{ "episodeId": "SLP233", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "vijay_boyapati": { "name": "Vijay Boyapati", "role": "guest", "tag": "VIJAY" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 9.07, "text": "Hi, you're listening to the Stefan Livera podcast. For episode two hundred and thirty-three, regular guest Vijay Boyapati re-joins me on the show, and he is the author of the bullish case for Bitcoin. And so today we're talking about possible valuations for Bitcoin, as well as some common misunderstandings that people have, and just some common errors errors in thinking that people have around bull runs, which I'm sure you will enjoy. This show is brought to you by swanbitcoin dot com, the best place to auto stack your Bitcoin in the US with incredibly easy setup and low fees. They've recently announced availability in New York, so they are now available in all fifty US states. 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Vijay, welcome back to the show." }, { "speaker": "vijay_boyapati", "time": "02:28", "start": 147.91, "text": "Thanks, Stefan. It's great to chat with you as always, and, I hope I'm keeping my record as being the, the guest who's been on your show the most. That's a very important record to me 'cause it was my, the first podcast I did, and I still think it's the best Bitcoin podcast out there." }, { "speaker": "stephan", "time": "02:45", "start": 165.2, "text": "well, thank you very much, Vijay. And I think you are, although I haven't checked the numbers recently, I should run the numbers, so it's gotta be," }, { "speaker": "stephan", "time": "02:54", "start": 174.27, "text": "it So yeah, so the market situation and Bitcoin has, it's been continually changing over time, and now it's, you know, we're, we're kind of getting to that point where we have to start thinking about what kind of market do we think Bitcoin is competing for. And so you had a great thread around valuations, I'd love to get into some of that. So I think, it would be good if you could perhaps spell out what are some of the high level- You know, valuations that we could think of for Bitcoin." }, { "speaker": "vijay_boyapati", "time": "03:29", "start": 208.8, "text": "Yeah, absolutely. And, and to give a little bit, bit of context, context, my background is in Austrian economics. I'm a computer scientist by training, but I spent a lot of time studying Austrian economics. And when I first came across Bitcoin in twenty eleven, the question that most interested me was, how does this have a price at all? That's, this question that economists really should be studying is Is how, how a price is set and how they formed. more recently, I've become interested in valuation frameworks and not just how does Bitcoin have a price, but what price should you assign to it? And so I've been kind of thinking about and digging around, what valuation frameworks are there out there, what have people used? And, and I came up with the four main ones that I've seen in my, you know, about nine years thinking about and observing the Bitcoin market. The first, framework is the one that pretty much everyone thinks of when they first come across Bitcoin, which is, \"This is just the tulip mania, this is another huge bubble, this thing doesn't have any intrinsic value, it's, some crazy token that's been created on the internet, how can it have value? Eventually the bubble is gonna burst.\" and if you, if you were to believe this framework, you'd probably assign, a long-term price target to Bitcoin of zero. And And, and this is the framework that you'll see still being used by people like Peter Schiff and Nouriel Roubini and, and Paul Krugman and the, you know, the kind of people who can't get away from that first skepticism and open their mind and, and sort of see that there's an underlying innovation here that's very important. So the second framework is that Bitcoin is a new monetary good, and it's clearly, solved some problem because there are certain people who value it, but the, the set of people who do value it is limited and is limited to people who are either technologically savvy or who have an ideological affinity, to Bitcoin, so libertarians, for instance. And if you were to believe this value- valuation framework, you'd probably assign a price target to Bitcoin of somewhere between ten thousand and a hundred thousand, because there are still, you know, a lot of people, who, who fit that category, libertarians and, and people with a technology background, and there's a lot of savings in Silicon Valley, so, that, that gets you, you know- A, a decent price level, but it's not sort of what I would call geopolitically significant. The third valuation framework that I found is that Bitcoin is essentially digital gold. It's a better version of gold. It has the, the same attributes that make gold good as a store of value, and in fact, it, it, it's better than gold along these attributes, especially along the attribute of scarcity. It's a, a strictly finite supply and, Transmissibility or transportability, it's, it, it's like gold with teleportation built in. So I can transmit a hundred million dollars worth of Bitcoin, across the world almost instantly, whereas doing that with gold is much more difficult. Now, if you were to believe this framework, you'd think that it, it totally makes sense for, for Bitcoin to have a market capitalization that's, you know, equivalent in the same ballpark as, as gold. So you'd probably assign, a price level, some- Somewhere between three hundred thousand, US dollars, which is slightly below gold, to, you know, anywhere up to maybe a million dollars, which is higher than gold's market capitalization, because you believe that it serves the same purpose as gold, but it does so in a better way. And the final framework that I've seen is that, Bitcoin becomes the world's, monetary base, the, the, the global reserve asset that nation states and large finance, financial institutions keep Their savings in. And that is a model which sort of views Bitcoin as serving the same purpose that gold served in the 19th century, when gold was the, the reserve currency of the world. And, and if you were to believe this, valuation model or framework, you would basically have to assign a price level to Bitcoin so that all the Bitcoins added up to the total global wealth, and, and that gets you to, a price level somewhere in the order of ten million dollars per Bitcoin or higher than that as the global economy grows." }, { "speaker": "stephan", "time": "08:15", "start": 495.25, "text": "Yeah, so I think it's, I, I wanna go back to the tulip mania kind of idea. So I guess talking, thinking of what someone like, you know, the typical skeptics nowadays, like someone like Peter Schiff, who just can't get past, you know, the subjective theory of value, I guess at the Kind of, if we had to push it to the maximum level, what those kinds of people could say is, \"Oh, well, see, you're just, you're just living through this kind of bubble period, and, you know, it might be that, you know, it just-- the bubble hasn't popped yet.