#781 Is The Bitcoin Bear Market Over? w/ Dylan LeClair

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system. In this conversation, we discuss bitcoin, on-chain metrics, market structure, and what to expect as we go deeper into 2022. ======================= Mode, UK Fintech app, allows you to buy, earn and grow Bitcoin, all in one app. Not only is it a secure app to buy & hold Bitcoin, Mode allows you to pay & receive up to 10% Bitcoin Cashback from its growing list of online partner brands. Available on the App Store and Google Play. Download Mode at modeapp.com and set up your account to be in with the chance of winning ONE WHOLE Bitcoin. Offer ends Jan 31, 2022. Only available in the UK. ======================= My friends at Coin Cloud will give you $50 in FREE Bitcoin when you buy $200 or more at any of their 4,000+ machines. Use promo code POMP to get your free Bitcoin. For details or to find your nearest Coin Cloud machine, visit www. Coin. Cloud/Pomp Coin Cloud has been serving customers since 2014 and has established itself as the world's leading digital currency machine (DCM) operator. More than just a Bitcoin ATM, Coin Cloud machines make it easy to buy and sell Bitcoin and 30+ other digital assets with cash. To find your local ATM and get $50 in free Bitcoin, visit www. Coin. Cloud/Pomp ======================= Fundrise is largest direct-to-investor real estate investment platform out there, giving you the opportunity to achieve upside of an asset class previously reserved for institutions and high net worth individuals. That’s right, Fundrise is making high-end private market real estate investing accessible to everyone via an easy-to-use, automated platform. See for yourself how over 190,000 investors have built a better portfolio with private real estate. It takes just a few minutes to get started with as little as $10. Go to Fundrise.com/Pomp today and, for a limited time, get $10 when you place your first investment. That’s Fundrise.com/Pomp =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan Leclerc is the Senior Market Analyst at UTXO Management. He also writes a newsletter with Bitcoin Magazine. In this conversation, we talk about Bitcoin, on-chain metrics, we talk about Bitcoin's price, the market structure, and what to expect in the coming weeks. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is brought to you by Mode. Mode allows you to buy, earn, and grow Bitcoin all in one app. Not only is it a secure app to buy and hold Bitcoin, Mode allows you to pay and receive up to 10% Bitcoin cash back from its growing list of online partner brands.

• 0:47Anthony Pompliano?

  Mode, the UK fintech app, is one of a kind. They're FCA-registered and are listed on the LSE in the UK and the OTCQB in the US. They choose to hold Bitcoin on their balance sheet. They are piloting a Bitcoin payroll product to pay UK employees in Bitcoin. Mode is giving away one whole Bitcoin to one of their customers. All you have to do is set up an account with Mode to be in a chance of winning. That's it. The opportunity ends January 31, 2022. Download Mode today on the App Store or the Google Play Store. It's only available in the UK, but if you're in the UK and you're not using Mode, you're wrong. Go download Mode today, where you can buy, earn, and grow Bitcoin. They're very Bitcoin-friendly. They'll

• 1:30Anthony Pompliano?

  Bitcoin on the balance sheet, and they're paying their UK employees in Bitcoin as well. Go download Mode today. This episode is brought to you by CoinCloud. Did you know you can buy and sell crypto with cash? I want to introduce you to CoinCloud. They are more than just a Bitcoin ATM company. CoinCloud is the world's leading digital currency machine operator. They've been around since 2014 and have thousands of machines across the country. You can buy and sell Bitcoin, Dogecoin, Cardano, and over 30 other digital assets. No connecting bank accounts, no long waits, and if you have questions, you can speak to a live, US-based customer support rep 24/7. I've had a lot of Bitcoin ATM companies reach out, but CoinCloud is the only team I've found that does things right. They put together a special offer for Listeners of this show, you can get $50 in free Bitcoin when you buy $200 or more at

• 2:15Anthony Pompliano?

  any CoinCloud machine and use promo code POMP. Find your local ATM at coin.clored/pomp. Again, that's coin.clored/pomp and use promo code POMP to get $50 of free Bitcoin when you buy $200 or more at any of their machines. Today's episode is brought to you by Fundrise. You all know I believe that the best investors both understand and seek out extreme asymmetry. Fundrise is here to help you do just that. It's the largest direct to investor real estate investment platform out there, giving you the opportunity to achieve upside of an asset class previously reserved for institutions and high net worth individuals. That's right, Fundrise is making high-end private market real estate investing accessible to everyone via an easy to use automated platform. Its 1 million users already know that the investment

• 2:59Anthony Pompliano?

