#939 Understanding The Current State Of Bitcoin w/ Darius Dale, Perianne Boring, & Brian Estes

This is a special episode of the Pomp Podcast. I was unable to record this episode, so my friend Darius Dale from 42 Macro helped to fill in. In this episode, Darius interviews Perianne Boring, the Founder & President Of The Chamber Of Digital Commerce and Brian Estes, the Off The Chain Capital CEO & CIO. In this conversation, they discuss the latest legislation out of New York State to ban Bitcoin mining and what Perianne and her team are doing to prevent this legislation from passing. They also discuss the current macro economic state get a deeper understanding as to why Bitcoin is so important right now. ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone. Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested — now conquer. ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at http://defi.tech =======================

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. This is a special episode of the Pomp Podcast. I unfortunately wasn't able to make it. So we had Darius Dale, the founder and CEO of 42 Macro, sit down and have a conversation with Brian Estes, the Off the Chain Capital CEO and CIO, and Peri Ann Borre, the founder and president of the Chamber of Digital Commerce. In this conversation, they talk about everything from macro data to the crypto markets. I really think that you guys will enjoy this conversation between three people that I have a ton of respect for. I hope that you guys enjoy this

• 0:43Anthony Pompliano?

  one. And before we get started, of course, I first want to talk about our sponsors. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful, user-friendly blockchain products that sync across all of your devices, making it easier to send, receive, and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24/7, Exodus always has your back. But the fun doesn't stop with staking and trading. They recently launched a new NFT marketplace where you can buy and sell your favorite NFTs on the Solana network. By partnering with the popular NFT platform, Magic Eden, they're offering the full Monty on verified collections with more added every single

• 1:24Anthony Pompliano?

  day. Ready to check it out for yourself? Run, don't walk. Over to exodus.com/pomp for your free download today. Again, if you want the world's leading desktop, mobile, and hardware crypto wallet, go to exodus.com/pomp today. Today's episode is sponsored by Abra. They're based in California and they're backed by top VC firms. Abra is an all-in-one, simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral, and earn interest with up to 13% APY on stable coins and 7.15% APY on Bitcoin. You can join nearly 2 million users by downloading Abra from the Google Play or Apple App Store. If you download the app today, you will get $15 in free crypto once you fund your account.

• 2:10Anthony Pompliano?

  You came, you invested, now conquer. Abra, conquer crypto. Go check it out today. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy. They're providing simplified trusted access to crypto, decentralized finance, and Web 3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single-stock purchase on a regulated exchange. DeFi Technologies is currently listed on the U.S. Exchange at DEFTF Stock Ticker and the Canadian NEO Exchange at DEFI.

• 2:51Anthony Pompliano?

  For more information or to subscribe to receive company updates and financial information, visit their website at defi.tech. I'm really excited about what these guys are doing. I've become an advisor to the business, and I highly suggest you go check them out. Go to their website at defi.tech today.

• 3:07Speaker 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.

• 3:31Anthony Pompliano?

  What's up, guys? You got your host, Darius Dell here. I'm founder and CEO of 42 Macro. We have Periann Boring of the Chamber of Digital Commerce. I'm also joined with Brian Estes. You guys all know Brian Estes, CIO of Off the Chain Capital, one of the best-performing Bitcoin and actual hedge fund in the continent of the United States. Really proud of you, what you accomplished, Brian. But let's turn it over to you, Periann. You have obviously a lot going on with this sort of ban, this bill that's going through the New York Legislature. Can you talk to us about that? Because that's a very big deal as it relates to Bitcoin mining.

• 4:01Speaker 02

  New York is truly failing us.

• 4:03Anthony Pompliano?

  New York's still failing us?

• 4:04Speaker 02

  They're failing us, yes. The legislature is planning to ban proof-of-work mining in the state. Technically, they're calling it a two-year moratorium, but effectively, it's a ban. This bill has already passed the Assembly. And it will come up for consideration in the Senate any day now. Our team at the Chamber of Digital Commerce, we have a team of lobbyists on the ground in Albany. They're working full time on this. And now is the time for anyone who cares about the future of this industry to make your opposition to this bill known. So I'll tell you, our efforts in the House were definitely heard.

• 4:49Speaker 02

  I'll give you just some play by play on what happened because it was.

• 4:51Speaker 03

  Yeah.

• 4:53Speaker 02

  It was fascinating.

• 4:53Speaker 03

  Take me back. So what's the, who's spearheading it? Why are they spearheading it? Like, what's the, you know, what's the implications of this bill passing and not potentially not passing?

• 5:02Speaker 02

  Yeah, so this bill is being pushed by environmentalists. The head sponsor of the bill, Anna Keels. She is a, she promotes herself on Twitter as a climate activist. And I had to pass through committee before I could go to the Assembly for a vote. We had worked really, really hard to get as much opposition to this as possible. They brought it up late at night for consideration in that committee. And they basically started the session saying, hey, surprise. We have changed the composition of the committee. There's now a new member on it.

• 5:44Speaker 02

  And that new member was someone they had recruited who was a supporter of the bill. And that was the only way they were able to get it out of committee. So they were pulling tricks out of their bags. I mean, it was politics at its truly its best and its worst.

• 5:57Speaker 03

  Shades of DC.

• 5:58Speaker 02

  But it really showed that people calling and voicing their opposition had a huge impact because they had to go that low just to get it through. And then it passed through the full Assembly after that. So.

• 6:11Speaker 03

  By the way, is this bill popular? Like, if it made it to the floor of the Assembly, would it actually pass or?

• 6:16Speaker 02

  Well, it passed the Assembly, so it now has to pass the Senate.

• 6:19Speaker 03

  It has to pass the Senate.

• 6:20Speaker 02

  And we have a fighting chance. We have a fighting chance based on our whip count. We think we need to flip about 12 Democrats in order. For it to fail. So we are focusing efforts on Senate Democrats today. So for anybody who would like to be a part of us, we're calling on literally everybody around the country. Even if you're not located in New York, if you are located in New York, contact your state senator and let them know your opposition to this bill. If you're not in New York, call the Senate leadership and help educate them on why this is bad. We have a campaign, all of the resources we're posting on our Twitter account.

• 7:00Speaker 02

  It's at Digital Chamber. We have talking points. We have resources so you can find your senator. But now, now is the fighting chance.

• 7:10Speaker 03

  I feel like I represent the sort of collective curiosity, if you will, of the traditional finance community. As someone who's very curious about Bitcoin, believes it has a place in your asset allocation, depending on kind of where you are in your investment time horizon, on your investment journey. As that person, as the person who doesn't really understand the full implications, the full scope of maybe the energy, like, why, why does this bill even exist? That's what I don't understand. Like, who is actively out there trying to prevent Bitcoin mining? You know, give me some stats, give me some facts, give me some figures. What are the issues?

• 7:42Speaker 02

  Well, from my position, we should not be passing such a draconian measure into law if we don't understand it. And clearly, New York does not understand this because there's a lot of misconceptions about why they're pushing this through. They're trying to curb energy use and carbon emissions. Well, Bitcoin uses a negligible amount of energy. It's not going to accomplish any of those goals. Further, there is an alternative piece of legislation that has already passed the Assembly that would conduct a task force to put forward a study to understand this better. So, I mean, if logic just prevailed, which of course, logic and reason don't always prevail in politics.

• 8:24Speaker 03

  Logic does not prevail. Money prevails in politics.

• 8:26Speaker 02

  We would first understand it and then take action. They're doing it completely backwards.

• 8:31Speaker 03

  Fair. Brian, do you think this will have any implications? Like, what's, play this forward. Like, let's say the bill passes. You see copycat bills across the nation. Maybe it makes its way to DC. Is there a real implication here as it relates to Bitcoin's supply?

