The Last Trade E042: Entering a New Paradigm with Mitch Kochman

Brian Cubellis (00:00.414) Gentlemen, are you choosing rich? Every day. I'm starting to question my whole Bitcoin maxi thing because, you know, NFT Nick is making some really good points. He's on a boat. He's on a boat. He's got a penthouse in New York. I don't know. Drake seems to be picking up the signal. posting sailor. comments on his on a story that's pretty big. He's got like, I think 200 million followers on Instagram. Wow. Seven X what I thought I thought it was like 30 million. I think it's in the I think it's in the nine figures. So what did he post exactly? He posted a Michael Saylor clip of what? It was him yesterday. Yeah, basically breaking out why like MSTR from like a higher beta or whatever like from a trading and all the things is is a breaking down why somebody would hold MSTR versus like spot. Yeah. So that would sort of suggest that like, Drake has a big MSTR position then, which is a wild world to live in. potentially. I mean, he's got a lot of money. It's probably diversified. Yeah, good for him. Good to have Drake on on Team Bitcoin. It's fine to not have NFT Nick on Team Bitcoin. That one we can we can miss out on. So David Garland, he's an NBA star, was in a Satoshi t -shirt, showing up to warm ups last week. So definitely, definitely getting getting some of that bull market buzz back. Brian Cubellis (01:39.094) The MSDR thing's funny because, you know, everybody probably has their friends that are, you know, aping in or family or wives. They're 401ks. But I was talking with, and I'm sure I'm only saying this because I saw it was public on Twitter is a rock star was joking around how he he has a position or had one. And it was because he was hanging out with like Preston and these guys in Madera and they're like telling him about it. And so he's like, screw it. And he's like, it's just a joke. So just talk. He's like, It's all a Ponzi just like laughing on this call because it's just like ripping outpacing. He's like, Bitcoin goes like this and MSG just goes like this. He's like, I don't even know why he's like, it's all just like a joke. And then a couple hours later, I looked on Twitter. He's like, guys, the volatility is too much. I'm stopping out my position. Like good luck. And I guess there's a thing, a crew at 2121 crew, cause it's trading like 1600 a share. He's like, you guys can deal with this. But I guess that's like, it's just been this trade that everybody knew. I'm just, and we're just. I don't know, I'm not in it. I'm just sitting on my little poor bitcoins. It's fascinating watching it play out because I mean, you think about and I don't know how much of it is, you know, it's a buzz and retail buzz pumping up and destroying shorts versus the actual valuation. But they're so levered up in that treasury. And like, I'm starting to lean more the side of, you know, this is just the impact of being so levered up on Bitcoin and what happens when all that bitcoins in the green. You know, there's a there's a chance not financial advice that this is you know, just just how this looks moving forward Well that I saw an interesting thread comparing micro strategies Bitcoin acquisition strategy to the hunt brothers In the 80s where they tried the corner the silver market Hmm made me question like is this something we should be worried about as an industry like is Micro strategy, I think at one point the hunt brothers had something I don't think Sailor and micro strategy will like ever get to this percentage, but I think at one point in the 80s They just they were doing the micro strategy thing where they're taking out cheap debt buying a bunch of silver I think they acquired something like 80 % of the physical silver on the market at the time And then they got to a point where they're levered too much and they were forced to liquidate by the government Crash the price of gold or silver from like 18 to $2 Brian Cubellis (04:02.317) I wonder though, if they had had it, if they were trying to corner the market on an asset that had increasing scarcity and like was early stage in its adoption and it was still a small asset in the global scheme of things, maybe it would have worked. But it doesn't work for silver where you can also ramp up production of the asset by mining more too. So maybe like that playbook does work. with a better asset. And of course, Saylor will never get to 80%. He's at 1 % now of all the Bitcoin. And it is kind of a fun thing to think about, like, how many entities, how many companies or nation states will ever get to 1 % of all the Bitcoin, because there's a lot more than 100 who should be interested in accumulating Bitcoin and will at some point. And obviously, they can't, you know, you can't have even 100. entities accumulate 1 % of the Bitcoin, it'll be a much, much smaller number. And obviously, the price has to go up in order to prevent that from from being possible, really. Yeah. And I think there's actually I was reading about it. And it was kind of like instinctually, I think it has to do with similar as oil, like commodities that have infrastructure baked in along with all the different bureaucracy tied in is what like kill trying to corner. and tie like a peg dollar peg nominal amounts to the underlying into it. They were like sued and there was like regulation. There's all these things happening, but there's none of that that exists in Bitcoin. So like the government can do something to sailor, but like if you're just sitting in your Abu Dhabi or Saudi Arabia, like they can do as much, they can buy as much Bitcoin as they want. And to Jesse's point, like it's just a reflexive market. There's no like central point where you can go like shut it off or don't like buy anymore. Right. Or make more of it. Yeah. That's it. I mean the other side of the coin is this just a full -on speculative attack on the dollar because news this week micro strategy did another convertible note oversubscribed over 800 million dollars at a 65 BIP interest rate due in 2030 I believe and so just doing the math on bitcoins average CAGR over What's that six year period I mean it seems pretty Brian Cubellis (06:25.549) Pretty wise financial more than 1 % Yeah It's a it's haven't had Pierre Richard on TFTC last week To talk about Elizabeth Warren's attack on the Bitcoin mining industry, but that's one thing we harken back to the first episode of TFTC that we ever recorded the first guest ever at on TFTC was Pierre and go back to October 2017 And he says it pretty explicitly like at some point one of these companies gonna start borrowing money just buy Bitcoin and lo and behold, three years later, MicroStrategy set out on that path and has accumulated 1 % of the total supply. Will Cole talks about this a lot, right? I don't know if it's Switzerland, but it's some European country. Switzerland, right? They print money from the central bank to buy equities, like US equity. So it's just a matter of time. Yeah. It's happening. First, First to last trade episode, we're recording above the previous all time high. How's it feel gentlemen? Brian Cubellis (07:32.013) Mitch, what was that you were saying before we started? It's it's quiet. It is quiet. It's the quietest all time high, you know, at least I've seen, you know, being in the markets since since 2017. I'm definitely getting getting some of the tax from, you know, from people that we've been begging to, you know, buy Bitcoin during during the bear markets. But I'd say as far as. the being commonplace and you know you see it on CNBC but I'd say friends, family, I think largely are blissfully unaware of the appreciation we've been seeing. Yeah, I was commenting before that it feels like we're entering a new era for Bitcoin of like we're leaving behind the time when an average person could stack a whole Bitcoin, you know, because $70 ,000 per Bitcoin, that's out of reach for most people, I would say. And it's It's kind of interesting how quiet it is and how the vast majority of people simply have yet to realize that they missed an opportunity. But I think I think that's people will look back on people will look back on seventy thousand as cheap, which is the alarming thing about where we're at right now, because, you know, every time we've gone through a long bear market and then slowly approached the previous all time high. When you reach that all time high again, it feels like, wow, we've made it back. We're as high as Bitcoin ever goes because you have this four year memory of here's the range that Bitcoin can possibly go to and we're at the top end of that. And then a year later, because of the halving that comes and the supply