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. All right, welcome back to Scarce Assets, Kane Mcgookin. I'm glad I'm pronouncing that correctly. Live on air Kane's with Arcos Global Advisors. They're a traditional wealth management shop. They're helping families thrive across generations, managing their wealth and thinking about their financial plan. But Kane's also a, say, a Bitcoin expert. If you're someone who's tuning in, who's not as familiar with Bitcoin, Kane has a lot of great insights to share. I think we've probably got connected, Kane, maybe two years ago. I forget exactly the origin of how we got in touch, but I know we've had conversations in private in the past. And I've always been really impressed with just how deep your knowledge is in traditional markets, the pulse in the economy, geopolitics as well, and then, of course, Bitcoin. So really excited to have you on the show. I appreciate you making some time. Yeah, Jackson, thanks for having me on. I appreciate that. I'm not sure if I'm an expert in anything yet, but trying to get there. So I appreciate those words and you know, the last names soft. So I, I understand that I get it internally, people always get it wrong. So I just shorten it and go by Cane and it's easier. So no big deal there, but excited to be on the day and look forward to having this conversation. I think, you know, every year there's something big in Bitcoin that that makes it more important for the current and future. This year with the strategic reserve and the, you know, White House Summit, we'll leave one word out for the White House summit. You know, that makes this space important as Bitcoin and and then just a broadening ecosystem builds out for the future. And so there's a lot of ways that we can go and talk about that. I'm sure we'll get into it. But on my end, on the wealth management side, just traditional business, we have clients who are interested in Bitcoin. I've been writing, doing stuff a long time in the space. So I try to just, some of it might be deep, but put out a lot of resources to help for those clients, prospects, people that have interest in the traditional side and then try to make connections with people like yourself on the the Bitcoin side. Like you said, we met, it was two years ago. You're right, it's present in that long, but it was through something I had written that I was talking to somebody that I knew, but I think introduced you to me. And so here we are today. Here we are. Thanks, Kane. Appreciate that. And so can you just share a bit about your background? I definitely want to get into what's going on in the White House in DC and also at the state level as well. I'm curious to get a lot of your thoughts there because if we do, you and I think back even six months ago, 12 months ago is a totally different political and regulatory environment for the asset class. And I think that uncertainties ultimately kept a lot of investors in the traditional space from allocating. So definitely cover that. But I think just as level set and get more of your background. You said you've been in Bitcoin a while now. How did you get into it? What initially piqued your interest about this asset or technology and then how do you kind of think about that as high level? How does that mesh with your background in on the wealth side? Yeah. So I'll step back a little bit from from that side. So I started when it was early 2000s in computer science finishing finance, went into wanted to kind of get into the space, but not really on the let's just say traditional wealth management side. That's where I ended up, but always did portfolio management investment analysis kind of with inside a big firm. And so number of years doing that, then worked a little bit on the institutional equity sales side, then left for a little bit and then came back to the end side, which is, you know, you're just traditional wealth management, RA, you're serving my network individuals. As time moved on and algorithms sort of invaded and passive indexing became a bigger and bigger thing, the portfolio management side is frankly less important. Not it's not less important, but it becomes less important because clients have different needs that sometimes don't really matter if they own Google or Amazon or Apple. It's just real like how do I make this cash flow, this balance sheet and those types of things work. So I took a lot of the early days which was cash flow, balance sheet and kind of how you would analyze a company and then I applied to people. So that's kind of a process we use. But once you sort of do that portfolio construction, that risk analysis side and, and you start to understand how the different piece of portfolios works together, it's sort of hard to get, get away from. So, you know, years went by and then Bitcoin came along just like everybody else. I kind of ignored it the first few times. I was looking back painfully last week, had some old emails and found some from 20/13/14 where I'm sending it saying you need to buy this thing, you need to look at this thing. So, you know, it's kind of a painful memory of what could have, should have, would have been. So it was, it was through those couple of years from 2015 to 17 that I really started to buckle down and look at Bitcoin and, and analyze it and, you know, trade or whatever, like everybody else. Again, being on the portfolio side, my background technical analysis, I know for a lot of people that's a voodoo type thing, but it really gives you a path both up and down to kind of better understand how markets and market relationships work. So in traditional markets, the technical analysis sides for the most part broken. I mean, there's still things that work and still signals and trends and whatnot that matter, but just the human psychology no longer shows up appropriately. And we can talk about it later, but that's a lot of the massaging through printing money and you know, you, you got plunge protection teams that come in and step in front of price. And so they don't let it fall naturally. That didn't exist in Bitcoin and crypto and that that's changed a little bit here in the last couple years, but it was just natural human psychology plan. So when I saw that, I was like, wow, this is this is what all the textbooks from the 30s and 50s and all the tape reading and stuff, this is what it's about. It's real time. So that really kind of drew me in and I'll pause there. Maybe you ask questions on some of that. So you came in more so from an interest in Bitcoin was a free market and the broader space was accurately displaying market sentiment