• 8:42Speaker 04

  I don't think it's a pass. I mean, if you look at the truth, the truth is that if you take all the world's energy, electricity, Bitcoin consumes 0.1% of the world's electricity. So even if you turn it off, it has, like Perry Andrew said, it has no meaningful effect. And 60% of the electricity that's used to mine Bitcoin comes from green or renewable energy sources. So in the United States, 20% of our energy use, electrical use, is from green energy or renewable. So the Bitcoin mining industry is three times more greener than the average US consumer.

• 9:25Speaker 03

  Wow.

• 9:25Speaker 04

  So it's, it's, you know.

• 9:27Speaker 03

  This is just an attack on Bitcoin.

• 9:29Speaker 04

  It's fake information out there, getting people riled up, and it's, like I said, even if you turn it off, it doesn't make a difference.

• 9:37Speaker 03

  Gotcha, gotcha. So this is the kind of, see, I, I thank you for sharing that because I've not heard those stats. All I've heard and seen is really Greta Thunberg saying that Bitcoin's gonna, you know, sink the planet, right? Like, I just heard from you, if we turned off all Bitcoin mining globally, the planet will be underwater in 20, you know, 51 instead of 2050, right?

• 9:57Speaker 02

  And here's the other part of that. So, building off what Brian's talking about in terms of Bitcoin mining being a huge user and consumer of renewables, the Bitcoin mining industry is one of the largest investors in sustainable energy operations. And we believe Bitcoin mining has the opportunity to lead the transition to green and sustainable power operations around the country and potentially around the world. So by just saying anything proof of work is gonna be banned in this state, all of those mines are just gonna go elsewhere. There's plenty of more friendly states like Texas that are opening them with,

• 10:38Speaker 02

  with welcome arms, who are partnered with renewable plants and helping fund the build out of more renewable sources around the country. So it will have the complete opposite effect.

• 10:47Speaker 03

  It's so interesting, like, and this maybe is a little bit off. Off topic, but there's a real bifurcation in regulatory policy. Like, we've always had a bifurcation regulatory policy across the United States of America. But in this particular time, right now, this moment that we're in, it seems like it's getting wider.

• 11:03Speaker 02

  It's so partisan.

• 11:04Speaker 03

  States like Florida and Texas are really driving innovation forward. We have states like Illinois, New York, California, really kind of clinging on to how the world used to be. And I think that's going to cause a lot of problems, going to cause a lot of migration. It's going to create a lot of opportunities, like any sort of opportunities you guys seeing as a function of this.

• 11:21Speaker 04

  I mean, we're in Florida now, and you talk to any real estate agent around here. And where are people moving from? They're moving from Illinois and New York.

• 11:29Speaker 03

  Totally.

• 11:29Speaker 04

  Down to Florida. I mean, it's, you know, the rules that, you know, that they put in a place, it just drives people out of their communities.

• 11:37Speaker 03

  Totally.

• 11:37Speaker 04

  And this is an example of that.

• 11:39Speaker 03

  And these are the best and brightest, too, by the way.

• 11:40Speaker 04

  You know, these are new jobs that could be in New York, and they're going to drive them down to Texas.

• 11:45Speaker 03

  Totally. A hundred percent. And yeah, it's not like this, you're not getting rid of the worst. You're getting rid of the best and brightest and arguably some of the most productive people who are creating jobs and innovating. And obviously, you know, there's that old age-old, you know, capital versus labor discussion. You know, we need to get into that. I don't think we have enough time to unpack that onion. But certainly, I do believe there's a lot going on. Can we talk about something, shifting gears a little bit, educating me, the TradFi guy? What's the difference between proof of stake and proof of work? I get it conceptually, but is there something deeper to understand, or is it just as obvious as it sounds?

• 12:22Speaker 02

  Typically, the way that I try to explain this to policymakers is that proof of stake is not an alternative to proof of work. Because that's one of the arguments. They're like, oh, well, you know, even if we ban proof of work, there's other things like proof of stake, and that'll be fine. But they're mistakenly believing that the operations of proof of stake and what that provides is an alternative to proof of work. So, proof of work creates digital property.

• 12:51Speaker 02

  Proof of stake does not. These are largely smart contracts applications. These are places to build decentralized applications. That is a completely different application. That's a completely different use case than a store of value or a digital gold. They're just not the same.

• 13:07Speaker 03

  Gotcha, gotcha.

• 13:08Speaker 04

  So I'll give an example. So when you go out and mine gold, you go buy, you know, land or lease land, you buy equipment, you spend time, you know, cultivating that land to find like gold nuggets, right? So the gold nugget is your proof of work. You had an outlay of capital, you had an outlay of time, and the result was a gold nugget. That's your proof of work. Like a proof of stake is like Microsoft operating system or iOS on your iPhone. It's an operating system. There's no, you know, there's no tangible item at the end of your, you know, so proof of stake is there are contracts on the internet using blockchain technology

• 13:50Speaker 04

  to allow decentralized finance, to allow prediction markets, to allow exchanges to occur. Whereas like Perry Ann said, proof of stake is, you know, there's property, there's digital property, which is like a Bitcoin.

• 14:05Speaker 02

  Proof of work.

• 14:06Speaker 04

  Or proof of work. You know, you have, you know.

• 14:09Speaker 02

  It's the creation of digital property.

• 14:10Speaker 04

  Yeah.

• 14:11Speaker 02

  A digital bearer instrument, which is what Bitcoin is.

• 14:13Speaker 03

  Gotcha. And so Bitcoin seems like it stands apart from a lot of the other sort of tokens, crypto tokens.

• 14:18Speaker 02

  Absolutely.

• 14:19Speaker 03

  Yeah, relative. Are there any other proof of?

• 14:21Speaker 04

  Yeah, yeah. So the proof of work blockchains that are out there, there's Bitcoin, there's all the hard forks off Bitcoin.

• 14:28Speaker 03

  Yep.

• 14:28Speaker 04

  Like Bitcoin Cash, Bitcoin SV, there's Dogecoin, Monero, Zcash. If you add all those up, all those proof of work blockchains up, Bitcoin constitutes 92% of the value of all the proof of work blockchains. So the world has already decided that Bitcoin's the winner for proof of work.

• 14:49Speaker 03

  Of course.

• 14:49Speaker 04

  You know, people talk about Dogecoin and Bitcoin Cash, and they don't have the network that Bitcoin has. And so they're a fail. They're in the process of failing.

• 14:58Speaker 03

  Of course.

• 14:59Speaker 04

  Bitcoin will eventually, you'll have one proof. For work blockchain and that's gonna be Bitcoin.

• 15:03Speaker 03

  There's only one.

• 15:04Speaker 04

  And the world's already decided that. And the Bitcoin wars occurred about four years ago with all the hard forks off of Bitcoin. Like Bitcoin Cash is actually better technology than Bitcoin, the original Bitcoin is. But people don't use it, so it doesn't have the network effect that Bitcoin does. And so, you know, so eventually all those other proof of work blockchains become worthless. And Bitcoin is 99.9% of the proof of work blockchains that are out there.

• 15:32Speaker 03

  You said this war sort of took place around four years ago?

• 15:35Speaker 04

  Yeah, the Bitcoin wars.

• 15:37Speaker 03

  Yes, what was the catalyst, what sort of happened there with the cycle, I guess?

• 15:42Speaker 04

  So we had Bitcoin, the original code. And then there were developers and miners and, you know, exchanges that wanted to upgrade the system. Because the problem with Bitcoin is that it's slow. And each block can only have one megabyte of information on it. And so when those blocks get full, when you try to do a lot of transactions, then the blocks get full and it backs up. Instead of a block clearing every 10 minutes, it could take two or three hours to print a new block to the blockchain. And so what they wanted to do was increase the block size. And that will allow more transactions to go through.

