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 22nd 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'm happy to be here with my Co host Jesse Myers and our guest Eric Weiss. So I'm proud to say that I shared Eric's first podcast experience. He and I were guests together on I think Swan Signal in around February of 2021, Needless to say. Yeah, Needless to say, that was almost a full cycle ago, so lots changed since then. Eric may be best known in the Bitcoin space for orange Pilling his friend Michael Saylor, and he in turn may be currently the world's most rapid acquirer of Bitcoin, which makes Eric arguably one of the most important players in Bitcoins history considering how he's affected the modern accumulation of Bitcoin. He's also a pioneer though, in building bridges between Bitcoin and the traditional financial system by virtue of founding the Bitcoin Investment Group, which launched, I believe, the first Bitcoin investment fund that allowed in kind distributions of actual Bitcoin, IE Bitcoin out the out the back end, which which really was was a pioneering move. And I should also mention that we're recording a week after the election and Bitcoins dollar price has jumped into the high 80s, eighty thousands that is, and there are rumors of nation state adoption. So anyway, very happy to be talking today with a man who played a major role in this recent trend of Bitcoin adoption and that's Eric. Eric, how are you? Great, thank you for having me. Thank you for that ridiculously generous introduction and thanks for being so nice to me on my first podcast. As you can recall, I was very reluctant to do it. It's not it's not what I spend my time doing, but you and Brady were very nice to me. So I've done a couple more since. So happy to be here and happy to be here on such an auspicious occasion. I we're pretty much at the all time highs right now, so that's an exciting time. It's nice to it's nice to see Bitcoiners smile after what has been a an interesting, if not bumpy, Rd. for pretty much all of us. Yeah, it's been a long winter, huh? And it kind of feels like a weight has, is, is lifting or has has lifted and suddenly we're all, you forget what that dopamine is like. And suddenly it's back. Yeah. It's good to have the bank. Yeah. For me, like, the best part of it is, you know, if you're doing what you guys do, what I do, which is educate people on Bitcoin, espouse the benefits and in so many words, you know, tell people why they should own Bitcoin, the people you care about mostly, Right? And that comes with a level of anxiety because it doesn't just go straight up. So it's nice when the people that you care about and the people you've given advice to are smiling and happy and in a good position. And, and for me, that's the best part about it. It's, it's more a feeling of relief than it is like, you know, excitement. I got a text yesterday from a guy who I helped orange pill at the top of last cycle and thankfully he held on through the whole bear market and I'm so relieved and so happy for him that like now he's actually seeing the benefits of. Of that exactly. That's how you know it was a well administered orange pill because he held nice. That's it. And greatness and strength are forged in in those painful eras. And so now, now he's ready for anything. I mean, if there's another savage bear market sometime in the future, in the next cycle, your buddy will be will be well prepared. Yeah, I think, I think in some ways the bull markets are just as difficult to huddle through. You know, right now it's really difficult for people to huddle. It's like, Oh my God, we're at, you know, whatever it is 89,000 and I could sell the Bitcoin that I've held on to for whatever period of time and do XYZ, right. And so it's it's just as difficult to huddle through the good times. Yeah, I was having that conversation with my dear wife this morning. You know, she's asking me questions. She's like, hey, Andy, you know, how come you aren't more euphoric about the price? You know, how come you know, how come you're not bouncing, bouncing off the walls? And I'm like, well, you know, other than having been through a couple cycles here, you know, so that so that tempers excitement. It's also the not wanting to screw up in the in the bull market phase, right? Yes, yes, there are maybe a few things I'd like to peel a couple of coins off to, you know, off the stack to do. But on the other hand, yeah, I want to be careful, careful about the timing. And so I I find the bull. Market. At least as stressful as the as the bear markets, but. That's I agree. 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 setup. For more information, check us out at on rampbitcoin.com. Well, you've been leading, you know, high, probably ultra high net worth, you know, and high net worth and, and institutional type investors into the space. You've been educating them, you know, helping them with their with their journeys. You know what what lessons learned or what thoughts do you have about your personal interaction, you know, whether through Bitcoin investment group or or otherwise? And how does that lead into into the conversations you're having with these folks today? Sure. So I think orange peeling someone. It's not. It doesn't happen usually over the course of one conversation, people kind of a ready to embrace Bitcoin when it's right for them. You know, Sailor's a great example. I must have brought it up, you know, countless times over the prior, you know, 3 or 4 years and you know, he's running a 2000 person company competing with the likes of Microsoft and Salesforce. And you know, this was not on his radar. He was, you know, in the trenches every day. And I bring this up and he's like, dude, come on. Like, I got real problems to worry about. And, you know, but you politely keep there and, and, and you're there when they become interested. And during the pandemic, things changed. And we were trying to make sense of things going on in the world. He was dealing with, you know, issues that he's talked about extensively, like having 500 million in cash on the balance sheet, being of the impression that the real