Transcript+
Before we get into the episode, a quick reminder that this podcast is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. Now for a word from on RAMP on RAMP is a Bitcoin asset management platform built on multi institution custody, leveraging our partnerships with industry veterans, Bit Go and Coin Cover on ramps. Multi Institution Custody is a segregated vault requiring two of three institutions at any point in time to sign once a client's unique permissions have been met. Our industry leading best in class approach to custody helps individuals and institutions secure new and existing Bitcoin positions. All keys are held in deep cold storage and kept 100% offline. Managed with institutional grade security best practices. The custody solution eliminates single points of failure and reduces counterparty risks. Ensuring maximum security and Peace of Mind on Ramp's suite of products includes our custody offering, a spot Bitcoin fund, private wealth services and inheritance planning, and managed wealth for advisors. Whether you're new to Bitcoin or a veteran in the space, we would love to connect with you. To understand your needs and how we can serve you, please visit our website at on rampbitcoin.com where you can schedule a consultation and connect directly with our team. Let's be clear. Bitcoin is an international asset. We are spending like drunken sailors. Bitcoin is the only economic entity where the supply is unaffected by the demand. If you want to preserve your wealth, you have to convert that currency into an asset that's scarce, desirable, portable, durable, and maintainable. Hello, my name is Andy Edstrom and I am thrilled to welcome you to the first episode of Scarce Assets, a show that examined scarcity, the most fundamental driver of economics and markets, and the scarcest asset of all, which is Bitcoin. I couldn't be happy to launch this program with two of my closest friends in Bitcoin. They are my Co host and Co founder of On RAMP Bitcoin, Jesse Myers and our guest the inimitable Preston Pish. Now I have the pleasure of saying a few things about Preston. First, he's an innovator both in the space of traditional finance and in Bitcoin. He Co founded the Investors Podcast Network, which is a family of shows that includes We Study Billionaires, which I think is the largest stock investing podcast in the world with over 150 million downloads. I'll let Preston correct me if that's wrong. Hey, I'll take that. I'll take, yeah, it might be a little, you know, people might have some opinions, but I'll take that. Seems true. Sounds true. It sounds true. And and not only did Preston start the show with his partner Stig Burerson, and then expand the network to include a bunch of other great hosts and their shows, but he launched the Bitcoin Fundamentals podcast, which is one of my personal favorite podcasts. I listen to every single episode because I find them so informative. The last thing I'm going to say about Preston is I've had the great pleasure of doing podcast episodes with him every quarter for almost a full four year cycle in Bitcoin. And I always have a great time and I always learn something from him. And if I haven't embarrassed him enough yet, I also want to say that Preston is just one of the nicest guys I've ever met. So I am really just delighted to have Preston as my first guest on Scarce Assets. Preston, how are you today? Did you get any time off for the holidays? I I did. Thank you for having me. I'm honored to be the first guest. I just want to say it is so I am enjoying the hell out of watching you host this and because it's not it's it's I don't like hosting the shows to be quite honest with you. I like being the guest on the shows. The preparation is very easy being a guest on the show and as you as you're learning Andy, when you host the show, there's a lot of work involved in coming up with the questions and having to be creative and all that. So it's it's kind of fun to see you in the hot seat, Sir. Well, the pleasure is absolutely mine. And of course, I've learned from the best, including you. One of your favorite moves, which I used for this one, was ask the audience, right? Ask Twitter what they want to what they want to cover on the show. That reduces the amount of prep work significantly. It does. It does help out, doesn't it? It absolutely does. It absolutely does. Well, we're going to have a fun time today. I think we should just, we should just launch right into it. Here we go. So one of the things we all think about is how to value Bitcoin, OK, which we believe is the scarcest asset in the world. And what it's upside potential is as an investment. And I think one of the frameworks we all use is how much monetary premium is Bitcoin going to capture from various other asset classes. Both of you, by the way, Preston and and Jesse have published on this topic as have I. So I guess what I'd like to do here at the beginning of 2024 is just ask you sort of an updated view, what are you most excited about in terms of where value is going to flow from into Bitcoin? Here's here's another move. Andy. Jesse, what do you think? Classic. You guys, yeah, you guys know I have a lot of thoughts, but Preston is the the one we we're excited to hear from and then I'll and then I'll flavor flavor in my kind of crazy thoughts. So let's let's just take the two different camps, right. So you have hardcore stock investors, people that would be looking at preserving their buying power through equity. What is that price That and and what I want to try to do because I talk about PE ratios and some of these ideas all the time on other shows. But what I rarely do is kind of really go into fundamental value 101 with people. And sometimes I would I would imagine as I'm thinking about the people listening to the show, they're just like oh here this here goes this guy talking about PE ratios. And I have no idea. I don't, I don't really even understand what he's talking about. So let me like really make this simple for you. When we're talking about APE ratio, we're talking about the price that somebody pays to own a company and the earnings after tax of what that company will produce in one year. So let's take Microsoft as an example. Microsoft's PE today is 35. This is a very high quality equity company. They've got giant moats with their intellectual property, they got their tentacles and everything. This is a $2.73 trillion trillion dollar market cap business. So if you took all the shares outstanding and you added the value of all those shares up values $2.73 trillion in market cap. But the thing that that a person, because a lot of people would look at this and say well Microsoft, every computer in the world has Microsoft on it and everybody's using it, Of course it's going to make a lot of money, right? Well, it does make a lot of money. It makes about $75 billion annually. OK. But the the question is how much are you willing to pay to to participate in earning $75 billion? And the answer is you'd have to pay $2.73 trillion to own that revenue or that free cash flow generating stream of money. OK, that's a lot. That means that if I was going to break it down really simply going back to the PE of a 35.5 on this company today, that means for every $35 you spend buying Microsoft, you can expect them to earn $1.00 a year later. OK, it's that simple. It's it's a ratio of 35.5 in the numerator, and in the denominator is always one, which is the $1.00 of earnings that they earn for that price. That's the simplest way I can describe it. It doesn't get any easier than that. So if we were going to say, well, how much percentage wise am I going to get for that $35? Well, if you take 1 / 35, it gives you a percent and it tells you the the yield or like how much money you could expect to get every year. OK. So when you do that math and if we were going to use 33.3, we'd make the the PE really simple because then we know it's a 3% yield because it's 1 divided by that number and you come up with the yield. So let's just say that the PE for Microsoft is 3% annualized based off of that price. So even though they're making $75 billion a year because of the price that you're going to pay to own it is so incredibly high, you're only going to get a 3% yield on an annualized basis for owning that stock, OK. This just isn't Microsoft that is priced so expensively, OK? The premium on all equity around the planet is really, really high. Like I would say a cheap, at least for publicly traded businesses, cheap equity is like 25 times earnings. High quality equity is like 35 times earnings like Microsoft. OK, so let's just say it's a PE of 20. Five 1 / 25 is equal to 4%. So even though the PE is 10 lower than the Microsoft, you're still only getting 1% more by owning this other stuff That's not even as high equity or high, high quality equity that has as big of a Moat as Microsoft's to own it. OK. So we've defined the value or the IRR, very generic internal rate of return that you would get to. But to own like really high quality equity, it's between like 3 and 4% annualized. OK, let's now do the analysis on what's the compound compound annual growth rate that Bitcoin has demonstrated over the last 10 years. OK. Now that doesn't mean that that it's going to continue to demonstrate that compound annual growth rate. But everything that I'm seeing is that it is going to do that from you know, a network adoption standpoint from people building on top of layer two to people. You know, when you look at how many coins haven't moved in the last year and it being over 70% which is higher than anytime in the history of Bitcoin as far as speculators versus investors. That's the highest ratio I've ever seen. You got all of Wall