• 16:24Speaker 04

  And if you do that, then what happens is that there are fewer and fewer people that could actually mine or clear the transactions on the Bitcoin network. So it concentrates the power with fewer people if you start increasing the block size. And so there was a big argument, do we increase the block size, do we not? And half the people wanted to, half the people didn't. And so what someone finally did was said, we're gonna create a new Bitcoin called Bitcoin Cash. And we'll increase the block size. And then they did that and just people don't use it.

• 16:58Speaker 03

  You said something just now that really caught my attention, and you said it twice, actually. The people. Who is the people?

• 17:04Speaker 04

  It's consensus. It's the, it's the community.

• 17:08Speaker 03

  Community.

• 17:08Speaker 04

  So it's a combination of users, Bitcoin owners, right? The exchanges that custody Bitcoin, the developers that, you know, that, you know, you know, change the code to make it better. It's the people that make the hardware that mine Bitcoin or clear the transactions. So everyone has to come together to consensus to decide, is this the best change for Bitcoin? And if you, if you don't want to change it, you could stick with your original code, or you could create a hard fork, which is all the history of the original blockchain, and you have a new one called Bitcoin Cash or Bitcoin SV, which has the new technology in it.

• 17:52Speaker 04

  And then you just wait and see if people want to start using that.

• 17:56Speaker 03

  Oh, gotcha.

• 17:58Speaker 04

  And so, so there's all sorts of versions of Bitcoin out there.

• 18:00Speaker 03

  Yeah.

• 18:01Speaker 04

  You know, there's, like I said, Bitcoin Cash, Bitcoin Cash SV, Bitcoin Diamond, Bitcoin Gold, you know.

• 18:07Speaker 03

  What's the, the, the one we all quote and cite?

• 18:10Speaker 04

  That's just Bitcoin. That's just the original Bitcoin code.

• 18:12Speaker 03

  Gotcha. That makes sense.

• 18:13Speaker 04

  The core.

• 18:14Speaker 03

  The core.

• 18:15Speaker 04

  Bitcoin core.

• 18:16Speaker 02

  But going back to kind of your original question, so you have proof of, proof of work blockchains. And Brian just outlined why Bitcoin is the winner. It's, it has dominated in terms of market cap of all the other proof of work blockchains. And proof of stake, we're still in too early of days to know who the winner is going to be.

• 18:36Speaker 03

  Yeah.

• 18:37Speaker 02

  So there's a lot of competition. It's hyper competitive right now against different proof of stake networks. And.

• 18:44Speaker 03

  Strikes me that it's odd that there would be a winner for that. It seems like that's so much more specialized. Like certain proof of stake tokens could be very used for, you know, XYZ transactions.

• 18:55Speaker 02

  There may be a couple, but there's not going to be thousands.

• 18:58Speaker 03

  Yeah, that's true.

• 18:59Speaker 04

  So there's. There'll be a handful.

• 19:01Speaker 03

  Yeah. So there's obviously been a ton of capital pouring into the space in the last couple of years. I mean, there's been a ton of capital sloshed around global financial markets last couple of years to begin with. So obviously crypto is, being the innovative kind of opportunity set that it, that it provides, we've seen a lot of, a lot of capital. Where are we in that, in the broader capital markets cycle for the crypto space? Or at least in your estimation?

• 19:24Speaker 04

  Yeah, so I've been involved since 2014.

• 19:27Speaker 03

  Yeah.

• 19:27Speaker 04

  You know, back then Bitcoin had a market cap of around $3 billion. Today, it's, you know, 850 billion. So, you know, it hit a trillion a few months ago. But you still don't see a lot of big institutional investors allocating to the space shot. So it's mainly, you know, libertarian in nature, family offices. You know, we did see an insurance company come in about a year and a half ago, MassMutual.

• 19:53Speaker 03

  MassMutual?

• 19:54Speaker 04

  Yeah, they bought $100 million worth of Bitcoin. You know, you have a couple of public corporations who own Bitcoin now on their balance sheet, MicroStrategy and Tesla. And so, you know, but the big institutional money, the brokers, you know, I think you come from traditional finance, you know, like Goldman Sachs, you know, Wells Fargo Advisors, Edward Jones, you know, they're just, you know, they're still not ready to allow their clients to invest in that space shot.

• 20:23Speaker 03

  Yeah, it's interesting. I saw that Fidelity, I know the guys that are over there pretty well, they allowed, they had some rule change that allows investors to start allocating to Bitcoin in their 401Ks. That's a pretty significant step. I mean, they're sitting on a couple trillion dollars of people's money.

• 20:37Speaker 04

  Yeah, yeah, yeah, Fidelity, you said Fidelity Retirement's about 3 trillion, but they also have $8 trillion of brokerage assets, too.

• 20:45Speaker 03

  Oh, geez.

• 20:46Speaker 04

  So you would think eventually, if they allow it in their retirement plans, they'll allow it in their brokerage accounts, too.

• 20:51Speaker 03

  Of course, yeah.

• 20:52Speaker 04

  You know, Fidelity, so Abby Johnson runs Fidelity. She got involved with Bitcoin about seven years ago, and Fidelity started mining Bitcoin, you know, internally. And then they tried to, they were figuring out, like, what's the use case for this? And they came up with the use cases as an investment tool, which is the same thing the Federal Reserve said four years ago. Federal Reserve Bank of St. Louis came out with a white paper in 2018. And in their white paper, they said, basically Bitcoin's best use case is as an investment tool and diversification tool for portfolios. And the reason they said that is because it's a non-correlated asset. And when you add a small amount... Of non-correlated assets to an investment portfolio.

• 21:37Speaker 04

  It increases what's called the Sharpe ratio.

• 21:40Speaker 03

  Oh, yeah.

• 21:40Speaker 04

  Which so your risk-adjusted returns go up when you add Bitcoin to a portfolio. And so if you're a fiduciary, you're an asset manager, your whole job is to increase your risk-adjusted returns. And so as more professional asset managers understand this, then they add Bitcoin to their portfolio.

• 21:59Speaker 03

  So I'll take it a step further. And you know the inner workings of finance as well as I do. I don't think the main job of investment managers is to increase the risk-adjusted return. The main job is to have money to manage, right? You know, you get the joke.

• 22:15Speaker 04

  Main job is not to get sued.

• 22:16Speaker 03

  Yeah, exactly. Is to maintain your assets under management and hopefully grow them over time. That tends to be the case. So clearly, there's this sort of, it strikes me that the demand for Bitcoin and I wouldn't necessarily say crypto. I'd say Bitcoin specifically because it is a store value type asset. Far sort of exceeds the regulatory ability for investors to get their hands on it. I mean, I can't tell you if I've had one investment manager say, oh, if only they, I could do this. Or, or an investor say, oh, if only they had an ETF instead of a trust or, you know, like Grayscale, things of that nature. I could do this, I can do that. Where are we in that sort of continuum of development and kind of regulatory change?

• 23:00Speaker 03

  Like, when will we see, you know, Bitcoin ETF, Bitcoin widely offered in 401Ks, et cetera?

• 23:06Speaker 04

  I think Perry Ann's best answer that.

• 23:08Speaker 02

  Well, specifically on a Bitcoin ETF or a spot Bitcoin, of course, we have futures Bitcoin ETFs. So the first, so since 2013, companies have been trying to get a spot Bitcoin ETF through the SEC process. So the Winklevoss twins were the first one to do that in 2013. We at the Chamber, we represent close to a dozen companies who have tried to get a spot Bitcoin ETF through the SEC process. We're currently interviewing each one of those companies to really understand what that process was like. And we're learning a lot of very interesting information about. How the SEC has handled this. We will be issuing a report on this shortly and we will be delivering

• 23:50Speaker 02

  that port to Congress who oversees and provides oversight of the SEC and just without kind of spoiling too much, based on our early findings of these interviews, we believe the SEC is not following their own mandates and is acting arbitrary and capricious.

• 24:08Speaker 03

  Hear that Gary?

