#1165 Dylan LeClair On Bitcoin, Nostr, Ordinals, Regulation, & The Fed

Dylan LeClair is the head of research at Bitcoin Magazine, & the co-founder of 21st Paradigm. In this conversation, we talk about bitcoin, macro economy, Nostr, ordinals, Lightning Network, bitcoin mining, regulation, & more. ======================= Announcing LYCEUM | Miami, a day-long event on March 4th in Miami Beach hosted by Pomp. We’re gathering an explosive group of experts to engage in a series of bold discussions, covering topics from investing, emerging tech, longevity, space exploration, entertainment and more. The speaker lineup includes names such as investing legend Cathie Wood, NYT bestselling author Vivek Ramaswamy, billionaire Christian Angermayer, master of Contrarian Thinking Codie Sanchez, Modern Wisdom host Chris Williamson plus many more. Listeners will receive an exclusive 40% discount on VIP and Insider Pass tickets with code POMP40. General Admission tickets are free of charge. Spots are limited so head to lyceummiami.com to buy your ticket today. ======================= Pomp writes a daily letter to over 200,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ =======================

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. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. We have no advertisers on this podcast, so it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Dylan Leclerc is a head of market research at Bitcoin Magazine, and he's the co-founder of 21st Paradigm. In this conversation, we talk about Bitcoin, the macroeconomy, Nostra, Ordinals, Lightning Network, Bitcoin mining,

• 0:45Anthony Pompliano?

  and a whole bunch of other topics that you'll be interested in. On-chain metrics, the king, Dylan Leclerc in studio, live. That's what this episode is all about. After you get done listening, jump on Twitter. Let Dylan and I know what you liked, what you didn't like, what you agree with and what you disagree with. We always appreciate the feedback and helps us make better episodes. Here is my conversation with Mr. Dylan Leclerc.

• 1:09Speaker 01

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• 1:38Speaker 02

  UKG is the workforce operating platform with unified HR, payroll, and workforce management, built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG, HR, Pay, and Workforce Management.

• 2:09Speaker 03

  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.

• 2:32Anthony Pompliano?

  All right, guys. Bang, bang. I've got Dylan here with me. You've been on a tear, my friend. Although I can't see your tweets all the time because I think they're suppressing you somehow, you've been firing for like six months straight. I don't know what happened. Contagion, macro issues, nonsense in the Bitcoin markets, nonsense in the crypto markets. When you look back over the last six months or so, we'll go back pre-FTX and kind of the second wave, if you will, of all the failures in the industry. How do you think about what's transpired? Like, how do you describe what's happened?

• 3:05Speaker 04

  Yeah, it was, I mean, it was the biggest absolute contagion event in the history of Bitcoin, crypto broadly. It was like Bitcoin's first kind of native financial crisis with no lender of last resort. So that was like certainly an interesting phenomenon to observe as a participant and just kind of an outside observer of a lot of these different exchanges and, you know, the broad ecosystem. There was kind of a convergence between Bitcoin and macro for all of 2022. And then there was the, you know, kind of a decoupling, but unlike what people suspected, it was a decoupling to the downside. And so, yeah, I mean, I think we flushed, we flushed everything out for the most part. Certainly could like, you know, the exchange rate of Bitcoin go

• 3:48Speaker 04

  lower. Like, I still think we actually get a recession and it's probably, what surprised me is that I thought it was going to happen sooner. I thought, you know, we had this big global bust in asset prices, fastest tightening cycle in history. The base case was that we were going to get a recession and it still is, but I maybe naively thought it would happen a little bit sooner. And I think, are we in a recession? Uh, I think according to the, the, the numbers, you know, official government numbers, I don't think we are. Um, the economy actually is still pretty hot in nominal terms. You have kind of like a two-tiered economy. It's like, you have the interest rate, financialized economy. So, you know, Wall Street, VC, you know, tech, like we're in kind of like a white collar recession of sorts. Um, and then there's like, kind of like the blue collar, uh, service sector, which is still like pretty piping hot.

• 4:33Speaker 04

  Right? I mean, you know, Miami's bussin', uh, bustling, bussin'.

• 4:38Anthony Pompliano?

  I'll, I'll throw data at you. Ready?

• 4:40Speaker 04

  Yeah.

• 4:40Anthony Pompliano?

  So the inflation rate in Miami is 10%.

• 4:43Speaker 04

  Yeah, wow.

• 4:43Anthony Pompliano?

  Right? Crazy. Uh, Miami now has the wealthiest neighborhoods, like two of the top five neighborhoods in the entire country, uh, because home prices have exploded higher.

• 4:52Speaker 04

  Yep.

• 4:53Anthony Pompliano?

  Uh, on top of that, uh, I was reading an article today on Bloomberg where they basically were like, it is Jerome Powell and the Fed versus the service industry. That is going to determine, uh, the inflation battle. And at the same time that they're raising interest rates and they're, you know, destroying investment demand, it becomes white collar stuff, right? Uh, the service industry is increasing pay.