\" And I suppose our answer, at least the way I would think of that, is more like, \"Well, hold on.\" Kept, were tulips able to be sent around the world? Were they strictly scarce? Did they have all these additional qualities? And I think the other point is just that really with these kind of past bubbles Tulips and South Sea, et cetera. it's not that they were like, it, it kind of died and then just re-rose again and again, wouldn't you say?" }, { "speaker": "vijay_boyapati", "time": "09:20", "start": 559.62, "text": "Yeah, I completely agree. I think the second point is Really important historically, there are no bubbles that I'm aware of that burst and then came back and then, you know, had, had another popping and then came back, but each time they came back, they came back even bigger. I'm not aware of any such bubble, and one that continued for an entire decade. It's just, It would be historically unprecedented. There's clearly something valuable that's being create-created here in a clear, technological and monetary innovation. so it's, it's sad that after ten years, people are still using these analogies. I can understand maybe in the first two or three years, someone might see it and think that way, but after a decade, you, you really are not thinking critically if you, if you believe that valuation model." }, { "speaker": "stephan", "time": "10:12", "start": 612.48, "text": "Yeah, and it's probably also fair to point out that just living in a fiat money world with, you know, awash with credit expansion, it might be a harder point to come back to, to say, \"Well...\" What if every asset is being pumped by this fiat, you know, central banking and, fractional reserve? could it be that Bitcoin's value is being artificially pushed up, but also everything is being pushed up by that?" }, { "speaker": "vijay_boyapati", "time": "10:39", "start": 639.22, "text": "Yeah, I think that's a fair point. I do think that, all assets are being inflated by the fact that the total amount of fiat money out there has increased tremendously, but When you get into a situation where the, the inflation gets out of control, people will flock to the most liquid goods first, the things that are the most tradable. So if you look at the, the Weimar hyper-inflation, yeah, people fled, the, the Rentenmark to, to real assets, things like, food and real estate, but the thing that they preferred the most was gold, and gold skyrocketed during the hyperinflation because it was the most liquid tradable good. And, and I think that's what you'll, you'll see if we get into a situation where the inflation gets out of control, that people will flock to the most liquid globally traded good, and, and Bitcoin really fits the bill quite well. It's, deeply liquid, it's traded across the entire world, it can be- Transmitted across the entire world. Gold, gold's sort of similar as well, but it, it has the disadvantage that, transmitting it is very difficult. And I'll, I'll give you an example, one case where this might be important. Imagine, imagine if you're the leader of a, a nation state that's not viewed very favorably by the United States, and you've essentially been kicked out of the, the global monetary system because the US doesn't like you. So for, for instance, Venezuela, and you're running out of savings, your na-nation's running out of savings, and you wanna repatriate your gold. You don't hold your own gold because, you know, it's hard to move gold around, and you've Gold you had in the Bank of England is your gold and you can get it when you want, and you ask them, \"Can I have, can we have our gold back?\" And they say, \"No, you can't have your gold back because we don't like you anymore.\" That, is a situation where there's a huge advantage in having Bitcoin versus gold, because the gold that you have is hard to move around, it's hard to pay other nations with because you have to physically transport it. So i-if you're a nation which has, become a pariah, there are huge advantages to holding Bitcoin versus gold." }, { "speaker": "stephan", "time": "13:00", "start": 780.42, "text": "Yeah, and so- Moving up to the next valuation, category or bucket, if you will, the, the new monetary tech for the tech-savvy cypherpunks and libertarians." }, { "speaker": "stephan", "time": "13:14", "start": 793.99, "text": "Curious what you think there, because some might-- I guess some people could say, \"Oh, well, fine, Bitcoin might be this useful tool, but in reality, it's difficult to use.\" And to me, I think that ignores the reality of what this is, right? If it's a better money, well, then people will make better technology and better user experience for that, and really what's driving it is what was the better money, not what has the best UX, if you will. But how do you think about that?" }, { "speaker": "vijay_boyapati", "time": "13:41", "start": 821.28, "text": "Yeah, I think you're absolutely correct. The, the fundamental problem is making a better money. The user interface is something that takes time, and the, the same thing applied to the internet, for instance, as, as, as a comparison. Bitcoin is only a decade old. If, if we were to look at what the internet looked like a decade after it had, it's really begun being used in the way we think of the internet, today, that gets you to, you know, the early two thousands, and I, I don't think many people back then really appreciated how important the internet was. It really took another decade, you know, two thousand and ten and eleven and twelve, when people recognized that this is, gonna be Profoundly important to the way the, the world economy works, and, and I think the same thing will be true for Bitcoin too. We don't fully understand how it's gonna change the financial system, but it seems important, and it seems a little difficult to use, and the internet was still difficult to use in the early two thousands, and internet penetration was still quite low. but in time, the technologies to make it more approachable and easy to access were developed, and they were developed because the underlying thing that had been built was very, very important. And the same thing is gonna be true for Bitcoin. We still see a lot of innovation and companies coming into the space trying to make it easier for people to use, and I, and I think one of the areas of innovation that we're gonna see a lot of work in over the- Next, say, three to five years, is making it easy for people to self-custody and to feel confident holding their own coin and sort of reduce the mental burden of managing your own private keys." }, { "speaker": "stephan", "time": "15:28", "start": 928.12, "text": "Yeah, and speaking of the demographics as well, I think even if you just looked at libertarians only, we haven't even hit saturation even in that demographic yet, right? There are a lot of libertarians who aren't into Bitcoin, maybe they got confused by all the B-cash stuff, or maybe they hold a very small- small amount of Bitcoin, they haven't actually really dived deep into this and actually taken a significant position into Bitcoin, wouldn't you