{ "episodeId": "SLP390", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "dan_mcardle": { "name": "Dan McArdle", "role": "guest", "tag": "DAN" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.59, "text": "Hi, you're listening to Stephan Livera podcast, show about Bitcoin and Austrian economics. This show is brought to you by Swan Bitcoin and Swan Bitcoin is putting on Pacific Bitcoin. This will be the biggest Bitcoin only conference ever. This is going to be on November 10th and 11th, 2022 in LA, California. Hang out with thousands of Bitcoiners from around the globe. I'm looking forward to it and- We're going to be able to meet and catch up with a whole bunch of Bitcoin people, whether they're on the main stage or whether we are hanging out at the conference and at events throughout the week. This conference is going to be optimized for fun with sports, games, music, photo opportunities, and high fives, and there's a lot more. The conference is the main event of LA Bitcoin Week. It'll be full of educational opportunities, meetups, coworking, and parties throughout the week. So come join us at the inaugural Pacific Bitcoin Conference in LA, November 10th and That is p a c bitcoin dot com. Voltage is paving the way as the leading enterprise-grade lightning solution for anyone building on layer two. Lightning is the future for Bitcoin payments, whether that's podcasting two point oh or whether you are doing commerce online or even in person. Voltage can help with integrating lightning and payment infrastructure into your solution quickly and hassle-free, so don't waste time with maintenance and integration, deploy and iterate faster. Whether you want to route payments, build your small business, or scale an enterprise company, Voltage is Is the solution. Go and get started over at Voltage dot Cloud. My favorite Bitcoin hardware signing device is the Coldcard, available from CoinKite dot com. So with your Bitcoin hardware signing device, you can plug it into your computer, it will give you twelve or twenty-four words that you write down, and that's your backup. Now you can use that easily with wallets like Sparrow or Specter Desktop or Electrum, and you can use it in all kinds of different configurations, whether that is single signature, you can use it with a pass- phrase, you can use it as part of a multi-signature setup. There's all different options that you should be thinking about and considering as part of your tailored security setup. So if you're interested to get your cold card, go and get yours at coinkite dot com. So today, Dan McArdle joins me and we chat about Bitcoin narratives, which ones are dead, especially as we've gone through this price drop recently. We talk about various statistics and things that people often talk about in the Bitcoin world, such as the four-year hodler statistic, and we all- Also discuss some of his insights from prior cycles and drawdowns, as well as FUD over the years, how it has changed over time, and some of the statistics as well around Kaga compound annual growth rate and how that's changed. So on to the show with Dan. Dan, welcome to the show. Thanks for having me. Good to be here. So Dan, we are going to chat about a few things today, but I think the main theme is this idea of Bitcoin narratives and are they dead or are they just delayed or postponed perhaps? but for anyone who doesn't know you, can you just give us just a brief overview your history in, in the Bitcoin world?" }, { "speaker": "dan_mcardle", "time": "03:10", "start": 189.94, "text": "Sure. So, I guess I first stumbled across Bitcoin from a Slashdot post when it crossed a dollar in 2011. ignored it like everyone does on their first, discovery. And then- rediscovered it a few months later when the price was going nuts in that 2011 bubble, and, that's when I kind of did my homework and, really discovered that this was something I needed to pay attention to and something truly unique. anyway, so fast forward to twenty fourteen, I was co-founder of Digital Currency Council, which at the time, was a professional network educating people on Bitcoin. Yeah, there was really nothing else, I think, in all our education materials, I had like one slide, these things called altcoins, but it was really, it was really all Bitcoin. Then, you know, that, that business was basically a victim of the, twenty fifteen bear market, twenty seventeen rolled around, and I created Unchained FX to kind of get more fundamentals data. out there in the space 'cause there, you know, that, that was an area of all these ICOs with these crazy supply schedules that nobody understood, and, you know, people were kind of getting taken advantage of by all that, so just trying to get better information out there so people could make better decisions. And ended up, rolling that into Massari, so I'm a co-founder of Massari, and, yeah," }, { "speaker": "stephan", "time": "04:20", "start": 260.26, "text": "that's what I've been, doing for the last few years. Excellent. And so- What we're seeing now is what we've seen many times before in Bitcoin's history. So perhaps it would be great to hear a little bit of context from yourself on big Bitcoin drawdowns historically. What did they look like before, and what, what does this one look like now, and how does this one compare historically?" }, { "speaker": "dan_mcardle", "time": "04:45", "start": 284.73, "text": "Yeah. So, I mean, my, I guess my first Bitcoin bear market was the twenty eleven bear, when we went from, you know, high of thirty two in June twenty eleven to less than two Dollars, dollar ninety one, I think, in November twenty eleven, so, so, you know, less than six months, we were down ninety four percent. So that was pretty brutal. you know, that, it's funny, I, like, I still say that was the worst bear market. Maybe it's because everybody's first bear market is always the one that they think is the worst, 'cause like, they've never seen it bounce back before, right? So, so it, it takes, I think for most people, it takes seeing it go, You know, whatever the case may be, it takes that for most people to really have the conviction. Anyway, at the same time, there are unique factors to every bear market, but in that one, you know, there were only like, you know, thirty or forty thousand, you know, anons on Bitcoin Talk that really cared about Bitcoin at the time. Like, you know, there was no mind share in, you know, in the mainstream, you know, and, you know, kind of anyone, you know, who mattered in kind of, you know, traditional finance or, VC So it was more conceivable that the world could just kind of forget about Bitcoin for a while, like, you know, we all kind of knew that this technology, you know, was here to stay, this idea was too powerful, but it seemed like it