{ "episodeId": "SLP559", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "vijay_boyapati": { "name": "Vijay Boyapati", "role": "guest", "tag": "VIJAY" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.24, "text": "I think that the size of the cohort that's reachable in this cycle is just massive. There's so many reasons I'm excited about this particular bull market, and I, I'm really curious to see how this one plays out." }, { "speaker": "vijay_boyapati", "time": "00:14", "start": 13.73, "text": "Hi everyone, you're watching Stephan Livera podcast brought to you by Swann dot com. Today, my friend Vijay Boyapati re-joins me on the show. Many of you will know him as the author of the bullish case for Bitcoin, and he's also working on the team at Swann as part of the Swann Vault team. So today we're talking about how to ride through the Bitcoin bull cycle. So I think there's a lot of really valuable insights in this conversation with Vijay around how to ride the bull cycle and some analysis of what's going on, of the different dynamics And also Vijay also discusses his take on whether Bitcoin is for everyone, and I think you might be surprised. so, keep an eye out for that, and I'm sure you'll enjoy this discussion with Vijay." }, { "speaker": "vijay_boyapati", "time": "01:08", "start": 67.92, "text": "Vijay, welcome back to the show. Thanks," }, { "speaker": "stephan", "time": "01:10", "start": 70.06, "text": "Stefan. Great to see you again." }, { "speaker": "vijay_boyapati", "time": "01:12", "start": 72.08, "text": "Yeah, been too long since I had you on the show. Obviously, we got a bull mark, it seems like the bull market is upon us, and, I thought it'd be great to get you on, get some of your insights, look at how you're viewing the market, as well as, I think you- You're, you know, you're more of an old-timer, so you have some, I think, advice and insight that you can share for newer listeners and people who are, you know, perhaps this is their first cycle. so, you know, let's just start with a bit of the overview today, you know, as we record this, it's 25th of March, 10 PM in Dubai, and it's, you know, Bitcoin is, pumping at the moment, about seventy thousand dollars. do you have any kind of overview thoughts" }, { "speaker": "stephan", "time": "01:58", "start": 118.05, "text": "My first thought is just to savor it, because, bear markets are long and painful and depressing and, and people seem to forget about Bitcoin. Bull markets are so exciting. It seems like everyone is thinking about Bitcoin, everyone's focused on it. The news, the media comes out and I had this long thread on Twitter about bull markets and, and how they play out, and one of the things I observe is that the media attention really starts to pick up Right around when Bitcoin makes a new all-time high, that's like, sort of, you know, a momentous moment in the bull market that, oh, wow, Bitcoin's not dead. Not only is it not dead, but it's, it's overtaken its previous all-time high, which we all said was crazy and irrational. And so the interest comes back, and then that's what I would mark as the beginning of the sort of parabolic move in the bull market, and, and eventually you get this huge climax of interest And everyone's pouring money into the market, and you, what, what happens is you run out of people who are reachable in the cycle, participants who are reachable in the cycle, and then you get the inevitable crash, and panic, and then you start the, the bear market phase. So I would say, you know, if to, to give a, a baseball analogy, we're probably in the third or fourth innings of this bull market. So we're, you know, somewhere in the middle of the bull market. I, I had written on Twitter, I think it was in November, that I, I believed that we'd started the bull market. and one of the things about bull markets is they start off kind of slowly. There's this like slow, steady accumulation, a-and, and the price, it, it accumulates Slowly because you have this overhang of supply. You have all of these people who bought at prices higher, and they're just looking to get out. They're, they're just hoping that the price gets up to, say, forty thousand or fifty thousand or sixty thousand, and when they get whole, they get out. And so you have this overhang of supply of people who are just looking to get out. And I know people, unfortunately, who think-- who have thought this way and, and used it as an opportunity to get out of Bitcoin. But once you get to the all-time high, Of supply, and then you have kind of this open field of price discovery where, where the price can really start to go parabolic." }, { "speaker": "vijay_boyapati", "time": "04:24", "start": 263.73, "text": "Yeah. Now, do you think it is different this time in that we got an all time high before the halving, whereas traditionally it's come after the halving? What does that portend for us? Does it mean anything, or is it just, you know, we're hitting it a bit early this time?" }, { "speaker": "stephan", "time": "04:39", "start": 278.6, "text": "Yeah, I, I would say I wouldn't put too much significance on it, except to say that the last cycle was a little strange in that- That, it was muted, it, what didn't go as high as people thought, even as high as I thought it would, and I think that pent up energy of people who, had been accumulating Bitcoin and had strong hands kind of transfers forward to the next cycle. and to me, it reminds me a little bit of the twenty seventeen cycle where we had this really long, painful bear market, and we, we really s-scratched and clawed our way out of that bear market slowly through two thousand 14, 15, and 16, but then you had this huge amount of energy and Bitcoin rocketed, you know, 20x, in less than a year. So it has those vibes to me." }, { "speaker": "vijay_boyapati", "time": "05:25", "start": 325.41, "text": "Yeah, and I think interestingly, I remember writing about this as well, that in 2017, people have this- Perception of, oh, just twenty thousand, but actually, it spent seventy five percent of the year under five thousand dollars, and it spent ninety percent of the year under ten thousand dollars. So it's all just that last sort of month, where a few months, where it really just went from five K up to like twenty K and then, you know, crashed down afterwards that, after that. But, I wonder maybe that's a similar kind of thing where you, as you were saying, like, you get this kind of slow buildup and then at the end it just really, it kinda-" }, { "speaker": "stephan", "time": "06:04", "start": 364.25, "text": "Yeah, that's absolutely correct. That's one of the points I make in my thread on, on bull markets is that a lot of the gains and the headline number that comes out of a cycle, like twenty thousand, really comes in this very short period of time at, at the end of the cycle. So I don't know what this cycle is gonna look like, whether we get to, you know, two hundred, four hundred, maybe a million, I don't know where, where we get, but it seems very likely that the, the, the, the last part Will be very concentrated into a small amount of time. So, for instance, we could be-- and this is all hypothetical, we could be kind of moving around, ninety thousand to one hundred and twenty thousand for like months this year, and then all of a sudden we go from one hundred and twenty thousand to two hundred and fifty thousand in the last like month. Something like that would not surprise me at all, because it is the nature of these parabolic moves that most of the move happens at the end, and it, it, it is really interesting. Because later on, people think back to the cycle and they think, \"Oh yeah, twenty thousand was high,\" but re- for two thousand and seventeen. But really, only very few people participated in that last part of, of the cycle because it, it only took a couple of weeks, I think, to go from ten thousand to twenty thousand." }, { "speaker": "vijay_boyapati", "time": "07:22", "start": 442.37, "text": "Yeah, and so The paradoxical thing though, is for a newcomer, the time they got interested was when it was close to twenty thousand, in that example, in the twenty seventeen example. Well, the time when the newcomer from the twenty one and twenty two cycle, the time they got interested was when it was like sixty thousand dollars. And so from their perspective, it's like, especially for that person who, quote unquote, bought the top of twenty one, maybe they bought around sixty K, let's say, and so they've spent all this time underwater on, on, let's say, on that- Early buy now, of course. If they've been a good, you know, DCA stacking Sats, you know, they've been accumulating and their average has, you know, come down because of the-- because they've been purchasing, so, you know, they're further up in the green by the time we get back up here. But it can feel psychologically, difficult for that person because of how much time they had to spend underwater." }, { "speaker": "stephan", "time": "08:15", "start": 495.19, "text": "Absolutely. It's really hard to feel like you've, you've bought something and you're underwater on it, and this is why I, I say The people who can survive that and have held through that, cycle and, and hold through to the next cycle, they become really strong hands. That's my experience. but I would say probably the majority of people who bought near the end