{ "episodeId": "SLP788", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "joe_burnett": { "name": "Joe Burnett", "role": "guest", "tag": "JOE" } }, "segments": [ { "speaker": "stephan", "time": "00:01", "start": 1.0, "text": "Hi, everyone. Welcome back to Stephan Livera Podcast. Rejoining me on the show today is Joe Burnett. Joe has had a, you know, a long history in the Bitcoin industry. Nowadays, he is at Strive as VP of Bitcoin Strategy over there, but, you know, Joe's been on the show before and historically worked at various, you know, Bitcoin-related firms, companies, I think Mimesis, Blockware, Unchained, Semler, and now Strive. But, yeah, welcome back to the show, Joe." }, { "speaker": "joe_burnett", "time": "00:26", "start": 26.0, "text": "Thanks, Stephan. Glad to be here again." }, { "speaker": "stephan", "time": "00:29", "start": 29.0, "text": "So, I think today would be a great time to just talk a bit about the thesis for Bitcoin because I think sometimes people can kind of lose sight of the fundamentals sometimes. So, maybe just offer an initial comment on your kind of broad macro view and what you're seeing in terms of Bitcoin sentiment." }, { "speaker": "joe_burnett", "time": "00:48", "start": 48.0, "text": "Yeah, absolutely. I mean, I think it's very important to go back to the fundamentals of Bitcoin in times like this, right? I'm reminded of a current, you know, negative aspect of, of framing Bitcoin right now, where people will say, oh, Bitcoin's five-year return is practically zero, which is factually correct. If you happen to have bought Bitcoin at the November of 2021 and held it to today, and if you bought the exact peak, you would have bought it around $69,000 per Bitcoin. Today, Bitcoin's at $73,000 per Bitcoin, and you had pretty much a, a, a 0% return. But I'm reminded of what actually happened at the bottom of the 2022 Bitcoin bear market, where literally the exact same argument was being used, where, okay, from the peak in 2020, 2017, which was, which was around like $20,000 per Bitcoin. Bitcoin in 2022, it was actually below $20,000. Like, I think it was $16,000, $15,000 was the low back in 2022. So that was like a, you know, 20, 25% negative return over five years for Bitcoin." }, { "speaker": "joe_burnett", "time": "02:03", "start": 123.0, "text": "That's, that's terrible. But of course, in hindsight, that was like the ideal time to load up on additional Bitcoin. So yeah, I mean, I think like, one, Bitcoin is an incredibly, incredibly volatile asset. Like, the, the bull markets are insane. The bear markets are brutal and, and can be devastating if you don't have the right time horizon and, and if you weren't expecting the volatility. But ultimately, I think Bitcoin is objectively the best form of money that humanity has ever discovered. It has these unique monetary properties, scarcity, portability, durability, divisibility, divisibility, and fungibility that make Bitcoin a better form of money. And this volatility is just normal market processes trying to grok and understand what Bitcoin is. Sometimes everyone, you know, loves it because the price is going up. Sometimes everyone hates it because there's another, you know, hot investment at the time or the price just hasn't cooperated for a certain period of time and people lose interest. But ultimately, I think because of Bitcoin's superior monetary policy and superior monetary properties, eventually supply just dries up and eventually new demand or new liquidity gets injected into the financial system that starts to, to move the price higher. Maybe kind of like we've seen from the June low of this year. Kind of where we are today, the price is slowly drifting higher despite sentiment being absolutely terrible in the space. And once the price keeps moving up further and further, the narrative starts to come back in and people start to grasp that, wait, maybe Bitcoin is better money. Maybe I need a larger allocation. Maybe I need some allocation. And then I think we'll be off to the races once again." }, { "speaker": "stephan", "time": "03:48", "start": 228.0, "text": "Now you've spoken about this concept of your wealth is melting. What does that actually mean?" }, { "speaker": "joe_burnett", "time": "03:53", "start": 233.0, "text": "Yeah, so this is a report that I published back when I was working at Unchained, and it's inspired largely with Jeff Booth's original thesis, the Price of Tomorrow was like his famous book that he published almost, I guess, 10 years ago at this point, or close to it at least." }, { "speaker": "stephan", "time": "04:10", "start": 250.0, "text": "Maybe four or five, but yeah, go on." }, { "speaker": "joe_burnett", "time": "04:12", "start": 252.0, "text": "Okay. But, so, so his book was, was quite interesting in the sense that he had this view that technology deflation was going to, or, or is going to be like extremely disruptive. Like it, it's, it's with AI, robotics, and just all sorts of new technology, it's not unreasonable for the price of, you know, basic consumer goods to decrease in value over time. So my view is like, completely agree with that. Seems very logical in real terms, basic consumer goods should be depreciating. But I think you could arguably take it one step further. In the sense that if you actually look back at what people use as traditional stores of value today, the same concept of technology deflation can apply to those traditional stores of value as well. Yes, it's, you know, on a slower basis and not nearly as effective as being able to produce a calculator or other very simple basic consumer goods, but as technology improves, we're able to mine more gold. We're able to, to do it more efficiently, more cheaply. New technology enables you to search in places that you may not have been able to search before, like the ocean or in different parts of the world." }, { "speaker": "joe_burnett", "time": "05:31", "start": 331.0, "text": "We're able to build more houses. We're able to build it more efficiently. I've seen videos of like people 3D printing houses and things like that. So all of these like traditional assets that we use to store wealth, the same concept applies to, to them as it does to the basic calculator. And it, I think it even applies to companies. Right? If Nvidia, you know, exists and had or has a $5 trillion market cap or whatever it is now, that's a massive bounty for the market to go out there and figure out how to produce either a better GPU at a lower cost or simply, or simply a better GPU at a higher cost or simply a new way to train and build AI models or run inference on AI models. Maybe there's something even better than a GPU that we can't even comprehend today. And so even storing wealth in large mega cap corporations like the S&P 500, that's a huge bounty for disruptors to come in and to take their margin. Like Jeff Bezos has the famous line, your margin is my opportunity. That's accelerating more and more with the speed of AI and the speed of disruption. And incumbents that are slow, you know, have hundreds of thousands of employees, like they're going to be a lot slower to adapt to any sort of change. Whereas, you know, we've seen like the rise of like the one person, you know, $100 million company or the one person billion dollar company. Like that is more and more possible now with the rise of AI. That continues to happen. That's extremely disruptive for a lot of these traditional stores of value that people use every