{ "episodeId": "SLP273", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "andy_edstrom": { "name": "Andy Edstrom", "role": "guest", "tag": "ANDY" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 9.19, "text": "Hi and welcome to the Stefan Livera podcast, a show about Bitcoin. Have you been thinking about leverage or taking out a collateralized loan? These kinds of questions are on many of our minds at this point, and I got Andy Edstrom back on the show to talk about it, and we talk about various ideas such as how to not get wrecked, why a- People using leverage, are we entering a supercycle or not, and some parallels or crossovers into the financial independence world." }, { "speaker": "andy_edstrom", "time": "00:41", "start": 41.27, "text": "Greetings, Stephan Livera fans. This is Dre here, and I have some big news to share. Swan Bitcoin's new private client services division is open for business. So last August, Michael Strategy's CEO, Michael Saylor, kicked off the trend of companies buying Bitcoin for their balance sheets. A flood of hype High-profile investors and companies have joined him, names like Paul Tudor Jones, BlackRock, Square, and Tesla. Swan Private exists to meet the massive international demand from thousands of companies, family offices, and high-net-worth investors from all around the globe. If you're thinking of buying between one hundred thousand and one hundred million US dollars worth of Bitcoin over the next year, visit swanbitcoin dot com slash private. That's swanbitcoin dot com slash private. Follow the onboarding form. Or email the CEO personally, cory at swanbitcoin dot com. That's c o r y at swanbitcoin dot com. Respect fans" }, { "speaker": "stephan", "time": "01:41", "start": 101.07, "text": "and one" }, { "speaker": "andy_edstrom", "time": "01:41", "start": 101.45, "text": "love." }, { "speaker": "stephan", "time": "01:43", "start": 102.85, "text": "Lend at HodlHodl is a non-custodial, Bitcoin-backed lending platform, so you can lend and borrow globally and anonymously. So if you have stablecoins like USDT, USDC or others, you can lend them out and earn attractive returns. The APR rates are higher on HodlHodl as well, so presumably the anonymous factor helps there. On the other hand, if you have bitcoins and you want some fiat liquidity, well, you can borrow against your bitcoins, so you don't have to trust one individual This is using a two of three multi-signature escrow where HoddleHoddle holds one key, you hold one, and the counterparty obviously holds the other key. So this is a Bitcoin DeFi with peer-to-peer lending and borrowing. Go to the platform and you can set your own terms and the interest rate and how long you want to borrow or lend. That website is lend.hoddlehoddle.com. Compass is an online marketplace making it easier for everyone to mine Bitcoin and enhance the Bitcoin network's security. So remember, for many of us, our residential power rates are simply not competitive, and if you would like to get into the Bitcoin mining game, well, Compass can help you out. They can help you source an ASIC and secure hosting at facilities around the world, and these facilities will have cheap industrial power rates which will make you much more competitive. So if you're unsure about how to get started with mining Bitcoin, Compass offers these hardware and Hosting bundle, so you don't have to have advanced technical knowledge, you can quickly get started mining Bitcoin with hardware that you own. Go to compassmining dot io and start mining Bitcoin today. Andy, welcome back to the show. Stefan, it's great to be with you, man. how are you? doing well. I am, following the space very closely, and we're seeing a lot of development around this idea of leverage and, you know, collateralization. And I thought, I know you wrote recently on this topic as well around how to-- Well, You're writing \"Don't Get Rekt\". so what was your-- what spurred you to write that piece?" }, { "speaker": "guest_2", "time": "03:38", "start": 218.16, "text": "Yeah, happy to talk about that. And before I do, though, I'll just, I'll just, remind you that when we did our first episode last year, I did my, I think my best Aussie accent, and, and you told me it sounded like a Kiwi accent, and, I was deeply distraught by that, so I, so I left, with my tail between my legs. It's, you know, it's taken me Back after that embarrassing episode, but I'm glad to be here. That's" }, { "speaker": "stephan", "time": "04:08", "start": 248.14, "text": "right. No, I, well, the Australian accent, it seems like a lot of, well, most of my listeners are not in Australia, so that's an interesting," }, { "speaker": "guest_2", "time": "04:16", "start": 255.98, "text": "you, you think? Yeah, well, there's not that, there's not that many Ozies, in the world, let's be honest. I mean, I'm sure you own that market, but, but in, in a global market such as we have with, with Bitcoin All across the world. You built, you built quite an audience and quite a platform here, and I'm just happy to be involved. Yeah, that's awesome, man." }, { "speaker": "stephan", "time": "04:41", "start": 281.01, "text": "But, yeah, let's hear from you. So, you know, not getting rekt. Why, why, why is that an important thing to think about?" }, { "speaker": "guest_2", "time": "04:48", "start": 288.5, "text": "Yeah. So, you're right, I did write this article, for BTC Times. It was published in March, and basically the idea was we'd had the first major bull move of the bull market, up move of the bull market, and I was thinking about leverage, and I was thinking about how things could go wrong for people. And honestly, I, I wrote this article for the plebs, right? including myself. And the idea was, you can be right about Bitcoin, right? You can be- The class of, I don't know, twenty sixteen or twenty seventeen or twenty eighteen, you know, or even earlier or later, and have managed to wade through all the noise of, of, you know, the, the bull and the bear and the altcoins and all that stuff and figured out that Bitcoin is the thing, and yet still blow yourself up by using leverage. And leverage isn't a new concept to Bitcoin, and I don't think it's that new a concept to many Bitcoiners. I mean, let's be real Anybody who's been in the space has, has, has watched and talked about, you know, what goes on in BitMEX and perpetual swaps and whatever hundred x leverage. But in a bull market like this, I think for the first time, many Bitcoiners are actually gonna have to make hard decisions about how do I access fiat to pay my expenses, right, without parting with, you know, with too much of my stack. And this topic is all the more pressing Right now, because at least in the US, you know, we got this new tax proposal which is gonna raise the capital gains tax. And look, none of us who are in this thing with any conviction, you know, wanna sell any of our stack. I mean, we wanna, we wanna, we wanna huddle forever, within reason. You know, some of us may have, you know, speaking purely hypothetically, some of us may have three kids and be the only, you know, the only source of income in the household and have Fiat expenses. And, you know, the reality is, after a big bull move, some of us may be making hard decisions about whether to part with some amount of our stack at some number, you know, somewhere in the six figures, let's say, in terms of USD price. And so, and so, yeah, it's all the more pressing thinking about, thinking about tax. And I'll just make this even, you know, more personal potentially. So I live in the state of California. So, you know, the state of California California basically has the highest income tax schedule in the country, with the possible exception of New York State or New York City, where you've also got a city tax. But, you know, basically you've got really high tax rates. And then plus you've got the capital gains rate for federal, and they're talking about raising that. And the nut of it is, if you sell-- if you have any kind of significant income and you sell any-- let me put it this way, you know, California state tax above fifty-seven thousand dollars of income is nine point three percent, so you're basically at ten percent max bracket, thirteen point three percent. So you add that to the capital gains, they're talking about, you know, taking the capital gains rate into the twenties at the max bracket, you know, as high as almost forty percent, and then you add the Medicare surtax. And now, now, mid-sentence, I'll give the disclaimer that none of this is tax advice or investment advice, but you're talking about giving away half of what you sell, because let's be honest, right? Capital gains