Speculative Attack: Pierre Rochard on Bitcoin's Endgame

[Music] It all comes down to computers communicating. The information superighway can be a confusing mix of on-ramps and off-ramps. Bitcoin is worthless artificial gold. Is it still rat poison? Probably rat poison squared. We need to get into the world of okay, this is actually foundational technology. What the internet of money does is it creates a single network which can do a microtransaction to a giga [Music] transaction. The internet is going to be one of the major forces for reducing the role of gun. The one thing that's missing but that will soon be developed is a reliable ecash. All right, welcome back to another episode of Final Settlement. Super special episode today. Uh, very excited for this one. Been looking forward to it all week. Um, and uh, we have Pierre Roshar on the show. And so, uh, I'm sure many of many of our audience members will will know who Pierre is and and know of his work, but in case you're unfamiliar, uh, Pierre has been at the forefront of of Bitcoin advocacy and and really education for over a decade as a, you know, a very early adopter of Bitcoin, a prolific writer, uh, a co-founder of the Satoshi Nakamoto Institute. He's really um, played a a critical role in sort of shaping the intellectual foundation of of Bitcoin in general over the past uh, you know, over a decade. And so, you know, he's also helped sort of drive institutional adoption and education through, you know, his work in the corporate world, uh, most recently at Riot Platforms. Um, and so we're really excited to dig into, you know, his journey, his views on Bitcoin's future. And, uh, in particular the the Bitcoin bond company, which was uh, announced recently that Pierre will be uh, will be launching soon. And so very excited to to dig into all of that and and maybe a few other topics. Um because there's no shortage of uh of things happening in the Bitcoin space right now. It feels uh it feels a little overwhelming at times the the amount of the deluge of news on a on a daily basis. Uh but Pierre, welcome to the show. Thanks for thanks for joining us. Thanks Ryan. Thanks Liam for having me on. Yeah. Well uh let's uh let's get into it. I think um you know a logical place to start is um you know sort of what preceded your vision for the Bitcoin bond company which I think is is something that's been rattling around in your brain for for over a decade. And so um you wrote a piece back in 2014 uh called Speculative Attack. Um, and so maybe, you know, just for the audience, if if you could give a brief overview of of what your thesis around sort of speculative attacking the dollar with Bitcoin was at that time, and then sort of maybe talk about how that's evolved over time, over the past decade from when you first had the these ideas and into, you know, where we sit today, everything that's going on from corporate adoption to sovereign level adoption and, you know, one, I guess, has has have things gone according to how you thought they would and then um beyond that, you know, how did that influence how you're thinking about things going forward? Yeah, absolutely. So, um I think that the place to start would be uh back in 2005, I was a high schooler and I stumbled into Austrian economics and sound money. And what I really liked about that was that they had an explanation for the business cycle uh that uh actually made sense to me versus some of the alternative explanations that I heard in school. Um and that that drove me to really being uh silver and gold type uh you know uh uh focused uh uh u you know intellectually right but uh at the same time I was really interested in free and open source software. So I was installing Linux on computers and uh listening to Richard Stallman lectures on the philosophy of users controlling their own code. And um I I didn't think that those two paths would really cross uh until uh my last year of grad school. I was getting my masters in financial accounting uh here at UT Austin and uh got introduced to Bitcoin as sound money that there would only ever be 21 million and that it was open source. And so this uh monetary policy had credibility to it. So um really went down the rabbit hole at that point and started writing about Bitcoin uh from my perspective which was very focused on monetary economics and um wrote a series of articles leading up to speculative attack where on speculative attack I really wanted to dig into what's the endgame uh for Bitcoin and how does it ultimately uh prevail in currency competition. ition and so in the world of monetary economics um there's a concept of a speculative attack the the term was coined by Paul Krugman of all people uh and he he he was looking at it from an academic perspective of what had occurred in the Asian currency crisis that were in the '9s and um the the broadstrokes uh of it is that you have investors who are borrowing in a weak currency uh in order to sell that weak currency and buy a strong currency. Um have the strong currency appreciate in value and then sell the strong currency to pay off the loan that was denominated in the weak currency. And that this has a the effect of um essent first of all creating more weak currency because when you're doing a loan through the commercial banking system and a fractional reserve uh fiat system uh they do create more currency and um that the that it's it's a cycle where the weak currency can either be defended uh by uh raising interest rates. So that just makes it more expensive to to borrow it and so then the uh the carry trade falls apart or through capital controls where uh the monetary authority will find ways to clamp down on the the speculators and to prevent them from borrowing the weak currency. Um or by defending it using currency reserves. And so uh having having the strong currency in reserve that they can use to stabilize the exchange rate and to uh make the trade unprofitable for the speculators. Um so with that framework in mind I I looked at it through that lens of well what would it look like if people were borrowing in uh in this context the strong currency is Bitcoin. So they're borrowing the weak currency which might be dollars. It might be Swiss Franks, you know, which is generally thought of as a strong currency but not as strong as Bitcoin or Indian rupees or you know, Turkish LRA could really be any currency that they're funding the trade with. Um, and that that would be the endgame for Bitcoin in the sense that uh it would it would wreck havoc on the currency markets and cause all of these weaker currencies to uh hyperinflate and to disappear. uh if if they were not defended. Um now what we've seen over the past 12 