Transcript+
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'm happy to welcome you to the 16th episode of Scarce Assets, a show that examines scarcity, the most fundamental driver of economics and markets and the scarcest asset of all, which is Bitcoin. My Co host, Jesse is traveling today, but he'll be back for the next episode. In the meantime, I'm happy to introduce my guest, Alex Thorne. Now Alex is Head of firm Wide Research at Galaxy Digital, where he leads a team of researchers covering the crypto ecosystem. Prior to that, he spent 12 years at Fidelity Investments where he Co managed Avon ventures, the early stage crypto VC fund affiliated with the parent company. And before that he was director of blockchain research at Fidelity Center for applied tech applied technology, excuse me, where he directed tech experimentation and also published research. Now I'm going to add my editorial here, which is that although it covers a wide space that many people would label as general crypto, I think Alex is one of the very best researchers in the field who gives Bitcoin the respect it deserves. And he also has a great podcast called Galaxy Brands. I listen to it all the time, including this morning when I heard his great interview with Richie Torres, and I'm sure we'll talk about that today. So Alex, thank you for the work you do and thank you for coming on Scarce Assets. How are you? I'm great, Andy, thanks for having me. I'm a big fan also of your work. And I, I think that's right. By the way, I, I look at the world through the crypto world through a Bitcoin lens, right? I'm a long time Bitcoiner. I think it's the most important project in crypto. I think it's very different from block chains and crypto as a segment. I think you're crazy if you're interested in this technology or the crypto asset class and you don't own Bitcoin, you're absolutely underweight. I think the most important digital asset that there is. But also, I mean, I think it it, there's a lot more to Bitcoin than its technology. And you know, we can long time followers of crypto will know that there's been literally dozens of attempts at creating a quote better Bitcoin. None of them have been better than Bitcoin and and most of them have outright failed. There's plenty of reasons for that, but I yes, I am interested in blockchain technology. I'm interested in in and what it can do. I'm interested in the segments like Defy and, and whether and, and I am interested in distributed networking and whether other types of block chains have other features. But I think Bitcoin is the most important. I think it's likely to be the most important for a long time. And it's very interesting. And we have a huge Bitcoin businesses at Galaxy. A giant portion of our company is focused on Bitcoin trading, Bitcoin lending, Bitcoin mining, right? Like we, so you know, Galaxy is involved in the whole of market. So of course we also do other things in the broader crypto space. But I think bitcoins, Michael, Michael Saylor says Bitcoin is the there is no second best, right? So I look, I'm interested in everything. I have a team of researchers. I mostly research Bitcoin and regulation and markets. I have other researchers who cover Ethereum and stuff. And I, I think it's perfectly valid to be interested in the broader crypto ecosystem. I think there's other interesting things happening, but there is, you know, you can't, you come at the king, you best not miss. There's something, there's something different and special happening with Bitcoin than the other things. Well, let's talk about coming at the king and let's talk about, you know, just throw you some red meat. Let's talk about politics. Oh, OK, yeah. For for a minute, so yeah. You. Recently published a thread on Twitter X discussing why a Kamala Harris administration, if elected, might continue with policies that are basically hostile to Bitcoin and crypto. Can you tell us about that? Yeah. And I and I, I think the big first caveat is we really don't know. We don't know. Kamal Harris has yet to speak after winning the nomination off the teleprompter, right. So outside of a few rallies with scripted remarks, we don't have any platform from her. We don't have any policy positions. You know, we have the Biden administration's positions of which she was the vice president, and we know that those were broadly negative. I mean, you know, Bitcoin doesn't have a lot of business before the government in the scheme of things, certainly not like crypto does, which is, you know, all entangled in questions of securities or commodities and various types of financial regulation questions. Bitcoins primary things I would say before, you know, from a legislative and regulatory standpoint, obviously the Bitcoin ETF was business before the SEC. They had to be drag kicking and screaming with the DC Circuit Court of Appeals ruling to even do that, but they have done it now. So I would say there's not much business for the for Bitcoin at the SEC level. There are possibilities that the CFT CS mandate could expand into spot markets, which could result in more regulation of spot Bitcoin trading. And then I would say the the the big questions that that by the way, Bitcoin and crypto share it still has right is self custody legal? Do blockchain nodes, even home nodes, lightning nodes, just straight up archival nodes that merely relay transactions. So they have to perform bank like compliance activities. The you know, should you have, what do they call it? The, the, the, the travel rule? Like should transactions have to be KYC? Should miners have to KYC the transactions in their blocks, Right. These these questions are big important questions that are in some cases existential in my view, for the legality of Bitcoin. I don't think, like, you know, Bitcoin could be outright banned in the US and I think in the long run Bitcoin will survive anyway, but that would be bad. And I think these questions overlap between Bitcoin and crypto. You know, the Etherium people are just as concerned about whether miners have to transact all their transactions the same way. Would would this prove mistake? Validators have to do that, right? So there's there is plenty of overlap. That's something I think the corners miss. Sometimes they say like, what do we care? Bitcoins not on the menu at the SEC. There's other stuff out there that's not good. We don't have any concrete policy positions from the Democratic presidential ticket yet. And as far as I can tell, neither Kamala Harris nor Tim Waltz have ever mentioned the word crypto or Bitcoin ever. I don't even think they've said the word blockchain, right? So we, we don't know. So what we look to for guidance on this is who is advising them on economic and, and financial regulatory policy. And again, it's still early. I mean, I'm, I, I think it's a lot of people are optimistic that it's possible we could get a slightly better outcome under a Harris Waltz administration than under a Biden Harris administration. We know that the Trump Vance ticket is extremely favorable. So, but I, I'm of the view that Bitcoin is nonpartisan. It's frankly apolitical. I think there are some aspects of it that are appealing to different political factions. For example, it's perfect scarcity, you know, aligns well with Austrian economic monetary theory. It's radical permissionlessness and self sovereignty, you know, appeals to people that want independence from government. Like there are some sort of I, I think like small lowercase P political aspects to the, the platform itself and the network itself. There's also plenty though, that appealed broadly to, you know, more classic American liberal