Street getting ready to buy an ETF and start plowing all that buying power into the spot market and it's going to be self custody or it's going to be, it's going to be stored and not put back on the market for all the people that own those shares. And the list goes, you got a halving event that's coming up in April and I could go on and on and on and on. You got gap accounting rules that are making it more favorable to put on companies, treasuries and and I'm out of breath. But like all of those things are why I think a person needs to look at the previous compound annual growth rate and take it very serious that that's what might continue to to exist moving forward and especially into the coming two years. OK. So what is that compound annual growth rate that we've seen on the lowest And I'm taking four year periods of time, OK, you pick the four year period, I don't care what it is, but pick out any four year period historically in Bitcoin. And when you do that assessment and you look at what that compound annual growth rate is on the high end, it would over a four year period of time it was 178% annualized, OK. Annualized on the low side it was 24%. And this is you picking any four year period you want, OK. If I had to guess on average you're probably around 75% compound on your annual growth rate. OK. But let's be conservative, let's be conservative here. Let's say it's 50%, OK. If it's 50%, OK, that means what in, in PE terms for equity, what would the, what would the equity have to be priced at to give you a 50% return? And it's a really simple calculation 'cause you go back to your PE and all you're doing is you're taking 1 divided by whatever the PE ratio is. And when you take two, as Andy held up, you get a 50% return, right. So now when we look at, when we look at Microsoft, because this was one of the questions that I saw somebody asked on Twitter, it was like what would Preston be willing to pay for Microsoft? OK, well, today Microsoft stock is at about $360.00 a share or in that ballpark. OK. So a PE of one, you'd take the you'd take the 35.5 and you're dividing it by the stock price of $360.00 and and you're like at around $10. A PE of two makes it $20. A PE of two makes it a kegger of 50%. OK, so this is how Preston Pish and I know that if you lined up 10,000 people off the street and you ask them what they would be willing to buy Microsoft for if they were living in a Bitcoin world, or they're they're seeing Bitcoin as the new settlement layer. And I said $20 in the current market price is $360.00. That person's going to look at me and they're like that dude is off his rocker. Crazy idiot doesn't know what he's talking about. OK, but I don't even think I would pay $20.00 for it because they have to continue to compound at that rate for it to hold up to what bitcoins done. So the numbers actually lower than $20 a share for a company that the world thinks is worth $360.00. OK, this is how this is how I look at the world. So when people were looking at me and saying that guy's crazy even though his, you know, if I could show you the return since 2015, you would maybe understand why I think you're crazy. OK? And if you want to hear my math on what I think the equity market should be priced at, you just heard it. Now go, you know, go have fun and laugh and snicker and I'm just going to continue to sit here and squat on these coins and enjoy the living hell out of my life, let me tell you. Wow, Mic drop. Well said Sir. Well said. Yeah, I love, you know, one of the conversations that I sometimes have with Jesse is the it's like the downside scenarios, not the, you know, Bitcoin fails and goes away scenario. But like let's just say that the compound annual return from Bitcoin is much lower in the future than it is or sorry than it was in recent years. Yeah. And so you say, OK, 50%, you know, annualized conservatively. And I may even go lower. I may say, yeah, go to. 25%, which is the lowest we saw in the past decade. I think that's probably the conservative way to do it, yeah. Yeah, exactly. And then even there, you're benchmarking against, yeah, 4A4 PE. Which is why I suspect, Preston, you have been so compelled to spend more of your time on Bitcoin and perhaps less of your time on equities, because this kind of a fat pitch doesn't come around too often. No, it does not. And there's a reason that Bill Miller, you know, and people like that. So this is a funny story. So I'm in Miami and I got the a chance to talk with Bill for quite a bit of time probably an hour and and I respect him immensely like he is such a deep thinker and somebody that you know when you when they say don't meet your heroes This this is a scenario where this guy is so legit so humble so smart and so he asked me he goes, Preston like do you have a majority of your liquid net worth Like do you have other like stock picks. And I'm trying I don't want to answer the question because I don't want to potentially like have like one of my heroes right. Like just strip me down and like give me like a a lesson on what I'm missing. Right. And like the look on my face and, like my lack of a response was like, he just kind of smirked and goes, I don't think you're being unreasonable. And he just. And that's what he said to me. And I was and I was like, oh, my God, I like you just like made me feel so much better about like I was fully expecting something like, yeah, maybe you shouldn't be so like in. But, you know he looked at me and he was just like, I think he's seeing something of such a similar nature. And, you know, I think the the thing that I think so many people were missing, I I think Lynn posted this this week and some others. It's just like when you put it in a log chart. I'm sorry, this is not a speculative like highly volatile thing. When you're looking at it from a very long lens on a log terms like anybody who studies technology and studies technology growth curves, they can clearly see what this is, right? Everything that we're seeing so far to date is that this is a massive movement to a new emerging technology. That's it. That's it. And and Bill Miller, I know a few years ago he said that he had 60% of his of his portfolio in Bitcoin. I I wonder what it is now. Maybe it's less. Yeah I don't know and and I'm sorry if if I'm sorry to bring up his his name I I don't like to do that in in an interview it was yeah I don't I don't know I I hope he doesn't mind me saying that but yeah well I I I. Think it does. Speak to Preston. Whether you like it or not you are the you are the value investor who has figured out Bitcoin and and and that I think is a big part of what people look to you for for your perspective on and and the Microsoft example is exactly that where you to put to put Bitcoin in the value investing terms it's like buying Microsoft at $20. Yeah, yeah. And I I the I think the numbers are so absurd that anybody that hears those numbers will immediately write it off. Like this guy's a kook. Like he has no idea what he's talking about. But I think if you do take the time and you invest a lot of time in trying to understand Bitcoin and under trying to understand the value prop. Because the the number one thing I hear from value investors on Bitcoin is well how do you value it. How there's what's the intrinsic value is, is the immediate comment that doesn't kick off cash flows. And so much of that is a mantra propagated by Warren Buffett of if it doesn't kick off free cash flows like gold, then it's worthless. And it's not something that I wouldn't, I don't think he would use the word worthless. He would use the word speculative that you need a greater fool or somebody like that in order to keep it going. And you have so many value investors that are propagating that narrative or that mantra. And you know I think this this next four years is going to it's going to be the same moment that I felt because I was very, very wrong about Tesla. I didn't really have an opinion on Tesla. Like the reason I just stayed away from it is because I just I couldn't wrap my head around the numbers I I did I understood the the growth arguments I understood all while they're they're incorporating battery technology it's it's a it's a tech play. It's a data play. It's like I I heard all of it, right? Bit where I was struggling was just around the numbers and I just could not get myself around the numbers and I was very wrong for never owning it. But at a certain point I would say in the past four years like it's just obvious I was very wrong through that whole period of time. Luckily, I wasn't trying to short it or anything crazy like that, but that acknowledgement will eventually happen. The market price will force a person, I think to deal with that reality that, hey, I was just wrong, I just missed it. And I think that this coming four year cycle is going to totally do that for a lot of people that have been kind of poking fun at Bitcoin. Because, you know, Saylor talks about like the price getting over a trillion. And you know, I mean, you're seeing it compared to some of these other like companies and what they're valued at and like, you can't ignore this anymore. With the market cap on on Microsoft is 2.7 and Bitcoin, let's say it goes above 2.7 and it's well, why is Bitcoin more valuable than than than Microsoft? Like you're forced to deal with that reality for anybody that's thinking even remotely sane. That's it. In the short term, you know feelings can prevail, but in the long term, reality outs. I love your analogy with Tesla, Preston. Another one of my favorites is Amazon. And in fact, I had this conversation with a client literally yesterday talking about basically she wants out of Bitcoin, right. She's seeing the pump. She's seeing the movie