years since I wrote that is uh that indeed there has been that dynamic. Um, and that ultimately the limiting factor for it has been the the one limiting factor that I did not write about that I didn't even think about was the fact that so many people would make so much money off of the strong currency off of Bitcoin appreciating um that they actually want to rebalance their portfolios even if they're not involved in the speculative attack at all. Right? So, uh they want to rotate into uh unfortunately sometimes altcoins, right? And they want to uh ride some kind of altcoin wave or they're just uh buying stocks and bonds or paying off their mortgage or putting their kids through college or uh just ch taking chips off the table after, you know, a 10x or 100x. And so, we've seen lots of people uh they end up regretting making that decision because then, you know, Bitcoin recovers eventually. Um but that's you know uh what drives a lot of the selling at the top of the cycle. Um but we also have seen with after the co inflation US dollar monetary policy tightened and so we saw rate hiking from 0% to 5%. Um and we also saw uh capital controls. So this was what we described as operation chokepoint 2.0 know uh where uh the banking system and the the wider financial system because we could include the SEC not approving uh the Bitcoin ETF in this kind of capital control um where they're trying to gate uh investor access to the strong currency in order to defend the weak currency. Although maybe they consciously didn't think of it that way. That was the uh the effect of that. Um and also you know that they were able to seize Bitcoin through uh you know the criminal justice system and develop a currency reserve of the strong currency and we also saw them you know selling off Bitcoin uh which had the effect of suppressing the Bitcoin price. Um so that that was uh now uh all of this is you know in flux now with this new administration. So, uh, we're we're uh looking at lowering interest rates, removing capital controls, and building up a reserve, uh, instead of selling one off. So, I think that, you know, Bitcoin's going from, uh, headwinds in that regards to tailwinds. And so, I think that, uh, in in many ways, the speculative attack is, uh, going to, uh, continue, uh, unabated. Um, but I think that you my my thesis was really that it would cause uh the dollar to collapse. But I I now I wonder if that's actually not the case in the sense that uh if we're building up a reserve of Bitcoin that the dollar ultimately could just be backstopped by Bitcoin and that it becomes a a a proxy for Bitcoin. Uh maybe one day we'll have like $1 equals one Satoshi uh equilibrium and it's all you know 100% reserve uh and the dollar is just an overlay on top of the larger Bitcoin monetary system. Um, you know, in terms of like what I got wrong with the speculative attack, I think was really uh something that should have been obvious at the time, but I I didn't really think through this part of well, what are the speculators borrowing against? Uh, so I had it in mind that they were borrowing against traditional financial assets, whether it's treasuries or, uh, mortgages, real estate, uh, and the like. Um, but I it didn't cross my mind that they would actually be using Bitcoin itself as a collateral. Uh, which, you know, what better collateral could you ask for than than the hard currency itself? And so, uh, that was probably uh the the biggest uh missing piece of um in in speculative tech and also h what are they financing? Um, what are the financing mechanisms specifically? um I limited my my observations and my thinking to the commercial banking system and so there you know they would only really accept traditional forms of collateral uh in the commercial banking system. Um Sailor opened my eyes to the fact that you could actually use the uh equity markets uh to to be the financing mechanism uh you know outside of the uh commercial banking system. Um so that's you know uh in in at the same time that I was writing uh speculative attack I was working in the traditional financial system. So uh I was working at Deote uh mortgaging or sorry uh auditing mortgage back securities uh and other kinds of new issuances of uh securization transactions and uh even back then I thought um even though I didn't write about it in speculative attack I I I did have an Excel spreadsheet open of what would it look like to securitize Bitcoin and to put Bitcoin as as collateral and to issue bonds against it. Um it it was way too early. One on the regulatory part where you know the uh SEC was not even approving uh the WLVI twins ETF back then. Um but also just in terms of the maturity of the market that you know the there was not a broad acceptance of Bitcoin as a store of value as a digital gold. Uh that that really emerged uh over the subsequent 12 years. So um now now is the right time though. That's why I decided to found the Bitcoin bond company and to to pursue this dream I've had of uh issuing bonds to finance Bitcoin. Yeah. Yeah, that's very well said. Um and many of the people uh that have been selling their bitcoins after their uh 100 10x gains uh definitely have not read so the Satoshi Nakamoto Institute about uh hoarding bitcoins too which was definitely prior to the speculative attack and uh and that whole line of research too. Um but yeah, on that point, um I guess like over time you've you uh talked through a bunch of different um ways to borrow against Bitcoin. I guess can you speak to what you perceive as the trade-offs between personal and and localized spec uh speculative attacks versus the the corporate and pulled speculative attacks uh both in terms of access to liquidity um and you know what the the end benefit can be to the user? And also just to add to that sort of like the you know how these ideas and concepts have evolved because like I remember you know I first started learning about Bitcoin in sort of 2017 18. I didn't have a lot of money. I I didn't have a a massive salary but I was personally speculated speculative attacking the dollar by just taking on credit card debt and buying Bitcoin with my entire salary effectively. And so we've gone from that like individuals taking it upon themselves to do this to now uh corporates and nation states thinking about these strategies. Yeah. So um I think that uh individual like retail buying of Bitcoin and leveraging up you know in various ways at at the individual level is going to continue. Um I would caution folks that that does come with risks, right? That um you're you're on credit cards you're you're paying a higher rate of interest. Uh then um then you can access at the institutional level of you