tax applies only to gains above your cost basis You've been stacking since ten k Bitcoin or lower, so multiple, and so basically you're talking about anything you sell is substantially all gains, right? So any amount you sell, you know, in a lot of cases, half goes to the taxman. Well, that's pretty brutal. You're in a position where you're gonna wanna borrow so that you avoid the tax. But, yeah, I wrote this piece in order to get people's, juices flowing thinking about possible scenarios in which borrowing, results in a, let's say, in a bad- That outcome. And, you know, the scenario I n- I lay out is we had the first move of the bull market, then some consolidation, you know, in the forties and the fifties, I'm talking about thousands of dollars per BTC. By the way, the, the article has a, a bit of a misprint. It says \"consolidated in the forty to fifty thousand dollar range,\" and the reason I know that's a misprint is because the price was already over fifty K when, you know, when it was published, but it was meant to say in the" }, { "speaker": "guest_2", "time": "09:15", "start": 555.21, "text": "fort Super cycle or that we don't have a big bear market, but it's easy to construct a scenario in which, you know, there's some proximate catalyst. Maybe it's an exchange hack, maybe it's some, you know, concerted government, you know, action. maybe it's just a bear market in stocks, right? I mean, let's be honest, BTC has had significant correlation with risk assets, so if you had a big sell-off in stocks, you know, that could trigger it for, you know, for Bitcoin, if it comes from a high enough A time in the cycle, you know, I don't know what the magic number is, you know, sixteen months post having or eighteen months post having, and the OGs look at the chart and they think, \"Oh, I've seen this movie before, right? \" it's, you know, X number of months past the having, and we've gone up a multiple, and, you know, maybe you've had a parabolic, you know, move at the end, like maybe you had a doubling in price, making up numbers, but like maybe, you know Negative catalysts, and then the OGs and large holders and the whales figure out, oh, this is probably the cycle repeating, and so that's the next, you know, leg down. And then obviously the noobs and the weak hands that don't really have the conviction to hold, they start folding out. And so, and then you start to eat into the leverage, right? Then you get to the people who have borrowed against their BTC, they're starting to get, to get margin called, right? 'Cause price is down, whatever, sixty percent. And then those margins, you know, Quotations, you know, that we, that we know to fear, and, you know, that's, that's kind of scenario where I worry about Bitcoiners who got everything right. They got the thesis right, they got the hodl conviction right, they're not intending to sell, and they have the long term view, but, god forbid, you know, they, they took out debt and the stack or the portion of the, of their stack that they pledged as collateral against that debt, is insufficient to avoid a margin call and basically they get wrecked." }, { "speaker": "stephan", "time": "11:18", "start": 678.18, "text": "Yeah, and that's, we saw this also in March 2020. So just context for listeners, we are recording this the third of May, twenty twenty-one. The price right now is, call it fifty-eight thousand USD. Bitcoin as a market is something like one point one trillion, just under that, right? And now, just a little bit over a year ago, there was a big move down, and at that time, in March 2020, it went from, I cut, off the top of my head, it's like nine or ten thousand Some of the platforms, now of course, BitMEX and some of the, you know, the DeGen leverage casinos, yes, a lot of people got wrecked there, but also some people on some of the other actual, you know, just collateralized platforms. And so I think that also brings up the conversation around how much, safety and how much collateral should people be pledging? And I guess what's a useful way to think about this? Like, should we be thinking, okay, you know, this amount is, say, one hundred percent of my stack, and let's say" }, { "speaker": "stephan", "time": "12:18", "start": 738.02, "text": "Call it, you know, five percent of my stack, and then I would put up, as an example, fifteen percent of my stack as collateral so that I'm three x coverage, and would that be enough? Or maybe I should actually be going to twenty percent of my stack, you know, as a way to, give myself protection on a big, you know, sudden downside move. So what are some of the ways to sort of think about that? And, you know, what kinds of levels do you think are like reasonable for people to think about?" }, { "speaker": "guest_2", "time": "12:44", "start": 764.47, "text": "Yeah. So I kinda wanna, I, I wanna say a couple things, and I kinda wanna back up and sort of reframe, reframe the whole issue in, in, in the market. The first thing I'll say is there's no safe level, and I, and, and I really want people to understand this. Why is there no safe level? Well, first of all, there's no floor on the price of Bitcoin, right? Because as you know, with, even if it only, you know, goes down by whatever the number is, you know, seventy percent for an instant, do you remember, was it Kraken? I can't remember, it was one of the major exchanges recently where the price like went totally haywire. It was like a flash crash basically, right? Okay, so what happens if your, you know, your entity that you've posted your collateral with and taken money from basically has a, has a flash crash on their books? 'Cause let's, 'cause, you know, honestly, all these guys, anyone who's lending against Bitcoin collateral either has a trading desk, you know, or is sort of intimately linked to a trading desk, right? 'Cause actually in a lot of cases, that's how they make their money, right? you know, they, they, they may provide services including lending, but, you know, they basically, they, they send, they make it easy to buy and sell BTC, and so they're basically a, you know, sales channel, right, for the, for either the desk that they are affiliated with or, you know, is their third party. Okay. So that's a concern, right? Like, you know, how do, how do you know that the quote-unquote price won't" }, { "speaker": "guest_2", "time": "14:14", "start": 854.09, "text": "Party is, is measuring against. Okay. Third consideration, suppose you go to post more collateral to defend your position, right? You get the margin call and they're like, \"Hey, you know, you're, you're about to get liquidated, you know, post more, more BTC, go into your cold storage or, you know, wherever you got more collateral, post up with us so that we don't liquidate you.\" Okay, well now you're assuming that you can make that transfer. you're assuming that their systems are working. What is the uptime for, let's just Which is entities, companies that buy or sell or, or allow customers to buy or sell Bitcoin. Well, they work most of the time, except for when you really need them to work." }, { "speaker": "stephan", "time": "14:55", "start": 894.58, "text": "And another interesting point to add there as well is that you might be-- So let's talk about the dynamic there. So during a price crash, what happens? Miners shut off. What does that do? It drops the, the network's hash rate or hash power. What does that mean? Blocks slow down. Which-- What does that mean? It means it's harder to now get into a block because blocks are Often there's more congestion, so you've got this double whammy effect where you, at the precise moment that you need to be putting more collateral in, the network is actually, in some sense, slowing down, so it's actually harder for you. So you might even be paying higher fee transactions in terms of Bitcoin transaction fee, assuming you can quickly get to your cold storage or maybe you have some in a warm storage and you're trying to send that in so that they don't liquidate you. Well, these are also like a double whammy thing, that's another double wham" }, { "speaker": "guest_2", "time": "15:44", "start": 944.05, "text": "The moment of maximum stress in the system, when you ne- most need it to work properly, yeah, that you're, that you're forced to transact. So, so all these, you know, these are all, considerations. So the short answer is there's no, you know, there's no safe limit. Now, I'll make some general comments, which is, there's different providers in the market, and they have kind of, they make various trade-offs. Some of them, you know, are na- I'm not sure I'm gonna talk about specific names, some