{ "episodeId": "SLP567", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "preston_pysh": { "name": "Preston Pysh", "role": "guest", "tag": "PRESTON" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.12, "text": "Hi, you're watching Stephan Livera podcast brought to you by Swann dot com. Have you wondered about Bitcoin and investing? How do you think about investing as a Bitcoiner? Rejoining me on the show today is Preston Pysh of TIP, The Investors Podcast, and he's also hosting a Bitcoin show over there also. We talk about the dilemma for Bitcoiners of hodling versus investing in companies and what are some of the different types of companies and investments that you could undertake, whether that's, you know, microstrategy or big public companies. Or perhaps at the VC and early stage company investment, as well as talking about some of his thoughts on what, happens over the course of a Bitcoin cycle and, technical realities as Bitcoin grows. Here's my chat with Preston Pysh." }, { "speaker": "stephan", "time": "00:58", "start": 57.99, "text": "Preston, welcome back to the" }, { "speaker": "preston_pysh", "time": "00:59", "start": 59.05, "text": "show, man. Hey, thrilled to be here. Always, always a pleasure to chat with you, Stefan." }, { "speaker": "stephan", "time": "01:04", "start": 64.34, "text": "Yeah, I always have a lot of, interesting conversations with you, Preston, and, you know, some of our prior episodes on the show, I remember we were talking about the idea of, Bitcoin as the denominator, right? And I think that's a really interesting con- conversation, and it's funny enough, that was, you know, from like a cycle ago, right? Yeah. But it's, it's, it's, it, it keeps coming back, right? It keeps coming back because it's becoming more and more important, because You know, especially if you're an investor in the space, you have to think, okay, how much am I gonna keep in my Bitcoin stack versus what am I gonna deploy into, into companies as an example. But then there's a deeper implication as well, and people-- as, as I, as you've been having conversations about this as well around, you know, microstrategy, what, yeah, what should people be valuing that at based on their massive hoard of, you know, over one percent of the supply of Bitcoin? So, you know, lots of getting into-- The real challenge," }, { "speaker": "preston_pysh", "time": "01:56", "start": 116.4, "text": "go on. The real challenge for, for both of us, I think, is we're just accounting nerds, and so we, we love getting into the accounting of this, and it's, it's challenging to not totally nerd out and like still, I guess have a conversation that people would still wanna hear us have, from maybe a bigger, broader level, but not get too granular on the, on the accounting. But sorry to interrupt you, go ahead. Yeah," }, { "speaker": "stephan", "time": "02:20", "start": 139.95, "text": "no, I think you're right. And I think the, the difficult thing, and maybe it's diff-- maybe it's on one hand it's difficult, on another it's easy. It's just kind of like- The more you look at things, it's like, oh man, I would rather just hold Bitcoin, right? And, and so, and I, and, and look, to context, obviously, y-you're an investor in the space, you're a GP at Ego Death Capital, you know, I, I've previously invested with, you know, Bitcoin Ventures and occasionally, you know, I'm doing angel investing here and there. And it's a hard conversation, right? Because you're kind of like, \"Oh man, do I really think this company is gonna outdo Bitcoin?\" Yeah. That's, that's kind of the bet you have to make. Or you're, you're either in that camp, and I know, let's say someone like Muzz would be sort of like, \"Yeah, we're trying to outdo Bitcoin,\" and other people might take the view of more like, \"Well, maybe like, you, you know, you hold most of it in Bitcoin, but you kind of put some investments out" }, { "speaker": "stephan", "time": "03:16", "start": 195.88, "text": "I put investments because I, you know, some of these investments are designed to try to help Bitcoin become money. Maybe that's another way to think of it. where, where your thoughts are on that? Where are your thoughts on that?" }, { "speaker": "preston_pysh", "time": "03:29", "start": 208.59, "text": "I would break it down into, I guess let's, let's break it into two parts. First of all, you have the, the very large cap, companies that are publicly traded, similar to MicroStrategy, and you could talk about how to think about all of that. From an economic calculation standpoint, like what is investable, and I think people already kind of know the, the answer, but I can kind of talk, and, and, and not necessarily speaking in, in, on behalf of MicroStrategy, but just like what would it take for somebody to invest in that particular space? And then I think you gotta look at it from like the VC, very early stage, seed, Series A type investments, and like what, how, how could that be investable? 'Cause that's-- and I think everything in between is almost in like a no man's zone where it's really difficult to outperform Bitcoin, like super difficult to outperform Bitcoin. So why would I, why would I say that, that those are the two buckets? The-- talking about the, the publicly traded micro-- let's, the micro strategy, like how is that even remotely investable? And, I would make the argument that there's a hidden asset on the balance sheet at MicroStrategy and any other company that would, would basically break glass on this strategy or this playbook, they would also have this invisible asset that's not listed on their balance sheet. And the invisible asset is they're able to tap into public markets, particularly fixed income markets, that then put deep liquidity into their common stock market. That then allow that company to put, if the company is profitable, and that's a really, really important p-part of all of this, is the company has to actually be profitable. it, it allows them to basically issue as long as there's a premium above the, the treasury and as long as you think that the Bitcoin price is appropriately priced in wherever you think we're at with the cycle or how these cycles take place. then it, then it becomes this, this potential asset where they can just lever the public markets to basically put more Bitcoin on their, on their balance sheet because of the, the, the, the way that the common stock is priced in the market. Or in, in Michael's case, he's doing this with the fixed income convertible debt issuance as well as, as another strategy. And I think that this is deeply misunderstood. I've talked about it, quite a bit in the, in the markets, and we can get into the m-more of the nuances. Of like how all of this is possible. But in general, I would just say, like in a very broad brush kind of way, that is, I, I don't know how to, like seriously, I've tried, I, I, I don't know how I would necessarily value it and put a, put a value on that, on, on that invisible asset. But I think it's so profound that it could maybe even be for MicroStrategy specifically, that invisible asset of being able to tap into the public markets and convert and transmute this common stock and this convertible debt into Bitcoin could be just as valuable as the enterprise software business, the operational business that MicroStrategy has that bangs out, call it seventy-five million a year in free cash flows, it might be just as valuable as that. So it'd almost be like having two of those because he's able to put on this Speculative attack type, trade where he's transmuting these public market valuations for securities into Bitcoin onto the balance sheet. So that's first and foremost. If a company isn't doing this at the, scale that, that MicroStrategy's doing it, I don't know that you could get an outperformance. I also think this is, this is a footstomp, comment If the, if the value of MicroStrategy like today, I don't think it's quite 2x, but let's just say that the, the value of the common stock is 2x that of the treasury, which it, it was there for, for a brief period of time. If a person buys at that point, I don't know that, that you're gonna get any type of outperformance out over Bitcoin. In fact, I think you might get underperformance on a long enough time horizon, which only makes all of this that much more confusing for a person that's looking at it from the outside in and isn't deeply familiar with economic calculation and determining valuations. So, it's, it's challenging to cover this from a media standpoint and challenging to talk about like these really big ideas that these billionaires are, they're putting on, like Michael, and that I suspect others are gonna start to do, maybe not as, as aggressively as he is, maybe they're doing it with a fraction of their, of their, you know, treasury or whatever of their free cash flows, but, The, this valuation and for a person who's looking at this from the outside in and maybe not familiar with, with financial markets, they might hear a conversation like this and be like, \"Oh, I've got to go buy MicroStrategy.