know there's essentially an economies of scale part um where uh they have a lower cost of financing. Um but also there's a a structural part that they um you know there's the difference between personal credit risk and corporate risk. And so um when when on the lender side when they're underwriting these uh bonds that or loans uh that it just comes with different risks, right? So um and also you know at the individual level we've seen uh products like uh margin trading at exchanges where there you have a risk of getting liquidated if Bitcoin uh flash crashes. And so um I think that at the individual level it can really be challenging because of of uh the different economics than for example sailor can have with a convertible bond uh where uh it's just a completely different ballgame. And so in in some ways um I think it'll continue at the individual level. I I would encourage people to to do it in a responsible way where they're just focused on spending less than they earn. uh so that they can plow their free cash flow into Bitcoin uh and and that that's uh you know you got to stay humble and stack sats uh and then at the corporate and institutional level I think that's where because you know it's a limited liability company and uh that they they they have uh I would argue perhaps more expertise in leveraging up uh and access to different products that uh might be a little bit safer uh to leverage up uh that they're going to be at the foreront front the tip of the spear of the speculative attack and uh that you know it the financial engineering does does take a lot of nuance at that scale 100%. And there's also legal and controls that are in place that can help uh get lenders more comfortable with uh lending to large corporates rather than uh individuals like myself if I just went to a bank and and tried to ask for a big loan to buy a ton of Bitcoin. But, you know, Liam, that that that might be changing now that uh the Fed recently, just today or yesterday, announced that they're going to allow commercial banks to work with Bitcoin. So, it might not be long before we can just deposit Bitcoin at JP Morgan and uh take out a mortgage against it essentially. Uh that because you know, from the risk perspective, I think that the biggest risk is uh essentially uh term risk, right? That Bitcoin's very cyclical. So, if you're taking out a loan that's a one-year term, uh, then you could be underwater after one year and you can't refinance it and then you're in trouble. Um, if you get out to five, 10 years, now you're you're really going through the cycle uh and that uh if as long as there's no liquidation clause in that that now it's I think a much more constructive relationship between the lender and the borrower and uh maybe less extractive. 100%. Yeah, there's something to be said about uh just keeping dollars in your checking account and Bitcoin in your savings account with banks moving forward as well. Yeah. Um yeah, one other uh question is like in the past you discussed roughly uh like Micro Strategy imitators being not too far behind. Uh Semilar and Metanet were early on and and uh 21 Capital this week. um on a long enough time horizon, you said we we should expect the share of the equity market uh participants adopting a similar strategy to to trend to 100%. I guess like why do you think this is the case? Uh and how do you see different uh Bitcoin corporate uh security vehicles kind of changing over over time? And I I guess like on top of that too, anything you could share about the MNAV and how long this arbitrage can take place would be helpful. Yeah. So, um I when when when Sailor first announced his uh first $500 million buy, uh I was working at Kraken and I I remember we we had a webinar and um one of the questions was like what's your what's your craziest uh prediction for for the year? which uh mine was that you know half the S&P 500 would imitate Sailor and and uh you know go go all in on Bitcoin. Uh that did not pan out and so um add that to the long list of overly bullish predictions that Pierre Rashard has made. Um but the the principle I think still stands that on a long enough time frame uh that will be true and it's true because uh these companies are either going to be decapizing themselves and not have uh not have access to capital anymore because all the capital is going towards uh Bitcoin companies. And so I think that um they would end up either getting acquired by a uh Bitcoin bag company or you know you've got an activist shareholder uh telling them to put Bitcoin on the balance sheet. Um and uh that uh the the second part of the question I forget now I guess how long do you think that the arbitrage can take place and uh do you think this is something that can do you see like MNAV kind of trending towards one um or what's your view there? So this is something so you know I I I learned about um securization before I learned about Bitcoin. And one of the most counterintuitive things about uh that that world is that when you um let's say you're you're just uh repackaging a set of mortgages. uh you would think that the um total value of the securities on the liabilities and equities side of the balance sheet would equal the total value of the assets uh on on on the collateral side of the balance sheet. Um and to my surprise uh that was not the case. Uh you do end up with a premium uh to the NAV. Uh and the reason for that premium is because uh contrary to what uh a lot of Bitcoiners think but also just uh I think the average lay person assumes uh financial engineering does create value. Uh and so by tunching up the risk return of the asset, you're able to grow the pie of people who want exposure to the asset. And so um that's really where the MNAV multiple comes from. And then we're also there's a speculative element when you're talking about it in the terms of you know a liquid uh equities um where you're you have to think about how will uh sailor or anybody else be able to manage the capital structure in the future uh to uh further drive value to the equity tunch by taking on uh debt and by uh leveraging up. And so, um, to me, the MNAV is is the combination of today's leverage with tomorrow's possible leverage, uh, because we're we're we're discounting future cash flows. And so, um, that's where I think it comes from. When does it go away? Uh, well, I I would argue, uh, when we've succeeded. uh so when um you know the the dollar is at sats parody and uh that uh we've reached an equilibrium between uh the bitcoin and the dollar uh I if if if US dollar policy makers are prudent and um have a path to that equilibrium. uh if they are not then I fear that uh the dollar will trend towards zero and the MNAV