of a cycle are the ones who are desperately hoping that they're made whole and then they, they exit." }, { "speaker": "vijay_boyapati", "time": "08:45", "start": 524.89, "text": "Yeah, I see. And so that's like a similar dynamic that I've seen, as you, as you mentioned, the supply overhang and people-- It's almost like they, they've been underwater and now they've finally got a chance to kind of, you know, come up for air, and, and sadly, they paradoxically again end up, counterintuitively, they end up selling at one of the worst possible times because it was just about to, you know, they've just come back into the black or back into the green, whatever you're calling it, and they're kind of And all the gain that's to come." }, { "speaker": "stephan", "time": "09:16", "start": 556.13, "text": "Yeah, and you know, it's an interesting point because I'm not a trader, but I will say I bu- I do believe that risk adjusted, the absolute best trade on Bitcoin is just after it clears its all time high. Like when it makes a clean break of its all time high, that's when it's really on, that's when the parabolic move is about to start. So, you know, if I was a trader, I would be looking for that as like a four year trade. Every four years, wait till Bitcoin breaks its all time point. And like I said, I'm not a trader, I'm not advocating this, but just observationally, this is what I've seen over the, you know, the last four cycles that I've seen, is that that is the perfect moment during, you know, it seems more rational that the best time to accumulate is during the bear market. And if you're DCA'ing, that's totally fine. But as a trader, it's really, really difficult. There's so much chop in a bear market where it'll go up, like, you know, Fifty percent, but then it'll drop fifty percent, and it just chops around and it cut-- it cuts traders to pieces. Most people who are trading Bitcoin in a bear market get completely wrecked. but the bull market does offer some trading opportunities, and probably the best one is the moment when it gets through the all-time high." }, { "speaker": "vijay_boyapati", "time": "10:32", "start": 632.08, "text": "Yeah, and as you mentioned, and I think, Thomas Lee, aka Funstrat also popularized this, this notion of the, the best days of the year, right? So he-- it's kind of like this idea of time In the market is better than timing the market, and he's saying, \"Look, you don't wanna miss those days, and if you're out, you miss-- if you missed like the ten, the ten best days, you missed most of the gain. And so that's why it's so important to just make sure you have an allocation, and obviously you gotta be-- you, you gotta have confidence and have an amount that you are able to huddle, right? Because if you-- I think this is also paradoxically sometimes people- Go too hard, in a sense, they'd try and buy more than they can actually safely huddle, because maybe they need that income or they need that money to pay their rent or their bills or whatever, or maybe someone's retired and, you know, it's important to have an amount that you can huddle, you know, I would say minimum four or five years, ideally ten years is a good huddle period, I would say, but, you know, obviously when someone's new, it's quite confronting to say, hey, you're in this and you gotta huddle for ten Frankly, you've done very, you've done amazingly." }, { "speaker": "stephan", "time": "11:42", "start": 701.57, "text": "Yeah. one thing I would say that's interesting about the psychology of this is that people find it easier to huddle when they're in the green, even if it's-- that, there's no rationality to it. What matters really is the percentage of your portfolio. So, you know, someone who's in the green who has like what most financial advisors would say is an irrational amount of Bitcoin, like let's say fifty or sixty percent of their portfolio is Bitcoin, but the fact that they're in the green makes it Huddle than someone who has, say, like two or three or four percent of Bitcoin, but they're in the red and they're like, \"Oh man, I can't believe I bought Bitcoin and the seven percent of my portfolio has now turned into like three percent, and I just wanna be made whole so I can get out.\" So it is interesting the psychology of being in the red or in the green. and my, my other comment about that is, I completely agree with what you said, you need to get the right position size. Choose the position sizes in your portfolio that you can h For some people that could be, you know, only one or two percent, but for other people could be ten or twenty or, you know, I know people and I'm sure you do too, who have like ninety plus percent of their assets in Bitcoin." }, { "speaker": "vijay_boyapati", "time": "12:52", "start": 771.66, "text": "Yeah, so I mean, ultimately people have to decide what's right for them and what, what their risk tolerance is. And I think this is a common point I've made this before as well, is that it's common for people to overstate or overestimate their risk tolerance, right? How much of a drawdown can you withstand? And if you're gonna, if you're gonna be, if you're gonna be a real hodler I think you gotta be willing to huddle through an eighty percent drawdown. Now, you and I have lived through that, you know, multiple rounds of that, but I think you've gotta be ready for that to come in the future as well. Like it, it, it's happened before, it could happen again. And I think a common narrative that comes is, \"Oh, it's the super cycle, this time is different, we'll never have a big eighty percent drawdown again.\" And, you know, people were saying that last cycle, and I was against it then as well, saying" }, { "speaker": "vijay_boyapati", "time": "13:40", "start": 819.83, "text": "But, I think that that's, that's an important point for people to think about, like we might have cycles to come, right?" }, { "speaker": "stephan", "time": "13:46", "start": 826.34, "text": "I think it's, I, I think it's embedded in human nature that we're gonna see these cycles, because you can't have a steady, predictable uptrend in something, because people see that and they're like, \"Oh, that's just going up and up, so I'm gonna get involved in it,\" and people start crowding into the trade, that's when it starts getting parabolic, people get ahead of themselves, and then you run Willing to participate in the cycle and then you're gonna get the crash. I just think it's part of human nature. I, I just can't see a situation where an asset goes up steadily, consistently over many, many years and people don't pile into" }, { "speaker": "vijay_boyapati", "time": "14:22", "start": 862.08, "text": "it. Yeah, I think it's like biologically or somehow naturally, we are just naturally momentum traders, right? Like if you just kind of think about what most people are doing, they see it going up and they, yeah, yeah, we sort of chase that. And, you know, what happened, to your point about- How many people are reachable in the cycle? I think that's the i-important point. and it's also how many people are reachable and are willing to huddle, right? because, I mean, here's the other point we could make, right? The ETF, now of course, you and I will tell people, hey, not your keys, not your coins, self custody is best, but nevertheless You could argue that the ETF has just blown the door open in terms of how many people are, quote unquote, accessible, right? Now, hi-historically, maybe we could have said, \"Look, it's easy to just go sign up on an exchange and, you know, do whatever, buy Bitcoin, whatever.\" But in practice- What it seems like is a lot of people wanted it to be just a ticker on their stock portfolio app, whether it's Charles Schwab or ETrade or whatever, and they just need to be able to buy a, a, a ticker that they-- on a platform that they've already done KYC, they've already done the hurdles. Maybe that's really-- that was the real game changer with ETFs." }, { "speaker": "stephan", "time": "15:36", "start": 936.17, "text": "Yeah, it is, it definitely is. There's quite a heavy lift to get someone over the line to do KYC and to- Explain to them what a wallet is and what Bitcoin addresses are. For normies, that's really difficult, especially when you're tryin' to convince them to- You know, put in an allocation of one or two percent, and then you say, \"Well, you've got to figure out all this other stuff.\" but they already have that sunk cost with-- Most people have brokerage accounts, most investors have a brokerage account. they've already got the sunk cost of doing the KYC, and they can easily go on and they understand how to buy stocks, and, \"Oh, I can buy Bitcoin as easily as buying stocks.