\" Preston and Stefan said it could outperform Bitcoin. No, no. What we're saying is there are, there are moments in time where it may be priced in a way that it could outperform Bitcoin. I would argue right now it's super speculative and that might not be the case. In fact, it probably isn't the case. But when the, when the price, when the common stock price is right," }, { "speaker": "stephan", "time": "08:51", "start": 530.87, "text": "you" }, { "speaker": "preston_pysh", "time": "08:51", "start": 530.95, "text": "know? Yeah. it's kinda like, you know, if you went, if I was going to say, \"Hey, you can buy a coffee shop in downtown, it's the only coffee shop that's allowed to be in downtown, and it makes a hundred thousand a year, but you're gonna buy it for ten million dollars,\" right? No way. no way, 'cause that's gonna take you, ten, it's gonna take you a hundred years to get your payback. A hundred years. Yeah. So like- But if I could say, \"Hey, you can buy that same coffee shop for two hundred thousand, \" right? Oh, and you're getting a" }, { "speaker": "stephan", "time": "09:19", "start": 559.41, "text": "slam dunk. It's a slam" }, { "speaker": "preston_pysh", "time": "09:21", "start": 560.91, "text": "dunk, but it's the same business. And so that's the point that people need to-- That example is how you gotta think of microstrategy. Like, there-- And, and the market is coming every day and it's, and it's saying, \"Hey, the price today for the coffee shop's five million. Bad deal. The, the coffee shop for-- Tomorrow, the coffee shop now is two hundred fifty The price is, is dynamically constantly changing in public markets, and it's coming to you every single day and saying, \"Here's the price, here's the price, here's the price,\" and you have to be able to say, \"Okay, this is what the business is worth, this is how much free cash flow is kicking off,\" and you gotta do this in Bitcoin terms, which makes it all the more confusing for somebody who's looking at fiat prices and trying to understand the, what he's doing with the treasury and Good lord, man. So I, I guess I, I really, really wanna emphasize this point because people who are hearing this conversation over and over again, what, what's not being discussed is the mar-- the price is constantly changing. Sometimes I'm a buyer, sometimes I'm just sitting there on my hands and letting the price run because I locked in, it's, it goes back to the coffee shop. If I was able to lock in a two hundred thousand dollar price and it's banging out a hundred a year, just because the price goes- Because the ten million doesn't mean that I automatically become a seller and have to deal with the ta-with the tax implications of selling at the higher price, and then where do I stick that? Not to mention if it's In the micro strategy example with the coffee shop, let's say the price ran to, to ten million, and the owner could transmute that premium into just Bitcoin on the balance sheet That's what's happening. So like, why would I sell that business when I know that the owner of this business is deeply convicted and deeply understands Bitcoin, is go- is going to take advantage of the crazies that are running the price to ten million? in the business, like I, I'm just gonna sit back and let that dude do what he does best, which is transmute all of that into the hardest money on the, the world has ever seen and stick it on the balance sheet, and then, you know, next quarterly report that comes out, it's like, \"Oh, surprise, MicroStrategy has another ten or twenty thousand Bitcoin on the balance sheet. Where did that come from? They didn't make that money in, in their free cash flows with the hundred thousand that the coffee shop makes.\" They, they did it from, through the premium of the business." }, { "speaker": "stephan", "time": "11:42", "start": 701.57, "text": "Yeah, it's such a confusing dynamic, right? Because you got fiat prices, Bitcoin price, the public equity price, how much they're able to purchase, and then, and, and I know there's, I think there's like some of these tracker websites, and there's a few guys, on social media who are sort of doing this analysis and posting it online for everyone to see, so then you can sort of get a- A kind of, a relative valuation to sort of see, okay, based on the Bitcoin stack, what's the current, you know, you know, evaluation and things like this. but it has been volatile, right? Like I think as we speak today, it's MicroStrategy. Now, typically, I hold zero MicroStrategy, MicroStrategy, I think I just, it's about eleven hundred or so. W-w-when recently it was like nineteen hundred in fiat dollars, I'd say. Yeah, it got" }, { "speaker": "preston_pysh", "time": "12:26", "start": 746.21, "text": "to two, got to two thousand in USD, yeah I would say their treasury, I could pull up the chart, I'd say their treasury is like six hundred dollars worth of Bitcoin on the treasury. So for that to be running as high as like two thousand, maybe it got up to seven hundred or-- it's, it's somewhere in that ballpark. Yeah. So like that, this is-- these are crazy premiums. And so when you have people on Twitter that are out there saying, \"Hey, the multiple could run to seven times the treasury.\" What I'm saying is, let's go back to the coffee shop example. So seven times, and it's like, \"Oh, well, it's gonna go to, you know, a thirty million or just some absurd multiple over what the company's kicking off in free cash flows.\" And I'm saying, \"I can't predict with any type of certainty whether that's gonna be true or not.\" So if I'm a buyer at ten because I think it's going to thirty million, like, \"I'm sorry, that's just gambling. That's not investing.\" That's not performing economic calculation. That, that is you clearly being able to define the risk of speculators either taking the price there or not. It's not based on fundamentals of this business makes a hundred thousand a year, and if I can buy it for two hundred thousand, I'm going to really crush it with the return profile, right? And by the way- If we're, if we're actually using Bitcoin as our unit of account and looking at the return profile of about fifty percent annualized, okay, that's kind of the price point you need to be at if you're just relying on the free cash flows of the business to buy it. That's how absurd the returns have to be. Because it's crazy, which is crazy, it's, it's unheard of. And anybody in traditional markets, if, if, if I went to Wall Street and sat down with, you know, professional money managers and said, \"Yeah, I'm not buying anything unless I think I can get fifty percent annualized,\" like nothing," }, { "speaker": "stephan", "time": "14:25", "start": 865.04, "text": "they'd laugh you out of the room, right? Like there'd be nothing that would meet that criteria." }, { "speaker": "preston_pysh", "time": "14:29", "start": 868.71, "text": "They would literally look at me and be like, \"You're psychotic.\" congratulations, good luck with that. And I'd be like, \"Well, I, I don't know what to tell you because for the last decade, this is the world we have-- you and I and everybody else has lived in is-- if you're not-- that's-- and that's being conservative is fifty percent annualized.\" So if I can't achieve that, I'm sorry, I'm just gonna squat on my Bitcoin and I'm gonna wait for the, for the juicy, ridiculous underhand pitch that has to be thrown to me because, me not-- I don't have to swing at every pitch and, and the co-- the compound annual growth rate of Bitcoin is obscene hurdle rates, obscene hurdle rates." }, { "speaker": "stephan", "time": "15:10", "start": 909.77, "text": "Yeah. And so, yeah, like we've spoken about, that's, the case of micro strategy, but what about other large public- Equities as an example, Coinbase or some of the large Bitcoin miners, right? Because there's a similar, you know, not exactly the same dynamic, but a similar dynamic. But I guess you would argue, or we could argue, that they don't necessarily have-- they're not necessarily doing the same, let's say, su-- superpower or the invisible asset of, let me u-- let me tap the public equity and debt markets, issue stock or issue debt, and then use that to buy Bitcoin. Now, I mean, maybe in a loose sense, you could say Bitcoin miners have Kind of doing that in an indirect way, they're not just directly buying the Bitcoin there. They're, they're using public equity markets and debt markets to get Bitcoin miners and plug those in and et cetera, but it's a different game, isn't it? So how would you distinguish then the microstrategy style versus some of the other- Let's call it Bitcoin or Bitcoin related public equities." }, { "speaker": "preston_pysh", "time": "16:08", "start": 967.69, "text": "So what, what makes MicroStrategy a little easier to value is the fact that their free cash flows are pretty steady and, and, the, the top line is very flat. when you get a business that's having a top line, let's just say Coinbase or you name it, company that has a top line that's really blowing out and, and growing, let's say the top line's growing at thirty for a large cap company, thirty percent is a pretty aggressive top line growth so now you're having to account for that in the valuation, you would also have to be accounting for whatever their, their Bitcoin strategy to, to tap into the public