could be on the back burner for a long time after that, after that draw. But that's not what happened. Then, you know, recovered in twenty twelve, you know, twenty thirteen, Bitcoin basically had two bubbles over the course of the whole thing. It did one hundred x, it started the year at eleven and, and, you know, it hit, hit eleven sixty three, I think, on Bitstamp in December that year. November. So that was, that was nuts. And, you know, then, you know, that was a couple months later, I mean, there were warning signs for Mount Gox for months prior to that, but a couple months after that peak. is when Mt. Ox declared bankruptcy, and then, you know, that, that was just kind of like a bomb in the space that, that just like destroyed sentiment for, for a couple years really. So, you know, if you were to draw an analogy, I'm starting to feel like, you know, with all these, you know, lenders blowing up and, you know, centralized institutions on top of Bitcoin, you know, there are some similarities there where these, you know, centralized entities that use the Bitcoin network that, you know, have taken control of people's Bitcoin and, Yeah, not, not treated it too well. There's, some analogies there with, with the Mount Gox blowup, but it's not-- I wouldn't say it's anywhere near as severe, at least yet. You know, 'cause Mount Gox, when it blew up, was eighty percent of the ecosystem, was eighty percent of trade volume, you know, was kind of the hub of, of the whole space, you know, at least as far as like the, the centralized activity goes. So yeah, I mean, that was, that was probably, a lot of people would say that was the worst one," }, { "speaker": "stephan", "time": "07:29", "start": 449.31, "text": "yeah. Yeah, for sure. And so it's interesting because comparing Mt. Gox's fall in late 2013, early 2014, as you were saying, that was probably, that was the only game in town. It was maybe eighty percent of the game in town. There were some small, smaller exchanges. Bitstamp was around then. There was that Russian one, BTCe, and, Kraken was around as well, but" }, { "speaker": "stephan", "time": "07:54", "start": 474.32, "text": "You know, so I've lived through some, but not as many as you. And so then comparing to today, if, let's say, a large exchange, something similar would have happened to Coinbase or Binance, right? Even then, it would still not be as much as what happened with Mt. Gox back in late 2013, early 2014." }, { "speaker": "dan_mcardle", "time": "08:13", "start": 493.22, "text": "Yeah, in terms of trade volume, that's true. So I, I would say probably though, if Coinbase blew up, which, you know, I don't think is in the cards, you know, never That would, from a sentiment perspective, that would probably be as brutal as Mt. Gox. so it'd probably have to be an event like that to be kind of of similar magnitude, at least in terms of what the sentiment toward the space would become overall, I think, e-even if trade volume is, Is more distributed nowadays." }, { "speaker": "stephan", "time": "08:42", "start": 521.63, "text": "For sure. Yeah. And so in terms of the numbers, right? And I know you've shared some statistics on Twitter as well, and people were talking about it, but in terms of eighty percent drawdowns, it seems to me like there have been at least three in Bitcoin's history, right? The twenty eleven, end of twenty thirteen sort of drop, and also the twenty seventeen, twenty eighteen cycle, that, that was an eighty percent drop there as well, because we went from like twenty thousand down to, I think at the absolute bottom, December twenty eighteen, it was Or something like that. So we went under four thousand, which is eighty, which would be the eighty percent drop mark. Now, there have been three eighty percent drops in Bitcoin's history. You've lived through three of them, I've lived through two of them, but not just that, there have been multiple fifty percent drawdowns, and even this recent one, if we're going peak to trough, we're seeing roughly sixty-nine thousand last year, and the absolute bottom of this recent go-around, it seems, was around seventeen thousand, seventeen thousand three hundred ish, which is about a So it's not even an eighty percent drop?" }, { "speaker": "dan_mcardle", "time": "09:42", "start": 581.71, "text": "Yeah, exactly. And there's a huge-- so actually, those eighty percents were, were higher. So, and there was actually another one. I, I kind of counted as four, 'cause the spring twenty thirteen, we went from two sixty-six to fifty, which I think is, you know, eighty-one percent drop. And then, you know, it's like, you know, people count twenty thirteen as one bull market, and that's fine, but like technically, we have had- four eighty percent or more drops. Then the, the other one, we've had, I think, eighty-one percent, eighty-four percent, and eighty-seven percent. And like, you know, the difference between eighty percent and eighty-seven percent doesn't sound like much, but it's, you know, it's almost another fifty percent drop once you've already been down eighty percent. so, so, you know, that gets brutal. but yeah, that, that's, that's not where we're at right now. So it's interesting. Like the, the, So, you know, maybe, you know, instead of getting, you know, excessive FOMO like retail does, like maybe they will, you know, rebalance their portfolios on the way up and, you know, kind of attenuate, you know, the parabolic spikes that we've traditionally seen, and, you know, we didn't see that this cycle, so maybe, maybe that, you know, that wasn't effective the institutional buyers. So we'll, we'll see if the same is, is true on the downside. Like maybe, you know, maybe there are bigger pools" }, { "speaker": "dan_mcardle", "time": "11:01", "start": 661.04, "text": "So, you know, so you not feel the despair like, like retail does at the bottom of, of bear markets. So, so we'll see. but, but we did have, you know, in twenty twenty, you know, Paul Tudor Jones, even Stan Druckenmiller, and a bunch of others like came out with, with what I, what I would say is the right thesis on Bitcoin, that it's a, you know, a hedge against excessive, you know, fiat money printing and, and, and the kind of necessary long" }, { "speaker": "dan_mcardle", "time": "11:31", "start": 691.2, "text": "One of these brief, I think, periods where, w-were fiat isn't expanding. And, yeah, but you know, if you look over these longer time frames, kind of the math just says that, you know, the Fed and, and other central banks kind of do have to inflate the debt away. They're, they're going to have to print more money, you know, the money supply's gonna have to increase, and, you know, these things have been historically very bullish for Bitcoin. So, you know, maybe, maybe some of