say?" }, { "speaker": "vijay_boyapati", "time": "15:54", "start": 953.96, "text": "Yeah, that's a great point. I, that's one I hadn't even thought about. The, the penetration even amongst the demographic who should be s-most sympathetic to Bitcoin is still fairly low. I, I mean, I, I don't have a specific number on the top of my head, but I, I would imagine it wouldn't be more than, say, thirty percent. So there's still a lot of room to grow in even the most sympathetic demographic So that, that gives you a sense of how much opportunity there is, how much upside there is amongst other demogra-graphics who don't really even think about these issues or why they're important." }, { "speaker": "stephan", "time": "16:26", "start": 985.84, "text": "Right. And I think also from a cycles perspective, and I'm sure you have probably noticed this, perhaps even in yourself and also in your observations of other people who are in the Bitcoin world, it's that oftentimes it just takes time to build some conviction, and it might need a full cycle, at least one, maybe even two cycles before someone Has, has built up, more of a conviction into holding, a significant part o-of their, wealth into Bitcoin rather than, let's say, the dipping your toe in. And so, it, it, I think it, it, it fundamentally is just gonna take time for enough people to have gone through a cycle" }, { "speaker": "vijay_boyapati", "time": "17:06", "start": 1025.74, "text": "Yeah, I, I think this is something that we've spoken about in one of your previous podcasts. I talk about, I've talked about on Twitter, the psychological process of becoming open to, or curious about Bitcoin and being willing to allocate some of your savings to it, and I talk about the idea of touch points, which is the number of times you've heard about Bitcoin or, someone you, you trust explaining it to you or having a small allocation to it and seeing that allocation. Increase in value to the point where you are curious and you dive down the rabbit hole. And for some people, the number of touch points they need is much higher than other people. So for instance, I, I heard about Bitcoin twice, and that got me interested, partly because the people who told me about it I really trusted. And partly because they were sort of explaining something in fertile i-ideological ground. I was, you know, a libertarian, I am a libertarian, and it was something that-- and I'm interested in economics and monetary theory, so, you know, when something like Bitcoin comes along, I'm pretty receptive to hearing about it. But for the average person, it may take ten or fifteen times before they think, \"Hey, I, I keep hearing about this from my friends, why don't I put a little bit of time in and figure out why this is important?\" Because I don't wanna be the last person, on this bandwagon if Bitcoin becomes really big. or it, it could be that, a person has been gifted some Bitcoin a few years ago and it was worth a hundred dollars a few years ago, and now it's worth a thousand dollars, and that alone was enough, to pique their curiosity to the point where they're now going down the rabbit hole. And honestly, I can tell you, put, from my own personal experience, this has happened among family members, people who I've- Gifted small amounts of Bitcoin to over the years, and they've sort of, their curiosity has grown with the price, which is, you know, kind of natural as well." }, { "speaker": "stephan", "time": "19:07", "start": 1147.48, "text": "Yeah, yeah. And, I'm curious as well. So I know you, a little while ago, you went on Tom Woods' show to talk about Bitcoin to his audience, and it's just a funny thing because it seems like libertarians should be all about Bitcoin, and yet so many of them aren't. Why, why do you think that is?" }, { "speaker": "vijay_boyapati", "time": "19:28", "start": 1168.3, "text": "Yeah, that's a good question, and I, I'm gonna say something controversial. I didn't expect to say something controversial, on your podcast, but I'm, I'm gonna assign the blame here to someone who I otherwise hold in high esteem, and that's Murray Rothbard. And I, I think the problem stems, back to a misinterpretation of the Misesian regression theorem, which is a theorem of how does money, get its Original value. And I think Rothbard was the first person to really take Mises' regression theorem and misinterpret it in a way that said money can only, evolve as something that starts as a commodity with, real utility, so, you know, something that you can use to dig holes or, Something used for jewelry or something like that, and I, I think that was a big mistake. And if you look in the Austrian community, a lot of people clung to that idea for, for many years, and some of the prominent Austrians still Haven't fully grappled with it and haven't fully figured out that that interpretation of the regression theorem is wrong. so that, that's at least my thinking on what happened, in the libertarian circles. There was that initial skepticism and dismissal and debate about, \"Hey, can this thing be money?\" And I think a lot of people became hostile because of that debate, because debates like this can often get heated and, and, and I think there was, some animosity that was created in the libertarian community and in Austrian circles. it's unfortunate, I, I think, when I, when I look at Rothbard's writing, I, I think he was a, a brilliant historian and a, a brilliant polemicist and a great- sort of, motivated to bring people to libertarianism, but I didn't, I don't think he was the, the same caliber of economist that Mises was. I think Mises was a giant and really, s-- several of the things that he worked on were revolutionary. and I think this is just a case where something, that he believed was, sort of-" }, { "speaker": "vijay_boyapati", "time": "21:50", "start": 1310.05, "text": "misinterpreted and, and twisted a little bit, and I, I don't think Mises himself would have looked at Bitcoin and said, \"This can't possibly be money, this, this thing is like a Ponzi scheme or something like that.