A New Era for Bitcoin

So this is the world that these regulators live in, like Bitcoin is happening all around them, and, you know, they're not, they're not robots, like they, they don't wanna be uncool. They don't wanna be the, the, the one that is the old crocodile that stops innovation when everyone around them is like, "Hey, when are you gonna approve this? What's going on? It's been, it's been ten years that people have been clamoring for a Bitcoin ETF."

Tuur, welcome back to the show. Thanks for having me, Stefan. Great to be back. Yeah, lots, lots of things going on. So as we speak, we are basically, well, I think, we're on the eve of the spot Bitcoin ETF approval. So just, we're recording this, Dubai time, eight eleven PM, January the 10th, and so, yeah, let's just kind of get your overall thoughts. I mean, let's start with this. Do you believe that we're changing eras in Bitcoin now?

I do think so, yeah, I do think so. And, and this ETF thing, like, I think you can look at it both ways, two ways, and then I think Both of them are okay to embrace at the same time. One is that this is a watershed moment for adoption because all of a sudden Everybody who has a brokerage account has instant access to, to the asset, and we have our, an army of advisors, financial advisors, who can now recommend Bitcoin and earn a commission doing so, and then additionally, we have of course the Wall Street giants who are gonna put their shoulders behind marketing this thing, so finally they get to like also, take part in, in the profit making of this industry. So that's kind of the adoption And story, the good one, and then the, the, the more concerning one, that, that, the, the, the worries that people have, is that while we are now having financial products that are siloing Bitcoin, where the government has pretty much full control, like if the government wants to freeze the assets that are backing the ETS, they can do so. Of course, they wouldn't do that today, but, you know, what if there's a big crisis, where there's, there's a big war breaking out, and, they need funds? Funds, then that could be used, so, so I think those concerns are valid and at the same time, it doesn't prevent me from being elated because I think that the public at large isn't ready to understand all the consequences of this, this story and, and yes, they will get burnt by Bitcoin ETFs, similarly to how a lot of people got burnt by shit coins and other- Just shenanigans in the crypto space, this is just another step of the maturation process. People are gonna have to learn that there is a difference between wrapped Bitcoin or Bitcoin ETFs and owning the real asset in, you know, in a multisig or a collaborative, environment. And, yeah, we'll be able to, you know, we'll, we'll see what happens, and of course, the scale of this thing is pretty large, like we may see up to, who knows, half a million Bitcoin? I don't know, is a million-- I'm curious about your thoughts, like how many Bitcoin are gonna get, owned by these ETF structures. But still, you know, it's, it's not a majority of the Bitcoin, it's still kind of a, a, a small slice of all the Bitcoins that are around, and so it'll be another learning process. Like people back in the day trusted Mount Gox with, I think it was seven percent of all the Bitcoin. That was a bad idea, but, you know, we moved on, we learned. Right.

I think you're, you make a lot of good points there. So let's, let's start with the Wall Street can now profit from this. They can actually come to the table a little bit where previously they couldn't, and I think it's an interesting story because for the first, let's say, you know, fifteen years of Bitcoin's life It was more accessible to retail and let's say maybe high net worth individuals than to these big institutions for various reasons, because of the custody, the legal aspects, the regulatory, the accounting Various reasons, retail and just everyday hodlers like you and I, we had a chance to front run, and I think the other interesting point that you touched on is this idea that Wall Street and Their distribution mechanisms now are gonna come to play, right? Because there are these products, right? BlackRock and Fidelity and, all the, you know, Galaxy and all, you know, Bitwise and VanEck and all these other, ETF providers and Grayscale of course, Now gonna have a product that they can put out there in the market, and then financial advisors, so particularly people like Fidelity, who have this big distribution angle that they can now leverage that to sell these products. And the ETF market, just for context for listeners, I believe last I checked the stats, it's around ten trillion dollars, that's just ETFs in general, right now as we speak today, the market for Bitcoin is, you know, call it 850 to 900 billion dollars. It's some tiny, tiny fraction, right?

Yeah, I mean, it, it just-- It's an ocean, right? It's an ocean of money that, that all of a sudden Bitcoin has access to, that Bitcoin is being plugged into. so yeah, I mean, it's, it's hard to not be excited as a Bitcoiner that, that, you know, all the-- Like you're saying, all these- Roadblocks have been gradually removed and it's also actually pretty exciting to me that, so many different ETFs are likely gonna be approved at the same time, because that allows for some arbitrage, maybe like some of the, some of the worst players aren't gonna get as rewarded by the market. yeah, I don't, I don't wanna, I don't wanna rosify the picture too much, but, but at least I think that's, that's good.

Right. And so let's talk a little bit about the, the siloing effect that you mentioned. So let's talk a little bit about what the actual risks could be theoretically. Could it be that, okay, as an example? Many of the current, you know, prospective Bitcoin ETF providers are using Coinbase as their custodian, with the exception, notably of Fidelity, who are doing Fidelity's own self-custody because they have their own professional custodian team.

Isn't there one that chooses Gemini too?

Oh, perhaps, yeah. I think you're probably right, but it's like most of them are using Coinbase custody. And so I guess that's gonna be a question in the future, like if there's a lot of the coins that end up with one entity, does that present some kind of centralization? Does it present some kind of risk at the systemic level or not really? No,

absolutely, absolutely. 'Cause what happens in times of crisis, and I've, I've said this many times before, is that governments will go after the low-hanging fruit. They will just Just take whatever's there and that's easy avail-easily available. And I've given this example before, but, you know, in, in World War II, the government needed sugar to send to the soldiers, and so they just went to Coca-Cola and grabbed it. you know, it's, it's just the way it is. And so I, I don't see why they wouldn't do the same with a bunch of money that's like in their minds just laying around there. and then of course, there's the other route, which is Just like in the free banking era, we see some bad actors going bankrupt, but those bad actors happen to have political ties and they kind of talk the government into pooling the money together to make a big insurance pool, a federal reserve, so to speak. That's exactly where the word com-come from. To then ensure the whole Bitcoin banking system. So I think that, you know, situations like this where a lot of Bitcoin is pooled together in one place could, inspire the government to think in that direction. And honestly, I think they will try. Eventually, I think they will try. but the difference between a gold standard and Bitcoin is that it is so much easier for people to store their own Bitcoin and to verify everything than it is, for people to store their own gold. Plus, it's so- So much easier for institutions to get involved because with multisig and these time delays and all these intricate mechanisms, you're much less exposed to the direct threat of violence. Like if you are just one signer in a three out of five configuration and the, the other four signers are abroad, then even if you live in a country with a very powerful mafia or whatever, you know, they can't really extract the money from you. So there's, there's a very powerful mechanisms that will allow for this existing decentralized system to continue growing even in the face of governments trying to re-centralize it all