• 24:12Speaker 02

  And I think there absolutely could be some very strong pieces there for litigation if someone you know, wanted to move forward with that. But we don't have even rules through the road. Accredited investors and non accredited investors today have access to very different crypto products.

• 24:33Speaker 02

  And they're holding this industry inconsistent to other commodity markets.

• 24:37Speaker 03

  Yeah, I was gonna say, it strikes me that the treatment of Bitcoin and cryptocurrency and digital assets in itself itself is very different than how we treat equities, commodities, fixed income.

• 24:50Speaker 02

  And that's not the SEC's job. That is not the SEC's job.

• 24:54Speaker 03

  Whose job is it?

• 24:56Speaker 02

  Well, it's not their job to pick winners and losers and that's what they're doing because they're saying it's okay for all these asset classes to move forward, but for Bitcoin, for crypto, we're going to hold it to a completely different standard. And even the commissioners at the SEC do not agree on the process. So some have been a part of holding up getting any spot crypto Bitcoin ETFs through the process. But then you have SEC Commissioner Hester Purse, whose nickname is Crypto Mom on Twitter, who has dissented against a number of these actions. And she has written at length about that she does not agree with the process. We're holding this industry to a different standard and we are not operating in accordance with our mandates.

• 25:39Speaker 03

  And is the reason for that, are they protecting the barbarians at the gates, so to speak?

• 25:45Speaker 02

  Well, that's certainly one, you know, one reason people are speculating.

• 25:48Speaker 03

  They're keeping people like me employed, effectively. Oh, because there's a real threat, right? Like, the decentralized finance is a major threat to how we are currently operating from a financial services perspective.

• 25:57Speaker 02

  Yeah, I mean, we definitely have a lot of pretty significant questions about what the motives are, because at this point, they are not following their mandates, and they're not holding this industry to the same standards of other commodity markets. So it's time for Congress to step in and provide oversight on that.

• 26:13Speaker 04

  We finance the money will become decentralized.

• 26:16Speaker 03

  Yeah, of course.

• 26:16Speaker 04

  So there's no question. It's just a matter of when. And so what the government's doing is trying to slow it down, slow down the pace. So, you know, it's gonna be very disruptive over the next 10 to 20 years as this happens. But all new technologies are disruptive.

• 26:31Speaker 03

  Totally. How disruptive was the Internet to travel agents?

• 26:34Speaker 04

  All right, exactly.

• 26:36Speaker 03

  Or any other thing that used to go somewhere to do it.

• 26:39Speaker 02

  But with the Internet, it was a lot different, right? So the inner, you know, the beginning architecture of the Internet, that was created by the US government through a program at DARPA with Ben Surph and Bob Kahn. They created all of that original code. And they built that for a defense project. And then they saw that there could be a lot of commercial value to this. And so at the time, the Clinton and Gore administration, they passed a series of executive orders stating that this is going to be a revolutionary technology, and we want to incentivize United States businesses to commercialize this. And it set a whole process in place to do that. And we did exactly that, and that led to one of the greatest economic booms this nation has ever seen.

• 27:20Speaker 03

  The greatest.

• 27:20Speaker 02

  And we still dominate, the United States still dominates the Internet today, and that has created so many benefits for the United States. Blockchain technology is just as important technology as the Internet.

• 27:33Speaker 03

  Wow, that's a bold statement. I want you to unpack that.

• 27:36Speaker 02

  Marc Andreessen also said that, too. Yeah, I mean, there's a quote by Marc Andreessen that sometimes we co-up, where he said, "This is just as important as the Internet itself." And if I've, so Bob Kahn, who was one of the co-inventors of the Internet, he lives right outside of DC, and I've had him come in several times to talk to our members, just like, what was that like? And How do you compare that to what you see with blockchain technology? And he has stated several times to us that the initial architecture of the internet was broken because they did not have a way to send things of value in a peer-to-peer way. Like, it was supposed to be a peer-to-peer communications network, and that's what it is. But that does not work when you implement anything of money or anything of value.

• 28:18Speaker 02

  Digital objects is the term that he uses. We say digital assets.

• 28:22Speaker 04

  And there's been a lot of people over the last 30 years of trying to figure out how to, how do we send value through the internet peer-to-peer? So Elon Musk and Peter Thiel, they started a company called PayPal back in 1998. So their original goal back in 1998 was to create Bitcoin. They wanted to create the software that allowed this peer-to-peer transfer of value through the internet. And they couldn't figure out how to do it. But, you know, it's been a, it's been a problem for a long time. And then, you know, a person named Satoshi Nakamoto, or a group of people called Satoshi Nakamoto, finally figured out how to create this software. And they just gave it to the world for free.

• 29:02Speaker 03

  What was the eureka moment?

• 29:06Speaker 02

  It's the double spend problem ultimately is that problem that the, the issue that had to be fixed. Which is how do you send something of value in a digital way without going through an intermediary?

• 29:16Speaker 04

  And without being able to copy and paste it and send it to someone else. So if I send you a dollar, I shouldn't be able to be able to copy and paste that same dollar and send it to Parian?

• 29:26Speaker 02

  Or think of it if like, if you take a photo on your cellphone and you, you text it to me. So what, what really happens is I have a copy of that, that photo on my phone and you have a copy of that photo on your phone. Great. Awesome. That does not work if money. So if you want to send me a dollar, it's really important that when you send it, it leaves your device and it's only on my device. They didn't figure out how to do that until Bitcoin.

• 29:50Speaker 03

  Gotcha. And do we, I mean, this is, again, pardon my dumb questions. And hopefully the listeners get a lot out of this. Have they sort of, I mean, obviously they figured that out, but do we know what that is? Like, what, what, what was the solution? What was the technological solution?

• 30:03Speaker 04

  The solution is it's properly decentralized.

• 30:06Speaker 02

  And it's proof of work.

• 30:07Speaker 04

  Yeah. Gotcha. Go ahead.

• 30:09Speaker 02

  It's, it's the way that Bitcoin works. I mean, that allows for that to happen. So, and when the internet was commercialized because of this issue, they had to retrofit the financial services industry on top.

• 30:24Speaker 02

  So now, and the internet revolutionized all sorts of industries, media being one of the first and one of the most important. But financial services, the rails of financial services never really changed.

• 30:35Speaker 03

  Oh, no, we're still doing T plus two.

• 30:37Speaker 02

  And so now, we are just starting to see that evolution and that revolution and that software upgrade for financial services. And that's why this is such an impactful technology, because the internet evolution didn't stop. It's now taking a whole nother form with the introduction of blockchains.

• 30:58Speaker 03

  Gotcha.

• 30:58Speaker 04

  So if you go back to like, the early 90s, like Periyan mentioned, you know, back in 1992, it was against the law to do a commercial transaction or advertise on the internet. It was actually against the law to do that. And so Al Gore and, you know, with the Clinton administration, you know, passed laws to commercialize the internet that allowed us to do commercial transactions and advertise. And, but the problem back then is we couldn't figure out that software to transfer value through the internet. And so we built the internet on top of the current banking system.

• 31:34Speaker 03

  Yeah.

• 31:35Speaker 04

  So in the credit card system that we have today. And, but it was built wrong. We all know it was built wrong 30 years ago, but that was the only solution. So what we're doing today, now that we have a solution, like the software that allows us to transfer value through the internet today, now, once we have that software, we're rebuilding the entire internet and we're putting it on blockchain technology. So that's, you know, that's what's going to happen over the next 10 to 20 years. The entire internet is being rebuilt on blockchain technology.

• 32:07Speaker 03

  So give me the, um, let's, that is a big statement and I definitely agree with you. I don't know why I agree with you, but I can feel it.

• 32:15Speaker 02

  So it's magical power.

• 32:16Speaker 03

  Yeah.

• 32:17Speaker 04

  So when you, when you do that, you're taking power away from the banking system, right? The banks, the credit card companies.

• 32:24Speaker 03

  Well, I think.

