#1346 Mark Yusko, David Alderman, Adam Sullivan | Bitcoin Halving Is NOT Priced In: Supply Shock INCOMING

Mark Yusko is the Founder, CIO, & Managing Director of Morgan Creek Capital Management. David Alderman is a Digital Asset Research Analyst at Franklin Templeton. Adam Sullivan is the CEO at Core Scientific. This conversation was recorded at Bitcoin Investor Day in New York. In this conversation, we discuss bitcoin halving, institutional demand, bitcoin miners, ethereum, and future outlook of crypto industry. ======================= Buy and sell cryptocurrency in a tax-advantaged crypto IRA with iTrustCapital. Enjoy 24/7 access, lowest fees in the industry, and tax benefits for your retirement. Open an account today at ⁠⁠⁠www.itrustcapital.com⁠⁠⁠ ======================= Core Scientific (NASDAQ: CORZ) is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America. To learn more about Core Scientific, please visit: ⁠⁠⁠www.corescientific.com⁠⁠ ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

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

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Mark Yusko, David Alderman, and Adam Sullivan. This conversation was recorded at Bitcoin Investor Day in New York City a few weeks ago. Mark Yusko is the founder, CIO, and Managing Director of Morgan Creek Capital

• 0:43Anthony Pompliano?

  Management. David Alderman is a digital research analyst at Franklin Templeton, and Adam Sullivan is the CEO at Core Scientific. In this conversation, we discuss the Bitcoin halving, institutional demand, Bitcoin miners, Ethereum, and the future outlook of the crypto industry. I really enjoyed this conversation with Mark, David, and Adam, and I think you guys will learn a lot from it. So here is my conversation with Mark Yusko, David Alderman, and Adam Sullivan.

• 1:11Speaker 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.

• 1:35Anthony Pompliano?

  Today's episode is brought to you by I Trust Capital. Are you buying crypto on an exchange because you're excited about the bull run? Well, I hope you're reporting your crypto gains to the IRS because they want you to pay your taxes. That's right, when you buy and sell crypto on an exchange, you need to pay the government taxes when you make profits. That sounds pretty taxing. There's another way you can buy and sell crypto without worrying about taxes. At I Trust Capital, you can buy and sell crypto inside of a tax-advantaged crypto IRA. Crypto IRAs are retirement accounts that work similarly to an exchange but with tax benefits. Let me give you an example. If you can buy and sell crypto on an exchange and you make a $20,000 profit, you have to pay the government taxes. However, if you do the same thing in your Roth IRA

• 2:19Anthony Pompliano?

  and you make a $20,000 profit, you don't need to pay any taxes. That's right. You get to keep all the profits and not have to pay taxes because it's in a tax advantaged account. So, opening a tax advantaged IRA at I Trust Capital only takes a few minutes. You have 24/7 access to the markets with some of the lowest fees in the industry. The bull run has begun and people are starting to see their accounts go up. So, start taking advantage of tax benefits with an IRA at I Trust Capital. You can start maximizing your crypto investments today. Go to Itrustcapital.com. That's Itrustcapital.com. Today's episode is brought to you by Core Scientific. They are one of the largest public

• 3:00Anthony Pompliano?

  Bitcoin mining companies and hosting solutions in North America. They specialize in transforming energy into high-value compute with exceptional efficiency at scale and recently announced a contract with CoreWeave, a leader in AI cloud compute, to provide up to 16 megawatts of data center capacity. With a substantial fleet of their own miners, Core Scientific not only earns Bitcoin for their own account, but also provides hosting services for large-scale Bitcoin mining customers, operating out of seven data centers in Georgia, Kentucky, North Carolina, North Dakota, and Texas. You can learn more about Core Scientific by visiting corescientific.com. That's corescientific.com. Go check them out today.

• 3:43Anthony Pompliano?

  All right. Next up, we have a panel. Very excited about. Come on up. First up, we have Mark Yusko, founder, CEO, and CIO at Morgan Creek Capital.

• 4:00Anthony Pompliano?