As you say, governments can get very grabby, and the US government, last I checked, has a deficit-- the federal government has a deficit of thirty-four trillion, about, and that's not even counting the unfunded liabilities, which is multiples of that again. And so it's probably easy to imagine a scenario where Maybe ten years down the line, there are politicians who are saying, "Hey, that's a nice little pot of funds there, let me try to seize that." But here's the other question, would it be a systemic risk to Bitcoin or would it be a risk to those individuals who believe they have Bitcoin ETF, right? Like the, the individuals who purchased that Bitcoin ETF, and that really the rest of the network is basically just gonna operate unchanged?

I think asking that question is answering it, because we know the precedent of Mt. Gox. Nobody who had Bitcoin outside of Mt. Gox really had to worry once Mt. Gox went down. The only thing that did happen is a lot of no-coiners, people that don't know much, they were like, "Oh, Bitcoin just went bankrupt," or, "You know, the CEO of Bitcoin is going to jail." Like, well, that's just a story. So there is a temporary kind of a, a PR story that puts Bitcoin in a bit of a bad light, but, It all gets ironed out, so it's, it's really, it would just be another lesson for people in the world to learn how, how this new financial system really works.

Yeah, that's a fair point. And I do wonder whether if the, you know, the other angle that people talk about is this Let's say a contentious fork example where maybe if there's a lot of coins in a particular, with one particular holder, that maybe they have a way to try to influence the outcome of that fork because they have a lot of coins, they can sort of sell the side that they don't like Maybe there's a, is there a potential angle there also? I don't

really see it, because I think that, yes, you know, governments are gonna control some amount of the Bitcoin, but, it's hard for me to conceive that they would ever control, I don't know, more than thirty, forty percent of the world supply. Like, I'm, I'm throwing a number out there, but that seems really high, those kind of numbers. I think it'd be more likely to have maybe like ten percent, fifteen, 'cause government just love spending, like they don't really Of saving, they usually go in debt rather than that they build up a big, reserve. and then so, yeah, temporarily they could sway the price like kind of how Central banks have, tried to do with gold, like they, they kinda sell into the bear and, try to keep that selling pressure on to prop up whatever else that they, they wanna promote, but that eventually turns against them. It's just a, a temporary thing, and it just means more cheap coins for people who understand what's actually happening, right? And, and also a- after they, they play that card, there's no more Bitcoin to sell, so it's kind of checkmating

themselves. Right, it's like a one time power that you get, right? Because once you've sold those coins, it's very difficult to actually get them back. And so the other element is, around how many coins are held in custody. Now, there are different statistics people share, and some people sort of share, you know, some, you know, like Glassnode statistics and things like this to say, "This is how many coins are left on the exchanges." But perhaps that is excluding some of the coins that aren't on exchanges, but perhaps held with a custodian. Right, so maybe there are, let's say, large entities who today either don't have the legal ability to, the regulatory ability, or perhaps some kind of technical capability, they don't wanna self-custody, and because of that, they're keeping their coins with some custodian. So then it sort of brings up that point again of like, I don't know how many people are held with custodians, so yeah, I'm curious what you think, what you see there. Do you think it's a similar answer there that basically there's not that many people in that camp and A lot of the coins are held by people out there who are holding their own coins.

Yeah, that, I'm not that worried about that either, because it's true, it's possibly a larger amount, but then you're talking about, a, a bunch of custodians spread over various jurisdictions, and, you know, usually the turnaround time, even if your bitcoins are stored in deep cold storage, I don't know, I would say in about a week, you can get all your bitcoins out And so as soon as some kind of trend starts to happen, we're like, "Oh, look, the government just, went after Coinbase." then people just take, pick up their phones and call their broker and be like, "Hey," or their exchange, and be like, "Hey, I wanna move this or, you know, so far you guys have held three out of five keys, well, I would like to keep one more actually, 'cause I feel safer if it's fully in my control and you guys just have a minority control of the keys." So that, that These multi-sig arrangements is that you don't even need to upend the way you really operate, especially if you're an institution, you can just kind of, and, and you can build that in as a contingency plan, which you should, I'm sure, like a market strategy has contingency plans for what if, you know, this current setup gets compromised, what is the next step, how do we move things? yeah, so it's all a learning process, and it's kind of like, I don't know, like it's happened so many times in history where- You need to see some kind of disaster happen to realize, like, "Oh my God, this is a real risk. So let's, let's kind of beef up our, our

security protocols." Right. And even today, there could be large entities who maybe they split their custody across multiple different providers as well to sort of diversify that risk as well. and I know even some of the large custodian companies have already been talking about this for years that they would try to Have keys in different jurisdictions as well, so that's like another way that even, that even the custodian companies, are trying to, sort of protect themselves in this way. Yeah. And the, the, the way I see the future is

really that we won't really have custodians per se having so much power, but it'll be more, there'll be trusted key holders, and they're kind of like, I don't know, like the Knights Templar or something, like they, they have a reputation of, of honesty, and then they will be trusted with a key Necessarily with the majority of keys to be able to move coins around.

Yeah. And one other thing I've really admired in your ability is, you've had a great sense of where we are in the market, right? Now, we're gonna talk a little bit about some of your reports that you've written. So the recent one you've written, now, this was from April twenty twenty-three, it's called How to Position for the Bitcoin Boom. Now, the interesting thing for listeners who don't know who Tuur is, Tuur's been around for a while and he's been writing