of" }, { "speaker": "guest_2", "time": "16:15", "start": 974.65, "text": "In terms of amount you have to post as collateral or how much you can borrow, some have low, and some of them have very tight margin call, let's say thresholds. That's something to be very wary of. In other words, even if you have, let's say, you post whatever a hundred grand and you're only borrowing forty, okay, you're borrowing at a forty percent loan to value, or maybe even just thirty percent, there are some providers that even if you're going at a low LTV, will still have very tight thresholds for when they margin call you. Right? So even though you're very over collateralized, they will still make you potentially post collateral if the, if the price moves down, you know, whatever twenty percent or something, which happens routinely, with Bitcoin. So that's one thing to be aware of. And then obviously there's other economic trade-offs which I think are worth talking about in the abstract. And if you're, if you'll humor me, I'll back up a little and, and sort of take the big picture view. So this comes from my, you know, experience working for the vampire squid, known as I'll never forget, we had a PowerPoint slide, right, in all the PowerPoint decks. And by the way, I worked in the, in the leveraged finance department. Leveraged finance is a euphemism for, for junk bonds and junk loans. which makes me think that, that we should adopt the, the moniker of junk coins, you know, in the, in the sector. Altcoins is like the, the term high yield, right? It's the sanitized, sanitized version high yield bonds rather than junk co-junk Use, you know, unclean language to describe, some of these altcoins. We just call them junk coins. I don't have to call them shit coins. Haha. Anyway, digress. So the slide we would have is, it would talk about the basic terms of, you know, whatever piece of debt we were talking about issuing, whether it was a bond or whether it was a loan. And there's some-- and that was corporate debt, but it, it really does translate to a large degree to personal debt. So what are the major factors when, when you're thinking about Is the loan to value, right? How much can you borrow against collateral? Which by the way, assumes that there is any collateral at all. There doesn't have to be. You know, loans can be unsecured. They can be based on credit. In the case of companies, they can be based on the company's credit. In the case of people, they can be based on personal credit. You know, like your credit score or, you know, history of repayment or what have you. There's term. How long will the lender extend you that loan on the agreed terms for? There's repayment Your ability to repay without penalty, and sometimes a redraw, right? Like with a revolving loan structure, like a credit card, or with the lender's ability basically to call the loan away from you. Okay. So these are a couple of, you know, major characteristics. Now, let's talk about what's generally available to people, right? Personal credit in the market. And there are a few things that, you know, examples that come to my mind. Okay. So I, for example, may have a Schwab account or some other brokerage account, you know, Robinhood, whatever, and I I have access to margin debt. Now, margin debt is what Bitcoin lending looks like today. You have an asset, it's in an account that's controlled or custodied by this third party. You get to borrow against the assets in the account, but if those assets fall in value, you get a margin call and they could sell the collateral. So that's com- it's most comparable to a, to a brokerage account with margin. But what's interesting about a brokerage account with margin is today, margin debt is stupid cheap. Okay? Okay. Interactive Brokers, Schwab, you know, I don't know for Robinhood, but in most cases, margin as debt is basically free. You know, you're borrowing at certainly less than two percent, and in a lot of cases, close to zero. Now, go to the other end of the spectrum, unsecured personal debt. I personally have a couple of credit lines with banks, and these are revolving lines, which is great, 'cause I, like with a credit card, I can borrow or repay when I choose. The interest rate is high, okay? It's like, I Not only can I borrow and repay when I feel like it, but there's no collateral posting. It's unsecured, it's based on my personal credit. You know, in some cases it may have to do with, okay, relationship with the bank, like maybe I've had an account with them for a while, or maybe they, you know, ran my credit report and they have access to my credit info. And so because I have, you know, decent credit, they say, \"Hey, we're willing to lend you some money unsecured.\" Yes, the interest rate is high, but there" }, { "speaker": "guest_2", "time": "20:44", "start": 1244.07, "text": "And the unsecured line is mortgage debt, and mortgage debt is obviously a gigantic market everywhere across the world, especially in the US. And in that case, you are pledging collateral, okay? But, a-and by the way, your loan-to-value tends to be quite high. I mean, you could go to eighty percent in a lot of cases. You get a long term, right? They're not gonna yank the rug out, out from under you, or they're not gonna terminate the loan, you know, after whatever three months or six months or a year? No, it's fifteen or The price is really rather attractive. I mean, you can borrow at four percent. Now, what's the catch? Well, there's a couple of catches. One is it is a subsidized market, let's admit, at least in the US, right? The Fed is still buying forty billion dollars of mortgage debt every month, and that's obviously, you know, directly subsidizing my mortgage and everybody else's out there. Nevertheless, I think when you look at, you know, foreign countries, non-American countries around the world, I think in jurisdictions where there's less subsidy or no subsidy You know, okay, maybe instead of four percent, it's six percent, you know, interest rate, but it's not ten, it's not double digits. And then the other thing is, or the other, you know, caveat is, is that's based on personal credit. So, so I look at these scenarios, and I apologize for, you know, being long-winded here, but I think it's important. I look at these structures of debt, and I look at the Bitcoin market, and I say, \"This is pathetic,\" because what's available in the Bitcoin market today is the Fully liquidatable, right? Like they can yank the rug when you get a margin call, even though you have collateral posted, which is, as we know, the world's most pristine, you know, liquid collateral asset in the world. And they're charging you through the nose in terms of the, the interest rate, and they're not giving you significant maturity, with some exceptions, which we can, which we can get into. And s-but here's, here's what's interesting. I'm not aware of any lender out there that offers a- Better product based on personal credit. In other words, what I would say as, as a potential borrower based on Bitcoin collateral is, \"Look, be like a mortgage lender. Do your proctology exam on me. You know, run my personal credit. You know, make me send you bank statements and payment histories and, you know, make me tell you how, you know, what money I moved where over the last couple years. Here's my tax returns. Do some due diligence on me, as a borrower. As a result of doing your credit analysis, charge me something better.