  Yeah, you can stand. We also have David Alderman, who's the Digital Asset Research Analyst at Franklin Templeton. And then we have Adam Sullivan, who is the CEO at Core Scientific.

• 4:15Speaker 02

  Mark, we're gonna start with you and let's use this microphone. You had a lot to do with helping hedge funds get into the institutional world and just kind of saw that path. What are the similarities and differences between the path that Bitcoin is taking and adoption in the institutional world? I think it's a great question in the sense that back 20 years ago, I was actually, affectionately maybe, known as the Madonna of hedge funds. What the hell does that mean? Well, it's because I was the guy that was up on stage telling all these people that hedge funds were good and it wasn't where all the dark people were and all the bad people.

• 4:54Speaker 02

  And when I showed up in North Carolina in 1998 to manage the endowment, they had actually banned hedge funds two years earlier. And that was not disclosed in my interview. I'm like, okay, fine, we'll have no hedge funds. We'll have long, short equity, absolute return, opportunistic equity. And the chancellor said, that's just nomenclature, right? He's like, yeah. And he says, good, as long as we're clear. So we did go to 30% and it made us flat from 2000 to 2002. So success is how you sell. So if we had gone down when the rest of the world went down, it probably wouldn't have been as successful. But I thought the point earlier about the little wins are really important is you've

• 5:39Speaker 02

  just got to make little wins. But the process of adoption does follow the same path every time. Well, everything's cyclical, whether it's, think about empires. They all start with power, the accumulation of power, and then you get the politics at the top where you screw it up, and then the populism comes and they kick you out, and then the next one starts. So the same thing is true here, is you get the conservative people in charge, usually groups, usually like-minded. My board at North Carolina, when I got there, 11 guys, nine of them from the same fraternity. So no diversity of any kind. And so they made bad decisions, shockingly.

• 6:23Speaker 02

  So you gotta change that. So someone earlier tweeted a picture of you and I trying to orange pill a Santa Barbara pension fund in 2019. And it was awesome. I mean, we were out there and actually I was in the suit and you were in the hoodie. No, I'm just kidding, which is true. But the, we actually both had suits on that day. But what's crazy about it is they listened to us and then they completely ignored us. And we actually made them an amazing offer, kind of what the hedge funds did to get adoption. We offered them no fees unless you make three times your money. Then we get 30% of profits.

• 7:03Speaker 02

  And if you think about the original days of hedge funds, it was zero fees and 20% of profits. So you're sitting on the same side. Then what happened, it became an asset management business and the fees started to creep up. And then people said, you know, I make more money on management fees than I do in carry. And it wrecked the business. So hopefully that same adoption path will come as we just get these little victories. But ultimately it takes leadership. You need to find that person or persons who can take a good idea, aren't afraid to go to their board. I remember when you and I did our first pitch to the police pension fund and their chairman,

• 7:45Speaker 02

  literally like full uniform, gun on the table, you know, Harley outside. And he's like, so wait a minute, you're telling me I gotta go tell my guys that I just put their retirement in drug dealer money? Like, no, that's not exactly what we said. Well, kind of it is. No, we said, what we want is you to say, we're a fiduciary. We have to make seven and a quarter percent. We can't do it in a zero interest rate world. We need a diversifying asset that's uncorrelated. And by the way, I have Robert, I have your answer, Robert.

• 8:22Speaker 02

  Oh, no. Embrace volatility. Embrace volatility, his shirt says. That is pretty good. Adam, maybe we could talk about, as these institutions are starting to wrap their heads around the asset class and the assets themselves, they have a lot of options, right? They can go, they can buy Bitcoin directly. They, for a while, have been able to buy equities like a Coinbase, et cetera, that are kind of infrastructure players. Then there's an entire bucket of miners, and so they could try to buy an index of the miners, or they could go try to pick individual miners, and there's probably some other things they could allocate to. How did you all have those conversations with potential shareholders or asset allocators around why mining is such an interesting part of the Bitcoin ecosystem? And then maybe even why Core Scientific specifically?