saying, oh, that's great, profitable trade, you know, let's, let's cut it back. And one of the frameworks I used with her was myself, my own understanding. So Bitcoin is how old? 15 years old now. And so Amazon I think was Founded in 1994. So Amazon was 15 years old in 2009. I did not understand Amazon in 2009. I probably looked at it like I looked at Tesla. You know, when you look like at Tesla and just really just did not comprehend the the potential upside and what was being built here and that's, that's it. That's how I see potentially the 2nd 15 years for Bitcoin is the 2nd, 15 years for Amazon. How did Amazon do? Well, you know, went up 40X or something along those lines. And I agree with you, people are going to start figuring this out, but maybe let's get a little more granular. We'll take a question from our mutual friend Eddie who runs the Portland meet up. He asks what will it take for a majority? OK, 50% or more of normie wealth managers, financial advisors to start taking Bitcoin seriously and recommending getting off 0 allocation to clients. You know, I don't. Is there a catalyst in your mind? I I'm going to tinker with the wording on that because I think it's more important to focus on when will 50% of the buying power figure it out. And I don't think that that is anywhere close to correlated with the number of people that are going to figure it out. In fact, I think you could even make a case for the fact that you have BlackRock and and the likes starting to play in this space that anybody who's managing a lot of fixed income like you got, you got a handful of people controlling trillions in that space. And all it takes is a couple of those people that are puppeteers of trillions to start allocating to this, that you start getting, you start getting interesting movements to start playing out. I'm always reminiscent of this debate I had with with Cuban back. I think it was 2020 and we're, you know, and he made the comment, you don't have to convince me of Bitcoin. You got to convince your grandma and your friend And like all these other. And I'm thinking to myself, not only is that just blatantly false, but there's no deep critical thinking around such a statement. Because the thing that's going to be the tailwind to this is going to be the one person in the room that can clock on a key who has literally trillions of buying power underneath of their their belt to start putting 2% of a position towards this. They're the ones that are going to really kind of provide that tailwind to full scale Bitcoin adoption. So I don't know when that is. I I can't answer that part of the question. I can tell you this, if you if you take the kegger and you apply it moving forward, the timeline is a lot faster than people are thinking in linear terms because it's just math. So if we apply a 50% kegger and let's just use like really round numbers. If we're if we're using, I'm not even going to do the math because I'm going to make a fool of myself, but do do the math. I won't do the public math, but pull out your calculator and compound a trillion at a 50% compound annual growth rate and see where things start getting interesting, like a 20 trillion or A50 trillion mark and look at how many years it takes to get there. The timeline is a lot faster than you realize. Yeah. And and the little bit I would add to to that Andy is you know, I think, I think that when we have a consensus among financial planners that Bitcoin should be a part of everyone's portfolio, that'll mean we have a consensus in the broader population. And that'll mean that Bitcoin is now a a consensus bet. And therefore the opportunity with it will have have been have disappeared. It will. The Bitcoin's reality will at that point be priced in and the opportunity will be gone. So, so long as you know, so long as the minority, the vast minority of financial planners are recommending Bitcoin, That's when the opportunity is greatest. And so you know, thank goodness it's it's still a small portion of of the Andy Edstrom's of the world or I should say your peers. I Andy, I got, I got a question for you and and Jesse because I was doing a discussion the other day about MicroStrategy and how micro strategy is leveraging this. Going back to the PE conversation, sorry to kind of like mix things up. But going back to the PE conversation we had earlier where like well what does, what do I think it's worth if we're looking at things from a Bitcoin world and we're talking about PES of two in this craziness, right. So Microsoft market cap 2.7 trillion, they let's just say that we think that it's 150 billion evaluation based on those PE ratios, right. That means that you have from from 2.7 trillion to 150 billion of economic energy that could be transmuted into Bitcoin through just common stock issuance and a conversion into Bitcoin onto the balance sheet, which is what micro strategy in my opinion, this is the play that micro strategy is doing is they're highly capitalized in a legacy market. They're leveraging that by issuing more common stock. They're transmuting it into Bitcoin until they can compress these these prices down to economic reality, right. How much? This is the question how much does that even though you're overpaying to own that equity today at APE of 35 if they do put on that position does it make it a better play than the ETF that you're just able to go out and buy right now? I I I don't think so today at those at those premiums, but my my opinion is I don't think so at APE of 35. But if the PE was 20 or the PE was 15 maybe you own the equity over the ETF at that point. I don't know like I I would I'd be curious how you would even go about the math to try to figure that out if you had a Bitcoin Maxi running the company had the authority to do it. Let's just say Sailor, right at what price because for me back when, so I I bought some micro strategy but I bought it at sub $200 right. I bought it, it was I want to say it was like 160 year or like 170 somewhere in that range. I'm not a buyer of micro strategy today, but I'm not a seller of the shares that I bought at those prices, right. So what PE would be appropriate for out performance by owning equity if somebody's putting on like this, I'm just gonna issue continue to issue common stock to what? Do you? Yeah. Love that. I love that. I love that question. So I mean it makes me think of to Jesse's comment that by the time everyone owns it, the opportunity is gone. And I think that's right. And corollary to that is that's the point at which Preston Pitch will actually be sniffing around the value yard and buying stocks when they're reasonable valuations. I think it's interesting to think about, you know, how does the convergence happen, right? Is it a significant downward RE rating in equity prices or is it an upward RE rating in Bitcoin price, you know, or is it somewhere in between? I guess my answer is, is yeah, clearly it's both. And I think my answer to your question is if I'm ACEO running a company that's valued at 35 times earnings, that sounds pretty seems non dilutive to my equity holders right at that high valuation to issue equity to buy Bitcoin. Now, my mandate as a manager in most cases is not that, at least not at a speculative level. In other words, I don't think my mandate is pull Michael Saylor and and issue convertible debt and other forms of debt right to to lever up the balance sheet. But he's not even doing it. In the past year, he didn't even do that. He was just issuing common stock, right? That's right, the the number of shares went up by 25% and it wasn't debt at all. There was no convertibility. It was just here's more shares. I'm gonna take those and I'm gonna increase the amount of Bitcoin per share in in the company. Yeah, and I like that. I like that analysis, the Bitcoin, the Bitcoin per share. And as long as that number is going up, I think there's going to be upside opportunity for for quite a few CEOs and managers if they're willing to take the bet. What do you think, Jesse? Yeah. So I feel like that's like that's one of the big topics here with micro strategies. I I I think that the consensus certainly in the broader world is that micro strategy has bet the farm on a speculation that Bitcoin will go up and then so that they have sort of taken advantage of an opportunity to create a de facto Bitcoin ETF and completely convert their business into this is just a Bitcoin bet. Whereas what I, what I think sailors doing is adopting a true like Bitcoin treasury strategy of like I don't want to be holding cash. Why would I want want to do that? I I want to hold as much Bitcoin as possible because because as as Preston just pointed out like there's no other asset out there that makes sense from a value point of view the way that Bitcoin does. So I'm going to put all of all of my energy, monetary energy into that and ride that as a as a strategy. And so I think from his mentality this is not like a oh, I'm betting the farm on Bitcoin instead he's he's found a way to add jet fuel to his operations. So he's just he's still running a business that's spinning off cash flows and with that goal of like might as well keep growing the number of Bitcoin per share and and somehow the market keeps feeding him these these opportunities to to improve on what he's already done. Because everyone's mispricing Bitcoin and allowing him to scoop up more while still adding issue shares to buy more Bitcoin and and yet somehow increase the number of Bitcoin per share in aggregate. It's pretty remarkable. This is the part that I think is so crazy about this. So the more that there's cognitive dissidents in equity prices between the the rest of the market figuring Bitcoin out and a couple people putting