\" I really do think this is profoundly important that the, the number of people who are now reachable to get an allocation to Bitcoin" }, { "speaker": "stephan", "time": "16:25", "start": 984.84, "text": "Orders of magnitude larger than it was beforehand. and it is also important to acknowledge these people are only getting one piece of the Bitcoin, prize. They're, they're getting the number go up technology, but they're not getting the freedom go up. So I think it is important for people to consider self-custody and, And taking that financial sovereignty if they can." }, { "speaker": "vijay_boyapati", "time": "16:50", "start": 1010.48, "text": "Yeah. Now, you've recently joined Swan, and obviously you announced this recently at, Pacific Bitcoin. you joined the Swan Vault team. So do you wanna just tell us a little bit about the Swan Vault and, you know, what's kind of the latest there?" }, { "speaker": "stephan", "time": "17:04", "start": 1024.29, "text": "Yes, Swan Vault is a product that makes collaborative custody, much easier. One of the things that's really scary about Bitcoin custody is that it's not that difficult to shoot yourself in the foot. And if you imagine like the idea of keys controlling Bitcoin, imagine if you had keys to your car and you lost the keys and the car vanished from the universe and would never come back. That's what it's like to lose your keys with Bitcoin. If you lose your Bitcoin keys or you do something silly and you like leave them online or someone gets them, digitally, then, then you're hosed, you're in deep, deep trouble. so that makes it much scarier than, you know, regular, financial accounts that you have At a bank where if you screw up, you just call them up and say, \"Here's my social security number or here's my, you know, passport ID or something, give me my account back.\" the thing that we're trying to develop at Swan is a collaborative custody solution where, we give you the same sovereignty that you'd have by self-custodying with a single signature or a single key, but we provide a kind of backup so if you lose one of your keys, we're there to help you out and get your funds back to you. So it's a two of three multisig solution, and it has all the benefits of self-sovereignty. You have two of the keys, and if you wanna move the funds by yourself, you can, and Swan has no say over that. But if you do accidentally shoot yourself in the foot and you lose one of your keys, we're there to help you, recover your funds." }, { "speaker": "vijay_boyapati", "time": "18:38", "start": 1118.28, "text": "Great. And so in terms of improvements in self-custody, technology and maybe culture, what are you seeing there? Like, do you think it's meaningfully getting easier for people to self-custody as the cycles go on?" }, { "speaker": "stephan", "time": "18:53", "start": 1133.32, "text": "That's" }, { "speaker": "vijay_boyapati", "time": "18:54", "start": 1133.54, "text": "a good question." }, { "speaker": "stephan", "time": "18:54", "start": 1134.16, "text": "I think there, has been improvements, but the improvements haven't been, as significant as I would have hoped. And I am interested to see what Block has come out with their new, wallet solution. Oh, Bitkey," }, { "speaker": "vijay_boyapati", "time": "19:08", "start": 1147.53, "text": "yeah." }, { "speaker": "stephan", "time": "19:08", "start": 1148.03, "text": "Bitkey, yeah. Because I do think Jack Dorsey has got a, a very user-centric, mindset, and I think that if anyone is gonna make self-custody easy for people to do, he's someone who would be able to do that. But in general, I- I don't think that, wallet solutions are quite as easy to use as I would have hoped for if you'd asked me this question in 2017. But yeah, it's, it's, it's an open question, about whether that's gonna improve meaningfully or what's gonna happen is that people are gonna just get access to Bitcoin through ETFs." }, { "speaker": "vijay_boyapati", "time": "19:43", "start": 1183.4, "text": "Back to the show in a moment. This show is brought to you by CoinKite dot com. CoinKite are the leading Bitcoin security hardware provider, making devices such as the Coldcard or the TapSigner and the new Coldcard Q, which I've got on order and waiting, and I'm looking forward to that. The reason we use these hardware devices is to keep our And as my friend n v k at CoinKite says, secure your Bitcoin like it's worth ten x what it is now, because it could quickly move. And with the cold card, you can do all kinds of options in terms of how you wanna secure your coins, whether you just wanna keep it basic, directly plug it in, use single signature, whether you wanna add an extra passphrase onto that, or whether you wanna go to the next level of using multi-signature, which is a more advanced step. And so there's all kinds of options. You can find out more over at coinkite dot Your metal seed backup, so they have the seed plate, you get the metal stamper, and you can stamp in your twelve or twenty-four words. That will also help you in the case of hardware device failure. So these are some of the things to think about when we are securing our coins, but generally you want to keep your private keys offline and in a specialized device when you need to sign Bitcoin transactions. So go to coincard dot com, use code livera for a discount on your cold cards and gear. This show also brought to you by Nomad Capitalist. As many of you know You know, I left Australia for various reasons, tax as well as the COVID tyranny, but with Bitcoin's price rise, as I record this, Bitcoin's price is around seventy thousand It's probably time for many people to think about plan B, citizenship and residence, and the team at Nomad Capitalist can help you strategize and then they can also help you implement that plan. And so the thing is, you've got to think about the different options. There's hundreds of countries and jurisdictions around the world. I live in Dubai, but Dubai may not be the right choice for every single person. You have to de-decide what is correct for you, for your family, and for your business, crucially. So when you talk to the team at Nomad Capitalist, they Identify where you might be able to make improvements in your setup, where maybe you can acquire a plan B citizenship or residence. So over at nomadcapitalist dot com slash apply, you can apply to become a customer there. This service is generally suitable for people with a liquid net worth above one million, and this is a service that helps you strategize and pick the right tools, to help you in terms of lowering your tax legally, going offshore, being able to invest Overse- overseas. So go to nomadcapitalist dot com slash apply. And now back to the show. Yeah, I think, the challenge is, you know, there have been easy wallets in the past as well, but oftentimes they were, they were making a trade off in security somewhere, and so then the user doesn't really understand that. But at the same time, you know, I think making it easy for people to self-custody and maybe there are other elements like social recovery and things like this that are, you know, maybe that's, you know," }, { "speaker": "stephan", "time": "22:42", "start": 1362.49, "text": "maybe that Really, really difficult. U-User interface and handling people shooting themselves in the foot and estate planning, there are all of these different factors that you have to balance and getting that balance correct, or not, not just correct, because you could argue for balance that's, different for different people, right? Some people really care about security and for them, like a three of mul- a five multisig spread over multiple continents is the right solution because they have like a- massive amount of funds on, under custody or they're self-custodying, but then you could have people who have, say, five thousand dollars, they're self-custodying five thousand dollars, and they wanna be able to use it much more frequently, and the potential for losing the keys is higher because they're walking around with it, and so social recovery becomes more important. If you're someone developing a wallet, what you need to find is you're looking for product market fit, which is what is the right balance here which has the biggest market share. and that's a really tough question, and I still think there needs to be more exploration of the space to figure out what, what the best product market fit" }, { "speaker": "vijay_boyapati", "time": "23:54", "start": 1433.99, "text": "is. Yeah, and I'll just point out here as well, I think there's more, let's say, awareness in the community or discussion in the community about what are the limits, how far will Bitcoin, and as, as it currently will, how far will it scale with current technology, current block size limit, et cetera? because, you know, you could argue that, maybe it's probably limiting somewhere, somewhere in the ballpark of ten to a hundred million people today, and if there's, if we're in a world with eight billion people and three hundred million corporate Then, you know, what are the implications then if only, let's say, the top ten or fifty million hodlers can realistically afford to hoddle? I guess that also has implications on, you know, what's the size of the market here, right? Like, you know, it means maybe the hardware wallets and the, and the custody solutions are kind of more oriented to, let's say, higher net worth customers, and maybe that's, you know, maybe that's gonna be, the main people who are going to self-custody, and other Some other kind of custodial system, because that's just the limits of, Bitcoin as we have it today. And, you know, maybe that'll drive further conversation about other improvements. Maybe there's covenant technology, something that improves that. but, I'm curious if you have any reactions on that or maybe it's, it's not something you've kind of deeply looked at." }, { "speaker": "stephan", "time": "25:15", "start": 1515.15, "text": "this is a huge rabbit hole, this topic, and I do have a lot of thoughts on it, and I do wanna write