• 5:12Speaker 04

  Yep.

• 5:13Anthony Pompliano?

  They're increasing prices and they basically are saying to themselves, if we don't increase our labor costs and also increase our product costs, we're not going to survive.

• 5:23Speaker 04

  Yeah.

• 5:23Anthony Pompliano?

  And so he's got to do a lot more to go after that industry. But the people caught in the crosshairs are the white collar kind of investment class. And I mean, some of these stocks are down 60, 70%, let alone, you know, Bitcoin, crypto, whatever.

• 5:36Speaker 04

  Yeah.

• 5:37Anthony Pompliano?

  It's, it's nasty out there.

• 5:39Speaker 04

  Yeah, it's, it's really interesting. Like this business cycle is, is a lot different than, you know, uh, maybe the historical analogies of the past. Like, some people are like, oh, it's like, oh wait. Some people are like, oh, it's like kind of similar to the tech bubble, right? Where you add all these crazy valuations and then they, they bust. Um, and I guess if you just think back to the tech bubble, right? Like everybody thinks about the NASDAQ going down 80%. What people don't really think about is two and a half years later, in 2002, the S and P 500 was 50% from its highs. Right? So like, these things do take time. Um, I think that two-tiered economy thing is, is very, very true. And, you know, I guess like if you, going back to say like 2021, if you said, you know, the Fed's going to get rates to five and some change percentage, uh, and things are going to be able to, you know, to stand for a

• 6:19Speaker 04

  A while, I would have been surprised. That would have caught me off guard. And since then, I mean, obviously, I've kind of realigned the expectations. But I still think that the end game, as in kind of this broad thesis, this big debt, debts, long-term debt cycle thesis is 100% accurate, still in play. Like, there's just mathematically, not, there's not a way we can serve it. Not like, not just the US government, not just the Treasury, but like, globally, debt burdens are still so high, and the only, the only really way out is to kind of let this inflation run hot for a sustained period of time. So it's interesting, right? They laid out the playbook. They're like, all right, we need to devalue this debt. We're going to let inflation run hot. If you look at what they said in 2020, they're like,

• 6:56Speaker 04

  we need inflation hot. Inflation came hot, right? Got hotter and hotter. And I don't think what, what they missed, or not maybe what they missed, but what they didn't perceive was the social and political pressure that would come as a result of that. Not just the US, but globally, right? Just like, first inflation crisis in 40, 50 years, right? So there was a lot of political pushback. And so, you know, they, instead of, they were still doing QE and, and zero interest rate policy a year ago, right? Like, I mean, it doesn't feel like that, but I mean, they were literally pumping $100 billion a month into the, into the financial sector 12 months ago. So we're still pretty early in this cycle, and it's going to be interesting to see how it plays out. But I, I still think we're, we're due for some form of broad economic downturn.

• 7:40Anthony Pompliano?

  How do you think Bitcoin would perform as we get deeper into kind of a recessionary period, right? There's a lot of people who said, hey, Bitcoin's never lived through a recession before. If you look over the last 18 months or so, obviously, we've raised interest rates, and had that tightening cycle. Bitcoin went down, along with all other financial assets, but many people would argue, like, actually, it's holding in there okay now, right? For the last, you know, call it six months or whatever it's been, it's pretty much flat.

• 8:05Speaker 04

  Yep.

• 8:05Anthony Pompliano?

  And is your expectation that we've kind of bottomed in this whole down cycle? Could a recession push us lower? Like, how do you think Bitcoin performs?

• 8:13Speaker 04

  Yeah, I mean, I like to view everything probabilistically. You know, a lot of the data we look at, like the on-chain Bitcoin native kind of stuff, like we saw capitulation, there's just no doubt about that. Like, you can go through, like, you know, all these statistics, average cost basis, whatever, you know, the average Bitcoin holder was underwater, you know, in the fall of 2022. That happens cyclically every single Bitcoin bear market. In the same way that, you know, the, say, the average cost basis, the Bitcoin exchange rate's usually like 3, 4x the average cost basis at the top of these kind of local bubbles, crashes, everyone on average is underwater. That happened again, right? So we saw a massive capitulation, like, we can see it in the data. There was some form of seller exhaustion, right?

• 8:54Speaker 04

  Like, I mean, every lender, exchange, hedge fund, market maker in the space, you know, the titans of the industry in 2020, 2021, basically all blew up, right? You know, GBTC, holding 600,000 Bitcoin, trading at a 50% discount to net asset value, like, like, that, you know, if that's... Is that bad? Yeah, is that bad? Yeah. If that's not capitulation, then I don't really know what is. But I think people kind of mistake that, okay, we saw capitulation, we saw, you know, as worse as it, you know, probably gets, versus, okay, now we're in for just like a sustained period of some chop consolidation. Like, I think people are like, okay, the worst is over, time for up only.