in in you know dollar terms will will continue to uh to exist. So maybe sort of an extension of what we're talking about, what I'm curious to get your thoughts on is, you know, from the perspective of any sort of company or entity, it's completely rational to adopt a strategy, right? Hoard the good money, uh, and, you know, effectively short the bad money. Um, and what we've seen over the past 12 to 24 months is is, you know, increased sort of perpetual new adoption of this strategy. And I guess in my mind I I struggle to to think about you know is there a point of saturation effectively where we don't need all of these uh different tickers that are Bitcoin treasury strategies obviously again from the company perspective totally rational thing for them to do but from like the perspective shareholders perspective um in your mind does like does most of this flow towards the largest player i.e. strategy and then like beyond that there's obviously advantages to uh specific jurisdictions right so like if you think about a metapanet they're the only one there so that's why I think they have a an advantage in that respect but maybe if we're just thinking about the United States like if we wake up in five years and there's you know a hundred different companies doing this strategy does that impact you know what mnav looks like for the long tale of these these companies um because most people will just go to the largest one that has the most uh flexibility and optionality to tap capital markets to do these things. Yeah. Uh so I I think I I agree that if if um other entrepreneurial publicly traded companies don't find ways to differentiate themselves from strategies approach and the capital structure that uh Sailor's developing um with you know strikes strife and uh the converts um and uh you know we'll we'll see what what else comes out of their uh their their quarterly call that that's coming up. Um I think that if they don't find ways to differentiate themselves then it is challenging because of the liquidity network effects right where now we have even a layer on top of micro strategy of uh the yield farming if we can want to call it that the volatility harvesting uh with MSTY and IMST um where you know you you do need to have a liquid options chain to to engaging in those activities. And so, uh, it becomes a flywheel effect that, uh, becomes really hard to to challenge. On top of the fact that, um, how do you acquire 500,000 Bitcoin? Uh, you know, uh, he's he's he's, um, very far ahead uh, of like number two or number three or number four. Um so I that said there are lots of other very smart people in the world who could uh find a differentiating angle and um maybe could have ways of approaching this that um you know for example uh for myself when I when I think about it uh from from my securization background in the debt side that's where you know I the way I think of differentiating with the Bitcoin bond company is by just doing all debt and no equity uh and essentially redistributing the equity to the bond holders which is something that a publicly traded company just can't do just because of the path dependency that they're on uh that you know they're they're on the uh they need to acrue value to the shareholders uh of the common stock and so and that's the fiduciary mandate and so um you know in terms of accessing different pools of capital I think that there are differentiated strategies that are possible uh Some of them we could think of today. others uh will be caught by surprise uh you know tomorrow of like wow why didn't anyone think of that sooner um and I think that you know that was that was the experience with micro strategy of hey why didn't anyone think of uh doing this sooner um because there were publicly traded vehicles uh before uh strategy you know uh tackled this um uh so um there's also uh you know maybe and I I personally I I like the approach of just keep the Bitcoin in cold storage. You know, don't try to get fancy on on the uh collateral side. Maybe some will take more risk and try to generate yield off their Bitcoin or uh offer, you know, kind of different approaches on the collateral side. Uh even, you know, we've heard of people trying to do this with Solana. Uh obviously as a Bitcoin maximalist I think that you know they're building on sand and that that's really going to underperform uh strategy. Uh but uh from a narrative and marketing perspective maybe they attract a different set of investors. Um you know that I hope that answers the question. Yeah. No that's that's all super helpful context and and thinking around it. Um maybe maybe we can sort of pivot and and jump into more about the Bitcoin bond company. So, um maybe just sort of high level how you're thinking about it, what types of um credit instruments you're planning to offer and how you're thinking about distributing them, various sort of cohorts of investors that you think are going to be interested in this. Um and we can just start sort of start high level and then we'll dig into some details. Yeah, absolutely. So, um I I think that what what I'm interested in is is shifting the Overton window. Uh, and uh, that's uh, I always try to find kind of what's what's the hardest thing to to work on, right, in in Bitcoin. Um, and uh, I enjoyed doing that a lot with uh, Bitcoin mining and the environmental impact, you know, with uh, Elizabeth Warren and and her um, her goons as uh, I think uh, President Trump put it. Um, so on on the capital market side, I think that the the hardest shift is is in the bond market because that is where the most conservative investors are. Uh, and so, uh, Sailor's taking a crack at it with the converts and I think that that that makes a lot of sense. Um it's still, you know, when we think about the convertible bond market, that's a a a a subset of the overall bond market that um the natural buyers of that might be arbitrage uh traders who at the end of the day are, you know, very active in the equity markets. Uh and so it's it's as adjacent to the equity as as one can get in in from a bond perspective. Um, and so I'm really interested in going deeper in the capital stack of uh finding ways to uh open up the Bitcoin conversation with institutional investors who might bulk at the uh volatility of spot bitcoin and also not have a mandate to invest in a commodity, right? Uh from a a regulatory perspective, that's what it's categorized as for better or for worse. even if it were categorized as a a currency, they still wouldn't have a mandate to hold a currency. Um, and they're focused on credit instruments. So, first of all, providing a wrapper around Bitcoin that is credit focused. Um, and doing it in a way