\" Than double digit interest rate and give me, you know, a reasonable deal on better terms. I believe that the, the lending market for Bitcoin will get there, but we ain't there yet, as far as I know, which is, which is unfortunate because the borrowing need is now, and what I've described in terms of a, a product, correct me if I'm wrong, I'd love to know if there, if there are, you know, lenders out there that are, that are actually doing credit analysis on, on borrowers, but I think we're at least one cycle away from that Really the product that this market needs." }, { "speaker": "stephan", "time": "23:46", "start": 1426.37, "text": "Yeah, that's an interesting way to put it. So I guess there's a few different things to think about there. One, I guess the main, I guess rejoinder would be that the reason that cheap credit exists in the fiat world is because of, you know, fiat money and central banking, and moving into a hard money world, it may just not be feasible to have that level. And I think, I think they will come down a little bit. My, one of my recent episodes with Parker Lewis, episode two six three, we spoke a little I think they will come down, maybe into the high single digits, that was what his view was, and I think over time, as, I think as you rightly point out, as these worlds collide or mesh, the Bitcoin world meets the normal, you know, as normal fiat finance bank places start giving people the option of having Bitcoin collateral or recognizing the Bitcoin asset aspect of it, whereas right now, if I take my Bitcoin and try to apply it to a normal Australian bank for a loan, they won't, they won't consider that Bitcoin, but" }, { "speaker": "guest_2", "time": "24:42", "start": 1482.25, "text": "that's right. Given time, they would. And, and, and you know, to Unchained's credit, you know, to Parker's credit, they do offer, you know, loans with significant maturities. I mean, I think they go out three years, I think, yeah, two or three years, I wanna say. It's expensive, it's quite expensive, but at least they're offering maturity. And yeah, what I'm saying, it's sort of a call to arms. I mean, I'm, I'm a little bit channeling, Michael Flaxman here. I'm not With multisig, you know, the analogy, right? If you're, if you're a lender, you know, come up with an, with a product where you're actually, you know, doing credit analysis or checking the credit of your, customers so that you can offer, you know, a reasonable interest rate and a reasonable maturity and repayment terms, you know, rather than just kind of living in this world of, oh, you know, we're just gonna treat it like margin debt, you know, like you have in a, in a Schwab account or in a Pricing difference, you know, that, that structure does exist, but in that world, you really ought to be offering cheaper pricing. And I, and I push back at the argument that, \"Oh, this is Bitcoin land, so interest rates are higher.\" And, I, the other point would just be that," }, { "speaker": "stephan", "time": "25:57", "start": 1557.18, "text": "well, we're still so early that Bitcoin is growing at ridiculous rates, right? So if you, look at, you know, the typical Kager, right, compound annual growth rate for the last ten years, it's something like a hundred and sixty percent, Forty percent, if they're paying, call it, in terms of interest, they're paying ten to fourteen percent instead of paying, you know, thirty or forty percent. Well, then I guess it can, it can kind of make sense, but, obviously the volatility is what, is a big, factor to consider, and obviously these big down moves can really, you can get wrecked, and then it can be, in that scenario, it can be the worst of both worlds, because now not only have you had to sell at that lower price, you now" }, { "speaker": "stephan", "time": "26:44", "start": 1604.15, "text": "At that level. So now you're gonna have to pay tax to the government, whichever government, the taxes for that also. So there are certainly risks, but I think it's one of those things where there's opportunities too, right? You have, we have to recognize kind of both sides of this, that people who have a, if you, if they have a big enough stack, and of course, like you said, there's no truly, fully safe, but you can think of it like there's, there's, you know, reckless hundred x on BitMEX, and then there's relatively" }, { "speaker": "stephan", "time": "27:14", "start": 1634.07, "text": "But like as an example, if you're doing five x times the amount, then generally speaking, most people would say, okay, five x times, you're relatively unlikely to be liquidated at that level. But I think it's also interesting as well because the market for this has grown so recently, right? Like some of the providers in this space only came up around twenty eighteen, maybe they were getting started in twenty seventeen, and so I think that's also an interesting factor as well because what happened in March twenty twenty last year, the market was a lot A lot smaller than, than it is now, isn't it?" }, { "speaker": "guest_2", "time": "27:47", "start": 1666.87, "text": "Yeah, and I think this is one of the points I made in the art-article too, and I, I think I, I think I may have singled out BlockFi, but the point I made was in March, so a year ago, most of these lenders were relatively small operations, at least compared to what they are now. And so the decision, you know, it was sort of anecdotal, and I don't think we really have any good data on who got liquidated in what size, at which different lenders, right? Which" }, { "speaker": "guest_2", "time": "28:14", "start": 1694.05, "text": "Customers better, you know, some made every effort to not liquidate people, you know, certainly BlockFi claims that. And, and my point is, okay, well, that's great when you're a, you know, a hundred million dollar valuation crypto startup, let's say, like they are, because it's nascent enough that A, you can't afford to destroy your customer base at that stage, because then you're just like out of the game, like you're a zero, right, as a company. And B, it's not that difficult to go to your LP base. Let's say, you know, as a lender, you partially destroy your capital base because you didn't liquidate your customers in time, and, you know, you had leverage on your balance sheet and basically you, you, you know, you blew up your equity cushion. Well, you can go potentially to your VC, you know, backers and have them write checks, and the checks aren't that big. Fast forward, right? Wind the clock forward to the year twenty twenty-one, we know that the lending market is, or market is burgeoning, you know, it's ten x bigger at least So you're at a, your loan book is multiples larger, and so you have market power against your customers, and if and when you have a downturn, you know, you're basically the gorilla now, you're at a multi-billion dollar valuation, which means you can probably afford to liquidate, you know, x percent of your customers, number, based number one, and number two, if you don't do that, well, going back to the well, to your VCs, you know, and your equity backers, right? It's like the check to make you, you know, Might have been a few million bucks back then, now it's a lot bigger and, it's a lot harder to basically fund rescue capital to one of these lenders that's insolvent at a-as a result of not liquidating enough of their customer base. So yeah, I just think it's a different dynamic, it's a different risk. And so when people say, \"Oh, we've lived through the disaster scenario a year ago,\" you know, when BTC was down sixty-five percent in a, a day or two, and I say, \"Nah, the market structure's changed,\" In that event as precedent, and assuming that a similar downturn in price is gonna result in a similar outcome in terms of, you know, borrowers getting liquidated. Right. Back to the show in a moment." }, { "speaker": "stephan", "time": "30:27", "start": 1826.6, "text": "Cyphersafe dot io are producing metal backup seed products, so don't rely on that piece of paper that comes with your hardware wallet. What would you do if your house went up on fire? Would you still be okay? Would you still be able to recover? The Cipher Wheel is a unique way to store your BIP thirty nine Bitcoin seed words. And you will receive some tiles, and you can slide those in, four for each word, and this can protect you and help ensure that you or your loved ones can access your bitcoins if an accident occurs. Go to cyphersafe dot io and use the code levera for a discount. Now speaking of security, have you thought about multi-signature? Unchained Capital are building Bitcoin native financial services using multi-sig, so you can create a vault for free with no setup or storage fees if you build this on your own. On the other hand, if you want some help, if you want the concierge service, they offer this as well, where they will ship you two hardware wallets, they'll answer your questions, they'll do calls with you, and deposit a thousand dollars of Bitcoin in your multi-signature two of three vault. So you can get a discount by using the code Le Unchained offer a range of services, both for individuals, for businesses. You can use this also in terms of a vault for your retirement account if you're storing Bitcoin there. So Unchained have a range of offerings. Go to unchained dot com and you can find out more. And finally, coinlight dot com, the creators of Coldcard, they have a new feature, it's called Seed Xor. So most people understand that metal backup seeds are important, but what happens now in terms of storing that clear text secret? Well, now with SeedXor, you have a plausibly deniable means of storing secrets in two or more parts that look and behave just like the original secret. So one twenty-four word seed phrase becomes two or more parts that are also BIP thirty-nine compatible, so you can back them up in multiple metal seeds. And so this is a new feature