#787 What In The World Is Going On With Bitcoins Price w/ Dylan LeClair

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system. In this conversation, we discuss bitcoin, on-chain metrics, market structure, and what to expect from the rest of the bitcoin bull market. ======================= Bitcoin 2022 is the LARGEST Bitcoin event in the world that takes place April 6th - 9th in Miami Beach, Florida. All four days will be jammed-packed with exclusive content, exciting announcements and an incredible lineup of bitcoin speakers, artists and leaders. Day 1 is INDUSTRY DAY for enterprising bitcoiners who are looking to build a business or career within the ecosystem. Days 2 and 3 are general conference days featuring speakers like El Salvador President Nayib Bukele, CEOs like Michael Saylor, Elizabeth Stark, Jack Mallers, Adam Back and hundreds more. The conference caps off on the fourth day with the world's first and largest Bitcoin Music Festival - Sound Money Fest headlined by rapper and fellow bitcoiner Logic, featuring artists K. Flay, MØ, Royal & the Serpent, Apashe, Asadi and more. Stay tuned for the upcoming lineup announcement! Last year’s conference SOLD OUT and this year’s is on pace to be 3x larger so make sure you grab your tickets before it's too late. Visit b.tc/conference to learn more. Ticket prices increase on JAN 14th, use promo code POMP for 10% off and I will see you in Miami!ire ecosystem bringing utility to #NFTs. ======================= Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. No extension required. Store, manage, and grow your portfolio, get NFT & multi-chain support, and more. Download the Brave privacy browser at brave.com/Pomp, and click the wallet icon to get started. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan Leclerc is the Senior Market Analyst at UTXO Management. He also writes a newsletter with Bitcoin Magazine. In this conversation, we talk about Bitcoin, on-chain metrics, we talk about Bitcoin's price, the market structure, and what to expect in the coming weeks. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is sponsored by the Bitcoin 2022 Conference. Bitcoin 2022 is the largest Bitcoin event in the world that takes place April 6th through the 9th

• 0:43Anthony Pompliano?

  in Miami Beach, Florida. All four days will be jam-packed with exclusive content, exciting announcements, and an incredible lineup of Bitcoin speakers, artists, and leaders. Day one is Industry Day for enterprising Bitcoiners who are looking to build a business or career within the ecosystem. Days two and three are General Conference Days, featuring speakers like El Salvador President Nayib Bukele, CEOs like Michael Saylor, Elizabeth Stark, Jack Mahlers, Adam Back, and hundreds more. The conference caps off on the fourth day with the world's first and largest Bitcoin music festival, Sound Money Fest, headlined by rapper and fellow Bitcoiner Logic, featuring artists K. Flay, Mo, Royal, and The Serpent, Apache, Asadi, and more. Stay tuned for the upcoming lineup announcement. Last year's

• 1:25Anthony Pompliano?

  conference sold out, and this year's is on pace to be three times larger, so make sure you grab your tickets before it's too late. Visit b.tc/conference to learn more. Again, that's b.tc/conference to learn more. Ticket prices increase on January 14th. Use promo code POMP for 10% off, and I will see you in Miami. Today's episode is brought to you by Fundrise. You all know I believe that the best investors both understand and seek out extreme asymmetry. Fundrise is here to help you do just that. It's the largest direct-to-investor real estate investment platform out there, giving you the opportunity to achieve upside of an asset class previously reserved for institutions and high net worth individuals. That's right, Fundrise is making high-end, private-market real estate investing accessible to everyone via

• 2:10Anthony Pompliano?

  An easy to use automated platform. Its 1 million users already know that the investment with Fundrise is capable of producing strong appreciation returns and income generation while helping to stabilize a diversified portfolio. That's more important now than ever in our inflationary environment. See for yourself how over 190,000 other investors have built a better portfolio with private real estate. It takes just a few minutes to get started with as little as $10. Go to fundrise.com/pomp today and for a limited time you'll get $10 when you place your first investment. Again, that's fundrise.com/pomp. Go check it out and when you make your first investment, they'll give you $10 on top of it. Fundrise.com/pomp. Today's episode is brought to you by Brave.

• 2:52Anthony Pompliano?

  Brave Wallet is the first secure crypto wallet built natively in a Web3 crypto browser. What's Web3? Web3 is freedom from big tech and Wall Street. More control and better privacy. But there's a weak point in Web3, your crypto wallet. Most wallets are browser extensions, a Web2 technology. That means the same old risks, app spoofing, phishing scams and theft. Brave Wallet is different. Brave Wallet is the first secure wallet built natively in a Web3 crypto browser. No extension required. With Brave Wallet, you can buy, store, send and swap assets, manage NFTs, even connect other wallets and dApps, all from the security of the best privacy browser on the market. Whether you're new to crypto or a seasoned pro, it's time to ditch those risky extensions. It's time to switch to Brave Wallet.