\" I think Mises would have been, much more curious and would want, want to have understood what it was and how it got value in the first place." }, { "speaker": "stephan", "time": "22:11", "start": 1331.45, "text": "right. and, that, that may, that may well be true that, this confusion around the regression Theorem was what led many Austro-libertarians to not go down the Bitcoin rabbit hole, as it were. but I suppose the other point there is that a lot of libertarians aren't necessarily Austrian, so I guess if for some of them, that wouldn't even matter. So what about the non-Austrian libertarians, even though you and I are in that camp? What about those other non-Austrian ones? Why aren't they into Bitcoin?" }, { "speaker": "vijay_boyapati", "time": "22:41", "start": 1360.67, "text": "That's a good question. I guess I can't, I don't have a general answer for you. I'd need to look" }, { "speaker": "vijay_boyapati", "time": "22:48", "start": 1368.01, "text": "And why they're dismissing it. it may be that they're just slow. Some people are slow on the uptake in recognizing that something is important. It's, it's kind of like investors in a way. Some people are quick and they see that something is important and they move quickly, to take advantage of that, and some people are just slow. and I think probably the same thing is true in, in libertarian circles as well. libertarians on average, my guess is they're, more curious and more intelligent. Than the average person, but there's probably still a spectrum of levels of curiosity and, and, openness, and there's probably a whole bunch of people who are just naturally not that curious about new technologies." }, { "speaker": "stephan", "time": "23:33", "start": 1413.23, "text": "Yeah, yeah, and it could also just be that, look, it's technology, it can be difficult for people if they're not a tech-savvy person. but, I anticipate a lot of those people will come in over this next cycle or so and, with, the gold, idea of Bitcoin being something in that range of valuation, as you said, something like three hundred to one million or three hundred thousand to one million, that is. I wonder then, whether we, we start to get into that we could potentially hit close into that range at the top of this cycle before crashing back down again. do you have any, thoughts on what? changes in the broader, let's say, investment world if Bitcoin were to get close to that kind of valuation?" }, { "speaker": "vijay_boyapati", "time": "24:21", "start": 1461.37, "text": "I think it's possible. I definitely think it's possible. and one of the things that I think is most fascinating, which mo- you know, fascinated me from the beginning, when I first came across Bitcoin, is this is the first time in history that we've seen a good being monetized. The process of gold becoming money took thousands of years, and so we get to observe this in real time, and we get to lo- On how, how it happens and what it looks like. it's not a, it's not a s- a simple straight linear process, it's messy and it's, go- there are ups and downs, there are booms and busts. But one of the most fascinating things that I've observed is that it sort of happens in these cycles, and these cycles are like a fractal pattern, a fractal pattern of increasing magnitude. And, and what I mean by that is, i-if you super-incho- pose the, price chart of a Bitcoin, bull cycle, from two thousand eleven to two thousand thirteen. If you superimpose that on the bull cycle from two thousand sixteen to the end of two thousand seventeen, it looks almost identical. And that's, a-and even crazier to me is if you superimpose that pattern on the, the gold price chart from nineteen eighty to two thousand ten, it looks pretty much the same. And, and what I've speculated is this might- Might be something that's inherent to the, the social dynamic of monetization. and, and so if, if we do that again, if we take the, the, the, the price chart of two thousand and seventeen and superimpose it on the current price chart, rescaled for the current price level, that, that would get you to, at the end of this bull market, if it plays out in a similar way to the previous one, to a price level of three hundred and twenty-five thousand per Bitcoin, somewhere in October twenty- 2021. currently we're, we're ahead of schedule, that is the price now is higher than it should be if you were to follow exactly the 2017 bull market, so we're moving faster than we did in the last market, market cycle I personally find that very, very strange. I would have thought that this bull market would take longer to play out just because of the scale of the market. so I, I'm surprised. I, I think this is pretty interesting. It's, it's, it's cool. And it, it could partly be explained by the fact that the, the, the, the people coming into the market right now are very large institutional players moving very large amounts of money, and that's perhaps why things are moving more quickly than they did in the last cycle." }, { "speaker": "stephan", "time": "27:00", "start": 1619.64, "text": "Yeah, and also on this whole idea of additional adoption, I think from your bullish case for Bitcoin, I can't remember, or maybe it was one of your tweets, I think you were saying something like, \"This cycle, this whole thing might take 50 years,\" but it seems nowadays, the way I'm looking at it now, it might actually be 10 or 20 years from now. Do you have any thoughts on, that kind of timeline idea of when you would anticipate we see this kind of final full- Global adoption?" }, { "speaker": "vijay_boyapati", "time": "27:31", "start": 1650.72, "text": "Yeah, so I've, for a long time I've been kind of agnostic to, price, you know, price movements, in the short to medium term. I, I haven't had strong predictions on, on what would happen. I've been-- I'm as bullish as anyone on Bitcoin in the longer term, say fifty years. I, I think there's almost an inevitability to it becoming, a global reserve asset, but, you know- Recently, there's been a lot of analysis, done by Plan B, about," }, { "speaker": "vijay_boyapati", "time": "28:07", "start": 1687.23, "text": "Bitcoin being adopted in, in a very sort of predictable, way. And To be honest, I was kind of skeptical that something like that could even be possible, because it almost violates what we as Austrians think of as, there being no statistical laws that you can sort of rely on, that all, all action can be changed at any time in market, it's all, it's all market dependent and dependent on the, actions of individual in the particular time period. but, but then- The analysis that Plan B has done is very interesting and it, it's, it's eerily accurate. It's almost scary to see how accurate it is. And if anything, I think Seifordine may have said this, this might be the first sort of statistical economic law that anyone has ever created. and, and if it's the case that it, it follows this same pattern into this bull cycle, I think, I think Plan B might be up for a Nobel Prize in economics." }, { "speaker": "stephan", "time": "29:11", "start": 1751.0, "text": "Back to the show in a moment after this message. 