values, like, you know, no intermediaries, you know, you can't be redlined by your bank, right? It doesn't see race or gender or sexual orientation, right? All that stuff is very positive. So I think in general, it's mostly apolitical. It certainly should be nonpartisan in my view. And I think for the, for any industry or project or platform or asset to be, you know, have great success in America, it certainly shouldn't be seen as a Republican thing or a Democratic thing. So I, I'm very in favor of reaching out to the Democratic Party and trying to help them understand the promise of Bitcoin and, and that it could, it is positive and it can be positive for America. So I'm open and I'm hoping that we'll get better open to and hoping that we get better policies out of a Harris Waltz ticket and, and if they win a Harris Waltz administration than we currently have. But like I said, people are policy. And some of the people that apparently reported by both the Journal and Bloomberg are advising Vice President Harris include two notoriously anti crypto and Bitcoin people, Brian Deese and Bharat Ramamurti. Brian led the National Economic Council. Bharat was his deputy for two or three years. All around the time that the Biden administration did this executive order mandated survey of crypto, right? They looked at a whole bunch of stuff, including Bitcoin mining all across the government, and they have a very strong anti crypto bent and I and I would venture to say they were at the at the center of this operation choke .2 point O, which is which I'm happy to summarize for the audience, if if that is helpful, but we're we're pretty confident they were key architects of that And by the way, that which is this effectively the systematic coercive, either de banking or creating of roadblocks and barriers for just companies involved in Bitcoin and cryptocurrency to have bank accounts and for banks to deal with companies like this, which I think is a fundamentally UN American thing to do right for legal businesses, make it impossible for them to get banking. That's, you know, you can't pay employees very easily without a bank account. In the scheme of things, Sure, you can pay them in Bitcoin or stable coins or whatever, but you know it's pretty hard to exist in American capital markets without a bank account. So we don't know what they're doing for her. Again, we don't know a lot about this policy, but just sort of throwing up the red flag here that these are two people who who really don't like us. That's what that thread was about. And you know, but again, like I said, we should reserve judgement. It's I think the the question is if if they end up being central to a Harris Waltz administration's Financial Policy, that's bad for us. At On Ramp, we believe that Bitcoin is the most important asset of the 21st century. The hard part is securing it right. There are shortcomings with keeping your coins on an exchange, but also with setting up your own self custody arrangement. On Ramp solves for these concerns. Our multi institution custody solution maximizes security and minimizes counterparty risk, ensuring that your Bitcoin remains securely in your possession and provides built in inheritance planning to ensure your family is protected as well. On Ramp provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it as a compliment to your existing self custody set up. For more information, check us out at on rampbitcoin.com. Yeah, no, I really appreciate that summary. I sort of it makes me feel about it makes me think about, OK, yeah, you know, there's more cards to be turned over in the poker game here. We don't know that much, but the cards that have been turned over are not great. You know, the flop, the flop has come and it it doesn't look fantastic. We've still got a couple more cards coming. I'm curious about the feels. I mean, you know, and I don't want you to speak for your boss, Mike Novogratz, but I think he's a pretty committed Democrat. I just wonder what the feeling is among, you know, among guys like him who are committed Democrats in terms of, you know, the, the educational effort. I know people on the Democratic side who are bitcoiners have reached out, you know, have made significant efforts to help educate the Democratic side. You know, I'm sure at any way they're willing to, you know, to accept, to accept help and information. I mean, is there a feeling of frustration kind of generalized at this point? Do you have any, do you have any sense not speaking for particular individuals, but just kind of the the group? Yeah, I think people are trying to get to them, right? I mean, there's there is a concerted effort to try to get in front of the Harris Waltz teams to educate them on on Bitcoin and why it's good and why it's not a threat to the country, right. And why you should you know why it's part of an innovation mandate, why there are jobs the Bitcoin brings, why it's good for the energy grid, right. Like there, there are a lot of efforts, I think from a lot of different people. My my sense is that it's the the message they're getting back is that the campaign is open to this, but we but we haven't seen a lot of engagement, right. I mean, even, you know, we're recording this on Thursday, August 15th, on Wednesday, last night, the 14th, there was this call crypto for Harris. And this is mostly organized, my understanding by, you know, Democratic activists in Washington who may work on crypto policy either for companies or lobbying firms or whatnot. And you know, there were some appearances from prominent Democrats, Chuck Schumer, but a lot of these were via video, pre recorded video. There was no, my understanding is appearance from any official from the Harris Waltz campaign. There aren't really that many officials yet. So it it seems sort of like the I, I would say I think people are are a little frustrated. I do think people are actually optimistic, though. One, the campaign is through channels officially signaling openness to this conversation. They're just not really engaging yet. I'm in it. And yeah, I mean, there is concern about like if if Brian Deese and Bharat Ramamurti are deeply involved in shaping the this campaign's economic policy. To be clear, like Bitcoin and crypto is like pretty low state, like low on the list of priorities for like American economic policy people. You know, things like inflation and global trade are higher on the list. But what I think people want is to get the candidates to care, right? Because if they care, then the policy won't simply be outsourced to these technocrats and bureaucrats. Because if it is, if it is brought Rahamurdi and, and no one gives him some other mandate on this issue, we know where he stands. And it's highly restrictive, combative to to the to Bitcoin. And so, yeah, I would say it's cautious optimism. I would also say that like, I think most of us believe that it can't really get worse than the Biden administration. They were extremely hostile, particularly the SEC, particularly Treasury. Another person who's been floated in those same articles and reported to be, you know, on a short list for Treasury Secretary is this guy Wally Adeyamo. And Wally is, he's not as bad as Barat. He doesn't appear to be as combative, but he's very aligned with the KYCAML on blockchain nodes on minors thing that really emanates from Elizabeth Warren, right? That's not great. So I would say it's cautious optimism. I think most likely, I mean, I've even said this straight up for Bitcoin price, like I think we're in a range, we're in the 50 to 70 K range. I don't think we really go much lower than the 49 K dip we had on last Monday on the like Japanese