• 3:36Anthony Pompliano?

  Download Brave at brave.com/pomp and click the wallet icon to get started. Again, go download Brave at brave.com/pomp and click the wallet icon to get started.

• 3:47Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:10Anthony Pompliano?

  Today Bitcoin on-chain derivatives and macro. Great title to all these slides. Let's start with Bitcoin realized market capitalization, the realized cap. What the hell is this and why is it important?

• 4:21Speaker 02

  Yeah, so this is kind of a mainstay in a lot of my slides, my slide decks with you guys. And this is just kind of a bigger, kind of broad picture of the Bitcoin market. So that realized cap is just the aggregate, basically, figure of every Bitcoin that's ever moved and the price it was last moved. So you can almost think of it as like an organic price of Bitcoin. And oftentimes during bull cycles, when the Bitcoin price goes parabolic, realized cap will increase with it, but with a lag, basically because new capital is flowing in to the asset and old coins are distributing. And so basically, over the last about, since summer, since about August, we've seen these capital inflows have really started to slow. But in absolute terms, they're still pretty big.

• 5:05Speaker 02

  I mean, it's about $90 billion of capital inflows since August. And to put that into perspective, the next slide there, if you're looking at the chart in linear terms, that realized cap figure, it's basically since August, we've seen realized cap grow by its entire figure at the top of the 2017 market. That should be labeled 2018, January 2018. It's $90 billion. So in relative terms, we haven't seen really the capital inflows for Bitcoin to be a multi-trillion dollar asset yet. But in absolute terms, the capital inflows are here and they're continuing to come in. It's just for the time being, it's slowed up a little bit, a little lackluster in relative terms.

• 5:46Anthony Pompliano?

  Okay, when you think of this realized market capitalization, can you explain, is this a kind of backwards looking metric to you, in your opinion? Or is it a forward looking metric in terms of, do you use this to understand what's already happened? Or do you use this to try to anticipate something that's going to happen in the future, whether it's price or other types of metrics?

• 6:05Speaker 02

  Yeah, that's a great question. I think with realized cap, it's more of a backwards looking metric, obviously, because you can see just, you know, the price at which every coin is ever moved. Realized price is just realized cap divided by circulating supply. Where you can kind of be more forward looking with the metric is if, say, you take a ratio of, and I didn't include it in the slide deck, but that market value to realized value metric I present a lot. It's just a ratio of price to This realized price metric and oftentimes the lower it goes currently it's about 1.75 Real the NVRV ratio below one is like a generational buying opportunity. So it's not often that we see it, but that's more of a forward looking metric and when you take a realized or a ratio of these two metrics.

• 6:48Speaker 02

  And so, you know, on a relative basis, it's a lot more attractive to buy Bitcoin at 40K today than it was at the beginning of last year. So that's more of a forward looking way of looking at this metric.

• 6:59Anthony Pompliano?

  Got it. Now we've got the realized price 30 day change, which is basically just taking, what is it? The 30 day kind of rolling average and looking at how that's changed over time?

• 7:09Speaker 02

  Yeah, so this is just a rate of change, almost a derivative, not to be confused with derivative financial markets. But for any calculus nerds out there, this is just a derivative as a rate of change of this realized price metric. And so you can see despite since say August, we've had 90 billion around there of capital inflows. On a relative basis, it hasn't been that much, given just the market size of Bitcoin has obviously grown a lot since 2017. And so just on a relative basis, just to kind of reiterate, capital inflows are here and they're large, but it's not enough to send Bitcoin parabolic just yet.

• 7:43Anthony Pompliano?

  Got it. And so then when we go ahead and we look at the three month futures annualized rolling basis, when you start thinking about realized price in relationship to futures or other types of more exotic, you know, ways people can get exposure, is there a connection between those two things? Or do you look at these as kind of separate and distinct types of data points? But it's important to look at them in totality to actually understand what's happening with Bitcoin.