day." }, { "speaker": "stephan", "time": "07:09", "start": 429.0, "text": "If somebody has a house or a portfolio that's up in dollars, why might they actually be still be getting poorer?" }, { "speaker": "joe_burnett", "time": "07:17", "start": 437.0, "text": "Yeah, it's a great question. I think, you know, a lot of people today think in the dollar mindset where they're always like, well, if my assets are going up in dollar terms, then it was a good investment. Like the dollar is their hurdle rate. But as everyone also kind of intuitively knows, the dollar is a pretty poor hurdle rate. Everyone knows that you shouldn't hold a lot of your wealth in actual dollars. You should hold your wealth in other things that tend to appreciate in terms of dollars over time. But the, the very fact that those things continue to at least go up, makes them feel like they had a win where, you know, it's, it was, it was better than holding dollars in a bank account. So, you know, that's, I, I'm better off. In that case, and that's of course very true, but if the dollar is perhaps an inferior form of money, then maybe holding dollars, you know, maybe you need to like reframe the entire question. Like maybe you need to think, well, if there is a better form of money, I should be measuring my wealth in that money. That's why like at Strive, you know, we have the Hurdle Rate podcast where we say Bitcoin is the hurdle rate. And the whole concept there is we believe Bitcoin is a better form of long-term money." }, { "speaker": "joe_burnett", "time": "08:32", "start": 512.0, "text": "And Bitcoin as a hurdle rate basically just means don't lose money. Like don't lose the Bitcoin that you have today. Even if you don't have your wealth in Bitcoin, you can measure your wealth today in Bitcoin, like your house or your equities or your bonds or whatever else you hold, and you can measure it in Bitcoin. And over a long period of time, historically these assets are underperforming Bitcoin. So you may have had a hundred or a thousand Bitcoin, you know, many, many years ago to your name, but now your portfolio may have gone down quite significantly, partially because, you know, Bitcoin is getting more valuable, but if it is a better form of money, maybe it is like the unit of account that you should be using, at least as a tool to measure, you know, your portfolio performance and, you know. Yeah. And like another thing to to think about is like, if you go back and look at, you know, the Venezuelan stock market, for for instance, it's gone up up into the right, like very aggressively for quite some time. Any any country with a failing currency, the assets are, you know, are are performing great, like on on in nominal terms, everything's going up, but that doesn't mean that it's a good investment per se. Maybe there's a a better way to look at things." }, { "speaker": "stephan", "time": "09:47", "start": 587.0, "text": "Obviously, right now, there's a lot of excitement around AI and people are trying to invest in AI, although right now maybe the price is down a little bit. But does AI make Bitcoin more valuable or less necessary?" }, { "speaker": "joe_burnett", "time": "10:00", "start": 600.0, "text": "Yeah, it's a great question. And I think there's like two competing views here. You have Elon Musk, his view, and maybe some others, suggesting that we're entering this world of complete abundance. And in that world, what is the demand for money? Like, why would you hold money if you already have everything you could ever want? And it's an interesting perspective. My counterargument against that is, well, today we certainly don't live in a world of abundance. I mean, most people are like struggling to just get by. And even if you are like doing quite well, you still likely need to work a significant amount of time before you can consider something like retirement and having this abundance at your fingertips. And so, from my perspective, we're in this period of, you know, not abundance, where people are struggling, and we're progressing towards this, you know, potential hyper, you know, future where like everything is abundant. We got to go from point A to point B. And if you're going to go from point A to point B, and you, you have this scarcity that exists today in the world, you want to store your wealth in something that will help you as we continue progressing towards that abundance, to where you, you then have abundance sooner rather than later." }, { "speaker": "joe_burnett", "time": "11:23", "start": 683.0, "text": "Like, yeah, you could wait until theoretically, we create an abundance of everything and everything's at your fingertips and maybe you don't need money at this, this point or maybe like it's, it's irrelevant. But again, I don't even know if we'll ever reach that. It's kind of like a theoretical idealist, idealistic scenario where we can create everything infinite amount forever and no one ever has any sort of artificial scarcity or any scarcity. And so I don't even necessarily know if we'll ever achieve that space, but I do know we're, we're progressing towards something like that or it's going to be, you know, there's going to be more abundance in the future than there is today as long as you're, you're generally optimistic about, you know, where humanity is going and where technology is going. And if that's the case, then I would apply my Your Wealth Is Melting framework. Well, it's like, okay, well, I have this certain amount of wealth today. I have certain assets. I need to decide which, where I want to store my assets for the time being. I want to have more abundance in the future. Future, I could pick equities, I could pick real estate, I could pick gold, I could pick bonds, or I could pick Bitcoin, and if Bitcoin is the best performer going into this world of abundance because it's better money and it's perfect scarcity, then that possibly or likely in my opinion will outperform all these other assets and it will enable me to capture more abundance in the future because I'll have that one asset that kind of holds up through this, you know, transition towards abundance." }, { "speaker": "stephan", "time": "12:55", "start": 775.0, "text": "So in a way, you're also making this argument that maybe we're going to live in this world with material abundance, partly driven by AI and maybe robotics and maybe some other, whatever other technologies may come, and that it's, there's not going to be a lot left to save in. That's what you're saying, isn't it?" }, { "speaker": "joe_burnett", "time": "13:13", "start": 793.0, "text": "Yeah, yeah, I think that's a good way to frame it, right? Like, an example that I had in the past in the Your Wealth Is Melting report was like a calculator. So like in 1980 or 70 or something like that, you know, a calculator may have cost like a couple thousand dollars to have. Now we all have a calculator on our computer, on our iPhone, effectively for free. Like you, downloading a calculator app or running it in Google or a website, like it's free to use a calculator. That doesn't mean like, you know, back then you could have invested in calculator companies. And if that company continued to only focus on building physical calculators that were expensive, may have gone, may not have done too well, may not have been a good way to store your wealth. And so that is, but, but, with that said, that doesn't mean we got poorer, right? Like, actually, we're significantly more wealthy as a whole