you put it in a in a public
traded vehicle, it gets a little bit
more more potentially serious or the
scale is bigger. Um but yeah,
>> guys, you really think like that's wild
to me. First of all, I didn't know that
there were companies using an altcoin
treasury uh like approach. Obviously, if
they created their own coin, sure. But
um that seems insane. Is this a thing
that's happening a lot? Like are there
any altcoins that you could point to and
be like, well, that was smart. I mean,
maybe Salana, but like woof. Other than
that,
>> yeah, I think a lot of them can make
good trades. Um, but I think that none
of them really have the quality of a
treasury asset, which is different. Uh,
basically something that I think there's
there's a difference between like a
hedge fund holding a trade versus a
publicly traded company using it as a
long-term treasury asset. I think
Bitcoin has met that standard. I don't
really view others as having met that
standard. I think they're more like
penny stock tech plays basically where,
you know, for example, I'm on the I'm on
the record of being bullish on stable
coins. So obviously any sort of rails
that enable stable coins to function
have certain some degree of value. Um so
I think it's not to say that there's no
value in the space. Uh but generally
speaking it's inflated because there is
this really big speculation element and
this PVP element kind of built on top of
it. Um, and so I think and I think over
time you've kind of seen the narratives
play out and now the the narratives in
that whole space are pretty weak outside
of stable coins and certain other forms
of of tokenization.
>> Do you use debt to buy Bitcoin?
>> I do not. Um, but I I mean I've been
long Micro Strategy since 2020. Um I I
view I I treat it as a much smaller
position than core Bitcoin. Uh and then
anyone who has optional leverage uh that
doesn't get rid of it is in some ways
using leverage to buy assets. So, for
example, you know, I I have uh
purposefully I have mortgages attached
to properties because if I if if if I
can short fiat currency at 3% for the
long term, I figure instead of, you
know, selling stocks or selling Bitcoin
uh to pay that off, uh I'm kind of
indirectly slightly levered uh on
assets. Uh but for the most part, I let
other proxies do it for me. I let you
know, Micro Strategy do that for me
rather than myself hold Bitcoin in debt.
And do you have a uh like philosophical
stance that you use to explain to
yourself or to other people like this is
why I don't go allin like Michael Sailor
because if if Sailor is right, he is
going to make himself one of the
wealthiest people on planet Earth. Like
if this continues to, you know, 10x from
here or more, like he's really really
going to be upper echelon of wealthy.
Not that he isn't already, but I mean it
will just be absolutely absurd. Um, but
boy oh boy, the reason I don't do it is
I just don't trust myself to be that
kind of right. Uh, while I have high
risk tolerance, clearly not that high,
uh, and there could be a black swan
event or whatever. And so I just as a
philosophy go I'm going to spread myself
across a broader basket of um risk on
assets to be sure but I I want that more
diffuse take because who knows?
>> Yeah. So my my approach is when I'm very
high convicted bullish on something uh I
size it so that if I'm right I
materially benefit from it but if I'm
wrong it's not like a financial kill
shot. It's just a major setback. And so
with Bitcoin, it is my largest
individual asset. Uh but it's one of
many assets. Uh and there's also a
difference between someone who, you
know, say sticks half their net worth in
Bitcoin versus someone who bought some
Bitcoin and then because of superior
performance, it's become half of their
net worth. Um and and they they
psychologically treat it somewhat
different. So uh I I you know, I have a
lot of Bitcoin exposure. Um, but it's in
that kind of broader mindset of more
broadly that I want to own multiple
types of high quality assets, short fiat
currency where I can or let other, you
know, let let my assets do it for me on
their balance sheets. Um, and I think
that, you know, to to uh quote Paul
Tudtor Jones, I think Bitcoin is the
fastest horse in the race. Um, but I
don't think it's the only horse. And I
think that it's I have a clearer head by
not being 100% in on something. uh it
gives me kind of a a zen aspect in bare
markets. So for example, in in November
2022 when Bitcoin was what had collapsed
from 69,000 all the way down to like
16,000 uh I was at the um Pacific
Bitcoin conference uh and you know we
were having a good time. we were on
stage, we were laughing. Uh, you know,
the the energy there was high. Uh, and I
think because one, people knew what they
own, and two, anyone who wasn't levered,
uh, or or didn't size it, uh,
inappropriately relative to their
volatility and risk expectations, uh,
use it as a buying opportunity. So, um,
I I think it makes sense for someone to
be allin.
>> Um, but not necessarily everybody and
not even necessarily most people is how
I put it. Another way of kind of
pointing out is that that, you know,
Michael Sailor does have other assets in
his personal life. He he does have
properties and things like that and this
particular vehicle obviously represents
the vast majority of his net worth. Uh
but he'd still be okay if if Bitcoin had
a problem. So, I think people, you know,
you want to put yourself in a position
where, you know, if Bitcoin doesn't
perform the way you think you will, it
could be, you know, obviously very
damaging to to someone financially, uh,
but it's not necessarily an irreoverable
thing, uh, you know, if if they
encounter an issue and and it's going to
partially depend on their level of
conviction and their level of research
that they've done on it.
>> Yeah, agreed. Do you see the volatility
of Bitcoin coming down and would you
celebrate that or be sad?
Uh so historically it has mildly
decreased cycle after cycle and I think
that's normal. I think that when you go
from a one like a you know a million
dollar asset to a billion dollar asset
to a trillion dollar asset uh it's
naturally that the the holding of it
gets more diffused uh and there's kind
of less kind of tail optionality uh
going on. So I think that uh over the
next 5 10 years I do expect volatility
will decrease uh and I I view it as a
good thing uh because as it kind of gets
higher towards total adjustable market
uh we'd expect volatility to decrease
and also part of why people don't use it
for payments uh at scale is that
volatility. Um so you can't really price
things in it because of that high
volatility. Uh we still live in a very
fiat world. our our liabilities uh
either in debts or in just ongoing
obligations, rent, mortgages, uh things
like that. Our expenses are in are in
fiat currencies around the world. Uh so
people can't really price things in
Bitcoin. If Bitcoin does get much larger
and more liquid and the volatility goes
down, that actually opens the
possibility where people could price
things uh more readily directly in
Bitcoin, especially when you're talking
about a context where, you know, a
continent with 40 currencies um and it
can become more of a standard uh that
that people use. So, um I do expect
volatility to decrease and while it the
downside is it takes away from the
explosive return potential over time, uh
I think the upsides outweigh it. But I
also think we have much more to go most
likely before that volatility gets, you
know, to what we consider low like gold.