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Go and check it out at lend dot huddlehuddle dot com. Right, and, as you say, generally speaking in Austrian economics, it's not that there's like some statistical laws that we can divine through statistical analysis, but I suppose the, maybe a Safdiean counter to that point would be something like, now that we have this monetary set point of Of twenty one million, maybe that really does change some things about, you know, the way, economics works because now the total supply is known, or at least the eventual total supply is known." }, { "speaker": "vijay_boyapati", "time": "31:26", "start": 1886.5, "text": "Yeah, I mean, perhaps the fact that we-- that people's expectations about that supply are becoming, sort of becoming more and more confident over time is, is one way to explain, this, this growing belief that stock to flow is a, a valid model. And there may be a feedback loop here as, as, more and more p-- people believe that the model is actually correct, it follows the model even more closely. So That, that would be an interesting thing. We're, we're, we're learning, and I think it's really good for us as Austrians to keep an open mind and be observant and, and watch the market and see how things play out. I, I probably am not quite as confident as Plan B in the model, and- I'm open to it being correct, and I think it would be absolutely incredible if it was correct. My bullishness is more for the longer term, and I personally always, urge caution for anyone getting into Bitcoin to think about this as an opportunity that they should, have like a, a, a decade horizon on. Buy some, buy some so that, you know, you don't feel uncomfortable with the amount you own, and just forget about it and come back in a decade and see where you're at, I, I think it's a little bit dangerous to think that you can buy something and next year it's gonna be up ten x. If it is up ten x, that's fantastic, that's great for you and, it's great for the whole community, but, don't, don't come into the space predicated on an assumption that that's true. Be cautious, be patient, and read as much and learn as much as possible to increase your conviction so that you feel comfortable owning Bitcoin for a long period" }, { "speaker": "stephan", "time": "33:17", "start": 1996.58, "text": "Right, and with this cycle, I think the narrative has shifted as well, that, or at least it's more like people have settled down onto more like a store of value long-term narrative, where perhaps historically- It was a bit more confusing, and other-- there were other ideas around what possible narratives there were, like, is this a crypto world or is this some other thing going on, where now I think there's at least a stronger contingent and a stronger messaging around what Bitcoin is." }, { "speaker": "vijay_boyapati", "time": "33:52", "start": 2032.42, "text": "Yeah, I think this is the first bull cycle when we have the correct narrative. There have been, like you say, a whole bunch of narratives floating around. There was one for a while, it was, everyone was all about, \"Blockchain is important, but Bitcoin isn't.\" And, within the Bitcoin community, I think the big important, debate was, \"What is Bitcoin? Is it a, is it a payment technology? Is it a payment rail? or is it a savings technology? Is it something more akin to--\" Digital gold and, and that debate really came to a head in two thousand and seventeen with the, the big split of the network. And, I think the important thing is that that split really resolved one of the biggest risks for Bitcoin, which is What, what is it? We, we, we're not really sure what it is, and, and there was a big risk at the time, a perceived risk amongst investors that, the whole thing could fall apart because the community couldn't get together. What happened in fact is when the network split, the market overwhelmingly voted for, Bitcoin as digital gold, as a, as a savings technology, as a, as a reserve asset. And, the fact that that was resolved, and now we've sort, sort of gotten past the whole idea that blockchains are important and Bitcoin isn't. This is the first bull cycle when people, I think, now generally view Bitcoin as a fantastic store of value, and they also recognize it is the only blockchain of any significance or any value, and that's incredibly important. I think having that narrative in place is gonna be enough to get us from where we are now. Bitcoin, attaining and eventually eclipsing gold in market value. To, to get it beyond that, to get it from gold to, being the world reserve asset, the, the narrative might need to expand or be, improved in s-some ways to, to bring along skeptical nation states or central banks, but But having the narrative we have now is enough to get us to being digital gold, in my opinion." }, { "speaker": "stephan", "time": "36:06", "start": 2165.64, "text": "Yeah, and also This is a point I have mentioned as well around what we might call order of operations, right? So it seems that there's a lot of, if we look out into the more shitcoin and crypto world, they, they are often talking about DeFi and as though, you know, you need to have all these kind of fancy, complicated financial instruments and, you know, you can't do that on Bitcoin, therefore that's why we need a shitcoin for that. And, I mean, to me, the way I've always thought about that is more like, well, Bitcoin has a lot more growing to do before those things are, you know, one hundred percent necessary, so you can experiment with them. And to some extent, you know, there, there is some level of Bitcoin DeFi nowadays with things like, you know, HodlHodlLend, sponsor, sponsor of my show, but also, other things like, you know, Lightning Pool and this idea of, you know, getting return for being a routing node and things like that. What's your thoughts on, you know? So-called DeFi, it and its, you know, potential importance to Bitcoin and when that would even become, a relevant factor." }, { "speaker": "vijay_boyapati", "time": "37:15", "start": 2235.19, "text": "Yeah, I like the way you framed that. I, I think you're right. You, you need to get the foundation set before you start building the rest of the house, and I feel like some of these other projects, they're really experimental. I don't, I don't take them seriously at all. they're, they're sort of working on the roof before they have any kind of foundation." }, { "speaker": "vijay_boyapati", "time": "37:35", "start": 2255.3, "text": "I, I am, I I'm very skeptical of the whole DeFi movement or like building this kind of stuff on Ethereum because one thing I think is underappreciated is that when, whenever you have any contract which, Makes reference to something in the physical world or some, some entity that can be coerced by the state, then having it in a de-cent-decentralized system doesn't really help you much. And, and I'll give you an example. So in, in 2017, there was this huge ICO boom when people thought, \"Hey, this is a really great way to build these contracts which are on Ethereum and we can raise money and we can do it completely outside of the purview of any regulation.