buyers and sellers. There wasn't this elephant in the room or gorilla in the market, you know, the Federal Reserve that was stepping in to bail out these markets. It was truly was the Wild West back in 20/17/2018 and it was largely driven by retail. And so that from a trader perspective got you interested. And then take it to the next step further. How did you go from that point, let's call it 2017 or so, over the past several years to where you are today in terms of the how is your understanding of Bitcoin and interest in it evolved in that time? Yeah, I think, and I'll step back and add one thing. A lot of this stems a lot of what's happening right now was my base case coming out of 2008 because in 2007 or 8 when the buck broke and and mutual funds blew up and it was like the financial system was 15 minutes from truly collapsing. That was my birthday and had a hedge fund client called before 7:00 AM is like liquidate everything, get out. And it was one of the biggest hedge funds in the world they worked at. And he was like it's all coming down. And I was like, you know, sort of like, what is this at the time I'm in my 20s. So that set off, you know, Wells Fargo collapsed for not Wells Fargo Wales, Wachovia, Wachovia collapsed. You had the mortgage insurers collapse, AIG, Bear Stearns. I started at Bear Stearns, left a year later, it collapsed. So I started reading through all the government emails and, and all the documents, the Dick fold trials and just like what's going on here. And that sent me down the credit default swap rabbit hole. And basically, when you looked at the balance sheets, you're like, OK, well, I know why JP Morgan got Bear Stearns. My assessment was you've got 2 firms with the largest trading pairs to each other for these toxic assets that can blow up the financial system. But if you stick them together, you have one firm and you have no trade. You can't be the buyer and the seller of the same side of the trade or opposite sides of the trade under the same root. So in my opinion, there was some of that. Obviously, that's not official, Nobody ever said that, but it makes sense from a financial system perspective. So my base case coming out of that was from early on, we had hedge funds and then mutual funds and there was always a bigger fish to retail come in with a lot of money to gobble up these assets, straight bubble and a bigger fish gobble that up. And that was a sport that sort of backed it all up. But I was like, well, there's nobody bigger than a central bank, just not so now central banks are the largest hedge funds in the world, but they don't have hedge fund managers. So the next crisis post 2008 will have to be a government, right? Because you'll have lost faith and money and all the stuff that we're seeing now. And you know, you've seen along the way, smaller governments, banks run into trouble, currencies collapse. But now we're getting in into the big boys, right? And this go around, what did we get, you know, to, to run the Fed? We got a got a hedge fund manager. So our treasury. So you know, that was a big thing for me. It I was sort of like a bitcoiner back then in 2008. It was like, wow, next Wednesday, you know, we're going to be at a million. You know, like next Wednesday all this is so much collapsed down. So it didn't and it took whatever from 2010 to 2020, so another decade for it really to resurface and it started resurfacing in 20/17/18. Gold spiked and interest rates, that relationship wasn't correct as normal. So I went back, did some research on some old books that I read and was like, OK, gold's got to be running again. And that was slow to play out. But over the next three or four years, we kind of saw that today we're seeing gold run like crazy. But anyways, it took me, it took it so long to happen. I got frustrated in the middle and was like, well, you know, all of this stuff that we're sort of frustrated with printing the money, nobody really cares. And if we're not really, you know, using money in a sound way and it doesn't really matter and it's all just funny money, then kind of what are we doing? So I left the industry for a little bit and came back on the on the the RA independent channel and kind of use all that sort of help people understand how flows of money work through their personal finances. So comes a long way of of kind of trying to tie all those together and, and why, you know, I think what's important about today, because I think that having having an understanding of all that helps the individual kind of not pay so much attention to the headlines. So pay attention to the things within their four walls of their house and the budgets and, and all that. So I was a little bit of a tangent there, but though there's some background that might help you. Yeah, that was great. The the idea that central banks are operating as hedge funds really resonates just in terms of host GFC. This, this over 15 years now just seems that there's been poor risk management. You mentioned that they're operating as hedge funds, but there's no one really managing risk. And so that's a big concern because as you mentioned, there are no entities that are bigger than the central bank. So curious, we've been seeing a lot of market volatility the past couple of months here. Just yesterday we're recording on Thursday, April 3rd. So yesterday is when Trump's tariffs were announced. Markets continue to be shaken up post that announcement and we have the 10 year creeping down. Inflation's I guess somewhat under control if you look at the official metrics. What are your thoughts on where we are in terms of the economy and markets at the moment? Do you think that the headlines are a little bit overblown in terms every day? I think we said right before we hit record, every time I open the Wall Street Journal, it seems like the world is ending. So what are your thoughts just in terms of sentiment and what's actually worth paying attention to in the markets right now? So I think First off, in, in terms of what's paying attention to, it's, you know, what are the things you can control within your household, within your budget. Those are the most important things and, and get those out of the way first if you need, if you have cash flow needs for certain things to make sure it's set aside, not invested. That's probably the biggest change in my career. When I came into the markets, you had savings and you had investments savings. You didn't put investments, but you kind of had yield. Second, it was a little bit not not much, but then it went, everything went into investments, right? Not a bad thing, but