• 9:34Speaker 04

  And I think Bitcoin as a macro asset, it, I mean, it has matured over the last three, four years, despite, you know, the volatility to the upside and the downside. I think it is, it is more of a macro asset than it was in 2018, 2019. So, you know, what are equities doing today? Well, that's probably what Bitcoin's doing with maybe a little bit more volatility. And so I think we got some time, like, I, you know, I would be very surprised to see Bitcoin, happily, I would be, you know, happily surprised if Bitcoin made new all-time highs in 23, but I have plenty of time, we have time, right? Like, the broad thesis of Bitcoin as an engineering solution, a superior engineering implementation for money is completely unchanged, right? I think it's just the timeline and the narratives got people a little bit caught offside, right?

• 10:18Speaker 04

  Like, Bitcoin is inflation hedge, and it's like, well, CPI inflation comes in, we see the first kind of bond stock... Market correlation to the downside in 50 years and not just like Bitcoin crypto investors, but like legacy investors, right? Who are like, okay, you know, stocks are falling, we're going to long bonds and they got absolutely pillaged, right? So like Bitcoin on a risk adjusted basis actually didn't even do that bad in 22, right? Like bonds traded worse, a lot of equities traded worse. And risk adjusted in 23 Bitcoin is like one of the best performers. So, you know, I think the game is unchanged. It's just it's a game of accumulation and patience.

• 10:50Anthony Pompliano?

  Yeah. When you think about the decoupling that's occurred at the start of 2023, explain what's happening there and like how you think about that?

• 10:59Speaker 04

  Uh, well, I mean, I don't really think there has, like, I mean, maybe like locally, like a day or two, right? You know, decent short squeeze in Bitcoin, but like you saw a kind of a rip in a lot of these kind of beaten up names, right? Whether it's like the Teslas of the world or tech or equities broadly, we kind of just saw like a general risk on rally. There was

• 11:19Anthony Pompliano?

  Why do you think that's happening? That is like, I'm trying to front run the Fed pivot or something else?

• 11:23Speaker 04

  Yeah, I think there was a belief that I think is reversing that, okay, we're going to see that I think the consensus in Q4 of 22 was, okay, we got this tightening cycle, things are really slowing down. The inflation is actually, you know, transitory. We're going to return to this kind of this mean 2% year-over-year line and the Fed's going to cut in 23. You saw like, you know, Fed futures, the bond market really kind of expect that, okay, we're going to go from 4% or 5% rates down to 3. We're going to ease. Stocks kind of front ran that. Bonds are pricing in a recession and equities are pricing in like this Goldilocks scenario of no earnings recession and, you know,

• 12:04Speaker 04

  future cuts. And now, all of those cuts that were expected in 23, you know, 3, 4 rate cuts, that's all kind of been priced back out. So no cuts in 23. Economy is still really nominally hot. And I think now 2024 is when broadly consensus is starting to price in that that real slowdown. So earnings recession, you know, the Fed's like openly stating, we want slack in the labor market. You know, that is a translation for we want some of you guys to get fired from your Jobs like this is what they want to do. They want to destroy demand. And so, you know, what's interesting is the dichotomy we kind of talked about like five minutes ago between the white collar kind of, you know, Wall Street, V C, tech, you know, interest rate sensitive parts of the economy versus like

• 12:49Speaker 04

  the service industry, anybody that's receiving social benefits from the from the government, right? Like anyone that's that's getting social security just got an eight, nine percent pay raise, right? So in real terms, like they didn't really get a pay raise, but in nominal terms, they they feel pretty good. They feel, you know, they got money to spend. There's still like one, one point five trillion dollars of like excess savings from all the COVID stimulus that hasn't been run through. So there's like, you know, the consumer, despite, you know, the savings rate being low, the consumer still has a good amount of cash to chuck around. So the economy is, is, you know, if you asked me six months ago, twenty twenty three, we're we're gonna see no recession, I would have been very, very surprised. But I think the data is showing that, you know, the U. S. At least is in a pretty decent spot. And so that gives the Fed some some room.

• 13:33Speaker 04

  So I mean, to be honest, I wouldn't even be surprised to see six percent rates on the Fed funds. But if you told me that in twenty twenty, I would have said, no way, you know?

• 13:40Anthony Pompliano?

  Yeah.

• 13:40Speaker 04

  So I mean, that's that's certainly something that's evolved.

• 13:43Anthony Pompliano?

  What is interesting is things like service worker pay continues to be very strong and increasing. A lot of these like local small businesses increasing prices. We see kind of this white collar recession that you're describing, but when we look at the American consumer, you have a savings rate that has been absolutely destroyed. It's at a historic low credit card debt exploding upwards, interest rate on that credit card debt exploding upwards. And it's like all the signs that like the consumer's in trouble. And at the same time that we're like on the precipice of a recession and the consumer is struggling, the Fed is basically like kind of walking over to the cliff and they're like, I'm gonna kick these people off, right? And like, let's see what happens.

• 14:25Anthony Pompliano?

  Do you think that they have to just focus on inflation and like whatever pain comes to the consumer, we just got to deal with it or like can there be that soft landing that they keep kind of pointing to saying like, you know, we'll put the ship right into the Hudson, like a pilot Sully over there and like we'll be good, we'll all walk out of this thing?