That you've done is you've been able to sort of call the bottom or at least write the report that sort of told people, hey, now's a good time to sort of get back into it. so I'm curious if you have any reflections on that just over your years in Bitcoin. I, I, as I, you know, correct me if I'm wrong, I believe you've been writing about Bitcoin and talking about Bitcoin since around twenty twelve, right? Two

thousand eleven, but that was in Dutch, and then in twenty twelve I started writing, in English about it. But I try to publish my reports not exactly at the bottom, because then literally nobody's interested, but like as you're coming off the bottom, I kinda wanna encourage the early people that are like, "Oh, maybe, you know, this is coming back," to kinda of-- and also myself, of course, I wanna-- but, but if I'm giving you the real honest pitch, it's usually Frustration builds up during the bear market, there's so much fud, people saying Bitcoin is dead, like eventually it just kind of gets on my nerves and I start digging into, alright, like let's, let's go back to the fundamentals and, that's actually the more real reason why I put out these reports during the bear market, 'cause during the- During the bull, it's the same, like especially when there is, you know, when there is, euphoria, people don't listen. so kind of there's that sweet spot somewhere in the bear market where you can actually catch the attention of a few people. And then of course, it's nice, you know, to have a track record of, of calling the bottom. but yeah, I, I do, I put it out at twenty-six thousand dollar Bitcoin, back in April. And, sorry, my dog is, getting ready for a nap. He's digging into the pillow.

gotcha. Yeah. So you published that report, April twenty twenty-three, and, I mean, there were a few key points you were talking about, but I think one of the ideas is looking at what the whales are doing basically, what are the large holders doing? And, you know, we look at this, obviously, Unchained Capital has this whole hodl waves aspect. I, I believe, it was Drew Bernal who came out with that, and I believe that was, piggybacking off some earlier work. I believe it was John Rat Back in twenty thirteen, back in twenty thirteen,

John Ratcliff, indeed, it was only later called HODL waves, but he, he found a way to show how many Bitcoin are only one year old, how many Bitcoin are between one and three years old, and, and so you could actually start understanding this market psychology

through that. Right. And then what's happened now is it's kind of become a very professionalized industry, because that was maybe the early days, you had John Ratcliff, people like Drew Banzhaf and, oh, the late Tamas Bloomer, who was also, you know, talking about some of these analytics, and nowadays you have the likes of Glassnode and people like that who are sort of, who've really sort of advanced that science a little bit, you know, even further. but, let's hear it from your perspective. Why does it matter what these whales are doing? How does that help us? Like, let's, let's think of this from a, you know, cycle analysis perspective. How do you sort of use that insight to understand where we are in the cycle?

Yeah. Well, it, it harkens back to the idea that if you can understand what the insiders are doing of any, any sector, any particular stock, any asset class, then you basically have an edge because they have an edge. They've been in the market for a long time, they own a lot of it, they're very personally invested. So, it, it, it, there's an honesty that comes with that, and they don't-- they might not even be talking about it, they, they might not even be on Twitter, but if you can see what they're doing, We have the blockchain, and so that's why Tomasz was so, so, so intrigued by blockchain analysis, and, and he came up with this, metric called, hodler net position change, which is basically it, it looks at not just large holders, but it actually looks at holders that have- A lot of Bitcoin that are they've held for a long time, like that's the more the definition of a whale, rather than someone who trading into Bitcoin, they might sell in a month from now, that's very different. And so you can see that the, w-w- you know, where are the large pools of Bitcoin that have been around for a long time? And then you can aggregate it all, like you, you, you look at literally the age of every single Bitcoin on the blockchain, and then you see these trends where sometimes a lot of old coins start moving Moving into the market, and that is rare, that doesn't happen a lot. And consistently what you see is that actually these old coins start moving when the markets are overheated, because that is the whales who are calling bluff and saying, "Look, there's just too many weak hands in the market, too many people who have no idea what Bitcoin is. I'm gonna actually sell some Bitcoin, and then maybe get back in later." So, so this is a metric I really love, and what you wanna look at is, okay, what's happening now? And, basically you wanna make sure that we're still in a quiet period, because that means that we're not at that exuberance period where the whales are, are calling bluff. And yeah, the, the last year, there's just, even though the price has moved a lot, the whales are just sitting tight because they believe Bitcoin is still massively undervalued. That, that's my interpretation.

Right. And so let's maybe we're doing a little bit of psychologicalizing or trying to get into their heads a little bit But it could be that when we see these very rapid price rises, right? Like when Bitcoin did that run in twenty seventeen, it went to twenty, it went from like one K up to twenty K over the course of twenty sixteen and twenty seventeen, right? In that period, because it had just rapidly, you know, basically done a twenty X You probably saw that there were a lot of people, let's say, taking some coins off, right? Maybe they were, maybe they were like, "Okay, I've hit a level that I can buy a house or buy a yacht or buy a Lambo or something like this," or like you said, they m- maybe they think, "Hey, I'm gonna sell some Bitcoin there at the top, what they believe is the top." And they maybe were able to repurchase at the bottom or relatively lower prices, would you say that's a way to- Psychologize or at least try to get into their heads of what they're thinking.

Yeah, no, exactly. Like, I mean, if you, if you're a massive whale, you have ten thousand Bitcoin, you split 'em up into, you know, parts of maybe a thousand Bitcoin each. You know, even if you wanna sen-- sell only fifty Bitcoin, you have to move that balance of one thousand Bitcoin to do that, so that will just show up. And, and there, there is this counterargument that people have used, it's like, "Oh, but, you The coins are moving, they could be self-dealing, they could be moving into one of their own wallets. But Thomas's point about that was that, yes, but they are still touching the Bitcoin, which means that they, they, in that moment, they're taking, they took them out of cold storage, and really they could sell, and very likely they're just considering that, they, they like might sell or not, but, that kind of behavior is significant if it happens in the aggregate, if a lot of old coiners are, are- You know, having that behavior at the same time, it's still a very valuable signal.

Yeah. And so, I mean, there are some small counterarguments you can make, but I think we would say they are much smaller as a factor. So as an example, it could also be that, look, Bitcoin has just gone up so much that this whale or large hodler is thinking, "Hey, I need to increase my security. I need to move my coins out of this setup into a higher grade multisig, as an example. " And maybe that is gonna be what caught, what looks on I guess we would argue, or we would say, that's actually a small fraction of the reason why most of the people who are moving a large amount of coin are doing it because, like you said, they want to maybe take some off the table, they want to sell, they want to buy a house or whatever, that that's generally the reason why, many of those whales might be You know, selling some or spending some. Yeah,

I mean, I, I feel, yeah, to me, I'm a little doubtful that that would be the reason because if, if you're a whale and your cost basis is so low, you have so much opportunity to beef up your security. You have the entire bear market, you have the early bull market. Like as, if you're very exposed to Bitcoin, you pay attention to the price, you see like, oh, we're up fifty, a hundred percent in a short amount of time. So why would you wait until the all Beef up your security. Also, it's the, the wrong time because then all the industry professionals are very, very busy, right? 'cause, 'cause there's so much demand, everyone is, is, it's hard to get people on the phone, et cetera. anyway, so, I, yeah, I just don't really see the reason why exactly at the, the exuberance phase they would, they would wanna do that in the aggregate at

least. Yeah. Right. And so continuing on with our idea of cycle analysis or at least trying to Have a rough idea of where we are. As you pointed out, I think just recently you were saying there have been very weak pullbacks so far, right? And to you, that was an indicator that this is early in the bull run. So could you just elaborate a little bit on that? What's going on there in, in people's minds?