interest rate was something like 10%. He's losing 50 million of purchasing power a year. And the company, he's got 2000 people working to make about 50 million a year. It feels like a treadmill. So it was when he was ready, you know, and I brought it up again and he said, OK, tell me, tell me more about this, right? And so it's kind of a matter of being there when people are ready, I think, and being a trusted voice and being respectful of if they're not ready, instead of beating them over the head with it, because you start to lose credibility when you start to beat someone over the head with it. And you sound like a evangelical, you know, lunatic, right? And so then I the other thing I think is all you can really do is answer questions, educate someone, pique their interest and point them in the right direction for additional resources. Because what gets someone to huddle through, like what Jesse was saying, you know, buying at a high and then holding it through the lows, that doesn't happen because someone told you to do this that you think is really smart. That happens because you've done the work yourself. You understand, you genuinely understand the value proposition and you don't want to part with it, right? You and and so the education is essential to a true orange pill in order for somebody to really be, you know, a Bitcoiner, in my opinion. So that's the role that I think we play is providing information, providing resources and and the story becomes infinitely more credible when you can provide other resources, whether it's a book, a podcast, you know, someone else speaking and they go, OK, you're not the only lunatic, you know, obsessed with this stuff. These other people are also pretty smart. Have, you know, different views, different angles, different analogies. And personally, I think that that's been Michael's greatest contribution is his ability to articulate the value proposition in so many different ways that people find the metaphor that they relate to and then they go, oh, I get it. I'm a, I'm an engineer, I understand that angle. Or, you know, I'm a physicist, I understand that angle. Or I'm a economist, I understand that angle. And sooner or later, he finds a way to relate to them. Or just, I've seen ice melt and I understand what that means, you know, to, to be watching a melting ice ice cube of your, your Fiat purchasing power diminishing over time. I have to, I have to ask the follow up of, I'm just so curious. Do you recall, was there any particular angle or anecdote or factoid about Bitcoin that really turned Michael Saylor's ambivalence towards it into active interest? We were hanging out by his pool and basically everything was closed. All businesses were pretty much closed for the most part. And the stock market was going up and we were scratching our heads because common sense tells you that when businesses close, the value of their stock shouldn't go up, right? And he recalls me saying, you know, any time there's a paradigm shift like this, there's opportunity, we just need to find it. And then I went on to talk about Bitcoin. And I think what struck him is the scarcity piece. And he was, unbeknown to me, he was looking for a store of value for Microstrategies, $500 million. It wasn't something that we had discussed. I wasn't aware that that was, you know, his mindset. And so I think it was in that context, you know, when I mentioned, you know, the the hard cap, that all of a sudden he was like, huh, OK, tell me more about that. Good times, Good times, yeah. Amazing. The hard cap gets everybody, really. Yeah. 21 million, that's that's the thing. There are other things too, but but that's really the thing. Well, I'd like to, you know, weave it back into some of your experience earlier in your career as well. So, you know, Jesse, Jesse has the has the honor of having provided some of the framework for bitcoins total potential value that that Michael's been been using, which has been fun to see. You have spent time in the bond market. You know, when I presented my thesis in my book five years ago and talked about, you know, which, which asset classes is Bitcoin going to eat share from? I actually omitted bonds. You spent a lot of time operating in the bond market. I'm curious, you know, 11 is just lessons learned from that that are, that are relevant to anything going on today. But I'm also curious how you think that might have been formed your understanding of Bitcoin? I think that one of the primary markets that Bitcoin is going to have an impact on our fixed income and bonds. As a matter of fact, a couple years ago I did some podcast, I forget what it was, and I laid out, maybe it was Breedlove and I laid out the new portfolio where there used to be this like 6040 kind of, you know, fixed income equities thing. And I replaced fixed income with Bitcoin basically because, you know, the general purpose of fixed income is store value and people want to keep pace with inflation, make some interest on their money. Hey, it's denominated in U.S. dollars, so we're not taking currency risk, right? Was kind of like the general perception. And I think as people start to realize that bonds are essentially locking in a loss as opposed to a gain, that people start to move very heavily towards Bitcoin from fixed income instruments. So I think it's they're they're going to be one of the biggest hit. Yeah, that that makes sense. That makes. Sense with the exception, yeah, I would just add like you know the one challenge there is the cash flow, right. So there are a lot of investors who are very big on cash flow. They're on a fixed income, they've got a bunch of money, whatever it is. And it's like, OK, I've got $100 million, you know, and this is 10%, you know, income. And I'm going to make, you know, 10 million a year. Great. I don't care if that's, you know, a good number, a bad number, but I can picture living in a Fiat world on my 10 million a year. I don't care, you know, So there's that. And then if you move to Bitcoin, it's like it takes an explanation, you know, where is my income coming from, so to speak? And and the other much smaller piece is portfolio, portfolio