it creates financial strain when your investments drop 2030% like what we saw in 2022-2023 or 50% or more. So in terms of the the backdrop of of the economy, of the markets, of the news narratives, I think as much as you can turn all that off, that was one of the earlier things I did in 2013 or 14. I just stopped watching the news all together. Now I pay attention to news headlines, Twitter feed probably too much to once you sort of see the patterns, you can kind of know which ones to or have a better feel of which ones to look at, which ones to follow up on. I get more news reading classical texts than I do from modern day because all the past events just same. Then again, you replace the names, replace the dates, replace the headlines. So that's helpful. And then in terms of the economy, you know, I think we had the Great Depression early 1900's, the Great Depression, we had Bretton Woods World War 2 ending, the monetary system being reset. And we had 1971 with it was really the second go around, but coming off gold standard getting Petro dollars and, and those were three separate events. And so there were three separate strategic plans that were put towards that event to stave that that situation off. And now we are facing all three of those things at one time, technically four. So the geopolitical infighting that was kind of like 1900 to 1922 and then carried into the 40s. So you had those four things and we're facing them all at once. So you got a big picture US, China, Russia. It's really been US and China and Russia kind of stepped in later. And then you've got a problem with the dollar, which effectively I think we can get in this a little bit, but Bitcoins role is that next liquidity feature. And a lot of what's going on with the Bitcoin is much like what we saw with Bretton Woods. So the dollar became the dominant system and you had the handful of currencies around it, which led to 180 currencies, not all of them very important. Well, if you have Bitcoin at the center and you have these stable coins, which is much fewer than 180, that become a dominance and importance for our digital markets and digital rails. And that's just where our life takes place. But we don't have a money in that system. So you're really creating that same Bretton Woods like system up, but in our digital life. And then with 1971 just coming off gold standard, everything's off gold standard. So if you have the fundamental economic problems of the 40s, Biden's plan was very much like, I think it was Roosevelt's plan, almost exactly alike. And then now we're trying to figure out the inflation component, which we haven't had to figure out since the 70s. So we saw markets kind of early 20 twenties, 2018 act like the 40s, and now we're seeing them act like the 60s and 70s. So, you know, big picture, having to live four major events under one roof is a little bit different than getting to live them out of water. Sounds scary? Well. I think the the IT does sound negative, but the opportunity is, you know, think about having the opportunity to be one of the builders and one of the people implementing Bretton Wood as one of the builders and planners of figuring out how do we rebuild the world after World War One, World War 2. Or think about being one of the builders of the, you know, derivatives market in the 80s and commercial only what strike and lightning and and those networks and components of those networks are doing are nothing different than the 1980s commercial banking build out. Yeah. Instead of having big banks with a sign on the front on different geographical, you know, countries at different parts of the world sending money back and forth, they just put a computer node and and so so a lot of those, I think the opportunity is being able to be part of that rebuild. Of of the infrastructure. So maybe that's a little brighter, yeah. Well, this clip resurfaced in the past day or two of Treasury Secretary Scott Basent believe it was a clip from prior to Trump's winning of the election. And he said in the next few years, we're going to have some sort of grand, some kind of grand economic reordering, something equivalent to a new Bretton Woods. There's a very good chance that happens in the next 4 years. And I'd like to be a part of it. And so that's almost exactly what you said. And it speaks directly to being a part of building that new frontier, right? Or, or being at the table for the reset of the monetary order. So what are your thoughts? You kind of laid out the, the four bigger forces that are at currently at play. What do you think that this next iteration looks like? Does that tie into the Bitcoin stable coin discussion you just mentioned? Are there other things maybe we should talk about first before getting there? What are your general thoughts about these next four years in the global economic reshuffling? So two things. One, I, I didn't really answer, I realized, So Greenspan in, in 2000 kind of set off this notion that, and this is where kind of prices really start to get massage and animal spirits got wiped out, but that they could go in and sort of manipulate markets and data to do whatever the narrative that was being pitched was. And and that's how the markets have worked in our lifetime. But prior to 2000 there was inflationary markets, which means stocks go up then bonds and commodities and they stocks and bonds can go up and down together in green spans time because they created bubbles intentionally that created this risk on risk off stocks go up, bonds go down, bonds go up, stocks go down. That is actually deflationary in nature, the behavior of that. But stock markets before that had been inflationary in nature, which meant they could go up together, they could go down together. And so that all changed in like 2017. Eighteen or that gold chart I meant. And so we've been back into an inflationary environment. So yields are above 4, stocks are still running. Well, I mean, general theory is that stocks can't go up if yields are rising, right? And 4 to 4 1/2 is kind of that breaking point. And stocks went down, bonds went down. We've had no hedge in bond land. You know, if you're a bit pointer, that was your best hedge, right, Because that was a long Vol asset. So we had volatility interest rates declining for 40 years. So you wanted to be shortfall. So you trade options then that's one of the biggest things is shortfall strategies now, because we've gone back to an inflationary, you know, make up going to be long Vol and that's one of the important parts of Bitcoin. So that ties in there. Trump's policy is appears to be, and I don't know, I