• 9:07Speaker 03

  Yeah, so it's interesting. Miners were really one of the first ways for institutions to get access to Bitcoin. There were public mining companies back in 2017, 2018, and it was at a time when most people didn't know what cold storage was, they were afraid to buy Bitcoin itself, and so a lot of people expressed that opinion by buying the miners. What we're seeing today is actually miners are actually mostly retail-held, but over time, we're actually seeing a lot more interest from institutions entering the space outside of just the traditional kind of long-short funds. We're actually seeing it driven by some new long-only funds that are entering the space now that Bitcoin has kind of reached a place in, I would say, a place in investment portfolios

• 9:51Speaker 03

  that is a lot different than it was in the past. You know, the fact that now large institutions are buying ETFs, it actually brings a new wave of investors back into mining companies. You know, the thesis behind buying a mining company is that you're investing, let's say, Bitcoin 70,000, you're investing $70,000 in US dollars today into a mining company in hopes that that will return a multiple of what the return on Bitcoin would be. That's really the thesis behind buying a miner, because what we're doing is we're mining Bitcoin for, you know, let's call it 50% gross margin, we're taking those proceeds and reinvesting in infrastructure, reinvesting in machines in order to produce more Bitcoin in the future. So it's that kind of multiple game that we're playing.

• 10:35Speaker 03

  You know, specifically for Core Scientific, what we're really seeing today, we're actually a new public company, we came public about eight weeks ago. You know, a lot of the interest... Is really because there's a significant dislocation in the market today in the value of different miners. No one paid attention to what actual economics were of mining companies were, you know, even back in 2023. Today, we're seeing something much different. Investors are showing up to meetings with very specific questions around operational performance, around growth plans, around actual capex and how we're actually going to perform going forward. Whereas if you think back to the conversations like 2021, it was, you know, throw an X a hash number out there, essentially a measure of compute that you're applying

• 11:18Speaker 03

  to the Bitcoin network. Throw an X a hash number out there and, you know, hope for the best. You know, that's not where investors are today. And it's a really positive signal. We're even seeing it on Twitter as well. The retail space has become extraordinarily smart on the businesses that we run. It's a complete difference from 2023 and a huge difference from 2021, when we saw, I think it was about 17 Bitcoin mining companies go public. So obviously very different, you know, Core Scientific, where we've mined more Bitcoin than any other public mining company in the past four years. And so from our perspective, it's about execution, it's about uptime, it's about all the things that go into actually running a really successful business. And that's something that investors

• 12:01Speaker 03

  are actually finally understanding today, which is, I think it's partially driven by just the number of eyes that are on Bitcoin today by institutions. I think it's partially driven by just all the news around ETFs.

• 12:13Speaker 02

  That makes a lot of sense. David, when you think about, from a research perspective, there's so many different parts of this market. So in some weird way, you're making the same evaluation as an institutional investor is in terms of where your attention is going to get invested, right? What are you going to look at? What are different data points? What are different metrics that you could kind of spend your time on? What have you found to be the things that are kind of like the signal among the noise? And specifically around either metrics you check on a daily basis or different analysis that you feel like, you know, you constantly are checking on to see what is going to happen in the market or what is happening right now?

• 12:49Speaker 04

  Yeah, I mean, that's a really good question. It's, uh, you know, it's what, well, one thing that's really interesting is as price goes up, I think the noise is going up a lot more. So it's like a big expansion of just people trying to sell you on these ideas that may or may not have like some, some merit to them. But like, if you want to just look at Bitcoin itself, obviously there's Bitcoin ETF flows. That's, that's an obvious one that everyone looks at. And then there's, you know, on-chain data.

• 13:17Speaker 04

  But even then, I think it's like, it's more important to really understand the specific activity that's happening within the chain. You know, like with, with Bitcoin right now, you have, um, well, the earlier people mentioned there's Bitcoin layer twos that are being built out. The only, you know, the major one being like Stacks or something like that. They have a huge upgrade coming up in like a month. And then there's also things like Bitcoin ordinals, which people kind of lean on different sides on how that is. But that's obviously changing the market structure within Bitcoin itself. So for me, I think it's like, it's being super active on-chain. It's really active, like analyzing on-chain analytics. And then, you know, one data point which people feel a little unsure about, but it's Twitter.