these, higher capital entities that came in in twenty twenty, have that se-thesis and can put a, put a higher floor on the downside, but, you know, we'll see, TBD." }, { "speaker": "stephan", "time": "12:06", "start": 725.96, "text": "Yeah, for sure. And as you were saying, I think it is about having that fundamental viewpoint and stepping back and thinking, well, what other ways is the fiat system going to go on? And how else does it carry on other than with more inflation eventually? Now, of course, that may not happen straight away, and of course, that-- the big question on most people's minds is if If the Fed is going to pivot, when? Is it gonna be late this year, early next year? I mean, who knows, right? But I think that's the fundamental question that anybody has to think about when they're thinking about Bitcoin. Now, I think the other point I really wanted to ask you about as well, is this common narrative, and it's been a, let's say it's been a talking point, is this idea that every time Bitcoin has gone through a cycle, it has never gone below the prior all time high, right? That, that's a common, let's say" }, { "speaker": "dan_mcardle", "time": "12:59", "start": 778.89, "text": "So again, it's how you count the cycles. so that, that spring twenty thirteen run, where Bitcoin went from, you know, eleven to two sixty-six and then had a negative eighty percent, you know, drawdown and then kind of, you know, flatlined at, at negative seventy percent for, you know, months, that certainly felt like a full cycle, right? So, and we kind of counted it as such at the time. So if you count that, then that high was two sixty-six, and then, you know, fast forward to the next cycle" }, { "speaker": "dan_mcardle", "time": "13:29", "start": 809.39, "text": "And then, you know, a little more than a year after that, we hit a low of, you know, a hundred fifty-three or so on, Bitstamp, I think. So that was, you know, which was below that spring twenty thirteen two sixty-six from that cycle. So, you know, these are-- I don't know if there's a ton of rhyme or reason to exactly what the peaks are and exactly what the troughs are. So, yeah, it's, it, it is, you know, people like have, you know, have had that narrative about" }, { "speaker": "dan_mcardle", "time": "13:59", "start": 838.85, "text": "You're, you're counting cycles like I am, and, you know, that's-- there's no reason that that should be a hard and fast rule anyway. I think what's important to focus on is just, is, is just the long term, you know, you're looking at, you know, five year return fundamentals. Yeah," }, { "speaker": "stephan", "time": "14:13", "start": 853.1, "text": "exactly. Of course. And so, yeah, as you rightly said, and so for me, living through that twenty thirteen double cycle, if you will, the narrative at the time was the whole Cyprus bailout. So that was the big narrative, Watch out, and that's, you know, in the narrative. Now, of course, narrative and reality are different. The narrative was sort of that all the Cypriot people are buying Bitcoin, but in reality, it may have been more like a, a kind of-- That was part of the narrative, and there were people outside of Cyprus who were just buying Bitcoin because of that narrative, potentially. And then, who knows? I mean, every-- Historically, people look back and say, \"Oh, that was the reason for this, right?\" So the, the other big reason people were saying" }, { "speaker": "stephan", "time": "14:59", "start": 898.85, "text": "You know, that was, that was the narrative, right?" }, { "speaker": "dan_mcardle", "time": "15:01", "start": 900.63, "text": "Yeah, yeah. I mean, that's a funny one 'cause, I mean, there were so many people at the time who were saying, okay, you know, after that, after that price peak and then crash, you know, that eleven sixty-three price peak, people were saying, \"Oh, you know, Bitcoin could never have gotten there without Willybot and will never break a thousand again because, you know, Willybot is dead now.\" It's like, \"Alright.\" Well, clearly proven false. Yeah, pe-people are always looking for, looking for easy reasons, and, you know, markets are, are complicated, so, the easy reasons are usually wrong." }, { "speaker": "stephan", "time": "15:33", "start": 932.58, "text": "Of course, yeah. Now, the other point that's been also a common talking point, and maybe this narrative is now gone, is this idea that a person who bought Bitcoin and held for four years or longer was never in a loss. And historically, up until recently, it used to be true that if you held for four years, you were-- the minimum you were up was, I think, three or even five x on what you had put in. That was historically true. Now, of course, if we cherry-pick the exact dates, let's say I bought the close to the top of December 2017 at nineteen thousand six hundred, and recently, the, you know, if you held for four and a half years, you at one point would have been underwater because the prices call it seventeen and a half thousand. So Broken because you could have been holding for four years, and been down. So I'm curious your thoughts on that and the breaking of that narrative. Does that mean anything or again, not really?" }, { "speaker": "dan_mcardle", "time": "16:26", "start": 985.96, "text": "Yeah, I, I mean, so I've always taken a, I, I advise taking at least a five-year view. I've personally always taken a ten-year view. you know, I remember when, you know, when I first kind of, you know, got- involved with Bitcoin, I was like, \"Alright, let's see what happens with this over ten years. Like, it's going to take time and it's going to be volatile. Like, you can't bootstrap something that could be a new global reserve currency for the digital era.\" Like, you know, without a ton of volatility, you're not going from, you know, zero to tens of trillions without, without some like pretty crazy price action. And, yeah, you know, like, you know, different sorts of macro environments last for many years. So, you know, Bitcoin is now a macro asset, kind of, I, I think twenty twenty really kind of transitioned to, I, I would call it a, a global macro asset. so, you know, that, that means we are gonna be exposed to these macrocycles, and they can last years. I would encourage people to really do their homework, really understand Bitcoin's potential, have a price target in mind based on fundamentals, and, have a long-term view, you know, ideally ten years or, or more, definitely at least five. And, yeah, that, you know, that, that's Kind of the more reasonable benchmark in my, in my opinion, given, given the volatility that's inherent in a process like this." }, { "speaker": "stephan", "time": "17:47", "start": 1067.13, "text": "Of course, I, I totally agree with you there. I think perhaps