It was, Czech Matej, who's the, I believe the CTO at Glassnode, who tweeted this out, and I, I noticed it, that indeed the drawbacks, so you can, you can make a chart where every time Bitcoin declines by a certain percentage, you just show it on the chart only the decline in percentage terms. So if you have a bunch of drawbacks of five percent, there'll be like little notches, and then if you have twenty percent, there's like a, a bigger spike down. And so you can map out the entire- History of Bitcoin in that way and what we've been seeing in the last year is that, yeah, there's been some drawbacks, but they're actually very small, compared to previous, bull markets, and the question is like, yeah, what does that mean? I think it's similar to twenty sixteen, twenty fifteen, sixteen, where there was so much undervaluation, that there's actually so much reluctance to sell early in the market because all the leverage has been squeezed out of the market in the, in the prior boom, all the weak hands have left pretty much, and so if there's new money coming in, every dip gets bought, pretty much. and I think that's, that's explaining why we haven't seen more dramatic pullbacks, because people always talk about the wall of worry. If you, if you're in that like sustained bull market, it never goes up in a straight line, you have these like big twenty, thirty percent corrections. I think those are coming, but it's very encouraging to me that the pullbacks have been so- Light so superficial, it's telling me this is still very early in the bull market.

I see. And I'm curious of you then, would you say the 2020 and 2021 bull run was a little muted in comparison to past bull runs like 2013 and 2017?

muted. I think there was more confusion, like in a way, Bitcoin got caught up in this wave of YOLO, you only live once, and, and FOMO, fear of missing out. remember that was the time of Wall Street bets was really big. People were literally gambling with money. There was just so much new stimulus that had come into the market that it created this drunkenness in the economy. The, the, remember how- Housing went crazy as well in twenty twenty-one, NFTs, like people started, it's like, you know, Beanie Babies on steroids. So, so, you know, in that market, of course, Bitcoin is gonna go up, but It didn't receive the pure investment that it's receiving right now, which is spot on. It's like, "I'm afraid of inflation, I'm afraid of bankruptcies, I'm afraid of bank runs, I'm afraid of, an energy crisis, I'm afraid of political instability, of maybe having to leave my country, I'm afraid of war." Like these are all the proper reasons to buy Bitcoin. I feel them now. This is why people are, are, are ignoring to a large extent the crypto- the crypto casino because they realize Bitcoin is actually representing that safe haven.

So the other angle that might be interesting here is We talk about, quote unquote, the DCA army, right? Like this kind of-- I mean, it's a colloquial term, but basically these people who just accumulate Bitcoin, right? Now, you know, many of us have been stacking Bitcoin, and, you know, it's just, it's an accumulation game, you're just trying to accumulate Bitcoin, right? And so- Whether you are, you know, doing most of your commerce in fiat, but you're just having a, a savings in Bitcoin, or whether you actually live on Bitcoin, but you just try to make sure you earn more than you spend in Bitcoin terms, right? That's kind of, generally speaking, those people are kind of in the DCA army camp. Do you think there's gonna be a lot more people who join this proverbial or colloquial DCA army right now that we have these ETFs? It could also be argued that there's now going to be more passive flows, right? Because

Investors are investing in these kinds of ETFs and things, and so they may make a strategic allocation, whether for them it's a smaller amount, maybe it's one percent, five percent, ten percent, and You know, people who just have new income, they're just gonna be stacking passively into Bitcoin. Now, of course, we would prefer that, you know, people are stacking their own coins, but there'll be people who are stacking the ETF, and that's going to also have this upwards effect on the price.

Yeah, I think that's possible. My, my, my gut is that It's a little bit gonna be, it's gonna be the corporations a little bit more, like it's going to be treasury management, corporations that have pension plans and things like that that who, they're gonna DCA into Bitcoin, because they're starting to worry about how much money they will have left to, to actually give these benefits to their retired, employee force or to, you know, to go to health insurance and things like that. I think a lot of people in this economy is- Especially are, are kind of living hand to mouth, like they don't have much left to save, so I think that it's, it's more likely to be on the corporate level now, where, you know, the, the regulatory stuff is ironed out, the, the, the compliance stuff is, is getting more and more clear, and, and, and we have these giant institutions that endorse it, so I think entrepreneurs are gonna feel safer to, like, you know, g- build up some exposure to, to Bitcoin, you know? Of course, but of course I, you know, I encourage anyone who can to, to be part of the DCA army. The, the only challenge is that if you DCA into the ETF and the fee structure changes or, you know, you wanna switch from one ETF to the other and they're both Bitcoin ETFs, if you live in a country that have, has capital gains tax, that's a, that's a tax event, a taxable event, whereas if you DCA straight into Bitcoin and later you wanna switch, provider. Later you wanna switch, custodian or host it yourself, there isn't no taxable event there, so that's really something to keep in mind.

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So that can be really handy because you can see all kinds of information, whether things like RBF were flagged or RBF history replaced by fee history, you can see a range of information there. They also have the mempool goggles, which is the latest feature they've, implemented. Which gives you insight into what's going on into the blocks, whether these are multisig transactions or single signature or inscriptions or something else, you can find out all of this stuff there over mempool dot space. Now they also have a transaction accelerator program which is coming out soon, make sure you sign up for the waitlist that is over at mempool dot space slash accelerator. So go and sign up for the waitlist at mempool dot space slash accelerator. And now back to the show with Tuur. Yeah, very important point to consider, And so, a-and as you point out, just with corporations stacking, I think Michael Saylor at MicroStrategy have been very emblematic for that. I think he's obviously out there running events called Bitcoin for Corporations and trying to help encourage that. And, we know there have been changes at the accounting standards level at FASB in the US, changing the intangible assets accounting standard to allow revaluation upwards in the case where Bitcoin rises. So that's going to be another- Positive, factor for larger public companies who have to abide by these accounting standards where maybe previously they may have been a little bit skittish or a bit wary of buying Bitcoin because they might be worried, well, hey, if I buy Bitcoin and it tanks, now I've got to write that into my income statement and that's gonna look bad for me when it comes to results time every quarter, 'cause I look bad, I look like I've lost all this money, but I don't get the upside, I don't get to write it up when Bitcoin goes up, whereas now, Understanding, my high level understanding of that FASB accounting change is that, yeah, this new change is coming, I believe, December this year, for companies who want to opt into that, standard. And so that's a great, thing that, will hopefully, ease the entry pathway for companies as well. Absolutely,