market, which we don't even have a company that's doing this right now, but let's just say we did, you would then have to be, balancing that, and I think that that's a way more dynamic, valuation, challenge for somebody that would be trying to know whether they should own that or not. I think it would be," }, { "speaker": "preston_pysh", "time": "17:10", "start": 1029.59, "text": "it, it would be, it'd be interesting because that, whoever would be running that strategy, for a business that would be growing, They would have additional liquidity in the common stock to basically lever to put on that strategy. I think it's a lot harder for s-- for somebody with a flatlined revenue like, like MicroStrategy to be doing this str-- to be exercising this speculative attack because they have to effectively manufacture some of the, some of the deep liquidity in the common stock, and Michael's doing that. I suspect Michael is doing this through all the, the convertible debt issuance and then the, the financialization that's happening on top of all of that convertible debt into the common stock, 'cause you're incentivizing all this quick money to come in and take both sides of the trade, which creates all this liquidity. But for a company that would have a top line that's growing like crazy, they would naturally have this, and then if they were also doing like some type of convertible debt in, in addition to this, they would even have More liquidity than like what Michael has, which would be really advantageous for the strategy. So I suspect it would be, it would be very-- and we're, we're talking very, what's the word I'm looking for? These are all, what if drills at this point. There's no company that's actually doing this right now, but if there was, I think that, that it might actually even be more advantageous than MicroStrategy if they could be putting on the, the speculative attack in the same manner that, that MicroStrategy would be. And I'm surprised Coinbase isn't, isn't trying to do something like this. I think it speaks more to," }, { "speaker": "preston_pysh", "time": "18:46", "start": 1125.9, "text": "what's the word? Incompetence isn't the right word, but, I guess I'm just surprised that you haven't seen others, especially like Coinbase or any other exchange, trying to do something like this, because their, their access to public markets is an invisible asset on the balance sheet, whether they realize it or not." }, { "speaker": "stephan", "time": "19:06", "start": 1146.45, "text": "And it, it does kind of raise that question, and of course, there are different answers people have said in response to this, right? Because the question is, why haven't other companies done it? Could it just be that, you know, MicroStrategy is somewhat unique in having this kind of founder who has a very large shareholding or at least a-and also voting rights, and therefore isn't likely to get kicked out of his own company, or, you know, there are maybe-- and even there are probably some of these tech CEOs who probably personally hold Bitcoin. Bitcoin, right? Like Mark Zuckerberg, it's known that he has named one of his goats Bitcoin, and, you know, it's clear that, you know, it's probably clear that a bunch of these guys actually hold Bitcoin in their personal name, but maybe they are unable to execute this at a corporate level, at a public company level, because maybe- I think it's voting rights. Yeah, yeah." }, { "speaker": "preston_pysh", "time": "19:57", "start": 1197.24, "text": "It's voting rights. You, you hit the nail on the head. Like, Michael's control from a voting standpoint is unprecedented for a company of that size. Relative to anybody else in the game. And so, yeah, Zuckerberg, I think, I agree with you. I think the guy's a hardcore Bitcoiner. I think there's many others like him, but I think because they don't have a controlling vote, at the magnitude that you see at MicroStrategy with Michael, they're just not able to convince the rest of the board and like all the, all the Wall Street firms that basically own all the stock in these companies, they've got a stranglehold on, on how aggressive they can go and do something like this. And, but I think, I think on this incoming cycle, especially if we get, if we get some like mid-six figure numbers in US dollar terms on the price of Bitcoin I don't know, man. I think that, I think some of this corporate treasury stuff is just going to be completely reassessed and thought about and, And I think that you're also gonna see ETF vehicles that are gonna have to, especially fixed income, ETF vehicles are gonna have to have some type of exposure to Bitcoin in addition to the, like maybe it's, two percent Bitcoin, the other ninety-eight percent is fixed income. and, I, I think some of those types of, mixing is going to be the rage probably, in a year to two years from now in that you have to have some type of insertion or like injection of Bitcoin into whatever the vehicle is, which is going to be really exciting, and I just don't know what that means as far as, what happens in the incoming cycle. And the fact that you now have Asia about to rip out some in-kind ETFs, I think is just ramping up this global competition for, what Bitcoin is and, and what it means to the world. I think it's way, way different than our last conversation, with respect to access. Michael, you know, describes it as an API, a money API into Bitcoin. and I know you and I have, some very strong hesitations about the ETFs in general and what it might, what it might cause in the future, but, in the meantime, I think that it's an important thing to, to think about and talk about and what it's going to kind of drive from like a, just a global narrative around Bitcoin as a, as a global settlement layer." }, { "speaker": "stephan", "time": "22:30", "start": 1349.57, "text": "Back to the show in a moment. Swann dot com is the leading place to buy Bitcoin, and the Swann team has a mission to onboard millions of People into Bitcoin. Now the team have been working really hard to update the Swan Bitcoin app, which you can find on the Apple App Store or the Google Play Store. So the team have created a really slick and smooth experience, so now you can go from zero to Bitcoin in just a few minutes. So if you have family and friends who you are struggling to get them onboarded, well, Swan Bitcoin application is a great way for you to help them. You can be standing there right there with them And in just a few minutes, they can have been onboarded and be buying Bitcoin. And Swan are making it really easy to do this because now there's zero fees on the first ten thousand dollars of Bitcoin buys that you do, and it's not just for new customers, it's also for existing customers. So remember to tell your friends and family to go to the App Store and search \"Swan Bitcoin,\" install the app, and get started with Bitcoin with Swan Bitcoin. This show also brought to you by mempool dot space, the leading Bitcoin and blockchain. Visualizer. I use it all the time when I am about to send a Bitcoin on-chain transaction, and I'm often just checking the site anyway, just to keep an eye on where things are at in Bitcoin's mempool. Now, you can search transactions, search, take the transaction identifier, and search that in mempool dot space, and of course, you can see the, the mempool in terms of unconfirmed transactions. You can see all kinds of information about the different transactions, such as whether it's had RBF replaced by fee signaled on, and the Team are always rolling out new ways to explore and view the chain, and so you can see Bitcoin on chain, you can see the Lightning Network, you can see the mining explorer, there's a liquid network explorer for those of you who wanna see that, and they are continually rolling out improvements. They've also got an accelerated program which you can find over at mempool dot space slash accelerator, so go and sign up over mempool dot space slash accelerator. And now back to the show. Yeah, I think, yeah, I think that's all fair because ultimately most people aren't really independently thinking things through at a first principles, you know, you know, they're not thinking of it like that, they're just sort of looking around and pinging off what other people are doing, and we're just Arguably, in the next year or so, we're gonna start hitting that tipping point, let's say, of enough other people are invested into Bitcoin that, you know, you know, Fidelity is offering this ETF and BlackRock is offering this ETF and so on, and most people are gonna start now feeling like, \"Oh, okay, I've got permission, right? I've got permission socially from the tribe, let's say, to actually seriously consider Bitcoin.