scarcity that plays out, suddenly the price is like 5X higher. Brian Cubellis (09:35.309) than it was at that moment when prior all -time high was met and exceeded finally. So, I think we're at that point again where like 70 ,000 is gonna look like 20 ,000 did four years ago, which is to say like a year later, it'll seem cheap based on where we're going. And it's like a kind of sad moment in many ways because... I don't know about you guys, but I feel like I succeeded in getting some of my friends and family to acquire a meaningful position of Bitcoin. But for the most part, they didn't listen. Most of my network still doesn't have a meaningful position of Bitcoin. And I doubt that they will get to whole coin status now. Yeah, it's gonna be hard for many people we're sitting at. I think we just dropped sitting around like $70 ,500. That's more than the median income in the United States right now. So, think for your average person and as this thing runs, it's gonna get harder and harder to stack sets. I think, I think the beauty of that though is like it goes back to positioning and the unit bias, like end of the day, anybody can preserve their wealth, right? So we have to figure out what is new messaging of like, it's not necessarily an investment. It's literally just protecting yourself and making sure you can stack and then think about your future and retain the purchasing power. So you can have some hope to build something. Cause I got caught with this, like with somebody bagging groceries, I asked like randomly about Bitcoin. It's like, yeah, that thing's too far. Bro, me and I got caught because I was like, shit, you're not going to buy a whole Bitcoin. But there's actually a lot more, there's obvious value to the underlying, but it's more nuanced than, hey, buy this as a percentage of your net worth. It's a little like, think about this because you can actually preserve your purchasing power and think about the future in a positive light than versus just being stuck on throwing dollars in a club to make it rain. So I think we just got to figure out that. And then the unit bias probably comes in at some point, right, where we switch Sats or something to help. Brian Cubellis (11:47.629) Yeah, I do like the the meme that's been going around lately of Bitcoin is only zero point zero one million dollars or less. Zero point zero seven. Sorry. Zero point zero seven million dollars. That's a good way to reframe it because that's where we're heading. And yeah, at some point, it would probably we probably switch to sats as as like what people talk about, but. Because when Bitcoin is fluctuating between 456 ,000 and 482 ,000 in a day, those numbers become so large that it's hard to make sense of them. It's like talking about Berkshire Hathaway stock prices. It's just not salient. And so maybe we switch to Sats. Sats the standard. I know we'll go as far as to say we almost actually have to switch to Sats because probably in parallel, if there's going to be technological component to Bitcoin being used in anything like consumer applications, it's going to be in Sats. So it's just going to be a synonymous thing with Bitcoin and you need it to be like the same standard. Because if you have one over here with like decimal places, you know, the other one over here with thousands, like I think there ends up being a standard that's established and it's probably Sats, right? I'd say probably, but we need the meaningful appreciation for it to not be absurd numbers that we're still dealing with there to buy burger with a thousand stats. It is a little bit tougher, but if we get that price appreciation, it will be easier numbers to transact with. But I do think that's probably the cycle. Probably the cycle that we as a community do need to figure out. You know what what that unibasis is going right? That'll probably be a big conversation in the next bear market As it stands right now one cuck buck one dollar is worth fourteen hundred fifteen sets. So Yeah at some point This year most likely will fall below a thousand sets per dollar. I Think that's when I get into a really interesting pair. Yeah, I agree. It's like, all right another related thing that I was thinking about this morning is I Brian Cubellis (14:13.485) I've been thinking about the the the layup for Bitcoin is to match gold. It's just such a clear path to do that as a minimum. And in my head, that has been like four hundred five hundred thousand dollars per Bitcoin to match gold. But gold is appreciating to right now. And with the inflation that we're inevitably going to see over the next few years, we probably. are at parity with gold around a billion, a million dollars per Bitcoin. All that all that that would mean is, you know, 21 trillion dollar asset class gold right now is like a 14, 15 trillion dollar asset class. So gold would just have to grow a little bit and Bitcoin grow a lot. But that would be that would be quite something that if if we're at parity with gold at that price point. And that's just the beginning for what Bitcoin will eventually do. That's the minimum. So, yeah, I think thinking about that this morning sort of made me realize how likely a million dollars per Bitcoin really is, because by the time that that's in the cards, gold will be at that total valuation anyway, and it'll just mean matching the pet rock. If you're setting gold as the bar that we're going for here, I read this week that ETF inflows just in the last two months were five times or were larger than the last five years of gold ETF inflows. So that acceleration is certainly happening. And I think we might end up there as it did gold's appreciating. But I think as more people wake up to... You know, and the we see the game theory occur on the Bitcoin side. I think you might see some flows out of gold and might speed up sort of Bitcoin taken over in that race. Yeah, a related bit of math there. It's I saw something on Twitter a week or two ago about, you know, it's like five hundred million dollars of of net inflows on average for the ETFs recently, every trading day. And obviously, we're about to enter. Brian Cubellis (16:34.509) an era where we're mining 450 Bitcoin per day. And so so long as there's that, so long as assuming that there's from all other demand sources, net zero inflows. So so not negative, but not positive. And the ETFs continue at five hundred million dollars a day for price equilibrium to reestablish in that in the new block reward era, price will have to go to a million dollars per Bitcoin. And obviously, there's a lot of assumptions in there that won't remain true. But that's how close that's how massive the ETF inflows are and how that bumps up against the increasing scarcity that's coming and puts suddenly a million dollars per Bitcoin in our sites. I don't think it happens this cycle, but it suddenly becomes possible. I've got an op -ed coming out this week, but the premise of it is largely what you described here is we're seeing supply -demand dynamics that we haven't really seen in previous Bitcoin cycles. We're at all -time high at the pre -halving. And the dynamics that are playing out, we've got different buyers here than we've ever seen in Bitcoin. It's more of a stable buyer, larger buyers coming in that don't have retail behaviors. And I think it's misguided comparing, at the risk of this time, it's different. Comparing previous cycles to this one, just because the game has totally changed. You've got anyone from your Fidelity's and BlackRock's putting Bitcoin in all -in -file or... total funds that they're giving Bitcoin an allocation to. Obviously, CEOs and board members are seeing what's going on in micro strategy and that stock price appreciation looking there. They've got incentive structures that are aligned to stock price increases. There will be dominoes to fall here. There's just different buyers with very, very different behaviors. I think if we're looking at past cycles to try to get price predictions here. Brian Cubellis (19:01.613) You know for better or worse. I think you know those people are gonna look pretty silly when one world said and done here Yeah, I think things are gonna get weird. Last week we mentioned the fact that the Arizona State Treasury wrote an official letter saying, hey, we want to make it so that a retirement systems can buy these Bitcoin ETFs. This morning we saw the patients capital, which is I believe 15 billion dollars in AUM is. amending their prospectus to enable them to have the ability to allocate up to 15 % of one of their funds into the Bitcoin ETFs. Their founder is a student of Bill Miller's, who is a prominent Bitcoiner from the TradFi world. And I was talking