volatility and how bonds can help offset some of the volatility from equities and reduce overall portfolio volatility. But, you know, but then you have to weigh that against like, OK, you're destroying value at a small nominal percent every year versus Bitcoin. The truth is people aren't opposed to volatility. They're opposed to downward volatility, right? Nobody. Yeah. And, and if you don't have the volatility, you can't get the upward move, right? So. We've, we've at Onrep, we have Mark Connors who's done some incredible research recently kind of highlighting how Bitcoin is, is good volatility and that, that everyone in, in traditional markets, in portfolio allocation is, is trained to avoid volatility because it is historically always meant downside volatility. And Bitcoin is the opposite, where you have those ten days a year where everything jumps upwards and you actually want that volatility in your portfolio. I hope it's more than 10 days because the last 10 days have been pretty good, yeah. Right. Amen. Well, I mean, look, Eric, you, you spend enough time being active in the bond markets. I mean, help us speculate a little. Who's going to buy all this Treasury paper, you know, assuming ongoing deficits, which seems like a safe assumption. You know what, what do you have any thoughts about how that market evolves in terms of the holder base? It's a good question. I mean, it's one of the few things that concerns is probably too strong a word, but it's it's one of the things I think about it. It would be problematic if nation states struggle to issue debt to fund the government if they weren't on a Bitcoin standard or didn't have Bitcoin. That would be problematic and you know, making an enemy of a nation states suboptimal course for Bitcoin. So I think about it, but I think there's equal chance that nation states will embrace Bitcoin and they'll be the beneficiaries of this. And there's no reason that they can't do what MicroStrategy has done and essentially issue Bitcoin back debt, which may be even more powerful than Fiat back debt. So it could be a tremendous boon to Treasuries. Yeah, I think that's right. You know, I used to worry about hyper bitcoinization. Everyone somewhere on their, on their Bitcoin journey thinks that it's happening. Now they think that they think that Bitcoin is taking over and the dollar is dying. And you know, I've become much more cautiously optimistic that notwithstanding the problems with the dollar, it's probably got pretty significant legs left and and there's a good chance of a of a peaceful transition here. In a long and smooth transition. I I don't see a transition. I think the two can live in perfect harmony indefinitely. I don't think the dollar has to be aggrieved in any way for Bitcoin to thrive. Yeah, I I just don't see that. I think that the world probably doesn't have an appetite for 160 currencies and that a lot of currencies will go away. But the world likes currencies. And I, you know, maybe we need a few, a dollar, yuan, I don't know if we need a euro or something. But you know, there'll, there'll be some currencies. And I think people will save in Bitcoin and transact in Fiat. And Bitcoin could, I mean, Bitcoin could proliferate the dollar to the entire planet like, you know, there. There's no reason that the dollar shouldn't be everywhere. And so in this scenario, is the dollar partly backed by Bitcoin or is it, you know, as it is today, unbacked Fiat currency and they're totally separate or, you know, do they, do they become intertwined? Yeah. I mean, I, I certainly envision scenarios where they become intertwined, especially with what, you know, Trump and Cynthia Lummis are talking about, about a strategic Bitcoin reserve. And, you know, Trump even going as far as say that, you know, Bitcoin can help the United States, you know, pay off their debt, so to speak. So that's intertwined, right? That's the credit of the US dollar being backed by Bitcoin. So yeah, I, I think nation states that embrace Bitcoin and I, I, I would imagine based on, you know, the, the announcements coming out of the Trump administration and members of Congress, that there's some game theory going on right now who wouldn't want to front run the United States. And MicroStrategy, who said that they're going to raise $42 billion and that they're going to buy Bitcoin with. And then they go and announce like a eight days later that they already bought 2 billion. So I think. I think they're probably no shortage of nation states or or large players who are, you know, getting into it now and in a big way, yeah. It'd be interesting to see if some news come comes to light soon. We've heard rumors. I don't know if we've heard heard any confirmation yet. We're recording here on November 12th. But we'll we'll see if if interesting things come to light. Yeah, it's hard to say where where this falls on the administration's priority list. You know, Bitcoin as Bitcoin as we tend to be pretty myopic, but, you know, choosing cabinet members and, you know, running the most important country in the world, I'm sure it comes with other priorities as well. And you know this, this one might not be #1 on the list. But but it could still inspire game theory. From other. Countries to try to front run any potential action. Very much so, especially when, you know, with the way we're talking about it, it's like we're really, we're really kind of showing our hand a little bit. Yeah. And you've had the front row seat to the, you know, to the leadership in the corporate adoption with respect to micro strategy. Are there any major differences that you think about with respect to nation state adoption as opposed to corporate adoption? Is this something that's ever crossed your mind? They're remarkably similar. It all just depends on, you know, every company has to navigate their board of directors, get the appropriate approvals, get everyone or enough people on the same page. And it depends how much sway, you know, the the folks who want it have within the organization. And I think the same can be said for nation states. You know, if China wanted to implement it, my guess is there wouldn't be a