that is also uh institutional grade, meaning that uh it's inside of a bankruptcy remote SPV. There's no uh counterparty risk, corporate risk. Um it you know the way the traditional financial institutions think of that as Bitcoiners we think of counterparty risk very differently right we think about you got you know not your keys not your bitcoin uh that's that's not how a traditional financial institution thinks of counterparty risk um a and so uh the beyond just having the the wrapper of bankruptcy remote SPV also having the risk transfer in the capital structure so being able to tanch up the risk so that there's a a senior trunch that appeals to somebody who wants uh an instrument that's over collateralized. Uh they're willing to give up upside in order to achieve that that risk mitigation. Um, and then on the other end of the spectrum, the the junior tranch that essentially wants to go leverage long bitcoin uh while still having uh yield visibility so that they they they have a a a percentage number to it but that in terms of participation in the profit share if bitcoin really you know hits a home run uh that they are uh strongly participating in the upside and so um then in the middle the mezzanine which is really you know okay for the credit fund that they're constructive on Bitcoin. They might not necessarily buy the moon math of Bitcoin going to a million dollars, but uh they they think that Bitcoin is going to continue to perform pretty well. Um that way we're we're opening up Bitcoin's risk return profile to a wider set of investors uh that that has you know not had access because frankly of the regulatory roadblock of the SEC uh just not wanting to um uh approve this for uh even a spot ETF which should be uncontroversial. Um but now I think the new SEC is merit neutral. They're not going to prejudge uh any of the securities as long as everything's disclosed on the up and up. Uh that they're going to approve uh uh uh more innovation. That's really helpful to understand. Um and think that's a smart way to go about it. So multiple different cohorts can get different types of exposure. I guess if you're comfortable sharing, we'd love to hear a little bit about how you think collateralization as well as uh kind of terms and and uh the timing of of uh these loans and and vehicle that that all goes into areas where there's a a fine line uh from a regulatory perspective of of what I can talk about and what I can't. Um I think that in terms of overcolateralization, uh it really is about making sure that When we look at Bitcoin's price history, the worst performing and and I I like the number of five years just because that gets you through the traditional Bitcoin cycle. Uh the worst performing five years was December of 2017 to December of 2022. Uh where you round trip to let's say 20 grand. Uh because that was the top of the cycle to the bottom of the next cycle, you know, with Sam Bankman Freed and all of his shenanigans. Um, and so if you look at that worst period, you could say, uh, well, as long as you're decently overcolateralized on the senior, uh, the principal and interest in in that scenario would have been paid on the senior, uh, and that the junior trunch would have gotten wiped out because they would have contributed to up the stack uh, interest on the senior and the mezz. Uh, and the mezz would likely have taken a haircut on the interest, but they would have gotten their principal back. And so that I think, you know, when we're thinking about uh putting ourselves in the shoes of of a a a bond holder uh that is looking for something that is is is mimicking or close to investment grade. Uh they that's what they want to see is that it now um in in between, right? That's where when we look at during the life of the vehicle, that's where you want to make sure that there's no liquidation. Uh because ultimately if you underwrite something at the top of the cycle and it grinds down for two years before recovering for three years, um if you sell at the bottom, you realize losses. uh but if you don't sell and you have a a recovery rate and you have a constructive view on that recovery rate then you can hold through the cycle and ultimately uh you know create value for the whole capital stack and so I think that's where it's important to have a vehicle that is not uh liquidating at the at the bottom of the bare market uh but you know has a longer term view that Bitcoin's going to continue to be around uh every 10 minutes a new block gets added to the chain uh and so there's not really a real physical impairment of the network itself. Uh it's just that there's there's a cyclical adoption uh phase for Bitcoin. Gotcha. Yeah, that that makes a ton of sense. I think maybe one one question um just ter in terms of how you think about demand for these products and these structures and the pools of capital that you expect to to come into this because in on one hand you know I think part of part of my mind goes to well you know someone who's looking for um sort of downside mitigated a little lower upside exposure to Bitcoin doesn't really fully understand Bitcoin Otherwise, maybe they would just outright buy Bitcoin, but obviously there's cohorts and swaths of the investment world that have a specific mandate and they need to be investing in credit or bond instruments. Um, so could you speak to that a little bit and how you sort of uh would handicap the uh sort of landscape of demand for products like this? Um, and you know, would you agree with like that notion that you know, at least some portion of that if they if they don't have a specific mandate, we'll just wake up one day and be like, well, why would I want capped upside? I'll just own the thing outright. Yeah. And and so they now have access to Black Rockck ETF and that's a great product uh for them. I think that in the institutional context, a lot of investment decisions are not made by one individual. uh they're made by a committee and to get consensus on the committee uh you sometimes have to uh negotiate uh and so that's where um you know you might want to have a product that uh does cap the upside uh in order to um uh have have the over collateralization and to protect the downside um in order to get it through a committee where you might have a lot of different views on Bitcoin. Um and so I think that um that's where you know having the right product for the right audience matters a lot. Um the uh and I so that that I think is is the short answer. Uh the longer answer uh or maybe it's not that much longer but uh in practice it will be longer. Uh it's the education right? I love doing Bitcoin education and so um this this provides a product where uh for uh these