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Before we get into the episode, a quick reminder that this podcast is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. If you are enjoying On RAMP media content, please like subscribe and share as it goes a long way in helping others find the signal through the noise. Now for a word from on RAMP. On RAMP is a Bitcoin asset management platform built on multi institution custody leveraging our partnership with Bit Go and their 10 plus year track record and securing assets and Coincover the premier digital asset risk mitigation company on RAMPS. Multi institution custody is a segregated institutional grade vault requiring two of three institutions at any point in time to sign once a client's unique permissions have been met At on RAMP we understand that your Bitcoin journey is a multi generational pursuit catalyzed by the ideals of perseverance, aspiration and legacy. That's why we're proud to introduce on RAMP Heritage, a suite of private client services dedicated to ensuring your Bitcoin legacy is preserved and passed on, embodying the true essence of wealth that goes beyond mere numbers. If you would like to learn more, please schedule a consultation as we prepare for the Bitcoin having and the next wave of global adoption of this nascent and growing asset class. We are having all annual maintenance fees for clients that secure their wealth before the next Bitcoin epoch. What you're telling me is that music is about to stop, and we're going to be left holding the biggest bag of odorous extra ever assembled in the history of governors 1974198792972000. And whatever we want to call this. It's all just the same thing over and over. We can't help ourselves. I say when we. Sell, hey, I say when we sell. Oh, we're live. Just like that. Logan just gave me the we're live. It's just about to comment on your bookshelf. Jesse looks. It's nice to see it growing. It's growing. I found a few more boxes. It'll keep growing that I still haven't found my Bitcoin book boxes boxed. Box it it's not. It's just one box that's. I I think. So why is it bearish only one box of Bitcoin books? I guess one of the problems with once you're into Bitcoin is it becomes a a big decision to buy a Bitcoin book because, you know, you could just hold on the SATS instead. And read a read an e-book. You know, save some money. This week we're joined Leanne Wankham to talk about Bitcoin and real estate. It's a really fascinating topic that gets me excited because a lot of what we talk about here, particularly on the macro side is this seemingly insurmountable debt issue, unfunded liabilities issue. A lot of what's going on with central banks and governments spending indiscriminately used to a lot of dismay. People are saying how we do, how do we fix this, how do we solve this massive gap between the liabilities and the amount of money that people are bringing in on a month to month basis. And Leon, I think what you're working on to imbue Bitcoin as collateral and credit products, particularly in the real estate market, paints a picture and a path forward to create a soft landing, at least for individuals that use these types of products. So before we jump into the nitty gritty of the products, why don't we start with a little introduction of yourself, what you've been doing for the last few years and how you got to focus particularly on this subject? Yes, sure. I'm going to try to keep it short. Thank you guys for the introduction and for the invite. I appreciate having the opportunity to discuss these important topics with such brilliant minds, so thank you for that. Personally, I've got involved with Bitcoin some time ago. In 2015, I wrote my master's thesis about Bitcoin. And then shortly after, I joined the real estate business. And the real estate business allowed me to understand the potential of Bitcoin because as one of the biggest asset classes in the world, you're either there's debt and there's real estate. Both are two of the largest asset classes, and depending on how you view that, it could be larger than real estate. But as a store value, real estate is the largest in the world. And that allowed me to see the potential of Bitcoin, because actually real estate is not a particularly good store value. It just became a store where you're due to the monetary policies that happened after the Nixon Shock in 1971. Once money was inflated at such a fast rate, people were forced to invest in scarce assets and real estate has turned into the preferred store value. That has a few reasons. Mainly it's scarcity and the ability to finance real estate purchases through loans, which banks like to grant because they make money by creating new money and then flooding the economy with that new money through loans that usually go into real estate. And over the past four years or the past 3 1/2 years, I've really focused on finding strategies that help real estate developers smooth the transition from a Fiat money standard into a Bitcoin standard. Because if we move on to a Bitcoin standard, which I believe we will do, real estate will lose its appeal as a store value. Because Bitcoin, as near perfect store value does, does not require high maintenance cost and perpetually increases in value over time with relatively easy security and relatively cheap self custody, real estate is going to lose its appeal as a store value and will also drop in price. So now the question is, how can real estate developers survive and make this transition smoothly? So yeah, I'm happy to be here to discuss that with you guys. Yeah. One of the things I I love about your story is it came from a first principles perspective of how did you solve your own problem which you generally I think is generally provides the best solutions right. When you're trying to solve your existing real estate conundrum that you were in and how did you infuse and how do you protect yourself from the downside. And then you can kind of like scale that out and come to the conclusions that you're you're coming to. The other thing that has been interesting and we've it's been this theme of like maybe we end up with a smoother transition than everybody expects. And when I listened to your previous part with Preston, who I think is a great for anybody listening that's interested in learning more about these topics, to check that out is it seems like a pretty streamlined process. Maybe not streamlined, but that there is a path to coming out of this situation by adopting or holding Bitcoin as part of like credit financing, which is just a fascinating idea in itself. And I would add one thing to what you said earlier, Michael, is solving your own problem, Leon, but also having the humility to recognize that real estate has this systemic problem now that Bitcoin is in the market and being able to internalize