it's like common sense has been restored, like the way you would imagine accounting should happen, like finally that's starting to be possible. So

one other aspect you, oh, one other area, this is more of a meme, but I'm, I'm curious to get your thoughts on this. So people have been talking about this idea of three green, one red, right? Now, for listeners who aren't familiar, basically this is looking at just the yearly candle, right? Just January one to December thirty-one, was Bitcoin up or down over that time period? And funnily enough, if you look back Yeah, ten years or whatever. You basically get this funny pattern, and it's almost too simple to be true, right? It's just, you see three up years, and then one red, one down year. So I'm curious your view too, can it really be that simple? Three green, one red. Bitcoin's wheel of fortune.

The wheel keeps turning. I, yeah, I don't, I don't think it's that simple. I mean, I do think, I, I sympathize, you know, I think it's true that, that basically it's saying Bitcoin is cyclical. but I think there's some luck involved with the, the way the year works and the, you know, the timing. I, I actually think that this cycle should- Probably accelerate like as, as fiat declines, I think the Bitcoin cycle should probably get shorter for a while. It's hard, it's hard to know, like maybe we'll have certain types of things that will shorten seasonality, but then, but then Some other, in some other respects, we'll have like more longer cycles, 'cause you would think a, a more stable market should have like gold, you know? Gold had very long cycles, some of which were just caused by supply, like all of a sudden there was a new discovery of gold and then a lot of new gold flooded into the global market and that caused the value of gold to go down, So, but yeah, this is really a sentiment driven cycle that we've been in so far, just pure, pretty much pure psychology. and so I think that as adoption accelerates, then this cycle should probably also accelerate, just like, you know, remember those spikes when you look at the graph of, the, the amount of Y-Mark marks that you had to pay for one dollar, like that was super spikey. I, I just feel like as the chaos increases, the, the speed of these cycles should also increase, and the length of-- basically the length of the bear market should shorten.

Interesting. So you believe that, you know, we, we-- it may not necessarily be a four-year cycle going forward, that cycles could, let's say, shorten?

Yeah. We, we might have, like similar to, I remember in twenty thirteen there was this like big run up and we went- To, I think it was like two hundred and seventy dollars or one hundred and seventy dollars. And yeah, it's about two sixty. Oh, two sixty, yeah. And then, and then we went down again. There were people who were like, "Oh, yeah, I guess we just had the, the full cycle and now we're in a bear market." But actually, there was just a lull, and then we went to thousand two hundred in, in early twenty fourteen. So I think similarly, we might have a big, big run up and then people think like, "Oh, I guess this is it, you know? We're down thirty percent, let's, let's get out." And then that's, that's a trap, and, Bitcoin keeps going.

Yeah, and that can be, concerning if, if somebody's trying to sort of play the cycle aspect of it. so I guess that's the other question, should people even try? I mean, ultimately, if you, if you, if you just, you know, have this long-term thesis, people would say, "Hey, you're, you're trying to pick up pennies in front of the steamroller here. Like, don't even, don't even try to do that. Just, you know, just accumulate. And okay, perhaps if you have to take

Trying to sort of time tops or bottoms.

Yeah, I mean, this starts to go into, I know, I remember in your notes you wrote down, life insurance, but it kind of goes into that area because as you build up an exposure to Bitcoin, then what you can do is start managing your, the timing of your sales, and you can build in a bit of a cushion by, if you borrow a g-a bit aban-against your stack And you incur that debt when Bitcoin is relatively low, and then once you think we are topping out or something, well, then you take a little bit off the top to pay back the debt and, and, and so on. And so that means that, You, you know, rather than having to have a cash reserve, like a fiat reserve to take care of unexpected expenses, you have a, a, a capital buffer that's just, Collateral, and so it's similar with life insurance, you build up a cash value in your policy, and then historically people would do this, y-you would borrow against your policy, if, if, if you need to, like that, and rather than relying on the government, 'cause that's the, that's the big deal nowadays, right? We live in a fiat system, welfare system, where people's unexpected expenses are covered by government by just printing more money, and that's going away, like the fiat system is is going down the drain, we're not gonna be able to do that anymore. looking at places like Argentina, like, yeah, there is a lot of welfare, but it's basically totally unreliable. and so what people need to do is find an alternative way to ensure themselves against unexpected events, and one of those events is death. But, but if you build up a, a buffer of capital, you can then also start to use,

small amounts of debt to, to serve as a buffer.

Yeah, interesting. And as you mentioned with, life insurance, this is also a bit of a debate from, what you might hear different financial advisors say. So in the sort of normal financial advisors and planners world, they might say, "Oh, don't do whole life insurance, do the term insurance and invest the difference," right? That's typically what they might argue. And there are others like Austrians, such as Bob Murphy, who talk about the infinite banking concept. And so that was kind of, you know, a, a life insurance concept, as you mentioned, Life insurance policy that you could borrow against or take some c-cash value out of to pay for things, and you treat it like this asset. Now of course, I think we would argue in the Bitcoin world, you just, you, you use Bitcoin as your savings as opposed to putting so much of that trust into a life insurance company. But I'm curious, do you see a sort of merging of these worlds of life insurance out of Bitcoin? And in that world, how would life insurers get returns to pay out, like? I, I would you-- do you believe that would be like post hyperbitcoinization, there'll be these insurance companies who have to, you know, invest bitcoins and need those bitcoins to be able to pay out to their policyholders? Is that how you view it, or do you view it a different way?