something about this at some point. And I think my opinion is somewhat controversial. I don't know if I've ever brought this up, so this might be the first time. It's a scoop. It's a scoop. I'm gonna, I'm gonna say it now. And then I'm gonna contradict myself in a way later on. Bitcoin isn't for everyone. A-and what do I mean by that? What, what I mean by that is not everyone will have a UTXO they control with a private key. and in fact, I think that will be exceedingly rare. And, and the analogy I like to make is that if you go back to the 19th century when we're under a gold standard, the classical gold standard Very few people had a brick of gold. Having a UTXO is kind of the equivalent of having a brick of gold. Maybe there's a handful of people on Earth who have several bricks, bricks of gold, but, you know, you actually were pretty rich if you had a few gold coins, and, you know, for everyday commerce, you use things which are smaller like copper or silver coins, or, you know, then you use promissory notes on gold, because carrying around a gold coin is like a big, big deal. It has a lot of value. I think there's this kind of egalitarian streak that goes through the Bitcoin community, and I sort of subscribe to Murray Rothbard's perspective that egalitarianism is a revolt against nature. Right. I, I, I think it's kind of a mistake, to think that Bitcoin was created so that everyone in Africa could do peer-to-peer payments, and have a UTXO. If that's your mindset, Bitcoin isn't for you. Bitcoin's DNA will prevent that. Bitcoin's To me, its fundamental, use case is as a new monetary base that allows for settlement between large finance-- financial institutions, and it allows us to put the world on a new financial base, monetary base, that cannot be corrupted and cannot be inflated, and that is so much more important than this kind of small fry peer-to-peer, \"I want to use Bitcoin to pay for coffee,\" or, you know, some libertarians like, \"I really want anonymous money to pay for drugs.\" Those concerns, I don't wanna invalidate at a local level that people care about those things, but the big picture here is if we can get the world on a new monetary base that's incorruptible That profoundly changes the geopolitics of the world and puts us in a much, much better position. effectively puts the world back on a, you know, a super gold standard, like the 19th century when the world came out of, lifted itself out of po-poverty and was the greatest creation of wealth in the history of humanity happened under a gold standard. I think that's what we want, and to get Bitcoin to a point where everyone could have a UTXO would require modifying It in such a way that you lose the value of Bitcoin, which is its immutability. You can't change it, it's very, very difficult to change, and this is the lesson of the block size wars. Even if you get a cabal of very powerful people in the Bitcoin community, miners and large holders and exchanges Who want Bitcoin to change, they couldn't change it, and that's what makes Bitcoin special. It makes it immune to tampering, it makes it immune to, you know, government control, it makes it immune to increases in the sub-- the inflation schedule. You can trust Bitcoin is gonna do what it does, which is produce blocks basically every ten minutes, allow you to have transactions that can't be censored, and gives you, an inflation schedule that you can rely on. There won't be more than twenty-one million bitcoins. And That is so precious. We have not had a human institution with that kind of permanence ever, so we don't wanna lose that, you know, chasing coffee payments. So my, my argument that is that Bitcoin isn't for everyone, but on the other hand, it is for everyone because a new monetary base, a superior monetary base benefits everyone on Earth. We, we'll have a new, global economy where trade can happen much more- more seamlessly, and which the, the monetary base is neutral and not political, that is a huge benefit to humanity. So on the one hand, it's not for everyone, not everyone's gonna have a UTXO, and that's okay, but it is for everyone 'cause we're gonna live in a better world." }, { "speaker": "vijay_boyapati", "time": "29:46", "start": 1785.76, "text": "Yeah, and I think, I think I, I can agree with that perspective. I, I mean, I've gone back and forth on certain ideas. Like, I think I'm still potentially open to the idea of like some kind of, you know, low risk, safe covenant soft fork that, you know, hopefully maybe it can enable a little bit more people, you know, some more people to be able to self-custody. But I, but I also do agree it, at the end of the day, that I think eight billion people with their own UTXO is And I, I think being realistic, the more realistic pathway is what, like what I, like what we were saying, it's more like we might be living in a world where there's ten million lightning banks. Lightning banks or Fedimint or Cashu or various, you know, kind of lightning banks, let's call them, just to kind of simplify it a bit, and, you know, in that world, that's still, you can still leave from one bank and go to another, and, you know, I think the-- there is an element there. I guess one other point people, and I do have an answer for this myself as well, but I'm curious to hear your thoughts. Some people would make the argument, \"Oh, well, if...\" In that world, less than one percent of the, of the world can actually self-custody. Is there a possibility that, you know, the twenty-one million cap is, gone at that point because they're gonna do fractional reserve or, you know, not enough people can do a bank run to keep the custodians honest or, this kind of concern? Do you have a, a view on that? I think it's an" }, { "speaker": "stephan", "time": "31:14", "start": 1873.95, "text": "interesting concern. I think the fact that Bitcoin is digital and can be moved much more quickly makes it harder to do fractional reserve than with gold in the 19th century, where gold is actually really difficult to move. So there's this huge inertia, like when you do a deposit at the bank. It's gonna stay there, it's probably gonna stay there, and the banks saw that, they saw that like people didn't wanna move their gold, and that allowed them to sort of fractionalize a lot more. I think with Bitcoin I, I think the fact that you can move it so quickly means that you're gonna get bank runs much more quickly if you're fractionalizing, and I think that the existence of bank runs is really what creates a market kind of suppression or cap on, on the growth of fractionalization, and because it will happen quickly, I think that suppression is, is greater than in a system where you can't move the money as easily." }, { "speaker": "vijay_boyapati", "time": "32:08", "start": 1927.64, "text": "Yeah, interesting. And I think the other point I would add to that, and I, I think I, I agree with you, the other answer I would give is is that even in that world, let's say there was ten million lightning banks, they aren't necessarily gonna trust each other. So they're gonna need Bitcoin and Lightning to settle with each other, right? So even if you wanted to create this kind of cartelized world with, with, you know, government captured banks They're not gonna trust each-- like, are they gonna-- how are they gonna trust each other? Are they just gonna magically trust each other, or again, are they gonna fall back to, \"Oh, Bitcoin and Lightning, you know, on chain?\" And so maybe at that level, that's another kind of argument there, that suggests that the system would still be stable in terms of, put it this way, if- I mean, put it this way, I believe there would be some people who try fractional reserve, right? Of course there'll be people who try fraud, and of course there will be rugs, but will that be an individual impact and not a systemic impact? That's kind of what we're talking about, right? Like maybe individuals will get wrecked or rugged. But the system would still defend the twenty-one million limit, i-i, you know, is, is how I'm seeing that." }, { "speaker": "stephan", "time": "33:18", "start": 1997.57, "text": "Yeah, I think that's completely fair, and I very frequently go back to gold as an analogy because I, I think a Bitcoin standard would be very similar to a gold standard in many ways. I think a lot of people in the Bitcoin community sort of see Bitcoin as this massive, like, game-changing revolution in terms of a monetary system, and certain aspects of it are, but in other ways, it's very familiar and sim- Similar to gold, and, and I think how Finney understood this. He, you know, there were a lot of people in the early days of Bitcoin who were like, \"Oh, this completely decentralizes everything, and we're gonna have peer-to-peer payments, and we're just gonna use Bitcoin, that's it, every individual's gonna have Bitcoin, and the fees are gonna be zero.\" And how Finney's like, \"No, there'll be banks, but there'll still be-- we need banks.