• 14:01Speaker 04

  Twitter is like by far the best information gatherer, but you have to, you know, you have to be terminally online to really filter out the noise.

• 14:08Speaker 02

  So, so talk about that a little bit, right? Like as a research analyst, uh, you have what I'll call, uh, accepted data points, right? So, you know, simple things, market cap or, uh, ETF flows, things like that, which are off-chain metrics, but that have an impact. You have the on-chain and then you do have, um, what many people would consider to be a great source of information. I would say Twitter, but also Telegram chats and some of this stuff. Like, how do you evaluate or put weight on those pieces of information that may not be as quantitative?

• 14:38Speaker 04

  Well, I mean, anything that you might see on like Telegram or Twitter, there's got to be, there has to be some sort of fundamental data point that you can point to, to, to, to kind of prove that that thesis might be the case. So like, you know, even, even something like meme coins that have taken off, you know, one key metric you could look at is just like holders on-chain. Like how many holders is that growing or not? And then sure, maybe you're hearing about certain coins within like a Telegram chat or on Twitter. But is there, is there anything real there or not? Cause, cause, you know, a lot of times it might just be, it might just be some Twitter influencer trying to pump their bags.

• 15:13Speaker 02

  That makes sense. Uh, Mark? You can allocate capital that the institutions give you in liquid cryptocurrencies, venture capital, lending, there's a bunch of different things. How do you think about where to put those dollars? Really important question. And the cycle exists and people say, oh, it's going to go away. I actually don't think so. I think it's hardcoded into Bitcoin. And because of that, you're going to have a period where liquid protocols are expensive or cheap. So we try to follow that cycle. And when they're cheap, you know, when Bitcoin is selling below its fair value, it's all what's fair value? You can't determine fair value. Well,

• 15:54Speaker 02

  you actually can. And there's lots of good models. There's on-chain data. There's Metcalfe's law models. So when the price is 15 and the fair value is 30, we're screaming at clients to allocate to the liquid protocols, but not to trade them. I mean, Robert was talking about this, that there's trading and there's nothing wrong with trading and high frequency and all that. But we look at it as a expression of a venture capital investment. So, you know, when we launched Morgan Creek Digital back in 18, our first fund, we could put up to 20% in liquid protocols. And we were in the middle of a bear market. And we sat

• 16:38Speaker 02

  and we watched the price go from 10 to 6 to 3. And I remember, why did we start this business again? And then it started to turn. And that's when we started to hit the gas. But convincing the clients at that point that that was a good idea, like, hey, you're venture capitalists. You're not supposed to be buying liquid. Remember, 20% liquid protocols, 80% the equity of businesses around the infrastructure.

• 17:07Speaker 02

  But at the time then, both were attractive because nobody wanted to put money into the venture capital. So we had our pick of the litter to invest in things like Coinbase and Figure and others. So it was the best of all worlds. But we didn't buy the liquid protocols to trade. We still own the Bitcoin we bought in the first quarter of 19 in our Fund One today. Now, at some point, we will sell it because we got to give the money back. But and we own the Ethereum and we own, well, we sold a lot of the Solana, but we still own some of the Solana.

• 17:43Speaker 02

  And we own all the graph. So but we were making those as Bitcoin at the time was a series B like Ethereum was more like a series A, just means there's more upside. Solana was a seed deal and the graph was pre-seed. 97% of pre-seeds go away. That one didn't. Solana went up a lot. Seed deals can go up a lot or not. But it's the relative attractiveness to fair value. So in the current environment, we're back toward fair value in Bitcoin. We're probably over fair value in some of the other coins. So in our new Fund,

• 18:21Speaker 02

  Fund Four, we're doing less in liquid, not nothing. But this is the best opportunity I may be seeing, this is going to be a big statement, but probably in my whole career, on venture opportunities. And I think this vintage year in venture is going to be the best one in 40 years.

• 18:45Speaker 02

  Adam, everyone wants to know about the Bitcoin halving. Are the miners screwed? Are they going to stop making money? The Bitcoin halving is going to take away half the Bitcoin. What happens?