\" Whereas historically, it might have been seen like a bit of a gamble or maybe it was too small. I think now is the time that they'll actually take it a bit more seriously. but I also hold the view, of, you know, we're still likely to see a big drawdown at the end of the cycle. Like, that's kind of where I'm thinking, but, of course, none of us knows, right? But I just think we're, we're, we're naturally sort of herd animal and we're just gonna, people, we're just gonna see this kind of momentum chasing behavior because naturally we just chase the momentum. So there'll be There'll be a dip and then it'll be like, \"Oh no, you know, the bottom's fallen out,\" and then we'll sort of, we'll rinse and repeat and we'll do it all again, right? That's how I'm seeing it, but I'm curious, what, what do you think?" }, { "speaker": "preston_pysh", "time": "25:59", "start": 1558.86, "text": "No, I, the longer I've been in this space, the, the deeper appreciation I've gained for this back and forth between long-term holders that are deeply convicted that actually understand what they own And a, a balance with the speculator who literally knows nothing and is just chasing the money, and how it ebbs and flows and goes back and forth between the two of them. And at, at certain points in time, that speculator who knows nothing that's just chasing the money is totally dominating the, the market dynamics, and they get exhausted, and then they start selling like crazy because they didn't even understand what they owned, they were just chasing, you know, the, the quick money. And then, then the, the long-term holders, the deeply convicted, knowledgeable people that understand what they own, then start to, to dominate the market, you know, when we had sixteen thousand. Dollar Bitcoin in USD terms, that's who was driving the market at that point, whether anybody realized it or not, and, and so they were scooping up all these really cheap sats, they were throwing everything that they had at it, they stepped the floor, and then, then they're, they are suffocating all of the speculators out of the market. And so this back and forth- It has continued to play out in a fractal, at just one layer and one higher local top after the next, and it's like, why would this be any different? The only reason, and this is a similar answer to what I gave you last time we talked, which, you know, was about, I think maybe four years ago or whatever, I just-- the, the, the wild card is when trust completely breaks down in the legacy system, and I just don't know when that is, and I-- and, and, and, and this isn't fixed income. And so what we didn't have on the last time we talked was, we literally had forty years of fixed income just getting bid- Relentlessly, relentlessly for forty years, it was just always, prices always went up, yields just kept going lower, and now we're starting to see that, just the hint of that to start to unravel." }, { "speaker": "stephan", "time": "28:08", "start": 1687.55, "text": "And so that's a great point. Yeah, I wanna, I wanna go into that a little bit further because as I'm sure you're aware, and probably many listeners, the US government recently seized some Russian, so I believe Russia, the Russian government owned some US government bonds and said, \"Hey, we're gonna start re- re- appropriating those towards Ukraine. And so maybe that's also starting this cycle now, exactly related to what you were saying, is that loss of trust, because up until recently, most people have been happy to just hold US government bonds. They were the quote-unquote risk-free rate, they were the quote-unquote, you know, safe thing to hold. But over time, the trust is eroding slowly, and, I think that's the point you're getting at. So the question would just be, is that trust gonna hold for another year or two, or is it actually- Gonna start crumbling even in the next year or two." }, { "speaker": "preston_pysh", "time": "28:58", "start": 1738.29, "text": "I don't know. I don't know. And, here's what's great, we don't have to know, right? And I think that that's, like, it's, it's fun, it's super speculative, it's, it's a sexy thing to talk about. Everybody's got an opinion, nobody has a clue. But at the end of the day, for me, I, I do look at it from the lens of, I don't need to know because all I need to think about is the math. And I sound like such a turbo nerd saying that, but like it's just, to me, it's, it goes back to this hurdle rate. If I think that, like, my hurdle rate is fifty percent annualized, somewhere in that ballpark, and I'm looking across the spectrum of opportunities every single day, and those opportunities are changing. Back in January, MicroStrategy was offering a price that was below its treasury of how much Bitcoin they had on the balance sheet. It was a, for me, it was a no-brainer. I was saying, \"I'm gonna own this. I, I At this price could outperform Bitcoin. I think there's a sixty-one o two attack risk that's, that comes with that additional outperformance based on the price that I was able to buy it in January. Now today, I won't, I, I won't touch the price. I'm not buying that. And so I'm not predicting anything. I'm not, I'm literally not predicting anything. All I'm doing is just performing the mathematics and saying, \"All right, at that moment in time, this was where I needed to plug my free cash flow.\" Today, my- My free cash flows, they're just dollar cost averaged into Bitcoin, 'cause I can't really see, at least on the large public market standpoint, there's nothing for me to buy. On the VC, early stage, of course, I'm allocating, you know, funds into Ego Death personally and as, obviously as, as a general partner, because when I'm looking at, and this goes to the math that, that we didn't talk about, but was the other, the second thing that I was referring to, when you're- You're looking at, early stage startups. Where could you invest that could outperform this fifty percent rate? And, you know, I, I think you have to be in an industry that is ripe for disruption, that is going to be dematerialized, and then you have to own equity that has some type of long term competitive moat in that space. 'Cause if I can go invest in a company that's valued at twenty million dollars, and I think that the long term value is in excess of a billion over the coming ten years I'm gonna outperform the fifty percent hurdle rate and just by owning that equity. Then, as a kicker, if I can invest in a company that, that has that growth potential, okay, because I can get access to it, and it also has a founder that deeply understands Bitcoin and is going to be denominating their retained earnings in Bitcoin, and they're, and they become profitable in that ten year period of time, well, then it's, I'm definitely gonna outperform the fifty percent hurdle rate. If that, if all of my, assumptions and, and, and expectations of that business become valid. So that, but unfortunately for a lot of people, they don't have access to this market and according to the SEC and like all the limitations that they put on, like the, the minimum investment thresholds to get into some of this stuff is, is extremely difficult. But as I'm talking about it from, from, you know, this calculation of like how I'm looking at the markets and not having to predict anything but just kind of- Be able to perform math. there's obviously risks in all of, all of these underlying assumptions, but, i-it's, it's truly using that hurdle rate and, and using that as a way to think through how to responsibly allocate capital, and what you find is it gets very focused, gets very, very focused because, yeah, it's such a high hurdle rate." }, { "speaker": "stephan", "time": "32:47", "start": 1967.11, "text": "Yeah, great point. So you mentioned the fifty percent hurdle rate, so let's get into that a little bit. I think that's also worth talking about, right? Because obviously, you and I, and probably most of our listeners today, we are, you know, we believe, generally speaking, we believe Bitcoin is the future of money. It's gonna, you know, and so that kind of implies an incredibly high future valuation. Now, people have thrown around different numbers, you know, whether it's however many million dollars a coin or whatever, but ultimately, we have to-- Now, we're But you, you would sort of expect that it should start to taper down at some point, right? Based on-- Or maybe another way to think of it is like, how many x is left in Bitcoin, right? Like if you were to kind of assume, okay, from here, okay, today's price is about sixty-six thousand, so you know, ten x takes us to six hundred and sixty, a hundred x is six point six mil How much more, you know, what, what would, let's say in today's terms, what would a, you know, a realistic valuation for Bitcoin look like if it, it really does come true like you and I believe? Like, is it gonna be six million? Is it gonna be, you know, two or three x that? Like, what are you thinking? Because that then also drives what your hurdle rate is, right?" }, { "speaker": "preston_pysh", "time": "34:01", "start": 2041.18, "text": "This is, this is a really, I think p-a lot of people get the interpretation of this question wrong. In fiat terms, the price of Bitcoin, the price of, of profitable equity, equity that actually makes money, and in terms of commodities there's going to be this, this flat line in, when you measure it in Bitcoin, it's going to eventually come to some type of saturation point or s-steady, price. If you look at the, the price of Bitcoin in terms of fiat, it's, it's literally going to the moon. It's not gonna stop. It's the, it's the Michael Saylor, it's the German Mark, right? Like everyone's seen the kind of infinite, yeah. And I think that this is something that's lost on a lot of people, because they'll be like, \"Oh, well, you know, like, what's the price of one Bitcoin? Five million, ten million?