to my neighbor last night, his wealth manager, Morgan Stanley. And we've been talking a lot about the ETFs and their impact. And he was explaining to me last night that it's far exceeded. His expectations up to this point just due to his knowledge of how slow these institutional investors move. And we were talking about the Arizona State Treasury and a couple of their funds that are beginning to amend their prospectuses to enable access to Bitcoin ETF specifically. And it really hasn't even started yet in terms of institutional inflows that we can. that we can expect in the future. It's going to take time, six to nine months for a lot of this to happen. So think about what you said there with the 15%, which is the right now, I think Fidelity, you know, they're really a more aggressive fund, I think was that was at 3%. It might have been a little higher. But all these, you know, asset managers are all competing against each other to show the best returns. And you're going to see that number increase and increase as you know, Brian Cubellis (21:02.893) number goes up to be most attractive to the most clients. And it's that game theory again. Largely, they're going to be competing against each other and it's just going to drive more liquidity to the asset class. Once again, it's going to get weird. Brian Cubellis (21:24.749) Yeah, we'll see. I mean, I don't know about you guys, but I'm like, I'm incredulous. After so long of believing that this asset is worth a million, $10 million, and it's finally starting to get appropriately repriced, just beginning to, I definitely have some emotional inertia of like, I kind of can't believe it's finally happening or finally beginning. And yeah, been pinching myself a little bit lately. And despite the fact that like, I don't think I could really have done much more in terms of stacking. I also feel like, man, the window of opportunity closed. Maybe I should have done more. Yeah, you all have that FOMO. That I should have been stacking more, I should have been making more money, but it is what it is. These ridiculous price pumps, reminders, like, I gotta work harder, gotta cut my cost where they can be cut to make sure that I'm saving as much Bitcoin as possible. And I was explaining it to my neighbor last night, he was talking about how he got one of his friends in the Bitcoin, they bought like $1 ,000 at $65 ,000 Bitcoin. And that was... Like 1 .5 million sats, I think. And I explained to him, I was like, if every person on the world were to adopt Bitcoin, you divide 8 billion, 21 million by 8 billion, like the average person's only gonna get 230 ,000 sats. If it were evenly distributed, which we know it's not. MicroStrategy has 1%. Satoshi has a million coins. We're gonna get sovereign wealth funds that scoop up hundreds of thousands, like. So thinking of that number, 230 ,000 sets, if it's evenly distributed among eight billion people, if you're above that, you're doing well. And it's a small amount of money right now still, even with the price bumping. Brian Cubellis (23:24.781) Part of what I found was fun about the show and talking with folks is, I think it's what made All In a good pod is there's people like doing stuff in the real world every day. And so you get to bring it every week and like have the conversations behind the scenes without naming the names in front. And one of the conversations I had yesterday was about like, there's this level of, it's not intensity, but like in the bull that you naturally feel, and the word's gonna escape me, but it's effectively like, It's not really responsibility, but it's just different when the stakes are at $70 ,000 and you're kind of like, now you maybe to Jesse's point, you're pinching yourself, he's like, okay, you built it for this. And now you have to, the way we like it, we're joking around. It's like you're driving down the highway at very fast speed and there's like a Brinks truck in front of you and there's a hundred dollar bills flying out. Now you have to start picking them up and you only have X amount of time. And so like the game and the stakes, start to increase as the price appreciates. And so there's a different level of responsibility and things at play versus when it's $25 ,000 and nobody's looking at it. And I think there's like this natural like uncomfortability or friction that's like starting to be felt by individuals that are working in this space. I don't know if anybody feels like that here, but I personally have in this individual I was talking to that works for one of the larger like ETP ETF providers was in a similar boat. And I think that's kind of what also Jesse was alluding to is like, okay, now you're here. And it's like, this is what you've been waiting for. Now there's like, what do you actually do to capitalize? I've seen the behavior change from, I'd say, let's first start with the existing Bitcoin platforms that I work with. And the, I'd say all through the bear, it was figuring out how do we build new products? And there was a, you know, anything from, you know, what we bought with OnRamp to Swan Vault and the work I did with Swan. It was all product creation. And that conversation with the existing platforms has totally changed. And it's now, how do we, number one, like there was a lot of shoring down on the infrastructure. And you've got a lot of, I'd say some of the miners out there looking for second and third custodians. Brian Cubellis (25:48.045) to spread a risk now that the asset price has gone up. But it's figuring out, we're faced with the new fee market as demand comes in. More people are using and moving asset. We've got all the BRC 20s and Ordinals taking up clogging up mempools, which comes and goes. But these platforms do need to respond. And be able to handle withdrawals in that environment. And a lot of them offer free withdrawals, which gets expensive. You need to be able to do send to many transactions. Bicco just replaced by a fee where if you've got a transaction clogged in the mempool, if you put a setting on that transaction, you can then flip it with a new transaction with a higher fee to ensure it gets processed. It's a lot of changes like that where really, how do we handle all the new demand, the new price appreciation, which obviously very different than releasing new products. Brian Cubellis (26:57.485) Yeah, I hope you were building in the bear market, anybody running a company out there, because the wave is coming. And I think we're better positioned from an industry standpoint to take on this wave outside of Coinbase, which is obviously not as battle tested as it should be at this point, 12 years into its existence, to handle an influx of users. But outside of Coinbase, it does seem like the infrastructure is more robust than ever. I'd say on the custodian side, I'd say trading side, liquidity, I think that's pretty short down. My concerns compared to the last cycle are in the banking side. Obviously, you've got banks upside down because of treasuries and as an industry, we are pretty underbanked and a lot of, you've got smaller banks. supporting a lot of a lot of on -ramps here. And Bicco, we've got a network of, I think, like six to eight banks supporting our infrastructure. I'm hoping a lot of the exchanges out there do have that the sort of rail so they don't need to shut down trading should a bank or cascaded banks go under. So that's where my fears are. It's all on fiat right now. But I think... Slowly the some of the the banks are in lockout larger banks are warming up and hopefully there's change there You mentioned that? Press pressant that you mentioned that today the latest CPI print came in above expectations These banks are obviously under stress. We had to have that private consortium led by Steve Mnuchin to come in and save New York Community Bank Corp last week, but it was a billion dollar capital injection there and Deposits are way bigger than that and you imagine their liabilities are too and so with inflation staying relatively elevated it'll be very interesting to see what the Fed does particularly with the context that a lot of these banks are under a lot of stress we have BTFP being being discontinued later this month and What are they gonna do? Brian Cubellis (29:22.573) How do you like that headline that snuck in there though? Like Steve Mnuchin comes in to save New York Bank Corp. You know, like the reality of that, I don't know the details. I don't know how much of the details are known, but for sure that is a sweetheart deal where Steve Mnuchin and his gang will make out like bandits and I have a feeling it'll be subsidized by taxpayers. Yes, eventually. It definitely will be. I am I'm