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

• 3:34Speaker 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.

• 3:58Anthony Pompliano?

  All right, before we get started with charts, graphs and cool visuals, how are you feeling in terms of Bitcoin, obviously just from a sentiment check, was at 69,000, nice, and drew all the way down, was sitting around 50,000 or kind of high 40s at the beginning of the year and over the last two weeks or so has kind of continued to fall

• 4:20Anthony Pompliano?

  Even more, is this all healthy? Like, how do you feel about the Twitter sentiment? Just talk me through that.

• 4:26Speaker 02

  Yeah, I think it was a pretty cool graphic the other day when it was comparing January 11th or January 10th, 2021 versus 2022. And there's a fear and greed index. And last year is at 90 at 40K. And just like yesterday or two days ago, it was at 10. And the fear and greed index just sentiment. But, you know, it's crazy what a year can do. I think, you know, 40% correction from all time highs. It's nothing but a thing in Bitcoin. And I think just a lot of the stuff with derivative market liquidations and then kind of a lot of the macro talk. I think that's all already kind of been priced in. If you just look at like, say, the year dollar futures for 2022 at the end of the year. So that means basically like, the market's expectation for the Fed funds rate, the pricing at about four rate hikes. So you're seeing a lot of that. I

• 5:09Speaker 02

  think Bitcoin just being honestly the most free market in the world, that's already kind of been getting priced into the Bitcoin market. And so in terms of, you know, further downside, we'll have to wait and see. But I think, you know, 40K is a pretty strong level for bulls. And I think there'll be a lot of support there for the time being.

• 5:26Anthony Pompliano?

  I think that that's a pretty good way to look at it. And Bitcoin is definitely the freest market in the world. Hopefully, it will stay there. All right. So I think that we've got a number of different graphics and stuff. But before we get to that, you basically have these like, five key points of understanding. And I just want to kind of highlight those first before we get to the graphics. So people keep these in the back of their head as as we go. The first is denominated in performance in USD or Bitcoin. The second is the having effect on minor revenue. The third is interplay of hash rate difficulty in minor revenue. The fourth is hash price. And the fifth is balance sheets on a Bitcoin standard. One of the things that I think is important here is you're talking about balance sheets with Bitcoin, talking about

• 6:11Anthony Pompliano?

  denominated performance in USD or Bitcoin. Historically, people obviously have thought about everything in dollars. And one of the reasons for that is they have to report in dollars in public companies. All of the accounting systems are built in dollars. All the taxes are paid in dollars, etc. Before we get into the actual Kind of charts. Do you think that that stuff has to change before people start thinking in terms of Bitcoin? Or can we have people thinking in terms of Bitcoin without, let's say, being able to pay taxes or change your accounting systems or anything like that?

• 6:43Speaker 02

  Yeah, I mean, you know, using Bitcoin as a unit of account on an individual basis is definitely a little bit easier than a corporate kind of entity, just with the accounting standards and, you know, the tax reporting and all of that. But I think more of it's just kind of a mental model, you know, operating on a Bitcoin standard, things get frequently a lot cheaper and a lot more expensive, you know, just a lot bigger kind of moves than you would on, say, a US dollar standard where things just gradually get more expensive over time. With Bitcoin, there's obviously volatility, right? Where, say, things on a Bitcoin standard got, you know, 40% more expensive over the last couple of months. But that's after, you know, anybody that's been doing, been operating on a Bitcoin standard

• 7:28Speaker 02

  for the last couple of years, life's gotten a lot cheaper, you know, to the extent of 90, 95% experiencing these kind of exponential gains and purchasing power. And so I think more so just kind of a mental model, but more and more people and entities and institutions around the world. And, you know, I think slowly nation states are kind of coming to operate on this Bitcoin standard mental model framework.

• 7:49Anthony Pompliano?

  It's gonna be amazing. All right, let's get into charts. We're gonna go rapid fire through these over the next 20 minutes. Bitcoin mining difficulty, nice little pink line here. What's this showing us?