that CoinKite are creating on the Coldcard, so go and check them out, it's coinkite dot com, and use the code Leverage for a discount. Back to the show. And so the other conversation that's coming now is this whole idea of supercycle, or are we entering the final cycle now? I've, I'm sort of, I don't believe that. I don't think we're going into that. I think it's one of those things where we're just not there yet, and we-- a lot of people wanna feel like this time is different, and now you don't have to worry about it, and just, you know, it's all good, and we're not gonna have another seventy or eighty percent drop, where sadly I, you know, it's that there might be a lot of people who plan things out on the basis that, oh, see, we're only gonna see twenty percent drops or thirty percent drops along the way up, so I will collateralize my loan on that basis and I'll be fine. And then actually, yeah, a lot of them will just end up getting wrecked because we'll end up overextending at some point. What are you thinking?" }, { "speaker": "guest_2", "time": "33:18", "start": 1997.97, "text": "Yeah, so a couple things to say there. I have conversations with our friend Bitcoin Tina, and he always, after I come off one of those conversations, I'm, Believing we're gonna have, you know, we're not gonna have a, a big bear market, you know, the history won't repeat. But, you know, my base case scenario is still like you. In other words, I say, okay, I allow for some percentage chance that either we go up and stay up, you know, or we go up steadily and don't have a significant, you know, bear market like we've had in past cycles. So what percentage ch- you know, because the market structure has changed, which is, which is a fair point. I mean So that may be true. What probability do I sound, assign to that, you know, outcome? I don't know, twenty percent, maybe. And so I still, like you, you know, have a base case which is, assuming that, you know, that the cycle repeats, that, that we'll have a significant downturn. So, and yeah, I mean, the reality is, you just don't know what the spot, you know, momentary wick downward will be. One of my favorite lessons, you know, as a professional investor through my career has been, whenever your You're pitching an investment idea to the investment committee, okay, at the investment fund. You always do scenario analyses, and you have your middle, you know, expected case, and you have your upside case, and you have your downside case, right, for how this, whatever, investment, stock, whatever it is, is gonna perform. And the downside case is frequently the, the quote-unquote, it's based on the quote-unquote worst case. What's the worst case? What people always do is they take the worst case available in history and they use that as some kind of benchmark. What's Analysis. Well, the worst case in history was always the worst case, until you had an event that was worse than the prior worst case, right? People learned that in the, in the global financial crisis of two thousand eight, two thousand nine. So look, I don't mean to be a Cassandra, and, you know, I don't mean to just totally rain on, rain on this per-parade. I mean, I'm quite bullish on Bitcoin, and I'm not expecting a disaster. I'm just observing that there's some, al-- you know, albeit tiny Isn't possibility or probability that things could go against you in a way that you just have to assume that there's a possibility that whatever portion of your stack you're borrowing against, is gonna get, you know, taken from you now. So that gets to, okay, well, if I'm, if I understand that, if I'm aware of that, then there are of course ways to mitigate that at least somewhat. You can do it with a small portion of your stack, you can do it at a, as you said, a low, low loan to value. I would still argue That the same logic applies with respect to, you know, any use of leverage. I mean, I've never traded on BitMEX, but, you know, for the, for the, for the degenerate traders, you know, who, who are playing the BitMEX casino or, I don't know, the Binance or the FTX, you know, casino, it's like, look, you wanna mess around with leverage, fine, but, you know, just contain the damage, you know, ring fence, you know, X percent of your assets that you're risking in that game" }, { "speaker": "guest_2", "time": "36:28", "start": 2188.26, "text": "to your asset base if you, you know, if you, if you size it appropriately. And I think that's one way to look at it. And then another consideration is, you know, think about counterparty risk, which always applies. So if not your keys, not your coin is true with an exchange, well, by def- definition, it's true with any counterparty that you're posting your Bitcoin as collateral and you're borrowing from. And, yeah, idiosyncrasies can happen with that particular party, they can get hacked, anything, anything bad basically that can happen to exchanges themselves. So it's worth considering also diversifying. In other words, you know, if I'm risking, I don't know, I'm pulling a, pulling out a number, ten percent of my stack with some, you know, to borrow against, maybe I do it with more than one counterparty, right? Maybe I divide it into two pieces so that I don't have any single counterparty risk and I can kind of diversify that risk in the same way that if one were diversifying risk across exchanges, one would have more than one, exchange account." }, { "speaker": "stephan", "time": "37:25", "start": 2245.35, "text": "Yeah, very, Also comes down to what you're doing with this as well, because the other thing is if you are borrowing for the sake of doing a business, then it's now tax deductible, or potentially, you'd have to look up, you know, everyone has to look up for themselves on whether that's tax deductible, but it's potentially tax deductible, meaning your net interest cost might come down a bit. And so that's like another idea. And then let's say that income that's coming in, maybe one example would be, let's say you were to use a collateralized loan with some Some Bitcoin miners, you know, then you are earning some Bitcoin, and then you can have that Bitcoin come into the collateral. So over time, your collateral position is still rising because you're earning Bitcoin, then it's sort of making you safer from the liquidation risk. But as you said, there's still the custodial, element of it. and then I guess another consideration would be, do you still have income, or are you planning to like literally, let's say you've been saving for years into Bitcoin, and now you wanna retire, and now you just wanna-- but now Say if you have income still, then you're in a better position because now you can use that to make payments or, or try to pay down in fiat terms if your income is in fiat, versus if you don't have income, well then you need to be even more conservative, right? Yeah," }, { "speaker": "guest_2", "time": "38:41", "start": 2321.02, "text": "you make a great point there, Stefan. It really does matter what your earnings profile is. And there's, yeah, there's certain folks among us who have little or no income because, I don't know, you're a hardcore Bitcoiner but you're retired, right? And so in that Saddling yourself with a, yeah, double digit percentage rate on that debt that you have to pay is a little bit dicer than, oh, you got a cushy fiat job, you know, you got, you got money coming in the door. I like your idea, of course, of taking some of the proceeds and using it to earn. I mean, understanding that there's embedded risk there, and of course, understanding that the longer the daisy chain of transactions that you construct, the more risk you have of when Trouble strikes and you need to, you know, fund collateral or you need to move assets, you know, it's just one more link in the chain to be broken or that can go wrong under, under duress. But yeah, you make a good point, there's other ways to-- I mean, there's, you know, there's also of course using options, basically posting collateral, gen-- finding ways of generating income, you know, as a, for instance, maybe you're willing to post collateral with a counterparty, you're borrowing some amount, but you're also generating income by, Calls, you know, selling calls, which if price goes up, you know, your Bitcoin may get called away with you or from you, but maybe you're okay, you know, with that for some portion of your stack because it's allowing you to generate income now, and yeah, you're giving away some of the potential upside, but, but if it doesn't work out that, you know, price goes-- price doesn't go up, well, then you collected the premium, you know, from the options, and meanwhile you still have your Bitcoin and it didn't get called away from you Outcomes with futures, you know, people talk about the, the contango trade, right? The simple, you know, post Bitcoin, long, have your long Bitcoin position posted with your counterparty, sell the futures contract, right? Possibly at a premium. So if spot Bitcoin today is, whatever, sixty K, and you're selling, you know, the six month futures contract at seventy K, there's an opportunity to, to capture that spread, and if it, you know, if price basically, basically it al- Allows you to capture, if you're ready to potentially part with a portion of your stack depending on how price moves, that's a scenario that may allow you to lock in a little bit extra, you know, rather than doing the hedge fund, you know, move of sort of doing this trade, this cash and carry trade over and over in series, you may reach a point where you say, \"Ah, Bitcoin's two hundred K, and I'm okay, you know, locking in that price, you know, generating a little bit of extra spread on that carry trade.