lot of discussion, right? Xi Jinping would say, we're doing this and they're going to do it. He has all he has all the voting stuff, right? So it depends. In a, in a Democratic Republic, it might be, you know, there might be a couple more, you know, amens that you need to get it done. Yep, each system having its own set of hoops and challenges that it has to deal with. Part of the beauty of the game theory being that it's great for although more authoritarian systems can adopt it faster or make a decision, it's also potentially threatening a little bit to their to their power and their control. And so good news for those of us who live in democratic republics, where it might take a little longer, but yeah. But the ethos might be closer aligned. The other good news for Hodlers is doesn't much matter who adopts it, we benefit. That's it. What a what? A cleverly designed design system. It just. Seems to work out genius. Yeah, Yeah. Well, I want to, I want to pick your brain a little bit on if Bitcoin, if Bitcoin is close to inevitable. Bitcoin companies are not necessarily. Earlier in your career, you spent some time as a venture capitalist building new companies is hard. Do you have any thoughts on why building successful companies in Bitcoin is also perhaps not so easy? Yes, there's some success cases, but you know, yeah, my personal view is like it's, it's, it's harder than it looks. Well, it's, it's much harder than it looks. It's it's, it's incredibly difficult. And the reason it's incredibly difficult is the use of every dollar spent to build your company is better spent buying Bitcoin. That's the problem right there. You would be hard pressed to come up with a business that has a better ROI than buying the Bitcoin itself. And that's the biggest challenge. When I first discovered Bitcoin in in 2013, end of 2013, let's not make it sound better than it was December, you know, like I racked my brain to think, what business can I start in this space? I've got to do something in this space. What can I do, right? And the best idea that I could come up with at the time was, well, I could start a directory of companies that accept Bitcoin. That would have been a horrible business in 2013 and it would be a horrible Business Today, right? So like I couldn't come up with any idea. It's very challenging, you know, even Bitcoin mining, I sit on the board of Core scientific and mining is a is a challenging business. It can be great in a lot of ways if you have an edge of some kind, but generally speaking, a business where your revenues get cut in half every four years, it's pretty tough business with high capital costs. You have to have unique competitive advantages to, you know, have an edge there. It's very interesting to, to the front half of that in particular sounded an awful lot like the answer we got from Michael Saylor on the last episode when we were talking about, you know, talking about MicroStrategy in the context of, of Bitcoin hodlers being tempted to, you know, redeploy capital from Bitcoin into MicroStrategy. And like, does that make sense? And, you know, obviously his, his, his take was that if you're taking on risk and you have to judge that against the, the hurdle rate, which is Bitcoin, which has been, you know, 25 to 50% annualized growth. And, and pretty much there's not much that that beats that. So you're so much better off holding, holding coins, but there are some exceptions where, you know, perhaps Microstrategy's playbook of, of really being able to grow its Bitcoin over time clears that bar far and away. And, and perhaps you have some some thoughts on on that in particular with regard to the the bond market's appetite or sort of forced appetite to take on these, these the proposition that MicroStrategy is, is offering them what any thoughts there? I don't I don't have any MicroStrategy specific thoughts I guess. I'm I'm sort of curious if. It's essentially levered Bitcoin, right? I mean, the only way you can outperform Bitcoin is levered Bitcoin. And in order to invest in levered Bitcoin, you have to be comfortable with the levering structure. And I think MicroStrategy has done an extraordinarily good job of, of, of being the straight man. You know, like when Michael first came onto the scene in Bitcoin and MicroStrategy did, he's going to rug us. When are they going to rug us? There's the only question is everybody. It was the only topic, right? Like we've seen this before. He's going to sell, He's going to, you know, and I think they've done an extraordinary job of backing up their words, signalling to the word, talking the talk, walking the walk. And now people are comfortable playing that investment because they know that they're going to stay the course, right? They've made that clear. And that's an essential part of their value proposition. And but yes, to Michael's point, there's risk in that. And you know, I think if Bitcoin were kind of feeling like it was topping out a little bit, right? And it was like, well, you know, Bitcoins risen to be three times the size of gold and, you know, maybe as a store of value, it's debatable how much room is left. Like are we at, you know, this price discovery equilibrium kind of area? Are we going to start to move with monetary inflation kind of thing? Then personally, I'm more like, OK, maybe let's try to squeeze some more yield out of this, you know, 7% of years, not where I'm trying to be here, but I think we have, you know, orders of magnitude more price appreciation from where we currently are. So for me personally, I don't need any more leverage than just a thick one. Yeah, that, that's what I bias too as well. And I agree that sort of as we climb the S curve of monetization, the hurdle rate starts to drop each year of of you know, what you should expect in Bitcoin versus alternatives and and that will sort of start to make sense to redeploy Bitcoin capital elsewhere once that hurdle rate starts to drop. 10/20/30 X is still good enough. For you. Oh yeah, and, and quite possibly 100 X, you know, and yeah, sort of what, what, what I expect long term. We'll take it, We'll take it. Does your Bitcoin custody setup keep you up at night? Maybe you still have coins sitting on an exchange Worried about hackers? 