• 8:07Speaker 02

  Yeah, I think it's, you know, you kind of have to look at all of these things to get a big picture of the market. And the reason I included this chart and obviously basically this rolling basis, the spread between that futures price and the spot price of Bitcoin, in this case, the three month futures. And then we annualize that out. So say when yields are 20%, really that's that basis spread is about 5%, but we annualize that that figure out. And so obviously there's a really, really strong correlation here. And basically what it's showing is that while you haven't seen this realized price or this realized Cap metric, grow a lot, expand a lot in relative terms. This chart is basically telling us that derivative speculation and mostly by incumbents,

• 8:49Speaker 02

  whether you want to call them whales or whether it's crypto hedge funds. Basically, the speculative bid in derivative markets has been basically the largest part of this price action over the last, say, quarter or two quarters. Those organic capital flows that we saw at like late 2020, early 2021, again, are here, but it's just not enough to send Bitcoin really parabolic. And when we broke that all time high and went to 69,000, it was mostly just derivative market speculation. That's been the driving force.

• 9:20Anthony Pompliano?

  Now, you've got this Bitcoin price weighted by hourly perps funding rate, which is an absolute mouthful to say. Explain what this is and then why do you think this is so important to pay attention to?

• 9:32Speaker 02

  Yeah, so perps is short for perpetual futures. It's another futures market instrument. And basically, this is, and the purpose is the largest derivative contracts in crypto and Bitcoin. And so what you can see here is weighted by the funding rate. It essentially just kind of shows when Bitcoin's a little overheated to the upside or downside, or it's more just kind of flat. It's basically a way to kind of show or to quantify that speculative bid, that speculative premium. So when funding is really high, what that means is that derivatives, that purpose price, that contract price is ahead of spot market price. So that's, you know, when that funding rate is very elevated, it's saying that that's the driving force in the Bitcoin market. And, you know, over the summer, we saw the opposite,

• 10:16Speaker 02

  where that funding rate was a lot was below, it was a negative funding rate. And so derivatives were driving the price lower than spot. And so that's why we kind of got a big short squeeze. And so it oscillates and definitely there's kind of a huge sentiment factor here. But that's kind of a lot of the reason why Bitcoin is so volatile. And we see these, these moves is these derivative markets and understanding the dynamics behind them.

• 10:39Anthony Pompliano?

  Got it. And so if we go ahead and then we look at the US government bond yields, which I know you love talking about some macro data, help us understand why the the bond yields are acting the way they are and what that has to do with Bitcoin.

• 10:49Speaker 02

  Yeah, so obviously we've seen a 7% CPI print, highest in 40 years. It comes at a time when when bond yields are near historic lows. In 2020, we kind of got to that historic low point. Yields almost went to zero and the Fed funds rate is at zero or 0.25 basis points, basically there. And recently, kind of the feds come out a little bit hawkish in 2022, saying we're gonna, the market's basically pricing in for rate hikes. And you can see this with, say, like, the government bond futures market. But you can see these yields are really starting to bend upwards. And for those that aren't familiar with bond contracts, yields are inverse with price. So when yields go up, the price of bonds go down.

• 11:31Speaker 02

  And when global debt markets are a few hundred trillion dollars and that risk-free yield is starting to go upwards, this means that government bonds are being sold. So a lot of things, equities, Bitcoin, as these yields go up, what it's saying is that these prices are going down. And just with how the credit system works and all the collateral values, essentially, it means kind of more of a risk off is coming as as the CPI print is coming really hot.

• 11:59Anthony Pompliano?

  Got it. And so when you start to look at the Fed rate hikes, obviously, there's people who think there's going to be three, four. We've also seen, I don't know, JP Morgan's CEO, Jamie Dimon, talk about seven, six. Where's your thought process in terms of like, what's more likely? Is it a lot or is it, nah, maybe we get like one to three?

• 12:19Speaker 02

  I think what the Fed's trying to do now is they're really trying to, they're really trying to get markets to correct a little bit without doing too much. They're trying to talk markets down because they know everything's in a big bubble. I don't think they're that oblivious. Apparently, that futures market's pricing in about four rate hikes in December of 2022. So it's pricing in a Fed funds rate of 125 basis points, 1.25%. Right now, it's at 25 basis points. And so that's the expectation. And I think they're going to hike until something breaks. I mean, that's what they've been doing for basis Basically, the last decade or two, they try to tighten when the economy is running hot. And then they end up breaking something in the bond market or the debt markets and they reverse course. And so I think that's kind of my base case here.

• 13:01Speaker 02

  I don't know how far they get, but credit markets are already starting to to gurgle a little bit. You can kind of see that contagion already starting to to unfold. And so I guess we'll see how far they get.

• 13:12Anthony Pompliano?

  All right, now we've got the S and P 500 reported earnings yield compared to the US Treasury 10 year bond yield. When you look at this, what is this showing you?