looking for a headline. I saw Jesse, did you see this something having to do with banks and their Treasury reserves? I have not been paying as close attention to that as I was a year ago. Let me find this headline. I'll send it to Logan to pull up. Well, Marty's looking it up. Mitch, I'd be curious to the extent, you know what you can share. You reference infrastructure. It's public. BitGo supports ETFs a few. I don't know the exact number. Maybe you can clarify that, but then also just like from an infrastructure perspective, you mentioned the banks, but I also think about like custody where we have Coinbase, we have BitGo. There's the, I think two big players, Kraken, I think came out last week that they want to get more in the institutional space when it comes to custody. Like how do you guys think about that? And like any, I don't know if it's like rumblings, but concerns or questions from clients about like, that seems like another kind of just like area of the market that doesn't have a lot of options. Yeah, I would say we definitely lost quite a few custodians. I want to be careful about, you know, commenting publicly about competition and, you know, I'd say the competitors that we are typically up against, there are some good ones out there. But I think one of the things I've enjoyed particularly about the ETF is how the Bitcoiners on Twitter will will hammer any custodian that isn't using current Bitcoin wallet tech. And it's important because we're improving the protocol for a reason. And if you've got a cyber horn that's attacking you for using old wallet tech, there's reasons to upgrade. And you can't get away with it anymore. Brian Cubellis (31:51.629) So I do think, in the case I reference Coinbase in particular, I think they did make some changes, at least in the short term. But I think in general, there's going to be more pressure to be on latest technology. But I'll be. I dodging a bit. I obviously, you know, in the custodial landscape, there there are pressures on other custodians out there right now. And I think where there will there's still some fallout to take place. I think, you know, it's not like a funds are in trouble sort of way, but, you know, &A and, you know, that sort of behavior. Yeah. And I think the core row is kind of driving is like we have all these ETFs. What is it? Eleven. And there's really like two custodians that handle it and thinking through like, what does that look like even from just a pure marketability perspective, right? Because these ETFs are switching around or thinking about how do they differentiate? I think it came out today, Van Ecke, or yesterday that they're like waiving all fees, which is like, we should smell like in its place. Like I think Jan's a great guy and they're doing great stuff, but it's like, well, nobody charges you for anything. Like there's no such things as a free lunch. Somebody has to pay somewhere for everything all the time. Like this is like. And so like that should always raise pause. And it's almost like the opposite is a false signal of like, if you're not charging, like what's happening and getting deeper, and then you start looking at like custody and all the things associated. So I think that's just, it's an interesting premise in itself. Yeah, I think, you know, the we probably have the large players that will be a part of this cycle, I think when sub 21 gets repealed, which is more of a matter of when not if. You'll have some &A from existing providers, you'll have some TradFi participants enter the space and we'll have some massive balance sheets start to get into this business. When do you forecast that? Like not, you don't have to give a direct, like do you think that's like a pre -2026 or like, because that's very interesting from the bank's perspective, seeing what's happening and wanting to get a piece. Brian Cubellis (34:13.133) Yeah, and obviously they do. I would be surprised. And obviously it's going to be pretty political. But 2026, I think, would be reasonable. Hopefully, maybe that's addressed in the crypto regulation that we've seen discussed. They said they were tabling to 2024. Is that going to happen in an election year? I think it's necessary. But it might take another, I'd say a year or two. It's pretty funny how this all got politicized like if Trump wins, everybody moves to Florida and Texas. If Trump loses, we're all going to the UAE. Because Trump was talking about this past week, right? He's like, yeah, it's cool. Like everybody uses it. And then I think this morning it's like Biden's going to put a 30 % tax on minors or some like headline. Yeah, I guess we could talk about that. So the 2025 the General Administration projections for 2025 revenue from the Biden administration came out this week and within that 236 page report on page 72 they lay out an excise tax on Bitcoin miners of 30 % they're gonna tax their electricity consumption so they'll have their electricity costs and then If Biden's administration gets their way, they'll have a 30 % excise tax on those electricity purchases. And this is actually a resurgence of something. They've proposed this in the past, I believe in the beginning of last year, in the middle of last year. And it actually ties very tightly with the EIA survey that got nixed in court a couple of weeks ago. That survey now makes a lot more sense, it seems like. yeah. The Biden administration wanted to put this excise tax on the industry and to make sure they were generating as much tax revenue as possible. They sent the EIA out with a survey to basically identify all these mining and for all these mining operations, how much electricity they were consuming so that they could accurately tax them with this excise tax. They just wanted to know more about the industry. That's all, Marty. They weren't trying to figure out exactly what their tax base is and how much to squeeze out of people when the time comes. Brian Cubellis (36:38.893) Yeah, take off your tinfoil hats. Yeah And I would I mentioned that I recorded with Pierre Last week if you're listening to this I highly recommend you go listen to that episode if you want to understand more about this particular confrontation between the Bitcoin mining industry in the Department of Energy the Basically, the government is coming to this problem with the pretextual from a pretextual basis where they're basically assuming that Bitcoin mining is bad for energy grids, bad for the environment, and bad for electricity pricing. But there's plenty of publicly available data that proves the exact opposite is true. Bitcoin mining consumes wasted energy, it makes grids more stable, more reliable, and it's good for the environment because it soaks up excess emissions in the form of methane with off -grid mining. And so even though the Biden administration is putting this, is proposing this excise tax of 30 % on the mining industry, I don't think it's going to pass. I think actors like Urquhart and the TVA are very clued in onto how Bitcoin mining operations work and what they provide to their individual grid systems that they'll stand up and say, hey, if you levy this excise tax, you're essentially taking out. one of our most dynamic and reliable demand sources and we need those to run our crids in a stable and reliable fashion. This ties into the politics thing, that whole quote of you may not care about war, but war will eventually care about you. It's like we may not care about politics, I'll speak personally, but it's going to care about us and it's where I come in and I was talking to Lee and I know Pierre was involved. It's like at the end of the day, people have to maneuver and wield the right influential power to get these things across because if we don't, That's how they will end up happening with the TVA and these other participants not actually speaking up. So yeah, it's huge what TBC has participated. I know again, Pierre was involved in it. I think Riot was involved, right? Yeah, it was Riot and the Texas Blockchain Council. That's no joke to see the US government. Like, so the US government had to back off and settle out of court. So now they have to go through this whole commenting process. Brian Cubellis (39:04.429) The the the whole Justification for the emergency order was completely bunk. They literally broke the law by By like the amount of days that people had to respond to the survey was like off like outside the letter of the law they They're claiming that like this data isn't available but riots and other Participants have responded to letters from Elizabeth Warren over the last two years asking for this data. They gave it to her She obviously didn't read it or acknowledge it and