\" And that's the number that's thrown around a lot. But it's, it's five million in buying power as you know it today, or ten million in the terms you know it today. So like, what could you go out and buy for five or ten million dollars? A super nice, fancy house, let's just say that, okay? Yeah. So let's say that Like that price for that house, because it's, a physical real thing, I don't think is ever going to, to go higher than, than one Bitcoin. It's going to flatline and mature to a Bitcoin for that super fancy nice house, or let's say, you know, a, a nice small jet, would be like Maybe one or two Bitcoin. So like thirty years from now, it's going to, it's going to still be one or two Bitcoin for the nice small jet. Like it's, the price isn't going to keep going. Now on fiat terms, the price is just gonna keep ripping to, to levels that are unimaginable until it, it turns into a Zimbabwe hundred trillion dollar note. And, I think, I think most listening to that would roll their eyes and say, \"There's no way,\" not-- And I think, but I think they're saying there's no way because in their lifetime they've never seen anything like that. You go talk to a person that lived in Venezuela or any of these, Argentina, any cou-- any country that has had extreme currency issues, they'll look at you and say, \"That's exactly what's gonna happen.\" Because they've seen it, they felt it, and it was real to them, and, and they're just looking at the, what's playing out on a global scale, and they're looking at bi- at the performance of Bitcoin and what it, how it has a fixed supply, and they're saying, \"There's nothing that's ever gonna be able to compete with this.\" So they just intuitively understand it, they get it, and they understand that in Bitcoin or in, in dollar terms, the price is gonna go up forever. So when we talk about like the volatility And we talk about like how high does the price go? It's very important that you, you always say in terms of what, 'cause if you're saying it in terms of fiat, it's going up forever, Laura. And if you're saying it in terms of some commodity, equity or, I mean, that's pretty much it, commodities or equities, 'cause in fixed income it's going-- those are going to nothing, at least long duration stuff is. you know, it-- there's, there's going to be a plateauing and an evening out, and the volatility will actually subside over time in terms of those hard things that are desirable." }, { "speaker": "stephan", "time": "37:27", "start": 2247.43, "text": "Yeah. And so then it's sort of like layering that into, okay, when I'm, let's say you're looking at a company, an early stage, you know, Bitcoin company, VC, angel, whatever, early stage sort of thing, and you're thinking, okay If I invest into this company, do I believe there is a fifty x in this or a hundred x in this? Because that's kind of what you're kind of-- Yeah. That's pretty much what you're investing on, right? Like, and okay, if you're taking the venture approach, like you might be investing in a bunch of these companies and expecting, okay, look, they're not all gonna make it, that's the nature of the business, but hopefully I make enough on a few, one or two of them, that they make up for everything, right?" }, { "speaker": "preston_pysh", "time": "38:09", "start": 2289.3, "text": "Yeah. Exactly, exactly You're saying, okay, if this is a billion dollar company in the coming ten years, like how much is a billion dollars in Bitcoin right now? And so then you're looking at that Bitcoin price and you're saying, all right, this is how much they're seeking in investment, how much Bitcoin is that today? Right? And hopefully those numbers are, you know, not in excess of the price that you think it's gonna be in Bitcoin terms within the next ten years. 'Cause if it is, you just can't do the investment, it's impossible. I think another, one other thing, and this might be a little bit off, one of the challenging things when you start getting into the early stage stuff is not being distracted by, you have to have a really deep appreciation for where you're at in the adoption timeline. So, what, what I mean by that When I'm looking at, at equity and early stage, founders that are coming with an idea, I might look at that idea and say, \"Alright, I think that this is going to definitely be something real, and this is going to be something that is going to be desirable in the market. You seem like the great founder and leader that, that would be able to, to grow and build, an enterprise like this.\" Your timing's just wrong based on where we're at in this, in, in this adoption curve, this technological adoption curve. Yeah. So, I'll give you an example. Payments Over the last four years, have been somewhat of a bloodbath from an investment standpoint, and mostly because it's just, it's very early. And unfortunately, this stuff needs to be built so that you can, you can move it all along, but the natural demand signal for Layer 2 Lightning payments To date, has been, has been abysmal. Everywhere in the world right now, people are still cognitively conditioned that they want dollars and that they wanna settle in dollars, and if they can get tokenized dollars, that's what, that's what's desirable in, you name it, country that's, that's unbanked and has payment issues, they still want dollars today. I think a lot of that's going to change in this coming two to four years. I think a lot of them are gonna start to say, \"You know what? I, I'll take Sats.\" instead of dollars, and some of that is because now we're starting to see new all time highs in Bitcoin, and I think if it really starts to run, you're gonna have a lot of these, these places that have just terrible local currencies, they're gonna, they're gonna-- a lot of them are gonna start to say, \"You know what? I don't want the dollars, you can give me the sats, and if you give me dollars, I'm gonna convert 'em into sats and, and store that in my small little localized, you know, business that I'm And so that natural demand signal is very, very important and very challenging for somebody that's trying to invest in early stage startups, that they're not too early. Because if you're too early, what that actually means is you're paying a way higher premium because you gotta continue to, to pump life and energy into this business until it, you get the natural demand signal for what's, what's coming. And I have no doubt, like in a ten-year timeframe, that like this natural demand signal is coming. Coming for payments, I, I like to think it's coming in the coming two to four years, but, as a capital allocator, you have to make sure you get that timing right because if you don't, you're, you're definitely going to pay twice to four times more for the business because you just literally got your timing really bad. and that can be, that can be very challenging. So you have to look for the, the-- Yes, that's-- You have to look for the, the natural demand signals as opposed to manufactured or, basically transmuting treasury into marketing dollars. That's, that's basically saying that's a, that's a fake mar-market demand signal. You want a natural market demand signal to, to be demonstrating some of this stuff to be able to do it a- effectively and to actually outperform your hurdle rate." }, { "speaker": "stephan", "time": "42:07", "start": 2526.71, "text": "Yeah, I think that's a very often misunderstood point because, if you just look objectively, if you just look at, let's say, HODL waves, the number of people who've not spent, or the number of coins that have not moved in, you know, six months or more-- I can't remember the exact number, but it's, it's typically around sixty or seventy percent, meaning most of the coins aren't transacting, they're not being used for transacting, they're being huddled. Huddling is objectively, objectively the more valuable use For most people, because most people who have savings, they've got access to fiat, and of course, yeah, we can talk about the privilege aspects of that, like guys like you and I who are, let's say, from Westernized countries, American, and I'm an Australian, we have access to US dollar fiat rails. Now, of course, I personally do earn and spend Bitcoin when I can, but I understand that most people aren't going to do that yet, just because for various reasons, capital gains tax reasons, for, you know, various aspects of it. You know, for people, they would rather just use their fiat rails. Now, I can, you know, clutch my fist and, you know, lament, but at the end of the day, we have to react, we have to be realistic about the world, and I think maybe this is an area where some of the big blockers were sort of putting the cart before the horse, right? Because they, they were seeing it like, \"Oh, everyone needs to be able to do medium of exchange really quickly and really cheaply.