this trade on today, there's one, it's Michael Saylor, Michael's Michael's. PE is going to continue to blow out probably beyond 35. I don't even know what his PE is right now, but it has to be high, right? the PE is going to continue to blow out even higher. OK. Which in effect is additional potential energy that he can leverage to turn into what I would you know I'm using potential energy, kinetic energy, but like the higher that PE goes the more he can debase those shares and shove all of that because of the sky high market premium in in transmuted into Bitcoin. So what I find so wild about it is instead of that, again using this term, potential energy basically diminishing or being used up as he puts that on. It's almost like the cognitive dissidence in in the space is adding more of the potential energy into the trade, which is I I don't even have words for how insane this is. Yeah exactly as until until the market figures out like what sailor's doing and and comes around to his viewpoint then he's going to keep having these opportunities to scoop up SAT's at a you know a low price and issue more shares to do that and and then what you and but. It's at a low price, Jesse, because his stock is being so heavily valued, right? Like he's able to transmute just turning it into just this massive amount of cash that then is turned into Bitcoin because the market is valuing it for this, this correlation to Bitcoin. Meanwhile, the company like, I think on the earnings side for like all the people working there, like they're banging out like anywhere from like 50 to 100 million is like the earnings power of this. Like what will be, I mean what will be the market cap on on MicroStrategy in two years from now? I think it's going to be, oh Lord. 10X what it is today. 10X what it is. So I mean, yeah, I think where they at eight, 8 billion, so it's going to be like an $80 billion company or something. Yeah. And and I I what I didn't know where MicroStrategy stacked up and the global ranking. So I looked it up recently 1500 so you know Fortune 2000 they're they're at 1500 on the Fortune 2000 I meaning meaning there's 1500 companies that are larger than them and none of them have figured out Bitcoin and started stacking. They're they're they're a small fish a medium sized fish in the global pond and and it's really only N of 1 to date of of a company that has the unique characteristics of micro strategy meaning that there's an an individual that has controlling voting rights and can unilaterally decide let's adopt A Bitcoin strategy because I have conviction and I don't need my board to all you know see what I see. There's only there's only one company out there so far there are more companies that are controlled by a single individual. I think we'll see some of them in the next cycle. Do figure out, OK, I should at least I should at least be doing 510% of what Michael Saylor has done with MicroStrategy, especially with the FASB rules adding that to, yeah, gap accounting. By the way that the FASB update that's coming out, I think it's AI think it's about a $4 billion change on what they're listing their equity at. Is it four or six, it's it's a lot like I think their equity on the balance sheet at the end of the third quarter, what wasn't even a billion, OK. But with the FASB update, I think it adds like an additional like 6 billion or something to the balance sheet. Yeah, I I did a little analysis of this a few months ago about like how does this play out over the next 18 months for micro strategy. You know because now they're going to a world where they're going to be booking quarterly profits in in you know multi billion dollar quarterly profits for a a company that's cash flowing, what was it, $100 million a year And now you're going to a world where it's quarterly multi billion dollar profits. And if we have a bull market that happens every quarter for the next six quarters or something like that. And it doesn't change the stock price necessarily because Wall Street's obviously incorporating that into their valuations. But but it changes the narrative around each micro strategy, earnings call every, every quarterly report comes out like oh wow, micro strategy hit it out of the park again. What are they doing? What should we be doing? Well, from A, from a risk standpoint too, after this fast B update the debt to equity on the company, think about it, if your equity at the end of the third quarter, I these numbers might not be right, I'm trying to remember from a couple days ago, but it was like $800 million of equity. If your equity then jumps to call it 6 billion or I can't remember if it was 6 or 8 billion that it jumps up to. Think about your debt to equity ratio. Now if equity is in, in the denominator of that calculation and you just call it 6X like your debt to equity now looks like in in the calculation that I really quickly roughly came up with is I think the the debt to equity moves to a .35 after the fast B update which is a really healthy safe level of in fact you could argue a very smart level to have because of the interest expense that you can you know take out of your your, you know your income statement to have actually more earnings power but in a safe and and reasonable way. But this is all but I guess the point is this was always the math but for people that are looking at at the numbers prior to the FASBE update, they're not seeing that as the math. They're being rope a doped into thinking that it's something else and and you know Michael I think this is one of the reasons why Michael's so excited about the and obviously he didn't say this to me or whatever but I'm just assuming This is why he's so excited about it is because it's going to be so obvious what he how reasonable he has been despite the strategy that is moving forward. Yeah, I saw, I saw you. I guess it was another podcast you were you were making the case that, you know, MicroStrategy is deploying a perfect speculative attack right now. And I wrote a little bit about this when they first started doing this 2-3 years ago, Three years ago, two years ago, whenever it was. And it seemed clear to me that this was a Hey, if I can borrow dollars and buy Bitcoin. And I understand Bitcoin, so I'm going to wait to pay back that debt in dollar terms while what meanwhile the Bitcoin that I've purchased grows, so I only need to shave off a small portion of it in order to pay back the the nominal dollar debt in the future. That's that's the speculative attack and and so they've they're they're three years into it and it's working. Thanks for tuning in. If you're interested in exploring any of these topics further, or want to learn more about how we can help you secure a new or existing Bitcoin allocation, get in touch with our team at on rampbitcoin.com. We look forward to supporting you on your Bitcoin journey. OK, so Preston, this giant gulf, this delta between reasonable equity valuations and reasonable valuations on Bitcoin, make us think, You know what? What are we missing? What's going wrong here? Of course, one of the pieces of fear, uncertainty and doubt about Bitcoin is prohibition. You know, will governments attack it? Will they allow it to exist? And it makes me think about the fact that I know you keep your finger on the pulse, or at least one eye on what's going on with regulation, what's going on with government activity. And I really liked the article you put out about the Fin CEN rule making, potential rule making. And I'd really like you to talk about it because I think it's one of the things about Bitcoin is we like to talk about it and we like to talk about financial markets. But I think here is an opportunity for people to actually take action, have their voices heard with respect to the powers that be in government. Yeah, so on the Fin CEN front this, you know, you could make an argument that this is an attack. This is an attack factor that Senator Warren and whoever her cronies are that want to try to stop this. I would argue it's probably big banks that are funding her and supporting her through this. And the irony of that is not lost on anybody as supposedly a person who's fighting the big banks. But that's that's what I would guess is kind of behind this is it's it's an attack from Wall Street as they're still bringing on their ETF or whatever. Or I, you know, I don't know. But the fact of the matter is, is it's very aggressive. The language in this is very aggressive. And the reason it's aggressive is just because of the sheer amount of an ambiguity of what they're proclaiming that the government should have as far as the ability to infringe on people's rights to enforce whatever they want. Because in this legacy system, the way that they keep the whole thing in check and that the way that they're able to to collect the amount of taxes that they're collecting is we're going to peer into the back rails of all any major transaction, anything over like 700 to $1000. The IRS can see all of that and based on how much they they, their algorithms tell them that a person should have made in the year versus what their their expenses are. That's what they should be paying in taxes. And when it's not, then a person gets audited or the business gets audited. It's that simple. Bitcoin. You can still tax. You can still do all these types of things through Bitcoin. But where I think that the what's lost on people that are enamored by this legacy system is instead of the the collection but occurring by looking and peering in and not trusting anybody on the back end side of the rails, you move the taxation to sales tax, right? If you go out and you buy a $10 million yacht, you're taxed on that $10 million yacht and you're paying up for such a