yen carry trade on wine situation. But like, and I think you, you, you probably can't get worse than a hair, probably even a, a no engagement Harris administration might even be just slightly better because of some turnover. But I, I, I think that, you know, the potential upside is huge. I think a Trump victory is very supportive for Bitcoin. So you're meant to be cautiously protective on the downside and, and own like wingy upside or certainly be long in the face of that. I don't think so. I would say probably people aren't that worried, but we're not getting much back yet from that campaign. Yeah. No, I think that's really well said. And some of that, I'm sure, comes from long experience, you know, years in the space, which is there's always FUD. Well, so there's always FUD, but there's always, you know, I guess real substantive threats, at least potentially from government. And some days I wake up thinking, you know, they're all gonna come at us guns blazing. And then other days I wake up thinking, you know, this is, I don't know, for me, seven years in now. And it's like, you know, nothing really that bad has happened, nothing existential. And yeah, I like your framing of sort of Trump election, you know, probably big upside potential for Bitcoin Harris selection, you know, probably probably not much worse. So maybe hit, you know, heads I win, tails I don't lose or something, something along those lines. Oh, and also, by the way, you know, we're still at only a trillion in change of network value for Bitcoin, fraction of the value of gold. Yeah, To be clear, like all else equal, a Harris administration, assuming they're not like catastrophically worse than the current situation like you, you have to remain bullish on Bitcoin. It's not Bitcoin doesn't stay in that range forever. I think of that range as basically through the election, right? We sort of think about it that way. I don't see other major catalysts upside or downside between now and then. I think that probably is the main catalyst for the next few months. But I mean, again, in a Harris Waltz victory scenario, like it's probably not much more restrictive from a regulatory standpoint than it is now. And then you still have global macro conditions. You have, you know, the the perpetual, you know, degradation of the dollar. You have fed policy which is likely to turn to easing, which should be supportive for scarce assets. And so like, I mean, and you have the adoption curve, you have the ETF adoptions like you, you have plenty of longer term. All all those longer term Bitcoin catalysts remain. So I, I don't, you know, I, I think it's fine. I mean, I think This is why you saw like 49 K bought up like crazy when it went down to that level. Even I had a sub 20% down 20% limit by order set on river that I'd even forgotten about that I woke up to being filled on it like 50K to do 50.2 or something. Like. I think I think people are very constructive on the on the trajectory for Bitcoin. It's more of a question of and, and, and I think it is fair to point out like the, the risks, the regulatory risk broadly applies much more to other cryptos than it does to Bitcoin in general, right. I mean, so much of that risk is related to the securities laws, which bitcoins really immune to at this point. I mean, so there's no so I, yeah, I think Bitcoin in particular is, and I've said this, I was calling for EPTC to go much lower last fall. I continue, I would say it's pretty low now, like so I'm not I'm not I'm not necessarily calling. I haven't rewritten. I'm still basically in the like, it should go lower. But the main thesis there was just that like all of these regulatory rules are so much more damaging to the Etherium world than Bitcoin. There's custody rule stuff, there's the exchange definition, there's like AMLKYC stuff that's hits it more than Bitcoin, right? And it some of that has eased with like recent Supreme Court rulings and, and, and other things. But like the downside scenario of a Harris Waltz campaign victory in itself applies much more broadly to the broader cryptocurrency landscape than it does to Bitcoin anyway. But yes, that that's how I think about it. Well, that's awesome. So first of all, good on you for having the stink bid in for Bitcoin that you didn't even remember that you forgot. It's like finding the $20 bill in the couch cushions. It was, except Bitcoins much better than finding than finding Fiat. So I love that you brought up ETH in terms of BTC and you know, we're not an ETH podcast, but I got it. I am really actually interested in your take there. I look at a chart. You know, I look at a chart, the very long term chart ET BTC and I see sort of a giant, you know, triangle or narrowing range. Like since inception and lately, you know, the the upper edge of that narrowing range has been, you know, EPTC has been falling kind of sort of bleeding out over a significant period of time now and then it just dumped recently and it's it may have dumped out of, you know, the support edge of the range, the bottom edge of the range. So I'm just I guess I do want to ask you, I mean, you said you haven't published. So maybe you're sort of reserving judgment, but you know, is this, is this the failure of that, you know, of that cross or, you know, or or still could there be, you know, another alt season, who knows next year, God knows when. It's it's a it's a really interesting question. And and yeah, I mean, I think long term bit corners don't need to care too much about this one way or another. I also don't think it is a 0 sum game and in general and markets like wealth can be created. Look, the Etherium people can make money and that doesn't I, I don't view that as being negative to Bitcoin. Like that's, you know, they're different. I view them as different. I think they are obviously if you look at how these block chains operate and what they, what their purposes are, they are different. Some people have a different view on that. A lot of Bitcoiners that I'm friends with or say that it takes away investment from Bitcoin. But like, look, Bitcoin doesn't do the things that Etherium does most of them. And that's good. Like I think that's they should be different. Yeah. I mean, look it, it, it years ago in like 1617, EPTC was much higher briefly. It spiked huge. Then during that 18/19/20 bear market, it came down, which historically has been the trend, right? People fleet equality and they they would fleet a Bitcoin and it and it's initial spike was all in the ICO craze, which you had to buy ETH to do, right. So like, that's why it went up high. Then it rebounded The the it's it's more local. Last few years high was all on the merge, right? So this was all on there was a very boring summer in in crypto markets. This is like 2022, right? And like people got really excited. Traders got excited about the merge, like the when Ethereum, right, they changed out the engine mid flight, right? They changed from proof of work consensus to proof of stake. And so there's a huge run up then when people are like playing a trade around whether they should, whether this was bullish, right? And it peaks at the merch and it's been basically down only since. And that's like 2 1/2 full years of down only EPTC ratio, literally lower lows and lower highs pretty much the entire time in a pretty nice downward channel, right? I think this is this time is a little different, right? I mean, you're in a bull market historically these bull market, you think? I mean, Bitcoin's the only asset that made a new all time high so far, right? E has not. And I don't, I think even Solana, which you know, 10X from fall of last year till now or till recently or