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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 on rentbitcoin.com. Well, let's, you know, Speaking of high hurdle rates and potentially beating those hurdle rates, perhaps I'll play devil's advocate, you know, perhaps data centers in AI, you know, offer that opportunity from your seat on the board of Core Scientific, you know, help us think about the opportunity in in data centers in general. I mean, if it's just focused on Bitcoin mining, you know, that's fine. I'm not sure how exactly you're thinking about it or whether you're thinking about a, you know, a more general type of a business model, but what, what can you tell us? So generally speaking, as you guys know, Bitcoin mining in order to do a profitable profitably requires very low cost power. And so there are there are data center locations that have power at a price that lends itself to Bitcoin mining, super cheap power where you can mine profitably and there are other locations that don't. That said, those other locations that don't, the threshold for what the AIHPC world wants is much, much higher. They are desperate for power. They are willing to pay extraordinary prices. So for a company like Core Scientific, and obviously this is all like, you know, publicly shared by our CEO, Adam Sullivan, who's done a terrific job of communicating this Core is being opportunistic with how they allocate their power. So higher price power that's no longer lending itself to being profitable from Bitcoin mining, they've allocated to AIHPC and struck extraordinary deals with core weave in order to build that out and be a very significant player in AI data center. Yeah, that's interesting. I am obviously very keen to understand how those two markets grow and evolve and interweave with each other. I guess it's a subset of the whole, you know, how does Bitcoin interlink with energy usage in general? But I got to believe there's, there's opportunities there, you know, as the as the market evolves. We interviewed Troy Cross pretty recently, I think, I think it was with Margo Paez, maybe his those co-author. They released a paper which they called was it the locust and the dung beetle. Am I getting that right, Jesse, where the idea was that AI is like the locust that's just hungry for, you know, regardless of the cost, any electricity it can get like it'll, you know, these these hyper scalers basically will pay anything and then. At the moment, yeah. Yeah, exactly, exactly. Will tell us, you know, tell us how you think. Does that evolve differently over time? Their thesis is that that the that it won't always be so. I I don't have a crystal ball and predicting power prices is way above my pay grade. Tell us the future, Eric, Tell us the future. But for the foreseeable future, there is more demand than there is supply. And converting to HPC is not an inexpensive thing. You know, as Core has publicly said, it can cost in the range of, you know, $5,000,000 per MW to convert to HPC compute from something like that center Bitcoin mining, right? So it's not inexpensive from a cap X point of view, but the demand right now is insatiable. Who knows what happens with respect to nuclear. I think both Google and Amazon, you know, made announcements recently that they were, you know, looking into these smaller reactor kind of situations That's going to take a while to come online. Elon's talking about all the power in the world being solar. So I think there are and there and there are a number of very intelligent thought leaders out there who think the cost of power starts to asymptote towards 0 / a really long period of time. So that said here in the short term, it's an extraordinary land grab and Bitcoin miners, the structure of a Bitcoin mining facility is very analogous to what an AI data center needs with respect. Like it's not just some data center out there in the middle of nowhere. You need access to fiber optic cable, right? Because Bitcoin mining requires you, you know, have very little lace latency and be online. Same with a IHPC. You need access to water and other things that are, you know, it's pretty exact footprint relative to, you know, between the two. And that's why you're seeing so many Bitcoin miners consider it, Although I have to give the management team at Core a little on the back. I haven't seen anyone negotiate a deal even close to the extraordinary deals that Core has negotiated and haven't seen anyone make meaningful move. The way they have 502 megawatts that they've contracted for is an extraordinary amount of power. That's a big number. That sounds like in a world where you want to be vertically integrated with respect to your energy source, it's good to have a lot of that locked up. Yeah. I do think, you know, at the end of the day, the we'll resume some version of commodity pricing in in that department. But right now, the land grab is going to last a while. Sort of taking this topic, I, my mind wandered to, to what this means for the future energy production of the world. You know, is Bitcoin, Eric, do you have any views on, on is Bitcoin or maybe Bitcoin and AI going to drive that asymptotic to 0 marginal, you know, production of cost of, of incremental energy production? Is that like what it takes for us to go from kind of where we've been stuck at for the last 50 years in terms of total energy production to another leg up in energy production for the world? Yeah. It's like, I mean, we talk about scarce assets, right? Like energy is only a scarce asset to the extent that people need more incentive to manufacture it and create it and technological advances, right? It's in my mind, it's kind of similar to the price of gold. If the price of gold were to quadruple, they'd find a way to dig a hell of a lot more than, you know, 1 1/2% of it out of the ground or shake it from asteroids or do whatever else, right? So they'll find a way to make more of it as the demand for energy increases and and we're increasing at an extraordinary rate here. You know, I mean, I'm on ChatGPT all day. I use it