large expenditure. That's the transition that I think you you see with tax codes as you move more and more to a Bitcoin standard. I'm getting away from the FinCEN thing. So the FinCEN piece comes out and it's all like everything in there is to enable the government to peer into anything and everything and to try to really kind of control node operators and all the things that make Bitcoin, Bitcoin, right. So the way that the government likes to pass this type of stuff. And you got to remember this falls under the president, Fin CEN falls under the president. And so they can just come out with these regulations. But what they have to do is they have to allow a comment period to the public. This is our proposal. This is what we think we're going to do. Here's your comment public lay it on us why you do or or don't disagree or you you you have issues with what we're proposing. We'll take that into consideration and then we're going to pass whatever we want. And if we break any laws, well that's up to the companies to fight that in in jurisprudence and in the in the courts after we approve it is really kind of the way that this goes down. So from their perspective they want as much leeway to do whatever they whatever they can as possible. They're incentivized to have that as much leeway in there as possible. You would think as citizens that some of the people that are drawing this stuff up that they would not want to infringe on their own rights, but it doesn't seem that that's the case here with what was proposed with this Vincent proposal. So thanks to AI and thanks to the ability to be able to consume just vast amounts of data that was in this Vincent proposal and to try to pick apart the case law that substantiates why they're infringing on our rights throughout this document I drafted. This is on the Ego Death website. I'm a partner at Ego Death. So that's where we decided to publish this FinCEN response. And the key points in the FinCEN, in the FinCEN response #1, there's there's a breach of unreasonable searches and seizures that that I found. I've backed up that opinion with a bunch of case law and you can go read the report on on what those items are. The second thing is freedom of speech and association. It was drastically breached in this FinCEN proposal and I back all that up with case law. The third thing was the right to financial privacy was breached in the FinCEN proposal and I have a lot of evidence to support to support and substantiate that due due process rights was another constitutional right that was that was breached. So I go into how and why and and here's the supporting evidence. The fifth thing was the right to secure and personal information was breached. A constitutional right. Again case law backed it up. The right to non discrimination was breached, backed up, the access to financial services was breached. So that and that one was a large one completely backed up. In addition to that FinCEN pad, what would I think it was about 30 questions, it's somewhere in that ballpark 3035 questions that they proposed to the public in the document that they they're curious what the public's response is to those specific questions. I go question by question, lay it all out. This thing was a whopper. I think when I was done it was like 7080 pages long. And the reason why I did this is because I wanted a turnkey way for somebody who who doesn't want their rights violated and actually wants to take action to submit a comment. But I didn't want them to have to do all the the hard work that I did for three weeks generating this document and that they can go in there, find something that they're passionate about, copy it, paste it, pledgerize it, pull a Harvard, do whatever you got to do and put the response into the register. We have until the 22nd of January. If you could have a link in your show notes Andy, to this fin send document, I would really appreciate it. So people can just click on the link at the very top of the document. There's another link that will take you to the register, to the exact spot in the register where you can post a reply, Find a spot in this document that you're passionate about, copy it, pledgerize it, transform it, put it in the ChatGPT, and change it around. And then for whatever you want to do, I don't care. And post a comment. Here's why this is important. Talking to legal counsel, talking to a lawyer that had nothing to do with the drafting of this, but the lawyer told me, he said, I said is this valuable, is this useful to you? He says it's definitely useful because when it actually gets adjudicated or it gets fought on the other side after it's been approved, what we can do is we can point back to the public register and we can say look, right here. You were told 100 times that this was breaching this constitutional right. And so now this company is is having to spend $10 million battling this with you when the public told you loud and clear 100 times that you were doing it right here, right. So that's a really powerful thing for all these companies that are going to have to spend money. Like any company in this industry is going to have to spend money to battle this thing because it is going to get approved and it's going to go through and they're going to have tons of ammo because after we published this, we had literally, I don't even know what it's up to. I wouldn't be surprised if we're at 1000 comments that have been added into the register after publishing this thing. And hopefully, hopefully, we can get another thousand more between now and the 22nd of January 2024. So first of all, Preston, thank you for putting this document together. One of my guiding principles is Make America Safe for Bitcoin or Keep America Safe for Bitcoins and Bitcoiners. And as we know, Bitcoin is freedom money, and it's American as apple pie. And I thank you for enumerating all those violations and providing the flexibility, frankly, for people to pick and choose what they care most about. This weekend for sure on my To Do List, I will be submitting my letter, my comment letter. I'm going to chase my new colleagues at on RAMP to make sure everybody else, everybody else does. And I encourage anyone listening to this podcast. We'll put the link in the notes for sure. Preston's done all the work. I mean, it sounds like it's not going to take more than 5 minutes, you know, pick your favorite constitutional right violation, you know, pick and choose, go ahead and submit it and personalize it. And yeah, it's important that people's voices be heard. And even for anyone listening who's not that into Bitcoin, I mean, this is about basic constitutional freedoms and rights, and property rights in particular, so might definitely I. Hear I hear comments from people on Twitter. They're like, it doesn't matter whether they pass it or or not, Bitcoin's going to be successful. And here's the thing. They're right. They are right. America does not have to get this right. Bitcoin will be successful whether they figure it out or not, or whether they shoot themselves in the foot in this 100m race that we're all about to run as a as a world. Right? But I don't want to have to move. I really don't. I have family and friends here, right? And I don't want to have to go live in some other country, right? Can I? You better believe I can vote with my feet. I can do that. I don't want to do that. That's. Why? That's why I'm doing this. I'm trying to help in any way I can to try to make sure that I don't have to vote with my feet. But Bitcoin is going to be successful. Whether this country figures it out or the the, you know, policymakers figure it out, It's going to be successful. So you can fight it all you want and whatever. In fact, you might accelerate it if you do. But I don't want to have to vote with my feet. But I will vote with my feet if I if I'm forced to. And and I want to see, I want to see America be the home of the Internet of value. I mean we got it so right with the Internet of information and you know that's been we've been riding that for the last 30 years and thank goodness it's it's been it's been wonderful for the country and here is the next big wave of innovation, Bitcoin specifically not crypto and we have the opportunity to retain that home field advantage. Yes, it. Would be a shame to give it up. I want strong leaders to step up, strong ethical leaders to step up and take charge. But there's no way that these leaders can make informed decisions if they're not properly educated. So that that's why I've dedicated my life to trying to educate people on this technology, on what needs to happen, so that whoever that leader is and decides to step up to try to ethically lead that they can potentially be armed with truth, so. We appreciate. We appreciate. So Speaking of education, you know, when I first made my first efforts to educating people, you know, clients, family, the public, etcetera on Bitcoin, it's been over. It's probably been five years now, going on five years now. I recognized it was a big issue. You know, probably the hardest thing honestly is, is helping people understand what Bitcoin is and how it works. And now five years later, in some regards, nothing's changed. Fortunately, we have so much better and more numerous resources, right? I mean, just the amount of talent that's come into the space, the new talent is tremendous. And also the experienced talent such as yourself just keeps raising its game. Thank you. You've had a few few years and a few cycles of of experience to to hone your craft. What do you, you know, what are the takeaways that you have where we sit here in 2024? I mean, you've been through several cycles now. What's changed? What stayed the same? You know, what are