• 32:24Speaker 04

  You know, because they're not efficient as blockchain.

• 32:27Speaker 03

  It might actually be bigger than banks. I mean, think about the power that a, a Google has over the internet or Facebook or, I mean, they own every social media platform or Twitter, you know, what do those, you know, let's leave banking aside because I think it's pretty clear that finance is going to be disintermediated and it's just going to have to change to deal with this new, this new world. How will the everyday human being interact with this new blockchain-enabled internet?

• 32:51Speaker 04

  Well, they, I, a lot of people do it today. You have Venmo. Do you use Venmo?

• 32:54Speaker 03

  Yeah.

• 32:55Speaker 04

  Venmo is a blockchain-based application owned by PayPal.

• 32:58Speaker 03

  Oh.

• 32:58Speaker 04

  They, they bought it five years ago.

• 33:00Speaker 03

  Yeah.

• 33:01Speaker 04

  So PayPal offers Bitcoin today.

• 33:03Speaker 02

  So in the state of New York, the application that was built for your vaccine passports, the ID, I don't know the name of it, but the ID system on your phone, this is me holding up a phone. That's a blockchain application that was built by.

• 33:16Speaker 03

  You're on millennial on earth without a phone.

• 33:18Speaker 02

  I just came out of the womb with one in my hand. Um, it, that's a, that was a blockchain application built by IBM.

• 33:25Speaker 04

  Yeah, you really don't want to know you're using blockchain.

• 33:27Speaker 02

  You don't need to.

• 33:28Speaker 04

  You don't need to.

• 33:29Speaker 02

  An user doesn't need to know.

• 33:30Speaker 04

  Yeah, and so it's, it's just the technology powering. For example, when you make a phone call today, most phone calls are through voiceover internet protocol. They're not going through like a cable line somewhere, but you don't know if you're, you know, using VoIP or cable or copper or what. You just know your phone call goes through, right? So that's what blockchain will enable in the future is you'll be using it, you just won't know you're using blockchain technology, just like when you use Venmo today, you don't know you're using blockchain.

• 33:59Speaker 03

  Gotcha. Gotcha. And so how does Ven, I mean, sorry about these dumb questions. I love learning about stuff. Uh, how does Venmo work? Like, is Venmo? Proof of work as well? Like, how does that work? Is there some sort of intermediary?

• 34:13Speaker 04

  So, when PayPal bought Venmo, it's centralized now. So, Venmo is a centralized application. So, Bitcoin is a public blockchain. So, anyone could use it. It's not discriminatory. Anyone in the world could just use Bitcoin. With Venmo, you need permission to use it. You have to apply. You have to put your personal information in and get a Venmo account. So, it's a private blockchain.

• 34:44Speaker 03

  Is it truly blockchain, though? Because it's still linking to my checking account.

• 34:48Speaker 04

  It's using the blockchain technology to transfer value.

• 34:51Speaker 03

  Gotcha, gotcha, gotcha. And so, you just said something that I think is important to hear as well. If you're in a TradFi space. It can very much enable traditional finance. It doesn't have to disintermediate or put more than one business.

• 35:06Speaker 04

  It'll make it 100 times better.

• 35:07Speaker 03

  It makes it better.

• 35:08Speaker 04

  Right.

• 35:09Speaker 03

  I mean, Jim Bianco, this guy, really good investor. He talks about sort of how, and Jim Bianco and Eric Townsend over at Macrovoices. They talk about how the entire bond market, the whole concept of the bond market, doesn't make any sense in the blockchain era. This concept that I'm going to give you money. I hope that you pay it back. Give me a little interest in five years from now or 10 years from now, 30 years from now. You give my money back. It just doesn't make any sense. There's a better way to transfer value to store, to capitalize economies and businesses. It strikes me that we are on to something here.

• 35:42Speaker 04

  Yeah, that goes back 700 years. So, back in the 1400s, we started using ledger technology. So, you have debits and credits, right? You have a ledger. And if you move money from one side ledger to the other side, that transfers the value. That's all Bitcoin is. It's ledger technology, except that this ledger, we're taking it and we're distributing it around the world every 10 minutes and updating it. So, everybody's using the same ledger. And so, now you don't have to have the reconciliation between two banks.

• 36:18Speaker 04

  Like if I move money, if you have a JP Morgan account, I have a Bank of America account, and I move money to you, JP Morgan and Bank of America have to reconcile their two ledgers

• 36:28Speaker 03

  Oh, yeah.

• 36:28Speaker 04

  that move that money. But if I send you Bitcoin or value through a Bitcoin or a blockchain network, that network, it's just one network. There's no reconciliation required. It just moves it from one side of the ledger to the other side of the ledger, and that's what transfers the value. So you don't have to wait a day for that process to batch. It just batches whenever it updates, like in 10 minutes for Bitcoin or every, you know, millisecond for Solana or Kadrano or some of the other blockchains that are out there.

• 37:00Speaker 03

  Wow, that's really powerful. And so, talk to me about why are there no, why are there more sort of fails then? Because obviously, there's all kinds of shenanigans going on from a counterparty risk perspective and traditional finance. I mean, that's kind of the, that was sort of the, the, uh, the trigger for the financial crisis was everyone realizing that Lehman, Lehman was not good money and their counterparty for all these, you know, big derivative contracts. Why does that not, why is that not a risk with blockchain technology? Like, it strikes me that that would be a core bug, if you will, of the system, is it not?

• 37:33Speaker 04

  So there are risks with like owning Bitcoin, like your wallet could get hacked, or where you keep your Bitcoin, that custodian could get hacked. But the Bitcoin network itself, this, you know, the Bitcoin blockchain has never been hacked. It uses cryptography. It uses military-grade SHA-256 cryptography that has never been hacked. So it's, you know, it's unhackable. There's, there's almost a trillion dollars of value in the Bitcoin blockchain. If someone could hack it, they're going to take the trillion dollars.

• 38:05Speaker 03

  Yeah.

• 38:05Speaker 04

  There's a trillion dollar bounty to go hack it.

• 38:09Speaker 03

  Totally.

• 38:09Speaker 04

  Yeah, so go hack it.

• 38:10Speaker 03

  I'm sure Putin's been trying.

• 38:11Speaker 04

  Yeah, people have been trying to hack it. You can't hack it. You can't, you can't break the SHA-256 cryptography.

• 38:18Speaker 03

  Gotcha.

• 38:19Speaker 04

  And then people say, the next question is, well, what about quantum computers? And so quantum computers, if they ever got close enough to be able to break that cryptography, that SHA 256, the developers would just turn up the next step to SHA 512, and then to SHA 1028, and then SHA 2040. You know, they just keep turning up their cryptography. What eventually happens is that there's not enough electricity in the world to break that code.

• 38:47Speaker 03

  Yeah.

• 38:47Speaker 04

  And if you turn it up high enough, there's not enough electrons in the universe to break it. So it's unhackable. You can't, you know, the power behind it, the computational power behind the network, you know, protects the money, protects that value.

• 39:05Speaker 03

  Gotcha. Folks, if you guys are listening to this, this is a masterclass. I really appreciate this. So let's kind of, let's switch gears a little bit, shift gears. Where are we in the crypto investing cycle? I have my own thoughts about where we are in the broader macroeconomic and liquidity cycles, but I'd love to hear kind of from two people who are native to the crypto space, who are very, you know, deeply intertwined in it. Where do you think we are in the investing cycle?

• 39:28Speaker 04

  All right, so if you look at US households, 25% of US households own Bitcoin today. So we're on our way, so if you use what's called S-curve analysis. So S-curve analysis is how you measure the adoption rate of new technologies. So Bitcoin was started in 2009. By 2019, 10% of households in the US own Bitcoin. In 2020, the comptroller of the US currency, Brian Brooks, said it was 15%. The Biden administration, just about a month ago, in their executive order, said it was 25%. And so we're on this pathway, the 90% adoption by 2029.