for everything, right? And it's just like those. The average query on chat takes 10 times the electricity that a query on Google does. So the demand is, is, is growing astronomically and all of these guys, you know, your, your giant tech companies, your metas and Amazons of the world, they're looking for as much power as they can get their hands on. So I do think we'll see a lot of innovation in how that power is brought to market and we'll get more efficient and more clever and more resourceful. And in particular, I think nuclear is going to play a big role. Agreed. I hope it happens sooner rather than later. I think there's been a little bit of push back from the regulators so far. But on the other hand, when the demand is from the largest companies in the world and when there's just such financial resources, you know, whatever 200 billion or more of CapEx I think from the hyper scalers this year and probably more more next year. That's probably a trend that's that's hard to fight. Yeah, I think I agree with you. And I think that the current trend that maybe we're seeing of kind of a woke virtue signalling trend that being broken and reversed, that thwarted a lot of that innovation, in particular as it relates to energy out of climate fears. You know, we, we could see that start to change too. We could see nation states embracing nuclear. You know, like think of Germany kind of, you know, moving away from nuclear and also selling all their Bitcoin that have been on the right side of some of these big trades recently. But you could. You could see those things reversing. Yeah, I also hope that that allies in Europe stop shooting themselves in the in the foot. I think I had read that they're now burning lignite again, right. The lowest quality coal source of energy, like the dirtiest. It's basically the dirtiest form of energy in the in the world other than just burning wood in terms of carbon. Yeah, well, let's I want to flip it a little bit to to a different industry for discussion, which is Bitcoin custody. You know, you've observed and participated in frankly, you know that industry because with your Bitcoin fund, you've provided a, you know, a solution to, to clients and customers. You know what, what do you see for the for the future, for for Bitcoin custody and what's you know, what trends or solutions are interesting to you? Yeah, I think first and foremost on the topic of custody, I think Bitcoin is all about freedom. I think, I think Bitcoin and freedom are very, you know, relatively synonymous in my mind. And I extend that same freedom to how people choose to custody. If someone wants to self custody, the highest form of custody, godspeed, right? If someone says, yeah, that's not for me, I want a custodian of some kind, OK, Someone says I just want the monetary piece of it, I'm going to do an ETFI. Don't want to be bothered with this all also fine. So I don't I don't have any strong opinion on that, right. I think that we live in an interesting world of people who are very close to this topic and the majority of the world is not as close to this topic as we are. And so my clientele, Bitcoin investment group, they don't have any interest in self custody at this point, right? I to, to, to the, you know, your earlier comment about me allowing, you know, creating a structure that allows for redemptions in Bitcoin. I'm thinking ahead for them. We know that being able to take possession of your Bitcoin is essential potentially, right? It's an essential part attribute of Bitcoin. So I wasn't going to do a fund unless we could pass along that attribute. But in the interim, the kinds of folks I deal with, they don't want any part of it. You know, we custody at Fidelity Digital Assets. It's very safe. They're comfortable with Fidelity as a custodian and they get AK1 at the end of the year that they just hand to their accountant. They want it to let they want Bitcoin to look like every other investment that they've ever done. And it's not their whole life. It's not their whole world. It may have started as a hey, my, my daughter or my grandson, you know, started talking about this and then I started seeing it on, you know, CNBC and in the Wall Street Journal. So OK, I'll take a flyer on it. And then it became, you know, Larry thinks out there talking about this stuff now too, like that's a guy that I really respect and he's saying that this is, you know, a store of value in a digital gold. Let's add to that position, you know, And so now all of a sudden it starts to become a bigger piece of my family office type folks portfolios and high, high net worth individual portfolios. It's no longer this risky crazy thing they heard about that they were just, you know, schmuck insurance or they were just taking a flyer on. Now they're seeing the benefits of the asset. And once they get, you know, a little taste of it and they compare it to the rest of their portfolio and how the rest of their portfolio is performing now all of a sudden it's like all of us, it's like, I wish I had more of that. And you know, then the next question I get is, well, did I miss it? Is it, is it too late to buy more of it? You know, we're, we're pure at 80,000, you know, like, and so you know then and you know how that conversation goes. So I look from a personal perspective, I don't self custody. My Bitcoin is in my fund and I'm fine with that. Self custody is not right for me right now. I'm capable of it, but I think it brings up more issues for me than it solves. And you know, I have, I have one client that's I'll give you an interesting perspective on, right. So I have one client who's very wealthy and he is a hardcore Bitcoin maximalist and he and his family have a lot of money. I think the majority of his money is in Bitcoin. And he was on a private jet with his wife and his two children and his brother. And it occurred to him while they were in flight that everybody in the world that knew his private keys was on that airplane. And he reached out to me. He's the only client I've ever gotten from Twitter, but he reached out to me after seeing me on Twitter, told me this story and said I'd like to invest in your