like, all right, we need to solve this problem and not try to do what a lot of real estate influencers on Twitter are doing, which is no bitcoin's crap. Real estate's good. It's maybe we have to combine the two. Yeah, absolutely. I personally, I've long grappled with understanding that Bitcoin is a superior store value to real estate because I was involved or I am involved in real estate development And I have to be honest, it was my ego that did not allow me to understand that Bitcoin is superior store value to real estate. And Michael, also commenting on what you said, this transition phase, I believe generally speaking people like real estate because of its cash flow. But the cash flow thesis in an inflationary environment has to be rethought because it becomes very difficult to outperform the level of monetary inflation with cash flow, right? So the first step that I would just suggest to real estate developers to continue operating smoothly is to funnel cash flow into Bitcoin. That is the first step and it's very simple. So to be able to take part of the cash flow, the rental income and funnel that into Bitcoin allows also to build maintenance reserves in order to perpetually increase or be able to have the same value in your real estate development portfolio. So, so to tease that out a little bit though, so like what do you view as like a typical yield in, in, in nominal percent for rental income from in real estate and then at what inflation levels does that get eclipsed by inflation? Yeah, that is a very good question. I'm just going to quickly roll out one example from 2021, November of 2021 when we did our last deal, because over the past three years we have not acquired new property because it has become unprofitable over the past three years. And in 2021, when interest rates were below 2%, it was still profitable to buy real estate in order to store value. And I quickly explained the rationale behind it. So we sold the property and the insurance company that bought the property, they were calculating with 2.3% year on year growth and that 2.3% year on year growth was more than the cost of borrowing money. And after in 2022 when interest rates went up to 456 percent, it became unprofitable to invest in real estate because the year on year growth rate on the money invested in real estate was below the cost of borrowing money. So the cost of borrowing money usually is sort of the the, the, the unit or the, yeah, the, the unit by which I measure if putting money into real estate to store its value is profitable over time or not. I hope that was answering your question. Yeah, absolutely. Yeah, the hurdle rate, yeah. I I love this analogy and this representation because I think about it from just like a like physical idea of like tenant improvements. When you refinance, you include tenant improvements so you can have larger you know amount of cash flow or higher price to offset. And it's like you're taking a digital asset that doesn't exist in the real world. But it's like in my mind, I think about this like putting a helipad on top of the piece of real estate or a pool or just something that consistently grows the cash flow or the value from a inflation perspective outpacing whatever the interest and all the liabilities for that piece of real estate. And that's how like I know it's not the same, but it that's how I think about like how a real estate developer would grow its portfolio and the long term like dollar value. And this is like actually not putting any whether it's the cash flow into direct tenant improvements, it's just storing it as a reserve and I guess that could translate to tenant improvements which would increase the value of the property or refinancing and parking it in Bitcoin. With this idea that year over year you're increasing the purchasing power of the overall note or debt. The the debt because you have this asset that's appreciating higher than the the cost of you know living and what you can charge your tenants. Absolutely. I totally agree with you and I think also Jesse, to answer your question a bit further and comment on what you said Michael, it's very important to differentiate between speculative investment in real estate to outperform inflation and real estate development. So the first the speculate speculative investment part that is basically debt. Since Bitcoin exists, there's no reason to invest into real estate to maintain your purchasing power because people can just save in Bitcoin and near perfect money by default and they will outperform anybody that invests into real estate even if people invest with borrowed money on leverage. Because the deflation, the increase in purchasing power in Bitcoin will outperform the growth rate of real estate even if it's bought on credit. So real estate development, that's the second part that will continue to exist. Why? People always need a place to live and they always need a place to work. The commercial real estate park will change also because the digitalization process that Bitcoin, generally speaking, is part of, because the world around us is being digitalized. It started with information purely with the Internet and then with Bitcoin. Now we also digitalize in value, right? And because of remote work and trends like COVID, people need less office offices, right? So commercial real estate is being disrupted both by trends in the workforce and by Bitcoin and residential properties. So housing that will continue and that will continue to thrive even on a Bitcoin standard. So now the question is how do you manage that that that transition And maybe quickly, Marty, you mentioned credit products, so maybe quickly I touch on that. So what I believe is very important is that if you construct new real estate, it's important to include Bitcoin in the financing process. If you guys want to touch on that already, maybe you want to talk about it later. No, I think it's a great time to touch on this because that will allow us to get into the meat of what is a really optimistic message, which is there is a way to manufacture a soft landing. The best part about it is it's not going to be via the central planners, the central banks, Oregon federal government stepping in simply the free market recognizing a better form of collateral that you can imbue in these credit products. So how do you envision these products working? Let's let's just run to the example of a refinance of a current or maybe not a refinance considering where interest rates are, but a financing of a new project where you would blend credit and Bitcoin. Sure. I just quickly make a comment on what you said, because you said something that is very important. If you are into real estate development, there's a high interest rate sensitivity because real estate is usually both bought and constructed on credit. That creates