\" But that's just not where the demand is, at least yet. Now, I would love for it to be here, but it's just not here yet. No." }, { "speaker": "preston_pysh", "time": "43:36", "start": 2615.83, "text": "Yeah, I mean, it's just, it's, it's just observing nature and saying, \"What's the incentives of this environment that we're looking at?\" And the incentives are, you know, everybody's used to the dollar, a lot of their debts are denominated in dollars, so that's what they wanna collect so that they can sit there and make that payment at the end of the month without introducing more volatility into their balance sheet. they're, they're not thinking or saying it in those terms, but they can, they just intuitively know that that's what they've got to do in order to reduce the amount of volatility that they're dealing with. And so, like saying more people need to be spending Bitcoin as payment is like yelling at the wind for blowing too hard, as opposed to saying, \"Okay, so the wind's blowing this way, this is how we need to react to our environment in order to navigate it most effectively.\" And, Yeah, I think it's just time. Like, we, we truly just need time. And what's going to happen with time is central bankers and all the, the legacy string pullers are gonna continue to overstep. They're gonna continue to debase even harder than they already have. You're gonna have even more impairment because of the misallocation of capital coming out of fiat. And all of these things are deeply pointing to the store of value issue first. The issue is store of value, and as that gets worse and worse and worse, you're-- it's going to become more and more obvious that you want to save and you want to retain everything in Bitcoin on your balance sheet. And so these, these people, as they're receiving payment, maybe they're receiving stablecoin payments, and they know that their free cash flows are ten percent of every dollar that comes through the door. If they're smart, they're gonna sweep everything. As soon as the, as soon as the point of sale happens, they're gonna sweep ten percent of it into Bitcoin and keep the other ninety percent for the bills to pay that are still in, in, in dollar bills or, the, the, the fiat pay or the fiat expenses that are denominated in, in dollars. So this is going to take time People shouldn't be upset, they shouldn't be like, I guess, telling people that they're doing a disservice by not paying in Bitcoin. I don't, I don't buy that. Like, hey, if you want to, like, hey, I was in, I was in Bedford, last weekend, I bought a sweatshirt from Peter McWhorter. I paid him Bitcoin because I wanted to, because it was fun. I wasn't doing it because I had a, I don't think the incentive was that I should be doing. In fact, I probably created, you know, more issues from a tax liability standpoint. I could have just tapped a, a Visa or whatever and got points back or so like all of those incentives are still very, challenging from a payment standpoint. But the vector of change, I think, is deeply in the favor of Bitcoin to continue to progress and move that way. And you, you know this better than anybody, there's still a ton of work from an engineering standpoint point to from a self custody payment standpoint on layer two, it needs to take place. So, I'm- I, I guess I'm looking at the, at the tech backdrop of this environment, I'm saying, there's no rush. Like, what's-- like, we, we need to do it responsibly, we need to build things very s-smartly, you know, whether it's Fedimints or whatever people think that the best technology is to enable, i-is, is best the, self-custody, solution as possible on layer two and, and beyond, but I don't know, I'm, I'm very bullish in this, in this area. I just think that we need more time and, and we need the incentives to kind of play out, continue to play out in a way that naturally takes the market there as opposed to us just Sitting here on a podcast and saying everybody's gotta go out and, and spend with Bitcoin and not dollars, I think that's irresponsible and just a fantasy land." }, { "speaker": "stephan", "time": "47:32", "start": 2852.31, "text": "Back to the show in a moment. CoinKite dot com are my favorite providers of Bitcoin hardware security products. 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I think we have to recognize that, you know, people act in their own interests and we can't, us kind of moral- Probably shaming and shouting at people isn't really gonna, you know, I, I think we're better off teaching people, hey, there's this new tool, you can save into Bitcoin, and we're, we're focusing on those people who are newer and haven't understood that part of it yet, and if we get to those people, you know, that's where we can sort of move the needle at least on getting Bitcoin adoption. of course, self-custodial payments are going to be difficult if you're trying to, if you're talking about at scale for the average user Most people appreciate that the Bitcoin's constraints that keep it decentralized, like let's be clear, it's about keeping Bitcoin secure and decentralized, there are certain constraints, and that's obviously the block size limit is, you know, a key one. But that is a key thing that, you know, the community decided on that in twenty seventeen that this is the pathway. And so, you know, i- it is about, as you said, being responsible, security focused, but, you know, and not, I think, where some people in the community- We are sort of saying, no, no, we need to like rush and rush to quickly get this change. That I think we, we've got to be, you know, focused on bug fixing, security, and sort of reliability. You know, I'm not an ossificationist, but I think it's, you know, I think AJ coined it, AJ Towns is a Bitcoin, developer, he coined it in a nice way. He said, \"Look, I'm not an ossificationist, but I'm more like a, a team slow and steady," }, { "speaker": "stephan", "time": "52:52", "start": 3171.75, "text": "right? We need to kind of, oh, we need to do this change now. And, you know, you know, I think a-and sometimes I, I almost get a sense that sometimes when, when people are trying to ram their change down too hard, like they're trying to sort of push it down someone's throat when they're, they're not quite ready for that yet. And so it's like- You sort of have to demonstrate why this change is a good thing, and, you know, that it's safe, importantly. and so these are some of the things and some of the hard conversations people are going to have to have as well, and, you know, things like how much custodial, you know, use is gonna be treated like, you know- That's, you know, we're okay for people to do that because we made this trade off around keeping the network secure and decentralized at the node level. Yeah. And there will be people who are priced out, you know, of course, we would like the world to be able to self-custody, but there are realities of that, and it's, it's what, what's ideal versus what's possible. And so I think that's why there's now been more, let's say, acknowledgement of Custodial. Well, 'cause that's, that's the thing, you either use Cust" }, { "speaker": "stephan", "time": "53:58", "start": 3238.38, "text": "Well, I mean, that's basically, y-y-or you pay the price for Bitcoin. That's pretty much it." }, { "speaker": "preston_pysh", "time": "54:03", "start": 3242.91, "text": "That's pretty much it. Yeah. I just know for, like, personally for me, like, layer one's like deep store value, I mean, it's, it's on layer one, and if I want to, and there's probably a lot of people that this is gonna tick them off hearing me say this, but like from a payment standpoint, when I, when I bought the, sweatshirt in Bedford last week, I pulled out Primal, I Strike, right? they're custodding that Bitcoin, and for the amount that I have loaded in that wallet, I, I'm fine with that. Like, if, if Strike would rug pool me for the couple hundred bucks worth of Bitcoin I have in that wallet, I'd, I'd kinda shrug my shoulders and be like, \"Now I know that that's a very privileged take, \"and I think that a person who would argue with me would say, \"Well, if you're, if you're this person, let's say you're living in Africa and, and like your" }, { "speaker": "preston_pysh", "time": "54:58", "start": 3298.06, "text": "You can do this with is something that relies on somebody else custodying this for you, you just, like your life savings just went to zero because you couldn't self-custody because you had such a small amount. And that's the argument, and I think it's a very, I think it's a, it's a very smart argument, and I think it's a very thoughtful argument, and I think we need to have deep respect for that argument. I, I guess If I was going to counter the person, I think that because at the root and at the base layer of all of this is this layer one, Bitcoin that nobody can screw with, it's going to change the incentives that, that we're so accustomed to, that exist today, where none of that is possible None of that is possible for custodians to compete on your trust in a way that it's clearly them that rug pulled you versus the state was doing these things at, at upstream of you that forced you to have counterparty risk and you blew up and then you lost all your money. The, the, the person at the lower level, let's say you were a bank, let's say you were a c-custodian