• 40:12Speaker 04

  So the time you want to own this is during that mass adoption. So between 2019 to 2029 is when you want to buy Bitcoin. After 2029, the growth is going to level out. So it's It's still early and that's just in the US. If you look worldwide, it's less than 1% of people in the world own Bitcoin. So it's still very early and the reason people don't own it is they just don't understand it. You know, they think, you know, it's like me, when I first learned about Bitcoin in 2014, I thought it was a total scam. I thought it was like, I saw Cameron and Tyler Winkleboss on CNBC talking about Bitcoin when it was a hundred dollars.

• 40:54Speaker 03

  It's a trust Harvard guy.

• 40:55Speaker 04

  Exactly. And I just thought they were doing a pump and dump. I just like, I couldn't believe it. And it took me about six months to figure out what this really was. And it's, all it is is ledger technology. We've been using the same ledger technology for 700 years. And this is the advancement, you know, of ledger technology. And, and once you understand that, then you have to own it. And, you know, it just makes sense to put 1 to 5% of your net worth in this. As, I, I look at it as protection. As we transition from the current monetary system that we have today

• 41:36Speaker 04

  into the next monetary system, which is going to be based on blockchain technology, you need to protect your assets. And, and the way you do that is you just put some of it in Bitcoin and hold it for the next 10, 20, 30 years.

• 41:51Speaker 03

  Gotcha. Like that. What are your thoughts?

• 41:54Speaker 02

  Well, I'm a monetary thinker like you. And if we look at how much money has changed just in the past 100 years, we have to expect that money is going to evolve just as much or even more rapidly. Because now we have more advanced technologies available. So the, I guess the, the past couple, I guess just in the past 7,500 years, the evolution of money, we began with the gold standard. So at the Britton Woods, you know, conference, the agreement set a gold standard for the whole world. And the world came together and they decided that gold was going to be fixed at $35 an ounce. The US dollar would be the reserve currency.

• 42:39Speaker 02

  Then all of all of the countries would peg their currency to the dollar, but they could legally demand gold from the treasury. That's what money was. Not that long ago, just a couple of decades ago. That system broke down very quickly. They were not able to maintain the peg. And by the 1980s, we fully transitioned to fiat. And 80% of industrialized nations were using floating currencies, which is what fiat currencies are today. So that's a huge change.

• 43:07Speaker 03

  Massive.

• 43:08Speaker 02

  Especially considering that gold and things of scarcity is what civilizations have used for exchange for money for for thousands of years. So that was a massive evolution in what money is. And since the 80s,

• 43:27Speaker 02

  you know, we're now seeing additional evolutions in what, you know, what is money? And with the introduction of the internet and artificial intelligence and blockchains and cryptocurrencies, we're going to see money change just as much. So I think we're going to see a huge change in the next 10, 20 years. And I agree with Brian. I think blockchains are going to be the foundation of our financial system.

• 43:51Speaker 03

  Yeah, no, it's you said the word change at least seven or eight times. And to me, when I hear the word change, I hear see opportunities. Obviously, there's winners and losers. But you also hear you think about the losers. The change is inherently scary for the legacy players, right? Central banks, we talk to Papa and I, the boys, we riff on this whole concept of a central bank, digital currency, a centralized blockchain-enabled digital currency. It strikes me that the folks with the guns down in DC, where you know, you've lived, don't want to transition from, you know, having the exorbitant privilege that comes with, you know, being the world's reserve currency.

• 44:29Speaker 02

  Yeah, absolutely.

• 44:30Speaker 03

  How do we go from from state A, which is where we are today, to state B? Because I think we all agree that state B is coming. Is that process deadly, bloody, terrifying, eventual markets? Like, how do you know? How do we go from A to B without causing a lot of?

• 44:48Speaker 04

  It's a volunteer network. So no one forces you to own Bitcoin. You volunteer into the system. So, once you understand it, you know, you you buy a little bit of Bitcoin. You you you join the parallel financial system. And so it's not gonna be bloody. It's not gonna be violent.

• 45:07Speaker 02

  It's a peaceful.

• 45:08Speaker 04

  It's a peaceful protest.

• 45:11Speaker 02

  I'll give you two, two real world examples. So Venezuela has seen huge amounts of economic challenges just within the past couple of years.

• 45:22Speaker 03

  Gone into a black hole.

• 45:23Speaker 02

  Yeah, and it wasn't always like that. I mean, Venezuela used to be an absolutely beautiful and safe place to live. But more recently, they've hyperinflated their currency and that's caused economic ruin. There was, it was the day we, the last time we hosted our DC Blockchain Summit. That's our conference we host at the Chamber. There was a, an article on the front page of the Washington Post or the New York Times or some mainstream publication. And it was a story about a family who had to get out of the country very fast. And the only way they could do that was using Bitcoin to buy a plane ticket and everything they needed to get out. And it's how they got their wealth out of the country. So that, that was one example. Another example more recently is in Afghanistan.

• 46:02Speaker 02

  So, Off the Chain made a donation to the Human Rights Foundation to help Afghan women basically escape the country when Taliban took over. But there's a school there who has been teaching women how to code and been paying them in Bitcoin since about 2013. And when these women had to escape, a lot of times you can't take anything with you. But they managed to be able to take their private keys. And when they got to their new location, they were able to start their life over.

• 46:34Speaker 03

  That's awesome.

• 46:34Speaker 02

  Using those resources that they had saved. So I see Bitcoin as an alternative. You never know when your financial system or your banking system is just not gonna work. I mean, I don't think people in Venezuela or Afghanistan could have ever imagined what happened. But when it does happen, it's really important that you have tools to protect your wealth. And Bitcoin is that option. It can be an option. And one of my passions is helping educate as many people as possible about what this technology is, what it can be used for, and how to safely navigate it in the extent you need it.

• 47:09Speaker 04

  It's basically just property that you could self custody. So it's like having a bar of gold in your house or cash.

• 47:16Speaker 03

  Who doesn't?

• 47:17Speaker 04

  Yeah.

• 47:19Speaker 04

  You know, so it's just property and if you want to escape the country you're in or you want to, you know, have assets that you self custody that can't be seized. You know, you could hold the Bitcoin private key in your head. You can memorize the private key. So I could have my money in my head.

• 47:35Speaker 03

  Yeah.

• 47:36Speaker 04

  You know, how someone would take that from me?

• 47:38Speaker 03

  Can't.

• 47:39Speaker 04

  Right, so, yeah, and you know, you look at what happened in Canada a couple of months ago with the truckers. You know, they started shutting down bank accounts of people who donated $10 to the truckers.

• 47:49Speaker 03

  We're gonna write books about that, by the way. I think that's one of the most under reported stories of my entire career.

• 47:55Speaker 04

  Because that encourages people to buy Bitcoin, right? The government doesn't want to report that.

• 48:03Speaker 03

  Totally.

• 48:03Speaker 04

  They realized pretty quickly that they were making a mistake.

• 48:07Speaker 03

  Oh, yeah.

• 48:07Speaker 04

  And so they stopped that program real fast. But, you know, if you donated money to the truckers, paid $10 and your bank account got shut down, how are you supposed to pay your heating bill? Pay your, you know, pay your healthcare costs, buy food?

• 48:20Speaker 03

  Totally.

• 48:21Speaker 04

  You know, the government just shut down your bank account. So you need some self sovereign money in your house to survive. And so, you know, if you're a sovereign individual, you need to have some Bitcoin. You need to have some, something that you could spend in case the government takes you off the financial system. Money, that's great.

• 48:41Speaker 02

  Money that you actually own.