• 18:55Speaker 03

  Yeah, the Bitcoin halving is not the Armageddon moment for us. You know, where Bitcoin price moved over the course of the past three months has actually dramatically changed the halving coming up. You know, initially, when Bitcoin was 35,000 or 40,000, the halving represents a meaningful change to how many machines are profitable on the network.

• 19:17Speaker 03

  Well, today with Bitcoin above 60,000, the profitability means almost no machines are actually going to turn off during the upcoming halving. Many of them are going to maintain profitability. The interesting part is, this halving is a bit different than previous halvings from the perspective of the, a lot of the companies in our space are extraordinarily well capitalized. And even though public Bitcoin miners only represent about 20% of the hash rate, many of them are sitting on a significant stockpile of cash. And they'll be able to fund their business. We've actually seen it with other public companies. They'll be able to fund, even if some of their machines go negative, they'll want to continue mining unprofitably to show more Bitcoin being mined. You know, that's going to be a big metric coming up is like,

• 20:02Speaker 03

  how much Bitcoin are actually mining post halving? So my expectation is, you know, probably about 10% of the network's going to turn off at this upcoming halving. I would expect most of that is mainly not going to be US-based. It's probably going to be in some other locations where the power prices are much higher than where people are mining in the United States. So the halving is not going to kill everyone, but it is going to make, I would say about three to six months post halving, a challenging time for a number of companies who are subscale, don't have access to capital, aren't producing enough free cash flow. You know, those are all kind of the hallmarks of what happened in 2022, but it's going to be on a much more sped up timeline because we essentially had a halving in 2022, not an actual halving, but hash rate went up, it doubled, Bitcoin price went

• 20:47Speaker 03

  down. And so we essentially just experienced the halving in 2022 and we saw what happened. Smaller miners sold a lot of their facilities to larger miners and we're going to see something similar happen in 2024. So it's actually going to be a pretty good event for companies that can, I'd say, take advantage of the high volatility that's going to occur post halving.

• 21:07Speaker 02

  And then David, if we extend that, what do you think happens halving wise in terms of price, institutional interest, you know, some of these other ramifications that are outside of just mining itself?

• 21:17Speaker 04

  Uh, yeah, I mean, well, most people associate Bitcoin halving with the idea of the four-year cycle. Um, I can't, you know, this is the first, at least empirically, this is the first year where the four-year cycle, uh, historical norms have been broken, right? We got a pre, we got an all-time high pre-halving. Um, so to say like the Bitcoin halving is gonna have a similar impact to price, I don't know if that's necessarily gonna be true. Um, and then on top of that, I think if you just look at, say, if you just look at daily volume uh, of Bitcoin, which is, I think, I looked today, it's like 40 billion, and daily inflation on Bitcoin itself is roughly like 50 to like 100 million. So I don't really, I don't really

• 21:59Speaker 04

  see that having much of an impact other than just driving like media attention on top of having, already having a pre-halving all-time high. Um, but it obviously has, I mean, has way bigger impact to Bitcoin miners than it necessarily does to Bitcoin itself.

• 22:12Speaker 03

  David, you're not gonna give us a big number?

• 22:16Speaker 02

  You know, compliance. I don't wanna push back, but I wanna, I wanna, I wanna extend that, that idea just a little bit, and it, I actually think the halving, uh, is gonna have a bigger impact, and I don't think it's priced in, and I think people are distracted by the, the demand shift that happened that caused this, this all-time high. And, and so they're, they're forgetting that when the halving occurs, the, the supply of block rewards gets cut, and despite the points that not as many miners will be in trouble, there will still be miners who are in trouble because their costs are fixed and the number

• 22:59Speaker 02

  of rewards goes down. And so there'll be a, a supply shock event, and you know how supply and demand work, that they, the price is gonna, gonna rise. Fair value has doubled in each of the previous halving cycles. Now, I don't think it'll double this time because now we have inscription fees related to ordinals, and so instead of going from 50K where fair value is today to 100,

• 23:29Speaker 02

  I actually think we go probably to 80 ish, but we're still below 80. So, once you start going toward that new fair value post having, then the FOMO kicks in. And once the FOMO kicks in and you get the increased adoption from the, the demand shift on the, you know, the Bank of America and Merrill Lynch and the, the thundering herd finally getting approval, like I still can't buy the ETFs at UBS where my family harmony account is because my brother-in-law works there, but eventually I will. And I think all of that's going to push us to a, a very different price level.