don't follow it in depth, but completely opposite of that. Hey, we just can't live on credit forever. We got to tighten our belt and it's going back to some foundational principles to get it reckless spending under control. Now, my guess is he's probably going to create as much currency as everybody before him because since Obama, I forgot the numbers, but Obama did, I don't remember 8 trillion. Trump did 16. Biden did more than that in the first quarter. And and so, you know, everybody's like, well, how did we get here in the US and the economic system get to the shape? It's not Trump or Biden or Republican or Democrat. It's 50 years of both sides of the aisle making physical and policy mistakes. And so I think where Trump comes in is he just, he plays his own game, whether it's good or bad. And I think we know what doesn't work is the stuff that we did for the last 30 years and we got to try something different. So maybe that works. And then lastly, Besant saying what he said about stable coins. I wrote an article about that in it was 2022 or 2023 in Bitcoin Magazine. And that summer I read the Paul Volcker book, I forgot the name of it, but it is main book. And it was very clear the problem that we face today is the same problem he faced in the 70s. And so in the 59, I think it was sometime in the 60s, they created SDRS, which are special drawing rights, which are effectively fake money that only central banks can use. And so in COVID, they ramped SDRS through the roof. No way, you know, So so you ramped Fiat currencies at every country, you ramped them through the roof, printing them and nobody talked about the SDRS. But the fake currency, which was supposed to be a digital currency between the central banks, they ramped that thing through the roof worse than than Fiat currency. So that's to me is like 2 times the amount of liquidity going in the system. So that they, they had the G7, which was our G5 and then it became G7. So they were trying to figure out how do we have these meetings between the countries to pay. You can let your currency fall. We'll let ours run. But we got to sweat into these agreements. But it took three weeks to fly from 1 country to another and get back and inform everybody. So the problem was they didn't have the technology. They didn't have a true digital currency. They didn't have Zoom, they didn't have cell phones to how to do everything basically on notepad. Well, today we sit in the same place, but we have cell phone Zoom and we have programmable money, we have Bitcoin and we have stable points. So all those things allow us to solve liquidity problems, which are just flow problems. And so that's sort of what was sent. He's like, hey, this is an opportunity. I've done cool things. I've worked for George Soros. I've been involved in some of the, you know, biggest parts of the market in history. I have a chance to go make a difference. And I, you know, so I think it's smart to to do that. I think that's a big opportunity. How do you weigh the? So I haven't thought too much about that parallel you just draw between the, was it the SDRS and stablecoins? So one thing I, I wanted to talk about and I want to get your opinion on, you know more about it than I do is so in this context of the reshuffling over the past decade or so, there's been adversarial nations looking to accumulate more gold and start to reduce their intake of U.S. Treasuries. And so Tether last year was the 7th largest buyer of U.S. Treasuries. And I want to get your thoughts on how do you think about it, How do you think people within the cabinet are thinking about the flow issue that you just described versus the dollar dominance geopolitical issue of de dollarization versus re dollarization with stable coins? Is it is it the same side of one coin or are these two different issues that need to be addressed? So I'll take you back. So when I really started diving in on Bitcoin, that one of my first thing was, you know, you can't centralized it. You can't, you know, it's, it's resistant to governments, all that stuff. One thing that Wall Street's very good at is cornering an asset, commandeering it and making it do what they want us to do. And I think if you look at the four year cycle of Bitcoin, this year is very different. What's different about Bitcoins price and its four year cycle is that there's now futures, there's options, there's ETFs and options on the ETS, which gives a lot of Wall Street tools ways to impact price. And, and so I think why that's important is because early on I was like, well, the, the one downside to this asset is yes, it's, you know, trust and trust the system, it's code, it's enforceable law. It can't be changed, but when you start putting derivatives on a spot asset, you can change the behavior of the asset and that's very much what we're seeing. I mean, you have a large chunk of Bitcoin that's lost. I think it was River or somebody about something the other day that was like around one and a half million. I'd always seen like 4,000,000 points. But anyways, big chunk that's lost. Micro strategy now owns a ton of Bitcoin and the ETF's own a ton of it. So you have ways for people say, hey, we just issued this new financial regulation. It applies to you. Either, you know, do what we say or we take your company, your assets, whatever. That's the negative side. The positive side is you turn MicroStrategy into a bank and you start lending on Bitcoin in the same ways that you have money for hundreds of thousands of years. But it kind of blows up the, you know, sound money aspect. But that's what happens to money You, you start sound and you eventually become unsound. It breaks something else comes in and starts sound, you know, unsound. It's just a cycle. And so the, the stable coin piece. So all that's kind of the way. And I think that that was telegraphed very early on. We were talking before, I think it was 2017, might have been 2020. I don't really remember. I posted it when I saw it, but S&P, so Moody's, Fitch and S&P used, they rate bonds and and all these other financial instruments. And that was the big thing. That was the problem in 2008. They were getting paid for ratings. It was pay to play. And so they were rating all this toxic John A because AAA A AA, because firms were paying them well, they rated compound. And I was like, why on earth is S&P rating an algorithmic stable? And last one of the big problems in 2008 was money markets and they broke in the linkages and the times and delays. And so if you have these programmable monies that are being rated by traditional financial institutions, when it's