• 13:20Speaker 02

  Yeah, so the S and P 500 earnings yield, this is essentially, this is the inverse of the P E ratio. P E ratio is just a way to kind of value a stock, price to earnings. How expensive relatively is a stock? So when you see this, this blue line, that's the S and P earnings yield. What it's showing is that's P E ratios are continuing to go up. And it's very, very correlated, this earnings yield with the 10 year treasury. And so, you know, when we're in an environment where real yields are deeply negative, that's that CPI at seven. And the 10, the 10 year treasury at say, 1.1.5 or 1.6. What it's really showing is that that's the reason that equities are going to moon.

• 13:59Speaker 02

  And so as, as the market starts pricing some rate hikes, some sustained inflation, whatever the case may be for these bonds to start selling off. That's kind of also a pretty, you know, a pretty heavy force for these equity markets to sell off. The discount rate on, on all of these equities, if yields go up, the valuations of these companies get crushed. And so when you're starting to see tech sell off, if you look at, say, Ark Innovation and their ETF, a lot of these long duration growth stock companies that that aren't very profitable and they're being priced out at a really high, insanely high multiples. The reason those are selling off is because of this, this developing environment of potentially higher yields. And that's what the market's pricing in.

• 14:41Anthony Pompliano?

  Yeah, it's, it's fascinating to watch this all kind of occur, given what's going on in the, in the crypto market. And then we've got the Bitcoin S and P 500 realized correlation, which seems to be like the topic de jour of tons of both macro investors and also mainstream media of just like, is Bitcoin in the? S and P 500 correlated and how should we think about that? What's your take on this chart?

• 15:04Speaker 02

  Yeah, so this is the rolling one month correlation right now. It's about a 56, 56%. So it's, you know, pretty, pretty well correlated here. And over longer timeframes, I think that correlation breaks down further. But really, when we're this kind of late in a debt cycle, everything's riding the tide of, of expanding or contracting liquidity. And so when we're starting to see that tide pull back a little bit, Bitcoin is, is treated by many as a risk asset. But I think what, what is often still, you know, the information asymmetry is still very strong is that ultimately Bitcoin is also a risk off asset in the sense that, yes, during a liquidity crunch, during a, during a period where the dollar gets bid, say March of 2020, Bitcoin is going to take a brief hit.

• 15:48Speaker 02

  But ultimately, the store of value thesis for Bitcoin isn't, isn't wrong. There is a production cost. There is a way to custody your Bitcoin with zero counterparty risk, unlike any other asset before. And so in that sense, Bitcoin is a risk off asset and is something that you want to own in a deflationary environment if it is allowed to play out. And I think the reality is, is that deflationary environment, however long it takes to unfold, I think it's not going to be allowed to persist for too long because this, this global everything bubble just can't, can't take it. And so while this correlation is, is pretty strong and if equity markets sell off as, as the market prices in a Fed hike or Fed, multiple Fed hikes, I think the reality is, you know,

• 16:33Speaker 02

  the macro funds, these investors that are looking just at correlations and not a fundamental understanding of Bitcoin, they're going to sell the asset. And that's okay, because the people that are, you know, have conviction and understand the thesis for a non-sovereign asset in the digital age that can't be printed or manipulated, they, they understand what Bitcoin is and are happy to buy at a discount.

• 16:54Anthony Pompliano?

  So really, there's a strong argument that there's been a financialization of Bitcoin. There's a different set of holders now. They're going to treat this like their risk asset versus the, you know, kind of quote-unquote Bitcoiners, who are going to actually just hold Bitcoin as their reserve asset. And so even though it's the same asset, when you have different people holding it for different reasons, it gets treated differently. And there's almost a mismatch to some degree of how much money the Wall Street and financial institutions have versus the, you know, average pleb who says, no, this is my reserve currency. Is that a fair way to think about it?

• 17:23Speaker 02

  It's a great way to think about it. And I think the financialization of Bitcoin is always going to happen. As Bitcoin is a, you know, $800 billion asset today, it's going to be a $5 trillion, $10 trillion asset at some point. The larger it gets, I think the more pure, basically, the more pure it becomes at showing the everything bubble and just being a representation of the credit expansion and credit contractions in the legacy system. We've seen that in 2020 and 2021, and now going into 2022. And I think it's going to become increasingly true into the future. It's just basically a calling the bluff of the central bank put. And it's basically a check on the Fed to say, however irresponsible you are, however far you want to take this, people have an opt-out. And

• 18:06Speaker 02

  so whenever they do reverse course on these hikes, and they will, depending on when the system breaks, when it, when there's a big crack in the bond market or in equities, if, say, equities drop 20%, I think the reaction of Bitcoin will be quite telling from that point. But we'll have to wait a little bit for that, in my opinion.