than we were in 1970 or 1980. We created this abundance, everyone can access a calculator, but like, where did the wealth go if it didn't accrue to, like, those early calculator companies that may have existed? My opinion, the wealth accrued to the consumer, like, now I can effectively buy millions of calculators and, and measure it in dollars or Bitcoin." }, { "speaker": "joe_burnett", "time": "14:28", "start": 868.0, "text": "And I think the same thing is kind of happening, not just with calculator industry, but virtually almost every other industry, and doesn't mean that, you know, another example, I guess, could be like the AI models, right? You know, you could invest in Anthropic or OpenAI or, or whatnot, but if an open source model comes out and is like 99% as good as the latest Claude model or the latest ChatGPT model, and it's already smarter than most humans. It's like maybe you don't need to pay Claude, you know, 100x more than just using the own, your, the, the open source model on either your own hardware or hardware in the cloud. Like, maybe there are, you know, no more moats around certain businesses. Like that's another thing that's commonly been talked about recently is like, there are no, there are no moats. And then Saylor, you know, kind of has mentioned like, well, Bitcoin is the moat. And I completely agree with that. And like, that's, that's basically the idea behind the report, Your Wealth Is Melting, is like, there are no more moats. And technology is accelerating at a faster and faster rate. And if there are no more moats, where are you going to put your money? You're going to put your money in the one thing that, that has a moat, the one thing that can't be debased, the best form of money. And I think that's kind of what we're seeing." }, { "speaker": "stephan", "time": "15:44", "start": 944.0, "text": "Yes, Bitcoin as the decentralized money, the premium store of value asset, the collateral asset, you know, there's different ways to frame it or think of it. And I think on the AI question, it's also interesting just to consider it this way. It's like consumer surplus, or Mises called it psychic profit, right? Like it's not that you're necessarily making a monetary gain, but you might, you know, benefit we as consumers as even just let's say you took a Claude $20 a month subscription, you might literally replace a knowledge worker who previously you had to pay $100,000 a year for that. But for $20 a month You know, you're, you're already getting like an amazing research assistant, you're getting an amazing, you know, coding assistant, whatever, you know, all these things that, you know, AI can do. And the funny thing is, it's not necessarily going to show up in GDP. If, you could, you could almost argue that it's like a, it's going to reduce GDP, but maybe the gain shows up in so-called psychic profit. And now, we, we could argue that the internet in general enabled a lot of this, right? That people can stream all kinds of content online, listen to music online for free or very cheap. And historically, they would have had to buy a lot of CDs or a lot of movies or a lot of, you know, whatever." }, { "speaker": "stephan", "time": "16:56", "start": 1016.0, "text": "It just, but AI is maybe going to accelerate that trend, so that we, the consumers, actually get to benefit a lot. But, as, I think this comes back to the whole AI trade as well, right? Because a lot of people were thinking in the mindset of AI is going to be the fastest horse, right? So that's why they wanted to go invest in AI stocks. And maybe that was true if you got in and like a year or two ago into like a bunch of the AI related stocks. But I guess that's the question. Is that going to be true going forward, or is Bitcoin going to be the better play going forward?" }, { "speaker": "joe_burnett", "time": "17:27", "start": 1047.0, "text": "Yeah, exactly. I mean, and I, I think markets are, are cyclical, right? Where AI stocks did look great for a long time because and and now that maybe, you know, price performance over the last few months has not been too good for the AI stocks. And I I think it's just due to like the cyclical cyclicality of markets, right? When there's a new technology or a new product or a new service that comes out, it's booming, something you can create a data center at X price, you can rent it out for Y price, you have massive margins, and and the industry is growing, everyone's optimistic. And so what that does, well, the companies that are doing that look like they're doing quite well on paper for the time being. And so all this capital investment then comes in because it's like, oh wow, like building data centers, building these AI models, like this is a great business. You can make a ton of money. But then of course, the market sees that, all this capital flows into the industry. We build out a massive, massive amount of data centers. And again, this could apply to any product or service effectively. Massive amount of data centers, train all of these models, but then is it possible that you overbuild or that the margins that initially were massive start to compress as competition begins to emerge?" }, { "speaker": "joe_burnett", "time": "18:46", "start": 1126.0, "text": "And, and that's just kind of what is, what has happened like countless, countless times through all sorts of different technology revolutions, whether it's like electricity or railroads or AI or the internet boom, you know, like market prices are there to show information to market participants, and that moves capital and, and allocates capital, but ultimately, you know, if you, it doesn't always last forever. Eventually, you know, if there's a, your margin is my opportunity again. If, if that margin exists, people are going to come after it. I think that's what we've seen with AI. Now, it doesn't mean that like, you know, this could be a, a different scenario where if we do create AGI or like super intelligence or all these different like AI terms and, you know, AI replaces the human workforce addressing a total addressable market that, you know, is absolutely massive, maybe there is like another wave of AI explosion and it does quite well. It's, you know, it's hard to, it's hard to know for sure, but ultimately, even if that happens, I think a lot of the end value should end up accruing to something like Bitcoin, because again, if even if the build out needs to grow another 10x, well, eventually the margins then compress again, and all of this wealth and productivity is created. And in my opinion, all of that wealth and productivity ultimately will probably flow to the consumer, and I think it'll flow to the consumer that holds all of the Bitcoin, because Bitcoin is the better form of money." }, { "speaker": "stephan", "time": "20:17", "start": 1217.0, "text": "Yeah, and just with the AI example, I think it's interesting because most people refer back to the so-called ChatGPT moment, right, which was, I don't know, 2022 or 23, around there, OpenAI, right? And then it's kind of been like, it was the OpenAI and Anthropic sort of two horse race for a while. Even though Google had come out with like some of the initial research or some of the early research in this famous Transformers paper and these things. And then for a while, Google was sort of out of the picture. And now, and then they kind of ripped back into the game with some of their newer models coming out that are quite competitive. And Meta was sort