in, in Africa and you're managing, whatever, you're, you're managing the, these, these wallets for people, and you're not dependent on somebody upstream of you rug pulling you, which then forced you to rug pull everybody underneath of you, because that's the, the way the legacy model works today. This Bitcoin with, with, where this is all going, I don't think that that's going to be the case, Going to have competition for trusted custodians to actually do the right thing, and they're not gonna have counterparty risk like, like we do today in this inherent fractional reserve system. And I think that's very different. I think those incentives are very different, and I think it creates a completely different world that, that works for even the person at the lowest level, and I think that that's being whitewashed and, and not thought about. And I, and, and maybe, and maybe I'm just making excuses for the technical limitations that I think we're up against with Bitcoin being able to scale, at Layer two. I'm, I'm really trying to be as balanced as, as possible in the way that I'm defining this and looking at it from both sides, but I, I like to think that the incentives are just very different than, than what we're accustomed to, and I think a lot of our bias from the legacy system is, is causing us to just not accept the, the direction that I think the technical solution is driving us towards that we have to, that we actually have to move towards on the custody side." }, { "speaker": "stephan", "time": "57:26", "start": 3446.26, "text": "Yeah." }, { "speaker": "preston_pysh", "time": "57:27", "start": 3446.76, "text": "I, yeah, I think I, I'm cur- Do you agree with that? Yeah, I think I," }, { "speaker": "stephan", "time": "57:29", "start": 3449.3, "text": "I think I pretty much agree with you there, because, like, as, as we were saying, there are just constraints at, at layer one. And if you wanted to be able to use Lightning today, the, people, you know, people have said that the ballpark for the number in terms of payments is somewhere between ten to a hundred million people, realistically, even with Lightning today, that's about the ballpark. So the way I'm thinking of it is like, Whatever, twenty million lightning banks and plus a few, you know, high net worth individuals who can afford to just hit the chain anyway, you know, that's kind of, and maybe large businesses who can afford to hit the chain, you know, for large purchases, that kind of thing. now, it's possible, let's say in the future, that with so-- with further covenant research, we look at like a low risk covenant that maybe, you know, can take that number up, take it a bit higher, who knows how, you know, exactly what? I think something Enhance, maybe that could help, enable some of these other L2s that are with a better, with better trade-offs, and maybe there are ways, but there are others who say, no, actually, it's unlikely that that, you know, that that's gonna work. Now, I, I, I- I think, you know, I'm open, I'd be open to sort of, you know, ha-- you know, people having the, having more of a debate around exactly what do we need. but at the end of the day, like we were saying, it's-- we've got to make sure security and reliability is first. So, so maybe bug fixes, right? I had a recent episode with Matt Corallo and Steve Lee, and they spoke about the great consensus cleanup, right? Like if we're gonna be a low time preference community, we should focus on bug fixes, security" }, { "speaker": "stephan", "time": "59:04", "start": 3544.24, "text": "That's like uncontroversial, right? Because it's a bug fix, it's sort of-- it's, it's less controversial in that way. So, you know, maybe, maybe we get that kind of thing first, and then in the future, there's more conversation about, okay, how can we, in a technical way, make it possible for more people to actually self-custody and do that? And, you know, until then, yeah, people are gonna just-- we're just gonna accept that there'll be people who use custodial Lightning wallets because either they can't afford to" }, { "speaker": "stephan", "time": "59:34", "start": 3574.3, "text": "You know, the technical barrier is high, but, I, I think what we are seeing though is a lot of people who kind of-- They're, they're either promoting a shitcoin or they're kind of out there with like this kind of fake L2 that's really like a multi-sig sort of thing. And so, so that's also, I guess, a nuanced thing to sort of help navigate in the space. And, I guess that, that is gonna, you know, at the end of the day, if this is what you stand for, then you" }, { "speaker": "stephan", "time": "01:00:04", "start": 3604.26, "text": "In 2017. That's the choice we made. I, you know, I, I think we have to- I don't know what else we could have made though back then. Like, I, I don't" }, { "speaker": "preston_pysh", "time": "01:00:12", "start": 3612.13, "text": "know- I don't know how you can scale it on Layer 2 without having some type of Lightning-like, implementation on top of it. Yeah." }, { "speaker": "stephan", "time": "01:00:22", "start": 3622.06, "text": "Oh, in fairness, I think some of the, the smarter big block, now the domo big blockers were just kinda like, \"Oh, just raise the block size.\" But the smarter big blockers were saying more like, \"No, even with Lightning, you need to raise the block size.\" And in fairness, there's an element of, okay, Lightning's not perfect, it's not a silver bullet. If you think back to the Lightning white paper, they said it was like a hundred and thirty-three megabytes. That, that's what they were en-- they, they were thinking about" }, { "speaker": "stephan", "time": "01:00:51", "start": 3651.14, "text": "Trade-offs, there is an element of criticism that's correct, right? Like it's not perfect. Yes. Yeah. There are trade-offs that we have to make. There's-- that's just life, you know? But I think that, is maybe where the community might debate that in the future, whether they want a block size increase. Now, I'm personally not arguing for that, I'd probably be against it, but I can see a possibility that that happens in the future, you know? Yeah. But, you know, that might be a long-term future thing, whereas And things like that of like UTXO sharing to enable more people. That's kind of how I'm seeing it for now, but, you know, things could change. But, yeah, well, I'm curious, what do you, what do you see there?" }, { "speaker": "preston_pysh", "time": "01:01:34", "start": 3694.49, "text": "No, I'm with you, a hundred percent. I don't really have, much more of a nuanced take than that. I, I think that, the, the reason we have clown world today is because there's no peg, there's just no global peg whatsoever. And if, if Bitcoin can even just provide that at a, at a ba-- at the most basic level, is just peg all these clown token fiat currencies, I think we can drastically ch-change We start changing the incentives around the world, in a trajectory that is way different than, than where we're at today. And, so yeah, when I'm looking at Layer One, you know, Saylor is such a hardcore ossification person, I think I'm more aligned with your point of view that, that you kinda outlined, which is, yes, we need to oss-ossify Layer One, but we also have a couple things that still need to be cleaned up a little bit. and so just saying, stop touching everything. I think is irresponsible as well. but we can't, we can't mess up layer one. So I, I think, I think that's lost, and I think it's lost on a lot of engineers because they're so hyper focused on building and trying to make, Bitcoin better and have more capabilities. Like any engineer does, it's like, hey, if we can add more capability, well, then let's add more capability. But I think many, many in the space don't understand like what is the truly the The root problem that's being solved for, and I think that if I had to define that very clearly, it's we have to peg fiat currency, period. That's going to solve clown world, and then everything else from an incentive really kind of changes if we can actually peg fiat currency. So it comes" }, { "speaker": "stephan", "time": "01:03:23", "start": 3803.67, "text": "down to knowing what you own and, you know, what-- knowing what you can own, right? Obviously with Bitcoin, you, you can own it, right? Whereas with other things, we are left with asking for permission, dealing with debasement, dealing with censorship, and, you know, a lot of our conversation, you know, in this episode has just been about how to think about investing, whether you are hodling Bitcoin, investing in companies, investing in early stage companies or pub-- public companies, and sort of where does that all blend down, One other area, I'm curious to get your view because you were, quite, like I, I recall at the bottom, pretty much at the bottom of the bear cycle, you know, the, at the end of '22, you kind of, you, you had this incredible tweet where you were like, \"Alright, I just deployed my free cash flow,\" and it was like Almost the bottom, it was like sixteen K or seventeen K when you did that, and I, I, I think probably people would love to hear a little bit from you on how you kind of assess the market cycle and sort of know where we're at. Now, you, you touched on this as well of kind of this dance back and forth between, let's say, the long-term, you know, hardcore hodlers versus when the speculators are driving. Driving the, you know, the circus, let's say. so if, if you have any thoughts on how you sort of assess the market and understand who's in charge?" }, { "speaker": "preston_pysh", "time": "01:04:43", "start": 3883.12, "text": "Yeah. it, it's luck." }, { "speaker": "stephan", "time": "01:04:49", "start": 3889.09, "text": "You just got lucky." }, { "speaker": "preston_pysh", "time": "01:04:50", "start": 3890.77, "text": "Just, yeah, I, I w- I would like to be able to say, \"Oh, I did this and I did that,\" and, and the, the reality of it was I was just very lucky and, and just kinda dug my, my feet in and just said, \"Nah, this is-- This seems like this is getting, overdone, I guess.