• 18:23Anthony Pompliano?

  Got it. And when you start to think about that financialization, obviously, if we kind of think of, on the far left, maybe of the spectrum, you have the individual, the retail investor, they're treating Bitcoin as that reserve asset. On the far right extreme, I think that it becomes really interesting when you think about maybe a nation state. And like, if you look at El Salvador, like, they're holding it as a quote-unquote "reserve asset" as well. They're not trading it, they're not treating it like a macro risk asset. But in the middle is the Wall Street firms, the organizations. And so is it concerning to you, or is it a positive signal that retail and countries almost act the same versus the institutions on Wall Street? Like, is it just time horizon difference? Or like, why is it?

• 19:04Anthony Pompliano?

  That an individual in a nation state act the same, but a trading firm or some sort of bank, they have much more of a short time horizon?

• 19:12Speaker 02

  Yeah, I think that's a fair way to put it. I think ultimately Bitcoin is just in its monetization phase and it's slowly entrenching itself on everyone's balance sheet in the entire world. When you decide to allocate to Bitcoin, you're saying, I'm going to hold this on the right side of my balance sheet, on the asset side of my balance sheet. And there's assets and liabilities everywhere. And so ultimately, the dollar being that world reserve currency, there's a lot of dollar-denominated liabilities out there. And so depending on, say, someone's risk management or their asset and liability structure or breakdown, with, say, something like a hedge fund, or a pension fund, or an endowment, where they're holding, say, US Treasury securities or anything else, Bitcoin is going to be treated in that risk bucket, right? It's a risk on asset.

• 19:55Speaker 02

  It is a high beta play on central bank liquidity. And for the plebs, or, say, for El Salvador, they're saying, we're going to adopt it as legal tender. We're going to adopt this as our unit of account, and we just want to accumulate. And so I think ultimately, everybody is kind of,

• 20:11Speaker 02

  depending on how they play it, but it's still just monetizing. It's a new asset. It's still only 13 years old, and people will allocate and play to how they want. And I think ultimately, it transfers from that risk on asset to just being a risk off asset, as people kind of understand that the end game of central bank and fiat currencies is always basically perpetual inflation, perpetual monetary expansion.

• 20:36Anthony Pompliano?

  Yeah, it's crazy. Joe, John, what questions you guys got? What's up, Dylan? Mine's just around news. So I think it was this morning Cash App announced that they're integrating Lightning Network, where US customers will be able to send Bitcoin anywhere in the world instantaneous for free. How does news like this play into your mind when it comes to like the broader price action that we might see?

• 20:56Speaker 02

  Yeah, it's I mean, it's a huge announcement, and I think the market doesn't really understand how big it is. Just the normalization and adoption of Bitcoin and second layer solutions like Lightning. How many square terminals are there in the US or around the world? Right? Like, what Jack Mallers is doing, what Jack Dorsey is doing. It's really, really exciting. And all this stuff like Lightning Network integration, it's a completely open open network. So anybody can can plug into this thing, just like Twitter did, right? They disconnected their API. And so this is not something where price will spike, like, say, if there was some small cap altcoin announced some some some news, the price would would spike 10 or 20%. Or if some, you know, GameStop announced that they were accepting

• 21:39Speaker 02

  Bitcoin or Dogecoin, the the price pumps. Well, with Bitcoin at a, you know, $800 billion asset, it's it's not gonna it's not gonna pump on news like that. It's ultimately, it's just about the supply and demand dynamics that takes sometimes weeks, months, quarters, years to unfold. That that supply squeeze thesis isn't wrong. It's just often a little early and derivatives kind of mask what's truly happening. But when someone like Square comes out and says, we're building on the Lightning Network, I think the the logical thinkers, the people that have that have been around tech for a while, can kind of see what's what's happening under the surface, and just, you know, how powerful these network effects ultimately are. And I think that's that's something that's quite misunderstood, in my opinion. It's not priced in.

• 22:20Anthony Pompliano?

  John, what you got for us?

• 22:22Speaker 03

  Dylan, so Intel also came out this morning and basically stated that that they are going to create mining rigs for people at low, low energy and very efficient rigs. How does that affect the hash rate? And like, is there a cap on how like many miners can be on the network at once? Like, is there at some point, does it become bad for the network with two main miners or not at all?