then they don't have any justification for this outside of they don't like Bitcoin. So the whole reason they're doing this is not because they truly believe that Bitcoin mining is bad for the environment, bad for grids, bad for electricity pricing for residential consumers. They don't like Bitcoin because they can't control it. And the Elizabeth Warrens of the world are really pushing for a CBDC and Bitcoin. in the Bitcoin mining industry are in the way of facilitating that transition to a central bank digital currency. And so they're going to ignore reality and just try to brute force all this regulation and excessive taxes through the market. I highly recommend anybody go. I read it last night, the 2025 general administration revenue projections. Just search, just control F, excise. It's insane how many excise taxes there are. Like Bitcoin mining was just one industry they want to levy an excise tax on. Like the government has completely lost control of their spending and they're really clamping down and trying to tax the shit out of everything. But not to be confused with Pierre's tweet, because that was not real. I was on a call the day and somebody signed in and I was like, I looked at it, I was like, this doesn't look official. The big Bitcoin and like right next to the US government logo. Yeah, he clarified that, yes, I made these charts based off of the assumptions the government was making. Brian Cubellis (41:09.165) It's pretty amazing to think about, like, can you imagine if the government had tried to levy an excise tax for internet traffic for like Yahoo or Google or Amazon in the early days, you know, like what would have happened? Like, it's pretty obvious to think about it from that thought problem perspective, but like those companies would have set up shop in a different jurisdiction. You know, they would. We wouldn't have Google or Amazon in the US, they'd be Canadian or they'd be, you know, a UK based company or something. And the reason the US won with the internet and became the home, the global home of internet development and internet companies is because we had like loose guide rails for allowing innovation to blossom before stepping in with. detrimental regulation and taxes. So, you know, I hope that the truth prevails here, Marty. And I think it's to Michael's point, it's like it's thanks to Texas Blockchain Council and Riot and folks like that that are putting in the fight and to surface the truth about how Bitcoin mining is actually good. And so long as a rule of law prevails and you know, the people in decision making places in the court system follow the rule of law and are interested in the truth rather than corruption. Then I think we win this fight, but it has to be fought. No, it's a very good point. It's it's. I think that was one of my biggest worries when the survey first came out, I wrote a newsletter about it was like, do not respond to this, like we have to fight back. And I was very happy to see that riot. And the Texas Blockchain Council stepped up because that is the biggest threat to Bitcoin and always has been is complacency and apathy. And I do think because of the nature of the federal government and how overarching it has become, many individuals think it's not even worth an effort to try to push back. But I think Riot and the Texas Blockchain Council just proved that like, no, like there is a rule of law. There are judges like Jesse mentioned that will Brian Cubellis (43:36.365) will follow the rule of law and all you have to do is take some effort and push back and say, no, you're not doing this to us. And in this case, the law prevailed, the truth prevailed. And that's the other thing. We have the truth on our side. We have the data. We have economic flourishing happening in areas where we're Bitcoin miners entering an economy. And that's another thing on top of all of the truth. In that regard, we have to really lean into is, the truth of the matter that if Elizabeth Warren and the Biden administration get their way in pushing the Bitcoin mining industry out of the country, it's really not going to do anything to Bitcoin. It's going to hurt American citizens. And you can eventually try to shovel in the CBDC, but life finds a way. Americans will find a way to get access and use Bitcoin because it is better money. And your CBDC is destined to fail. And so... That is the proposition it's put forward to the people pushing against the industry is like, hey, this is happening, whether you like it or not. If it doesn't happen here, it's going to happen somewhere else. And eventually it will come back here because Bitcoin is the best money. And so do you want to shoot yourself in the foot and have the American economy miss out on the proliferation of this incredible technology for the next decade, two decades, a generation, whatever it may be, or do you want to accept reality and let Americans prosper from this reality and actually innovate and lead in terms of Bitcoin Well what I? Don't understand here is and first. Thank you to to riot and everybody who helped push against this and Grateful for you guys and the Texas blockchain council, too but the political calculus involved and it's you know for for the last several years of we you know, we've got 20 % you know, it's that numbers I'm sure higher as we've been picking up, you know people But 20 % of Americans out of that whole crypto at this point. You've got more on boarding to you know, you know via the ETF as liquidity pours into this ecosystem I and you know that the demographics for for those holders. It's gonna skew younger It's gonna skew towards more towards the you know more the left and you know, the the democratic base I don't understand, you know how Brian Cubellis (46:03.053) Who's running the numbers here that this is going to be politically favorable for them? Because I think you've got the majority of people who might be even pro this, probably not listening, probably voting in that direction anyway. And you're just losing a meaningful number of your voter base when margins are razor thin. And we're in 2020 and probably will be in 2024. It just doesn't make sense to me. Brian Cubellis (46:34.285) Yeah, I already said it very diplomatically. It was nice. It was just like, it's just like has to be said. It's like, it's pretty sick. Like what Jesse was referencing is like you're gonna stifle. It's like a double whammy. You stifle innovation and then you just harm people like because people literally work at these places. Like in terms of it's like they literally work there and you're like, yeah, we're just gonna like kill you on inflation. We're gonna kill you on all these things and we're gonna take away your job. Well, and there's a negative externality ripple effect here. Yes, you target the Bitcoin mining industry. But if you're successful in pushing them out, like it doesn't only affect the Bitcoin mining industry. Think about the electrical infrastructure that's being built to supply electricity to these Bitcoin miners. I mean, you're talking about a lot of heavy construction jobs, a lot of electrical engineering jobs, a lot of jobs within ERCOT. On the pricing side of things, like this is not confined to people that... plug in and operate ASICs. There's a very interconnected industry growing around just the production of Bitcoin via Bitcoin mining. It's not only going to affect Bitcoin. There's something like gigawatts worth of capacity in line and ERCOT is working hard to get the construction teams and electrical engineers in place to build out that infrastructure. If you were to levy this excise tax, all of that would be rendered moot overnight. and you'd have to fire a bunch of people that are outside of the Bitcoin mining industry. Yeah. You know, I think about Texas and freedom loving, you know, another place it's a pretty freedom loving is the city of brotherly love. Philadelphia, free. Yeah, we got to give you guys a huge shout out with the launch of branches. I swear, probably 40 % of like inbound last week was from individuals living in Philadelphia, interested in getting involved, meeting the team, participating, helping out. which is really cool to see. And it was people from across the spectrum, people that are stacking sats to executives at companies. So we got our John friends in Jackson who lives in Philly along with our advisor working on some special stuff for I think the April meetup and then maybe some stuff this summer. Yeah. I mean, despite what many will say about Philadelphia, that spirit of freedom that was imbued in the city during the American Revolution still exists. It's a little faint. It's a faint flame. Brian Cubellis (48:58.125) But