whatever, like still didn't make a new all time high yet either. I think the situation is kind of different. You haven't seen an alt season. What we ended up seeing in crypto markets over the last year, a Bitcoin LED rally fueled in in large part, I think by hype around the ETFs. Think about this drum beat, right? Like we pretty much knew the market was pretty sure they would be approved as early as like late September. And you had months and months and months of like James Seyfart and Eric Balchunis, like updating us with new filings. I mean, it was a really fun market to be honest, because you had this drum beat. And like people that followed closely were pretty sure even in August when that ruling came out against in Grayscale's favor against the SEC, that like this ruling was the nail in the coffin for the SE CS denial arguments. So you have this giant, giant drum beat that of course did culminate with them launching in January on January 11th. And then you had about two weeks where people hadn't really figured out how to like buy these yet or whatever or like, you know, getting turned on. But Grayscale was out out flowing. And then after about two weeks in like from like mid to late January through March, you had just like unbelievable amounts of inflows into these products and Bitcoin just ran to new all time highs. Nothing else did right. And then you had you had basically the only the, the hot from a token standpoint, the other hot thing in crypto. And I'm gonna get to the question part of this 'cause I think it's relevant, but it was meme coins, right? There was all this meme coin frenzy. It was a point where 10,000 meme coins were being launched on Solana an hour every hour. One of the most successful crypto start-ups this year is Pump dot Fun, which literally like automates the process of launching a meme coin like from literally creation of the token to getting it listed on a Solana decks right so that it can trade and. Turn key solution for creating meme coins. That's exactly right and and now obviously meme coins by definition have no utility, right? They're not they're they are literally memes like to be clear, in case the audience is unaware, they have no purpose at all. That's the point. Separately, I think that like says something really dark about the state of the global economy and people's feelings of hopelessness of getting ahead that they, it's, it's, it's somewhat akin to the rise of like sports gambling, in my view, which is, and at least sports, like his teams playing sports. It's not. I mean, meme coins are the distillation of the most cynical way of trading, right? Like the literally trading it for no reason at all. It's the apotheosis of financial nihilism. It is. It absolutely is. It's extremely well said. I completely agree with that. And so you have this barbell of like the most iconic, you know, secure, scarce digital asset ever created, like having institutional adoption on one side, all of the crypto stuff in the middle, not that interesting to the market. Defy NFTS all doing like me, like I mean defy functioning successfully, but you know, it's not defy tokens not doing great and what not and like the story isn't defied I the traders, the institutional traders that trade crypto, not energized by it. NFT trading volumes still down a lot from where they were right. All these sort of other narrative web three like kind of going nowhere at the moment. A lot of that built on Ethereum and then on the far other end, this like apotheosis of cynical, you know, hopelessness of meme coins. So that's where we've been. And because of that, and now, of course, as a platform, Etherium effectively facing unprecedented challenge from Solana, like in all of the history of these networks, like Etherium's never faced such a compelling all L1 as Solana. It's, it's also fundamentally a different technology than Etherium. So it's not just like previously all these Etherium killers, quote UN quote, were just sort of like clones of Etherium, right? With slight tweaks. Solana's fundamentally designed much differently, for better or worse. I, I think all of this has really weighed on that ETH BTC ratio and I mean, just if you want to look at the ETH soul ratio too to learn about that story, you'll see it there as well. So I, I, I think Ethereum is sort of getting squeezed on both sides. It had tried to be remember they had they, they have they altered the monetary policy yet again and started calling it ultrasound money, because the more it's used, the more deflationary it gets. Like, OK, it's it's an interesting, it's interesting to me. But again, like that, I don't think they understand what sound money actually means, which is that the line should be straight, like we should know what the line is, right, and should be unchanging, credibly transparent, right, which is what Bitcoins monetary policy is. Whereas there's this all over the place, right? And yes, it it sometimes is more deflationary than Bitcoin. Great, OK, But like, you know, the whole point to me of a sound monetary theory is even more than the fact that it that it that it's monetary expansion declines over the time, sure, and eventually decays to effectively nothing even more than that. It's that it's predictable. It's transparent, predictable, incredibly unchanging. It's inelastic. Like that's sound money to me. And of course, Ethereum is not that. So it's it fails at that. And I think smart people know this. Investors in Bitcoin because of its monetary policy, they know that Ethereum's not credible in that way. And then as a platform turns out like for applications and other types of crypto use cases, Solana has proven to be very competitive here, right? So in that sense, it's actually getting squeezed on both sides from a narrative standpoint. I think that's been a big part of that story. And and, and yeah, we just haven't seen the alt season where like ETH and a bunch of alts RIP. So like, I mean, I, I don't know if we will. I don't know that we won't. I do think Etherium will find its footing a little bit now that it also has ETFs, but also the recent drop. I mean it, it's pretty much widely used now as like a collateral currency and and not much more for the people that we talked to, right. So that's more about well, can I buy ETH and fund it with can I buy Solana and fund it with, with ETH, right? Like it's there, I would say. And this is does make me wonder about whether we are nearing a bottom in that ratio because I can just tell you broadly across the crypto trading, you know, like diaspora, I don't know like ecosystem community like that. We talked to just basically all of the biggest crypto trading funds who also trade Bitcoin. Obviously. I would say it's pretty unprecedented bearishness for ETH, at least on a relative basis right now. And so you kind of wonder also if you look at they have the same dynamic on a much smaller scale with the ETF's with grayscale outflows and you know, net inflows into others, it's much smaller scale. To be clear, like these things are trading $300 million of volume a day right now on it's like bad days. Bitcoin ETF's trade a billion, so it's like more than triple. And of course Grayscale like GBDC was 30 billion in assets and outflowed half, which is a huge amount and an absolute basis E ETF EE was 10 billion. And and so it's like it was a third, right. So you are seeing the ETH EE outflows recede. And so you, you, you probably do start to get to a net inflows situation cumulatively for the ETF at some point, which should then be more constructive for ETH. But right now they're experiencing unprecedented outflows with an issue or complex that frankly was unprepared