• 22:45Speaker 02

  No, I there is no cap. And I think ultimately, there's there's the largest economic incentive in the world to continue to spin up and plug in these miners. If you have any sort of waste energy, underutilized energy resource, Bitcoin is going to come in Bitcoin mining, and they're gonna basically, they're going to harvest that underutilized energy and almost flatten

• 23:06Speaker 02

  These these power costs around the world, we're just starting to see that play out. But it's a no brainer for all these semiconductor manufacturers, chip manufacturers to get into Bitcoin mining production, or just whether that's ASICs, or you started to see like there's GPUs for for other crypto networks that are that are being produced. And there's a super high demand for these chips because because they're so valuable. And so it's a no brainer. And I think it's ultimately very encouraging. We want to see competition in this in this field. And for a while, it was kind of dominated by a monopoly with Bitmain. And so just to see other other people announce their, I think Square announced that they were going to produce Bitcoin miners. They're going to tend to block Blockstream has also announced they acquired an ASIC manufacturer.

• 23:51Speaker 02

  And so to kind of see this this competition and potentially to see it onboard and onshore in the United States is very encouraging. And it's good development.

• 24:00Anthony Pompliano?

  Dylan, we just got news that Intel, a $220 billion industry leader in hardware manufacturing and chip computation, is going to launch a low voltage, kind of high impact Bitcoin ASIC for mining. When you see a player like that start to participate in the industry,

• 24:26Anthony Pompliano?

  is that just like a, yeah, of course, like everyone's going to do this? Or is that something else that like is at play here like like Intel, right? This isn't Bitmain. This isn't some no name firm that's like, oh, shit, we got to throw the Hail Mary pass. Intel does whatever the hell Intel wants to do. And they're going to get into Bitcoin mining. Like, what do you what's your take on that?

• 24:45Speaker 02

  Have you seen the price of ASICs recently? I mean, it's a no brainer.

• 24:49Speaker 02

  Yeah, I mean, they're all going to come. I mean, ASIC manufacturing as a percent of total semiconductor production is still very small. I think it's less than 1%. And so that's going to that that number is going to grow and demand for ASICs is going to continue to skyrocket. Bitcoin mining margins are still pretty ridiculous. And I think the end game is that there is a going to be a commodity like a commoditization of ASIC miners and profit margins for Bitcoin miners over the long term. Not next year, maybe not the year after, but 10 years out, 50 years out, 100 years out, profit margins are going to be very, very thin as it's the most competitive industry in the world, or it's going to be. Anybody can plug in this, these ASICs and ultimately the ones that will win

• 25:32Speaker 02

  are probably have that power cost near zero. And so in the meantime, there's still this, this huge incentive to plug these things in and profit margins are not near zero. You can almost, you can plug in at 20 cents per terawatt or per kilowatt hour and still be profitable in a lot of places. That's like, that's like plugging it in at your outlet at home. And so in the meantime, I think ASICs are going to continue to be manufactured at a pretty rapid pace and hash rate is going to go exponential. I've seen some estimates that hash rate is going to increase by 50% here in 2022. So a lot of these things are going to be plugged in and I think the, the price of ASICs is going to continue to go up by a lot.

• 26:12Anthony Pompliano?

  When you think about hash rate and price and the relationship there, does hash rate pull price or does price pull hash rate?

• 26:19Speaker 02

  What came first, chicken or the egg?

• 26:22Anthony Pompliano?

  Depends who you ask.

• 26:24Speaker 02

  Yeah, I mean, that's, I think, you know, rising hash rate strengthens network security. It reinforces the mutability of Bitcoin and it, you know, expands the network effects and thus Bitcoin becomes more valuable, so more people allocate to it. It's, it's a really tough question. I think there's no definitive answer there, but I'm bullish on rising hash rate and bullish on rising network security.

• 26:48Anthony Pompliano?

  Got it. You guys got any other questions?

• 26:50Speaker 04

  No, thanks for coming on.

• 26:51Anthony Pompliano?

  Well, hold on, I got one more question.

• 26:53Speaker 04

  I know, just being nice to our guest here.

• 26:58Anthony Pompliano?

  Calm it down. All right. Dylan, as you look forward over the next 12 months, we're still in January, so let's say 12 months by the end of this year, what is the one thing that you think has a high probability of happening that most people are completely ignoring or aren't talking enough about? Like, is there one thing where you're like, bam, this is going to happen in my opinion, but a lot of people aren't? We recently saw Fidelity talk about other countries adopting Bitcoin and things like that. But like, is there one thing that you're saying completely undervalued by the market or not being spoken about enough?