• 7:58Speaker 02

  Yeah, so this whole kind of slide deck is just, I've heard a lot of buzz about publicly traded Bitcoin miners. And so I think, you know, what we really want to do here is, is if you're buying publicly traded miner stocks or evaluating them, how are you actually evaluating the performance? So right here, we have mining difficulty, and this is in log scale. So if you look at linear scale, it's basically, it doesn't look like, it looked like it was at zero until like 2020, and then all of a sudden just went parabolic upwards. But in in log scale, mining difficulty is appreciated by, you know, I think like 10 orders of magnitude or something outrageous, you know, as Bitcoin mining went from just doing it on CPUs where you could mine 50 Bitcoin, just on your old crappy laptop to now You know, these just an unbelievable amount of hash and power all over the world.

• 8:43Speaker 02

  So, understanding mining difficulty and how basically Bitcoin supply elasticity works, where every commodity in the world, as it gets more expensive than sense to produce it, obviously increases. But with Bitcoin, there's a difficulty adjustment. So, as it gets more lucrative to produce, to mine, it becomes incrementally that much harder to get the thing. And so, it's unlike any asset in the world in that sense. And I think it's really important to understand that if you're going into the business of Bitcoin mining or buying these miners.

• 9:12Anthony Pompliano?

  All right. Next, we've got hash rate here, which also seems to just be going up along with obviously the difficulty. But is there any end in sight for hash rate?

• 9:21Speaker 02

  Yeah, so I mean, essentially, this is the same chart. Difficulty is basically, there's a 10 minute block target over a 200, I'm sorry, 2016 block interval, right? So, every 2016 blocks, if blocks are coming in faster than that 10 minute interval, then difficulty will adjust upwards. And likewise, if it's slower than that 10 minute target, then it'll adjust downwards. So, this is showing the same chart, but hash rate is derived by basically how fast blocks are coming in relative to how difficult it is to mine blocks.

• 9:52Anthony Pompliano?

  All right. Mining difficulty and hash rate. When you look at this, this is just literally overlaying on top of each other for the most part?

• 9:58Speaker 02

  Yeah. This is just, this is in linear terms, and this is just the last two years, just for some, you know, just for a visual graphic.

• 10:05Anthony Pompliano?

  Okay. Then we've got hash price, which is the miner revenue per tera hash. What is this showing us?

• 10:10Speaker 02

  Yeah, so this is that same chart over time, and this is in US dollars. So, as Bitcoins appreciated, you know, a bunch similar to how hash rate had risen, but you kind of see basically, and this is in log scale, but over time, a marginal unit of hash rate gets you less and less in terms of dollars as hash rate continues to just go exponential. And so, what you're trying to see is that, you know, a lot of these inefficient rigs over time have to get plugged into more and more efficient uses of that energy to stay competitive. And so, it's kind of this Darwinistic process where, you know, basically, the revenue is trending to zero in Bitcoin terms, and that's what we're going to show in the next one. But this one is in USD terms. It's just pretty crazy how much hash rate. continues to to increase over time.

• 10:55Anthony Pompliano?

  All right, then we've got hash price, the minor revenue per tera hash in this this next chart.

• 11:00Speaker 02

  Yep. And so this is, this is just an up close and view of the same thing. And this is in linear terms. And so this is a dollar denominated, but basically what you can see is, and if you look closely to say, May of 2020, you see basically a vertical line down. That is the having event. And so if you tend to look at a lot of publicly traded miners, basically in Bitcoin terms, what you'll see is that they trade at a multiple or pretty closely to this to this metric here. Because hash price is taking that minor revenue and dividing it by by the hash rate. So as hash rate increases, it basically profit margins for a lot of these miners compress.

• 11:38Anthony Pompliano?

  Got it. Then we've got more of the havings kind of zoomed out here. You can see three havings on this next graphic. And basically, that's really what's helping to drive this down over time.

• 11:47Speaker 02

  Yeah, so this is that same hash price metric, but it's it's denominated in BTC terms. So when I say I say things on Twitter a lot like, basically, it's it's the production price of Bitcoin, the cost to produce a marginal Satoshi is going is trending towards infinity. And basically, what this means is is hash rates, essentially, there's an economic incentive for hash rate to increase forever. If you factor in Moore's law, basically, you know, processing power, computing power is is increasing exponential terms, as well as, you know, just there's this huge economic incentive to monetize wasted energy resources all over the world. What you see here is that, along with the havings and the difficulty adjustments, if you look very, very closely, you'll see kind of,

• 12:28Speaker 02

  it's like a step function all the way down in this chart. And that's every time difficulty increases, or there's a having event where you can really see it, it becomes that much more difficult to mine a unit of Bitcoin or a Satoshi. And so this is really key to to evaluating publicly traded miners or, you know, Bitcoin Bitcoin mining in general. And and we're kind of working our way in to see some of these charts in Bitcoin terms.