another criticism that could be leveled, and again, it depends on who people were listening to, but this idea of, if people were listening to that talking point of the four year, you know, so on, then people could say, \"Well, aren't you Bitcoin guys? You're just changing the goalposts now. You're saying, 'Oh, it's now five years, or now You view the long term of Bitcoin being, when, how long do you think it's gonna take to become, say, firstly, let's say, kind of in the same realm as, as gold, let's say, eleven or twelve trillion as an, as a total market, and then eventually someday, global money, maybe that's M3, right? About a hundred trillion, maybe a hundred and ten, hundred and twenty trillion worth, but maybe that's, that's decades away, we don't know. right. So, yeah, I think some," }, { "speaker": "stephan", "time": "18:40", "start": 1119.51, "text": "and it's Be down if you cherry pick the dates. If you were a four year stacker, like if you were regularly stacking, yes, I don't believe you were ever underwater. Or not, as in you were underwater once you'd been stacking for four years. Yeah." }, { "speaker": "dan_mcardle", "time": "18:52", "start": 1132.36, "text": "Right. I've been meaning to do that analysis, but I haven't. yeah, so I have on casebitcoin dot com, I have some of the, Some of these like long-term ROI charts and, yeah, the four-year ROI right now is still plus two hundred percent, whereas, you know, gold and the S&P five hundred are, are both, you know, forty-something percent. so still, you know, substantial outperformance if you just look, you know, this date four years ago. So yeah, that's, you know, obviously not cherry-picking the exact high. But yeah, you know, even so, it's conceivable that, that those, like, you know, three- and four-year numbers will, will go negative at some point, you know, if we, you know, go into some, you know, severe recession and liquidity crunch and the Fed's still hiking and, you know, rolling off the balance sheet and all that, like, it's You know, if you hold the, hold the asset for, for the right reasons and you, you, you have a, have a fundamental view and a, and a target in mind, you know, that you're really understanding the asset, I think, is what, what gives you the, the conviction to, to hold through these periods. And, you know, if you don't understand what you own and you are getting scared, well, you know, maybe you shouldn't own it until you understand it better." }, { "speaker": "stephan", "time": "20:01", "start": 1201.39, "text": "Yeah, for sure. And I really like that website, casebitcoin" }, { "speaker": "dan_mcardle", "time": "20:12", "start": 1211.7, "text": "So the site I put together in twenty twenty really to kind of lay out the case for Bitcoin as, as more and more kind of traditional finance people and even retail, was just getting, you know, interested in Bitcoin. so I try to collect, you know, there's a, it's a mix of, quantitative and, and qualitative stuff. So, I have a library of, you know, some of the key kind of, you know, articles, blog posts, Twitter threads, et cetera, on, on Bitcoin from over the years that really give you a good framework for, for understanding it. yeah, and then a bunch of data, you know, about its, performance, as an asset. So just, you know, basic stuff like ROI and then, you know, some like risk adjusted returns and, you know, Sharpe and Sortino ratios and things like that. then, you know, just a bunch of, you know, other kind of health stats on, on, on the network and the asset. And so yeah, it's funny, you know, I feel like since I created that, like people, people do understand, you know, the case for Bitcoin a lot, a lot better. It's just, you know, there's more information that's gotten out there in the last two years and, You know, I think a lot of people that, that did come in in, in twenty twenty, do kind of understand the fundamentals. So, yeah, the site is in, is in dire need of, of, updating, but, yeah, still a lot of good data there, I think." }, { "speaker": "stephan", "time": "21:29", "start": 1289.32, "text": "Yeah, for sure. I think things like the Kager stats are also interesting for people to see and just compare and say, \"Okay, this is what Bitcoin did over ten years on a Kager basis.\" So Kager stands for Compound Annual Growth Rate, and as we speak today, it's end of June 2022, and that number is about 120% on a ten-year basis. Now, of course, if we looked at that number on a five-year basis, it would be very different, but it's still interesting to get some perspective. Now, of course, personally Obviously, I anticipate that to taper down over time. I'm, I'm not expecting that to stay a hundred and twenty percent every year. It'll probably taper down. And if you were, yeah, if you were looking at, say, the medium term, I've spoken with my friend Hasmukh as well, and he, his suggestion is something more like sixty to seventy percent is sort of more like a medium term, you could see it achieving that kind of level." }, { "speaker": "dan_mcardle", "time": "22:19", "start": 1338.72, "text": "Yeah, I, I mean, there are very few assets in financial history that have, you know, had a ten-year kegger of, of even sixty percent, and, you know, like you said, bitcoins is one hundred and twenty percent right now, even the five year looks like it's fifty-one percent, and, you know, look at gold and S&P are, are both single digits. So I, I mean, and that's fifty percent versus, you know, eight percent i-in a five-year kegger is huge 'cause that's compounding every over five years. So yeah, you know, there's, there's no arguing with the, with the past performance, I don't think. I agree with you that, you know, now that we're a bigger asset, it can't grow, grow as fast forever, but this is back to like what you think the ultimate upside is, right? Like, you know, it, it seems, in my own kind of mental model, it's like, okay, well, you know, I mean, an easy, an easy comp is gold at, you know, something like eleven trillion, today," }, { "speaker": "dan_mcardle", "time": "23:12", "start": 1391.71, "text": "Sucks in, you know, more store of value demand, you know, outside of what is in gold and, specifically from bonds as, as government bonds, which, you know, I don't, I don't know how many hundreds of trillions are probably in government bonds globally, but yeah, as, you know, as we get into an environment where bonds look less and less attractive, yeah, that, that capital is gonna seek another home." }, { "speaker": "stephan", "time": "23:34", "start": 1414.15, "text": "Another question that people are being asked is this question of, \"Oh, is Bitcoin no longer?