\" a-and I, I-- So I, what I think of is, this School Goldstein, which was an awesome monetary system and really brought about a lot of wealth creation in the nineteenth century. so yeah, I, I think there are a lot of" }, { "speaker": "vijay_boyapati", "time": "34:21", "start": 2061.13, "text": "similarities there. I see, yeah. And so I guess to me the main concern that someone could raise is just this idea that governments might try to capture, you know, because if not enough people can self-custody, then maybe there's more of a risk of capture. But I, I suppose that's where the debate would be, and, you know, I guess the answer could also be Be that, look, Bitcoin is just so much better than gold that it's a lot harder to capture, especially in a, you know, in a globalized world with the internet and the possibility of millions of lightning banks in so many different countries around the world." }, { "speaker": "stephan", "time": "34:54", "start": 2094.33, "text": "I think the political capture can go both ways. Bitcoin can capture governments too. As people start owning Bitcoin, they become advocates for it, and you get politicians who own Bitcoin and, and they write legislation which becomes friendly to Bitcoin. I don't think we're quite there yet. in terms of full political capture, I don't think there's enough ownership of Bitcoin to say that we've got to full political capture. and I do worry about the concentration risk from the ETFs, the fact that Coinbase is custodians, bitcoins for, I believe, eight of the ten ETFs. I think that is a huge concern. we definitely need, some, I guess more custodians and for that to decentralize out. Must more custodians. We need more competition and innovation in the custody. market, and, I, I would like to see that play out, hopefully in the next one or two years. I think it would be really bad if Coinbase ended up holding, say, five or ten percent of the bit-- total supply of bitcoins, that would be a real danger." }, { "speaker": "vijay_boyapati", "time": "35:56", "start": 2155.98, "text": "Yeah, I see. And so, just to nail down that exact risk, is it the risk of, let's say, a contentious fork, and let's say the government sort of says Coinbase, \"We want you to go this way on the fork,\" and Coinbase has, at that point, let's say, ten percent of the supply or something, and that'll-- that gives them a certain level of extra influence over the direction of the protocol, but I guess hypothetically doesn't give them full control, right? I mean, the rest of the network could still go the other way." }, { "speaker": "stephan", "time": "36:25", "start": 2184.68, "text": "I think it's just a centralized point of failure and that the government could lean on them in various different ways, and we may not even be able to imagine all the ways. One of them might be confiscation. Although one thing I think is really important to point out is people sometimes make the comparison to the confiscation of gold, Executive Order 6102. It's important to understand that that was done, In what's actually a constitutional way, the US Constitution has the Bill of Rights, and one of them is you, you can't confiscate something without just compensation. Like the government can't just walk around taking stuff and saying, \"This is ours now.\" the, the reason they were able to confiscate gold is that gold was, redeemable for dollars and vice versa. You could take dollars and get gold, and you could take gold and get paper bills as well. And so the government just said, \"Hey, we're giving you just compensation.\" And we know the value of a dollar is, sorry, the, the value of a one ounce gold coin is twenty dollars. So if you have a gold coin in the bank, we'll give you a twenty dollar bill. So in, in a way, you could argue that that was constitutional and it wasn't a confiscation because the government was just paying the market price for gold. Much, much more difficult to go and confiscate, Bitcoin or gold now, because they don't have that same constitutional trick where gold was money and there were these notes which could be redeemed at a fixed value. That doesn't exist anymore. You can't just easily say, I'm gonna give you a twenty dollar bill for, for one Bitcoin. There is no fixed exchange rate to do that. if they wanted to buy Bitcoin on the open market, well, then that's gonna be very, very difficult." }, { "speaker": "vijay_boyapati", "time": "38:06", "start": 2286.14, "text": "Back to the show in a moment. Mempool.space is the leading Bitcoin and blockchain visualizer. I use it all the time when it comes to checking what's happening in Bitcoin's mempool, as well as assessing things like Bitcoin's mining network, as well as looking at Bitcoin's Lightning network, and they also have an upcoming accelerator program. So for those people who wanna sign up for that, you can find out more at mempool.space/slash-accelerator. The mempool team are continually coming out with new ways to look at the chain and understand what's going on there. You can look at transactions, you can look at And search the RBF history, the replaced by fee history, and there's so many more things that the team are just continually rolling out, so you can find out more over at mempool dot space. And finally, the lead sponsor of this show is Swan Bitcoin over at swan dot com or using the Swan Bitcoin app available on the Apple App Store or the Google Play Store. 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Over at Swan Private, you'll have access to a dedicated concierge, a person you can call, they can help you with more advanced considerations, things like tax loss harvesting or support for entity accounts and additional, guidance around your custody setup. You can find out more over at swan dot com. And now back to the show. Yeah, so you don't see a risk there that, let's say, the government says, \"Oh, Vijay, we're gonna give you, you know, a certain price for your Bitcoin in the ETF, but actually the real market price is much higher,\" you know, kind of like what they do in, you know, previously in Argentina or these other countries, where they have like the government rate for money and then the, the true rate, and they give you, you know- Yeah." }, { "speaker": "stephan", "time": "40:28", "start": 2428.03, "text": "I, I, I think that's unlikely in the US at the current moment. I think" }, { "speaker": "stephan", "time": "40:37", "start": 2437.24, "text": "Public like you'd see in South America or not yet," }, { "speaker": "vijay_boyapati", "time": "40:39", "start": 2439.38, "text": "at least." }, { "speaker": "stephan", "time": "40:40", "start": 2439.78, "text": "Not, not yet, not yet, but, I, I, I do think the Bill of Rights still has power in the US." }, { "speaker": "vijay_boyapati", "time": "40:46", "start": 2446.09, "text": "Yeah. And I think it's- It's also fair to say that there were political differences between now and what, you know, the kind of environment that supported the US sixty-one, o-two, whatever it was, in like eighty years, ninety years ago, whatever it was, that, you know, they, they had a lot more control over, you know, the political system than, you know, the current, political, the, the way things are in America, at least for now. Yeah, absolutely. So that's a crucial difference." }, { "speaker": "stephan", "time": "41:19", "start": 2478.69, "text": "Yeah, Franklin Roosevelt was effectively working as a dictator. He had enormous power when he was president and was able to do things like that. the political class in the US has a lot less power today, and a, a lot more power is concentrated in institutions that are kind of neighboring the government, but not quite in the government, things like universities, corporations, stuff like that, the media as well. There might even be" }, { "speaker": "vijay_boyapati", "time": "41:44", "start": 2503.9, "text": "potentially some resistance at the state level, like one idea is to sort of have more state- States give the right to self custody or the states give rights to mining and so, you know, run a, run a Bitcoin node and this kind of thing. I mean, we could make parallels even with, like drug legalization, right? So it's like at, at the state levels, in many states in the US, as I understand, it's, you know, either legal or being decriminalized in a lot of cases, but at the federal level, you know, the federal police can't really do much about that." }, { "speaker": "stephan", "time": "42:13", "start": 2533.15, "text": "Yeah, that's a great example, and the US system is designed in a way that you can, you can make things difficult to do, as a dictator, because there are all these sort of checks and balances, and judicial system is one of those. So for instance, the SEC has been blocking ETS for a really long time, and eventually they got sued for this. The judicial system can be a check as well, and you could say, \"Well, the executive branch can do whatever it wants, it can ignore the- The judicial system, but actually in practice they don't do that. And, and when the, the court system said, \"No, your, your decision on ETFs has been capricious,\" they, they folded and they, they approved the ETF. So there are various ways, and one of them is what, what you're suggesting, where you can get these things approved at the state level and then make the federal government fight the states, and that if you have enough people arguing, basically creates gridlock, and that's, that's a great- And that can be to our A great, great thing for people who believe, believe in personal freedom is to have the government gridlocked as much as possible." }, { "speaker": "vijay_boyapati", "time": "43:19", "start": 2599.16, "text": "Yeah, interesting. And so, yeah, that could also be an interesting dynamic. And also, the USA is one