institutional investors they might not necessarily be interested in uh Bitcoin education if there is not a product uh behind it. And so uh getting getting the foot in the door uh is is important there. And if at the end of the conversation they're like, "Hey, Pierre, we're we're happy about what you're doing. uh we we like Bitcoin, but we're going to buy a spot ETF. Um you know, I'm really happy about that outcome, even if it's not my product or uh what I'm talking about. Uh at the end of the day, uh I think we're all on the same team. And so that's the same way I see uh what Sailor's doing with strategy and what Jack Mullers is doing with 21. Uh and uh you know uh that that it's all about driving Bitcoin adoption in general. Yeah, 100%. I I'm glad you said that because um you know I think it's easy for folks to get wrapped up in a line of thinking that I I personally struggle with this line of thinking but like that somehow any of this adoption from the corporate and sovereign level is is somehow a bad thing. Like you do see these takes on Bitcoin Twitter though where it's like oh like you know the institutions are co-opting Bitcoin and it's just like well you know if you step back like well how did you think this was going to happen if if Bitcoin is to become global money obviously institutions nation states corporates are going to get involved and so like this is I think how in my mind how it was always going to play out. How do you have any thoughts there just in terms of like um you know should there be any concern about any of this? I I personally don't think so. I think everything is good. Bitcoin adoption to your point the education I think is a massive factor here of like okay SoftBank is getting into Bitcoin that is a massive signal for institutions highet worth folks all over the world um to start start learning about Bitcoin. Uh yes so two thoughts on that. Um, one is that, um, over the past 12 years, I've developed a tremendous amount of conviction on Bitcoin's decentralization. And so whether it's large Bitcoin miners like Riot or large custodians like Coinbase, um, I think Bitcoin is anti-fragile. Uh, we we saw it with the failure of Mount Gaus in the early days. Like that did not destroy Bitcoin. uh the failure of FTX did not destroy Bitcoin. Um so I I think that uh I I have no concerns on on the Bitcoin side of things. Um my concern is really um you know for example uh the the teachers that have been saving up through their pension fund and they are relying on that to retire. uh and that if that pension fund is underperforming or uh you know just doesn't have enough Bitcoin exposure uh that it undermines their purchasing power in retirement. Um, do we as Bitcoiners, do we want to say, "Oh, uh, I told you so. You should have been buying spot Bitcoin and putting it on your hardware wallet and running your own Bitcoin node, uh, and you know, uh, too bad for you that you put your money in this pension fund. Um, haha, right?" Like that to me is not a great outcome. It's it's also I think it's an immoral outcome like that. um we we don't want to have a society where um the the teacher or whoever is the end recipient of because again these financial institutions they're aggregating capital from normal people right uh and so uh through the division of labor that's the position that they are in and they have a mandate to uh help normal people whether it's an insurance company that's going to uh you know pay out claims uh or it's a pension fund or an endowment or any other kind where they they're on a mission and that um I really see Bitcoin as a way to help them accomplish their mission uh and that to deliver the results for their constituents. Uh so um I I think that it's it's crucial to have them have a financial exposure to Bitcoin because I think Bitcoin's going to be the best performing asset for the next 10 years, right? Just as it has been for the past 10 years. um and finding a way to build a bridge to them so that they are actually uh benefiting from Bitcoin in the same way that all of us sovereign individuals are. Very well said. Yeah, there's there's a lot to be said about the the timing of this comp uh company launch too. Um I know the the regulatory front is is definitely shifted from where it has been. Um, but I guess like there's there's a lot of shifting perception of Bitcoin as well. Uh, I guess do you have anything you would like to share with the the timing of the launch of of this company? It's obviously something that you've been thinking about for for a long time. Yeah, the the so you know the SEC having its hand force last year and uh approving ETFs um I think that that that certainly shifted the the acceptance of Bitcoin as an asset in traditional finance. Uh and so now we have Larry Frink on national television saying things that are unimaginable, you know, 10 years ago of uh Bitcoin sits above governments. uh you know, can you imagine the CEO of Black Rockck saying that? It's just um and then having the the president of the United States say, "Oh, Bitcoin is a strategic asset." Uh you know, the this is the kind of for better or for worse, uh the the kind of social acceptance that is necessary in institutional finance to make progress uh for Bitcoin as an asset. Um and so uh I think the timing is perfect in that regard as well. Um and at the same time though there's lots of work to be done, right? So uh I I don't think that it's an immediate uh overnight success. I think that there's uh lots of education that that needs to happen to um you know to to to further Bitcoin's uh acceptance because that's also why there's so much upside for Bitcoin uh that all of these uh institutions have a 0% allocation to anything Bitcoin related uh and that uh it's only going to go up from here. Yeah. And and that's that's exactly right. That's that is the opportunity. That's the asymmetric information based on publicly available information that uh you know people are just still very slowly waking up to. I think one of the more interesting things really over just the past couple months or so I would say is um you know people like to c talk about this divergence the decoupling from risk assets. You know I don't put a lot of stock in any short window of data. Um, but I'm curious your thoughts on that dynamic because, you know, once I started really understanding Bitcoin, and I think this is true of most people, but like once you really get there, you start to view it as the most possible riskoff thing you could own. And you know, the the reality is that most people in traditional finance um, and most normal people haven't done that level of work, so they lump it in with tech stocks, the NASDAQ. And you