\" An inflation hedge, or was it ever an inflation hedge? How do you consider that question?" }, { "speaker": "dan_mcardle", "time": "23:47", "start": 1426.56, "text": "So that, so that's an interesting one, and I think, so I, I think that's a sloppy term, basically. There's debase and there's inflation, and they're two different things. And, you know, I've been guilty of, kind of using them interchangeably in the past before, I, I think a lot of people have, and that- Unfortunately, as, as, contributed to this like kind of simple idea that people have that, oh, you know, we have CPI prints, you know, above eight percent now and, and Bitcoin is, you know, has been performing poorly o- you know, over the last few months, therefore it's not an inflation hedge. It's like, well, okay, let's be a little more specific. Like, Bitcoin has responded, I think, phenomenally well to monetary debasement, to when the, when the Fed, you know, announced QE, printed five trillion More than doubling the size of, of the balance sheet with, you know, just unprecedented money printing. You know, Bitcoin was, you know, to quote Paul Tudor Jones, the fastest horse. And debasement and inflation are often related, like debasement leads to inflation. But the thing that I would expect Bitcoin to respond to is the debasement, not specifically, the CPI inflation when that comes around. So I would look at like what, you know, central banks are doing, like what their money supplies are doing, Bitcoin as a, the world's first First credibly fixed supply monetary asset like that, it, that is in direct contrast to, what central banks do. So I would expect it to respond to what central banks do fundamentally, whereas CPI is, you know, a downstream effect and central banks can be doing other things when, when CPI prints get high, just, which is exactly what we're seeing now." }, { "speaker": "stephan", "time": "25:22", "start": 1522.04, "text": "Back to the show in a moment. So the events at exchanges and lending platforms over the last few weeks have been an important reminder of how important it is to take control of your Bitcoin keys. So don't hold your Bitcoin with somebody else, they could block your withdrawals when you need it most, or even worse, you could have your Bitcoin caught up in someone else's insolvency. This is where Unchained Capital can help you. Unchained offers Kloneege onboarding, a personalized service to guide you through setting up cold storage and withdrawing from an exchange to keys you control. They ship you the Set up and help with withdrawal from an exchange and cover some questions you might have after your setup. Unchained has ongoing, support to help you get comfortable with controlling your own keys. So if you've been putting it off, now's a great time to get into this. So go and check it out, unchained dot com slash concierge and get a discount with the code Livera. Those of you interested in Bitcoin mining, brains dot com is the site for you. Brains offer products and services in the Bitcoin mining world. So firstly, they have Brains OS Plus. This is firmware that you can install on your ASIC machine. Go to the website and check whether your model is supported, but if it is, you might be able to improve your efficiency by as much as twenty-five percent. So don't leave Sats on the table, go and consider whether it's worthwhile and possible for you to install Brainzo S Plus on your ASIC machine. And for those of you managing multiple miners, Brainz also has the Brainz Farm Proxy. This is a hash rate aggregation proxy that enables data load reduction, stable connections, easy primary and backups, all con- Configurations and more. You can find information about all of this over at brains dot com, that's brains, spelt with two 'i's. And now, back to the show. And while we're on this point, it's probably worthwhile pointing out the Austrian conception of inflation is the money debasement part of it, whereas nowadays the Keynesian or statist definition of inflation is more around what CPI is, and they conflate the two. Whereas an Austrian economist is looking at it more like, no, that's money supply inflation. is inflation, and that has a downstream impact of purchasing power decrease, which is what the mainstream economists will call, \"Oh, that's CPI, that's, you know, that's inflation in there.\" And so in their mind, so it's, it's actually useful to tease out that distinction, and in a way, that's actually what you were just getting at as part of your answer on the inflation hedge, because as you rightly pointed out, a lot of the government money printing was done twenty twenty, twenty twenty-one, and so even though we're getting high CPI prints now A lot of the money printing was already done, and that was when Bitcoin already went up. So I think that's probably a fair point for people to understand or appreciate. But even there, it's perhaps not a fair expectation to say that Bitcoin must immediately respond to every little thing, because I think what we see now is this kind of modern news culture where they say, \"Oh, look, stock market is down because of this particular news item or news item A or B,\" and it's not always like that. There's not always a reason or rhyme to it." }, { "speaker": "dan_mcardle", "time": "28:22", "start": 1701.68, "text": "Yeah, totally. You, you'll, you'll, you'll see, take some time for, you know, for the moves to, to have more clarity. But, I mean, another thing to point out is, if you look at how Bitcoin has performed from the start of the twenty twenty QE until now versus, you know, other assets that also responded well to the, to the liquidity, Bitcoin is, is still up something like three X, I believe, from when the Fed announced, that QE in twenty, in March twenty twenty, and the kind Poster child for, you know, for tech growth, you know, the Ark Invests, you know, ARKK ETF, has also responded very well to, to the liquidity and went up multiples, but has since fully retraced and is now below, those, you know, those levels in March 2020, whereas, whereas Bitcoin is still sitting there at three x. So, you know, over the full cycle, that's still massive outperformance, and, and, you know, Bitcoin is still beating commodities, it's, you know, very much beating gold and, and the S&P overall. So yeah, I think, Paul Tudor Jones was, was dead on with the, fastest horse comment." }, { "speaker": "stephan", "time": "29:25", "start": 1765.01, "text": "For any listeners who are going through their first bear market, do you have any tips for them on how to get through this, the bear market?" }, { "speaker": "dan_mcardle", "time": "29:33", "start": 1773.3, "text": "Yeah, I mean, you know, I guess a lot of what I've already said about, you know, just like really doing your, your homework and understanding what you own. I, I think, you know, this ties in with position sizing, you know, make sure what you can tolerate the volatility, that, you know, what you put into Bitcoin isn't, isn't money that you're gonna, you know, need to live at anytime soon. You know, this is, you know, again, not, not investment advice, and everybody's, you know, situation is different," }, { "speaker": "dan_mcardle", "time": "30:03", "start": 1802.9, "text": "I should say, and, and yeah, understand what you own, and, yeah, that at least in my case has, has given me the conviction to, to hold through the bears." }, { "speaker": "stephan", "time": "30:13", "start": 1812.52, "text": "Yeah, for sure. And in terms of, let's say Bitcoin FUD, right? So what we see is it seems to come back in cycles, and there are certain ideas and items that just come up every time, and some of these are just items that a new coiner or a pre-coiner might be thinking, \"Oh, but what about X, Y, and Z?