• 24:10Speaker 04

  Don't you think, don't you think the FOMO is already here?

• 24:13Speaker 02

  Oh, I don't think the FOMO has even started. I mean, look at, look at search activity for Bitcoin is very low. Look, this is a echo chamber. We all talk to each other and on crypto Twitter, how, how smart we are and how, but the average person, again, my family members aren't calling me yet. They will, um, this Thanksgiving, by the way, this is going to be the most awesome Thanksgiving. You're going to be invited back and it's going to be awesome.

• 24:44Speaker 02

  David, um, one of the ideas, obviously having is a big, uh, kind of catalyst. Are there things that in your research you look at either as risks or, uh, potential moments or developments that people should be paying attention to that if they were to come to fruition could actually be negative?

• 25:03Speaker 04

  I mean, yeah, I think there's, there's still like, there's still everyone's, you know, like, uh, Rob was talking about sovereign wealth fund might come in, right? But, but who knows, they could, they could come out and make some media around they've just decided not to, and price could be trying to reflect some sort of positive expectation that a sovereign wealth fund is going to buy. So to me, I think it's, it's something along those lines of like where the market is expecting something to happen. And then you get, you know, some sort of catalyst that we don't really know when that could happen, but comes out and then price could, could head down from there.

• 25:36Speaker 03

  On the sovereign wealth fund side, it's actually interesting. Many sovereign wealth funds are actually invested in Bitcoin miners. They're bringing more Bitcoin mining to their countries. We're seeing it across the Middle East. We're also seeing it across many other countries as well, where there are state-sponsored mining operations. Now, the interesting part from our conversations with folks in the Middle East is mainly around, they're not buying Bitcoin yet, but for some reason, they want to spend a half billion dollars to build their own mining infrastructure. You know, I think that is a huge signal for some of them entering the space in a much more major way, because they've been investing in a lot of companies throughout the past few years, but now you're looking at what they're building in the Middle East. They're

• 26:17Speaker 03

  taking gigawatts of power and dedicating it to Bitcoin mining, and yet they don't hold Bitcoin yet, right? And so for those, those folks who, as they start to mature in terms of their, I would say their life cycle of getting orange pilled, it's like, they're very close to actually dedicating a significant amount of capital to Bitcoin, and they're doing it right now through mining, which is probably one of the most interesting expressions right now for a country to make, is saying, yeah, we're willing to dedicate, you know, a billion dollars to mining this year. It's like, okay, well, when are you going to be buying Bitcoin?

• 26:51Speaker 02

  So I would love to propose, my favorite question that I get from institutional investors, well, actually, it's the second favorite. The first favorite is, I just learned about Bitcoin yesterday. I think I can fix it, right? Which usually, like, okay, let's move on past that one. The second is, what happens if Satoshi was to reappear, or if the coins in Satoshi's wallet was to move? What do you guys think would happen both in the short and long term?

• 27:20Speaker 02

  Two great questions. Jameson Lopp, like, addressed the first one, right, which is, here are the lines of code that Satoshi can't even change. Here are he, he, I used to say he, she, they, but he self-identified once as a he, so probably he, unless it happens to be the CIA, which probably is, but.

• 27:44Speaker 02

  Not joking, actually. But the key is, if that wallet were to move, it definitely changes the narrative of that being the nameless, faceless, kind of mythological, almost like a religion, right? But I don't think that would cause as much stress as people anticipate. I do think the idea that you could get enough people to agree to change the supply cap or things, and people talk about that with inscription costs,

• 28:27Speaker 02

  that would take a lot of concerted effort. So I don't worry too much about it.