people still missing versus versus what's new? The thing that hasn't changed is just the sheer amount of convergence of really profound ideas and technical skills to really fully understand Bitcoin. So you know it when you understand game theory and you have a deep understanding of game theory, that is one of tons of things that you have to understand to fully understand Bitcoin. When you understand encryption technology, that's yet another thing that you really have to be able to wrap your head around. You will, you will hear people just say, block, I literally heard this yesterday from a from a family friend. Yeah, it's blockchain. Yeah, it's it's blockchain that's going to be the thing. And it's it's they they stop right there. And it's like, Yep, I know that word. I know there's something there that means that the government can't shut it down. But that's the that's the end of the analysis. And so for a person to have very, very, and I'm just naming a couple areas of expertise that you got to really understand to fully grok Bitcoin. And the one thing that I think that has not changed is it is very, very, very difficult for the public to fully own own is the word Bitcoin. Most people want to speculate with Bitcoin most people. And so if I was going to make a case for there not being a super cycle, which I think there will be at a certain point, I'm not saying on this cycle, but I think and it could be on the cycle, I don't know. But the reason I think we would have more cycles is because of that intellectual burden that somebody has to perform to continue to be a deep convicted holder of the coins. I can see it right now like this incoming cycle. The black rocks and the fidelities are going to provide a speculative tool for your your kid sister and grandma to come make a quick buck and they're going to come in, they're going to make a quick buck and then and they might get wrecked because they might not decide to try to make the quick buck until the until the end of the cycle. Assuming we go through another cycle and you can where you can really see this in the charts is really the the long term holding period of like today we're at 70% + 70%. And when you see that the price start to run what you see is people are taking profits people are going out and and maybe buying a nicer house or another another car or whatever the case might be And you're seeing that long term holder as a percentage trickle down and I don't think that that's going to be maybe I'm wrong I I I think that that might play out again coming here in the in the next cycle the thing that so let's talk about like the the Super cycle sorry to go on and on about this so on the Super. Cycle. Please continue. I love this is my favorite. This is my favorite topic, Actually, somebody asked this on Twitter. I can't remember who, but yes, it's worth worth talking about. South on the Super cycle piece, I think that you're not going to get that to play out until the opportunity cost of of the other stuff you can own is so disgustingly obvious that it's losing money at a breakneck pace that they everybody realizes that it is just Bitcoin. It's not this other crap. And when when people were convinced that inflation was only 7% and the government's lying, to me it's only actually 10 or 15% or whatever they've whatever story they're they're telling themselves. I think you continue to go through cycles if they're able to kind of hold the treasury market together with inflation being these numbers that aren't that aren't 50%. But I think once those numbers, yeah, and I have no idea when they get to such crazy numbers, but if those numbers in the backdrop of the other stuff they could own is losing its value by 50% a year, like down in oh man, Argentina, right. If if you look at what those citizens are dealing with, I think that that for them in this incoming cycle, Bitcoin is going to start to really make a whole lot more sense whenever it's puts in a new all time high. Because today it's like, Oh yeah, I want to earn the dollar. I want to earn the dollar down in Argentina. But after the dollar, after the Bitcoin price chart is showing new all time highs and dollar terms, do you think they're going to be saying they want to earn dollars, They're going to probably start saying, hey, I want to own Bitcoin. So there's this, there's this slow dynamic that's kind of taking place. I don't know. But I think that those are the important ingredients or the things to kind of factor in when the bull cycle or when these cycles, these four year cycles are going to start to subside. I think that makes perfect sense. Any thoughts, Jesse? Yeah, I I I think Preston was. There's so many interesting variables there and it's hard to say like what what starts to overpower and when. Because I guess my until until I see some compelling argument otherwise, I guess my base case will continue to be that every four years we get an incremental slice of adopters and going through a different phase of Bitcoin adoption. Meaning that, you know, the most visible thing that happens is the first time anybody touches Bitcoin, they're speculating, everybody speculates the first, the first cycle, and then it's the second cycle. Where they're like, hmm, that was the best performing asset in My Portfolio. Maybe I want to accumulate and hold on to that. The tulips are back. Right. And so but then then the behavior changes from from speculation from pure Tulip mania to wait these tulips are they get valuable over time more valuable and and despite despite them crashing every four years. And so you know I think we, we see the different behavior of incremental slice of the adoption curve every four years as as that cohort moves through you know their Bitcoin journey and the halving is enough to enforce that that keeps happening. And so that's that's the base that's the base case that's the, the downside scenario in my book. But then there's this, this exogenous driver of does the financial system start to really collapse or or or erode because of the national debt and and what that means for the amount of of, you know, interest payments and then how we have to issue new debt and you know, debase the currency. Does that help create a tipping point where nobody wants to own, wants to hold on to dollars because the Bitcoin thesis becomes clear. And then that becomes that hyper bitcoinization moment where once everybody sees that a speculative attack on the dollar by borrowing dollars to buy Bitcoin makes sense, then it's game over for the dollar and then you arrive at a Bitcoin standard. So I don't know, I mean my base, the, the, the downside scenario is we win, you know, a little bit at a time every four years. But yeah, maybe there's a tipping point. Green, Green, Green, red. Yes, that's it. Repeat cycle cycle, repeat cycle repeat. I I actually, you know I don't know call me crazy but I welcome the the slow adoption. I think it was part of the genius design of the system is that you get this bubble and then crash dynamic. I think Satoshi may have expected that and that actually does a service to the lengthening out the cycle of Bitcoin adoption because it does, as you say, take, you know, a couple of cycles to really do your homework for most people. And I'm OK with not hyper bitcoinization. I'm OK with the an orderly adoption of Bitcoin. I'm OK with people in Argentina shifting to the dollar and then over time shifting into Bitcoin. That seems good for everyone. It seems good for Bitcoin, I think despite the fact that Bitcoin, as you pointed out Preston, has delivered the fastest investment returns in history, there are some who want that want it to happen even even faster. But you know, it's not up to us. We can speculate. It's fun to, it's fun to do scenario analysis. However, I will say that when it comes to actually investing, which is something all of us are in the business of, it does help think you, help you think about sizing your position. Perhaps not everyone is comfortable with having the majority of their net worth in Bitcoin, but at least it it, it informs the, you know, the allocation that that you're likely to make. Yeah, yeah. So what do you think about, what are you thinking about allocations these days, Preston? And I don't mean for you personally, but when you have conversations with, let's say, professional investors or folks who know they may be individuals, they may just be high net worth or ultra high net worth individuals, what what's the advice you give with respect to either allocating or learning about Bitcoin or both? I think the first question I'd have for them is do you have a fiduciary duty? And if they respond yes, then my next question is, is well then why are you ignoring the best performing thing that has performed for a decade straight. And then the next question is, is because they'll say, oh it's high volatility in my and then I would say isn't there this thing on Wall Street that you control risk by having position size that's appropriate for the volatility in that underlying asset to which they should say yes there is And to then then you could say well how about this thing that over any four year period you pick has the highest sharp ratio of anything over the last decade like the it's nonsensical today for a professional money manager or financial advisor to not take a client question about Bitcoin seriously. Like I I would actually think that they're in neglect of their fiduciary duty at this point. My personal opinion, so then it becomes the position size and so much of this comes down to what's the person's net worth, what's the person's goals and objectives, what's their tolerance for volatility inside of their portfolio, what's their, you know, what's their