• 14:45Speaker 04

  Yeah, I think, you know, there was, there was increasing belief in late Q4, early Q1, in January timeframe where it was like, okay, we're going to go from, everyone kind of thought there was a hard landing coming to soft landing to no landing, right? Like, oh, this, all of a sudden, they might, they might actually do this. And I think with, with kind of, you see like China opening up, they're, you know, shoving money out again, they're printing, you know, the consumer's still pretty strong, like you're talking about the service industry, that's still piping hot. Inflation, which is, you know, part of their dual mandate, we could debate, you know, I think that's a different story about like whether that mandate is even, not worthy, but you know, they're, they're kind of their dual mandate of maximum unemployment and 2% inflation, or you know, what's the official wording of

• 15:30Speaker 04

  that? Price stability? It's not, I mean, price increasing isn't stability, but that's another story. I mean, we can have that debate about whether that's even the right goal to have.

• 15:39Anthony Pompliano?

  Do you think it is?

• 15:40Speaker 04

  I think it's a, it's, you know, part of this Keynesian economic paradigm, which is, you know, everybody's kind of been raised in and brought up in. And so like the Bitcoin perspective, the Austrian perspective kind of looks outside of that box, almost like, you know, from like a fourth dimension. It's like, we're looking in on this, in this system, this incumbent system, like, you know, this is, this is the matrix. But this is the world we're in, right? I'm not naive, like, I'm not naive enough to, to, to not understand the game that's being played, right? So the feds, you know, the Fed, despite, you know, the labor force participation dropping after COVID, right? This official data says unemployment's at 50-year lows, right?

• 16:21Anthony Pompliano?

  3.4%.

• 16:23Speaker 04

  3.4%.

• 16:23Anthony Pompliano?

  Did you read the numbers?

• 16:24Speaker 04

  Yeah.

• 16:25Anthony Pompliano?

  And the small business down the street can't find anyone to work.

• 16:28Speaker 04

  Yeah. And so it's certainly a really interesting business cycle. And I think they're going to, they're going to And who knows, maybe they don't follow through, maybe, you know, Powell, kind of, as Arthur Burns reincarnated, you know, the Fed chair that in the face of inflation, kind of backed off and let it rip, right? That would certainly be very, very interesting. But I think, and this is political, right? I think they were embarrassed by the transitory call in 21. You know, inflation's transitory, don't worry, guys. They were dead wrong. And because of that, their credibility was was kind of shot a little bit. So they're going to, I think they're going to try to reinforce that

• 17:07Speaker 04

  their dominance, I guess, on the market. And I think they purposely want to inflict pain. So, you know, financial assets, I, you know, some people are pretty bullish for 23. I, I think stocks and bonds continue to be correlated. I think they struggle. I think Bitcoin could have periods of decoupling or relative strength, but I, I don't suspect a raging bull market.

• 17:29Speaker 04

  At least for the time being, you know.

• 17:31Anthony Pompliano?

  So Bitcoin, if we look at the on-chain metrics, I think it's 73% or so of all Bitcoin in circulation, hasn't moved in over a year, or somewhere around there, whatever the date is, or date is today. That would say that we have a highly illiquid market.

• 17:48Speaker 04

  Yep.

• 17:49Anthony Pompliano?

  But in order to get that raging bull market, you need some sort of catalyst. When you look out over the next couple of years, some people may point to the halving, others may point to other things. What do you think could be a catalyst to kind of set off the next, you know, true bull market and kind of not just sideways or the stoppage of going down, but actually to go back up? Hey, guys, what's going on? I hope that you're enjoying this conversation. I wanted to interrupt for a second to tell you about an event that we're hosting on March 4th at the Miami Beach Convention Center. It's called Lyceum Miami, and I've gone and asked some of the most popular guests from this show over the years to come in person at the event. It's gonna be awesome. We have everyone from Kathy Wood to Vivek Ramaswamy, Chris Williamson, Cody Sanchez, and many, many others.

• 18:34Anthony Pompliano?

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• 19:16Anthony Pompliano?

  I can't wait to see all of you there. Go ahead and click on the link in the description and let's get back into this conversation.

• 19:23Speaker 04

  Yeah, it's pretty interesting because like, you know, we were, we were talking throughout 2021, 2022. One of the things that, that surprised me during the second leg of the kind of the double bubble in 2021, you know, Bitcoin hit an all time high of 64,000, crashed to 30,000 after the China thing. And, you know, like Elon.

• 19:40Anthony Pompliano?

  Double bubble?