it can be it can be harnessed. Would you grow? Marty, would you say New England or Philadelphia cares more about freedom and patriotism? Philadelphia. I had to throw out the Philly props because we rag on it a lot. You see the pictures of the zombies on Twitter. There's a lot to rag on. There's a lot to rag on. We've got to be objective about the state, the city, and what's going on. But I have hope that flame, again, that flame exists in the bellies of many Philadelphians. Maybe not all, but many. We joke with Jackson because he goes to Dubai. We're always like, he's never going to come back. You go from the streets of Philadelphia to Dubai, and you're like, what am I doing? Another Philly song, on the streets of Philadelphia. Yeah, we'll see. We're gonna save Philly. Philly's gonna save itself. It's a very hardened population. Well, that's a positive thread of what we just talked about with TBC. It's like, if not you, then who? Step up, you form, you go to the John, you become part of the industry, you save him a better form of money, and you have a fighting chance to fix stuff. Brian Cubellis (50:15.181) I don't think the buying image, I don't think the sex -ice tax is gonna get through. States will stand up and even if it does get through, I could see states like Texas and Tennessee being like, yeah, you don't have to pay that. If the federal government comes and tries to shut you down, we'll protect you. That's interesting angle. You're not going to get those moonshine miners down in Texas. I mean, that's something people seriously consider. It's just like, what are you doing with this tax money? You're going to tax me 30 % and then let's look at the national debt. Let's look at your revenues. Let's look at the interest expense on that debt. Let's look at the result of you issuing this debt, taking that money in and then allocating it. Is it really producing a good outcome? No. I think as American citizens, we need to begin seriously thinking about what are we getting for our tax dollars? Why do we even need to pay taxes? You can print the money. Is this a big humiliation ritual? I think Bukele had a talk about this. He did. At CPAC. He was basically, he basically gave him the playbook. He's like, you pay taxes. It's a humiliation ritual. They can just print the money. This is why inflation's going crazy. And they're gonna have to print a lot more money. I mean, again, CPI is high. Jesse, I'm interested to get your thoughts. And then Logan, pull up the tweet. I found what's going on in the treasury market. So they're, they're changing the def, like what it can be defined. They're changing the leverage calculations within Basel 3. and taking treasuries out of the necessary assets that you need to count in this leverage calculation. So this is essentially creating an opportunity for limitless purchasers of treasuries as future issuance begins to surge because they've got to roll over a bunch of debts and then begin paying off the interest they've already accrued. So you basically have the cap coming off of the treasury market. It seems like. Brian Cubellis (52:16.653) They're tapping out. They're like, we need as much liquidity as we can get. All right, banks, you don't need to factor these into your leverage calculations anymore. Go buy as much as you want, because we need you to. It's more than a full -time job just to keep up with how the goal posts are quietly moved. Because there's that. There's this latest thing. There's the fact that banks have been on a zero reserve requirement. you know, fractional reserve banking model. So nobody has a reserve banking. Yeah, no reserve banking model. You know, they change the keep changing the money supply calculation. They change the methodology for it from that M2 to M2 SL, which which inserted a few ways that they can adjust it without publicly changing, you know, how it's calculated. It'll just show up as. at slightly different numbers over time. And at first it was the same and they will have the ability to pull these levers over time to manipulate what they have to show in terms of the money supply numbers that they are obligated to report. And those are just three examples of just the endless supply of like goalpost shifting stuff. And then like BTFP and all the other acronyms that they're managing to put out to have off balance sheet. expansion of, you know, of central bank balance sheets. Sounds like Ethereum when you're describing the inflation. It's like, it's really that simple, right? It's just like security through sufficient complexity. Yeah. I mean, this is far beyond sufficient complexity. This is a Rube Goldberg machine that would make Rude Goldberg blush the US financial system of the banking system. The sad part is the best we've got. What was it like? Was it Egypt that just like completely was it Egypt? Yeah, they manipulated interest rates and had a 50 % devaluation overnight. And what can go wrong here when you're incentivizing bankers to then go buy treasuries again, and then if inflation does go up and you do have to raise rates, you're gonna have underwater banks again. Brian Cubellis (54:41.293) I would just rinse and repeat what we just went through. Well, that's the big. Question right now is because inflation is still going up with rates high. They've signaled that they want to lower rates. And now, like this seems. Which is interesting, too, because it's Basel three, which is international. Reserve laws, so it seems like the global banking system is like, fuck, like we kind of do something. And so what happens like you do take this out of leverage ratio, so you can actually. like for right now like buying a bunch of treasuries like adds to that ratio after this gets passed it's like all right you essentially had what we deemed as high leverage yesterday not as high leverage anymore and so you just sort of shove it under the radar and let people shovel into this a Mitch to your point what's gonna happen is they're gonna just like flood the market with liquidity and drive asset prices up and it seems like a Hail Mary to buy the Fed and the international bankers to like be like we just need to get these asset prices up so people think they're rich and I don't see how this ends well at all. I was just laughing because like none of this stuff should be controversial or like tinfoil hatty and it is because it's just numbers. And I was thinking about like all in I was like those guys are smart. They should talk about it. And if you go down the list of those guys, like one of them knows it but can't say it because he made his money in the world. So he has to play the game and then you start going around and some of them know it all the way back to like you go to that archetype that's like, no, everything's fine. It can never blow up. And that's just how we like look at the world. It's like some people know, but they're like, I made the money here. It'll all get figured out. And then you go back and it's like, you know, it's just somebody else. And they're like, yeah, this is like, this is crazy. Like how could the government, the dollar and all the things that, you know, people talk about with the integrity of it ever happen. And they're just not like an earn. I don't know. I'm just like working through, like, this is not that hard to understand. It's not sustainable. But for some reason, if somebody listened to this, it was not initiated into like. Brian Cubellis (56:43.661) Bitcoin or understanding that there's some value around it would think that what Marty or we just talked about the past three minutes or five minutes is absolutely insane. Brian Cubellis (56:53.677) Yeah, and there's not a lot of talk about this either. So this is like, no, I mean, even from like, like the Wall Street Journal, like, like all in guys, like they'll touch that third rail every once in a while, even though I want to consider a third rail, but they'll go where other people won't like the fact that they're not talking about it. Nobody else is. It's this guy, the Fed guy, like, hey guys, did you notice this is going on? And I mean, I put out a, you know, a national debt. article about a year ago and they pulled it up on the All In podcast, the charts from it, and Chamath said, this is a nothing. This doesn't matter. This is fine. This is fine. We're actually going to issue 100 year bonds. That's what we should do. Yeah. I mean, his point of view is, you know, I think it's easy. It's easy to like, tell yourself that, this is a cherry picking of data. And like, if you look at this on a, like a GDP adjusted basis, it's, it's all, it's all fine. We're still, you know, we're still growing, but then you show that chart and