\" You know, and if I get called out on one side of the contract, you know, or if I'm forced to sell some portion, I'm okay with that." }, { "speaker": "stephan", "time": "41:34", "start": 2493.82, "text": "Yeah. I think it's, it's an interesting conversation and also it, it really depends what phase of your life you're in, because if you're in your twenties or thirties, you're very much in an earning and accumulating wealth phase, whereas, let's say if you're in your sixties, seventies, well, now you're starting to get more to a, how do I draw down some of that wealth? So forever, maybe that is actually what people have to do, and people might say, \"No, Stephan, that's too bearish, you should never sell, only ever borrow.\" And I don't know, I, I guess you've got to decide for yourself what level of risk you're willing to take, and, you know, just that factor of sometimes you, you, if you need to be able to s-spend now for living expenses or to, you know, to buy that house for your family that you always wanted or whatever it is, I think you have to sort of weigh that up" }, { "speaker": "guest_2", "time": "42:28", "start": 2548.22, "text": "Great point. I mean, we are-- there are, there are those among us who are hardcore Bitcoiners, do have a significant other, you know? Maybe, maybe married, maybe have a wife, maybe realize that Bitcoin is the investment opportunity of a lifetime, and maybe, you know, that significant other, that life partner, has been very supportive and generous, and despite that the fact that every fifth word coming out of your mouth is Bitcoin, has said, \"You know what, partner, I'm with you. I believe in you. I don't understand this stuff as well as you do.\" As you do, but I agree, we should huddle, you know, we're all in. And years go by, this is the bear market, let's say, right? It's twenty eighteen, you know, and you, and you accumulate and you huddle and you got those diamond hands, but number goes up and, you know, maybe it's time-- Maybe it's time to consider having a family. Maybe your long-suffering loyal spouse needs-- Maybe, maybe you need to, give her a shot at, at home ownership when you've been, Your tiny studio apartment and pushing every last, piece of fiat that comes into your bank account, you know, into Bitcoin. So, yeah, everyone's situation is different. It's all a matter of, your personal, preference. But I do think you make a good point about if you're younger, you can afford to take more risk, arguably. you know, if you're older and/or retired, the opposite is true. I think people do-- The good thing about long-term hodlers If you've lived through a fu- a full cycle, you've experienced the pain, you've experienced the volatility, you know, you're battle hardened. I would say that if, if you haven't been listening to Stephan Livera podcast since episode one came out, maybe you've listened to the whole catalog, but maybe you only started listening, you know, nine months ago, and you haven't been through a full cycle, then maybe you should consider your personal psychology and just acknowledge the fact that you haven't lived through- A bear cycle yet, there's nothing quite like, the visceral feeling of, you know, of number go down, which has happened, from time to time. Although the, the NGU technology is, is intact for the long term, as we know there can be short term periods of, of downward movement, and if you haven't been battle hardened, then you should just consider, oh, how tight is my grip? You know, how convicted am I? if I haven't lived through that, then maybe I should just, maybe I should- Should be somewhat conservative in borrowing because one of the basic premises of investing and personal investing and personal, asset management and wealth management is the worst possible thing you can do is take more risk, quote unquote risk. Let's just say, take on more volatility you can live with, and then you panic sell the bottom. And this is, you know, that has nothing to do with Bitcoin, that has to do with stock investing, you know, other financial asset investing. Yeah, the worst possible- Well, outcome I can say from, you know, personal experience as a wealth manager is that your client underest-- or sorry, overestimates their risk tolerance, and then in a panic they're like, \"Okay, they-- you know, they capitulate, they sell at the worst possible time, and that is the surest way to, impairing your financial security for the long run.\" So again, sorry to be the wet blanket, but, you know, these are, these are some things to, to consider." }, { "speaker": "stephan", "time": "45:55", "start": 2754.89, "text": "Yeah, I think these are, I think you're right And psyche about how the sentiment goes. It's important to, if you haven't, if you're relatively new to Bitcoin and you haven't been through a bear cycle or multiple bear cycles, you really have to understand that right now, you know, it's May twenty twenty-one, there's all this bullish news, there's like, oh, some new company that bought Bitcoin or this new company who's, you know, et cetera. But you've now got to think, what is, what sort of news articles are we going to be seeing in the bear down cycle, right? And in that It's like there'll be people who hate Bitcoin, it will be a lot more people who are indifferent to Bitcoin, so they might have heard of it, but they just don't care. and I know we're-- it sounds weird because we're saying this right now in the middle of the bull run, we're probably about to get into the really crazy part of it i-i-in the months to come later this year, but it's just there to warn people and get them to think about what's gonna happen if that cycle, or if or when that cycle turns. I guess now it's probably I've, I've been around since 2013. It, it feels to me like the bear markets are getting progressively less cold, if you will, or the winters are getting less cold, right? The 2014, 15 bear market was brutal. It was so brutal. Whereas the, call it 2018 bear market, I mean, yeah, it was, it was kinda hard, but it wasn't like, it wasn't like 2014, 15, and so who knows, maybe the bear cycle of '22" }, { "speaker": "guest_2", "time": "47:29", "start": 2848.64, "text": "Yeah, I think it's a really good point because there's two, you know, sort of measurable or quantifiable, I think, factors there about the bear's getting less severe. One is just the drawdown, right? I mean, the peak to trough drawdowns have been decreasing. I mean, whatever, the first one was ninety-five percent, the next one was, I don't know, ninety, and then the last one was eighty-three percent, I wanna say. So they're still severe, but yeah, peak to trough has gotten, less severe in each Downturn, so that's one quanti-quantifiable factor. The second thing you mentioned about the news cycle, which is a really good point I hadn't thought about before, which is, you know, I wish I'd been in Bitcoin in, you know, twenty thirteen. I have to imagine that, yeah, when, when the excitement went away, the space was so small, like the number of companies and the amount of activity and the news coverage, you know, must have been order of magnitude smaller than what's going on now, right? So there must have been weeks at a time or Pretty much nothing happened, right? Like there weren't new product launches, there weren't, you know, lots of new startups getting funded. Exactly. There wasn't as much stuff getting built just because the space was so much smaller. Yeah. And so at least one would think that after, gosh, I don't know, after all the mainstreaming and, you know, all the payment apps and the banks, you know, supporting Bitcoin now, I mean, it's