expectation for, you know, sustaining. I mean I'm sorry but if you're not at least trying to attain a 10% return annualized, you're not even keeping up with the with the M2 debasement of of the currency that's being supplied into the system. So, like, it needs to be that at least, but for the for all of these variables and all these reasons, like you have to construct something that allows the person to actually stick with the position. Because if they don't stick with the position, they're not going to just be wrong on the entry, they're going to be wrong on the exit as well. Which is like a double whammy because they're going to buy it emotionally and speculatively and then they're going to sell it the same way and at the exact wrong timing on both fronts. So and the only way the person can have that conviction in the position is through just straight up knowledge. You have to understand what you own, even if it's a small position size. So that would be my thoughts around like how to think about the problem for a financial advisor for somebody on Wall Street is you have to think about all those key things. And then and then another piece to this is, is the the way that the person puts on the buy. So I was just talking with Rational Root this past week. I think it would be awesome and I'm just too lazy to, to do the work to build this chart. And I know he's an expert, not just that like doing these charts, but his way of graphically laying things out is far superior than what I could do myself. So that's why I've kind of brought the idea up to him. But you know, his his wheel chart and how you have the four different seasons of Bitcoin. I think it's important for a person that's trying to do a spot buy because one of the questions I hear from somebody, or the scenario that I see from people is they hear a little bit about Bitcoin, they immediately like it and they immediately want to buy some. And a lot of the times, this same person does not want to buy 2%. They're like, I want to buy 10% of My Portfolio with this, like literally tomorrow. OK. So that's great. Sounds like me. Sounds like me when I first bought Bitcoin, by the way. But the problem for this person that I found in this scenario is they've heard an hour to 10 hours worth of content. They're super excited and their their excitement for it far exceeds their intellectual knowledge to to have a large position size, which means they may sell it and lose money. OK. So what I think is important for that person is what I would describe is like a dollar cost average over a specified period of time for a quote, UN quote spot by. So you got $100,000, you put on a spot, you put on a a DCA for 90 days, OK. And because you spread it out over 90 days, your chance of being scared out of the position because you haven't matched your intellectual knowledge of what you own with your vigor for this new exciting thing that you found, that you discovered helps you not get into this situation where you get scared away. I think that if you did an analysis of The Four Seasons that that DCA spot by is going to fluctuate drastically like today I would. If I'm guessing right. I don't know what it is, but I think you could safely DCA into Bitcoin with $100,000 spread across 60 days and you're probably never, if you never bought again, you're probably not going to really have any red in that in that principle in early 2026, if you were going to buy, assuming we continue to go through cycles, you might have to DCA that spot by for maybe a a year to nine months, depending on where you're at, to make sure that your principal is not getting wrecked and you're getting scared the hell out of the position. Yeah, I. Love this. I love this framing. I love this framing. Sorry. Go ahead. One one other thing, the irony of that statement is at the beginning of of 26 is going to be probably the peak of somebody wanting to do a complete spot by on the day, just because of the emotional, speculative nature of it. And that is the exact moment when they need the DCA, probably the longest. That's it. That's it. It's, it's an adverse selection dynamic. It's when the price has peaked, has reached its cycle peak, that's when it's all over the media. That's when all the news is around. It may be, by the way, it may be the time when some people are saying, oh, this is it, this is the big one, you know, This is when Bitcoin just goes vertical and doesn't and doesn't crash and the cycles are over. It's the last cycle, and that is when your emotions are likely to be highest and you're likely to be most keen. It reminds me of the the classic data, the classic research on investor behavior in mutual funds specifically, right, which is whatever your average mutual fund makes, pick a number of 6% annualized, but your average mutual fund investor makes like half. That makes something like 3% because of course they're buying the top and they're selling the bottom. And yes, it's that behavioral, It's that behavioral element. It's probably why Buffett says that, you know, an extra 20 IQ points over some threshold doesn't really help you be a better investor. It's more about temperament and moving against against the crowd. One one other one other really interesting idea that when we look at where we are today, I think a person needs about 1% of Bitcoin to preserve their net worth today portfolio size wise. Let's say Bitcoin goes to 500,000 by late 25. OK. Just as a as a number you would probably need about 10% of your portfolio to preserve your your net worth at that point. OK. And think back to what I just said which is that's going to be the exact moment where if a person's trying to do a spot buy of 10% of their net worth and the Bitcoin which is a massive position size in finance, right. If you're taking on a position of anything, they need to have the the longest, potentially the longest at that point. You know what Andy? I I think late, like halfway through 2025 into late 2025, I just don't even want to go on podcast or even talk about this anymore because the decision is going to be so insanely hard as to like what the hell you do. I don't have an I don't have advice for that person. My advice is that you need to own like 1% in your portfolio today. That's my advice. That's it. That's it. Time stamp that today. Yeah. And then when everyone's asking you about it, when we're much higher in in price into the cycle, then yeah, it just becomes more it becomes it's it's you're toggling between by 1% get off 0 versus work very hard and educate yourself and learn. Yes. Learning is keep. And that go ahead back to you the I guess the original question there of what is the right position size for for everybody and and obviously it varies but the two Oceans Trust put out a a really interesting analysis that that showed that you know obviously we know the sharp ratio is for Bitcoin is most attractive thing out there. But if you have a 2% allocation in your portfolio that actually decreases overall portfolio volatility. So not only do you get like the most attractive returns, you're actually decreasing volatility if you have 2%, so you know one percent, 2% something like that is I think in my opinion necessary at this point. And I'm and and so far Andy has not had this question turned on him. So I want to, I want to know what does Andy say to his clients or when this comes up, how do you address it? Yeah, happy to do that. So pretty much everyone for whom I invest assets gets at what is at this point a few percent position and that's a surprising outcome. Some people are surprised by that, OK. In other words, some people think, oh, I'm a really aggressive high risk investor, so I should have more Bitcoin. And my retort to that argument is, well, if you're the opposite of that, if you're a quote low risk investor, which implies that you're going to have more bills and bonds in the portfolio, you can have more of the Preston's favorite investment asset, the US Treasury, Well, what does that mean? It means you're more exposed to the debasement of the currency. And so if the currency gets debased at a more rapid rate, well, Gee, you better have some inflation and debasement proof assets in your portfolio. And the most, the hardest asset that I've yet found in my career managing, investing people's money is Bitcoin. It's taking share from gold in our portfolios. I I have to say I'm short, short to medium term sort of bullish gold. You know, the thing I tell people is I sort of expect comparable dollar accrete accretion of value to gold and Bitcoin. So like if gold double S and adds 10 trillion to market cap in the next number of years and Bitcoin adds 10 trillion of market cap right, which is a multiple on its current price, that seems like a pretty reasonable outcome for me in this decade. Who knows what'll happen, but I think that's a a reasonably likely scenario. So that's what that's what happens for my clients. One of the most interesting numbers I think you can look at is if you if you take any four year holding period after the last 10 years and you construct a portfolio of 98% S&P 500 SPYE TF2 percent Bitcoin, you will double the performance of the S&P 500. Amazing. That's an amazing. That's an amazing thing, you know, And Jesse and I have had a conversation in the past about, you know what, what's a, what's a, an uninspiring scenario for investment for the next decade. Like I could or half a decade. I could imagine that bonds do very poorly, that equities, you know, barely maintain their purchasing power, and Bitcoin far outperforms the pack with a, let's say 20 to 30%, you know, gross annualized return, which is 10 to 20% net of inflation. Now I think it'll do better than that, but even if it does that and it's still far