an issue because as a real estate developer you become very, very dependent on the sample planners, right? You are very sensitive to changes in interest rate. A long term Bitcoin also gives the opportunity to operate independently of that, which is very important. And to answer your question, in order to be able to do that, I suggest the following and if I would be a bank right, this is what I would do while financing a new real estate project. If a real estate developer requires let's say $10 million for a new real estate project, I would finance 1112 or $13 million. And with that additional 10/20/30 percent, I would require the real estate developer to buy Bitcoin and hold it in the same entity that develops the new project. And I quickly explain why I would require that in order to do 2 things, #1 hatch against the monetary premium that sits in real estate right now. Because the most part of the value of real estate sits in there. Not because of its utility value, but it sits in there because real estate has been priced away from its utility value and it acts as money, as a store value for people to save their purchasing hour from eroding Fiat currencies. So as Bitcoin comes into the equation, it will most likely drain real estate of its monetary premium. So if you hold Bitcoin and the same entity that develops a new real estate project, you are hedged against that process. You are hedged against the monetary premium being drained out of real estate. And now the second part is, as a real estate developer, even if we will move on a Bitcoin standard, it is a very debt intense business because you need a lot of money to construct new properties. If you hold Bitcoin in an entity that constructs real estate, let's say a real estate construction process takes five to six years. Once you're finished constructing the real estate, you hold pristine collateral, which is Bitcoin, which will have most likely has already risen in price because five to six years usually includes a cycle, a halving cycle which historically speaking leads to an increase in price because of a reduction in supply. So you are able to then refinance your project and also perpetually borrow money in order to maintain the property and offer a service to the market. Because what real estate really is, it's a service, right? You provide housing to the market and you receive money in return, what Ludwig for Mises called original interest, which is the difference between capital invested and the return of an investment. And in real estate development, that is the rental income that you receive by providing the service or providing housing to the market. I love. I love this example who's Leon I don't know if I shared with you when we're at dinner is I worked at we work in the the days and I was just looking up to confirm. So Wework raised $22 billion over the course of you know it's history before going bankrupt and imagine just 1 billion of that going into Bitcoin to offset that. And what's funny is Adam's up to you know same same tricks in Miami. They're doing some stuff like commercial I'm sorry residential real estate and similar concept of we work where they're I think they they obviously took out debt but then they raised I think 300 million from A16Z1 of my friends went over to to help for a bit and left. But he took me of a tour the last time I was in Miami and I went and looked at this high rise. And you could just see them burning the money again because they're setting up the, you know, amenities to attract the younger, younger kids, whether it's the pool, the gym. But you can see how that's just not going to outpace the cost of living and where they have to keep up on the debt that they owe. And so you can just see the writing on the wall, how it's naturally going to end up in the same situation. But it didn't have to or it doesn't have to. If you're able to think about real estate as that utility, as that marketable good given to the end user while also protecting yourself by, you know, holding 20% whatever the number is on of Bitcoin. And I think it's important because I think most people will listen to this and think it's all insane because you're looking at physical real estate and and all of that. But the end it's just math. It's just the way this whole situation plays out. And I think it's been refreshing to hear you talk about it because Jesse and I know at least one real estate developer that's a mutual friend and and there's probably others that I think naturally like still hold on to the real estate. And I've always been kind of like I think naturally real estate investors have always been like apprehensive generally to Bitcoin. And it it's always kind of like, perplexed me because it's the idea of scarcity. But I think the idea also of its physical versus this thing that's not like has a mental barrier for allowing them to kind of see through, you know, the the forest or the trees. But that coming back to like the particulars of the product, I think many people in Bitcoin have been trying, have been thinking of Bitcoin as super collateral and like what is the first type of credit product that you put Bitcoin into that makes sense. And I think from a duration match up standpoint there's nothing better than real estate because these loans historically are longer duration loans, commercial real estate, commercial real estate side 10 years, residential 30 years. And so it makes a lot of sense intuitively to me that you would start with these longer duration credit products and imbue Bitcoin with them because it gives you the ability to partake in bitcoins monetization phase. You're you're essentially forced to hold it within the structure for a long period of time where the likelihood that that Bitcoin will accrue in value significantly increases. Yeah, absolutely. I 100% agree with you. And another good aspect of the interplay of Bitcoin and real estate is that you do not have to pay attention to Bitcoin's volatility. That is natural to a new form of money that is finding its price on the market because you can use the rental income to pay back the debt. So the volatility of Bitcoin does not play a role. And the duration of the loan as you said and especially in residential property development is 20 to 30 years. So it is a perfect asset to be matched with real estate development. I agree with you. Yeah that that's a really interesting point The the duration of these loans is is a perfect match with with Bitcoin. But if you'll allow me to play devil's advocate a little bit here of like I'm trying to think about a scenario where an asset paired with Bitcoin isn't supercharged right like you could do you could put anything with Bitcoin like if you if I don't I'm not very bullish on on bonds. I think bonds will destroy value in real terms over the next decade or two. But if you if