• 48:42Speaker 03

  So let's get, let's get, let's get a little draconian here. So I have a firm belief that we're moving to a multipolar world. I think that's pretty clear. Eventually it'll be a unipolar world again as China overtakes us. You know, this is the history of empires and nations. You rise, you fall and get replaced by the new guy. And very clearly it looks like China's going to be the new guy, obviously not tomorrow. What sort of, you know, I wonder about kind of, you know, an asset that is borderless, if you will, you know, that creates, that allows, you know, people, humans, investors, businesses, companies to sort of transform and stir wealth sort of outside of quote unquote whatever the system is. Right now, it's sort of technically speaking, outside

• 49:24Speaker 03

  of the dollar system. As we transition to this sort of multipolar world where there's bound to be a lot of friction, potentially conflict, obviously, there's conflict in Russia, Ukraine, and that could obviously potentially get worse if we get NATO involved. It strikes me that Bitcoin will become more valuable to the human, but even increasingly less valuable to the state in the sense that they're not going to want, they're going to want capital controls, all these types of things that tend to force people into Bitcoin. They're actually going to put up more walls to prevent that from happening. Do you see any sort of clear, present obstacles, challenges for further adoption? Because it sounds like we're all on this rosy S curve and everything's great. But I also understand

• 50:08Speaker 03

  that we're currently in a fourth turning. I don't know if you guys are familiar with the concept of fourth turning, but my former colleague, Neil Howell, wrote a book back in the 90s, effectively talks about how human beings go in this sort of multi-generational cycle. There's generational archetypes, and when they align in a certain pattern, you tend to create just conflict, dissension, destruction of institutions. And I firmly believe that sort of, there's a few institutions that I think we're going to destroy in this current fourth turning that we're still in. I think the two-party system's probably on its way out in the United States of America. It doesn't seem like it's working for anyone, not even the two parties at this point. I do believe that, look, the sort of concept of dollar hegemony and this sort of US being this dominant force in the world is probably

• 50:51Speaker 03

  on its way out, if only because we have enough problems internally that we have turned and faced inward to solve some of these, some of our own internal challenges. It strikes me that Bitcoin is a way out of that for the person, for the human, but it's a challenge and an obstacle for the state.

• 51:09Speaker 02

  Who does the state serve?

• 51:11Speaker 03

  People in theory, or the state, does the state serve us or does the state serve the state?

• 51:17Speaker 02

  Well, it's supposed to serve its people, right? So the government should be doing what's best for its citizenry. And I believe that a sound monetary system is what's best. A currency that can be stolen by an unelected, you know, group of bureaucrats at a non-government agency, non-federal agency, that's not what's best for the people.

• 51:38Speaker 03

  By the way, you know that, no offense, obviously, as a fiance is a white woman, we have like 10 old white dudes sit around a room and determine what the quantity and price of money is for the whole world. Isn't that a ridiculous concept in 2022?

• 51:55Speaker 02

  And that has only been going, and remember, that did not exist even just a couple of decades.

• 52:00Speaker 03

  Until 1933, right?

• 52:01Speaker 02

  Well, 1913 was when the Fed was established, but the way that our current monetary system works is very, very, very new.

• 52:07Speaker 03

  Yeah.

• 52:08Speaker 02

  And so, and it's also, in my opinion, it's unconstitutional.

• 52:11Speaker 03

  What a ridiculous activity.

• 52:13Speaker 02

  Yeah, using gold and silver for, for, you know, debts and for paying debts. So I, I believe what's best is having a sound money. And maybe that is, I mean, I think it's Bitcoin, but you know, maybe it could be something else. I don't know what else it would be. I don't really see another kind of competitor to that today. But, uh, you know, the idea of having this world reserve currency where you have this unique authority of implementing sanctions, like that is something very, very new.

• 52:42Speaker 04

  So, Darius, you said something really important, well, you said you have a bunch of people sitting around an oval table.

• 52:49Speaker 03

  Oval table.

• 52:49Speaker 04

  Deciding what the price of money is.

• 52:51Speaker 03

  And the supply.

• 52:51Speaker 04

  Yeah, so they, they determine like what the interest rate is and like you just said, the supply of money. So over the last two years, the US government has printed 40% more dollars than were in existence two years ago. And then people today wonder, like, why are my prices going up?

• 53:11Speaker 03

  Of course.

• 53:11Speaker 04

  Why are car prices up? Why is gas up? Why is my home price up?

• 53:16Speaker 03

  Totally.

• 53:17Speaker 04

  Why is my rent up? You know, why is my healthcare cost up? And the reason is that there's more dollars in circulation than there were before. So the dollars that you owned before are worth less than they were.

• 53:30Speaker 03

  Totally.

• 53:30Speaker 04

  Because there's more dollars out there. So when you have more of something, it's worth less.

• 53:35Speaker 03

  Blind to man.

• 53:35Speaker 04

  And so your home that you live in, it's probably the same three bedrooms, two baths, same lot, right? Your home didn't grow 30%. Your home doesn't provide you 30% more utility.

• 53:47Speaker 03

  Not at all.

• 53:48Speaker 04

  Than it did, you know, two years ago. But it's worth 30% more. Well, it's not really worth 30% more. What's happened is that the dollar has lost 30% of its value.

• 53:58Speaker 03

  Totally.

• 53:59Speaker 04

  So it takes more dollars to buy the same home. And to buy the same gallon of gas, or the bushel of wheat, or the, or the car, right? And so, so what, that's called theft. The government is stealing from us. When they print, you know, when, so we go out and we, you know, spend 40 hours a week, or 60 hours a week, working, right? We put time in, we put labor in, we get a paycheck. And if the government could just hit Ctrl P and print more dollars, they just stole part of my paycheck.

• 54:31Speaker 03

  Stole part of your life.

• 54:33Speaker 04

  Right.

• 54:33Speaker 03

  What money is is the transfer of human time, which is your life.

• 54:37Speaker 02

  And that, that's slavery.

• 54:38Speaker 04

  Yeah.

• 54:38Speaker 02

  Out of slavery.

• 54:39Speaker 04

  So, so, so it's immoral. So these people sitting around the table deciding how much money to print, they're basically deciding how much slavery should I impose on people?

• 54:50Speaker 03

  Absolutely.

• 54:51Speaker 04

  And they're stealing your time and your money. And so that's not right. It's immoral for that to happen. And so Bitcoin fixes that problem. You can't create more than 21 million Bitcoin. Finite supply capped at 21 million, never be over 21 million. No one's ever print 22 million Bitcoin. So, so you're, there's a cap, there's a finite supply, and that, that theft will stop once we're on a Bitcoin standard.

• 55:18Speaker 03

  God damn it, I'm so bearish, man. I want to run and buy more Bitcoin.

• 55:23Speaker 03

  So I'll give my two spiel on the kind of market.

• 55:26Speaker 04

  You were talking earlier, like, what's the transition? You know, it's like having a baby. It's not comfortable and it's, and it's a lot of risk with that. But once you have the baby and then, you know, you have all this, you know, hope for the future.

• 55:40Speaker 03

  Yeah.

• 55:40Speaker 04

  Right? And that's, you know, that's coming. You know, it's gonna be a hard transition, but once we get on the other side of this in 10 or 20 years, the future is like bright for all humanity. You know, we're, you know, the next thousand years are gonna be great. We just have to get off this government issued money system that we've been on for 51 years. 1971, we were on commodity based money because our money was backed by gold. After 1971, it's based on how much money do we want to print, right? And so that the system is failing us. We see it failing us right in front of our eyes. And all we have to do is, you know, decide as humankind to get off the system and get on to the new system.

• 56:24Speaker 04

  And then the transition will be complete. And it just doesn't happen overnight. People have to be educated. I mean, Perry and I, you know, we drove down to Miami this morning, three and a half hours to come talk to you because we want to help educate people on what's going on. It's important and, you know.