know, for the past probably two to two to four years, there have been short-term correlations with the NASDAQ and it it sort of trades as such. Um, I think we're starting to see little blips of that uh that changing and and part of that in my mind is literally due to what you referenced around like the president of the United States calling it a strategic asset. Uh various corporates adopting it as a store of value, not as a emergent tech play. Like that that's not why they're buying Bitcoin. they're buying it to store value into the future and propagate that forward with uh you know various risks mitigated relative to other assets they could do that with. Um so I do think we're we're sort of obviously still in the early stages, but I'm seeing small little signs of people starting to to perceive Bitcoin for its true nature, its true underlying monetary properties that make it risk off in my mind. Would you agree with that? and and what do you think the next potential catalysts are to continue that sort of transformation in the perception of what Bitcoin really is? Uh yeah, so I I think that uh the correlations are as you pointed out uh they change so much over time. So um if we look at the Bitcoin cycles arguably in in the past they've been triggered by the havingss. Uh so uh you know you you cut the supply coming onto the market in half and then it it just causes a bull market and that's unrelated to anything happening outside of Bitcoin. It's this indogenous shock. Um and now we could argue that because more than 90% of the Bitcoin supply is already mined uh that the havingss are going to have a smaller and smaller effect. Um maybe the previous one just you know had a dimminimous effect compared to the exogenous shock of uh President Trump getting elected um and uh the the ETFs getting approved and that those were really the catalysts for going from uh 20 grand to 100 grand. Right? So uh then going forward what other uh catalysts will there be you know beyond just uh incremental adoption. Um I I I I don't know. I think we'll be surprised just by the nature of that. Um one macroargument would be that the other big variable is US dollar monetary policy and fiscal policy for that matter. And so um if US monetary policy uh loosens from where it currently is uh that that would be a huge tailwind for Bitcoin uh and for other risk on assets. But as you pointed out that um you know and this is something that Black Rockck themselves also pointed out was Bitcoin is not neatly in either bucket of risk on or risk off. Uh and so um but I do think that it could uh enter a period of correlation with risk on if you're uh loosening monetary policy, right? Um and vice versa, right? So if if we have a financial crisis um and hopefully that doesn't materialize, but if if that were to happen like we saw March 12th of 2020 with the COVID crisis, like everything gets whacked. And so um that's because Bitcoin, it's an asset that you know, if you're trying to meet a margin call on your portfolio, you just have to sell anything and everything. And so uh that you would see a selloff in Bitcoin in in at in a crisis moment but that in response to that crisis what would happen what would happen is that we would need to print lots more dollars. And so uh then you go back into okay who benefits disproportionately. I think Bitcoin benefits more than Nvidia in that scenario of uh a monetary loosening. So that's where um you know the the correlation it can still be directionally the same but in terms of magnitude I think Bitcoin will will outperform. Agreed. The one one thing that I would maybe take the other side of is the um having having less of an effect moving forward because I would argue that I expect Bitcoin's market cap to more than double each having somewhat offsetting at least the dollar amount of uh Bitcoin supply issuance moving forward. But uh that's my take. It it's um you know uh it it was nice that uh so I would argue that it was nice that in the past the havingings caused a uh you know parabolic bull market. Um but the not so nice part was then uh the bare market which actually uh kind of it um prevented adoption right nobody wants to buy into something that's going down. So uh a large part of uh from a factor perspective, Bitcoin's very strong on momentum uh to the upside and the downside. If if we uh have less of a having impact and that Bitcoin can kind of drift upwards and have you know a a runup and then go sideways and then another run up and go sideways over a much longer time period, then that I think has its advantages as well, right? rather than the manic uh and panic. Yeah. No, that that's a great point because there's obviously just a you know what I would call like a fear factor of people who again don't fully understand what they're looking at, but they see it so volatile. They also probably don't understand that, you know, Bitcoin's volatility is unique relative to other assets and that it's positively skewed whereas most other assets have a negative skew in terms of their volatility. Um, but that's, you know, that's in the weeds and most people looking at it just see it going down 70 80% and they're like, "No way." Um, so I agree with you like there's there's actually there could be benefits to um, you know, volatility sort of dampening over time and a slower grind upward would just be uh, less scary for folks and and maybe incentivize them to to learn about it faster than they otherwise would. Um, so yeah, I think that's that's a great point. I wanted to um pull up on the screen here uh just hash rate just ripping uh guess it it uh adjusted a little bit recently but um you know given your expertise in the the mining space of the Bitcoin world I'm curious what your thoughts are on um just what we've seen uh in terms of hash rate really since um you know this this dip in in 21 the China mining ban ever since then it's kind of just and you know up and to the right. Um and you know is this is this nation states getting into the game in in your view? Um you know I I think there's long been rumors of that being the case, but you know any any thoughts in general on on the mining space and and hash rate? Uh yes. So um one one factor is just the generational change in AS6. And so um as AS6 become more efficient, you can hold out hold everything else constant. Hash rate increases. Um the other is that um Bitcoin mining is the most competitive industry in the world, right? It's entirely permissionless and all you need is access to electricity and there's a a thriving secondary market of ASIC mining rigs um and lots of service providers, you know, finding uh lots of nooks and crannies to to hook into uh to to be mining um