you bought bonds and then with 10% of that money bought Bitcoin and put that together, that portfolio would perform very well. But that's true with absolutely anything. I think also like you you could buy Beanie Babies and and and you know if you put 10% of that into Bitcoin that portfolio 90% of it would go to zero, 10% of it would, would 20X and and suddenly you're you're doing pretty well. So, so Leon, I guess the the question is, is it that Bitcoin makes it like a tolerable, A palatable transition like by incorporating that into real estate you you, you turn real estate from something that is a net losing proposition into something that is a well hedged, net winning proposition because of Bitcoin's properties. In other words, is this is this about making a an asset that no longer makes sense, still makes sense, or how do you view that? Yes, I would frame it slightly different. And I would say what you said would apply to bonds, for example. Because if you think about bonds, you'd say like let's say a bond. And I could very well imagine that will happen in the future, that a bond has one to 10% in Bitcoin. But then the question is why buy a bond with 10% of Bitcoin in it when you can just buy Bitcoin, right. So with real estate it's a bit different. A little bit different though, and it's something that Marty also said at the beginning. As central banks and governments lose their grip on the economy, there are certain services and certain assets that the free market has to provide to prevent societal collapse, and housing is one of them. So I believe that yes, what you said is true. Speculative investment in real estate has lost its appeal because of Bitcoin. But people still need a place to live, right? And also on a Bitcoin standard, having a business with a regular yielding cash flow, which real estate is, is very attractive. And in order to be able to continuously provide housing to the market to prevent a societal collapse under hyperinflation, it's important to include Bitcoin and real estate development. Even though just buying Bitcoin would outperform buying real estate. But I want to make a nuanced differentiation between the speculative investment in real estate and the actual development of housing and office spaces and manufacturing facilities. Yeah, that's why I love a. Great point there and and and I think that's I guess that's extremely important that you you make that differentiation between speculative and what society needs in real estate and that this is a formula for making things that are necessary investments that are necessary makes sense in a in a Bitcoin world where Bitcoin is is monetizing and I get and what's great about that is that it that applies to any sort of capital investment formula like you you could do this for a property plant and equipment for some new you know manufacturing heavy business as a way to make sure that you're hedging against the the rise of Bitcoin during the the duration of that business plan. You know if it's like a 1020 year business plan to prop up a new factory that's going to produce widgets and you need to make sure that that's hedged against losing value in Bitcoin terms this is the formula for doing that. So it's it, it's interesting that it expands beyond just real estate, real estate being the most important and and by far the largest I think application of such a hedged model for capital investment. But hopefully we see this play out in real estate and in any other sort of business plans where people are considering how to deploy capital. Thanks for tuning in. If you're interested in exploring any of these topics further, or want to learn more about how we can help you secure a new or existing Bitcoin allocation, get in touch with our team at on rampbitcoin.com. We look forward to supporting you on your Bitcoin journey. Well, it's it's beautiful. Number one, it really is because because it it really, there's there's two things that I want to bring out. One, because one of the laziest tropes that's trotted out by people who deride Bitcoin is, oh, you're just going to hoard Bitcoin. You're not going to invest in the economy and productivity and is going to go down and this provides A mechanism where it's like, no, that's not true. You can actually use Bitcoin to become more productive. And so at 1031, we've invested in battery finance which is doing something very similar. And Andrew Hohn's founder of Battery has this really simple example, which is like you own, you have somebody who owns a pizza shop and they want to reinvest it in an oven to to basically increase their production at the local pizza shop. You can see them taking out a loan like this on their property, getting some cash, getting some Bitcoin, using the cash to reinvest in a pizza oven which allows them to increase their revenues, which they can be either reinvest in the business, maybe buy Bitcoin with, but in the long run, like they're they're essentially a stronger business. They're able to provide more pizza to the market more efficiently, hopefully increase their margins, maybe reinvest in Bitcoin and they're just in a bunch better spot. And so the the whole idea of bitcoiners just aping into Bitcoin and hoarding it to accrue the value of its during its monetization phase and not do anything with it, I think it's lazy. And Leon, what you're building and others are focusing on in the credit market is a prime example of no, you can actually use Bitcoin to accelerate productivity in certain markets. Yeah it's to the point you said beautiful in the sense of where it's exciting is everybody knows we talked about all the time real estate is a huge there's a huge problem this gives the picture vision of how you can have a smooth transition to that any other assets. But then the other idea is that there's all that there's a natural thought, you know with Bitcoin community or individuals that hold their keys like multi institution maybe doesn't matter what it what is it used for custody and outside of heritage or inheritance where most individuals in Bitcoin take significant trade-offs because they have to you know leave the treasure map with a hardware device or you know multi zip provider or you have to leave it on an exchange which historically won't outlive you as we've seen the past 15 years. This is the second version or second thing I've seen it. It's like clear example of why it would exist, because when you layer on risk of it, of the bank, the financing and and the execution, but you still have to execute on this to be able to make sure that you can actually pay back the note and all the things associated. The custody should be bulletproof or as close to bulletproof where something happens, there's fault tolerance or redundancy into it. Because if you're already going to, if you're layering in 15 years of hacks and exchange