a no, no for them to even be thinking about it, that's a fundamental sign. And so we Fast forward to today and you've got, you know, treasury is saying, hey, we want to be involved in stable and we got a strategic revert, strategic reserve and we want to bring this technology to the financial system. So I think the signs are there. And, and I think like Vicente said about another Bretton Woods, I don't know why. And it's kind of baffling to me that the second third world countries didn't do this three or four years ago, like when El Salvador came out because that Bitcoin, and I know it's not popular with crypto rails in a way, because just flow, it's just moving money. But Bitcoin was a way to them to opt out of the dollar system, a way for them to to set up their own financial freedom. And they didn't really do it. So now we're still in a financial mess and percent saying, hey, this probably makes sense. Probably the biggest shift for me in the last two years is that while dollars do have the negative stigma of being cash is trash because it is there are periods where it's useful. But most importantly, it kind of is the best layer to network known demand because it doesn't matter what country you go in, you show somebody a dollar, they're going to accept because most people in those countries want that thing. So what I'm getting at is you can still use Bitcoin, the savings technology, but actually buy a Coke in China with a dollar bill and you just liquidate some Bitcoin right there and you know, you know, do it or swipe your credit card, which uses dollars and pay that bill with some of the dollars that you got your Bitcoin at some point. So that probably is a little bit faster than like Sailor has said for years, I couldn't repurpose all of his terminals inside of MicroStrategy. And if he told all his vendors and customers and everybody they have to pay a Bitcoin, it would be too expensive to to overhaul and it would be such a pain that, you know, that's a way that makes that work. So what I'm getting at is if you got all these fiats, they're collapsing into dollars to milkshake theory, but the dollar, the known exchange unit of it is still useful and the network of it is still useful. Then you take the Bitcoin and a stable coin set of currencies that are more useful than the 180 fiats. So you had like let's just say 10 or 13 and guess what? Those stable coins, USDTUSDC, all those things solve the Treasury's problem. Who's going to buy these bonds? Yeah. And and it actually the 2020-2021 issue of yield farming, it solves that because there's real yield underneath there versus just crazy who knows what. At Onramp, we believe that Bitcoin is the most important asset of the 21st century. The hard part is securing it right. There are shortcomings with keeping your coins on an exchange, but also with setting up your own self custody arrangement. On Ramp solves for these concerns. Our multi institution custody solution maximizes security and minimizes counterparty risk, ensuring that your Bitcoin remains securely in your possession and provides built in inheritance planning to ensure your family is protected as well. On Ramp provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it as a compliment to your existing self custody set up. For more information, check us out at on rampbitcoin.com. Yeah, that, I mean, that was incredibly insightful. And the thing I'm still trying to, to, to grapple with is now, so these brick nations, right, bricks, they've been pushing for gold and, you know, settling yuan and, and other Fiat currencies for hard assets and commodities. Does this just does the stable coin Bitcoin monetary reset that the US is pushing forward? Does that just kind of leapfrog all the efforts that these BRICS nations have been working on over the past decade? I mean, I would, it would seem like it. I, I think it's smart from the US standpoint. I think this administration versus the last one, I think to, you know, go Elizabeth Warren on it and try to shut everything down and keep innovation from having it is a very traditional way of doing banking. I don't think that's smart. Zuckerberg told them that one of the congressmen or senators and when they dog and pony him dog and pony showed him around Washington in 2017. And like the guy said, look, son, do you understand that this is a weapon that we use? And he said, do you understand that the technology is innovate or get bypassed? And so I think taking the stance where you're not going to use Bitcoin stable coins in this innovative technology to better money, transit and potentially lifestyles is not a good mood. So I think it is good and I think it could lead to that. I mean, who who knows? I think that's the hopes because China's with their Belt and Roads initiative since 2010 or 12, maybe 15, they've bought up most of the critical resources around the globe. And so that puts them in a dominant position, whereas we've kind of offended a lot of people by aiding different things and different groups, you know, when you're #1 the targets on your back, but when you're #3 it's kind of easy to, you know, back door. We did it to Britain in 1920s and 40s. So China's running our pre 19 or early 1900s playbook. And we either have to defend well or figure out a new one. And that seems to be Bitcoin, and I hope it works. I think there's a lot of use for it to work. Yeah. What are your thoughts that going back to the derivatives that you commented on 5-10 minutes ago, I'm curious to hear your thoughts just where we are at this cycle. You mentioned that this cycle feels different in terms of the price and you made a case for that's because there are all these derivatives and financial instruments that didn't exist in the previous cycle. So what are your thoughts in terms of derivative exposure on the price of Bitcoin? Do you think, would you be bold enough to say that there's some sort of manipulation of the price? Yeah, let's go there. I want to. I want to hear what you think. Look, I, I, I ran the daily volatility of Bitcoin from 2010 to now and I looked at the date that each one of those things the the future. So that was 2017, the options, I think it was 2018 sometime around there, then the ETFs this task year and the options on DTFS and the date of launch of each of those, the volatility profile dropped going forward. So, you know, I always try to explain it, an insurance company, they collect premium and modern insurance companies, they create an index of price that they're pretty comfortable with. Doesn't mean the price not going to move, but it's going, they're pretty confident in how