• 19:41Speaker 04

  Yeah. And then we, you know, in hindsight, obviously FTX had something to do with it. You know, there was, you know, some other shenanigans. The altcoin ecosystem kind of helped inflate, reinflate that. But it was really interesting because I'm looking at all this data, right? And, you know, Bitcoin, there was, there was days where Bitcoin's up 10%, stocks down, bonds down, you know, VIX volatility up in legacy markets. And it's like, you know, what is going on? And at the same time, we're looking at this data and it's like, holy crap, you know, like 60, 70, 80% of the supply isn't moving, right? Like whoever's in this market bidding this is having to fight for like a super small part of this pie. And so that, the decoupling or like the, at least the, the theory of a decoupling looked very, very real. And I think in hindsight, what I got, I got wrong, at

• 20:26Speaker 04

  least a little bit locally, as, as we drew down was that supply can remain super, super constrained. That supply elasticity cuts not only up, but it cuts down. It cuts both ways, right? So 80% of the supply doesn't care. They're price agnostic buyers, they're holders. They don't, they don't give a crap about the exchange rate. But that, you know, 20% or like even, you know, the 2 million coins on exchanges that trades every day, right? Whether it's market makers or hedge funds or, you know, speculators. Yeah, because of that inelasticity, not only does it, you know, in a raging bull market is it a clear beneficiary, but in a bear market, right? That supply and elasticity also leads to downside volatility, right?

• 21:07Speaker 04

  So, so I think that that supply being super, super tightly held and very, very illiquid is fantastic for a bull market when there's marginal inflows. But if there's, you know, any marginal outflows or, you know, people are just trading this like it's a derivative of the S and P 500, right? That supply and elasticity on a day-to-day basis doesn't really, that it doesn't matter, right? And on the margin, if you have people that are continuing to acquire it and buy it and hold it and not sell it, that's going to make a difference. But I think, you know, the next, like, it's really, you need that, you need that, that kick, you need that, that spark. What do you think it could be?

• 21:44Speaker 04

  Um, I, I think, I mean, the obvious one is like, you know, monetary easing, like, you know, we have a recession and there's some form of fiscal and monetary response. But I think, you know, eventually it could just be like, at least the last couple of months, it's been somewhat of like a seller exhaustion, short squeeze, right? It's just like supply set at the margin for any asset, this is an absolutely scarce one, it's tightly held, there's just not enough coins to go around. I mean, to, to, to kick it back to a trillion dollar asset class is going to take, you know, a little bit more inflows than we got, have currently. But I think, you know, and we see the S and C coming down a little bit, I think, like, as much as I'm a, I kind of have the, the uncapped side of me,

• 22:27Speaker 04

  that the libertarian, free market, maximalist side of me, I understand the world we live in, I understand that, you know, the regulatory environment is going to keep some institutions, you know, that are bootstrapped by this stuff on the sidelines, at least, at least locally. And I think, you know, this stuff gets cleared up a little bit, I, you know, who knows what they do with the stable coins, all of this. But I think, you know, we got a little bit till some of that's figured out and some of the big boys, you know, the public companies, the big institutions. Like Bitcoin's very, very illiquid, like we said, and that's, that's a good thing, but like, if you were an institution, say an insurance company, right? And you want 50 basis points, you want 1% of your portfolio in Bitcoin, because you're looking at it and you're saying, hey, in a bear market, it does well risk adjusted.

• 23:09Speaker 04

  In a bull market, it does well risk adjusted, let's get a sliver of this thing. And you have a, you know, a $500 billion portfolio as an insurance fund, and it's, it's long duration, right? You have, you have payouts for the next 40 years. I mean, Try deploying a billion dollars into Bitcoin market. Like, you're gonna send the price up, right? And likewise, if you had a billion dollars to sell, the illiquidity is gonna cut the other way. And so, like, you can see, like, it's kind of funny. You can see whenever Saylor over the past years, like, on the tape, it's like, oh, there's a Coinbase buyer. And it's just like you see in the data, like, there's someone just chipping away, buying every second, like. So I think, you know, it's still very, very, despite being 13, 14 years old, the good news, or maybe bad, depending on how you perceive it, but the good news is it's still very immature,

• 23:54Speaker 04

  still very early, and it's still very nascent. That it is a globally liquid asset, but it's not, it's not nearly as liquid as a lot of the legacy assets. So, you know, the good news is it's early. The, the bad news is like, you know, the, the big boys can't really come in because of, you know, regulatory, because of public perception, you know? People say, oh, Bitcoin, but like, they perceive it as like, crypto, FTX, fraud, you know, I can't touch that thing. So, you know, I think obviously, education is important. These are long-term things. And if that's, you know, that's the, the battle we're facing.

• 24:28Anthony Pompliano?

  When you think of regulation, is there potential oversight of stable coins the most surprising piece of what's transpired over the last couple of months? Like, obviously, there's things around Three Arrows Capital, around Terra Luna, around FTX, right? Like, like, things that obviously had issues in the last year or two, but then something like stable coins, I think a lot of people look and they're like, sure, I thought maybe that they would go after some of the coins, or all of the coins, or whatever, but stable coins never really seemed to be the thing that people pointed to, and was like, I think regulators are gonna have a problem with that, or they're gonna think this is, you know, outside of, uh, kind of the, the fence that they want this stuff in. Is that the same way you read it?