insolvencies and all the things, you can't actually execute on a vision like this. I mean, you could try, but it's probably a fool's errand because historically the exchange you left your Bitcoin at wouldn't work and you need to leave it somewhere you can't take the Bitcoin and the money. And so this was something that came up with Leon at at dinner when we were chatting. And so then I'd be curious your thoughts on it, because I think to Jesse's point, this plays outside of just real estate. It's how we think about the transition where people have dollar liabilities that will be stronger or the the pace of inflation they'll need to offset that by holding Bitcoin. But then the reality is you have to have the financial products and financial institutions that deliver this in a way that like makes sense for them as well. Yeah, no, I agree with you. So the perfect base case for having Bitcoin, for example, included let's say in our financing would be that a bank works together with somebody like you guys and they say, hey, we'll provide financing with you will give you additional ten, 2030% in Bitcoin. And we hold it in a collaborative custodial way without adding unnecessary third party risk because you don't know in the future that say 5 or 10 years if an institution that financed your Bitcoin purchase will still exist going forward in into the future. And I also understand that a financial institution does not want to finance Bitcoin that I just held in the single sick wallet by the real estate developer because they want to have some insurance that if the real estate developer defaults, they won't lose out on the Bitcoin. Because if you think about it from the perspective of a bank, it's also very smart to include Bitcoin into the financing because if the real estate project fails, they still can hold on to the Bitcoin as collateral even if the real estate project was not finished. The financial asset does not exist yet the asset Bitcoin does exist. So this is also, I think, a great way for financial institution to hatch against the creditor defaulting on the loan and going bankrupt. It's funny to think about how far banks are from viewing Bitcoin as the pristine collateral that they should view it as like that it actually is. But you know I think if you walked into any large bank today and propose this sort of model of of let's do you know, let's let's finance a a real estate deal but to make it extra safe we're going to put 20% into Bitcoin. You'd be laughed out of the room, even though that is the reality. And then you know, I, I guess, Leon, it's a compliment to you that you know once you go deep enough down the Bitcoin rabbit hole and you see it for what it is, then your whole world view about every other asset has to shift, has to flip really. And then you're you're now existing in a world where you're accommodating the realities of Bitcoin and and how attractive it is and how important it is over the coming decades. And incorporating that into your mental models, your your business models, for what makes sense in that world. And what makes sense in that world is the diametric opposite of how the traditional banking system views Bitcoin and relative to other assets. Yeah, that's true. They they'll get there. Yeah, they'll get there. And until they do, it's an opportunity for bitcoiners to pioneer that. That's yeah, I. Think private? Yeah. I think private products, like there's something interesting and collapsing what battery does with an actual like leveraging, holding the key or participating because that's like the core, like the private market will do it first to show the financial institutions how it's done. The crazy part is there's an equilibrium point where they just start buying Bitcoin because they they're like, why? You know, versus letting the dollars out for whatever interest. It's like why don't they just buy Bitcoin? So it kind of like accelerates it. But I think it's like just we look at the space for too long that that probably takes a longer time. So they'll just take their nice interest rate. But that's always been the thought with credit facilities and Bitcoin, it's like and once they understand it and they're willing to give their dollars up, why don't they just buy Bitcoin? Yeah. And that's part of the it's sort of messed up. Like when when if you, if you really dig into Bitcoin deep enough and you have the epiphany moment and you realize I should sell my chairs, like I should sell everything and liquidate it and turn it into Bitcoin because nothing is going to outperform Bitcoin. And you know that's the conclusion that you end up, you end up at. But that's just unrealistic. It's also incompatible with like a civilization functioning. And you know, Leon's point here is, is great that people are not going to stop doing real estate development. It's it's a necessary thing. There's money to be made. And yet, how do you, you know, accommodate the reality that like each incremental dollar pointed towards real estate would would generate a better return if it was pointed at Bitcoin instead And and so you have to like balance those things out. And I hadn't heard of a working model of a good formula for how to do that until Leon here. But here's the question lately on Ammart is like, let's say you're battery, I'm battery, why don't I just buy all Bitcoin like I have. The strategy is like if I understand this that deeply to go and lend the money. I don't want to like take the risk of Leon and figuring this stuff out and holding the Bitcoin and multi sig, it's like I'll just buy the Bitcoin. That's like the conundrum that I still haven't. I haven't fully wrapped and I think like it'll I I don't I I think we're too close to it. So I think it'll be figured out. These people aren't thinking like this, but the reality is like that. The smart movie is just to buy all Bitcoin, not to lend the. Dog. But then, but then the problem is, like people who have been working their whole careers operating in industry, they're not going to stop trying to do that and trying to make money by doing that. And so even though the strictly speaking, probably the best thing to do is sell your chairs, sell all your real estate, sell everything, put it into Bitcoin, people won't operate that way. And then instead the best that they can do is incorporate Bitcoin into their industry. And this is that that approach I get. Because Leon, I'm sure you're you're the loans that you're underwriting are in your locality. Similarly with battery, I think they're underwriting loans that are the places that they can see and touch. And like when you get down to it, it's like you live in a you want to live in a society that's actually functioning. And Bitcoin is a mechanism to keep it functioning. Like, yes, you could sell your chairs, take all the dollars, buy all the Bitcoin, hold