possible that they just all reverse themselves and go away, but it seems unlikely. So it seems like you're still gonna- Have news. I know, I know, Stefan, that you're gonna be reporting and others, you know, are gonna be putting out great content in a way that just didn't exist, you know, back in twenty thirteen, twenty fourteen. There was, I, I can only imagine there wasn't, there wasn't constant flow of good Bitcoin content to keep people warm, you know, to keep people engaged, keep people hopeful for the future." }, { "speaker": "stephan", "time": "49:24", "start": 2964.19, "text": "Well, yeah, we'll see, we'll see, hey, I think, that's, that's the other thing thing as well for listeners out there, whether you're, you know, a new hodler or you've been around and, you've been in the game for a while, you really have to think about, am I willing to go through another four year cycle? Right? That's, that's at the end of the day, that's what you have to think about and ultimately, most of us are in, like, the hardcore, those of us who are hardcore are in this for the long, we're playing ten, twenty, thirty years out, at the minimum, you" }, { "speaker": "stephan", "time": "49:58", "start": 2998.18, "text": "Sustain myself for that time period, or otherwise you need to start thinking about, well, do I have some kind of buffer in terms of assets or something, to sort of sustain yourself, because that's also been a thing where, you know, some earlier Bitcoiners had to basically spend a lot of their Bitcoins during the worst possible time of the bear market, and so then they're spending a lot of their coin at that, at that worst possible time. Yeah," }, { "speaker": "guest_2", "time": "50:21", "start": 3020.99, "text": "that's, that's absolutely right. And I still, I go back to my example of the, of the patient spouse And, you're going and you're saying, \"Uh, sweetheart, I need another four years. You know, there's no gonna be starting a family, we're not gonna buy a house, you know, we're just gonna have to hang out and, and, and let our stack grow for another, four year cycle.\" And, the, the hardest core hodlers will say, \"Well, if she's not willing to stay with you, then, you know, you picked the wrong one and you should move on.\" But, but I tend to" }, { "speaker": "guest_2", "time": "50:58", "start": 3058.24, "text": "To have to decide how much, how much relationship stress am I willing to live with, as you suggested, you know, how much, you know, selling of that asset am I willing to do in the depths, you know, if I don't have enough, fiat income to, you know, to support my expense base, or how much am I willing to cut, cut budget, right? How many, how many of my chairs am I willing to sell? I want to sell all my chairs or am I only willing to sell some of my chairs?" }, { "speaker": "stephan", "time": "51:28", "start": 3088.22, "text": "Great question. You should have already sold all of them. No, but, I tell you what, and another thing that's interesting, and I follow the, you know, years ago I used to follow the FIRE community a bit more, right? So that's this whole idea of financial independence, retire early, right? And I think I, I was always one of those people who was interested in saving and personal finance. I, I was kind of interested in that idea, and they have this concept called safe withdrawal rate, right? And so this idea is, just as an example, let's" }, { "speaker": "stephan", "time": "51:58", "start": 3118.36, "text": "You're operating on a four percent safe withdrawal rate, then you can spend approximately forty thousand per year and not go busto before you die, basically. and so that was calculated based on what was known as the Trinity study and kind of looking at stocks and bond returns, and it was sort of looking at like a thirty-year pathway from retirement till, you know, death. And so I, I guess that might be an interesting conversation when that comes up in the whole Bitcoin world of, you know, what would a safe, you know, collateralization rate be? And I don't know No, maybe we're too early, or maybe it has to be extremely low right now, like one percent or two percent of your stack, and otherwise you're just not gonna make it. I, I wonder what your thoughts are on that and kind of how long it would be until that kind of becomes a Bitcoin, a common Bitcoiner conversation." }, { "speaker": "guest_2", "time": "52:43", "start": 3163.11, "text": "Yeah. No, I love this, I love this topic. So the four percent rule is like a classic, you know, in wealth management, right? It's like, okay, you can do all these fancy projection models about rates of return and inflation and living That's is, and you can do Monte Carlo analyses, you know, and you can do all this fancy analysis basically. But yeah, the four percent rule was kind of the rule of thumb, like, yeah, probably you can afford, in many cases, depending on how long you live, which is a big caveat, you can probably afford to, to spend four percent of your capital over time and, and as you say, not go bust, okay. But that has a few key assumptions, embedded in it which may not be true. The first is, yeah, what is the re rate of inflation, you know, consumer-- let's say, and without getting into arguments about definition, but let's say, what is, you know, what's gonna happen to the price of your consumer basket, you know, over the long run? That's one. Two is how long are you gonna live? I mean, I think that study-- I don't remember what the longevity, you know, assumptions embedded within that were, but medical technology is an amazing thing, and we're all living longer than we used to, and so, yeah, you might have to have a lot more runway, a More years of life to fund than basically than we would have assumed in the past. And then the last piece is, yeah, what is a reasonable-- you know, there were rates of return, investment rates of return embedded in that analysis. I've been telling clients for, I don't know, five years ago that, or five years or so that, you know, ten percent annualized return in the stock market is, is a thing of the past. I mean, that, that was true for decades, but given the debt levels in the world, it's gonna be hard for that to happen over time Unless of course they just print so much money that, yeah, stock, stock number goes up, but, you know, eventually get inflations, you know, to offset it. Now, in fairness, if there's one asset that I think can really outpace the rest in terms of performance over the long run, it may be Bitcoin. So if you have a big chunk of Bitcoin in your portfolio, that could potentially make a major impact on your ability to fund that four percent, you know, living expense with Draw rate on your overall asset pool. So I have to, yeah, I have to allow for that caveat, but I guess what I would say is this notion that you can retire at, pick a number, you know, age forty, right? I mean, I don't know, I don't know what these fire guys, you know, usually assume, but they're not talking about, you know, retiring at seventy instead of seventy-five, right? No, they're talking about, you know, leaving the workforce at age forty or forty-five. Right. That implies just assuming that you're asset-based Is gonna earn a real, i.e. inflation-adjusted return over, I don't know, seventy years, right? Seventy more years of life, eighty more years, I don't know, long time. And like with any model or assumption, you know, the longer the time frame, the less certainty you have. And, yeah, I think it's a kind of a risky proposition in general to assume that, oh, I don't have to generate any, you know, economic return on my labor or my time spent. For the majority of my life. I hope that's true. I hope it's, I think it was Keynes, you know, I can't believe I'm gonna quote, you know, who said like, or who projected, I don't know, a hundred years ago or eighty years ago that by now we'd all be on the beach, right? Because technology growth and so on, yeah. Yeah, exactly. The machines would be doing all the work and, we could all be writing, poetry or we-- or, you know, we'd all be working five hours a It's risky basically to cut yourself off, from earnings early in life. Now, I guess the one thing I'll say about that is there was a time when leaving the workforce was relatively permanent because you did your studies, you developed a specialty, you picked a career or even a company, and you stayed in that career with that company for basically your whole earnings life. I guess you could argue that, okay, in a world where it's likely you'll have to make multiple career changes, you know, where you need to be basically flexible and- Learning and, and trying new things, you