Yeah, well, I think first of all, you're right, the, the current world of life insurance companies is very, very far away from our world as bitcoiners. Very, very far away. It's very arcane, lots of bureaucracy, lots of, lots of- Rules, very top down as well. Like as a policyholder, like you don't really have any, any influence. but if you look at how life insurance companies historically were founded, it was very much a bottom-up project. It was very much people getting together, pooling their assets, deciding on policy. that's why they would call them mutuals. It, it was like, we, you know, we mutually take care of each other. and the overhead actually could be pretty light because ultimately the-- you're not a hedge fund, you're not like- You know, going in and, and hiring quants and everything, it's, it's a very simple operation. and especially, I think in Bitcoin, which isn't just a bit def-deflationary like gold used to be, but it's kind of hyper-deflationary, like it increases in value relatively fast. Over the long run. So what you can do is basically you pool the assets and you don't even need to reinvest them, like you, you could just hold them and by, you know, for example, if someone invests, I don't know 0.3 Bitcoin every year. Well, then you can calculate based on actuarial tables, okay, if this person dies in year one, he's ma- his family is maybe gonna get 30 Bitcoin. If he dies in year five, they'll get,

20 Bitcoin if he dies in year 20, he's gonna get, they're gonna get 7 Bitcoin. If he dies at age 80, they're not gonna get anything, 'cause that's how life insurance work, 'cause like all the way at the end, you, you barely get anything because you had a productive working life, which was your plan A to begin with, like, life insurance is only there for You know, if you have to go to plan B where a crisis happens, family needs to be taken care of. so yeah, I mean, I do think that because life insurance is a pretty predictable business, and that the, the coins will be held for a long time, I think we'll see various models and certain life insurance companies will, especially in the beginning, like in this early age that we're at, will reinvest the Bitcoin, try to find like a low risk way to- Earn two, three percent a year on those Bitcoin, denominated in Bitcoin of course, to kind of spice up the, the, the returns, but also especially to stay legally compliant, 'cause weirdly, in this fiat world that we live in, there seems to be mandates, like you're, you're obliged to chase a return for your clients, and in many places you're also obli-obliged to diversify your pool of assets, which of course goes against A pure Bitcoin life insurance company, but so those things are gonna have to be ironed out, like maybe the first of them are gonna be very offshore type, type, companies. But yeah, like very exciting way to, to think about how, you know, m- Not just like Bitcoin Citadel, not just like, "Oh, I'm a hodler," but like, how does a, a, a society on a Bitcoin standard, how does that look like, where we don't have government welfare, where we don't have endless fiat, how do we get that security? And then of, of course, if you think about inheritance, that's also where that comes into play. It's, it's part of why life insurance is actually still popular today, is that it's one of the few ways to pass on wealth to the next generation, without A very significant tax event, because the payout of the life insurance, like the government looks really bad if it starts taxing widows, right? Or orphans. so in that sense, you have this like moral protection shield, for the next generation.

Interesting. And one other area that might be required before this kind of Bitcoin life insurance could be realized, would we need to see more stability in Bitcoin's price, right? Because for now, we're very early in Bitcoin's adoption. Depending on how you count it, it's probably-- in terms of hardcore people who really are hardcore about hodling Bitcoin or hold a serious amount of their net worth in Bitcoin, it's probably less than one percent globally. And so there's a long way to go before we get any level of stability. So are you foreseeing then that this would be post, you know, majority adoption? Like, would we need more than fifty, you know, twenty percent, fifty percent adoption? To, before this is a reality.

If I were to be a life insurance promoter right now, a Bitcoin life insurance promoter, I would say, "No, you, you want to start your policy now because you get to add more Bitcoin to your cash, balance. You get to more, more Bitcoin, add more Bitcoin to your bottom line thanks to the volatility, because you're DCAing. Like your, your policy is probably gonna be expressed in, dollars, 'cause your income is expressed usually in dollars." Dollars. And so then when you want that volatility so that in the bear market, you're, you're actually adding a lot to the bottom line of your insurance policy. so I would-- I mean, of course, probably if you're thinking about adoption, we're gonna see more adoption the more generally adopted, accepted Bitcoin is. But, but, from a purely selfish point of view, you would wanna get your, get your policy today rather than five or ten years from now.

Right. I, I was speaking more at the insurer level being able to provide that, because if Bitcoin is so volatile, how do they, you know, give you that? Well, I mean, they,

they, their, their tables, their payout promises are gonna be expressed in Bitcoin, and so they don't really-- They're not affected by the Bitcoin price at all. The only thing is, of course, that if you get paid out during a bear market, the value of your payout is gonna be low, and so that means- It is what it is. Maybe you'll spend some of it right away and you're huddled the rest, till later, you know, but it's just part of the volatility of Bitcoin, you know? But it's not the problem of the insurance company.

Right. Because you're saying they would pre-calculate these Bitcoin terms, do their actuarial tables all, all upfront or in advance. And they would,

they would never promise more than they, they can afford to spend, because, you, it's really quite amazing if you study the science of this, like the death Quite understood as far as, as a, statistical phenomenon, it's, it's quite, especially of course, if you only have ten people in your pool, then not, but if you, if you start having a thousand, ten thousand people, it starts to become, you know, you can do a survey and kind of like look at some health factors and pretty accurately predict what's gonna happen and keep a little buffer 'cause you, you need, you need to have some profit for the company, of course.

Right. So let's come back to some of the psychology questions. I think this is an interesting one. You've talked, you've talked about this idea that there'll be people who hate buy Bitcoin, or even that some government officials may have to hate approve, quote unquote Bitcoin products, whether that's a Bitcoin ETF or others. So, can you talk us through this psychology? Why would people hate buy Bitcoin? Yeah, right.