country out of, you know, like it used to be that the USA was so dominant in terms of economically, militarily, and it, you know, people talk about this idea of a multipolar world, right? So even if the US government manages to control Bitcoin completely, which again, I think isn't gonna happen, but even if it completely controls But in the US, the US is what, three hundred and fifty million people out of a population of eight billion people, and there's a lot of wealth outside of the US. And so, you know, I think that is also another check on, this kind of capture" }, { "speaker": "stephan", "time": "43:56", "start": 2636.38, "text": "The great irony, though, I find, Stephan, is that the US is the friendliest to Bitcoin. There are all of these other countries I believe would benefit a lot from, Bitcoin emerging as a, a, a world reserve currency, which don't seem to understand how this would hurt the US for Bitcoin to emerge, and they've actually been pretty antagonistic, like China and Russia, if they were really thinking, long term, they would see the benefits of encouraging Bitcoin adoption rather than fighting it. It and the US, I think, and I wrote this in my book, has the most to lose economically and geopolitically for Bitcoin to become the global reserve currency, yet at the same time, the US is the country which has been most favorable from a regulatory perspective towards Bitcoin. But I think that's also this kind of libertarian streak that goes through the country's history." }, { "speaker": "vijay_boyapati", "time": "44:48", "start": 2687.82, "text": "Yeah, interesting. And so, yeah, I mean, where, where does it all land? I think one other thing you could say is that" }, { "speaker": "vijay_boyapati", "time": "44:57", "start": 2696.82, "text": "Even though there is meant to be this kind of system of, you know, the executive, the judi-the judiciary and the legislative as meant to theoretically keep each other in check, in practice That when you vote, the, you know, that party gets to choose who gets into the Supreme Court. So it's kind of like over time, they still get to influence the judiciary by putting in loyalists. So there's kind of, it kind of erodes over time, doesn't it?" }, { "speaker": "stephan", "time": "45:24", "start": 2723.96, "text": "Yeah, that's an interesting example. I, the thing that I, I think about the Supreme Court is that there've been presidents who have appointed people to the Supreme Court hoping that they would act in a certain way, but they've been, much more unreliable. So people put on the court who they thought would be conservative but ended up being liberal, and, and vice versa. Right. And that is one of the benefits of the creation of the, the- The structure of the Supreme Court is that the justices are appointed for life, and so they don't really answer to anyone once they're appointed. And so when they get on, that, that's when you start seeing their real, real, views and real opinions." }, { "speaker": "vijay_boyapati", "time": "46:03", "start": 2762.56, "text": "Yeah." }, { "speaker": "stephan", "time": "46:03", "start": 2763.16, "text": "so- You're right, there is some influence, but I, I do think the judiciary is a system that has historically provided a good check to the government." }, { "speaker": "vijay_boyapati", "time": "46:13", "start": 2772.89, "text": "Yeah. Alright, well, yeah, I think it's a, you know, some interesting points around, system capture and how Bitcoin- Potentially captures the state back, right? Or, i-i-is decentralized enough that it survives anyway because it's a big world out there. we were talking a little bit about some of the lawsuits, and, you know, another thing that you've been talking about is, GBTC and, and DCG as well. And what, what does it mean, right? And so, do you wanna just give us a bit of an overview? Where are your thoughts on this? Because, you know, Genesis had their bankruptcy and- You know, there's been a lot of talk about what's happening with grayscale. where are you at, on that for now?" }, { "speaker": "stephan", "time": "46:57", "start": 2817.3, "text": "So there's, I mean, this is a very long story, and GBTC, this, product which allowed people to get, exposure to Bitcoin prior to the ETFs, was at the heart of the collapse in twenty twenty-two, and I don't think people fully appreciated how important GBTC is. It was-- if you look at these bankruptcies, FTX and BlockFi and Genesis, GBTC is everywhere, like they, they all hold GBTC. So it sort of became this systemic problem, a-and the, the story is that you had this fund which allowed people to get exposure to Bitcoin before there were ETFs, but the fund was structured in a way that it couldn't track Bitcoin properly. there was no redemption mechanism that ETFs have, and in, in its early history, actually most of its history, it traded at a big premium to the Bitcoin's- That it held. So if it held, say, a hundred bitcoins, then the value of the f-total value of the fund was like a hundred and fifty bitcoins worth, because there was so much demand from people to get exposure to Bitcoin in traditional equity markets that they were willing to pay a premium, and there was no sort of arbitrage redemption mechanism to, to get the price to track properly. what happened was that It, this created an arbitrage trade where people could sort of farm the premium, and this became really big in the twenty twenty cycle where, you had this huge hedge funds lot of, like three arrows capital and others, three arrows capital is the, the, the, the biggest one, which were just doing this arbitrage trade to make, you know, hundreds of millions of dollars farming the premium, and eventually the premium kind of disappeared. It had existed through all of GBT's history, GBT- He sees history from twenty thirteen up to about twenty twenty one, I believe. It dis-- the premium disappeared in twenty twenty one, and the reason it disappeared was there was more competition for things that you could get access to Bitcoin in equity accounts. So MicroStrategy, for instance, became like a, a way to get exposure to Bitcoin if you're an equity investor. So the premium goes away, and then all of these people who are playing the premium trade start exploding, and Three Arrows Capital explodes. they were not only doing the, GBTC premium, trade, but they were also doing the Terra Luna," }, { "speaker": "stephan", "time": "49:25", "start": 2964.77, "text": "trade as well, and, and that blew up. Then Three Arrows Capital goes under, and then it knocks over, it puts a big hole in Genesis's balance sheet, and then Genesis starts calling in loans from FTX And then FTX becomes unstable, and then eventually it collapses as well, and then it sort of falls back on Genesis, and Genesis collapses. So these all, all are tied to this GBTC product. the story is much, much deeper and, and more in depth, and I have a, a massive thread on this on Twitter, it's like my longest thread ever, it's like forty-five tweets or something like that. Yeah, yeah," }, { "speaker": "vijay_boyapati", "time": "49:58", "start": 2998.39, "text": "I'll put that in the show notes. But go on." }, { "speaker": "stephan", "time": "50:00", "start": 2999.97, "text": "Yeah, yeah, yeah. So, So eventually this thing GBTC gets approved, as an ETF. the, the problem now for the issuer of GBTC, Grayscale, is that GBTC was held by all of these companies that went bankrupt, and they need to do something with it because they need to pay back their creditors. And, some of the bankrupt estates have said, \"We're just gonna pay people back in dollars, regardless of what you deposited with us, whether it was Bitcoin or Ethereum or some altcoin or dollars, everyone gets dollars.\" And that, that means they need to liquidate their assets, and so some of these estates, like FTX for example, took the GBTC and just sold it to dollars. And so that puts downward pressure on the market because, now that it's an ETF, a sale of GBTC will cause a sale on the spot market of Bitcoin. then there are other bankruptcy estates like Genesis where the goal is, they've said is to not sell it to dollars, but to give back creditors, if they're a Bitcoin creditor, to give them Bitcoin back, and that obviously has huge advantages for the creditors because then they're not getting a taxable event. and they're also, the estate keeping the Bitcoin means that as Bitcoin goes up, the estate's value goes up. so the ETFs when they were approved caused a huge inflow. There was a lot of interest from retail investors to get money into Bitcoin, and now they had a way of doing so. But at the same time, you have GBTC having outflows because you have these bankruptcy estates selling, and also they chose to have this really high management fee. GBTC chose to run as an ETF with a one point five percent yearly management fee. That's really, really high because the, the rest of their competitors, the other nine ETFs, are running with fees of like point zero two five percent, and some of them have completely eliminated the fees for the first six months or year of the existence. So GPTC stands out like a sore thumb. People who own it, are thinking, \"Well, why would I own this ETF when I can own any of these other nine ETFs which have much, much lower fees?