• 56:42Speaker 03

  It's, look, this has been an awesome discussion. I walked in here, knew, I thought I knew a lot about, you know, digital asset space, though I try to, you know, weave it into traditional finance and in the context of portfolio construction. And I think it's so much bigger than that. You know, I think there's a, there's a real movement here and I can understand why everyone I talk to in this space is so passionate about it. Because it is revolutionary, it's game changing. Now, that doesn't mean you need to buy it at every price. That doesn't mean that every price that ticks and clears on the, on the, on the screen, on the squiggly line on the screen, is a good price to purchase it at. That doesn't necessarily mean you should not have some allocation to this, this revolution. So Brian, Perry Anne, any parting thoughts?

• 57:23Speaker 04

  Ladies first.

• 57:26Speaker 02

  Save the world, buy Bitcoin.

• 57:29Speaker 03

  That was easy.

• 57:30Speaker 02

  I think that was like kind of the conclusion of our conversation, but I mean, just on allocation and portfolio construction, I mean, as you, as you may know, you know, Brian serves as the CIO and CEO of Off the Chain Capital, and they recently just announced their financial performance. They made that public for the first time ever, just the other week. And they are the number one performing fund out of all hedge funds.

• 57:59Speaker 03

  Across all strategies.

• 58:00Speaker 04

  Yeah, number one out of almost 6,000 hedge funds.

• 58:04Speaker 03

  Congratulations, man.

• 58:05Speaker 04

  Over the last five years.

• 58:06Speaker 03

  That's a really big.

• 58:07Speaker 02

  But the reason why, I mean, you see what a kind of a unique thinker Brian is, but the reason why is because he's applied this value approach to investing. So, I mean, it would be great if he maybe just broke that down a little bit.

• 58:20Speaker 03

  Yeah, I would love to.

• 58:20Speaker 02

  If no one else is doing this, and it's so unique.

• 58:23Speaker 04

  Yeah. So, you know, I come from traditional finance, and I'm a value investor. And people say, well, how can you be a value investor in blockchain?

• 58:31Speaker 03

  I know, right?

• 58:31Speaker 04

  And so basically, all we're doing is we're trying to buy a dollar's worth of blockchain assets for 50 cents. So we use our traditional Benjamin Graham, Warren Buffett value style, and find weird ways to buy Bitcoin at discounts. So we buy it through bankruptcy courts, we buy it through futures contracts on hash rates from Bitcoin miners. We find employees at blockchain companies who helped start these companies five years ago, but now they have a life event. They're getting married, getting divorced, having a baby, you know, buying a house, and they need liquidity. They need to sell some of their company's equity to buy the house. And so we buy their equity from them at a discount to what we think

• 59:15Speaker 04

  it's worth. And so that's, you know, this. It's not complicated what we're doing, we're just no one else is doing it.

• 59:22Speaker 03

  This is what hedge funds used to do.

• 59:24Speaker 04

  Right.

• 59:24Speaker 03

  And now they're all, I joke that like all the assets under management in the hedge fund space have effectively gone into the sort of, you know, the kind of the big four, if you think of it from a pot shop perspective, the Citadel, Millennium, Point 72, um, Valley Asny, all those kinds of firms where you have really smart guys, you know, Winklevoss, Harvard, Yale type folks like myself, we get in a room, they give us a coloring book, they give us, you know, crayons and they give us a picture of Santa Claus and tell us to color. Well, we're all going to color the shirt red and the boots black and the beard white. And that's what we're all doing. And finance used to be like, let's go find some esoteric opportunities and get an actual return and take some risk. And so I'm really proud to see that someone is out there doing that and really generating returns and obviously educating the community. So Brian, we really appreciate you.

• 1:00:09Speaker 04

  Appreciate that. And then the last word I have is so, um, everyone could buy Bitcoin, right? You go to PayPal, you know, Schwab, Fidelity, whatever. If you buy Bitcoin, if you own Bitcoin, just do yourself a favor because what happens is that Bitcoin is very volatile. It's not going to go up a lot as you own it. When it goes up a lot, don't sell it. You'll have this urge to sell it because you just made a lot of money, but don't sell it. When it goes down 70%, don't sell it either because you'll have this urge to sell it when it goes down. The best thing to do is just hold it, hold it for the next 10 to 20 years, never sell it. And that's all you have to do. Don't overthink it. Don't think that I could out trade Bitcoin.

• 1:00:53Speaker 04

  No one could out trade Bitcoin. Just buy it and hold it for the next 10 to 20 years. That's all you have to do.

• 1:00:58Speaker 03

  I'll add one, one, one thing to that too is if you understand where you are in the market and the economic and liquidity cycles, which is something we specialize in, I certainly specialize in. There are times, there are better times to buy it than there are, than other times.

• 1:01:11Speaker 04

  Yeah. So we have models that help us value Bitcoin. So our, our models say that Bitcoin is extremely undervalued today.

• 1:01:18Speaker 03

  Yeah.

• 1:01:18Speaker 04

  So Bitcoin's fair market.

• 1:01:20Speaker 03

  On what duration?

• 1:01:22Speaker 04

  Today.

• 1:01:22Speaker 03

  No, no, I mean, when you say under value, do you anticipate the, the, the, the, the sort of getting back to appropriate valuation over three weeks, three months, three years?

• 1:01:32Speaker 04

  No one knows.

• 1:01:33Speaker 03

  Gotcha, gotcha.

• 1:01:34Speaker 04

  Yeah, so we know that if you use a stock to flow model,

• 1:01:38Speaker 03

  Yeah.

• 1:01:38Speaker 04

  or you use Metcalfe's Law, or you use-

• 1:01:41Speaker 03

  What's Metcalfe's Law?

• 1:01:42Speaker 04

  Metcalfe's Law is how you value a network. So you square the number of users, and then what we do is we multiply that times the transactional volume going through the Bitcoin network.

• 1:01:51Speaker 03

  Yeah.

• 1:01:52Speaker 04

  And you come up with a number. And that number says Bitcoin's fair market value today is around 50,000.

• 1:01:57Speaker 03

  Oh, wow.

• 1:01:57Speaker 04

  And it's trading for like 38,000.

• 1:01:59Speaker 03

  Gotcha.

• 1:02:00Speaker 04

  If you use the stock to flow model, which is how you value commodities like gold, that model says that Bitcoin's worth $100,000 today. And so it's, it's undervalued. But these models tell us that in the future Bitcoins are going to be worth like a million dollars in 2025 and $10 million in 2029. And these models are between 94 and 99% correlated to the historical price of Bitcoin over the last 13 years. So they're very accurate models.

• 1:02:33Speaker 03

  In sample or out of sample? Does that, that makes a huge difference?

• 1:02:36Speaker 04

  What do you mean, in sample or out of sample?

• 1:02:38Speaker 03

  Is, is that correlation, is the model been trained on that data?

• 1:02:42Speaker 04

  Yeah, it's, yeah, it's using that data.

• 1:02:43Speaker 03

  So it's in sample? Yeah, gotcha. I'd love to see that, out of sample, because that's, that'd be a different, but still, that's really high.

• 1:02:48Speaker 04

  Yeah, it's very high, yeah.

• 1:02:49Speaker 03

  Extremely high.

• 1:02:50Speaker 04

  If you go to a casino and there's a 95% chance that you're, you know, you're going to be, the model works and you're betting that all day long.

• 1:02:57Speaker 03

  Gotcha. Well, this is, uh, this is excellent, man. I appreciate you guys stopping by and joining us. I'm, I'm not as good as Pomp at being Pomp, but I'm pretty good at being Pomp.

• 1:03:05Speaker 04

  I think you did a great job, yeah.

• 1:03:06Speaker 03

  Thank you. Hope everything's all well.

• 1:03:09Speaker 04

  A lot better looking than Pomp.

• 1:03:11Speaker 03

  I don't think, I don't think Felina thinks that, but you know, it is what it is. Well, appreciate you, Perry Ann Boring, Brian Estes, I'm Darius Dell. We'll catch you back here next time. Thank you.

• 1:03:20Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.