Yeah. well, basically Bitcoin is better technology. It's, it's getting adopted eventually by the whole world. The early adopters, most of them are libertarians. They're people who believe in property rights, private property rights, who believe in small government, who believe in the right to privacy, And so that is quite, you know, their values are in line with the technology, but there's also people who, I mean, I guess first of all, who have financial interests in the old system. That's the, the kind of classical explanation is like you're cantillionaire, you know, you benefit from all this cheap credit, that's why you, you know, you, you, you speak the way you're fed. but then additionally, there's lots and lots of people who just have political beliefs that You know, that are such that make them believe that property is bad, that, that it's something bad for society, that we need a big government, that weak people need to be taken care of, and that doesn't happen in a, in a society where there's free markets. And so to them, Bitcoin goes against their beliefs, and so it hurts to adopt it, it hurts, like similar to someone who believes that, global warming is man-made and it's- It's happening right now and it's a very acute problem, and yet they see themselves buying a g-a gas powered car. They drive it, they're hate buying the car. They don't want to, but they have to. and so people who are no coiners, who have been avoiding Bitcoin for the last fifteen years, have seen their Bitcoin denominated- Portfolio wealth plummet, and it's keeps on plummeting year after year, and so eventually they're gonna be like, "Look, I gotta survive somehow. I hate Bitcoin, but I feel like I have to buy some." And that's when you get these Columns in, places like The Economist where they're like, "Oh, Bitcoin is like a cockroach and, and it's, you know, keep, keep, people keep trying to kill it, but it keeps coming back." And so basically what they're saying is like, maybe we have to add some cockroaches to our financial portfolio. It's like ugly, but you, you gotta do it. It's just like, they're, you know, we don't wanna eat the bugs, but you gotta do it. so that's how I look at that. And There are also people of, of flesh and blood. They have family, like Christine Lagarde has said publicly that her son owns Bitcoin or crypto. there was an article, that was promoted by Gary Gensler, just yesterday. it was written by Lori Shoch, she's the director of the SEC's Office of Investor Education and Advocacy. And, and for example, she in the intro of that article writes, which is of course, it's all padding for the Bitcoin ETFs, I believe. She writes, "I can't I can't tell you how many people have come up to me and asked if they should invest in Bitcoin. I recently conducted an investor education program at a retirement community, and a woman said to me, "My children keep telling me I need to hurry up and invest in Bitcoin. Is it safe? Have I already missed the boat?" So this is the world that these regulators live in, like Bitcoin is happening all around them, and, you know, they're not, they're not robots, like they, they don't wanna be uncool. They don't wanna be the, the, the one that is the old crocodile that stops innovation when everyone around them is like, "Hey, w-w-when are you gonna approve this? What's going on? It's been, it's been ten years that people have been clamoring for a Bitcoin ETF." Like, do you live in the real world? Like, and so they just feel that pressure, and then they're like, "Alright, you know, I'm gonna hate-approve this thing. Like, I don't want to, but I'm gonna do it, 'cause I don't wanna lose my career. Like, maybe if I keep being the old crocodile, they're gonna kick me out and some young buck is

gonna take my place." Interesting that it's come this far. And so maybe, as you point out, in the early years, there's career risk of adopting Bitcoin or being

shift and a cultural shift. Now the career risk is the other way around. It's, there's a career risk if you don't adopt Bitcoin. Yeah,

exactly. Yeah, exactly. And I mean, you know, you could take the analogy of, of, homosexuality. Like in the, in the fifties, you had career risks if you were too friendly to gay people. And then, I was rewatching some episodes of Silicon Valley, the, the comedy, the HBO comedy series, and what they're showing there is like there's actually career risks, and That if you are intolerant towards gay people, then you, you, you, s- you know, you risk your career. So, so it's kind of like, so yeah, society changes, culture changes, and

people adapt So looking to the future of Bitcoin, sorry, one other question I wanted to get to before that one. Why would you say every company needs a Bitcoin strategy?

Every company needs a Bitcoin strategy because every company needs to avoid extinction. And if you are stubborn and you refuse to have a Bitcoin strategy, have Bitcoin on your balance sheet, accept it as a payment, have a, a Bitcoin related plan for your employees, then you- You will lose, i-it's like, I think the, the way I see it is that cyberspace, like the internet, is kind of like this Meteor impact that happened, and it changed everything, like, you know, the meteor that, that ended the dinosaur era, it created this giant ash plume, and if you weren't Hardened, if you weren't a hard species, which didn't mean you were big and strong, it just meant like you were hard in terms of able, fit to survive this challenge, you were gonna die, you were gonna get extinct, and that's why these little mammals who were able to hide in little holes, who were ignored up to then, very small part of the world, they were able to survive and they became the next era, dominating the next eras, of, of archaeology and history, geology logical time. And so similarly, I mean, luckily of course, we are adaptable beings, and so you can make a decision to adapt to this, this meteoric impact of the internet. And so the reason I say cyberspace as being the meteoric impact is that It's impacting so much of our life, you know, AI is, is, is posing a lot of threat, factors already. if you are-- Everybody lives online nowadays, well, if you don't have second factor authentication, you're gonna get damaged, you're gonna get attacked, your reputation is gonna get tarnished, you're gonna lose money, you're gonna lose your job, your, your company's gonna go bankrupt 'cause the databases have leaked, et cetera. And so you need to start adopting these cypherpunk tools. To survive, and that includes Bitcoin. Bitcoin is just part of the toolbox to survive in an era where DDoS attacks are happening all around us, and, and we're proving your identity is getting harder and harder. So cryptography really, that's, that's, that's where, where, where it's at. And, and the only money that's really protected by cryptography is Bitcoin. I don't know, it's a very kind of esoteric explanation as to why you need to have Bitcoin on your balance sheet or switch to the Bitcoin standard as a company company, but ultimately, yeah, it's to avoid extinction.

When it comes to the future of Bitcoin over this, let's say, cycle or so, you know, let's say the next few years, do you have any, I guess, thoughts on- You know, what kind of, domino effects we may see that, you know, we may see this US ETF get approved, and then we may see ETFs in other countries, and we may see more and more companies who start doing a micro strategy or other countries who start doing, in El Salvador. I'm curious if you have any thoughts around what kind of dominoes could fall in the next cycle. Yeah, man,

all of them. I mean, it's like the wildfire started and like, you know, let's speculate on where it's gonna spread, and it kind of depends on, you know, the wind and some factors that we don't control. Also, like, we don't know how, how hollow and rotten all the trees are and how fast they're gonna catch fire. so there's a lot of unknowns there. I, I do feel certain that it is happening And of course, like, like a melee revolution, like that could just start spreading all around the world too, 'cause, 'cause I, I do really sincerely believe that Bitcoin is a part of all this, this kind of counter movement, this countercultural movement for smaller government, more responsibility, longer term thinking. I think there was an undercurrent of that, but a lot of those people are feeling emboldened now because they can have written about this in the Bitcoin Reformation. If you have an exit strategy If you have the option to actually exit, you start feeling more free and you speak more freely, and I think that's what we're seeing as Bitcoin is kind of, this, this, I don't know, super fuel for, change in the world. so yeah, it's all tied together. It, it's not just Bitcoin that's spreading, it's all tied together. I don't know where the- You know, the next, it might be a central bank that puts it on their balance sheet. I mean, I think generally speaking, you can say that people who are already more freedom minded are gonna be earlier adopters, so maybe entrepreneurs are more likely to be part of the next wave than stodgy old government bureaucrats, so Just exciting times, and like, like we said, it's just very early in this bull market.