of seen as like maybe lagging a little bit, and then they ripped back into the, you know, so there's like such stiff competition that we don't really know if any of these companies is going to be able to sustain a moat just on the AI. You know, that they may have to do other things to be able to sustain that moat. And that's where there's kind of this conversation around, you know, vertical integration that maybe you need to kind of have maybe an application layer where you can kind of actually get the value. Or maybe you need to own the infrastructure layer that, you know, the cloud, you know, layer. You know, there's all these arguments about, you know, where in the stack the value is going to accrue. But nevertheless, if you are an investor looking at the AI trade, you have to think about, well, where exactly am I going to try to place my money?" }, { "speaker": "stephan", "time": "21:31", "start": 1291.0, "text": "Because you might have to call it correctly. And if you call it incorrectly, you may not outpace Bitcoin. In fact, you're unlikely, I think it's unlikely that you would if you, you know, don't pick correctly. So I think that's maybe another thing. Like, if you compare Bitcoin compared to asset classes, I think it's probably fair to say, if you look at Bitcoin versus asset classes, instead of individual stocks. Maybe that's a, that's an interesting way to think about it. So how do you see that? Like if you can bet Bitcoin versus asset classes or Bitcoin versus individual stocks?" }, { "speaker": "joe_burnett", "time": "22:04", "start": 1324.0, "text": "Yeah, it's a really interesting question. Yeah, I mean, I guess probably an endless rabbit hole that, that you could twist your brain around. I, I, generally speaking, since we're so early in the Bitcoin monetization process, I think the, the concept applies to both. Like I think Bitcoin will outperform like US equities as a whole, and I think it will likely outperform individual companies within US equities. In a way, I think of Bitcoin being like this global productivity index, similar to the S&P 500 is to individual stocks. Like I believe I've seen like some studies in the past that show like a large majority of the companies in the S&P 500 actually don't outperform the index. It's pretty much a small ever-changing segment of companies that ultimately drive a large majority of the total return for the S&P 500 or virtually any equity index." }, { "speaker": "stephan", "time": "22:58", "start": 1378.0, "text": "And I guess nowadays this is the the MAG7, but maybe it rotates over time, right?" }, { "speaker": "joe_burnett", "time": "23:03", "start": 1383.0, "text": "Exactly. And yeah, we don't know, you know, for the next 10 years it it may not be the MAG7. It may be something that's not even in the index. In fact, it probably might might be something that's not in not in the index currently, given how fast everything is changing. And so like with that perspective, it's like, all right, you can try to pick any individual company in the index. I think, you know, you're probably going to underperform the S&P 500. You're probably going to underperform Bitcoin as well. And I think Bitcoin simply just is this productivity index. Like if you don't want to have to pick one of the winners or you don't want to have to pick different asset classes that you think will outperform, I think Bitcoin more so is that like global long-term productivity index. And I think it'll probably outperform both many individual companies, but also the asset classes themselves. But of course, like, you know, Bitcoin, we woke up tomorrow and Bitcoin's $10 million per coin and the, you know, the cost of mine is still what it is today and we have like a massive mining build out. You know, I could see a scenario where maybe $10 million per Bitcoin doesn't stay up there forever and maybe it might make sense to rotate some of the money into an equity that has a relatively reasonable valuation, assuming that maybe Bitcoin's price will come down relative to that equity. You'll be able to use cash flows from that company to, you know, buy cheaper Bitcoin in the future, things like that. So I think it all kind of depends on valuation, but I think like, especially as of right now, in the current early stage of Bitcoin adoption, I would expect Bitcoin to outperform, you know, many of the broader asset classes and many of the individual entities within these asset classes." }, { "speaker": "stephan", "time": "24:42", "start": 1482.0, "text": "You're kind of also getting into this idea of mean reversion and maybe the power law aspects as well. So talk to us a little bit about that. I know you are recently writing and speaking about this idea that the power law might break. So I guess first offer a quick explanation like what is this Bitcoin power law stuff and then explain for us why you think the power law could break in Bitcoin." }, { "speaker": "joe_burnett", "time": "25:03", "start": 1503.0, "text": "Yeah, absolutely. I mean, over the years like the Bitcoin community has been interested in various models, right? We had the stock-to-flow model which was quite popular. At this point, it's been concluded that Bitcoin broke to the downside in the stock-to-flow model. The stock-to-flow model was too bullish. And the stock-to-flow model was simply charting the stock-to-flow of Bitcoin, which is basically the inverse of Bitcoin's supply inflation rate. So showing that, you know, the stock might be, you know, a certain amount and the flow of new coins being mined relative to that existing relatively large stock at this point, that's kind of the measurement. The power law is, you know, another model where it's just charting the growth of Bitcoin and it's a log-log model, so the returns are diminishing over time, but they're still modeled out to be like far greater than pretty much every other asset class, at least over the next 10, 20 years. But ultimately, it does diminish over time. And my view is that is probably a great model for like the foreseeable future, but I don't know if it will last." }, { "speaker": "joe_burnett", "time": "26:14", "start": 1574.0, "text": "Forever, because ultimately I think we're measuring the price of Bitcoin in fiat money. Fiat monies historically eventually fail. You know, maybe it lasts 10 years, maybe it lasts 20 years, maybe it lasts 50 years, I don't know. But eventually I, I think that the dollar and other fiat monies will, will, will ultimately fail, because they are inferior forms of money to Bitcoin, compared to Bitcoin. And I think when that happens, Bitcoin could break above the power law, and it could, you know, sustainably break above the power law. And Bitcoin kind of becomes like the global money and the global capital asset that, that people kind of use for their, their long-term savings and maybe even day-to-day transactional currency." }, { "speaker": "stephan", "time": "26:59", "start": 1619.0, "text": "I see. And I guess, what would you say is the reason why you think it would break? Is it just that you think Fiat currency just totally collapses down or like what do you, what, what do you, is there a specific like point of why you think that would happen?" }, { "speaker": "joe_burnett", "time": "27:14", "start": 1634.0, "text": "Yeah. I mean, I think part of it is like just the simple failure of fiat currencies. I also think, you know, looking back at work from Pierre Rochard on the Nakamoto Institute, he wrote about like