\" And I Sometimes there is a slightly different flavor in the FUD or over the years, there's a slightly different idea, but I'm curious if you have any thoughts to share on Bitcoin FUD and how it has sort of changed or evolved a little bit over the years." }, { "speaker": "dan_mcardle", "time": "30:48", "start": 1848.01, "text": "Yeah, it's interesting. It, it actually, I was thinking about this the other day, it actually has evolved, substantially. We have laid to rest prior FUD that, thankfully hasn't really reared its head again. So like some early ones, where you still see this a little bit now, You know, Bitcoin has no intrinsic value, you know, is the thing people like to say. It's like, well, this, that's a misunderstanding of like where value comes from. I think, you know, most, you know, Austrian economists would correctly, in my view, refer to the subjective theory of value that value for anything comes from, you know, its use or demand from, you know, certain humans in certain contexts. Like, there's no, there's nothing intrinsic about value. Goldbugs get this wrong, I think. And, anyway, I, I think people now Understand Bitcoin's value proposition more fundamentally than just like saying, \"Oh, it, you know, because it's digital and you can't touch it, it has no value,\" which was a thing for years. Kind of another one was, people asserted a lot early on that like Satoshi was-- there's no way, you know, he didn't put a backdoor in this thing and wasn't gonna like come back and steal all the Bitcoin or whatever. Like, it sounds ridiculous to say now, and, and, you know, it was then for anybody who understood, you know, the network But that was some fud we had to deal with for a while. So like, n- now it's like, it's funny, like the fud is, it's almost more political. you know, I think one of the most aggressive ones is the ESG stuff, the, you know? Assertion that, you know, Bitcoin is some like environmental disaster. Like, you know, we, we saw a little bit of that years ago, but it's really in the last like one to two years, it's just gotten ridiculous. And, yeah, I mean, that one's the one that annoys me the most now, it's just like so pervasive and, and really actually does matter. Like, you know, un-unfortunately, people who maybe haven't made up their mind on Bitcoin, like, you know, are, you know, do hear these things and it does matter to them. so I, I think it is important that, you know, that we all combat these, these bad ideas. And just, just as like one quick way to point out how silly that is, I think, Daniel Buckner, has, you know, done some like back of the napkin math on, Bitcoin's energy use, you know, relative to some other like common things like, clothes dryers, for example. You know, Bitcoin's energy use, clothes dryers use fifteen times more energy globally than, the entire Bitcoin network. and then another one he's calculated is, the emissions due to food waste, so just like, you know, wasted food that ends up rotting in trash cans or whatever, is sixty times the, the emissions that the Bitcoin network puts out. So, I mean, i-if anyone is like saying, you know, Bitcoin is destroying the planet and all that stuff, it, like, they're either ignorant or politically motivated, I think, and, Yeah. So that's, a little tour of a few of the fund items over the years." }, { "speaker": "stephan", "time": "33:35", "start": 2014.59, "text": "Yeah, sure. And I think the other interesting one is dealing with ESG people is some of them will latch onto a certain narrative, so they may see something from a certain Dutch central banker's blog, as an example, and then latch onto this and say, \"Ah, see, it-- here's a research item showing this.\" But I think maybe one other item that may be pulling people back to reality now is what's going on in the world with energy today. We're now seeing certain nations Who are previously were very, \"Oh, look how renewable we are, we don't do fossil fuel.\" And now all of a sudden with the crisis going on with the Russian war and so on, now they're saying, \"No, actually, for example, Germany is coming and turning coal back on.\" Or, another statistic I could share is that I understand from what I'm seeing on Twitter, at least in Australia, there's more people who are not so hot on the whole net zero agenda because they are seeing an energy crisis and they are starting to think a little bit more rationally about energy Hopefully that is something that we can convey to people as well, because here's the other thing, we're both bullish on Bitcoin, obviously, and many listeners are too, and so we believe the energy usage is going to go up. So while Bitcoin right now is less than, say, the, the dryers or the food waste, we don't know what that could be in ten, twenty, thirty years' time. It might well be more." }, { "speaker": "dan_mcardle", "time": "34:51", "start": 2091.37, "text": "Yeah. So, so there are two sides to this. So yes, the, the usage will probably go up, but I don't think it, it So, you know, if you look on multi-decade timescales, and, you know, this does get fuzzy like way, way out when, you know, when transaction fees, become, you know, much, much bigger relative to block reward, but, you know, for the foreseeable several decades, Bitcoin should scale sub-linearly with price So, in terms of, energy usage. And, and it's funny 'cause like everyone looks at energy, but what really matters is emissions. like that's, that's what we care about, you know, in, in terms of environmental impact. And, you know, Bitcoin has these unique-- because the energy Bitcoin consumes can be consumed anywhere, it's location independent, it doesn't need to be next to big population centers, you know, the energy is, it- You know, Bitcoin miners migrate to stranded energy resources, which tend to be renewable, a lot of hydro, 'cause it's cheaper, 'cause, you know, those producers don't have another, another ready