you show the fact that debt to GDP is now 130%. and, and Lynn Alden has done some great work on how when you get above a hundred percent, that tends to be kind of the death spiral where like, countries don't get out of that. They don't dig out of that hole. That eventually is a one way train to a soft default usually through inflation of defaulting on the debts. And even that, I think from Chamath's point of view is like, well, that's fine because we're still the best country and people are going to want our debt. That was really his take. People want our debt. People are hungry for our debt, hungrier now than ever, which is, in my opinion, pretty myopic because yeah, it's the, as I guess, as Greg Foss likes to say, it's the, US dollar is the, the, the best looking horse at the glue factory. It's, you know, it's stronger than the competition, but none of them are good because they're all fiat based and they all have enjoyed several decades of running up. Brian Cubellis (59:18.861) debts that nobody has any intention of ever paying. And the bill is going to come due eventually. And meanwhile, simultaneously, there are scarce assets like gold or Bitcoin that can be the escape valve for people trying to save, who want to not have their savings inflated away right from under them. And for some reason, Chamath doesn't see that set of facts laid out and connect the dots to show that, we're at the end of a long -term debt cycle. And the fact that the US is the most attractive debt issuer on the global stage today doesn't mean that our national finances will be fine. To just give credit to Chamath, he's very smart. I think he does know. When you go around the list, I think for sure he knows, I think Sachs potentially. The problem is it's the whole thing. Show me incentives, I'll show you the outcome. And the reality is all of our incentives, and we're talking a book that we believe to be true and our businesses around it so we can talk about it. At the end of the day, he has investors, he has a bunch of businesses. So we can't talk about these things because they're just like completely not kosher from a number of respects. And the person that put it like, it's like he's. carried Bitcoin since what, 2012, 2014, whatever he like seeded GBTC. Like he called it schmuck insurance. Schmuck insurance from what? Like, you know, the dollars. So I think he knows, but your point Jesse, like they anchor around this whole idea that it's okay because we are the world reserve currency. And so we'll get out of it. And there's some, some truth to that, but I'm pretty convinced like him and Sachs have an idea. The other side of it is like the other side of just the general populace. That's like, this is all insane. It can't happen because they're just like, haven't even dug deep enough, forget about Bitcoin just to know about the structure of the US government and its fiscal situation. Brian Cubellis (01:01:24.013) Like he's brilliant. Like I can't imagine, like Chamath, he's like probably smarter than all of us. Like come on. Like I don't think he does. Don't sell yourself so short, Michael. But you know what I'm saying? Like I don't think he doesn't understand the fiscal situation or it's untenable and like, because it's just numbers. I think he literally has to play a game of being a billionaire and like not getting kicked out of the group for saying the things out loud that we're saying because our incentives are aligned to be okay with it. So I'll give him benefit of the doubt in a different way. that I think explains it. I think he has an incredible belief in American exceptionalism and productivity through technology. And I think that that is his North Star and he thinks that that solves everything long term. And I think that that's like a very noble point of view. And I think it's a commendable, like very American point of view of like, we solve this by through capitalism. And I think that that, you know, it's the, it's ultimately the yuppie elite mentality of like, the world is great. I have faith in our institutions of capitalism and the financial system. And we solve this by doing what we've always done because America's great. And I think, so I think that like, that's the trap that he falls into is having too much confidence in American exceptionalism and productivity through technology. And generally, like these people are right until they're not. Like, it's not like, you know, the conversations that we're having are new. You know, yes, you know, Bitcoin is still, you know, 15 years old. But, you know, the gold bugs were out there saying the same things for decades. It's just, you know, it's a tipping point. And are we at that tipping point now? I think we're getting there. I think, you know, Bitcoin is the exit valve. We have the rails to, you know, even through the ETF for all this liquidity to use that exit valve. When Alden said ETF and RIS was, it's an API integration to bring liquidity from traditional finance to Bitcoin. I think all the stage is set and we're just sitting here watching. Are we at that tipping point? Jesse, have you seen this? They haven't told Chamath there's a new sheriff in town. Brian Cubellis (01:03:49.677) I don't know if anybody can see it. Logan, you pull it up. That's that's funny that's in the Wall Street Journal I love it yeah, well that I mean this and this also Ties into like the game theory of Bitcoin at some point Yes, they have to play the game now and posture a certain way, but at some point there's an inflection point where it flips and again if you're an early adopter an early advocate of Bitcoin over the traditional debt -based financial system, you're going to benefit massively. And so there will be a point at some point, I believe in the next five years between now and 2030, where these types, the chumas of the world, are basically making a calculation in their mind, like, yes, I've had to posture this way for this amount of time, but it seems like the right bet to make now is to posture the other way. Like, it's all fucked. We need to get on Bitcoin. And then you make that transition. You get like Elizabeth Warren's bags are very heavy right now, basically. Yeah. I'll give you a little bit credit. He when in 20 was it 2021 or 2022 to 2021, the inflation prints were out there. And there was the signal that we were headed for a downturn. Sorry, it was 2021. 22. He was trying to signal to, you know, American population that you've been children of a zero present interest rate environment. And you've got to, I remember that it impacted me hearing his words, you got to be able to look at your family and know what you're holding and be confident in that. And sure, he pushed a lot of SPACs and invested in a lot of those companies, but at the same time he did exit and he was trying to sound the warning signs that that was coming. Brian Cubellis (01:05:53.485) Yeah. And the other thing I'll say about Chamath is that so his Bitcoin story is pretty remarkable to me. There's some article, I think, in like Vice or something from a decade ago about about him getting into Bitcoin. And he got into Bitcoin because he was on a private jet flight from the Bay Area to Vegas with Wences Cezares, who is patient zero of Bitcoin. in Silicon Valley. And so he got just a one -on -one orange pilling from like, you know, a legendary Bitcoiner who I think probably spun it as like, this is early digital gold. You have a chance to bet on this new technology and you're going to want to have a slice of it. And Chamath bought a bunch of it just as like a tech bet, I think. And so he's been unbelievably right and has a huge Bitcoin position and has held on to it to his credit. And I think that that creates this sort of phenomenon that you often see with like the OG Bitcoiners is a lot of them don't actually understand Bitcoin, but they were early and they were right enough to buy some and to hold it. And so in their mind, they're extremely confident that they get it because obviously they get it. They were early. They bought it. They held it. They know everything. But The reality of it is you can be right for the wrong reasons. The Winklevide twins, their whole thesis is Bitcoin is digital gold. And so they bought some when it was like $11. And they were going to hold on to it until it becomes digital gold. And that was enough. That was enough for them to make a billion dollars because they've been holding on, watching that thesis play out. while not understanding that Bitcoin is turning into much more than digital gold. And I think the same story is true with Chamath. And I think that kind of plants the seed of like being very wrong about the current state of Bitcoin and where