the concept of a speculative attack, borrowing in the weaker currency and buying the stronger currency. I think we've seen over time Bitcoin's volatility has trended lower and lower. Effectively making Bitcoin better collateral because you can borrow more against it and, and not have to worry about, you know, a 90% drawdown that we saw, you know, many, many years ago in Bitcoin. And I think if Bitcoin is becoming better collateral and the volatility has been declining, then I think it becomes more appropriate to create credit against it. This could be banks, you know, using Bitcoin as deposits and, or using Bitcoin as, you know, an asset that you can hold in your account and then lending dollars against it. It could be like the Bitcoin native companies like Unchained and, and Ledn where you can borrow fiat dollars against your Bitcoin and, you know. That creates new dollar credit that enters the system." }, { "speaker": "joe_burnett", "time": "28:28", "start": 1708.0, "text": "It can be treasury companies like Strategy and Strive, where we issue digital credit in the form of perpetual preferred equity, which are USD income securities that are publicly traded and, and trade like future dollars, the future dividends that you would earn from them. And so, I think with that context, it's kind of like, all right, we're able to create more and more dollar credit. If you think about what dollar, what dollars even are, you have treasury bills, you have money market funds, you have, you know, physical cash, you have bank deposits. A lot of these are like, not actually physical cash, it's, it's, it's like debt, it's, it's credit, it's securities, T-bills, money market funds are securities. And so, you can create new dollar-like instruments that effectively increase the supply of dollars in the system, and if more and more dollar credit is being created to acquire bitcoin, then the price of Bitcoin theoretically could go higher. And if the price of Bitcoin goes higher, it becomes better collateral, where you could issue more dollar credit. And, you know, the reason that it could be sustainable is because Bitcoin is a perfectly scarce asset and the dollar is not a perfectly scarce asset. We're creating more and more dollars in the financial system all the time by design. It could just reach a potential inflection point at some point in the future where it becomes kind of a self-fulfilling prophecy where People keep creating new dollar credit, the price of Bitcoin keeps expanding. Eventually at some point, maybe people don't want to hold the dollar credit or maybe Bitcoin reprices quite dramatically." }, { "speaker": "stephan", "time": "30:07", "start": 1807.0, "text": "Interesting. And when would you say that could be? Like if we're saying the power law might break down, is there a timeline you think that would be realistic to happen?" }, { "speaker": "joe_burnett", "time": "30:15", "start": 1815.0, "text": "I don't know. I mean, I think with Bitcoin, my perspective my base case is the power law. So don't get me wrong, like, I don't think that, we're breaking the power law tomorrow. However, I think Bitcoin is by far the most undervalued asset in, like, the entire global financial system right now. So, you know, Bitcoin gold parity is around like 1.5, 1.4 million dollars per Bitcoin last I checked. It's very, very undervalued. Like, this thing could, in my opinion, this thing could reprice very quickly, very aggressively. But it could take a long time. You know, some people in Bitcoin, I think, think it's taken way too long. You know, they look back over the past, if they got in at the top in 2021, they're like, this is ridiculous. This is taking incredibly too long. What's going on here? Other people, you know, think like in the grand scheme of human history, I mean, Bitcoin's, I don't, not very old, 17, 18 years old or whatever, whatever it is. It's not very old in the grand scheme of things. Watching a new form of money go from literally zero to, you know, a trillion dollar asset in less than 20 years, that's, that's pretty incredible. You know, you look back at like railroads or electricity or the telephone or the internet, like these things took a long amount of time for them to actually occur. So like in the grand scheme of human history, this is occurring incredibly fast. And it, and I, with my opinion, I think with AI and technology accelerating, I think it could accelerate even faster from here. But of course, when Bitcoin actually breaks the power law, if it ever does, you know, it's hard to tell, so I wouldn't put a specific timeframe on it." }, { "speaker": "stephan", "time": "31:55", "start": 1915.0, "text": "Yeah, I think, I mean, I'm a fan of the power law. I don't have any like super strong view on if it breaks or not, but I could see a, maybe it's a plausible scenario more like when the size of the Bitcoin market comes to surpass, let's say, the global market for US bonds or the global market for government bonds or maybe the global market for gold. Like once we surpass that and maybe that on power law trajectory or whatever, maybe that's like 2040, 2045-ish. So right now it's November 2026, so we're talking like 15, 20 years out. Maybe it's more plausible at that point and, you know, then we're going to have to, we're going to see which way things go, right? And I think Matthew Mezinskis of Porkopolis has spoken about this idea of like, does Bitcoin go exponential or does the TradFi system turn into a power law system? Because it's kind of like if these two systems are kind of mashing into each other and it's sort of like one side of them is going to win. So I guess it's too early. Nobody can really predict, but that maybe it seems at least a plausible scenario. But I guess bringing things to more short and medium term, if the idea is, okay, money printing, you know, governments of the world, they have these very big debts. Obviously, you're American, American government debt is like, whatever, 40 trillion last I checked. Do you think the case for Bitcoin then hinges on further money printing by the state." }, { "speaker": "joe_burnett", "time": "33:17", "start": 1997.0, "text": "I would, I think that that certainly helps. I don't think that it's required per se. I mean, I think like if you look at how most dollars are created in the financial system, it's not necessarily the government literally printing money, right? It could be commercial banks lending it into existence. It could be, you know, money market funds getting, getting larger. Other things behave as like dollar money like products. I think that will, is required to continue expanding and I think that Bitcoin would benefit from that. Like I, one way I think of it is CPI, like the Fed has a consumer price inflation target that they try to meet every year, 2%, 3%, whatever the number is. Typically the, the amount of dollars measured by like US M2 or something like that is expanding at a greater rate than just 2%. I think part of it is, you know, money created like directly from the government, from central banks, but also from commercial banks and, you know, all these different aspects of the financial system. And I think with, like with that context, the, the reason that it's a greater growth rate than consumer price inflation is because you kind of need it to, to, to get consumer price inflation up." }, { "speaker": "joe_burnett", "time": "34:29", "start": 2069.0, "text": "Like you, in the fiat world where we're all, we're