the Bitcoin, wait for it to to monetize and benefit from that monetization phase. But then you you walk outside your office and you can't go buy a slice of pizza. You can't. Well on this is they could lend against that Bitcoin for dollars to invest like they could get, they could do stuff with the asset. Yeah, but I don't know if they go ahead. Leon, you. No, you go. I'll go after you. No, I mean, you're the expert on this. I'm I'm opining here. OK. No, yeah, I was just thinking battery for example, there would not be able to raise that amount of money if they say, hey, we just want to buy Bitcoin. But because they are having an an approach to Bitcoin that is easy to understand for existing institutions that hold large funds of capital, they are able to provide that capital for them to then lend it out and buy Bitcoin. So I think it's actually a a Better Business move if you want to say to buy more Bitcoin. Having this more traditional approach because of what Jesse said, it fits in to people's mindsets because people generally still operate under the Fiat premise if they know it or don't know it. Maybe they've been subconsciously programmed to it or they've just been accustomed to it. So I believe by having this approach overall, they'll be able to buy more Bitcoin. If there were, other than saying, hey please give us money to just buy Bitcoin. Yeah, I think that nails it. I think. I think there's a really interesting approach to Bitcoin that that we tend not to think about very often, but I think it's very powerful. And that is, how do you create a a, a Bitcoin exposure product that is more palatable, perceived as less risky and therefore people can make a larger per per percentage allocation to that versus just holding Bitcoin like and and obviously this is, this is with regard to traditional investors who who view Bitcoin as risky. But you know, if if you're talking to a baby boomer who's very wealthy and they are thinking about an allocation to Bitcoin, if you can, maybe they can tolerate a 1% allocation to just holding spot Bitcoin. But maybe they could tolerate a 5% allocation to something that is a less risky version that still gives you exposure to Bitcoin but perhaps dampens down the volatility. And you know, if so long as that the returns are not, you know, diminished by by 5X, you're better off getting them into that product that allows for a larger exposure, even if it takes away some of the amplitude of the upside of Bitcoin, if that makes sense. It it makes complete sense. But the thing that I always struggle with is like, the historicals will always look back and and tell that person that they should have just bought Bitcoin. At what point do we reach that point? Yeah, what point do we reach that where they're just like, that's why I've always struggled to rap. Like, I get it and it will work, but there's just like, it basically just accelerates everything that we know is going to happen simply because at a certain point you have all the data points. It's like just by the thing. And here's where we get into the interesting part. So Leon, when I'm curious to get your perspective on is at what point, let's say that you're successful in going out and underwriting these loans and viewing them with Bitcoin. At what point would you know that the strategy is successful And the point I'm trying to get at here is I could easily we've we've been talking a lot particularly over the last ten months about the demand for Bitcoin that is being driven by the ETFs. When you think about these products and the the size of the real estate market globally and you begin to imagine a state of FOMO that could be induced where managers like your yourself are successful in deploying the strategy and you see other people from the outside looking in and saying oh crap, this is probably a good strategy. Go after for us and you're taking Bitcoin, you're locking it up for 10 to 30 years like in terms of like the what that would do on on the supply side of Bitcoin for an extended period of time and thinking about the price reaction to to that supply being locked up in these credit products. Like when would you know that these, like how long would it take to know that the strategy is successful on your end and how how much Bitcoin could you see being locked up in this type of loan structure within the next 5 to 10 years? Yeah, good. Good questions. Answering your first question will tie in to what you said, Michael. It will help people to understand that Bitcoin is repricing the world and outperforms every asset out there. I think the moment that, let's say somebody wants to finance a new real estate project with $10 million, but the bank says I require you to buy an additional $1 million worth of Bitcoin. So the whole loan is $11 million, $10 million for the real estate projects and $1 million for Bitcoin. I think the point when the $1 million in Bitcoin will be worth more than the entire real estate project, which will happen usually after two to three cycles, that will be the moment when people understand, oh wow, Bitcoin is the superior store of wealth and the superior asset class. So that will be somewhere between 8 to 12 years from today or from the moment these products exist. Because these products don't exist yet, because I believe we need another cycle for banks to trust the ability of Bitcoin to retain value over time. And then the second question you ask, how much money will be locked up in these products? That is a great question and also a question I'm asking myself and I'm currently looking into with a friend of mine to find some statistics or at least build some statistics to see the possible impact of two things, real estate being part of sorry, Bitcoin being part of real estate financing products and Bitcoin draining the monetary premium of real estate. I don't know how much money will be locked up in Bitcoin through incorporating Bitcoin and real estate financing projects. But let's say I suggested having 10% of the financing in Bitcoin, so out of 11,000,000, right out of 10,000,001 million in Bitcoin, 10 million overall. So that's like 10%. And if you say the real estate market is 330 trillion, taking reference to one of the charts, Jesse that you shared in one of your newsletters that I really enjoyed where you talked about the possible valuation model for Bitcoin going forward. If we say that 10%, so 300 out of 330 trillion, that would be 33 trillion will be locked up in Bitcoin with a multiplier of let's say four to five. We can do the math on our head. So it will be multiple trillions going forward. And because of the supply shock and Bitcoin and hodless not selling the Bitcoin, there's less Bitcoin to be bought than in existence. The effect of that 33 trillion on the market cut of Bitcoin will most likely be immense. It will be not alike, but