fund, right, for that reason. So to each their own. There are applications. I think self custody right now is challenging for the average person. You know, these little hardware devices that scare people that aren't so easy to use, that don't have great UIS that are, you know, in in non-technical people generate more fear than they alleviate. And as the technology improves and as the devices and applications get better, I think we'll see more and more people take possession of their Bitcoin and self custody. Super interesting. So obviously, you know, at on ramp we are focused on custody and and multi institution custody, which is of a variation of multi sig custody where you're basically hiring three different institutions to be a key holder on your behalf. So it ends up not being self custody, but it's also not unilateral custodian custody. It's this interesting new model of of multi institution custody and it's been very interesting like being on this journey of sort of revisiting the self custody mantras and custody in general with Bitcoin of for 15 years it. It was the right. Advice of like look between leaving your coins on Mount Gox or FTX or doing self custody like you should go do self custody. You're better off right in that push. I think the Bitcoin community at at large has sort of lost the the very real downsides or trade-offs that you take on when you do engage in self custody. And, and it's scary and it's not right for everyone. And and I think it's a healthy conversation for us to talk about alternatives to it like trusting no shortage, no shortage. Of horror stories of people doing self custody who lost their proud keys. And you know, that's why we have 3 or 4 million Bitcoin that's gone forever. So it's a large part, you know, I think the I think the multi Corp custody thing is very interesting. I've. Always wondered how that's going. To evolve because if I elevate it to a our most trusted custodians, right, Let's say we've got Goldman Sachs, JP Morgan and you know, Barclays, right, three fairly well trusted institutions. Those institutions have made a living espousing the exact opposite, right? They have said don't trust JP Morgan, trust only me, Goldman Sachs, we're the best custodian. It's almost like an admission of we can't handle this our own to, you know, be in a multi sig kind of thing. So I'm very curious to see if there's a paradigm shift and things really do change here and there's a, you know, a more harmonious perspective on these things or if it's like, you know, all out war. It's just it's very, very interesting to see how it evolves totally and hundreds. Of years of custody have have have centered on, you know, build your fortress and defend it well and you know, don't trust any other fortress like that. That is that's what people operate under. And it, it has been very interesting to see, you know, our, our, our our key holding institutions with is on ramp bit go and coin cover and, and I think it's a fantastic set of, of Bitcoin native, you know, custodians who of course, do not take unilateral control in this process. And they get it because they're they're BICO invented multi sig. So you know, Mike Belshi, he gets it. And we're starting to see now more interest from, from other trust companies and, and, and other companies who have seen the model and now they're interested in and are interested in participating. And I think we're, I think personally, I mean, I thought to get too much on the soapbox. I think we're looking at the evolution of this format as a third major format in, you know, the choice between self custody, third party custody and now multi institution custody, which simply isn't possible with any other traditional asset. That's because of because of multi sag. It creates this new format that that I think has inherent advantages over, you know, the the fault tolerance of of of custody is pretty incredible. And I think that it is it will even play a part in helping Bitcoin become the biggest store of value asset in the world. Because if you can trust capital into this asset and it has a type of custody that is, you know, lower risk than any other asset out there, then it it can become a bigger source of what you trust than anything else. I think that'll be part of the story over the next few decades. Yeah, I think that. If it evolves that way, I think it'll be driven by the consumer and the institutions will come kicking and screaming. But you know, yeah, I think that's right, I think. It's I think it's demand from people who are like, like I've heard about multi sig and it sounds great, but I don't want to do it. So I would love to pay you to do it. You know, you know, Barclays or or JP Morgan or whatever or I'm not. Trusting you alone, JP Morgan with my Bitcoin like, but if you partner with, you know, other institutions, I will trust the triumph or whatever, you know yeah and. Yet also, you know, the big brand name institutions, you mentioned Fidelity, you know, there's going to be plenty of capital in the world that's that's willing to trust Fidelity, you know, at least with a portion of their stack. And that's the other beauty of it too, is you can mix and match, right. You can have some, you can have some in your home brew Ninja self custody set up and some with single custodian and some with the, you know, with the multi institution. Yeah. Well, let's, let's switch it up a little bit here. Eric, you're in Miami Beach, you're adjacent to Miami. What's the business scene like lately? I mean, there was kind of a, you know, there was there was a pretty significant migration I think recently into the your market. Is that because tell us, tell us about that. Is that ongoing, you know, does that make it harder to get restaurant reservations? Is this is this crimp in your style with what's going on here? It's actually the. The restaurants are opening so quickly. It's unbelievable. All the best restaurants in New York coming to Miami. All the best restaurants from LA are coming to Miami. It's just, it's unbelievable what's happening like, but yes, it is challenging to get reservations at some of them. But yeah, the biggest problem is the traffic, but