• 27:28Speaker 02

  Yeah, I mean, that fidelity thing was was pretty big. I mean, a lot of Bitcoiners have been talking about it. But it's been more of a kind of a niche thing and to see some giant like fidelity come out and reinforce that that opinion and that sentiment is is obviously very strong. I think the 2020 midterms are going to be really, really interesting. I know behind the scenes, there's a lot of people working on Bitcoin advocacy and and basically championing pro Bitcoin candidates. And I think what we'll see is any crypto Bitcoin opposition from political from political candidates, they'll get ousted. And those pro Bitcoin candidates are going to are going to be elected, I think, I think in big numbers. And I think we're just starting to see a lot of those politicians come out. And so

• 28:10Speaker 02

  the the narrative that the US or that Bitcoin is is pro capitalism, pro freedom, and it's a US kind of as a US asset and CBDCs are more of a of a communist Chinese eastern eastern sort of asset or sort of idealism is something that I don't think is priced in. And the market's still kind of, there's still people that will say Bitcoin's going to be banned. And it and it kind of blows my mind. I understand not everyone's living and breathing in the industry every single day, but I don't think that's priced in. The US just basically Bitcoin becoming the sort of thing that if you are opposed to it in the political spectrum or the political sphere,

• 28:51Speaker 02

  you stand no chance. And so that, I think, is a development that we'll we'll start to see in in big numbers in 2022. And by 2024, I think it'll be pretty pretty understood that if you are are not pro Bitcoin, then then you don't stand a chance in US politics.

• 29:08Anthony Pompliano?

  I definitely agree with that. I'm not gonna say much more, but the elaboration that I'll provide is that there are a lot of candidates right now who have recognized this. And it's similar to challengers in the technology industry going up against incumbents. They constantly look for an edge. And so what do they do? They try to build disruptive technology to get network effects, to get some sort of advantage on customer acquisition, distribution, etc. And the incumbents usually try to use regulatory capture, their size, their balance sheet, and all the things. And and pretty much people know in technology, what are the advantages of a challenger, you know, speed, innovation, strategy versus the advantages of an incumbent?

• 29:47Anthony Pompliano?

  It's playing out in politics right now. There's a lot of incumbent politicians who think this is the dumbest stuff in the world. They want nothing to do with it. They think that everyone who touches Bitcoin or cryptocurrencies or digital technologies like this, they're criminals, they're bad people, they're cheering for the demise of the United States, etc. And there's a whole bunch of challengers who recognize the exact opposite and realize that this is a generational shift in the way people think, in the way that they actually hold their wealth, in the way that they actually interface and communicate with each other, etc. And it's fascinating to me to watch people who are not even in elected office

• 30:26Anthony Pompliano?

  yet, already reaching out and trying to establish support with the Bitcoin crypto industry and to allow people to know, if you're a one-issue voter, I'm on the right side of your issue. You know, basically vote for me because I believe what you believe. And there's not very many issues in American politics where people are one-issue voters, right? There's, you know, maybe some gun stuff, there are probably some healthcare stuff, but you know, there's a couple, but there's not many. And now somehow Bitcoin and the crypto industry in a larger sense has become a one-issue for literally hundreds of thousands, millions of people. And so there's entire, you know, kind

• 31:06Anthony Pompliano?

  of political monopolies on a single seat that have happened because somebody was in a certain jurisdiction with a certain view of the world, and they said, I stand for this and I'm gonna always be this, and if you're this one-issue voter, vote for me. And the best examples are like, you know, guns in Texas, right, is the kind of meme, but there's a truth in the meme. I think throughout the country, there are gonna be people who establish political monopolies on certain seats by just saying, I'm pro this technology, I wanna see everyone be successful that's in this industry, and the wealth creation, the tailwind, the flow of intellectual capital, etc., into the industry will carry that person for literally decades to come in the political realm, all the way to the point where eventually one of those people is gonna become the President of the United States. It just may

• 31:50Anthony Pompliano?

  take, you know, 10, 15, 20 years, but it's gonna happen at some point, and I don't think that that's being priced in by, you know, many people in the political arena.

• 31:59Speaker 02

  No, it's not at all. Brad Sherman's cooked. He's done. Yeah, I mean, it's really encouraging to see that not many people understand what's unfolding. And so, I mean, I'm getting a little bit of a behind the scenes look. And it's definitely really exciting. I mean, I'm a single issue voter. I didn't vote in 2020. I think for the most part bipartisan politics doesn't get you anywhere. So, you know, champion Bitcoin, stand up for pro freedom and you'll get my vote.

• 32:25Anthony Pompliano?

  Seems like a pretty, uh, pretty good pitch to a politician.