economics that you know can be almost like free electricity, right? If you've got a hydro dam that is underutilized that you're able to hook into or flared natural gas that nobody else is using that you got free fuel there. So um that's that's for one. Uh the the other part of it too is that um the um the the the global competition of it makes it such that um you know if if if Russia for example and I I'm no fan of Russia obviously I I I I I'll start with that but uh that because they have been cut off from a lot of the international financial system uh one of their incentives is to access hard currency like Bitcoin by monetizing their energy assets. And so um you know that there's there's that part. Um and then here in the US that Bitcoin mining companies being publicly traded, they've had access to a lot of capital and have been able to put that to use in uh turning on mining rigs. And so um right now if you look at the mining economics on a dollars per megawatt perspective, uh it is cutthroat. And so um that I think reflects the fact that it's it's just this global commodity that there's there's so much competition in um and now we're seeing a lot of Bitcoin mining companies start to look at okay how do we uh redeploy capacity towards AI and HBC that can have higher margins than Bitcoin mining itself uh at this point in time. Yeah, that's fascinating. Um maybe um I wanted to one just give you a kudos for uh the new podcast that you started um which uh I think is fantastic. It's uh you want to talk a little bit about that sort of just back on the the angle of of why education is so important and what you guys are are trying to do with the new pod. Yeah, absolutely. So, um, uh, Michael Goldstein and I, uh, we met in college. Uh, he started a Austrian economics reading circle, the Mises Circle. And um I I was attracted to it because I I had gotten into Austrian economics through the Mises Institute uh which is a um an academic uh think tank essentially uh of uh of researchers in Austrian economics based in Auburn, Alabama that um had been publishing on the internet. Um, and when I was in high school, I was downloading MP3s onto my iPod, uh, to just kind of give you an idea into how early I was into the podcast game. Um, so, uh, the when we were learning about Bitcoin, the information was in lots of different places. And so um we wanted to and and Michael especially you know he's he's the I would I would really say he's the founder he's the president of the Mises Institute or sorry of the Nakamoto Institute Nakamoto Institute uh to pay it forward and to um get all these resources into one place uh translate them into lots of different languages and to help drive forward Bitcoin adoption because ultimately yes Bitcoin is software it's code but it's also I think a an ideology, an ethos around it, a culture uh that is um you know if we want people to understand what Bitcoin's value proposition is and why we shouldn't uh you know go and change Bitcoin or start another cryptocurrency and all of all of these big questions um kind of be be putting out thought leadership on that and so uh the Nakamoto Institute has been uh I think the the the best avenue for uh looking at even pre- Bitcoin thought. You know, there's lots of cipher punk writings that Satoshi Nakamoto drew from all of Satoshi's writings and then kind of the post Bitcoin thought of okay, Bitcoin exists. Let's try to wrap our heads around it and try to explain it in different ways uh that might be uh you know relatable to folks. And so uh and and be timeless, right? So it's not like um it's not about current events. It's really about trying to figure out what are the timeless aspects of Bitcoin. Um, with with the benefit of hindsight, we wanted to go and look at what what had been written 10 years ago. Uh, and uh, take a fresh look at it and, uh, so that's what we've been doing on the podcast, the reorg, uh, which is a technical term from from Bitcoin. Um, that, uh, Michael and I have been recording. I think we got 10 episodes now under our belt. Uh we recorded two more today. So there you go. Uh you know just to to keep uh keep it fresh and also to to to for people who were not around 10 years ago to resurface these articles and to look at it with uh our our our 2025 eyes. Yeah. Yeah. I've I've been listening to all of them and they're great. I would highly recommend to anybody. Uh we'll throw it in the show notes. Fantastic stuff. Um, please please check it out and uh there are a lot of great writings in there too and really appreciate your perspective on uh you know old ideas with a a little bit of a fresh look too and and many of them are very timeless uh as you mentioned. So if you have a question or thought uh or concern it's probably answered within the uh the reorg somewhere on the website. Yeah. Well, thank you, Liam. And uh you know, we're we're standing on the shoulders of giants because uh obviously if if I were to say like everything on the Nakamon Institute was already discussed in the Bitcoin talk forums in 2011, right? Uh there's uh there's a lot of history there. Uh so um yeah, it's it's been a lot of fun to to to put together those resources. Yeah, it it's uh truly fantastic. And Pier, I will say I'm jealous that you started learning about Austrian economics in high school. My high school teachers and even my college professors, I you majored in economics didn't learn one lick about Austrian economics. So that that tells you everything you need to know about uh you know the institutionalization of Keynesianism over the years. Um maybe uh one one question because we're we're coming up on time and want to be respectful of your time. Um but maybe just sort of uh going forward, what can people expect in terms of uh you know quasi roadmap if you will for the Bitcoin bond company and where can people learn more about it? Uh yeah so you know it's it's a ton of work behind the scenes uh and uh just follow me at Bitcoinpierre onx uh as I have updates uh that's where they will go. Um but uh yeah, this is not, you know, it's not a a retail facing product. And so, uh in many ways, uh it's just uh me me out here in the trenches. Uh and um uh I I hope to have more over the coming uh let's say years. Awesome. Well, uh thank you very much for for joining us. This is a a great conversation and and always appreciate your insights and thoughts, Pierre. So, thanks again for joining us. Yeah. Thanks, Ryan. Thanks, Liam. Thanks, Pierre. All right. Take care, voice. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onra Media is forformational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/cont to schedule a consultation with one of our private client adviserss.