market to, to buy that energy. and then you have things like, natgas flaring, which is, you know, a big part of, miners, you know, expanding to, to mine on otherwise flared natural gas, which actually, you know, when you plug a Bitcoin miner into those systems, it actually reduces emissions, and there's United States alone to power the Bitcoin network. So like, you know, when you look at, when you look at these two factors of, you know, scaling sublinearly with price and the incentive for, you know, Bitcoin, Bitcoin to be, you know, mined in ways that are cleaner than the grid overall, I mean, it just, you know, makes the kind of ESG FUD arguments all the more ridiculous. Yeah," }, { "speaker": "stephan", "time": "36:33", "start": 2193.18, "text": "for sure. I'm also curious, are there other angles that have not yet been explored or maybe aren't as prominent now, but maybe in the future? So maybe one example would be this idea of inequality. So this idea that, \"Oh, look, all these early Bitcoin people, you had it easy. you know, even, even if you had to hold through three or four eighty percent drawdowns, it won't look like that to them in the future, in five or ten years' time.\" Do you think that is another angle, this inequality line of attack?" }, { "speaker": "dan_mcardle", "time": "37:01", "start": 2220.59, "text": "Yeah, I think we'll definitely see that. I mean, I feel like that's started to happen already, and it's funny 'cause I remember a post from, I think, Rasa on Bitcoin Talk from like 2013 with, with that bubble, with, you like had this long post about predicting that, this was going to be a line of attack in the future, that, you know, all the early bitcoiners got lucky and, you know, that's How unfair that is, blah, blah, blah. But I don't know, I, I mean, I think, you know, the, the counterargument there is just like kind of acknowledging the nature of markets, right? Like these cycles are massively redistributive in their effects, right? 'Cause like, you know, early Bitcoiners are, you know, when the price goes, you know, hundred x, are gonna wanna, you know, cash out some amount, and, you know, people who, who don't understand it are, are gonna, are gonna sell in, in the You know, new holders, over time, and we do see the gini coefficients going down over time. It, you know, it's very noisy data, but I, you know, think you can draw that, that trend. And yeah, then, like, then the obvious comparison is like, okay, so, so there, that's Bitcoin in a vacuum, but what are you comparing it to, right? Like, you're comparing it to fiat, and you're comparing it to central banks, which, you know, buy trillions of dollars of, of bonds from banks in, in QE, which, which I would argue, QE's likely the kind of the steady state going forward for many central banks for the next ten, twenty years. And sure, you're familiar with the Cantillon effect, where, you know, it New money in a society first, 'cause they are able to, you know, spend it to buy real, you know, hard assets before that money trickles down to, you know, to less fortunate people in society. So where the, you know, the Fed and other central banks, like their mechanism for injecting money into society is usually through the banks, you know, clearly that's gonna cause like financial assets and, And, and therefore people who hold a lot of financial assets to gain wealth first, and, you know, everyone else at the bottom is, is, is, is, you know, stuck bearing the ultimate inflation that results from that without That much or any of the benefits. And, you know, Bitcoin doesn't have that dynamic at all, so you really have to look at its structure, in comparison to the alternatives too." }, { "speaker": "stephan", "time": "39:18", "start": 2358.15, "text": "Of course. And speaking of alternatives, there are probably many investors right now really stopping and thinking a bit more about what they are currently allocated to. So right now, it's obviously very common people who aren't really thinking about it or they just take the default. Their pension fund is putting them in a whole range of different things, or maybe their financial advisor just has them on On sixty forty stocks and bonds, and sixty forty stocks and bonds is literally having one of its worst years on record. So it's a, we're in this environment where people have to really stop and think, what am I fundamentally choosing to hold? So if you had to think which markets are most likely to be gobbled up by Bitcoin, or let's say holders of this other asset may defect over to Bitcoin, what would you say are the most likely?" }, { "speaker": "dan_mcardle", "time": "40:04", "start": 2404.08, "text": "Well, I, I mean, I just look at government bonds as a huge part of money that, that can end up, you know Some percentage of it and end up in, in, in Bitcoin ultimately. Like, like Bitcoin just stands in such sharp contrast to, you know, the dynamics in the bond market and, and I think what are long-term dynamics in the bond market. Like, if you look at, at Japan, right? Like, you know, their debt to GDP is well over two hundred percent, I believe. So they're in this position where they can't raise rates, otherwise it basically, you know, causes the government to default. 'cause, you know, interest expense, just becomes like way too high, eats up all the tax revenue. so the-- so right now, the central bank of Japan is, I think they pegged the ten-year bond at, you know, quarter percent So twenty five basis points. And how do they peg it? Well, they, they print more yen to buy bonds. Like whenever bondholders, you know, sell too much, to causing that yield to go higher, the, the central bank has to step in and, and buy those bonds with freshly printed yen. It seems like, you know, Japan is the farthest along in this dynamic, but, you know, if you just look at like the debt to GDP numbers of other nations, you know, US being the most obvious, yeah, it's like we're, we're a few years behind Those dynamics seem like they ha-has to happen here as well. So why would you own bonds when they're basically gonna get paid back in massively devalued currency? So you will, you know, a bondholder, you know, will get their nominal rate of return, but that purchasing power is gonna be, you know, vastly devalued. So, you know, it's, it's like, you know, where do you put your money? Like said, you know, these holders, if they're, if they have the flexibility to move their capital somewhere else, I, I would think they Looking, more deeply, especially at hard assets and especially liquid hard assets, and, you know, that's Bitcoin." }, { "speaker": "stephan", "time": "41:50", "start": 2509.83, "text": "And adding to what you were saying, one other idea I've he-heard from, I think a few macro guys, basically