\" And I think that- That was people were quickly disabused of the idea that that was possible because, you know, companies that are running and raising capital and have an office can still be subpoenaed by the SEC and they, they can be physically, coerced. a-and if you have a business which is using these contracts or you have some physical object which uses a contract, those things exist in the physical world and can be coerced. So I think the, the use of decentralization in those exa- those situations is almost like decentralization theater. It's not, it, it's not useful, it doesn't help. It, there's no advantage of doing those same things with, you know, Amazon Web Services and using a Postgres d-database. I, I don't see the advantage there. In fact, it's much less efficient to do it on something like Ethereum. It's only in the, in the world of money which- Which is sort of ethereal and, doesn't have fis- doesn't need to have physical form and, and can be transmitted and transported around the world, then I think it makes sense to, to use a, a blockchain." }, { "speaker": "stephan", "time": "39:36", "start": 2376.04, "text": "I see. And so, I guess one interesting counter example there might be something like Bitcoin DLC, right? but I suppose if I under- if I interpreted your view right there, you, I guess you're kind of viewing that like that's a bit more of a sideshow compared to the, you know, the main stage, which is Bitcoin as money." }, { "speaker": "vijay_boyapati", "time": "39:56", "start": 2396.0, "text": "Yeah, I think so, and I, I think there are, you know, businesses that are building on Bitcoin and building, sort of financial products on Bitcoin like lending and derivatives and things like that, I have not yet seen an example where that's been done in a truly decentralized way on top of Bitcoin. So something like BlockFi, that's a company that's building these, products, lending products on Bitcoin. Those products, I think are to-- totally fine and, but, but I think also BlockFi is a company that can be coerced in, in the future if the, if the government says we don't want these products to exist, they can just go shut down BlockFi. It would be interesting to see if someone could build, a, a tr-truly decentralized lending market on top of Bitcoin and have, you know, market interest rates being set, in a decentralized way. if that's possible, that's fantastic. I just, I don't believe I've seen that yet." }, { "speaker": "stephan", "time": "41:00", "start": 2460.05, "text": "Right, typically it's needed some kind of entity to help facilitate, and maybe that is good enough in terms of people having service and having someone they can talk to and figure out how to use it with, So, yeah, I think-" }, { "speaker": "vijay_boyapati", "time": "41:19", "start": 2478.78, "text": "Yeah, that's it. I, I just want to sort of cover what you said just now, a little bit more. There's an example of something called wrapped Bitcoin, where you can wrap a Bitcoin and trade it, on, on some Ethereum markets, but the wrapping process actually requires you to set up an account with, what's the business, BitGo? so already the whole point of having a decentralized system of trading wrapped Bitcoin, as it's called on Ethereum, is kind of a, a farce, because you're, you're dealing with a centralized authority already. And if, if Bit- BitGo gets raided, then that is gone. You're, the, the wrapped Bitcoin that you're trading on Ethereum is gone. So it, it's kind of theater to do that and to do it on Ethereum when you could do Do the same thing just by creating, you know, a web app, and, and just using a database to tra- trade bitcoins back and forth, just like you could trade bitcoins back and forth with someone on Coinbase." }, { "speaker": "stephan", "time": "42:24", "start": 2543.82, "text": "Yeah, and, I'm, I'm also sort of related, but I'm also curious to get your perspectives on, stablecoins here. So obviously, I, you know, I don't view stablecoins as any kind of monetary competitor with Bitcoin, but, I, I guess, I've seen different perspectives in the community. Some are bearish, some are bullish, some view stablecoins more like they might be the, the grease that enables people to kind of get in and out of different exchanges or, a stepping stone for people who want to try- And start with those before then getting into Bitcoin. Do you fundamentally view stablecoins in a similar way, or are you kind of bullish or bearish on them?" }, { "speaker": "vijay_boyapati", "time": "43:04", "start": 2583.72, "text": "I think they sort of, they aid the onramps, they aid people in being able to get fiat money into Bitcoin, especially in places where it's not easy to get, you know, if there's an exchange which only takes dollars, it might be easy to use Tether in a place where dollars aren't available in your country. In general, though, I, I just sort of see them as money substitutes for fiat currency. I don't think they're particularly interesting, i-it's just that you can trade them digitally. They're still Completely centralized, which is, they're, they're missing the, the, the property that makes Bitcoin interesting and, and makes it useful as, an uncensorable digital store of value, is that, it, they're not, i-, it's not centralized. There's no central party that can roll back your, savings in Bitcoin if they wanted to. With something like Teva, I don't believe that at all. I, I don't, it's entirely possible that the, the company- That runs Tether could be shut down and all your savings are taken away. So I'm only, I'm only positive on them in the sense that they make it easier for some people to get their fiat savings into Bitcoin." }, { "speaker": "stephan", "time": "44:21", "start": 2660.7, "text": "Right, and, yeah, from, yeah, from what I know, it seems like exchanges typically like having it just as a way to help people in and out as well, and there are some people who just view it like, \"I just want to be temporarily in that stablecoin and so on,\" and so they're trying to minimize the amount of time that they're in it, but I suppose there might be others who actually try to hold some of their value in tether because they would rather not hold it in their local fiat, that kind of thing. But that's, I" }, { "speaker": "vijay_boyapati", "time": "44:50", "start": 2689.8, "text": "Yeah, I think one other comment, I think there's pe- there are people who, do arbitrage and try to, make profits from the spread between various exchanges, and it's easier for them to transmit, dollar value, tradable dollar value between exchanges using something like Tether than going through the, the banking system, because the, the banking system is so old and antiquated and terrible that everything takes so long, and if you're trying to, trying to up- Arbitrage, say a ten dollar spread between Coinbase and Binance, and you're trying to move dollars between them, it's much easier to use something like Tether than it is to, do it through the banking system." }, { "speaker": "stephan", "time": "45:32", "start": 2732.1, "text": "Yeah, for sure. also, I guess a few might be interesting to talk about a few insights in terms of how these bull cycles go, just for maybe some listeners are a little newer, they aren't as familiar, maybe they weren't paying as much attention during the 2016 and 17, runs, but, I think it's interesting to point out and note that there will just be pullbacks along the way, and, people, might get, get, They might end up losing a lot of money if they're trying to call tops and bottoms and trying to trade in and out." }, { "speaker": "vijay_boyapati", "time": "46:10", "start": 2770.22, "text": "Yeah, if you, if you look at previous bull market cycles, nothing happens, the process of monetization we've already learnt doesn't happen in a straight line, it happens in, in sort of It's a very bumpy ride, and, if you look at previous, the previous bull market cycle, there were several tops called through the cycle. I mean, there were people calling the top at three thousand, five thousand, nine thousand, fifteen thousand, and every one of those was wrong. so, so if, if you want to sort of see the big gains, over the long term, you're not gonna be trying to trade these things because Trade these tops because it's very easy to get tricked and see something, see a price movement to, let's say in this cycle it gets to seventy-five thousand and then it drops down thirty or forty percent, it drops down to forty thousand. A lot of people are gonna panic and sell out because they'll think, \"This is the end, Bitcoin is gonna drop all the way back down to three thousand or something like that.