probably similar to what the ETFs are currently doing to the Bitcoin market price. I could imagine that at least. And I love like you know the idea of counter positioning. You know that when you're like the, the early entrant in this idea of that too much debt, not enough dollars, they have to consistently deploy more liquidity, which means as a strategy gets involved like they naturally have to give more dollars to lend against the asset however it's deployed as up to the individual. It just like, further accelerates the whole thing. Yeah. I love how this is, this is basically like a pathway to hyper bitcoinization is sort of what you're presenting here and and thank you for referencing the that that article which if for people listening, if they're, if they want to read the same article it's you can get it at on rampbitcoin.com/FPV full potential evaluation. That's that piece that dives into all that. And yeah, I got that $330 trillion global real estate market datapoint from Bain and company report that that an old Co worker sent me. So that was a pretty solid number that that I've seen some alternative numbers on recently in the Bitcoin community. But I I think I stand by my 3:30 because it comes from Bain and companies pretty awesome analytical rigor. Yeah. And and so Leon, it's it's interesting that you know this applies to real estate, this applies also to bonds in a in a, you know you talk about how it's how we're going to take away the the monetary premium from from real estate. We're also going to take the monetary premium from bonds as people realize that it doesn't make sense to hold bonds in an in an inflationary environment where they're generating negative real returns and and I can't. And you know if you think about that whole global asset landscape chart that includes that 330 trillion in in real estate, all of those assets, you know every single one of them gold, the stock market record PES, every single one of those asset buckets will underperform Bitcoin as Bitcoin monetizes. And that monetization process is the demonetization of all existing assets that we have turned to have have made de facto store value buckets, real estate, stocks, bonds being the big ones in an era where you can't rely on storing value and Fiat money because it's inflationary. And so it's just like all roads point to hyper bit colonization when you look at it from that lens and and you know you've focused on the real estate segment which is the biggest bucket in the global asset landscape. And yeah it it, you know you talk about 8 to 12 years for people to realize that this is the winning formula. But I I can't I also at the same time can't help but think that at 8 to 12 years from now people will think that you got lucky. You know like oh that was a lucky and risky bet you shouldn't have taken not realizing that it was it was well informed and and wise to be taking. What are your thoughts on that? You could. You could be true. It could be very could be true. Absolutely. Because if you think about it, that's what people say today about people that bought Bitcoin in 2010, right? Maybe. Maybe I have a tunnel vision because I'm so involved in in Bitcoin and I read about Bitcoin and and listen to podcasts all day. Maybe my view was a bit subjective. So you could be right. You could be right. But the banks that do give out these loans and the real estate developers that do take out these loans, they will start, you know, individually to realize that. So I think that on an individual level, maybe of the individuals that are giving out these loans and the individuals that are taking these loans on that level, it will most likely take 8 to 12 years. And for the mainstream, as you said, it's either gonna take longer or they never understand. Yeah. And on this note too, just curious, I'm sure you've been having this discussion with people in your industry. How has it been received or are there anybody, is there anybody that you've spoken with in the real estate development community that you're you're involved with that that is picking up what you're putting down or do people think you're crazy? Yeah, does. Does anybody get it? I think that people think I'm a bit crazy, to be very honest with you. I've learned also to be very selective with who I discussed these topics because it's not worth putting my time and effort into explaining these interests. If somebody just thinks I'm crazy, sometimes they think I'm crazy in a good way, right? Not everybody thinks that being crazy is bad, But to answer your question, since the last I'd say three to four months, people have become very open to what I say and receptive for what I say. Before, people were almost a little bit aggressive. They almost felt like I'm attacking them on a personal level, which I'm not doing at all. I'm just looking at it with a bird's eye view, so to say. So I'm not attacking people that are developing real estate. I'm also not attacking people that invest in real estate. I'm just trying to help people being aware of the market environment and the disruption that Bitcoin is a near perfect store value represents to the real estate sector which is used as a store value. Yeah. Again independent of us I really think helps is the the ability to like make the the underlying bulletproof from a getting to five to 10 years on the outside, right. Because it's very crazy if you layer risk on risk. But if you can take the underline and know it will be there in five years, it takes that assumption away because you can look at the numbers and the 15 year historicals are there. If you take away that the asset will be there and then it just becomes the strategy and then once you prove the strategy out, but it people need that like deal taking out that risk and the assumptions or I think it just becomes a harder bill. And that's why this next cycle I think will work because the price will come, the tools will be there, the information is there. And then once it's developed, people will be able to look at that and say, OK, now there's a playbook as we grow into the rest of this decade. Yeah, and I've got to run here in 5 minutes. Do not end the conversation. It's not ready in 5 minutes. But before I leave, I do want to touch on this one topic because Leon, I know you were here in Austin for the Bitcoin urbanism meet up last month. And I think this type of credit structure could enable something like a renaissance in the architecture, the the, the physical landscape of our urban environments. Because when you think about it, by imbuing these loan products with Bitcoin and if Bitcoin continues to appreciate and value the owner of that loan, whether it's an individual homeowner, a real estate developer, and then use the Bitcoin in the loan to maybe take out more cash to begin developing, reinvesting in that particular property or building new properties like in terms of supercharging development and the quality of development, you see these products as being a vehicle towards a more beautiful future. 