\" Yeah. And, you know, maybe it's just- Time in the markets and participating in markets through the decades that kind of, is queuing me into something that, takes, yeah, maybe you had like an intuition that you sort of felt, you know, yeah, a lot of patience over the years you can teach, yeah." }, { "speaker": "stephan", "time": "01:05:30", "start": 3930.71, "text": "Maybe it's not something you can explicitly explain, but you maybe you kind of, you have this intuition that, okay, you know, It, how much more lower can it go after all the FTX and BlockFi and, you know, all the things that were blowing up last cycle, and so, yeah, I think that's maybe, something where, you know, if you're able to sort of take your emotions out of it and come back to what you were saying, right? Like if you're focusing on Bitcoin and meeting your hurdle rate, you know, the fifty percent hurdle rate, let's say, it's kind-- obviously it's a rough thing, but and it may shift over time, but that's You've got" }, { "speaker": "preston_pysh", "time": "01:06:08", "start": 3968.22, "text": "for people. I, on that, I was way more convicted on the dollar bidding back. I did some show with Peter McCormick, and it was like nine months to a year before when I allocated, it was actually maybe it was Yeah, it was probably nine to ten months, I would say, before, that call, that sixteen K call or whatever. I was very convicted that the dollar was going to bid, and I was very convicted just because of all the, the, the drum beating that all these central bankers like clearly were losing control. And in that moment, I was like, \"Alright, I'm just gonna-- I might be very wrong about this, Bitcoin might take off or whatever, but...\" I was pretty sure the dollar was going to outperform Bitcoin for at least half a year or more, and so it was like, \"I'm, I'm very satisfied, well, I don't know if I can say that. I had, I have the Bitcoin position, I didn't sell anything, right? It was just like the free cash flows that are coming in through the business, like, what do I do with these? And because I'm, again, going back to this idea of like, what's gonna give me the best performance based on this exact moment in time," }, { "speaker": "preston_pysh", "time": "01:07:18", "start": 4038.58, "text": "Fixed income's gonna get obliterated because they don't have inflation under control. I think Bitcoin's gonna struggle in the face of them trying to control the dollar and the euro and all the other major fiat currencies. So it's like, I'm just going to, I'm just gonna stack dollars. As, as painful as that sounds for me to say, because I think the dollar is like a disaster. But in, in that moment, I was very deeply convicted that it was gonna bid, so I was just storing that. So then transmuting it into Bitcoin at that moment, it was, it was because, You, you saw so much sell pressure for so long, and it was, it was-- And, and one other thing that I've learned is when, when it feels so wrong Like when it really feels deeply wrong to put on a position, it is almost always the best time to put on the" }, { "speaker": "stephan", "time": "01:08:11", "start": 4091.41, "text": "position. It's like the buy when there's blood in the streets, right? I mean," }, { "speaker": "preston_pysh", "time": "01:08:14", "start": 4094.73, "text": "it was like, wow, this feels like-- and, and people were saying, \"Uh, I mean, you go on Twitter, even personal friends were like, \"Oh, yeah, well, when this goes down to twelve or this goes down to eleven, I'm gonna buy.\" And, and when they-- when I had people telling me this, and it was at sixteen, and I And I was like, \"That's the, that's a bottom. That's a bottom.\" When I start hearing those kinds of things and, just, because for me it w-- at that point it was greed. It was like, \"This is sixteen K. If you would've told me before this cycle that we were gonna go below fifty, I probably would've said, 'I don't know about that. I think, you know, I think.'\" And so seeing sixteen and then hearing people say, \"Oh, yeah, it's going to, ten or whatever.\" I was, I was like, \"This is what a bottom looks like, this is what a bottom sounds like, this is greed of, of sell pressure.\" And, even if it would go down to ten, I would still be very satisfied at sixteen, and, and when I was telling myself, \"Hey, these are still amazing prices, don't be greedy,\" is what I was telling myself in that moment, I just kind of had this intuition that, like, \"This is the moment.\" So, yeah." }, { "speaker": "stephan", "time": "01:09:25", "start": 4165.41, "text": "Fascinating. And I mean, look, it's luck. Yeah, but I mean, it's fascinating because I think there's gonna be, you know, the, now obviously none of us have a crystal ball, right? But I, I believe there will be cycles to come, right? I belie- I just believe there will be cycles to come. I just don't believe we're, we're ready for the, you know, let's call it the final hyperbitcoinization, I mean, of course, I would love, you know, it'd be great, but, I just think we're gonna see a few cycles to" }, { "speaker": "stephan", "time": "01:09:57", "start": 4197.27, "text": "Go down, but, you know, something will eventually happen and, you know, it'll change." }, { "speaker": "preston_pysh", "time": "01:10:02", "start": 4202.04, "text": "I have a proclamation. I am never doing this again. I'm just dollar cost averaging at this point. I'm not going to, I'm not going to, Because there's two cycles now that I've kind of played these games, and, and maybe it's ego that was, that was causing me to, to play these games, but, you know, s-some of the most interesting charts that I saw was people that, that posted the, the top of sixty-nine K on the last cycle and somebody that dollar cost averaged through the entire downturn and when they started to be in the green and how early they started being in the green when this thing started to recover. And I'm- I was just looking at it and it's like, yeah, so I, I, I outperformed that, but there was so much luck involved in me outperforming that, and then when I was looking at the performance of somebody that was just dollar cost averaging, I was like This isn't worth the, not that I had stress," }, { "speaker": "stephan", "time": "01:10:57", "start": 4257.2, "text": "yeah." }, { "speaker": "preston_pysh", "time": "01:10:57", "start": 4257.86, "text": "And I, I didn't have stress. In fact, I was actually having a lot of fun, like just trying to, to game it. and again, my position that I had, like, I was fine even if I messed this up royally, which I totally could have done, I was still fine. but It's just, it's too much. It, you don't need to do that. Like, once you really start dollar cost averaging and just kind of sit back and, like, you know what your free cash flows are, so my dollar cost average is literally a daily. it's just, it's a daily buy every single day, based on what my estimate of my free cash flows are. And I'll tell you, I've never been happier. I've never been happier just sitting here. And so if we go through another cycle and we see crazy seventy, eighty percent vault, I don't care, I'm just gonna sit back and let this thing just dollar cost average. It's not worth my time and effort, it's just too easy anymore, and I'm just so convicted that this thing is just going to continue to rage, so. Yeah." }, { "speaker": "stephan", "time": "01:11:57", "start": 4317.3, "text": "yeah. Well, that reminds me of, Michael Saylor's infamous quote about, \"I'm gonna, I'm gonna be buying the top forever.\" Top forever. So, yeah, we're just gonna keep buying the top and, one of these days it'll be, the final" }, { "speaker": "stephan", "time": "01:12:14", "start": 4334.87, "text": "About, Preston's work. I, you know, I like to listen to Preston's podcast. Of course, there's so much stuff, I can't listen to every single episode, but I, I try to catch them. so listeners, check out Preston's work. And Preston, thanks for joining me today." }, { "speaker": "preston_pysh", "time": "01:12:26", "start": 4346.03, "text": "Thank you so much, Stefan. It's always a pleasure." }, { "speaker": "stephan", "time": "01:12:28", "start": 4348.8, "text": "I hope you enjoyed the chat with Preston. Make sure you press like and share if you enjoyed this chat, and I hope to see you in the Citadel." } ] }