• 25:09Speaker 04

  Yeah, it's, it's interesting because, you know, I, I think that the dynamic has changed a little bit now with this interest rate environment, right? Stable coins in a zero interest rate policy world isn't the most lucrative business, right? You're just, you know, kind of tokenizing some dollars, some short-duration treasuries. And, you know, there's the compliance costs and all this other stuff, if you want to operate in the US, obviously, there's the tethers of the world and, and whatnot. But with rate, with short-end rates at 5%. I mean, having a multi-billion dollar stablecoin is a profit puppy, right? Coinbase just reported their revenue, I forget what the numbers were, but a lot of their revenue is just from their Circle program. They just have a bunch of cash, the users have cash on the platform, they don't pay them

• 25:53Speaker 04

  interest, and they just get that short-term interest rate. Tether now is reporting a bunch of profits because they have a ton of their cash in liquid treasuries. So, from the regulation perspective, it's clear that stablecoins is a very lucrative business, and I think the next five, maybe this decade, you're going to see a lot of the legacy incumbent players want a piece of the pie. You see Circle teaming up with BlackRock. Not only are stablecoins a path to monetize treasuries for the US government, it's a structural buyer of US debt, and that's a good thing. They want that. They want more buyers. If you just look at the past 30, 40 years, the government's always trying to figure out, okay, who's going to be the buyer of our debt?

• 26:38Speaker 04

  The Saudis, Russia, China, and the Fed, obviously. And a lot of those sovereigns have kind of stepped back a little bit. Stablecoins, it's a $100 billion market today, it could very easily be a trillion-dollar market tomorrow, or not tomorrow, but the next few years. And so that's a big market opportunity, not only for the US government and to find structural buyers of the debt, but also for the legacy players who just get the tokenized dollars, or a stablecoin on a blockchain, and then get that interest expense. So I think that regulatory pressure is partially because there is a lot of interest to capture this business, and it's a political game, right?

• 27:16Speaker 04

  It's a regulatory game, it's a political game, and the crypto incumbents, despite being relatively in a much better place than they were, say, in 2016, 2017, 2018, are still just kind of drops in the bucket compared to the legacy titans.

• 27:33Anthony Pompliano?

  What is your take on Nostr, I guess is how you pronounce it?

• 27:38Speaker 04

  Yeah.

• 27:39Anthony Pompliano?

  And Ordinals?

• 27:39Speaker 04

  Yeah, Nostr is really cool. I'm on Nostr. I don't post much, but it's exciting and it's growing unbelievably fast.

• 27:48Anthony Pompliano?

  For those that don't know, it is a decentralized social site that basically allows you to use public address and send messages via kind of peer-to-peer relays, very similar to Bitcoin.

• 28:00Speaker 04

  Yeah, so it's, yeah, public-private keys. I think that the basics of the protocol have existed for like two decades, but it was just, you know, just kind of this novel implementation of this technology. So, kind of similar to Bitcoin, like the technology existed for a while. It was just someone kind of like finally just like putting the pieces together and introducing it in a different way. It's very exciting. It's like, you know, you can send lightning, you can like zap people's sats. It would just like basically like you see Twitter is like implementing Twitter coins. I don't know if you saw that. But, you know, they probably are spending all this money to implement this like their own coin and this all this program. And meanwhile, we have this very, very basic, like if you look at the Nostr or the Damas app on the App Store, that's just like an implementation

• 28:44Speaker 04

  of the Nostr protocol. They built it on top. It's like a UX. It's like five megabytes. It's tiny, right? And so, and use like relays to do it. So it's not the most user-friendly thing. Like, my mom's not going to sign up for Nostr and as easy as Twitter.

• 28:59Anthony Pompliano?

  Because if I ask you right now, like, "Hey, what's your profile?"

• 29:02Speaker 04

  Yeah.

• 29:03Anthony Pompliano?

  You basically are going to tell me a pub key.

• 29:04Speaker 04

  Yeah.

• 29:05Anthony Pompliano?

  Right? Which you probably, I'm assuming, don't have it memorized.

• 29:09Speaker 04

  No.

• 29:10Anthony Pompliano?

  And so therefore, it's not the same thing. It's like, "Hey, follow me on Twitter @"

• 29:13Speaker 04

  Yeah.

• 29:14Anthony Pompliano?

  Right? And so that's, some of that has to be fixed. Doesn't necessarily mean it's not going to work. It's just like, it has to get to the point where it's so user-friendly that you can get even more mainstream adoption than people who are willing to kind of overlook the UI/UX stuff.

• 29:26Speaker 04

  Yeah. And like I, you know, for the, for like three, I think two or three months, I saw Jack Dorsey posting about it. And he was, you know, back when there was probably a couple hundred users, he was on that. I logged on, created a thing, and he's on there, you know, five hours a day. And he's, you know, chucking Bitcoin at developers and, you know, setting this stuff up in Africa. And I'm like, you know, Jack's a pretty smart guy. Created two- Massive companies founded to, you know, Twitter and Square. Very, very, very early to Bitcoin and then that implementation with Square like this guy knows what he's doing. Why is he so obsessed with this thing? And I think it's because Jack, I mean, Jack was in the middle of the storm of Twitter.