• 12:50Anthony Pompliano?

  Okay. And then if we go ahead and we go to the next chart here, this is, I think, just a having zoomed in where you can see a very significant drop in a in a single one. When you look at this, what exactly is is this showing in terms of?

• 13:07Anthony Pompliano?

  On this graphic here.

• 13:09Speaker 02

  Yeah, so I've kind of put a lot of similar charts in this slide deck, but really what I'm trying to show is with a mix of linear and logarithmic scale, just, you know, how, how fast this ecosystem is moving. So this chart is in linear terms and what it's showing is basically how much Bitcoin, a marginal unit of hash rate or a terahash can get you. So if, you know, if you plug in an ASIC, what can you expect for revenue? And what you can basically see is since, since 2017, since the top, it's become unbelievably more difficult to mine Bitcoin, you know, per, per unit of, of hash rate. And so, and you can see that kind of that halving there, there was a decrease of 50%. And so when you look at a lot of these publicly traded mining charts and BTC terms, I think

• 13:52Speaker 02

  you'll notice, you know, you'll notice something pretty staggering and it might look a lot like this chart.

• 13:57Anthony Pompliano?

  Got it. And then this last one here around the, the hash rate, this is the zoomed in on the halving drop. That's pretty significant when you zoom in on it. Is that something that we should expect every single time there's a halving?

• 14:10Speaker 02

  Yeah, so this is miner revenue per terahash in BTC terms. And so what you can see here is a lot of the variance and, and the kind of the, those, those step functions are, that's difficulty and hash rate. And you can see some of the things like the, the miner capitulation and with difficulty had this huge downwards adjustment. That's that spike you see kind of in, in July, where it actually became a lot more profitable for any miners that were able to remain plugged in. But yeah, this is, this is in BTC terms and every halving you can expect going forward. Eventually, fees will, will make up a dominant majority of, of the miner revenue. But for now, you know, fees as a percent of miner revenue is still 1 to 2% and that block subsidy currently at 6.25 every, every 10 minutes or every block makes up a dominant share of the miner revenue.

• 14:55Anthony Pompliano?

  All right. Now, these next charts are, are going to be fun. We've got Riot denominated in BTC, Riot being the publicly traded mining organization. We have Mara, Hut, BITF, and Hive. Basically, you've got five of them here. What are you, one, trying to show? And then maybe we can kind of click through each one of them as as we go, but they're all down against Bitcoin. And so what exactly are you trying to to show here?

• 15:25Speaker 02

  Yeah, I'm not not trying to discourage anybody from buying mining mining stocks. I have no affiliation with any of these companies. I don't really have an agenda. You know, the the charts that I was showing earlier, we're really trying to do one thing. It's trying to get people to think in a Bitcoin standard. And so, you know, a lot of these, if you look at a lot of these companies, especially over the last last two years or since, say, the bear market in 2018, in USD terms, they're they're up a huge amount. But especially since before that 2017 bull run or say, you know, at the bottom of 2020, if you're looking at a lot of these companies in BTC terms, they're down almost, you know, some of them 90%, 90% plus. And this is because if you're evaluating these companies and their valuations in Bitcoin terms,

• 16:11Speaker 02

  the the fact is, the fact of the matter is that basically their their revenue, and if they increase their hash rate, they can attempt to keep pace. But the revenue in Bitcoin terms is essentially programmed to go down forever. Basically, all all mining is are in Bitcoin terms. And so, you know, playing with publicly traded miners, investing in them, allocating in them is totally fine. And, you know, I encourage people to do their own research. But at the end of the day is, you know, a lot of this performance is is somewhat expected if you kind of understand the economics of Bitcoin mining. And so the companies that kind of hyper Bitcoinize their balance sheets the best will will keep up. You know, say, Michael Saylor and MicroStrategy, since since adopting a Bitcoin standard, I think are slightly underperforming Bitcoin itself.