it acts. And so when you do that, you do option bands on either side of it to collect premiums off of what you're pretty confident that you know where it's going. Now there's going to be times that you lose. AIG was an example, but you can collect a lot of premium off that. But what those volatility, what the options do and what you kind of understand when you understand by volatilities, you sell the high and you buy the low and that that naturally suppresses price over time. The I've written it's the same things going on you, I don't know if you saw the past week or two about the Fed potentially having to step in and back hedge funds because of the arbitrate so. I didn't catch that. Yeah. Can you cover it? Yeah. So arbitrage is effectively using derivatives options, just financial engineering to, you know, take advantage of market inefficiencies. They evaporate really quickly. But really what that do it does is it pushes price around. So it massages, suppresses price because when you have paper products or derivatives. If so, before I get on that, let's just step into it right quick. If you had one Bitcoin and or 10 Bitcoin and the market was 10 Bitcoin, so fix supply and you had a buyer that had five and whatever another buyer comes to buy 6, so there's only 10. So that price has to adjust out to force the guy with five to sell, that is a non. But if you have paper products and a buyer with six comes in, you can create an ARB market with paper and create out of thin air enough to cover that one. So if there's more demand coming in, you can create more paper on top to push it down. If there's a lack of demand and price comes down, you can create demand through derivatives that buy in at cheaper prices to to, you know, inflate that demand. So I think we're we're seeing that. I think the volatility tells you that. I think that the GBTC trade was early signs of that. You know the roll 40% a year, it's just a covered call and that sounds fun and can be lucrative until your asset drops by 20% or more and then you're stuck with an asset, you got to wait for it to recover. So that's that side of it and the volatility profile tells you that. And then you'll see there are a number of charts that show like the average of the 20 whatever 17 through 2025 or the previous poll cycles. And in this period bitcoins basically flat from here to here when in the other markets it was already running. Now do I think that Bitcoins price is done though, I just don't think it goes as high as kind of the expectations because when you look at the power law that the multiple decline every cycle again, it's just like that volatility. There was another half of the question. I forgot what you asked. No, that, that was kind of the gist of it, but I wanted to get also a sentiment check in terms of where you think things go through the rest of the year. And one thing maybe even before that on the outlook side. Just how? Like, what's your framework for thinking about Bitcoin as an investable asset? If you put on the hat of someone who works in traditional finance and is still coming up the curve on what Bitcoin is and its merits, its fundamental properties, what do you think are the most important things are to dig into or pay attention to? Yeah, I think that's a good question. I think first and foremost kind of like back earlier when I said find out what your priorities are and make sure you're hit hitting those first. So if you have expenses, don't you know put all your money in the market, make sure you're covering that. I think, and I'm not huge Warren Buffett fan, but understanding what you own is probably a pretty, pretty good thing And and it's, you know, don't get jaded. If you had come into Bitcoin, I was talking to the guy that was pretty big guy and he's like, well, you know, I found Bitcoin at 2021 and, and I was waiting for it to come down to 25,000, the institutional guy. That was a big number for most of them. And I bought it and this is the greatest trade ever and I'm going to start levering it and all the stuff. And I was like, look, the bull markets only last like a year. So just, you know, be careful, right? Because today I don't know if you've ever sat through anything at 80% drawdown. It's it hurts now could be less again with the banks and derivatives, I would expect that it's less, but that's what it has been. So in a bull markets, easy to own, you need to own Bitcoin both through a bull and a bear. Nobody's great enough to the time the tops and bottoms and get them all right to truly figure out, do I want this thing in My Portfolio? What percentage should that be? I think everybody's different. What I've found on the traditional side, it's a lot lower probably than it should be because the emotions just aren't aren't there. The capacity to withstand those drawdowns aren't there. A traditional client is not used to seeing a thirty 4060% drawdown in a position. Not many stocks go to 0. Nothing really goes to zero that much they they happen, but they'll go to like 2 or $3 and just sit there and forever. And so I think on the traditional side, it's like, man, I see this thing at a 30% fine. I'm never going to make my money back. Like I just won't even get back even because that happens a lot now with about a Facebook, Amazon and Apple, the the paying in mag 7, that's a little bit different story because those did recover it and they did go and they had bloodbaths, but traditional companies just too far between don't. So that's the hardest part with Bitcoin. The highs are high and the lows are low. And and so I have a lot of conversations where I'm probably more, you know, risk averse with the traditional wealth client just because I've seen a lot of them. And when CNBC pumping it and sailors on every day and you know, to the moon bitcoins at 1,000,000 by next Thursday, they want their whole, most people want their whole portfolio. But then if you do that, then by the, you know, three months from now when it's down 48% there, they're ready to fire you. So you kind of have to, it's a, it's a hard thing about I think for the modern portfolio touched on it. But if you're in a short ball fall environment for the last 40 years and we're transitioned to a long ball environment, I think that everybody should consider like what component Bitcoin plays because I think like we got every few decades we get, you know, an update to the modern portfolio and the 6040 hasn't done that well this decade. And I think Bitcoin would help with that. I know Bitwise was one of the first ones to have these four traditional advisors, these models for you to say, hey, take your