• 30:06Speaker 04

  With the political pressure and understands the reality of running a, you know, a public forum, social media company. You know, we, we don't even have to go into all the stuff that happened in 2020, 2021, the censorship. I mean, hell, I lost my, my, back when verification was like a, you know, kind of a credentialism thing. I was like official journalist for a media company. Bitcoin magazine is a verified media company. I was, you know, a journalist. Posted some COVID wrong thing. I lost my verification and they said, you know, you're, I got an email. You're no longer notable. And, and it was essentially like, it was, it was a warning shot. It was like, hey, like, and for me, like Twitter is like a, a pretty important part of my career and what I do. And so it was like, all right, like, it was almost like I, I self censored.

• 30:49Speaker 04

  Because like, I don't want to get banned off this site. It's very integral to what I do. And you saw a lot of people, like prominent, you know, scientists, whatever, that it got banned. So there's, there's problems with centralized social media. And I think the reason Jack's so obsessive with Nostr, not obsessive, but passionate and funding all this development. Is because the idea of a, you know, a decentralized identification system and social network is very, very powerful. Another kind of rabbit hole is like deep fakes and artificial intelligence, like Pomp, both of us and you, way more than myself. Have hundreds, thousands of hours of, of live video.

• 31:28Speaker 04

  Out there for the internet. I don't know if you've seen like the, the Joe Biden, Donald Trump kind of deep fakes where they're talking to each other and saying, saying funny stuff.

• 31:36Anthony Pompliano?

  I want someone to put me in the video game with Biden, Trump and like, you can throw somebody else in there and just like two on two. And let us go at it.

• 31:44Speaker 04

  But like, it's, it's funny, but it's also a little scary in the sense of

• 31:47Anthony Pompliano?

  Scary as shit.

• 31:48Speaker 04

  Like, I mean, this is relatively new technology. I mean, I guess they've been building it behind the scenes, but extrapolate it out, right? Just like the, the general trend of technology where it's going in five years from now, it's probably Probably gonna be trivial to fake a video of yourself saying something and whatever it may be, right? It could be as malicious or, or, you know, fun as, as you wanna envision. But how, what's like, how do you verify what's real and not in a world where it's, it's, it costs nothing? To create a fake of something, right? So, and so, and we've, we've, we're already like, we're not screwed, but your, your 10,000 hours of content's already there. Right? Maybe you could try to scrub it all, but you can't, you can't scrub it. So, so the decentralized identification as a concept.

• 32:30Speaker 04

  As like, okay, this is a public, private key verification system for me and what I say and what I post, right? Like, I think that's not even just with Nostr, but in general, you're gonna need something like that to, to verify publicly in the future. And so I don't know what that world looks like, but you know, that trend is really something that has caught my attention recently.

• 32:53Anthony Pompliano?

  What about ordinals? Are you a NFT maximus now?

• 32:55Speaker 04

  I don't have any NFT maximus. I think it's interesting. You know, it's a very, it's the, the surprising thing was that a lot of extremely smart Bitcoin technologists, developers. You know, like Luke Dasher Jr., like creator of the SegWit implementation, you know, kind of solution to the block war drama conflict in 2017. And a lot of the guys that coded up Taproot didn't see this coming. And then, you know, some of them are even saying like, you're, you're cheating the code, right? But I don't think that at all. I think it's a novel use of block space.

• 33:32Speaker 04

  This is a free market and if someone wants to pay up to put a JPG or whatever on a blockchain, then it's a public, it's a public marketplace, right? And so a lot of people are saying this solves the fee problem. I never thought there was a fee problem to begin with.

• 33:48Anthony Pompliano?

  It's been near all time lows, right? For quite a while.

• 33:50Speaker 04

  Yeah, well, I just think that in, you know, the difficulty adjustment and, you know, the, the trend of Bitcoin usage and adoption. There's going to, I mean, just the nature of the, the difficulty adjustment and mining incentives, there's going to be an equilibrium for fees in the future. If there's no fees to pay up, I mean, people will use Bitcoin to transact. I think that it's. It's valuable enough. It's already won the censorship game and there's nothing else immutable. So people will pay to use Bitcoin. If there's not enough fees, miners will stop mining. You know, there's a queue of transactions will clog in the men pool. An equilibrium will be found. Now there's an additional driver for block space demand. You know, that changes the equilibrium, but it doesn't really change the fundamental

• 34:32Speaker 04

  kind of truth of Bitcoin as this, you know, open, public thing that anybody can utilize. So I think it's cool. You know, maybe I'll mint an inscription or ordinal. But, you know, a lot of people are having fun with it, so.

• 34:45Anthony Pompliano?