• 16:54Speaker 02

  And that and their balance sheet is essentially 100% Bitcoin now. But a lot of these companies, you know, they're they're buying a bunch of ASICs, they're trying to plug them in. And since their IPO or just, you know, I chose three, four year timeframes for a lot of these companies, they're underperforming Bitcoin by a wide margin because in in USD terms, the revenue is increasing and they're growing and they're growing fast. But in BTC terms, the revenue is decreasing, programmatically so because of the halving and the difficulty adjustments. So these are just some things to kind of consider when you're evaluating, say, investing in mining companies or or even, you know, any company, really. It's just that, you know, the fact of the matter is it's going to get, it's programmed to become, you know,

• 17:35Speaker 02

  to produce a marginal unit of Bitcoin, it's going to get harder forever if hash rate continues to increase. So. You know, just some, just some ideas.

• 17:42Anthony Pompliano?

  Got it. And so when you think about denomination in Bitcoin, obviously, uh, denominating stocks in Bitcoin, uh, like this are, are pretty eye opening. Uh, if you were to do this for the S and P 500, if you were to do this for, uh, NASDAQ, et cetera, let's say in 2021, all of them are down against Bitcoin. And that's just a function of Bitcoin was up, you know, 65%, they weren't. And so naturally, uh, that denomination ends up looking like it's just down. Uh, do you think that professional investors kind of, um, not the, the retail crowd, not the, uh, Bitcoin crowd, but Wall Street firms or hedge funds, uh, big banks, like eventually do they start to change the way that they actually denominate,

• 18:23Anthony Pompliano?

  uh, these investments as well? Or do you think they're so kind of codified into the, uh, the fiat, um, mentality and the denomination in dollars that they stay, uh, without looking at it this way?

• 18:34Speaker 02

  Yeah, I think it's pretty standard for like, say, a lot of fund managers to get, you know, benchmarked to the S and P or to the NASDAQ or just, you know, to a, to a standard basket of equities. Um, and I think it's going to be increasingly common for a lot of these managers. As Bitcoin becomes, you know, it's already kind of entrenched itself as a macro asset. But I think, you know, over the 2022, over the next, you know, say four years or decade, really, uh, what you're going to see is Bitcoin itself becomes a benchmark. And I don't expect the volatility to completely go away. I actually expect, uh, volatility to persist for, for the most part. But I think the reality is as, as this asset class grows in relevance and kind of acceptance, uh, it's going to be kind of a benchmark to say, you know, why would I give you any money or why would I invest in your company when I can just buy this thing and outperform, you know, almost everything?

• 19:18Speaker 02

  And so, uh, whether that's for, you know, publicly traded miners or whether that's for, uh, hedge funds and their performance, um, you know, if, if a simple retail investor can go, go buy Bitcoin and outperform you, uh, and a lot of times with Bitcoin, you know, not in 2021 with so much volatility, but through most of Bitcoin's history, it was the best, uh, in, in vol adjusted or, uh, in risk adjusted terms, it was the best performing asset as well. And so, uh, it'll be interesting to see how it all plays out, but I think Bitcoin increasingly becomes a benchmark for performance for all of. Wall Street and investors in general.

• 19:50Anthony Pompliano?

  Yeah. And when you think about this, one of the things that's most interesting to me is if somebody was to go and do a bunch of research on publicly traded companies and spend a bunch of time trying to understand valuation metrics and cash flow, you know, investment strategy, return on investment, taxes, like there's so much that goes into evaluating, let's say, one publicly traded business. Let's just say, Amazon. We were talking earlier about Bill Miller and his conviction in Amazon and kind of how he breaks that business down.

• 20:20Anthony Pompliano?

  And then if you try to take that analysis and bring it to a bunch of different public companies, there's this feeling of like, you never can actually accomplish all of the analysis. You can't analyze every single public company. You can't actually continue to find what's the company that's, you know, got a brand new angel round. Okay. What's this? What's this? What's this? What's this? And so there's this sense of like, just dollar cost averaging into Bitcoin and like Bitcoin and chill. It brings almost this like mental clarity. It brings this like very simple, long-term belief of like, look, I don't need to be a genius. I just simply need to understand a market structure and then I just chill and like, I'm going to be perfectly fine.

• 20:59Anthony Pompliano?

  Is that kind of how you think about the difference between like the super hardcore analysis that goes on at these hedge funds, these large financial firms versus like the everyday Bitcoin pleb that just says, hey, I'm just going to dollar cost average into this and, you know, good luck. Let's see what happens here?