\"" }, { "speaker": "vijay_boyapati", "time": "47:17", "start": 2837.47, "text": "but, you should-- in, in any bull cycle, you should expect that there are gonna be at least three or four drops which are at least thirty percent. And if you haven't experienced it before, a thirty percent drop is very, very painful, and the only way you're gonna s-- survive this is if you have conviction, you, you go down the rabbit hole and understand why Bitcoin is long term really valuable, and you should sort of go through and listen to every one of the- Stephan's podcast to get conviction, and, and maybe put your Bitcoin somewhere where it's hard to get it out, to, so it's hard to, to trade it. So put it in cold storage, put it in a, a lockbox somewhere, and just forget about it and don't even look at the price. That's, that's what I tell people. Buy some amount of Bitcoin that you feel comfortable about, and just hold it for five to ten years and, and don't even look at the price until then." }, { "speaker": "stephan", "time": "48:13", "start": 2892.95, "text": "Right. And I think it's a common tendency But for some people to feel like they can try to pick the tops and the bottoms, or that, okay, if there's a drop, it might only be twenty percent drops, and then they might lever into a certain position and then actually get wrecked because it dropped more than they thought it would, and, you know, then there's tears at the end, whereas it's mu- it's so much more simple to just simply, you know, take a position, and, you know, if you're able to, and you've got income and you're happy, you know, then keep Just play it like that, and that's the simple way that, you know, people who've done that strategy have done well." }, { "speaker": "vijay_boyapati", "time": "48:54", "start": 2934.31, "text": "Yeah. Another mis-- a common mistake in bull markets is, I don't wanna buy now because it's already gone up so much. And it's funny, I, a friend reminded me just yesterday of an email, exchange we had going back to, I think it was two thousand twelve, and he said, \"Ah, I don't, I just, I really don't wanna buy Bitcoin here. It's thirty- $15, it's gone up so much in the last few days, I just feel really uncomfortable. And he reminded me of that and how, how painful it was to look at that and, and think, \"Whoa, I, I, I was like...\" I was getting worked up over a few dollars, I didn't see the big picture here. And I think Bitcoin is still an asymmetric bet, I still think it has massive upside from here, so- The mistake people make is, I don't wanna buy it now 'cause it's gone up a lot, so I'm gonna wait for a pullback and buy it on the pullback. But let's say the price is fifteen thousand, you wait for a pullback, it could get up to twenty-five thousand and then pull back to twenty thousand, and then you've, you haven't bought in. The, the better way to think about it isn't, \"I'm trying to find the exact right price.\" The, the right way to think about it is, \"What fraction of my portfolio am I" }, { "speaker": "stephan", "time": "50:17", "start": 3016.53, "text": "Yeah. And o-obviously, as this cycle plays out, I'm sure we will see the same characters, right? Peter Schiff, Nouriel, Krugman, whoever else, they'll come out every time there's a drop. And, one thing that I've noticed really is that they're very short-term focused, right? They look at this short-term drop of, you know, twenty percent or thirty percent, and then they won't look back at the actual long term where we've seen, you know, multiple, multiples. Literally, Bitcoin has gone to multiples of what you Selection bias of people who are able to be long term thinkers versus the people who only see things in the short term." }, { "speaker": "vijay_boyapati", "time": "50:53", "start": 3052.69, "text": "Yeah, I joked about this on Twitter when Bitcoin recently dropped, I think it was from like eighteen thousand five hundred to seventeen thousand, I was like, \"See, Peter Schiff is right! \" You know, obviously, they, they've totally missed the forest for the trees, they haven't seen the big picture. and I think, just a little more cynically, I, I think in the case of Peter Schiff and Noreen Rubini, I, I think this is a motivated dishonesty. I think they see that they get a lot of engagement from this and it's good for their brand. And, and so, p-p-some of Peter Schiff's tweets are so- Inherently dishonest that I, I, I still find it hard to figure out if he's either a dishonest person or he's just stupid, and I keep sort of going back and forth between those two, but it may be that he's actually really smart. He's figured out that he, he mentioned on Twitter that his, his, number of followers has gone from like two hundred to three hundred thousand, just by tweeting about Bitcoin. That's all he tweets about, even though he's a, Sort of a used gold salesman, he's found out that he can get a lot of engagement by, talking about Twitter, because the Bitcoin community is a very active, passionate community, and you tweet anything about Bitcoin, you're gonna get a lot of people, engaging with you, and I think this is gonna be, the first cycle when you see a lot of celebrities getting involved in Bitcoin too. So this, this bull run is gonna have a lot of attention, it's gonna be, it's gonna be Crazier than anything you've, you've ever seen. It's gonna be like a circus, so prepare your body for twenty twenty-one. It's gonna be a very wild ride." }, { "speaker": "stephan", "time": "52:44", "start": 3164.32, "text": "And I remember even, in the twenty seventeen cycle, there were, you know, it was like Katy Perry is coming out with her own coin or something, I can't remember exactly, right? They, they were all coming out with their own coin, that was the thing, right? whereas maybe this time it'll be more like, you know, Bitcoin bling or, I don't know" }, { "speaker": "vijay_boyapati", "time": "53:03", "start": 3182.97, "text": "Yeah, I'd almost forgotten about that. You're absolutely correct. It sort of illustrates how we've finally, honed down to the correct narrative. Back then, it was like all about blockchains, so everyone had their own blockchain, and that was cool. But, I mean, of course, that idea is completely absurd. You don't wanna have one money for buying bread and another money for paying gas. You want one money, just a single good, hard money, and that's Bitcoin. So, this cycle is gonna be completely Bitcoin. dominated and, and everyone, every celebrity and their dog is gonna wanna talk about Bitcoin, so