to market them, right, because everyone thought they would be denied and they, they really did think that so. And most of them are focused on selling Bitcoin still. I think if you, I, I bet you, if you talked, if, if, if they would talk, you know, off the record or candidly, most of the ETF issuers that have both would have preferred that they weren't the ETH ones were not approved yet. And that they could spend the next year or two educating and marketing the Bitcoin ETFs and then move to the Etherium ETFs. Like they're really, there was not the like 5 month drum beat and like anticipation and then like massive explosion of interest right when they hit them. I mean, I think people are going to look back and really be, be really blown away when they, when they recall, like the, the drum beat of excitement for the Bitcoin ETFs was truly something you, you probably won't see again ever in markets. So all of that contributing to Bitcoin's outperformance. That's a phenomenal summary, by the way, for listeners who feel like digging back into the archive. There's a period of probably a couple years where I used to write articles. I did about a dozen articles for Coindesk, and my goal was just to write about Bitcoin, you know, basically just to get Bitcoin content, you know, into the broader cacophony of, you know, whatever gets published on Coindesk. But I did write one article about Etherium and the title was Sell the Etherium Merge. That's a good call. That's what happened. Yeah, I did not, I actually did not expect that trade at least in Bitcoin terms to to last as long as as long as it has, but but there you go. Well, you mentioned, Alex, you mentioned use as collateral. Maybe we could talk about another form of collateral which is wrapped BTCWBTC. You know, I hear there's some news about change in the structure of wrapped BTC. My guess is you're aware of what's going on there. Can you tell us a little bit about what's going on because this does affect the use of Bitcoin as collateral and therefore effects Bitcoin demand throughout the ecosystem? Yeah, so so RAP BTC is an Etherium token collateralized with Bitcoin 1 to one, right. So think of it like a stable coin, except instead of tracking the dollar and holding dollar like assets, bit go issues the RAP BTC token and holds Bitcoin in an equal amount and they have a good it is a good tool. If you're somebody who wants to use Bitcoin in other cryptocurrency ecosystems, primarily Etherium D5 right? You want to lend Bitcoin or borrow Bitcoin using Ethereum's platforms, then then rap Bitcoin is the main way that people do that. And to Bitco's credit, this is a pretty good product. It has daily cryptographic attestations of the proof of reserves of the Bitcoin Bitco, of course, a very old and and long time multi sig based and and promoting Bitcoin custodian in the scheme of things, one of the oldest and if I think if you go, I think it's WBTC dot network. Maybe is the dashboard so far. If anybody wants to let me just double check that so I give the correct URL dot network. I think this is the website. It is Yep. So they have a dashboard. So they have 154,000 Bitcoin, which is a lot. I mean, that's, that's that makes this product or whatever. And by the way, it looks like it's on several other networks too, not just Etherium, but it's 154.265 BTC and that is then tokenized into an ERC 20 token on Etherium, right? That lets you just do Bitcoin on, on Etherium. Now obviously it there's, it's not, you know. Similar order magnitude, right to MicroStrategy or you know, the biggest Bitcoin ETFs? Just so that's right at. The stage for listeners like this is. A That's right. It's it. That's a lot. Ash, this is a major stack. Of coins yeah there's a if we look at where bitcoins currently are sitting on the network I think MicroStrategy is well over 200,000 Bitcoin at this point but they're they're may be the single largest holder probably at US some of it sitting with the US government a fairly large amount or other governments that seize them right this would remember Trump had announced in Nashville that he wouldn't sell those Bitcoin and that would form the basis of the national strategic Bitcoin stockpile. He said other governments have seized Bitcoin, right? Germany was selling all this Bitcoin down that they seized from a piracy website. Like of course, ETFs hold a lot of Bitcoin and then by the way, the plebs hold a lot of Bitcoin as well. Like the everyday person holds plenty of Bitcoin in that sort of capital stack. But one of the big ones is Bitco's wrap Bitcoin products. So it does matter. Obviously these WBTC tokens have different, I'll use the well overused term, trade-offs. They have different features than actually native Bitcoin, right? You're not inheriting the security of the underlying Bitcoin blockchain. You're relying one on the custody of Bitco, both their, their competence and their you know that they're not malevolent, they don't steal the Bitcoin or something, right? I think WBTC users know that, but that's it's not sovereign, right? Of course, you have smart contract risk related to both their contract that they issue it with and wherever you use it. If you put it in Ave. or Compound or one of these Defy applications on Ethereum, then you're taking risks there too. So it is different risk profile than native Bitcoin. But yes, native Bitcoin collateralizes it. My understanding of the story is that Bitco is now spinning it out into a joint venture with Bit Digital, which is a foreign company, I don't know exactly where headquartered somewhere in Asia that it involves Justin's son, right? And I don't know Justin's son, the founder of Tron and also, I believe one of the largest crypto traders in the world. And I think I don't know the motivation for that. I don't know what it really will mean, what it appears to mean. I, I, I saw Mike Belshi, the CEO of Bitco saying that it that there will be a multi jurisdictional multi sig now holding the keys for the underlying Bitcoin. I I don't know, but I think people are some people are concerned about Justin Sun's involvement in that right. So I think that's that's the story. I don't have much more information on it. I do know I did see that maker Dow, which is a decentralized stable coin and sort of lending platform on Ethereum, one of the oldest Defy apps they allowed and had a large amount of their stable coin die collateralized with wrapped Bitcoin. And there is a motion in their governance process to remove it as a thing in direct response to this. And I saw also that it appears Coinbase may be about to launch their own version of rap Bitcoin now CBBTC they said. So yeah, it's an interesting it look and I would step back to and broadly say, you know, people ask me, are the ETFs good for Bitcoin? Like, you know, like do we really want Bitcoin over there? It's not as good as, you know, I I personally self custody my Bitcoin and I'm not going to say how, but I believe in using actual Bitcoin and gaining the full sovereign benefits of holding Bitcoin myself. And it's hard. And if you can't figure out how to do it safely, there's a lot of great resources out there by the way, to help. But if not, I think that's OK. Like, but you know, I mean, I trust my stocks to Fidelity like I like, I get it, like I I but I also happen to believe that if you want Bitcoin to be extremely widely adopted as money, even just as digital gold. But let's even say money, if you believe in the concept of hyper bitcoinization, that it's going to be so widely available that you you might pay with it, you might save in it, Maybe you'll invest with it. Like it's going to be in every single system. Like, right, Like