• 21:15Speaker 02

  Yeah, I think, I think you kind of nailed it there. There's a lot of, there's a growing, you know, amount of people out there that say, you know, none of this makes sense. The cost of capital is manipulated and broken. And I think there's a real reason that value investing since say, 2008 or 2010, you know, has underperformed by a wide margin is value investing is basically baking into the cake of this assumption that the cost of capital or that the, you know, the interest rate is, is fair, is actually is positive, really. So when real yields are negative and you're trying to, what's the fair value of a company or a discount cash flow analysis when, when you're plugging in this, this formula into the equation, you're plugging in this, this assumption.

• 21:57Speaker 02

  This variable and it's the cost of capital and it's, you know, what is real yields right now? Five, negative five, negative six percent. Um, and so I think that's where value investing uh has gone, you know, gone wrong this last decade. And I think that's where it returns on a Bitcoin standard uh eventually. Obviously, there's a lot of volatility uh denominating everything in Bitcoin, using Bitcoin as your unit of account uh in 2022, 2021, 2020. Uh, those who did have done, done great. Uh, but I think, you know, right now, a lot of people are saying, I'm not even investing. I'm just saving money uh and five years down the line, 10 years down the line. Uh, when, when these companies, uh, you know, maybe are on Bitcoin standards themselves or Bitcoins appreciated by another order of magnitude or two, uh, it'll make sense to start investing and get that, you know,

• 22:42Speaker 02

  positive ROI in BTC terms. Uh, but for now, you know, while investing is very expensive, I'm just going to save some money.

• 22:49Anthony Pompliano?

  Joe, John, what do you guys got? Dylan, what's going on, man? Good to see you again.

• 22:52Speaker 02

  Joe.

• 22:53Anthony Pompliano?

  Uh, so my question is just how interest rate fits into this narrative, right? So the, the general idea is obvious that uh interest rates will rise and risk on assets will depreciate in value or have a pullback, specifically tech stocks and stuff like that. But I don't know if we've necessarily seen a period of a sustained period of high interest rates when it comes uh to Bitcoin's cycle, right, or lifespan. So I'm curious to know how you think or how you think about interest rates in the grand scheme of things. Like where does this take Bitcoin over the next 12, 24, 36 months?

• 23:20Speaker 02

  Yeah, it's a great question. I think that's the, that's the trillion dollar question. I think uh a lot of the people even, you know, running the show with the Fed don't even know. Uh, and they're just kind of winging it and they'll put on a brave face and go out there and pretend like they, they know how it's going to all play out, but uh they're just winging it. I think for the most part, real, real yields can't sustainably rise. Uh, real yields can't even probably break zero, like we can't have positive real yield without the entire system just collapsing. Um, and basically since, you know, 1981, when the interest rates, you know, cyclically topped, uh, we've seen just a secular trend of lower real yields over this, over this time. And I, I think that's kind of, uh, that's needed to keep this whole thing glued together. And so, you know, with Bitcoin, uh, you know, we, we have a couple, you know, key assumptions or, or things that we,

• 24:05Speaker 02

  uh, you know, would like to say we understand, which is uh Kind of what we covered earlier that it's going to become harder to produce Bitcoin. Basically not forever, which which you know, kind of sounds outrageous. But as long as there's an economic incentive to mine Bitcoin, people will do it. And as and as long as that's true and people can plug in ASICs all around the world with just satellite signal and some energy resources. It's going to become harder and harder to produce the thing. There's a, you know, unforgeable costliness to Bitcoin, an asset similar to say gold. So regardless of if there's, you know, credit expansion or or deflation and deflationary bust. Bitcoin will have that production cost and have that absolute scarcity that no other asset on the planet has. So, you know, whether if interest rates rise sustainably, I think everything gets hit.

• 24:49Speaker 02

  And I think there's a, you know, really good buying opportunity for Bitcoin. Similar to say March of 2020 where Bitcoin bottomed first. And there was a lot of volatility along the way and the 50% drawdown intraday. But it bottomed first and then obviously went, you know, parabolic in the later part of the year. And so because of the response of the money printing. And so I think interest rates can't sustainably rise without something breaking. And I think when the thing breaks the next time, whatever it is, probably something in the bond market or euro dollar market or. You know, anything in this kind of very fragile financial system. But the response from that and what comes and what happens with Bitcoin after that, I think, I think that's the real next big move here.

• 25:29Speaker 01

  Gotcha. John, what you got? Dylan, what are you seeing with long term holders versus short term holders? Obviously, we have seen a drastic decrease in price. Are long term holders still accumulating right now and is it the short term holders that are selling?