all owed debt to each other, it's all like a debt-based monetary system. You have to keep pushing the, the debt down the road as far and far as possible, creating more and more debt, creating more and more dollars. And yes, like the, maybe the M2 growth rate, a lot of that wealth ends up occurring into like assets, like the S&P 500 or gold or real estate, and maybe like these basic consumer goods that we're figuring out how to make more and more efficiently over time. Like maybe that only can keeps going up 2% per year, 3% per year. But all of like the things that people actually really want that are like premium or kind of more valuable, those things keep going up at an, at an even faster rate than basic consumer prices. And I think, I think that that's kind of going to happen. So like, do, do governments need to like turn on the money printer full steam for Bitcoin to do like very well? I think that helps, but I don't think it's required." }, { "speaker": "stephan", "time": "35:28", "start": 2128.0, "text": "Right. And as you are well aware, there's different categorizations of money. You have like base money and then there's broad money. And so base money typically refers to like central bank reserves, central bank assets. And so we saw like big prints happen in sort of the 2008 era and the COVID 2020 era where we saw these massive expansions there. But otherwise, you could still have a case of like expansion at the broad money level, but not necessarily like massive expansions happening at the central bank reserve, you know, balance sheet level. So I guess that's kind of also another, another way to kind of explain it in, in a different way to what you're saying there. So I think the turning to more on the question of these Bitcoin treasury companies, obviously you're at Strive. I want to talk a little bit about this from a Bitcoiner perspective. I think now, as you know, and as listeners know, I'm, you know, I'm pro Bitcoin, I'm pro treasury companies, I'm pro digital credit personally, not financial advice, of course. But there is, there seems to be a concern amongst Bitcoiners that it's, maybe it's cannibalizing demand that would have otherwise gone into buying Bitcoin. What do you think about that? These common, the common stock equity or even the preferred, so in your case, obviously there's ASST, which is your, you know, your common stock, and then there's SATA and SATS, which are the preferreds. Talk to us about a bit about this idea. Is, you know, are Bitcoin treasury companies or digital credit cannibalizing Bitcoin demand?" }, { "speaker": "joe_burnett", "time": "36:59", "start": 2219.0, "text": "Yeah, it's an interesting question. I mean, with the concept of amplified Bitcoin, so like the common stock and whether that's, you know, ASST at Strive or MSTR or other ones as well, you know, our objective is to outperform the hurdle rate of Bitcoin. We want to outperform Bitcoin. And so in a way, when people are allocating capital, if they're using Bitcoin as their hurdle rate, maybe they do decide to allocate some incremental new capital into the common stock rather than Bitcoin per se. Of course, like the common stock is owns a ton of Bitcoin, so I don't necessarily think it's cannibalizing demand for Bitcoin. Like it ends up buying Bitcoin, right? I was kind of like when I first started at Semler I was like very close to the ATM activity and like working with the banks to, to do it. And the way it, it, it works is like you, you file a placement notice with, with the bank with like your, basically your instructions of how you want them to act in the market. And in a way, I kind of view these stocks as, you know, Bitcoin equivalents or not perfectly Bitcoin equivalents, but like very sim, like it's definitely Bitcoin exposure that the company has, like that's kind of undeniable. And so like as someone would buy a share of Semler We potentially were selling the share. And then at like the very same moment, we were loading up the dollars into an exchange and buying Bitcoin." }, { "speaker": "joe_burnett", "time": "38:30", "start": 2310.0, "text": "And so it was kind of like a, a delta neutral trade to some extent. It's almost like saying, like, if you buy Bitcoin on Coinbase and then sell it on Kraken, like what happens? It's like if you buy Strategy and then Strategy then sells the shares to you, Strategy gets the dollars and buys Bitcoin with their trading partner. It's all kind of like a delta neutral trade to some extent. like ultimately. Here" }, { "speaker": "stephan", "time": "38:53", "start": 2333.0, "text": "I'm thinking our friend Parker Lewis might say, well, hang on, if, if these, you know, if these common stocks are at a premium, then, you know, let's say, just for example, say, let's say you're at 1.5x MNAV or 2x MNAV, he would, he might argue to us that, hey, that customer or that person who has bought the common stock is paying double the price or 1.5x the price when in his mind, it would have all just otherwise gone directly to Bitcoin, right?" }, { "speaker": "joe_burnett", "time": "39:19", "start": 2359.0, "text": "I mean, I think like in the past cycle, like if the, if the treasury companies didn't existed, maybe the bull, maybe the Bitcoin bull market would have been higher. Like it's, it's kind of hard to tell. With that said, like I don't think that, you know, buying at a premium, whatever that necessarily means, like there's like, there's a, there's a billion different ways to assess a premium and so on, but yeah," }, { "speaker": "stephan", "time": "39:41", "start": 2381.0, "text": "Hypothetically, yeah." }, { "speaker": "joe_burnett", "time": "39:42", "start": 2382.0, "text": "Yeah. And so in, in some sense, sure, like sure, like if you were buying a stock at 10x MNAV back in 2025, maybe that capital, if all of that capital had gone into Bitcoin, maybe we would have gone to like 135 instead of 126 or something like that. But also like I don't, you know, I don't think that like that's massively suppressing the price of Bitcoin by any means. Like I said, like I was on the other side of the trade of like, okay, like I'm watching the company sell the shares and I'm watching, watching the company buy the Bitcoin. It's basically like one for, you know, one for one back at that time. Like if we raise money, we'd, we'd buy the Bitcoin with the money. Like it, it didn't matter what you were really paying for the stock. Like we, if you put a dollar in, when we went to Coinbase or whoever our trading partner, trading partners were, we bought Bitcoin. Like it was pretty, pretty simple transaction. So yeah, I mean like, I think that's like the common stocks, right? Like that's amplified Bitcoin, you know. We, we, we borrow, we, we try to outperform Bitcoin over the long run. We do this by issuing what Saylor has referred to as digital credit, perpetual preferred equity, Strive, we have SATA and SATS. And this one I think definitely does not cannibalize demand for Bitcoin." }, { "speaker": "joe_burnett", "time": "40:56", "start": 2456.0, "text": "To me, like this massively explodes the potential TAM for Bitcoin today. Because I, I, I truly do believe that when I talk to normal people, whether that's like extremely high net worth people, or whether that's like retail young people, kind of like myself, the, one of the major concerns of Bitcoin is it's extremely volatile. I mean, like, as people are pointing out, people are saying like, over the last five years, Bitcoin