know, doing new side hustles, I can come up with a pretty good argument for, you know, trying a different side hustle, you know, leaving sort of the steady job and maybe experimenting, maybe, you know, maybe starting a very successful and ultimately very successful, Bitcoin podcast as a, for instance. But yeah, I don't, I don't really recommend leaving the workforce, early and assuming you're gonna make, four percent plus, unless you're heavy Bitcoin and Bitcoin works out, you know, for a long time to come, which I think is quite likely, but, you know, as a fiduciary investment advisor, I have to point out that there, of course, are risks and there's a possibility it doesn't turn out that way." }, { "speaker": "stephan", "time": "57:40", "start": 3460.28, "text": "Of course, of course. and I think the other concept that is discussed in some of those communities is this idea that, okay, maybe you could, you might try to, quote-unquote, retire early, but really you're also keeping an eye on what's happening to that investment portfolio" }, { "speaker": "stephan", "time": "57:58", "start": 3478.2, "text": "starts dropping a bit and you're like, okay, now my spending is more than the four percent level, okay, it's time to go back to work or trying to do a side hustle and earn some money that way so I can spend that instead of spending down my, my capital, right? That's one way to think of it, right?" }, { "speaker": "guest_2", "time": "58:11", "start": 3490.96, "text": "Yeah. So let me just make one comment in that regard, and I think that's a good point, but I do caution, again, I'm always the wet blanket over here, I do caution because I've faced this with, you know, with clients It is, it is difficult to take a couple years off and then just jump back in to your former role because in all likelihood, it's gonna take you a while to get hired. You know, your personal contacts in the industry will have atrophied somewhat over time. You know, your knowledge of the industry may not be quite up to snuff as it was before. And so the reality, in my experience, is actually people end up taking, you know, easily a thirty percent pay cut. You leave the workforce, you leave whatever job you had, you're gone for a few years, and you You're, you're earning thirty percent less. Oh, and by the way, you know, there's always-- The more competitive and/or professional the job that you left, right? The longer usually is the, is the hiring cycle. It's not like you show up at-- I mean, you know, if you're in the fast-- If you're working the fast food counter, for example, yeah, you can probably get rehired, you know, in a couple weeks. If you're, you know, a professional manager, the rehire cycle is in months. So just some" }, { "speaker": "stephan", "time": "59:28", "start": 3568.2, "text": "So, like, examinations or observations there. I think these are all things people have to think about. I think the other one could be people might say, \"Okay, look, I've saved up enough of a nest egg, now it's time for me to start my own business, right? I wanna take a bit of a chance because I think this business that I'm gonna start, or maybe, maybe they wanna go work in the Bitcoin industry somewhere, right? Just go and like, maybe they're taking a bit of a pay cut to do that, but they think I'm so" }, { "speaker": "stephan", "time": "59:59", "start": 3598.58, "text": "That so that I can work with something that I really enjoy." }, { "speaker": "guest_2", "time": "01:00:00", "start": 3600.96, "text": "Totally, no, I think this is spot on. I mean, how many people love Bitcoin, are true Bitcoiners, they're working their fiat job, you know, and they'd really rather be working in Bitcoin part time or full time as the case may be, and the bull market happens and we, you know, we go to six figure, you know, u- USD equivalent, BTC price, and you're like, \"Great, maybe I can buy some freedom, right? Maybe I can buy some runway to leave the fiat Focus on what I really like to do, and yeah, I take a pay cut, but, it's totally worth it because I'm working on something I believe in, you know, and I'm helping build, build this industry and this ecosystem. And so, yeah, in that case, you know, some people will have to either borrow a little against their stack or they may have to sell a little bit. Of course, you have to remember that if you are substituting, you know, a portion of your investment portfolio, which is Bitcoin, and you're putting your labor into Bitcoin" }, { "speaker": "guest_2", "time": "01:00:58", "start": 3658.18, "text": "Invested in the asset and your earnings are, are tied to the industry. So, yeah, that's just a, it's just a risk, it's a risk factor to consider. It's sort of the op-- It's the opposite of the old, financial advisor rule of, \"Oh, don't keep all of your four hundred one K in your company stock, right? \" Because all your income is generated from that company, you know, and you've got this investment, so if something bad happens to the company, you know, you lose on both sides. Fortunately" }, { "speaker": "guest_2", "time": "01:01:28", "start": 3688.18, "text": "Protocol, so in that sense, it's less of a risk, but, yeah, just, just one thing to consider." }, { "speaker": "stephan", "time": "01:01:34", "start": 3694.36, "text": "Yeah, so I think at the end of the day, I guess to give a fair treatment here, it's not that like all leverage is bad and never use it. I think it's more just like there are opportunities, but just understand there's risks as well, and you've risks and costs to that, right? You'll pay interest, there's a risk of liquidation, there's custodial risk, but the opportunities are, well, you" }, { "speaker": "stephan", "time": "01:01:58", "start": 3718.18, "text": "That stack as well, purchase more freedom in other ways maybe. So I guess that's kind of how I would summarize it. But yeah, if you got any other kind of thoughts to close out this idea of, leverage and not getting wrecked." }, { "speaker": "guest_2", "time": "01:02:10", "start": 3730.1, "text": "Yeah, I mean, it's, it's, it's the usual thing, you know, think through the disaster scenarios, pull out the old spreadsheet, run some, you know, run some numbers, think about, oh, what happens, you know, what percent of my stack have I risked? You know, what happens if price" }, { "speaker": "guest_2", "time": "01:02:28", "start": 3748.18, "text": "Margin call scenario look like or the liquidation scenario look like, you know, what does it look like to have to actually fund double digit interest, you know, over a period of, let's be real, you know, let's say four years, right? Let's say it's four year, you know, winter, et cetera, et cetera. You know, putting, putting numbers in front of you can make it, can make it a little bit more real. It can also make it more real, not only for yourself, but for other people that depend on This is what it looks like if I risk this much, we're not ruined. We find through a cycle, it can give some, some potential confidence about, you know, oh, what's the, what's the worst case scenario? And the other thing I would close with is, yeah, is call to action, call to action to, to lenders in the space, show us a product that may, God forbid, have a deeper, deeper level of KYC and, you know, knowing your customer, knowing your borrower. But I think there's a, I think we are missing something in Is based on a little more credit analysis, analysis of credit scores or reports or payment history or tax returns, whatever it is. I think that there ought to be, there really ought to be a product which has better terms for the borrower in exchange for, you know, some greater credit history and/or, yeah, credit information or credit support. Excellent." }, { "speaker": "stephan", "time": "01:03:49", "start": 3829.27, "text": "so listeners go and find Andy, his Twitter is at edstromandrew and the website andyedstrom dot com. Anywhere else that you'd like people to find you, Andy?" }, { "speaker": "guest_2", "time": "01:03:57", "start": 3837.3, "text": "Yeah, no, those are the main- In places, obviously, I constantly shill my book Why Buy Bitcoin? And of course, swanbitcoin dot com forward slash Andy to stack your sets." }, { "speaker": "stephan", "time": "01:04:06", "start": 3846.78, "text": "Fantastic, thanks Andy." }, { "speaker": "guest_2", "time": "01:04:08", "start": 3848.0, "text": "Thank you, Stefan." }, { "speaker": "stephan", "time": "01:04:09", "start": 3849.3, "text": "So I hope you found that one useful in terms of what's going on with all the bull market craziness. And find the show notes at stefanlivera dot com slash two seven three. Thanks, and I'll see you in the citadels." } ] }