there's it is not slowing down at all. I think increasingly people want to be in red states, especially business people, people who earn want to be in red states. And so, you know, you get a lot of people leaving the Northeast and the New York still and California's and they're coming to, they're choosing generally speaking, between Texas if they want space and land or don't want to come too Far East, and Miami if they like the water and the only, the only tropical climate in the continental US. So yeah, the nice thing about Miami is there's lots of different ways you can live. You can, you can live on water, you can have horses, you can live in apartment buildings. You know, there there's a good mix of urban and rural and golf and this and that. So it's a it's a really nice quality of life here, although I shouldn't be saying that we don't want, we don't want any more people coming. But yeah, it's getting a little crowded, but it's great. It when I started, when I started the fund, people were still saying, well, you, you, you've got to be based in New York, otherwise no one is going to trust you. You know, like you can't, you can't have a Miami based company. And now the perception is completely flipped. If you're in New York, it's kind of become an IQ test and it's like, are you an idiot? Why? Like why, why are you paying extra taxes for nothing? So, so that's great. I credit David Tepper in Appaloosa and and some of these just really well respected, you know, billionaire hedge fund guys who made the move who who gave us a lot of credibility, Ken Griffin and guys like that Citadel. So very helpful. But it's great. It's thriving. And what Miami lacked was professional people, intellectual stimulation, and we are no longer lacking in that department. Wow. So come on down. People are coming from town of the two man I I I've actually I've. I've seen in my life little bits of snapshots of how Miami has developed. My, my dad grew up in Miami, My, my grandmother lived there. I, I don't know if you, if you know who you're talking to here. I'm actually the 1997 Miami Yacht Club sailing camp champion. So whoa, that's a little fun fact that I've never shared on a Bitcoin forum before, but wow, that's what. Everybody's going to be tweeting. As a result, when this gets released, that that one piece. That's what's been, yeah, but but back then. You know, 1997 there the the high rises on the water were rather limited and then now it's there. It's unbelievable how how much they've proliferated all all over the. All over the city. In the waterfront in particular, it's incredible. There's just cranes. Up in the air constantly, the development continues. It's it's really it's off the charts. Well, I'll raise my hand as the. As the resident tax chump on this call, cause 'cause Jesse's in Texas, you're in Florida, I'm still here in California. Yeah, I got, I got, you know, I got extended family here, you know, my parents in laws, etcetera, etcetera. But yeah, it's family matters. But you. Literally get paid to move to one of these two states. You quite literally get paid. And I don't think people do the math correctly because people say, you know, if it's like New York, California, it's like, oh, well, you know, you're, you know, OK, so you, you know, save 12 1/2 percent a year or something, but that's not really the math. The math is you actually take home 25% more. And so if you think about it in that context, you know, and every four years it's like getting five years of pay. It's a pretty big difference. That's a big raise. And the lower cost of living, right, people? Yeah, people use the wrong. The wrong denominator there. And then of course, there's the, there's the compounding on top of that. You know, once you've taken those dollars out of the hands of, out of your junior partner known as the US government. Well, it's really the state government in this case. But yeah, I was, I, I remember it left an impression on me when I first read Sovereign Individual, which as you know, is a favorite in the space. And there is a whole chapter almost on, you know, opportunity cost of being in a low tax versus a higher tax jurisdiction. And yeah, it's, it's, it's big, it matters. Good. Well, I, you know, we're we're coming up on our allotted time here on our hour. Any other you know, thoughts you have topics you'd like to like to discuss here? We're in we're in uncharted territory in terms of price discovery price, all time high Bitcoin price, You know, give us give us your thoughts and or advice for the ongoing Bitcoin bull market. Yeah, I. Think. I'll just kind of reiterate what I may have said earlier, which is the the superpower for being able to hold on to your Bitcoin is knowledge. And take it from someone who did not hold on to their Bitcoin from 2013, right, It's knowledge. It's very, very difficult to have a significant amount of conviction to hold your Bitcoin through a bad time or wanting to sell it, to buy the car or house or whatever material thing it is that you that you think you want. If you haven't put in the work and read the books or watch the podcast just to understand the decision you're making. That's not to say that people shouldn't do it, but just understand the trade off that you're making because once you sell your Bitcoin, it's going to be very hard to get it back. Sage advice. Sage advice. Couldn't have said it better. Better myself. All right. Well, Eric, where can people follow your work and or get in touch? What's the hand off here? Yeah, probably. I guess Twitter or X is, you know, pretty much the place and what's my thing there? It's it's at Eric under score BIG Bitcoin investment group fund. So Eric under score BIG fund. Yeah, highly recommend that. Highly recommend that follow. Well, what an awesome conversation, Eric. Really appreciate it. Thank you for all you do, especially with respect to educating people about Bitcoin. It's been a real pleasure and this has been scarce assets. Thank you guys. Appreciate it. 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 in 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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