• 28:33Speaker 03

  I think one of my biggest concerns, we actually listed as a risk factor in our filings, if Satoshi's coins move. It actually would be a really big deal. I think my first thought would be, did someone break Bitcoin? Because that's honestly the biggest concern, right? Like, if those coins haven't moved since they were put into the wallet, it's like, well, here's the next question. It's like, well, why did they move? Is it the actual owner? Was it Satoshi? Or did someone figure out a way to break into his wallet? Like, what was actually done to get access to those coins? I think if there was a Satoshi that came out and he moved some coins and he, you know, he decided to sign some blocks that actually told everyone that he was Satoshi

• 29:17Speaker 03

  and he was back, well, then it's a big question. It's like, well, who is it? How did it start? You know, we'll actually get a lot better background on what the original thought process was outside of just reading, you know, hundreds of pages of Bitcoin talk forums. So I think it is a big risk. But I think it's also, how did they move? And was it him that moved them? Or was it somebody else?

• 29:41Speaker 02

  I appreciate you alluding to the fact that maybe other people who have claimed to be Satoshi are not, since they can't seem to prove it. David, what do you think?

• 29:50Speaker 04

  I mean, it's obviously a negative headline, like, huge negative headline. But yeah, it would be a question of like, where were they sent to? Was it sent to a different wallet? You know, if it gets sent to Binance or something? Like, that's not good.

• 30:07Speaker 02

  There's one interesting thing on this that, you know, when I met Pomp back in 2017 and we started this whole journey, I have to thank you, by the way. So I actually just Googled Satoshi Nakamoto. And if you do that, you come up with "Intelligence Central", because Satoshi means intelligence and Nakamoto is the surname of people from the central provinces in Japan. I'm like, whoa, that's like really close. So dug a little deeper, I'm like, alright, well, what if CIA/NSA did create this?

• 30:46Speaker 02

  And the plan was, we know we're fucked, technical term, with the current dollar system. So you get people to change fiat into this great hard asset and then you steal it through a backdoor. And so Scott Stornetta, who, if you read the white paper, he is listed three times. He invented the word blockchain with his partner Stuart Haber. So he's a venture partner of ours. And so I asked Scott, "Scott, what do you think? Is this possible?" He's like, "Well, I never really thought about that before." No. I'm like, "What the hell? How'd you do that?" He says, "Well, the way you're thinking about a backdoor is not possible in Bitcoin

• 31:31Speaker 02

  because of the air gap." Now, with Ethereum, it could definitely be possible. But that's a whole nother story. But it was just interesting that even if this were that, he didn't think there could be a backdoor. So it would have to be, to your point, somebody actually having the keys and transferring, probably not being broken with quantum.

• 31:59Speaker 02

  Last thing that I want each of you to opine on is in this market as institutional investors come in, they want to think of position sizing, where to allocate the capital. But also, I think a lot of them are trying to get educated, they're trying to understand what is going on, how do I stay on top of what seems to be this fast-moving 24/7/365 market, which also is covered to some degree, and you know, people like CNBC, Bloomberg, Wall Street Journal, etc., they're doing the best job that they can, but they got a lot of stuff going on in kind of the global financial world, kind of Bitcoin, Twitter moves at a much different speed. And so, maybe each of you could talk about, like, what were some of the resources that got you up to speed? And then also, what are

• 32:42Speaker 02

  the things that you're looking at on a day-to-day basis that if you were in their seat, they should be looking at?

• 32:50Speaker 03

  Yeah, so it's interesting, a lot of the institutional investors that we meet with, this is some of their first investments sometimes into Bitcoin-related companies, and they're often running pair trades against Bitcoins, whether they're long miners, short Bitcoin, or they're short miners and long Bitcoin. We're actually seeing that pair trade actually expand rather rapidly with the launch of the ETFs, just the liquidity and their ability to trade in their prime brokerage account makes it a lot easier for them to do that. So, you know, a lot of the places that we point people to, at least on the mining side, there's some very good information about mining companies that is mainly done by, I would say, not the mining companies themselves, but you know, like

• 33:30Speaker 03

  Clark Moody is a great dashboard that actually informs people about the Bitcoin, or about Bitcoin mining statistics. And there's also a lot of good information that's being put out by, I would call them Bitcoin mining supporters out there. You know, we have a lot of haters, Greenpeace is definitely one of them. And so, you know, we luckily have a lot of people on our side, putting out good information around, you know, the benefits that Bitcoin mining provides to grids, etc. So, you know, on the Bitcoin mining side, it's, you know, I'd say, look, if you Google Bitcoin mining, you know, avoid the Greenpeace articles, and then you'll probably find some good information.