has done nothing. It's about, about a 0% CAGR. Like, that's, that's not a great return. If Bitcoin, but like over certain, like if you took a longer time horizon or you, or you did like a DCA strategy, like the CAGR of Bitcoin is still really good. I mean, it's, you know, maybe like 30, 50% on certain time horizons, maybe even higher if you, if you go back further. If you had a product that paid a stable USD yield, maybe it's not 30%, maybe it's not 15%, but maybe it's a yield that's above pretty much what you could get on every other existing asset class. That's very attractive to like normal people. And I don't think that that's like an exaggeration. I mean, like it's this whole concept of digital credit was pioneered with Bitcoin basically at all time highs and it went straight down after that. Like this, we haven't even really seen this in a Bitcoin bull market. And this You know, segment of this emerging industry is like a 10 plus trillion dollar indus, or billion dollar industry, right? Like this is, this has grown quite extensively in a Bitcoin bear market, and I think it's because it solves a problem that a lot of normal people have. They, they want high returns, they want less volatility than Bitcoin," }, { "speaker": "joe_burnett", "time": "42:43", "start": 2563.0, "text": "They want USD cash flow, they want USD income, and it's meeting a market need. And I think that like, in a way, these companies are simply entrepreneurs out there in the market, providing a product that the market actually wants. And the market has clearly demonstrated that they want a product like this. I think that's why we've had success there. And again, I think there's the other side of the trade, the amplified Bitcoin side, like, it's a win-win transaction. It's a marketplace almost to some extent where some people want high USD yield, other people are willing to effectively pay that yield in order to get access to amplified Bitcoin. And the fact that like both markets exist at the same time and both are growing quite rapidly, you know, in the grand scheme of things, since Strategy started this general strategy in 2020, I think it's just a sign that this is something that the market really wants. And I think when the Bitcoin, next Bitcoin bull market really gets going, I think it's going to be even more clear than ever before." }, { "speaker": "stephan", "time": "43:43", "start": 2623.0, "text": "Yeah, and as I, as I said, I'm bullish on Bitcoin and on, Bitcoin treasury companies. I think, I think it, it, it is additive. Maybe you could make certain arguments about in certain circumstances, maybe it's slightly cannibalizing on this side, but maybe on the other side, it's still attracting. Like, I guess the argument is, is it going to attract more people overall on the whole, even if it's cannibalizing in certain small areas here? And I think probably yes, I believe that is true. I believe there will be, it is expanding the pie per se, but I, you know, at least the way I would explain it, like if someone's asking me at a Bitcoin meetup or whatever, I would just say, look, fundamentals, you know, set up your cold storage and DCA. That's what works for, you know, for I think for most people, but DCA Bitcoin should be the, you know, the standard thing that most people do. But I understand that for some people, maybe they're not ready for that. Maybe they want digital credit or they want the amplified Bitcoin story, which they want like a levered or an amplified form of Bitcoin that obviously, you know, goes up even harder than Bitcoin does and it might go down harder than Bitcoin goes down when Bitcoin goes down. So, that's at least how I'm understanding it, but of course there, there are a range of different treasury companies out there, with different trade-offs and so on. So, any thoughts on where you think the industry is going from a, you know, digital credit and treasury company perspective?" }, { "speaker": "joe_burnett", "time": "44:59", "start": 2699.0, "text": "Yeah, I mean, I think, like I said, we've only seen digital credit really in a, in mostly a bitcoin bear market, like I believe Stretch came out in like June or July of last year, 2025. Strategy, like their stock, for instance, peaked in late 2024. Bitcoin priced in gold also peaked in late 2024. So, so you can make arguments that like similar to 2021, maybe the real peak was like spring of 2021. Maybe the real Bitcoin peak was like December 2024, measured in like another hard money. And, and digital credit has existed purely in a, in a Bitcoin bear market. And I think like building the track record during the Bitcoin bear market is going to be like a huge, you know, timeline for like normal people. Like normal people see the, the digital credit yields and maybe they're like, I'll, I'll, I'll try a little bit. This is like interesting, like I can't get this anywhere else. Or they'll be like how do you, how is this even possible? This doesn't even make sense. But then if you can say, well, you know, it survived a 50% Bitcoin drawdown in a bear market, USD cash reserves existed to pay the dividends." }, { "speaker": "joe_burnett", "time": "46:14", "start": 2774.0, "text": "Companies had years, even decades worth of Bitcoin on the balance sheet that had dividend coverage, potential dividend coverage as well. Like, the yield was, or the dividend, you know, through this past bear market from my perspective, it was never in question. Like there was never, even in the death spiral for Stretch that, that people referred to, there was never like a question that Strategy was ever going to not pay its dividend during that time. Like Strategy had like decades and decades worth of dividend coverage even at the Bitcoin low. It was just people like freaking out. Some people may have used leverage too aggressively and they were forced sellers. But ultimately buying like Stretch, you know, at the bottom, like that was an incredible trade for people that decided to do that. And so I think digital credit is probably going to keep exploding. I think the track record will have been built. The yield will be probably far greater than anything else that traditional markets have to offer. I think with both of those things playing out kind of at the same time, while Bitcoin starts to appreciate and becomes, you know, better collateral, a lot of capital is probably just going to flow into the space, and I think that's going to be huge for the entire industry." }, { "speaker": "stephan", "time": "47:30", "start": 2850.0, "text": "On the question of cycles and surviving these cycles, I think that's perhaps an interesting one also, because what we might naively think is that people just come and adopt Bitcoin and they're here and they're with us now, you know, and they just stay. But actually, in practice, what I've noticed is sometimes people, you know, try to take the orange pill, but it goes out. And then maybe on the second go, actually, it, it goes in, you know, per se. That sometimes people come in in a cycle and they, they don't quite know what they've got and they sell in the bear and then only later they come back and realize, no, that was I should have held. And actually, we can talk about that even at an individual level and even at companies. Because what, what are we seeing now, even in the mining world? A lot of the public miners are pivoting from Bitcoin into AI. And some, many of them are actually selling their Bitcoin or winding down their Bitcoin mining