• 25:43Speaker 02

  Yeah, so short term holders are, you know, a little bit underwater here just because, you know, we were ranging in that 50, 60 K range for a while. We saw long term holders actually basically contrary to what we've seen in the past distribute into the drawdown. And I think a part of that had to do with the macro worries and fears that have kind of popped up over the last couple of months. You know, we've seen like, say, Arc Invest or a lot of these what people would call speculative risk on assets have sold off in a big way. And I think just more so kind of the the macro Wall Street investors that have come into the space. Who treat Bitcoin like a, you know, risk on asset and. Aren't evaluating things on a Bitcoin standard, you know, they they probably trimmed their Bitcoin holdings, you know, just looking at correlations and treating it just like another asset in their in their portfolio.

• 26:28Speaker 02

  In the meantime, a lot of people that have kind of come to understand this is a monetary asset and are evaluating things in Bitcoin terms are pumped because, you know, their income in Bitcoin terms has risen and they're they're saving a lot more with their with the DCA, right? So I think there's like kind of two classes of investors that are allocating to this thing. And on the margin, you know, the big guys that are that, you know, are investing trillions of dollars across asset classes can have a pretty big effect on this price. But for now, I think, you know, a lot of that's already been kind of priced in and the long term holders are starting to to accumulate again.

• 26:59Anthony Pompliano?

  What are your thoughts on Bill Miller saying his portfolio is 50% Bitcoin?

• 27:04Speaker 02

  I mean, that's a Chad move. I think, you know, it shows shows a lot of conviction and I think what, you know, is kind of maybe not lost in all of that is is similar to kind of what Paul Tudor Jones came out and said in 2020. Not not in terms of allocation size because Paul Tudor Jones only had 5%, but, you know, this very, very respected investor in the in the Wall Street circles, billionaire investor, who a lot of people, you know, probably behind the scenes copy trade or or, you know, listen very intently to what he has to say. You know, Paul Tudor Jones had that effect in 2020 where a lot of people said, oh, my gosh, you know, I need exposure. This guy knows what he's talking about. And I think, you know, Bill Miller coming out and saying, you know, 50%, yeah, I don't care if it goes down. I'm gonna buy more.

• 27:44Speaker 02

  I'm never gonna sell. You know, there's a lot of there's a lot of billionaires out there that probably realize that they're short Bitcoin and they they need some more.

• 27:51Anthony Pompliano?

  I think that's a great way to look at it is if Bill Miller's in 50 and Paul Tudor Jones was out 2 to 5. It's a big difference, big delta. So we're gonna see what happens here. Before we let you go very quickly, any predictions for 2022, whether it's price, whether it's a milestone? What are you thinking, looking forward to in 2022?

• 28:12Speaker 02

  Yeah, I think we're gonna get a I think we're gonna get a few more nation states that come that come pretty hard into adopting Bitcoin, whether it's legal tender or maybe adding it to the reserves or strategically mining Bitcoin, maybe, you know, an energy producer. I think that's coming. And I think, you know, Dukeyle has kind of hinted at it a little bit, but there's a lot of people and, you know, I guess nations that are kind of looking at the playbook that El Salvador has started to implement. And, you know, there's some bumps along the road, obviously, but I think, I think that'll come. And I think, you know, we'll see El Salvador with this, with this bond offering, right? They're just kind of routing around the IMF, laughing that in like Dukeyle actually laughing in IMF's face on Twitter.

• 28:54Speaker 02

  And not even paying down the debt that they owe and saying, we're just going to raise a Bitcoin bond. And so if that's oversubscribed or that's, you know, there's some, you know, sufficient demand for that offering. It'll be really interesting to kind of see the response from other, you know, countries in similar situations that, you know, want to, want to get financing or want to maybe attract foreign capital.

• 29:14Anthony Pompliano?

  All right, my friend. I appreciate you coming on. Newsletter is linked in, in the Twitter bio too. So let's, uh, let's go, man. We got a lot of work to do in 2022. Counting on you. Pay me in Bitcoin. Basically. And there you go. It's perfect. Do that again, real quick. We'll get a little screenshot of you then. Yeah, they're perfect. Yeah. All right. I appreciate you coming on. For anyone who isn't following Dylan, go follow him. If you're not subscribed to the newsletter, go subscribe to the newsletter. And we'll do this again next Tuesday, my friend.

• 29:44Speaker 02

  See you guys.

• 29:45Anthony Pompliano?

  Appreciate you.