\" And if you have your GPTC- See in a tax-protected account, there's really no cost to selling it and then buying one of the o- other ETFs. The only natural holders of GBTC are people who held it or bought it a long time ago in a taxable account, and so they're sitting on a large taxable gain on GBTC and they're thinking, \"Ah, I don't wanna sell it because I'd have to pay like thirty, maybe forty percent in taxes. I'll just eat the one point five percent in fees.\" For, you know, however many years I wanna hold my Bitcoin before I diversify, that grayscale was banking on the number of people in that situation being large, but what we've seen is Actually, the number of people who've re-redeemed their GBTC has been massive. They started off the year with six hundred thousand Bitcoin, bitcoins under management, they're down to about three hundred thousand, half of their fund, a huge, they were the one of the biggest holders of Bitcoin. Half of their fund has bled out, so they have started to change their opinion on this, and, Michael Sonichai, the CEO, has come out and said, \"Actually, we are gonna reduce the fees over time.\" I think they're panicking. This is the sign of a company in panic mode. Like, if we don't do something about this quickly, then we're gonna lose all of our assets under management, a-and the rate at which they're bleeding doesn't seem to have slowed down either. The last week has been Hundred, you know, hundreds of millions of dollars are, are pouring out of GBTC per day." }, { "speaker": "vijay_boyapati", "time": "53:59", "start": 3238.55, "text": "Yeah, and I'll point out as well that, yes, as you said, there's been this huge outflow of bitcoins, but in one sense, they've gotten very lucky because there's been this big price rise, right? Because like, you know, as we speak, it's about seventy thousand dollars per bitcoin, you know, just as recently as Let's say late twenty twenty-two, it was like sixteen thousand dollars of Bitcoin, right? So that massive rise has to some extent helped them keep a, a fiat value AUM higher than it otherwise would have been, even if their Bitcoin AUM value has come down. Now, the other kind of rumor, I guess, or word on the street is that, you know, the DCG, the owning company or the parent company of Grayscale, needs the revenue, and that's why they're sort of trying to milk this cat Cash cow, it, yeah, but it, it just seems, yeah, it seems odd that they kept the fee that high. Maybe, yeah, it was just kind of like, let's just milk it until, milk it as long as we can until everyone leaves. I, I don't know, it just seems a bit," }, { "speaker": "vijay_boyapati", "time": "55:04", "start": 3304.19, "text": "Yeah, it seems a bit inexplicable in that way." }, { "speaker": "stephan", "time": "55:06", "start": 3306.38, "text": "That's my perspective. I think they made a business de-decision, and actually, I think it's probably, if you think about it, the rational business deci-decision. Like W-what, what strategy do you take if you're grayscale? You're g- without doubt, you're gonna have a, a large number of redemptions because of the bankruptcy estates, and then you're hoping that certain people aren't gonna leave because they are in taxable accounts and they don't, they don't wanna pay the fee. You can't really compete with, BlackRock or Fidelity, in terms of, inflows because they have natural client bases. Fidelity is one of the largest c- Asset managers on earth, they have this huge client base and they can just go speak to their clients and say, \"Hey, we got this bit Bitcoin ETF, why don't you put some money in?\" Grayscale doesn't have that kind of connection, so they have these huge headwinds for people to wanna redeem and bankruptcy estates to, to wanna redeem. So Reducing fees isn't really gonna slow that down, I don't think, in any, any meaningful way. So even if they had reduced fees, they would have felt, seen the outflows. So they're like, okay, how do we make as much money from this as possible before this drops to a point where, you know, we, we're not gonna have any assets under management? So I think they said, let's, make hay while the sun shines, to go with an old, method. And just milk it while it's on the way down" }, { "speaker": "vijay_boyapati", "time": "56:33", "start": 3392.67, "text": "Yeah. I, I do wonder, like, if they had gone to a, a rate that's competitive, right? As I understand, their competitors are, call it somewhere in that zero point two to zero point three percent range, if they'd gone at least somewhere in the ballpark, would we have seen so many outflows? I don't know. I think they would have, you know, people would have said, \"Oh, okay, even if they had gone at point three five, like just a little bit above the others, the, the current holders of GBTC might" }, { "speaker": "stephan", "time": "56:59", "start": 3418.87, "text": "have said, Would have caused people in, non-taxable accounts to move," }, { "speaker": "vijay_boyapati", "time": "57:08", "start": 3428.45, "text": "right? Because there's" }, { "speaker": "stephan", "time": "57:09", "start": 3429.43, "text": "no friction and there's no cost to doing that, so you would have just switched over. So I don't think they could have stopped that. They couldn't have stop, stopped the bankruptcy li- sort of liquidations. and the problem is if they dropped their fee to say point three five or point two five to be competitive with the other funds Then it takes them six x longer to make that money back, like six years. Imagine six years. Who knows what happens in six years? Who knows if they're, they're around at all or DCG's been sued into oblivion for its role in the Genesis bankruptcy? you don't know what's gonna happen, even the, the market is so like, crazy, the Bitcoin market, things have changed so much, we don't know what's gonna happen in a couple years. So I don't think that they could have tolerated that kind of runway to make the money back I think they, their thought is like, let's just make as much money as we can for the next year or two, and that's gonna pay for like twelve years of if we had fees at point two five percent. So from a business perspective, it kind of makes sense. It just means that eventually their business isn't gonna be very meaningful, and they're probably gonna try and sell it, is my guess. Like, they're gonna go to someone like BlackRock and say, \"Look, you can get all these assets under management, you can grow your, you can double your fund, We're gonna sell, I don't know, for a billion dollars or something like that." }, { "speaker": "vijay_boyapati", "time": "58:31", "start": 3510.83, "text": "Yeah, that's, that's a totally fair analysis, I think. So I guess bottom line, zooming out, does that mean it's kind of like people are just waiting for the GPTC to sort of bleed out? Before, you know, the real, the real crazy bull run can happen, or what are you thinking?" }, { "speaker": "stephan", "time": "58:48", "start": 3528.2, "text": "I think, you know, the rate at which it's gonna bleed out is gonna slow down significantly. I think the, a big chunk of the bleeding came from bankruptcy estates, and my guess is that's mostly done, or if it's not done, it's like eighty-five percent done. so I, I think the bull market's gonna be unaffected from here. I think we're gonna, I, I actually think that the bull market, like, resuming Partly because, like last week, I think was the last major week of redemptions. Maybe, maybe we get one more week, but I, I don't think this is gonna affect the bull market going forward." }, { "speaker": "vijay_boyapati", "time": "59:25", "start": 3564.8, "text": "Yeah. So, let's flip now to some tips and, common traps, I guess, like, you know, I think, you know, as you've been around for a while, there'll be some listeners who are new, and I think it might be good to just talk through, you know, what are some common traps that people should be wary of in a bull cycle, whether it's, you know- Shitcoining or yield farming or trading or, I'm curious to hear what, what do you, what, what would you say are the main traps that a listener should be wary of in the bull cycle?" }, { "speaker": "stephan", "time": "59:55", "start": 3594.87, "text": "I think the underlying theme, the thing that's most important is the idea of the feeling you wanna catch up, and that causes all of these other problems. Like people, they get some Bitcoin and they're like, \"Oh, well, there are all these other people who bought Bitcoin much earlier and they're up like a hundred percent or three hundred percent or whatever. how do them. I can catch up if I get into a shitcoin which is going up a thousand percent, or I can, I can do some yield farming strategy or they just go out on the risk curve is what people do because they feel like they need to catch up and they, they do this sort of high time preference thing which is, I, I'll do something which sounds really good, it's super risky, but it'll let me get to my goals much more quickly rather than the hard responsible thing which is get good money. Save it diligently, DCA, all those kind of things kind of are boring when, when you, when you explain them to people, so they just take on more risk than they should, a-and that, that manifests itself in lots of different ways. Shitcoining is probably the biggest one, and then, doing these DeFi things and, and lending, Giving your Bitcoin away to these third party custodians who have some strategy that they, they tell you is gonna make you rich, all of these things are, are, are bad ideas." }, { "speaker": "vijay_boyapati", "time": "01:01:18", "start": 3678.68, "text": "Yeah, that's totally fair. also, I think There might be an element to which people overpay in certain things. Like as an example, what we traditionally see in the mining world is there's a sweet spot time to buy Bitcoin mining rigs, and usually that's in like the bottom of the bear cycle, right? Like late 2022, nobody wants to buy these Bitcoin mining rigs, there's a ton of them for sale, they're so cheap. That's like the sweet spot time to buy mining rigs, and then usually what happens in the bull run is hash price goes on a bull run as well, and so people end up really overpaying for the mining rigs. So I'm cur-- So I'm curious if you have any thoughts on that or, w-whether you see that as kind of like a trap that people run into or, maybe even people buying, trying to buy mining stock instead of buying Bitcoin, right? Like maybe that's another one people can, fall into. Yeah," }, { "speaker": "stephan", "time": "01:02:10", "start": 3730.25, "text": "this is a, this is Before, before, I knew about Bitcoin when I was a gold bug, and I used to explain to people who were interested in gold, they, they would go down this mining rabbit hole as well. They'd be like, \"Well, why don't I buy miners? They seem to go up faster than gold.