  What's interesting to me is both of those seem to have brought a lot of attention to Bitcoin. I think that there's this one impact of like, there are a whole new class of Bitcoiners showed up between like 2020 and 2022, where I think some of the data was like, half of all Bitcoiners showed up in 2021. Right? And so they only knew really the economic conversation around Bitcoin. And now there's multiple examples with both of those and other things that are happening where people get like re-inspired. And they're like, oh, this could be, you know, kind of this really powerful technology. This could be used for a lot of different things. And it's hard to measure what's going on there, but I think Nostra has

• 35:27Anthony Pompliano?

  700,000 people have downloaded it now or something, 700,000 users. Like it's a big number, right? Whatever the 500K, a million, whatever it is, it's a big number. And then the ordinals I saw, there's tens of thousands, I think, that have been created at this point. And so like, you look at that and you're like, I don't know very many companies that have brought that many people to use their products on Bitcoin like that in a long time. And so it's pretty impressive to see, you know, what they've been able to do.

• 35:51Speaker 04

  Yeah. I think it's cool that, you know, there's, there's a certain cohort of people in crypto broadly that, that not like to hop from thing to thing, but like, you know, the crypto native class, it's like, okay, you know, we're going to mint NFTs on ETH and then hop to Solana and then do this on DeFi and whatever. And, and those people in, in general, for the longest time have been like, listen, Bitcoin's cool. It's the biggest thing. It's the most liquid thing. It, you know, kind of. Takes the direction of the market either way. It's king, but it's boring as hell. Right? And like, I'll say this as a Bitcoiner, like Bitcoin, um, I mean, not its exchange rate, but like, if you're trying to report on what Bitcoin does every day, it's like, okay, well, you know, 900 Bitcoin remind, we found a bunch of blocks, right?

• 36:33Anthony Pompliano?

  You could write the article the day before.

• 36:35Speaker 04

  But yeah, you can just copy paste it every day. It's like, oh, Bitcoins operating, right? Like, uh, you know, there's an occasional soft fork that's exciting, but like fundamentally, this system is just, does what it does and it just continues to chug along.

• 36:47Anthony Pompliano?

  You end up almost recovering Twitter conversation more than you do the actual blockchain.

• 36:50Speaker 04

  Yeah, yeah. Um, and so it is interesting that there's kind of a technological debate to it and a new class of, of investors excited to utilize this thing. I think that's really exciting. Um, so it's still very nascent. Um, you know, I, I'm not really like, I, I mean, certainly like, could these things appreciate a whole bunch? Yeah. Um, but you know, the, the speculative art stuff, uh, that doesn't interest me. Like that's, I think that does a disservice, um, because it's a new novel thing, but like, you know, uh, I'm, I'm not so much of like a, a collector myself. Maybe that'll change. We'll see.

• 37:25Anthony Pompliano?

  All right. I want to do rapid fire questions to, uh, to end it here. Uh, Bitcoin hash rate hits new all time high, uh, in 2023, if there's a recession or hash rate goes down?

• 37:37Speaker 04

  Yeah. Hash rate just keeps chugging. I mean, it's at all time highs right now, like 300 x a hash a second. Um, I think it's a bunch of Asics on the sidelines, um, waiting like, you know, if, if price ticks up at all, you're going to see, uh, more, more of that come online. I think there's a, there's a structural shortage of rack space, uh, after all these mining blowups, Core Scientific, Celsius, all this, um, you know, they're all miners. Um, and so this, this stuff takes time, but yeah, I mean, it's certainly, mining is the most brutal competitive business in the world. Um, and, and you have to be a top tier, uh, operation to survive multiple cycles.

• 38:10Anthony Pompliano?

  China continues to be abrasive towards Bitcoin or they reverse course, realize they made a mistake and come back?

• 38:16Speaker 04

  I'm not a China expert, but communism and Bitcoin don't mix. It's oil and water, so I'd be surprised if Xi Jinping, you know, open-armed embraced Bitcoin. But, you know, who knows?

• 38:30Anthony Pompliano?

  New York, Nashville, Miami, Austin, San Francisco, or LA?

• 38:35Speaker 04

  Never been to San Fran, been to LA once. Pretty bullish on Nashville, bullish on Miami, bullish on New York. You know, I guess I'll just go with Nashville because that's where BDC Inc. is from. But, you know, gotta love the no-tax jurisdictions, too. So Miami, I'll give it a runner-up there.

• 38:55Anthony Pompliano?

  Tank top or Hawaiian shirt?

• 38:57Speaker 04

  Both.

• 39:00Anthony Pompliano?

  For those that are only listening, that's what he's wearing. Would you rather take the vaccine or buy Ethereum?

• 39:06Speaker 04

  Oof, I would load up on ETH.

• 39:14Anthony Pompliano?

  All right, where can we send people to find you on the internet?

• 39:17Speaker 04

  You can find me on Twitter, @DylanLeclair underscore, dylanleclair.com. Yeah, it's been a fun one.

• 39:23Anthony Pompliano?

  All right, I appreciate it very much. We'll W do it again.

• 39:26Speaker 04

  Cheers.