it's gonna be very, very exciting and interesting and, everyone's gonna be talking about it, good or bad, and people who have been talking about Bitcoin like yourself For a long time, are gonna get a lot of inbound media attention." }, { "speaker": "stephan", "time": "53:54", "start": 3233.86, "text": "Yeah, though we will see. I mean, I guess if everyone wants their own blockchain and their own, their own coin, there might be, you know, it may be, it may be that, you know, Bitcoin obviously will grow a lot, and we will see less as a percentage who get fooled by shit coins, but it might actually still be bigger in absolute terms, right? Just because of the numbers involved here. So there may still be a lot of people who get confused and go Etcetera." }, { "speaker": "vijay_boyapati", "time": "54:21", "start": 3260.52, "text": "Yeah, you, you're right. That's, that's a, a good point. in, in relative terms, I think it'll get much smaller, but, as Bitcoin becomes massive, there will still be some sort of fraction of people who own Bitcoin who are degenerate gamblers and who will, wanna, you know, try their luck in, in some of the altcoins. And because the altcoins are so small and so illiquid, any small- fraction of Bitcoin moving into them can massively spike their price, so move them from like a quarter of a penny to like nine or ten pennies, so a-and that can get certain people excited, like, \"Wow, I can make fifty x on this altcoin,\" but really only a few people can make that because it's so illiquid. Anyone who was coming in with, you know, a large amount of capital would completely lose all of their capital doing that. but, there, there will be some fraction of people who sort of fall for this, and it's unfortunate because, you know, we've gone through a couple of these cycles where we try and-- we care about people and their savings, and we don't want them to be hurt, and as much as you warn people beforehand, there will still be some fraction who fall for this nonsense." }, { "speaker": "stephan", "time": "55:38", "start": 3337.91, "text": "Yeah, it's unfortunate to see, but, I guess, you know, just gotta try to keep putting out good material and hope that, people, catch onto Also, I was interested to get your thoughts around, some of the, let's call it, platform risks or technological risks around things like Ethereum, because I think it's important to just kind of spell out for people what's the difference between, you know, Bitcoin that's built and engineered to last for the long term versus, you know, the way people are building on things like Ethereum. What are some of the practices that you're seeing over there?" }, { "speaker": "vijay_boyapati", "time": "56:13", "start": 3373.0, "text": "Well, Bitcoin, oh, sorry, Ethereum is exciting to a certain mindset, the engineering mindset, people who like writing code and scripting and things like that, sort of a Silicon Valley mindset, and engineering mindset which is obsessed with direct utility, and so they see Ethereum and they think, \"I can build all these things on top of it, therefore it must be useful.\" It's not thinking about it from a monetary perspective and, the value comes from, stability and credibility of monetary policy. And in that regard, I think there is no altcoin that comes anywhere close to Bitcoin, and that, that includes Ethereum. There is no credibility to the, the monetary policy of Ethereum, and you can see that because in the early days, they had a contract on Ethereum. Which was kind of like a, they, they sort of touted it as a decentralized, venture capital fund. And then someone figured out, a, a hole in the contract where they could steal money from this fund. And, and what they did was they, they essentially rolled it back. They, they forked the Ethereum blockchain so that that, that bug was kind of, and the theft of the funds was wiped out. And that really tells you that there's no credibility to, Ethereum's, protocol being immutable. They can change it at any time. And, and part of the problem there is that you, you st- you have a founder, you have one person who has enormous influence over the development of Ethereum, which is Vitalik Buterin. And that's totally fine as a software project, but it's not fine as a monetary good. It's not something that you can trust. so it- In, in regards to the credibility of monetary policy, I think there's only one coin that's, that has that credibility and that's Bitcoin." }, { "speaker": "stephan", "time": "58:09", "start": 3489.01, "text": "Absolutely, and, you know, that's why, you know, I stay Bitcoin only and I, you know, I encourage listeners to, you know, just stay Bitcoin only and, don't get, tricked, with, some of these, sort of charlatan-esque, scam projects going on. so, I guess probably a good spot to wrap Any, closing thoughts for the listeners?" }, { "speaker": "vijay_boyapati", "time": "58:34", "start": 3513.83, "text": "I think it's, we, we still haven't gotten into the, the, the frenzy phase of the bull market, when it's gonna become really hard to concentrate and pay attention. Anyone who's been interested in Bitcoin for a while will know the feeling that when you're going through a bull market, it's, it's hard to concentrate on work, it's hard to concentrate on anything. I think this is the best time to, if you're building things, sort of batten down the hatches and build as fast- Fast as you can. If you're interested in investing, then spend as much time as you can digging into the important materials and, and how to self-custody, and things that'll help you with your conviction during a bull market. One of the things I like to say is that people's conviction is tested much more in a bull market than in a bear market, because you see this, you know, some fraction of your savings growing enormously, and it's really hard to hold onto it unless You have that long-term conviction. So before we get into the crazy phase, which I think is probably gonna happen in the next few months, now is the time to, you know, spend time learning or building or, doing the things that are important before, you know, you'll be completely distracted. All of us will be completely distracted, once we get to the parabolic phase of the bull market." }, { "speaker": "stephan", "time": "59:53", "start": 3593.14, "text": "Yeah, definitely. I think, it's gonna bring back memories there. Listeners, make sure you follow vj real underscore vj on On Twitter, and if you haven't already, go and read his article, \"The Bullish Case for Bitcoin\". Thanks, Vijay." }, { "speaker": "vijay_boyapati", "time": "01:00:04", "start": 3604.91, "text": "Thanks, Stefan." }, { "speaker": "stephan", "time": "01:00:06", "start": 3606.17, "text": "I hope you enjoyed the show, and just as we're going into this big run, I'd really appreciate any reviews you can leave me on the podcasting or podcast platform that you're listening on. Thanks very much for that. Make sure you subscribe because I've got a very big episode coming very soon. You can get the show notes at stefanlivera dot com. Thanks, and I'll see you in the citadels." } ] }