operations. To fund their AI data center build out. And we're seeing, you know, different stories where, you know, maybe individuals or companies, or even in the treasury company world, there were treasury companies who started a Bitcoin treasury strategy, and then they ended up selling, or maybe they were over levered, or maybe they weren't able to raise the capital, or, you know, this, that, and the other. So talk to us a bit about this idea from your perspective, people who maybe they come into Bitcoin, but they don't, it doesn't stick the first time." }, { "speaker": "joe_burnett", "time": "48:46", "start": 2926.0, "text": "Yeah, it's a, it's a really great question. The corporation side is also a really interesting point. And even like one you didn't bring up, like the financial advisory side. I've, I've interacted with some financial advisors that they say like one of the reasons they don't allocate a large portion of a client's portfolio to Bitcoin is because one, they know it's going to be volatile. Like they know Bitcoin's probably going to fall 50% at some point like it just did. And when it falls 50%, if they over allocate to the client and the client didn't understand it, the client's going to be like, why did you just lose a lot of my money? Like, what have you done over the last 12 months? Like for normal people, 12 months is a long time, right? Like if Bitcoin falls 50%, you're like, what were you doing for the last year? Like this is, that was terrible. And so like, you have, if you were obtaining exposure to Bitcoin, whether it's for a company, financial advisor, or an individual, you have to have that longer time horizon. If you don't have the longer time horizon, or the key stakeholders any of those structures don't have the long time horizon, you're going to do something dumb. You're going to sell the bottom, you're going to over leverage at the top, you're going, you're going to make a mistake and you're going to end up with less Bitcoin than you had before." }, { "speaker": "joe_burnett", "time": "49:59", "start": 2999.0, "text": "And I think when the next bull market comes around, you'll be like, dang, I, I, I made a mistake. Like that was obvious, like I shouldn't have over leveraged at the top, I shouldn't have sold the bottom, whatever it is. I think corporations are actually particularly interesting in this aspect because you have a lot of different key stakeholders, right? Like you have the executive team, which is not just typically one person, like yet there's multiple people. All of those people like need to be very bought into the Bitcoin thesis. Then you have like the board, which the board for a lot of these public companies that adopted the Bitcoin strategy, they were just kind of doing it, you know, because it was hot at the time, like they didn't, their business may have been failing. You know, Eric Semler, who is, you know, chairman of Semler Scientific, he famously said like the zombie companies should be the ones that buy Bitcoin. And obviously I completely agree with that. It makes perfect sense. But if the board or the executives, you know, kind of lose faith in the strategy, like they don't have the long-term conviction on Bitcoin, well, they're going to pivot like at the worst possible time because they're like, oh, I thought this was working. It's not working 12 months later. We need to do something else. Or the miners, like the miners, you know, pivoted AI, then they're selling Bitcoin, maybe potentially at the bottom right now. A lot of the, like, when you have a lot of key stakeholders, what, like the executive team, the board, and then the shareholders as well that can like, you know, change the board and ultimately change the executive team, like there's a lot of counter people involved. And I think when you get more people involved, things can change and possibly the wrong direction at the wrong time. And like that's the nature of markets. When when Bitcoin and and an asset is going up and the bull market is super hot, everyone loves it. When the bear market's happening and Bitcoin is going down, everyone hates it. And like that's that's why the bull, that's why the price got high and the why, that's why the price got low because everyone loved it at the top and everyone wanted exposure" }, { "speaker": "joe_burnett", "time": "51:47", "start": 3107.0, "text": "And everyone hated it and didn't want exposure at the bottom. And if that's the case, then people are exiting and trying to trying to figure out what they should do at the bottom and I think that that causes a lot of problems. So I think when you're evaluating, you know, or when people are evaluating companies or when you're thinking about getting Bitcoin exposure, you have to have that long time horizon and you have to make sure that the people that are in charge of managing the capital also have that long time horizon." }, { "speaker": "stephan", "time": "52:12", "start": 3132.0, "text": "Yeah, I think situations change and that's Yeah, that's driven, yeah, some of these different decisions that we've seen. maybe for some of the Bitcoin mining companies, it's because they had all these, you know, the power purchase agreements or they had these contracts and that ended up being really, really valuable at a time when that's so scarce in the data centers and all that stuff. Now, that's another whole question, but even for the treasury companies that didn't make it, right? The ones that tried and failed, you know, or they just pivoted for whatever reason. I guess, what would you say are the main takeaways? Maybe it's to get back to the fundamentals, right? What are the key fundamentals that people should remember when it comes to Bitcoin so that they can survive?" }, { "speaker": "joe_burnett", "time": "52:49", "start": 3169.0, "text": "Yeah. I mean, it's like we talked about, right? Like Bitcoin is a better form of money. It's in this monetization process. So like it's not, it's not a get rich quick scheme. You know, it's, it's ideally going to go up over a longer period of time. And like that, that's kind of the, the fundamentals of Bitcoin. There will be volatility. It's not going to be a straight line. You know, I, I wish it was. That would be awesome. But also if it was a straight line, people would start bidding it faster and higher, and we would get into a major bull market, and then the major bull market would lead to a bear market, and like, that's the kind of what's, what has happened over and over again through Bitcoin's history. So yeah, like that's, like that's the fundamentals of Bitcoin. Like it's just a better form of money. You have to have a long time horizon. You have to have, you have to make sure the people holding the capital have a long time horizon. And yeah, I mean ultimately I think that that's just a better way to invest too. Like if you're moving from thing to thing with no conviction, that you're buying like the hot thing at the time, it's probably a good way to, to just destroy capital over the long run. Whereas if you can find a high quality thing, hold it for a very long time, you know, that's, that's kind of how you do quite well." }, { "speaker": "stephan", "time": "53:56", "start": 3236.0, "text": "Excellent. Well, I think that's a great spot to finish there. So listeners go and check out Joe Burnett from Strive. Joe, thanks for joining me." }, { "speaker": "joe_burnett", "time": "54:02", "start": 3242.0, "text": "Yeah, thanks for having me." } ] }