normal equity ETF model, stick Bitcoin in it and look at all the fancy statistics. And I I think Bitcoin has a place in the modern portfolio to help the limitations on the bond and even to an extent the stocks up. Yeah, that makes sense. And one of the things as well that ties into that in terms of being long volatility also you'd mentioned earlier that doesn't really matter who's in office. There's going to be more Fiat currencies, more dollars that enter the system. And So what are your thoughts then in terms of this next bout of inflation? Because right now things seem to be have cooled off and seems that more people are concerned about an economic slowdown than they are, you know, recession than they are inflation. And so how do you kind of think about, there's a lot of angles we could go in, but I'm trying to parse out dollar debasements. Inevitable there's going to be more and more liquidity in the system because it's credit based. You need more dollars that drives up the price of Bitcoin, drives up the price of other asset classes. But then also to the other side, you said that Bitcoins returns are diminished compared to previous cycles. There's these derivatives that are compressing volatility. So it's a two-part question. The first piece would just be general thoughts on this next bout of money printing or expansion of the money supply. What's kind of a catalyst for that? And do you have any sort of timeline there? And then the second piece would be why so bearish on Bitcoin if if there is going to be more, you know, expansion of the dollar supply? Yeah. Not bearish on Bitcoin, but I I do, I do try to. I feel guilty if I drive the car off a Cliff for someone else. So I try to like tamper my, my inner bullishness of, of, of Bitcoin so that somebody has a, a hopefully a less painful ride. You know, they, I won't ever have anybody Yoloing in. I think that's safe, but they can they can do that. So I think let me go back. I kind of lost lost track there in in terms of inflation. I think it was Peter Thill in Bitcoin 2021. It might have been in 2022. He gave that presentation and I think he's the most spot on at the time. It was heavy narrative, fake ones inflation edge. You know, it is when you when you look at a long windows, but when when it inflation ramped as hot as Bitcoin didn't do that well because people were having to make real household choices. Do I I've got to pay more for food. My incomes not going up. It's flat to down at best. I have to sell something to buy these things that I need And and it's like I told a younger guys like look, I like Bitcoin, but you can't eat your Bitcoin. You can't sleep in your Bitcoin. And so there, when you get into an adult lifestyle where where you've got kids and you've got vacations and you've got a lot of different things, if you didn't buy early and you didn't have a ton, you have to make, you have to look at your financial resources and say, which ones can I sell? And, and most people when they, when you get in a bear market, they lose faith and, and so they sell that thing and then, you know, kind of have frustration with that six months later when it rises. So I think he astutely incorrectly pointed out this, that it's a warning of inflation. And ever since then, when you've seen Bitcoin rally, then you saw inflation come in. And so, you know, gold faces that same thing from time to time. Like it's an inflation hedge, but it went dead and dormant from 1980 to 2007. Like you'd have wished that you actually lost money. So that inflation hedges don't mean that every time there's inflation, it has to go up. But I think Bitcoin has been a good warning. So that's the inflation component. And then what was the other the second part? Yeah, the second part, so the first part was about the inflation and then the second part was more so just about why, you know, why so bearish, but you kind of answered that question as well. So I guess your thought are your thoughts then to summarize that you don't necessarily think. Liquidity So with the the the liquidity and whatnot, I think what really has me most bullish about Bitcoin is, you know, there are only really a couple of store value assets prior to Bitcoin. Land, you know, artifacts, tools, art, those, you know, not that big a deal, but land and gold. So gold's the only money that's ever lasted throughout mankind. I think gold will always be here because our entire basis around monetary systems is based on gold. And that's where Bitcoin gets that digital. And I think there will work side by side. But from a liquidity standpoint, Bitcoin is the only store value asset that you can instantaneously settle and pay for something. Not I'm going to pay with Bitcoin, but if I just swipe my credit card for 100 bucks and I have a Bitcoin stack, I can instantly settle that it'd be in my account and send that to pay off my credit card. All within, you know, let's just take the longest confirmation an hour. So to sell land, it takes six months. It's in a hot market, it could be a week, but it takes six months to sell a bar of gold. If you got it in storage or whatever, it could take a couple of days, right? Even if it's at your house, you got to go to a pawn shop and you got to agree on a haircut. Whereas Bitcoin is just like boom, done. I can ACH those dollars from whatever exchange or wallet to my bank and and pay the credit card. I think that was over the summer too, right where the everyone kind of rushed the door with the yen carry trade. I believe that was in July or August and Bitcoin crashed maybe 10% or so, or might have been 10,000, might have been greater than 10% over the course of a weekend because that was the only market that people could tap into. Yeah. So great point. When people are forced, they, they sell what they can, not what they want to. And so unfortunately the ARB trade that we mentioned and the derivatives kind of pushing around spot is part of, you know, part of the emission to be considered a global financial asset. Is there a flip side to this in terms of the, you know, the power law you mentioned diminishing returns, derivatives, pushing down volatility. Is there a flip side where the the US government clearly has, they've made a clear stance that they want to be the leaders in Bitcoin. You know, they delineated between Bitcoin and crypto with the strategic reserve versus the stockpile exploration of, you know, budget neutral ways to accumulate more Bitcoin. So isn't there another side to the coin here where Bitcoin is kind of in this consolidation period, but the table's kind of set in terms of sovereign nation stepping in and