dollars in a bank account are different than dollars in a money market fund and dollars on in cash in your hand. Like they're all, they all are the same unit, They're all the same asset, but they have different properties. They have different, you know, cash under the mattress is more secure than cash in the bank in terms of having it literally stolen from you, right? Like if you're in, if you have your cash in a Cyprian bank And and like in the, you know, in the last decade, they took half of it, right? Like when the country was going bankrupt, like they, they did a haircut on it. This is what got Winklevoss twins interested in Bitcoin, by the way. They can't do that if your cash is under the mattress. Similarly, like if they try to 19, you know, executive order 61 O2 your Bitcoin. If they just say they it's illegal to own Bitcoin the way that it once was illegal to own gold. Well, if you have the Bitcoin self custodied securely, like they're not going to be able to take it right, So it's going to. But if you have it at a third party custodian or exchange, maybe they can't. So there's, there's different trade-offs, but I believe that in the long run, like for Bitcoin to be hyper successful, it needs to. Be everywhere Bitcoin in your bank account, Bitcoin on your brokerage account, Bitcoin in your gold vault, Bitcoin perhaps on your Ethereum if Ethereum's going to exist like there are there. So I don't view that like rap. Bitcoin is like bad for Bitcoin the same way I don't really view the ETFs as bad for Bitcoin. I do think it's incumbent upon Bitcoiners to make sure that the values, the features and capabilities of Bitcoin that express its most important underlying values like permissionlessness, openness, credible monetary policy, self custody, unstoppable payments, those features that that enable those things do need to be protected in the protocol itself in the long run because that is important. So if all the ETF issuers were to band together and say we want a hard fork that makes Bitcoin KYC for every transaction, that has to be opposed, obviously, right? But I don't I luckily it's not a proof of stake system. So the amount of Bitcoin that you hold basically gives you no technical advantage in dictating the future of the protocol, unlike a proof of state network where capital literally controls consensus. So, but nonetheless, there's a giant pile of this Bitcoin and rap Bitcoin. And I don't know, I mean, it looks like Coinbase is planning to compete. It's possible others will as well. Does your Bitcoin custody set up keep you up at night? Maybe you still have coins sitting on an exchange worried about hackers. Or maybe you've set up your own self custody but don't feel safe with your Bitcoin savings stashed on a little plastic device in your desk drawer. Gain Peace of Mind with On Ramp and our multi institution custody solution. Here's how it works. On Ramp creates a dedicated multi sig vault just for you. 3 separate institutions each hold a key on ramp bit go and coin cover, but none can move funds unilaterally. Instead, only you have control over your coins with on ramps multi institution custody. You'll sleep better at night knowing your Bitcoin is stored with best in class security on chain with fault tolerant multi sig. If you believe your Bitcoin is going to be worth a lot someday, don't jeopardize that future by exposing your coins to hackers on exchanges, $5 wrench attacks in the real world, or perhaps most importantly, the risk that you might screw something up with a highly technical self custody set up on ramps. Multi institution custody eliminates single points of failure, reduces your personal attack surface and technical burden, and provides access to financial services that allow you to confidently secure your Bitcoin, including inheritance planning, insurance backed warranties for all balances and transactions, low cost trading, and more. Bitcoin is a once in a species asset, secure it right. Learn more at onrampbitcoin.com. Yeah, No, I think it's really interesting. It's really well said with respect to, you know, the ethos in Bitcoin and the core, the core factors that must be protected on the main chain. You know, some of our listeners will be hardcore Bitcoiners, they understand these distinctions. Others are newer and and learning, you know, one of the things we're doing at onramp obviously is multi institution, multi sig Bitco, by the way, is one of the key holders. And so one one way to understand this is rapt BTC is and maybe this new instantiation. Likewise, by the way, on ramps, you know, doing multi jurisdiction custody. So these are sort of good ideas. There's they're, they make sense with respect to security, you know, for anyone who is willing to entrust, let's say a quorum of third parties to, to hold their Bitcoin. And of course, with the wrapped BTC having the extra layer, as you pointed out rightly of let's call it, you know, Ethereum risk or Tron risk or whatever, whatever, wherever that coin is wrapped, whatever wraps that coin is that other sort of additional, additional layer of risk which is worth being aware of and worth understanding. Absolutely. If you're playing in that space. And yeah, yeah, the reality of Bitcoin just being, if Bitcoin continues to succeed, people will do additional new and strange and sometimes terrible and sometimes wonderful things with their coins. And that's just gonna be the path that adoption takes as this thing gets bigger and bigger. Yeah, we're going to see weird stuff. I agree. Well, you've already seen. You and I both have already seen quite a bit of of weird stuff in our travels. You you probably more than than I have. That's why I like it. I mean, that's one of the main things that draw draws me to this to be a researcher in Bitcoin and in crypto is it's just so interesting. There's just so much interesting stuff happening. I of course, I believe in the long term future and, and importance of Bitcoin, but like also, I just think it's a fascinating industry to cover and work in. There's so much weird and exciting stuff happening and, and of course, at its best, right, like crypto, including Bitcoin can have such a massive change to the world, right? It can be such a positive at its best. At its worst, it's one of the most entertaining and terrible industries in the history of mankind, right? So like we've got such a broad thing, you know, we just try and you know, I try Galaxy tries, for example, to be on the right side of that and not be part of the fraud or scams that have plagued, you know, the high profile ones that have plagued us in the past. But yes, at dude at its best and in Bitcoin is certainly on the side of the spectrum of the best. I think it's, it's just such a fascinating and positive thing that it's just about, you know, you trying to bend that arc over time towards, you know, permissionlessness, scarcity, self custody and and good monetary policy. That's it, that's it. Never a dull moment. Very rewarding reminder by the way, people, people I periodically get inbound, you know, asking me, you know, should I come work in, in the Bitcoin industry and I say, well, just don't forget the downturns and don't forget the don't forget the cyclicality. Oh, it hardens you. It hardens you completely, right. I mean, we've got, I mean, it's like what there's all these memes, you know, they're like, Oh my gosh, the NASDAQ down 5%. Like, you know, stock guys, like, you know, despondent, he's freaking out, right? Bitcoin is going down 50%. We're like, do I have any more money to buy? Or like we're like laughing memes on Twitter and stuff. I mean, it's it's we've been through a lot the longer you're