One other area around the future of Bitcoin use, because obviously not everybody can transact on chain, right? Like everybody's clear about that, and it may not even be possible that everybody can have their own Lightning channel, at least today. Maybe with future technology, it may become possible. But I'm curious how you're thinking about some of these alternative ways that people are interacting with Bitcoin or looking at it. So, for example, there's Liquid, which is- A federated sidechain, you can think of it kind of like a custodian kind of, but spread across the fifteen functionaries. there's eCash, and there's kind of the single eCash form and the federated eCash form. and there's just straight up custodial lightning as an example. I'm curious how you're looking at some of these methods of Bitcoin use, and what, what, what do you see, becoming prominent?

Well, first of all, I wanna see all of them kind of grow and proliferate, and of course, we're all gonna have debates on what the best-- which one offers the best trade-off for security versus privacy, et cetera. They're all gonna have different trade-offs, that's, that's a fact. the level of security that you can achieve with a proof-of-work based blockchain that's globally adopted is unprecedented, but the bandwidth that that offers is limited by definition. I think- I think Greg Maxwell puts it really well when he says it's like a court system and, and the Bitcoin blockchain is the supreme court. It's the, it's the, the smartest, it's the most fair, of all courts, but it's also the most expensive place to settle a dispute. and so these, these layer twos are gonna be lower level court systems that work in a different way. And so it's polycentric law at work. It's really beautiful if you look at it that way, So that's how I see this entire discussion. It's like, you, you don't want-- as much as I'm a maximalist for, for Bitcoin, right? For Bitcoin adoption, we only need one Bitcoin standard. I'm very much a pluralist when it comes to the layer twos. I think we need many systems and we need competition and we need arbitrage between them and money to flow from one to the other. I've been vocal for years that I think the- The liquid side chain was undervalued and underappreciated. People were saying like, "Oh, nobody's using it, and it's, you know, there, there's not enough hackathons, and, and there's-- it's, it's too cumbersome." There was all kinds of, you know, not enough smart contracts, all kinds of things people were saying. And my feeling was that this is something that is designed to flourish when fees are really high and, there was another reason, well, maybe also when privacy is really valued, much more valued than before, and so like a, like an Ethereum is very bad for privacy, for example, but people didn't care and so they would use it anyway. And then the Bitcoin blockchain for a long time had low fees, and so people were like, "Oh, let's just, everyone is gonna go on Lightning, it's the, the future, we can all open Lightning channels." And then it's like, "Oh, really? Like eight billion people are gonna So, so, you know, I, I feel like finally Liquid is getting the attention it deserves, it's a very powerful platform, but it's not the panacea, it's not gonna solve everything. there's also the ARC proposal I've heard of, Alex, Bergalex was, excited about that and, Yeah, I mean, who knows? Maybe, maybe this is still very early age, the Layer 2, like we, we've been thinking that we, we solved it all, but maybe there's more to it, and people are saying that, yeah, maybe Lightning will have a different role in this ecosystem than we previously thought.

Right, and I think the Lightning part is a, a different understanding than in the earlier days of Lightning, where maybe the common understanding was just, "Oh yeah, everyone can run their own node," whereas now, I think the use for Lightning is being better understood, you know? And, you know, maybe some of us were wrong, right? Like I, I probably, I think I had the wrong impression, that I think it's going to be more used in a bi- B2B context and- Although of course I want as many people to be non-custodial as possible, I also accept that there will be a lot of custodial Lightning users, and, you know, I can't, you know, shaking my fists at the, at the stars isn't gonna change that, that there will be a lot of people who simply can't afford to go on-chain And so they will use some kind of custodial solution, whether that's custodial Lightning, and Lightning may become more like this kind of interoperative layer or interconnected tissue between the different layers, whether that's people on Ark, people using eCash and FedMeant sort of things, and people using Liquid, and people on Light, and just people natively using Lightning, and there may be these kind of swap providers who help you kind of swap between, the different- Solutions, maybe that's what the future looks like.

Yeah. Yeah, I mean, that's, that's what I

think. Yeah, that's what I think. Alright, well, I think that's probably a good spot to finish up. any closing thoughts, Tuur, and where can people find you online? Closing thoughts, I mean,

strap on your seatbelt, like this, this thing is gonna light our hair on fire. This thing is gonna go, go, go. I, I really- I really think we're so early, nobody's interested in Bitcoin yet. If you look at the search trends, it's like, no, the world isn't paying attention yet. the world needs this. it's crazy to me how- All these global macro factors are starting to come together, like the, like you were talking about the deficit, for example. I mean, Jeff Gundlach had a, a slide in his deck where they made some projections for US government, how sustainable their, their expenditures are, and basically if If, the interest rates goes to nine percent, they're literally bankrupt by twenty twenty-nine. That means that interest rate payments would grow larger than a hundred percent of tax income. And also if it stays where it is right now at six percent, they also go bankrupt quite quickly. and, and the alternative, of course, is to lower the interest rates, which means you blow up the value of the money. so it's just, you know, just so many crazy things Things that are happening at the same time, and I'm so happy that Bitcoin exists, 'cause truly, like, w-well, you know, a lot of, a lot of us who've been looking at this for, for fifteen, twenty years, we were thinking about digging a hole with a bunch of gold and like just waiting for the, the zombie apocalypse, 'cause it's, it's just so terrible to have a, a, a financial system that all of a sudden can no longer calculate and where the money is dead. It, it is terrifying. And so for Bitcoin to build this alternative, it's like, it's like we're, we're building a system B or a system D, like to debrie, it's like to, to get by, a way for the world to actually get by and get through this crisis. Like we see stories about this all the time in like war zones and things like that today, that they're like, if it wasn't for Bitcoin, I couldn't have sent money to my family to get them out, et cetera. So it's a lifeline, it's, it's a lifeline, Already here, like the renaissance has already started, and oh man, I'm so excited. It's, it's amazing to, to live in this exact era.

Well, great to chat with you, Tuur. listeners, make sure you, follow Tuur, I'll put all his links in the show notes. yeah, look, I agree with you. I think we're living through this re-renaissance, it's a new era, and so, strap in. Hey, looking forward to chatting again with you soon. Thanks for joining

me.