accumulating A finite asset? I mean that that seems to be like the other side of, oh, well, your volatility has diminished over time. The cycles are still relevant and perhaps the cycles more muted compared to the others. The other one would be, well, now we have these massive pools of capital that may potentially be accumulating Bitcoin. Whereas this market certainly 10 years ago and even five years ago was still largely a retail market, even today 70% of the Bitcoin is held by individuals. Yeah, I, I don't. And again, the price of admission to become a global asset, you can't do it on $500 trades. You have to have real serious capital come in and institutions, just by nature of how they operate, aren't willing to cold store. I mean, institutions are cold storing, but you give them a asset they're comfortable with, one that gets through their bylaws, one that they don't have to go through legal and compliance to fight to get it in, which is why a lot of them bought micro strategy and other things like that. They're effectively buying Bitcoin, right? Particularly with ETS because that money's going 5.85 micro strategy and it just goes somewhere else in the market to a seller, right. But yeah, so that brings big capital in. And at this phase, it kind of fits with power loss for a system to continue to grow exponentially in that regard. 10X, you know, 10X up, 10X time. It has the hat, it has to eat more capital. It takes more resources, otherwise it dies. And and so, you know, if you look at cell phone and like look at Verizon and AT&T today, they're, I mean, T-mobile's there, but they're all three basically fighting over the same customer, Android and iPhone. They're fighting over the same 4 billion people right there. We're not create. I mean, we are creating more people. We're not creating more people that are of age to use those things. They're like, Hey, if you come join my side, I'll give you Netflix and Hulu and then the other side, Well, if you come join my side, I'll give you Netflix, Hulu and ESPN. And then if you come join my side, I'll throw in Comcast. And so they're, you know, because when you go on these, whether you look at an S curve or a power law, it starts to bend, it starts to flatten out. That's the price of admission for maturity and adoption. Like it just takes a different level thing. And, and some of what I said about massaging is natural as adoption happens and that price flattens out, that's because the volatility you laid up in, in, in, in financial systems, when the volatility flattens out, you get more products, which is why I say, OK, you can turn MicroStrategy into a bank because you can create revenues and things off the top of it. So I think in a, it sounds negative, but in a positive light, the maturation of Bitcoin and, and the lowering of volatility and all those things just mean it's, it's further proving it. It's doing what a Bitcoiner has always said it would do, you know, eat the world, eat everything in it. I personally think that just like in 2000, you had nerdy guys working on HTML and everyone's like, why would you ever want to do that? You're a loser. Get out of your mom's basement. But then in 2008 there were rock stars because they were setting up all the infrastructure integrations with AWS and then that became API integrations and we're getting those API like integration. So people between, you know, 2009 or really you say like 2015 and 2021 that really understood the infrastructure of Bitcoin and what it could do. I think in another decade every company will have some kind of Bitcoin wallet or some kind of, you know, crypto wallet to hook in and just like every site eventually got, you know, or, or every company eventually got a website. So yeah, I think all that's positive. Absolutely. Yeah, no. And that's just starting to come to fruition, right, Because for cycles, certainly in 2017, even 2021, there was all this chatter about, oh, you know, the institutions are coming. I think 2021 more so banks were actually starting to prepare to enter the space. And then FTX happened and. Everything blew up in 2022. So set back some plans for years among other things as well. But I agree with you. I mean, this is, we talked about it a lot, right? We're early to Bitcoin. I still believe that to be true for many different reasons. But the implications of that, of course, are that things haven't been fully figured out yet, right? So you play that out 10 years from now, maybe you have banks will still exist 10 years from now and perhaps people have banking relationships where they have still a dollar account, checking account, but then they have a Bitcoin account that's also easily interfaceable through a bank. Right. And, and on that front where you know, there, there is a problem, I mean, it's, it's fact, it's, it's pretty ingrained is if you have an account and you're only saving in dollars, you're not like that's true, you're not doing yourself any favor. So you have to have some asset, the stores value. And, and, and that's really what's broken more so than currency and spending. And Bitcoin has done that job very well. I agree. Well, Kane, maybe we can wrap it up here. I appreciate the time. It was good to catch up with you. It's been a while. I think the last time we caught up was in person in Nashville. So yeah, over six months ago. What? Yeah, if anyone was interested in the conversation and just wants to get in touch, whether just to chat about Bitcoin or learn more about the wealth management business, how should they reach out to you? Yeah, well, First off, thanks for having me on Shameless plug on your end. They can look at this podcast on on ramps website and social media, but no, my I, I'm on Twitter. I do everything under my name. I just kind of think if you're going to say something, say it and let your name be by. So it's just my name or I guess X always say to Twitter sub stack. I write stuff, you know, so DMS are open and happy to chat. I think Bitcoin is super important for the future. I think it's important for monetary system. I think that we're seeing that happen. It does appear that powers that be understand that, and I think that's a good thing for the United States. I think that was our best shot at getting off the path we're on. So I think all those things are important and I appreciate the conversation today. Thanks, Kane. As do I. 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 Onramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com contact to schedule a consultation with one of our private client advisors.
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