in this space. And by the way, just to be clear, I mean, volatility is going down over time. It has been right. I mean, you know, there was AI actually remember there was one of the scariest downturns that I saw and people don't talk about this lot was Labor Day 2017. Bitcoin was up around $4000, crashed to like 1400. It's a big drop, bigger than the 50% drop. This is during what we know now was a massive bull run. It ended up like almost 20 exit from there and in just a few months, right? But like people didn't know that was going to happen. They didn't know it was going to go to 20 K in December 2017. Only three months before it was down like 65% in the middle of what was supposed to be a bull market, right. We just saw what a 25% drawdown in in pretty aggressive recovery too. I mean, we're still in like the high 50s and low 60s. So we're not like back at all time highs, but like, I mean that this is a that was a huge market move. Bitcoin had last week, last Monday and the weekend before, right? Like down 25% is a lot of money. You had a $10,000 red candle. Like on that chart, that's a big decline, but it's only like 25%. Like we've seen 60 plus percent drawdowns during Blair bull markets, right? So like, if you've been in this space a long time, like it and it's good because like the same people, you know, we, we, if you look at the long term Bitcoin price chart or you, you explain and teach the fundamentals of Bitcoin. Smart people understand that and see the long term potential, right? But yet still a lot of these smart people are then like, Oh my gosh, is it going to 0? And I'm like, wow, how are you still asking that? Of course it's not going to 0. What is this? A correction? A correction for ANTS 25. I'll. Tell you how exactly Alex, my first Bitcoin that I bought was literally the day after the hard fork August 2nd 2017, and it's not because I was waiting to see like how the the hard fork would shake out no, it's because I couldn't like fund my Coinbase account faster. Yeah right. Because I just discovered it and Bitcoin was going to take over the world and you know and and and yeah, I also viscerally remember because I made then subsequently a sizable buy right around call it 5K and it immediately went to 3K in like right three days and I was a little bit shocked and stunned and so yes, every new participant that comes into the market, you know, maybe it's guys buying in the ETF if they haven't owned it. Well, it's like my dad used to tell me, you don't understand taking losses until you viscerally understand it, which is literally in your gut as it's happening to you. And so yes, it's just, it's just, I think human nature that may just just be the way it goes. Yeah, it really is. You know, it's like that. There's that meme of like the two, the two information desks and one of them says like Bitcoin AT70K and it's totally empty. And then one or sorry, it's Bitcoin at 50K and it's totally empty. And then the other one says Bitcoin AT70K and the line's out the door. And it's like, you know, if you love Bitcoin at 73 K, you should love it at 50K. Like it's, isn't it cheaper? But it's just people just they can't do it, you know, but more people are, are, are getting good at doing it. More people are owning Bitcoin every day. The IT is also, I mean, I think this was very evident in Nashville, but, and actually an Etherium person wrote an interesting thread about this that was like a very focused Etherium like ecosystem person was at the conference in Nashville and they wrote a whole thread being like, I just need to explain to the Etherium world that like what is happening in Bitcoin is completely different than what is happening in Etherium from a, from a movement standpoint. Like Bitcoin in a lot of ways is a movement even more than a money. And well, movements may have monies and it certainly is a money, it's certainly a commodity type of asset as well. But the, the more and more people everyday are owning Bitcoin and buying Bitcoin, and so that volatility does go down. So those people are learning and, and, and the, you know, dude, I'm literally backing up the truck. I mean, I bought, I did. Another one was when BSV was forking from BCH, Bitcoin had literally like like a like a dying patient had still the echoes coming down from the 2017 drawdown. So it's now like November 2018, almost a full year later and it's still just like lower low, like kind of flat, though around six is the bottom, but just lower highs over and over again. And then it literally like flatlines at like 6K for like a month. And I'm like, all right, this is the bottom. We're at the bottom. I'm going to buy. And then, and then I think probably because Roger Veer or like Craig Wright had some Bitcoin and when they launched BSV, they decided to dump the remainder of their Bitcoin immediately nuke to 3K, like 50% additional drawdown from 6:00 to 3:00. And then that of course ended up being the actual bottom. And I was literally buying like I was like, oh, it went below 6. It's been at six for a month. It was like 5950. I'm like buying like you, you just get burned with that. I mean, you have a long and again, I, I was buying the whole time anyway, probably all the way down. I still now just I tell people I've been dollar cost averaging for five years now weekly, which is great because now I just know, look, did I, I, I can tell you for a fact that I bought every top and bought every bottom. Why? Because I'm just always buying like, and this is also the mindset that I, I tell institutional investors. I try to like, I'm not saying they have to think like that, right? They've got professional investors. They're going to do position sizing and portfolio strategy and maybe time try to time the market because they're good at investing, right? Not everybody is and I get that, but like, you know, I think I know that I bought every bottom because I'm just buying. And I think, and I try to explain to them that like this is a mentality, like they're try to explain the movement to the investors who see it as an asset or an asset class. And it is. But I'm like, there's also, you know, 10,000 people standing in a room to talk about Bitcoin now. Like you just don't fully get it unless you learn a little bit and get involved in Bitcoin culture. Like we're kind of built different at this point. And yeah, I mean, dips are for buying. That's it, man. I'd probably put that on my grave. Buy the dip. So it's funny you mentioned that story because I did essentially exactly the same thing. I went in with Ira money in the like the low sixes thinking exactly what you thought. Like, OK, this is the poor we're we're done here. And then gut wrenching puke downward. And that that was and then December stayed down and it was in January, OK, January, the following month that I started writing. Why buy Bitcoin? Partly because it was a test of the thesis. I was there was part of part of me was saying was screaming. Part of my brain was screaming, Andy, what if you're wrong? You better really make sure you understand this asset that that you've put a substantial amount of your net worth into. And so, yeah, that was the genesis for me of the research paper, you know, the test of the thesis, like, oh God, I. Hope I love it Well. And then by by June of 2019, so just nine or seven months after that drop from six to three at the end of 2018, Bitcoin traded over 13,000 during the first Bitcoin conference in San Francisco. And I recall that well. So we we went from in just six months, you went from three to 13 and just like, I mean what you're kind of like, well, alright, so then you're 5K buy or my 5500 K buy look or 5500 buy looks good. I think I'm