• 32:28Speaker 04

  I like that.

• 32:30Anthony Pompliano?

  Is your view of the world Dylan, that politicians are gonna have to capitulate to the Bitcoiners?

• 32:35Speaker 02

  Yeah, I think so. And there's, it's kind of a paradox because ultimately embracing Bitcoin like for say, uh, Ukele, right? Uh, embracing Bitcoin, uh, this thing that he has no control over. Uh, and he didn't have his own currency to begin with, but it ultimately reduces the power of the state, uh, marginally. I think I actually, uh, quite a, quite a bit, but, uh, there is a paradox there that embracing Bitcoin ultimately, uh, will kind of strip a lot of the, the fiat decree that politicians have currently. Um, and obviously that's, that's not too well understood, but the incentives are aligned where they, they should, because there's a whole lot of capital and a whole lot of people in the world across demographics,

• 33:16Speaker 02

  across races, across sexes, across, uh, both parties, uh, that are, that are these single issue voters. And so, uh, that's something that I think this last five minutes that we're, what we've been talking about, it's not remotely priced in, uh, or understood for that matter.

• 33:30Anthony Pompliano?

  I think that you are very right, my friend. All right. How are we looking on, uh, on subs for, uh, for Twitter and for the newsletter? Let's, anyone who, uh, who does not follow Dylan yet on Twitter, you're wrong. Let's go. Make sure, 106,000, let's go. There we go. I'm gonna get, I think, 300K by the end of the year. Easy. Book it. Yeah, he's like, yeah, that's gonna happen.

• 33:50Speaker 04

  300, that's it?

• 33:51Anthony Pompliano?

  I mean, he's got.

• 33:52Speaker 04

  I think he's, it's not about me. I'm talking about Dylan's potential here.

• 33:56Anthony Pompliano?

  I'm saying, how many did you have?

• 33:58Speaker 04

  Uh, you know, 353, but who's counting?

• 34:00Anthony Pompliano?

  300.

• 34:04Anthony Pompliano?

  353, can you get to a million this year?

• 34:07Speaker 04

  Oh, so you got more faith in me, huh? Over here.

• 34:09Anthony Pompliano?

  No, this is 3X.

• 34:12Speaker 04

  Okay, and what's Dylan at?

• 34:13Anthony Pompliano?

  100, can he get to 300?

• 34:15Speaker 04

  All right, are you gonna get to, uh?

• 34:17Anthony Pompliano?

  3 million?

• 34:18Speaker 04

  Yeah. No, that's not 3X. That's less than 3X.

• 34:21Anthony Pompliano?

  Yeah, it is less than 3X. All right, there's, ah, come on.

• 34:25Speaker 04

  Told you 353, what up?

• 34:26Anthony Pompliano?

  Dylan, Dylan, I just wanna call out here very quickly. Wait, go back, pull that back up real quick. I just wanna call out.

• 34:32Speaker 04

  Oh, look at the third word. Now, look at the third word. Sports business and Bitcoin.

• 34:36Anthony Pompliano?

  I'm riding the tailwinds.

• 34:40Speaker 04

  Tell me some charts, man.

• 34:41Anthony Pompliano?

  Give the people what they want. Bro, that's like, that's the male equivalent of a finance thirst trap right there going on in the Twitter account.

• 34:49Speaker 04

  All right, we won't even start with yours.

• 34:51Anthony Pompliano?

  All right, see ya.

• 34:52Speaker 04

  That's what I thought.

• 34:53Anthony Pompliano?

  Thank you for joining us, man. We appreciate it. Anyone who, uh, who wants, uh, for, I forgot to mention this last week. So we'll post some clips from this conversation, uh, today, maybe tomorrow. And then, uh, we'll post a full interview Sunday. Uh, the video will come out and, uh, you can listen to the podcast episode tomorrow. So, uh, I had people, uh, I don't wanna say who it is, Dylan, but I'll text it to you. Who, who messaged me? There's somebody who runs a very, very large, tens of billions of dollar asset management firm, who DM'd me on Twitter last week and said, "Where are the charts? I'm listening to this guy, he's talking about charts, there's no charts." He's listening to the podcast episode. So I had to go send it to him and he watched it, he goes, "Okay, very smart, very smart. I enjoyed that conversation." So you, uh, you, you got the eyes and ears of, uh, of, uh, of the right people, so keep it up.

• 35:38Speaker 02

  Love to hear it. Appreciate you giving me the platform.

• 35:40Anthony Pompliano?

  All right, buddy, we'll talk soon.

• 35:42Speaker 02

  Peace.