\" And I said, \"Well, there are all these other risks to mining, gold mining in particular, there's geopolitical risks, there's management risk, there's, you know, the, the financial risk of managing the gold and knowing when to sell it and when not to More risks to mining than if you bo- if you're bullish on the underlying commodity, just buy the underlying commodity. And that's the same for Bitcoin mining too. There are all kinds of risks, and mining, Bitcoin mining, I think is even more cutthroat than gold mining, because of the difficulty adjustment. Bitcoin as a system makes, Bitcoin mining one of the most difficult, competitive free markets out there, and the halving is, you know, for most of us, is an exciting event And for, for miners, it's a terrifying event. Imagine you're a miner and suddenly the, the amount of revenue you're getting gets cut in half every four years. and, and you need to be on top of your game in terms of costs management efficiency, all of the, all of these things have to be really nailed down, otherwise you're gonna be killed because someone else is gonna come along and do those things better than you. So I'd say stay away from miners and, and generally stay away from trading, trying to find the right price point. Some people get killed not through shitcoining, but by just trying to trade Bitcoin, like, \"Oh, it's gone up a certain amount, so I should sell out and wait till it goes down, and I'll buy back in and I'll have more Bitcoin that way.\" The problem with doing that is, first, the friction of taxation. If you live in a place where you get taxed for sales, the friction is so high, there's no way you can beat the system. There's just no way. It's, it's, it's too high. Even if you time it perfectly, you're not gonna come out ahead. but even if you live in a, in an area where you're not taxed, it is so hard to predict, and I've seen people who've sold their Bitcoin in anticipation it's gonna drop to a certain level to buy back in, and it doesn't, and it goes on a run, and they feel so disappointed because they lost the opportunity of being in the market, as you said earlier on, Being in the market during those few days when it went on, on a big run. So trading in and out, I think is really dangerous. Using leverage is incredibly dangerous. There are so many people who have been blown out, who had like large Bitcoin positions and then just leveraged them, and because of that, they got margin called on a bad trade, and then they lost all of their bitcoins. the only thing that's really safe is to huddle. Just huddle and, and, and, just survive. The game is survive as long as possible. It is so hard. There are so many temptations and so many people who say, \"Ah, you can make a bit of money here,\" or \"You can do this strategy with Bitcoin,\" or \"There's this altcoin,\" or maybe try mining. All temptations that are trying to take your Bitcoin away from you. Get into a zen state. Put your bitcoins in cold storage and be patient, and you will be rewarded greatly. You'll be rewarded much more than ninety-nine point nine percent of traders who are trying to do this super smart strategy and beat Bitcoin. that's, that's the dirty secret is that people who do the simplest, dumbest, most boring thing beat almost everyone else." }, { "speaker": "vijay_boyapati", "time": "01:05:46", "start": 3946.6, "text": "Yeah, that's a fantastic way to put it. I guess one other point around, dealing with corrections on the way up, right? And that's-- this is something we've seen in past cycles as well. Maybe it goes twenty or thirty percent dips, but it's still kind of on the way out. Do you have any tips for people to, let's say, not get shaken out?" }, { "speaker": "stephan", "time": "01:06:04", "start": 3964.64, "text": "I think, just having a DCA mindset, it really helps a lot, because when you see dips and you're, you're a person who DCA's, you actually get excited, you have a very different feeling to someone who's gone all in at some price, and, and is doing it as a trade. So if you have a DCA mindset, I think you're probably not gonna be worried and, and know that the cycle is probably gonna end at some point and if, if the amount of Bitcoin you're talking about isn't like gonna change your life now, you just need to have patience. I think it will change your life eventually, and you just need to focus on getting as much as possible while the getting is good, and the getting is still good. We're still at such an early stage of adoption, You know, the g-gold became the global reserve currency in, in the 19th century, but this is like we're still in the Middle Ages for Bitcoin. There's still this like long runway of accumulation that needs to happen before Bitcoin becomes a reserve currency." }, { "speaker": "vijay_boyapati", "time": "01:07:09", "start": 4029.61, "text": "Yeah. And as we stand now, I mean, people throw around different numbers, is it like a hundred million people or two hundred mil-millions people, but this kind of counts, you know, quote-unquote crypto and custodial accounts on various exchanges. If you had to kind of guess how many people actually hold a serious amount of Bitcoin on-chain in their own hardware wallet or multisig Where, where do you think that kind of number is? Like, do you think that's kind of in the single digit millions, ten million, twenty million? Yeah," }, { "speaker": "stephan", "time": "01:07:35", "start": 4055.51, "text": "yeah, exactly. My, my ballpark is somewhere between five and twenty million. Yeah. it depends on how you define what significant is, but it's not, it's still a minuscule fraction" }, { "speaker": "vijay_boyapati", "time": "01:07:45", "start": 4065.19, "text": "of the world's population. Right. And that's, you know, five to twenty million in a population of eight billion people, and, you know, not every millionaire can have one Bitcoin, right? So that just shows you Things will really change very quickly once, you know, the herd comes, and I think we're still before the, the real, the real herd rushing moment. So, Yeah, thanks for your insights. yeah, I think, you know, that's a great spot to finish there, but, is there any other, anything else you really wanted to mention before we close out for this episode?" }, { "speaker": "stephan", "time": "01:08:21", "start": 4101.59, "text": "I, I am a believer that the ETFs are game-changing because it really, unlocks the gates from the tradfi world and g-gives us huge liquidity channel. I think Bitcoin's price is really strongly related to the, the size and the stability of the liquidity channels into Bitcoin. In the early days, the liquidity channels were terrible. Like the first liquidity, major liquidity channel was Mt. Gox. It was very poorly run. A bunch of bitcoins, hundreds of thousands of bitcoins were stolen from it, but at each stages you got new players, so more reliable like Coinbase, the liquidity increased and allowed US buyers to get into Bitcoin more easily, and then, then you get the ETS, which I think are a huge, huge step up. I, I, I think that the size of the cohort that's reachable in this cycle is just massive. so I'm super excited for this bull market and the fact that the prior bull- Market was really muted for various reasons because of the bankruptcies and the Federal Reserve, and now the Federal Reserve instead of being a headwind, I think is gonna be a tailwind. There's so many reasons I'm excited about this particular bull market, and I, I'm, I'm really curious to see how this one plays out." }, { "speaker": "vijay_boyapati", "time": "01:09:35", "start": 4175.16, "text": "Well, listeners, you heard it from Vijay. Make sure you huddle, and, thank you, Vijay, for joining me." }, { "speaker": "stephan", "time": "01:09:42", "start": 4182.18, "text": "Thanks, Stefan." }, { "speaker": "vijay_boyapati", "time": "01:09:43", "start": 4183.28, "text": "I hope you enjoyed the show. Get the show notes at stefanlivera dot com. Thanks, and I'll see you in the Citadel." } ] }