pretty much I think Jesse has put out content on this before himself actually, but there's very few times historically where you could have bought Bitcoin and lost money. It's if you if you hold for X number and and micro strategy at their conference in Vegas I was at, they had a good chart on this to forget. I think it's somewhere we can find. But like again, similar idea, like if you held Bitcoin for like more than X number of days, then it literally hasn't ever mattered when you bought it basically, you know? Yep, the cycles. If you can hold the hold through four or five year cycle, historically you've been in the green. There's also the corollary, which I think is unfortunate, which is if you buy the top, you will be underwater for a long time. Yeah, historically speaking, that's true. Bitcoin spends most of its time well below the previous high price it does. People should just just get used to and try and remember, well, we're getting up close to time here. But I do want to ask you one more thing about volatility related issue is I think we're still waiting for approval of options on the Bitcoin ETF products. And by historical standards it's taking longer than usual, although that's been the story of all Bitcoin products at least anything that you can hold in a, in a brokerage account. Do you have any thoughts on the timing there? What's what's going on as well as you know, will that have a significant effect do you think on dollar price volatility, you know, once they are approved? I don't have a good update. It is irregular for it to take this long. Pretty much any other ETF can get options. So it's not clear exactly what the issue is to me. You know, I mean, there is no court case forcing them to approve options at the SEC. And we know that we have an SEC that is hostile to digital assets including Bitcoin. You know, technically they bitcoins the only asset they've said is a commodity. But I mean, like I said, they had to be drag kicking and screaming by the federal court just to approve the ETFs. Nobody really knows why. I mean, I don't really know why do they just hate it? I mean, look, everyone knows bitcoins volatile. There are a ton of volatile equities out there. Like nobody. It's not illegal for an asset for investing to be volatile, right? No risk, no reward. Like everybody knows that. Like there's nothing. I can't think of another reason why they would be delayed. I do think that it would be positive. It should make the market more liquid in general. It should help. It'll certainly help institutional traders and people that work in Bitcoin, everybody from minors to the APS that create and redeem shares in the ETFs to other types of traders, macro traders, right? I mean, options are very useful. They are also useful for gaining leverage or hedging, which are kind of opposite. I think you should get them. I think you will get them at some point. I think 1 interesting thing people don't talk about is that it will, it'll, it'll result in some changes in the Bitcoin market structure. And in that like, you know, Galaxy's one of the biggest options market makers in Bitcoin. We do tons of options trading. And again, like, you know, everyone like Galaxy that does from GSR and Wintermute and Cumberland and whomever else like these big institutional options desks, they'll they'll be impacted by, by the launch of this because there are plenty of we'll still be doing it. And I don't want to speak to Galaxy's future strategies in this area. But like, let's say you're a traditional hedge fund or that wants to trade Bitcoin options. Like you can go to a today, you basically have to go over the counter to firms like Galaxy, right? And yeah, I mean, you could try to, you can trade on dare a bit if you can figure out how to trade in an offshore, offshore options exchange, right? Many can't, we don't really have listed spot options. Not really. I think they're, I think there, there are, there are a couple like, but they're all that's not where the volume is. I think you will see significant volume on the ETF options, which because the Bitcoin ETFs are commodity based trusts that have one job, which is to hold and track the price of Bitcoin. Like it's from a pure exposure standpoint, it's identical. I mean basically to trading an option based on the physical quote UN quote spot Bitcoin. So I think you'll see some disruption in the Bitcoin exchange institutional trading world as these are approved. There's also other opportunities, like I said that I don't want to speak to, but that's one of the things we won't talk about a lot. I think it it could dampen volatility. It doesn't need to. It does help institutionalized the the options, the trading capabilities that that Americans would have access to. And look, Bitcoin is real. It's here to stay. You can buy it in trusts that are offered by the world's biggest asset managers. There's no reason you shouldn't be able to trade options on it like any other asset like. Yeah, absolutely, absolutely makes sense to me. It's a little bit of head scratcher, but but yeah, the lesson, one of the many lessons learned in Bitcoin has been that things take longer than you might expect if there's any involvement of the SEC or or other government agents fees. Well, Alex, this has been a phenomenal conversation. Really appreciate it. I do highly recommend people follow you. Your Twitter X account is at Intangible coins. Galaxy Brains. A great name, by the way. Thank you. Podcast, like I said, I listen to it all the time. I get a lot of value out of it out of it. So highly recommend that to people. What else you know, any place else you want to tell people that they can find you? Or any anything else you want to close with? I mean, I love the podcast. I, I'm really, I love multi sig in general. So I love that you guys are trying to and, and working to bring multi sig to institutional and, and institutional investors, retirement investors. I think it's really powerful. I think multi sig is one of the most. And by the way, Bitcoin has multi signature custody as a native feature, right? Is not a native feature on Ethereum. It has to be done with smart contracts and sort of generalized can be done, but it's, it's not a native feature. So I encourage people to look into multi sig technologies from providers themselves, whatever. In general, I think it's really powerful. You can read our stuff too at galaxy.com/research. We write a lot about Bitcoin, a lot about policy, about other cryptos too, if you're interested. I really tell my team, our focus is to not just tell you what's happening, but to offer a viewpoint. So you can obviously disagree with the view, but I feel that it turns out, fortunately, people are lazy. They like to be told how to think. We'll always offer a view, right? We're not just like, here's an overview of XYZ. We'll always be like, This is why it's matters or doesn't matter. Maybe it, we don't think it matters or this is the way to think about it. So we try to be offer a little bit more insight than some of our sort of other friends in the research world. So check us out galaxy.com/research. I love it. And just in case anyone had any doubt about whether Alex Thorne has a view on things, he definitely does. That's one of the things I most appreciate about you so. Yeah, my views are not scarce, I'll tell you that, Andy. Well said. Well, we'll close on that one. And thank you, Alex, for coming on scarce assets. Thank you, Andy. Great to be here. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit on rampbitcoin.com/contact to schedule a consultation with one of our private Client advisors.
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