• 34:10Speaker 04

  Yeah, I mean, I think, well, for my personal, I guess, journey in crypto, it's like started in 2017. And I just started learning through podcasts. I still feel like there's a lot of really good podcasts out there. But it just kind of depends how detailed you want to be in terms of like how into the weeds. But then, you know, Franklin Templeton, we also, we're starting to publish a lot of, a lot of research on Bitcoin and do more stuff on Twitter, which maybe some people have seen recently, but like recently, actually today, we published one on stacks, the Bitcoin Layer 2 on our Twitter account, it's like FTI underscore DA. But yeah, I think, you know, it's, it's one of those things where

• 34:54Speaker 04

  it's a weird, a native digital asset is really hard, I think, for a lot of people to get their minds around. And so just trying to absorb a bunch of different information from a buffer, a bunch of different places is a really good way to get a gauge of, you know, how you want to think about the asset itself.

• 35:11Speaker 02

  I think the epiphany for me was in the early days, we tried referring people to what seemed like all the logical things, whether it's Jamison Lopp's Lopp.net, which is the greatest collection of resources out there, to, hey, just read the white paper, to, hey, listen to, you know, write the, the episode of Patrick O'Shaughnessy's and Invest Like the Best, right before I listened to yours, that's how we met. There was one, you tried to explain how hashing works and all the details.

• 35:46Speaker 02

  It's, it's great, except that's not what the institutions need. They don't need to understand how, when you're talking to your computer, your metal and glass box, your wife can hear it on the other side of the country in real time. They don't have to understand CDMA versus TDMA. That was my mistake. What they need to understand, and so we actually created our own white paper for this. They need to understand capital asset pricing model, why I'm wearing the Embrace Volatility t-shirt, why the whole purpose of being a fiduciary is to create a portfolio of highly volatile assets that are uncorrelated with one another, that zig when each other zags, so they can achieve their long-term goal, which is to compound capital above their actuary assumed rate.

• 36:32Speaker 02

  Once I stopped trying to help them understand the technology and just understand how this is, look, I'm old, I have white hair, I've been around a long time, and I've seen every asset that tried to help institutions do this. When I started in this business, it's hard to believe, equities were verboten, right? You didn't do equities if you were a good fiduciary. The cover story in the Business Week was "The Death of Equities", quote, "No self-respecting fiduciary should ever own equities again." That was 1979, crazy. So then equities were a diversifier, then international equities were a diversifier, then ERISA passed, and then you had hedge funds, and then you had venture capital.

• 37:16Speaker 02

  The problem is, all these things are correlated to each other because they all are dependent on the same things: GDP growth, economic data, interest rates, and inflation. Bitcoin is not. It's 0.0 correlated to bonds, 0.15 correlated to stocks, for a reason. It's dependent on millennial adoption, on the technology itself, on regulation. It's an entire new... And so I've been shilling now Chris Dixon's book, Read, Write, Own. And if you haven't read it, you have to read it. It's a super easy read, and every fiduciary needs to read it, because once you have the epiphany, which I did, and I wrote about this in 17 when we first met, that once you see that this is about a technological evolution, no different than the mainframe, to the microchip, to the personal computer, the internet,

• 38:01Speaker 02

  to the mobile net, and now the Truth Net, once you see that, and you understand that a blockchain is the better way of doing compute, which, if you're listening to Sam, is the most valuable asset in the world today, then you don't have to understand how it works, you just have to understand that you need to be there.

• 38:21Speaker 02

  Thank you to all three of you. I learned something from me, all of you, all the time, so I appreciate you guys sharing time with the whole crowd.