100% and I'll quickly go back into the 70s and roll out my answer from there. Because what happened in 1971, the Nixon Shock President Richard Nixon, the US President decoupled the US dollar from gold. the US was living on a quasi gold standard since 1944 since Bretton Woods. And what happened in the 70s then was inflation kicked in and the CapEx or the capital expenditure to maintain real estate grew significantly. What did people do? They're just passed on the cost to the tenants, so they just increased rent. But in the 80s and in the 90s, what happened, especially in Europe, governments then put rent caps on rent because real estate owners who were faced with continuous increase in CapEx were just continuously raising the rent to be able to deal with the higher cost of maintenance and construction. There's a problem with putting rent caps. Problem #1, it creates a short it creates a shortage of housing. Because if I can't raise the rents and construction costs have risen significantly through inflation, it becomes unprofitable to provide housing. So it creates very distorted price signals, right? But now we as real estate developers, we don't necessarily have to pass on increased construction costs due to inflation to the tenants. Now we have the opportunity to do what you said, Marty. We can take part of the rental income, we can save it in Bitcoin, and that will allow us to then perpetually maintain the property. And I'll give you an example. So I moved to Berlin some time ago. Berlin is a great city. It's a metropolitan city. But Berlin created rent caps that are so drastic that the real estate owners that I know in Berlin, I talked with someone three years ago, he said to me, Leon, listen, I'm not going to invest a single cent in my house because it's not worth it, because I can't raise the rent. So why would I invest into a house to maintain it if I can't make any money off it, right. So the price signals in the market have become so distorted that real estate owners are not interested in maintaining their own product, which is the house that they built. And that's completely crazy to me. It's a rational market decision by a rational actor that's being penalized by the Fiat system. But it is bad as a tenant because your property is not maintained. And now through Bitcoin, we have the opportunity to act independently of central banks, takes off the cash flow put into Bitcoin and then in five to 10 years we have the capital to maintain the properties. Yeah, and you layer in, You accept your rent in Bitcoin. Now you're really cooking. Yes. That's a part of it. This is what gets me. This is the white pill I think people, people need right now. There is that's That's again, why I keep saying it's beautiful because I've first recognized this in the Bitcoin mining and energy sector, where the energy sector has a lot of problems that central planners have been trying to fix by throwing subsidies and debt at it. And Bitcoin mining just fits into the energy stack beautifully to provide a free market solution to solve a lot of the problems that are inherent throughout the energy sector. And now you're just seeing this applied to real estate and it's the same exact fire in my belly, the epiphany of, oh, this can happen here as well. By injecting Bitcoin into this market, into this capital stack, you are accelerating and providing a free market solution to a problem that's been attempted to be solved by central planners for for decades now. And this is what gets me excited and it's the type of narrative that we should be really be putting out to the market where it's it's not necessarily driven by fear of things devolving into chaos. It's no we've found a solution to lessen the blow as the debt situation continues to spiral out of control. Yeah, we should. We should have Leon on with Andrew because I think like they've looked at this problem for so long that I think like what Jesse alluded to early is very interesting. You go start a real estate because it's a, it's a big hairy problem. But there's a bunch of other assets that we can think about in the world that are probably actually easier to get credit against from a capital markets perspective or private credit where you can put the strategy against. And so for anybody listening or thinking about it, there's probably a lot to discuss and like play with. Yeah, and and and that topic, I agree Marty. The the white pill of one of the things that brings me a ton of optimism about the Bitcoin future is the the how it it switches the flywheel of degrading quality into improving quality and craftsmanship in all goods. You know, by having a deflationary monetary standard where you have to improve the the quality of your products in order to command the same price, which is the flip of what we've had, where you have to make your product worse and worse and worse in order to keep your prices the same and still make money. So yeah, we have to get into that conversation later. I know we just, we Marty's, Marty's got to go here. But Leon, we should have you back on the show to dig into that whole big topic of Bitcoin urbanism and how and how this sort of model, the real estate and Bitcoin incorporation and the other tenets of Bitcoin urbanism can create the kind of brighter future for for societies that people have been grasping for and chasing and trying to top down model for the last 100 years. And Bitcoin creates this bottom up flywheel for creating those outcomes that people have been dreaming of. Yeah, I'd be happy to, for sure. Awesome. We'll appreciate you coming on Leon. We'll we'll get something on the books. Do you want to share any kind of parting thoughts or where people can find you or reach out? Yes. If you would like to get in touch with me, you can find me on Twitter at Leon Vancombe and I write a newsletter that is focusing on Bitcoin and real estate called The Bitcoin Newsletter on Sub Stack. So if you like you can subscribe to that and hopefully by the beginning of next year. I have a book finished with the working title of Digital Real Estate. It's taken me a long time to read because I'm an I I go very deep into these topics, so I spent hours looking into data going back into the Roman period of the use of land to store value. So it will take me a bit longer than expected, but hopefully at the end of this process I'll have a quality product that will help real estate developers to maneuver this shift. That's awesome. I look forward to reading that, yeah. Thanks for joining us, laying on and sharing your thoughts and look forward to getting you back on. Thank you for having me. Thanks.
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