there, there's this idea of the Japanese widow maker trade. And so basically the idea was, the trade was to short the yen, but it was known as the widow maker because for such a long time, people who were trying it failed. But it seems like now, the people who are trying the widow maker trade are actually profiting from that It may be also, now that that's actually starting to occur, we're going to see more of a defection from people who are holding bonds, at least the ones who are holding voluntarily. Of course, there are some institutions and some parties who are holding bonds because they have to for some regulatory reason, some capital reason, some, you know, some other reason where they, they have to. But the people who are doing it by choice, they could at least start with a small Bitcoin position. So I think, I think that's probably a very likely scenario. If you were to compare Bitcoin with other asset classes, so property as an example, or, you know, maybe even just cash, how would you compare from a fundamental point of view? How would you compare Bitcoin versus other asset classes there?" }, { "speaker": "dan_mcardle", "time": "42:57", "start": 2577.15, "text": "Yeah, so, so yeah, there are certainly other, you know, limited supply hard assets, I would, I would call them, you know, real estate, gold, like, you know, they're a bunch, even stocks to, to a certain extent, that, you know, that should be a bit of a debasement hedge, coin that is really still quite underappreciated is, is, it is the only financial asset you can actually own, like that you can truly own without any counterpa- relying on any counterparty for you to, for you to have, you know, title to that asset. Like when you buy real estate, you're relying on wh- whatever government, you know, runs the jurisdiction you bought that real estate in, their court system is basically what guarantees your title to that asset. And, you know, with gold, like, okay, like you can, you know, bury some in your Like cross a border or, you know, when, when things get, you know, politically difficult, it's much harder to actually get real, you know, transactional utility out of your gold than it, than it would be for, for Bitcoin. So I think that's, you know, especially as, as things get more heated politically, you know, we have increasing polarization in the US, like, you know, I think reasonable people are, are kind of worried about, you know, extremism and authoritarianism on both sides of the political aisle, you know, in environments" }, { "speaker": "dan_mcardle", "time": "44:14", "start": 2653.58, "text": "political system for your ownership of it, and that there's, there's real attraction there that, I think is, is still quite underappreciated, but, yeah, might be entering people's minds more and more." }, { "speaker": "stephan", "time": "44:25", "start": 2664.78, "text": "Of course. And so there are scenarios where, as an example, in Australia, there was a recent case shared by my friend Katan, he was talking about how various apartment owners were being mandated by the government that they weren't allowed to do Airbnb on their own property. And so in a similar way, it's like these property-- well, physical property that you're holding, it can be severely restricted in how you use it or monetize that. And so that could be really impactful for you if you're a physical property holder and then- And the government rezones it or does something to your ability to actually use that property. And so that's an example there where, you know, in Bitcoin that just doesn't happen. so, of course, Bitcoin isn't totally immune. Of course, Bitcoin is still a little bit at the whim of what's going on with central banks. But I think as we, as we were establishing earlier, there's this fundamental reason that central banks are just going to have to expand their balance sheet, even if they're making these overtures right now about lowering their balance sheet or trying to lower it Right, exactly. If we, I'm also thinking back to Christine Lagarde's comments about, \"Oh, it will come, in due time, it will come,\" when she was questioned about the size of the ECB balance sheet. And, so I think these are all points that, are interesting for people to bear in mind. So I guess at this point, any listeners who are, I guess, wanting advice from you, you're a longtime, Bitcoiner, do you have any thoughts to close out for them on what to do, how to, Go about, the bear cycle or the sideways cycle or whatever we're calling this." }, { "speaker": "dan_mcardle", "time": "45:59", "start": 2759.04, "text": "Sure. I, I, I mean, I, I guess like first thing is just realize this time isn't different, like it is, you know, that we-- this has happened, you know, four times before. It always, it feels like, you know, sentiment shifts, and I mean, obviously sentiment shifts, but it feels like, you know, the world like fundamentally changes its attitude toward Bitcoin, and like, you know, there's some truths to that in the short term, but the I would recommend, you know, it's a good time to kind of get your house in order in terms of like, you know, are there aspects of the, the ecosystem you don't understand? You know, there are, you know, arguments for, you know, for or against the asset you don't understand. so, you know, understand things better fundamentally, and also, learn, you know, learn the, the technology and tools better. You know, to, you know, learn how to safely take control of your keys. You know, with this," }, { "speaker": "dan_mcardle", "time": "46:52", "start": 2812.36, "text": "In contrast to everything else, like you have to actually take, control of your keys for that to be true. So, you know, I would recommend, deeply understanding that so that you can have proper cold storage. Maybe you have, you know, some cold hot system, keep a little bit on exchange, but, take control of, of, of the vast majority of it yourself. But, yeah, you know, do, do your research to do that safely. Maybe, you know, you wanna use one of the, you know, third party services that help you do that" }, { "speaker": "dan_mcardle", "time": "47:22", "start": 2842.02, "text": "And you can go to for help. So yeah, I mean, that, that's just, it's been great to see the development of these tools, and, yeah, I just recommend that, that people, use, use the bear market to, to do their homework." }, { "speaker": "stephan", "time": "47:33", "start": 2852.6, "text": "Fantastic. Well, Dan, thank you. that's been great. And listeners go and find Dan. You can find him on Twitter at robustus and the website casebitcoin dot com. So, Dan, thanks again for joining me today. Yeah, thanks for having me. Get the show notes at stephanlivera.com/390. Thanks for listening, and I'll see you in the citadels." } ] }