outpaces the performance of most or all other assets there, still you got to have it in your portfolio and you don't have to have 10% in your portfolio, but you probably should have more than 1% in most cases. And I think for many people that's the right, that's the right answer as far as the portfolio is concerned. Yes. So I want to, I want to switch gears a little bit before we, before we wrap up here, switched to mining. This question comes from Eric Podwowski. I think I may have butchered his last name, but sorry about that. Eric, He asks will Bitcoin ASIC miners become scarcer over time or more abundant? I want to alter that question a little bit. I'm curious your view on centralization of mining. Obviously, probably the most important thing about Bitcoin is it's decentralization, is the fact that no individual or faction can control it, and from that springs all or most of the great characteristics of Bitcoin, whether as an investment or otherwise. Do you think that Bitcoin mining can decentralize over time? What What are your thoughts? The two big concerns on the mining front are the pools and the just the hardware being tied to the chips. There's a fantastic book called Chip Wars. If you take the time to read that book, it will do a much better job than I could ever do, kind of explaining that risk. But at the end of the day, you have lithography machines in a very centralized kind of way that that produce these really hardcore four or less nanometer type chips on the market and that is a centralizing situation, right. And that's something that I think needs to be talked about, thought about. There's already a massive amount of ASICS that are on the market that are very specific to mining Bitcoin that I think help protect against that attack vector. And I think that if you were going to look at the 4A production of a six and maybe the lack of production of a six, you I think the attack would be somewhat obvious to the world if that attack vector was was exercised and and maybe give the the community enough time to to form a thoughtful response to such an attack. But I think that that's that's an important one. And then on the mining pool side, you have, you know you can say whatever you want about ocean. But Ocean has helped highlight what I think is a risk which is there's not many pools. These pools are deciding what the temp, the block template is going to be and all the people that are providing like you know you could have 100 people providing hash rate. But if there's one person deciding which transactions are going into the actual block because they're the pool operator and there's only like 8 or 9 pool operators, that's a that's kind of centralized and that's something that I think needs to continue to be talked about. I love this idea of minors submitting what they want the block template to be in which transactions are going to get into the block if their rig is the one that finds the block. And I where that gets a little bit tricky because I think anybody that hears that like yeah, why aren't all of them doing that? That's that's how it should be, right. But there is a little bit of a concern that like let's say the three of us are mining together in a pool and I just come up with like a horrible submission for what my block template is that produces no fees. And I find the block and I put that forth and like you guys lost out and and hundreds of thousands of dollars or whatever the amount would be for the fees at whatever point in time we are in the future that that would piss you two off, right? And and you'd be like why is this pool do this? Why isn't there essentially controlled. So what I think needs to kind of take place is the pool produces what would be a templated block and or fees and maybe like 10% below those fees. If if the submission of the block template by call it Andy is less than that 10% threshold, then the the templated block that the pool operator is managing as each block is found submits that as the in place of Andy's submission because he was at a -15% from the fees, right that it's not included, like there's some type of threshold that that is submitted forth. If somebody is just, you know, not not doing their part by submitting an appropriate template, I think that's the solution and I hope to see more of it. The thing I love about Ocean is it is definitely kick the hornet's nest and create a ton of conversation that hasn't been needed, desperately needed on this particular topic. And I think it's all very, very healthy for Bitcoin moving forward that people were talking about it and and identifying it as a risk. I like that scenario that you laid out. It's a, it's sort of a gut check. You know, good enough generally is good enough for block construction. But if, but if they're way off market, they're way out of bounds, then you've got a a check on that. I love that. Yeah. Excellent. Well, Preston, this has been so much fun. Want to be cognizant of your time today? Is there anything else you want to tell people about today? You mentioned ego death. I don't know if you want to talk about what you're up to there, or if there's anything you want to tell people about where they can find you. Yeah, Ego Death Capital. I've been asked to be AGP over there. I'm honored to be AGP. There's going to be some news probably coming out pretty soon. I think that's all. I don't know legally what I'm allowed to say or not say, but you can check out the website and you know Lynn Alden, Jeff Booth, Nico, Andy. We are a very tight team. We only invest in Bitcoin companies and we have no token clauses like we are. We're hardcore bitcoiners and anybody who who's followed any of our work knows that. And we are very excited to be able to contribute in any kind of way to the community. We like to think like LP's even though we are GPS similar to like the big, the Warren Buffett, Buffett thing that he would always say is like I I like to think of myself as a common shareholder with everybody else as the way that we invest. And you know I think that's very true to how everybody on the team thinks. And so anything we can do in this space to to further it along and to make sure that it's successful is is really you know while being good stewards of of LP's is really kind of how we think about things. So yeah check out the website. Yeah man, I just, I'm I'm thrilled to be here. I'm super motivated and excited for 2024 and 2025. There's so much to be excited for. Don't let your guard down. If your family members tell you they own an ETF say congratulations, that's awesome and then tell them about self custody and why it's so important and all the the the history of rug pulls in in Bitcoin and there's been some monster rug pools and don't hesitate to bring up how big of a you know multi billion dollar rug pool FTX was And just because they think that they're holding something that can never be rug pulled it it can be so that would be my message for people going into the new year that there's a lot to look forward to and it and it's exciting time. That's a great message. It's sage advice. I'd also like to recommend people implement the no token clause and all their personal relationships and and friendships. Yes, we could get into that whole debacle. I don't know if you if you guys want to talk the incentive real fast the the incentive on the last cycle that why we're so so many VCs in the shit coin market. And the reason they were is because there was lots of liquidity with this. And then you got into this situation where there was massive ethical barriers breached where because the liquidity was there they could go hire a marketing firm to pump and promote this this rug pool, right. All the liquidity is there because it's a token. They make a bunch of money. They pull it out from from the the dummies on the Internet buying stupid things that like there's literally nothing behind these tokens at all. And it was, it was an ugly time. You had Jack Dorsey, you had many other really smart people kind of highlighting what was taking place. But I think it was still lost on a lot of these digens that were just out there, like buying these things, thinking that they were giving them out to celebrities to like obviously the pictures and stuff. But just a horrible time ethically and morally for, you know, some of the actors in the space that you would have expected that would be, you know, that they don't need to be doing these types of things, billionaires doing these types of things. That was just really quite disgusting to see. So I'm excited to to hopefully not to demonstrate what right looks like and to to to show that that that is a disgusting path to kind of lead. Hear, hear, hear, hear. Let's hear it for hopefully, fingers crossed, a Bitcoin cycle where retail does not get dumped on by professional scammers. Yes, yes. Absolutely. It does give me hope that, like it was pure Wild West and has been historically. But the more that Wall Street, the more that Tradify shows up and does their homework and then starts to use their brand to say, you know what? We're going to we're going to put our name behind what we trust. And that's Bitcoin. That's going to help a lot. I and then that gives me hope. Yes. Yeah. Amen. Well, gentlemen, it's been a real pleasure. Preston, great to see you. Thank you so much. Hope we can do this again in the future. Really excited for a great 2024 for you and and all you've been doing and I look forward to continuing to learn more from you in the New Year here. Likewise, Andy and Jesse. Thank you guys. Three months and change to the having, so get excited. Yes, very exciting. Gentlemen, cheers. It's been a pleasure. Till next time, talk to you on scarce assets.
Transcript source: fountain