Bitcoin is headed, because you were so right in the past that it doesn't matter. You don't have to pay attention. Brian Cubellis (01:08:12.461) Yeah, you're going to be forced to pay attention and really dig into what's going on here. It's happening. What else caught your eyes in the news this week? Brian Cubellis (01:08:30.221) watching volatility come back to Bitcoin right behind you, Marty. I know. It was 71 not long ago. We're at 69 .5 now. Yeah. The halving, it's kind of strange. It's a real like the price action pre -halving. Yeah, we'll see. Who knows? Are we above or below previous all -time highs? Is this a fake out? I guess we... past the previous all -time high with authority this week, we're now still above it. Right now it's in at like 69, 500, barely above it. But what are the dynamics? Typically when we pass the all -time high, it's usually like up into the right and you don't say hello to it ever again, but outside of 2017 when we went below that. But for that matter, it usually does take a couple of weeks to decisively break through like. the prior all -time high, there's usually a pattern of like getting above it, dipping back below and then, you know, takes a while to eat through that. Everything's a little different now, though, because of the scale of like net inflows from the ETFs, like $500 million of demand a day. You know, the 10x what we're mining every day in Bitcoin demand, eating through available for sale supply. Again, I think that one of the major misconceptions that people fall into is thinking, there's 21 million Bitcoin. So what's the big deal with 10 ,000 Bitcoin being gobbled up per day by the ETFs? The truth is there's not 21 million Bitcoin available for sale at these prices. There's, I don't know, 500 ,000, 100 ,000. Obviously, there's different nodes of supply as you work up the price chart because people become willing sellers as they hit their magic number or they start to scale out or whatever reasons. But 10 ,000 Bitcoin a day is a huge percentage of what is available to be purchased at any price point. And... Brian Cubellis (01:10:49.389) That again, that's a much bigger Delta versus what we see after the halving where the halving creates like a 2X imbalance. And right now we have a 10X imbalance before the halving has even come. If we're dealing with the same scale of inflows, 10 ,000 Bitcoin per day on average at the halving, then it's suddenly a 20X imbalance. So where in the past we've been stuck at prior all -time highs for two weeks because we were dealing with a two X imbalance and that took some time to eat through things. I think it makes sense for us to eat through much faster when we're dealing with a 10 X imbalance. So I continue to think like it's still up or sideways only so long as ETF demand remains where it is. Like I don't think this is like a... a summer 2019 scenario like Marty has been scarred by, where we pump off the bottom and rip until there's euphoria and then dip for the next several months. But I think this is real and sustained. Yeah, I think it's like truly a global asset in the sense that it's always been global, but the global liquidity pools opening up like today, it was like Thailand's SEC approved and then London Stock Exchange are approving ETNs. So like all of these different vehicles or countries starting to want the capital to accrue to their country, or like we talked about the Hong Kong ETF. And so like what would change is the main question for it to go in the opposite direction because it just looks like a one -way trade. Which is why, on Jesse's point of how we normally perform at an all -time high, obviously we did have a leverage wipeout the first time that we... we touched on on 69K again, a week or so ago, feels like a lifetime ago. I'm really careful about comparing what's going on right now to what we've seen before, because I think in general, mistakes can be made and you think you know something and you get you get rugged. One thing I've noticed that pivot for a second. Brian Cubellis (01:13:12.269) and I'm interested for my for Marty's take on it is in the the equities market, I've definitely seen a divergence in the Bitcoin correlated stocks. And you've got your micro strategies, you know, mooning, you've got your coin bases up. And you've got that side of the fence. But I think going whether it's going into the halving or some of the other, you know, whether it's sovereigns coming into the space or, you know, a lot heavier money, but your public miners have not been performing the same way and have had a lot of downward pressure on their prices. And some of that was pre -ETF, but it seems to be happening again. Marty, how do you think that affects things coming out of the having the miners ability to raise money going into this new cycle and the post -having environment? Yeah. I don't want to talk my own book. That's part of the reason we announced the proposed merger between Cathedral and Cungsleden last week. I think up until this point of Bitcoin's history outside of micro strategy, retail investors didn't really have proxy exposure to Bitcoin outside of Bitcoin mining stocks. So historically Bitcoin mining stocks have been that equity of choice or basket of equities. of choice for retail investors to get indirect exposure to Bitcoin. And historically up until this year, I would say the mining stocks had a very simple strategy that was tried and true, which is go out, raise a bunch of money via debt or inequity offering to the market, and then buy a bunch of ASX, increase your hashrate under management that you're able to publicize, and then the market will reward you by pushing your stock price. I don't think that is going to work moving forward. I think analysts especially and even retail investors to a certain extent have Begin to better understand these mining businesses and yes You can go raise money buy a bunch of basics make that announcement and have a larger hashrate under management as a company, but is it Profitable and is it actually returning? Your initial investment of capital in a timely amount of time and I think Brian Cubellis (01:15:42.125) It's proving over time that it's not the best strategy to just ape in the a6 Increase your hashrate that does not lead to the best profit margins and return of shareholder equity in the long run. So I think Moving forward. I'm not this is not to say that mining stocks are dead is to say that they really have to begin to focus on Revenues and profitability and margin much more smartly. And so I think what we're gonna see is Moving forward is the separation of the strategy of just raise money, accumulate ASICs, announce it to companies that are really focused on return on invested capital, high margins, and optionality in terms of revenue streams. So companies engaged in demand response programs that have additional revenue from participating in that will probably fare well. Those that get direct energy exposure. Have the optionality to either mine with Bitcoin or like 360 mining is out of the commons They have the ability to mine Bitcoin or sell natural gas to market at any given point in time so that revenue optionality being able to Go for the revenue stream that is going to produce the most revenue natural gases are high natural gas prices are high It's like yeah, I'll sell natural gas back to the market over mine Bitcoin. That'll make my company more profitable in the long run at Cathedral with this proposed merger that is sort of the idea that we went with is how do we diversify our revenue streams and with Kong's laden we are able to do that by building infrastructure, hosting infrastructure very cheaply. Since we can build it so cheaply, since Kong's laden can build it cheaply, you get a quicker return on your initial invested capital which leads to higher profit margin in the long run. So long story short, I think the tried and true. Strategy of raising money buying a six announcing it stock price goes up. I don't think that's the game anymore I think the market now that it has optionality in terms of indirect Bitcoin exposure via the ETFs and stocks like micro strategy it's really gonna force the mining industry to To not be lazy with that strategy and actually run good businesses moving forward that focus on margin return on invest a capital Brian Cubellis (01:18:08.045) and growth that is manageable. Do you think over the long run this is probably a good thing for Bitcoin and that there's not, you know, I'd say, I'm sure there will always be a responsibility here, but you know, over leverage miners and the incentive to over leverage, you know, and cause some of the issues that we saw in the last cycle. Yes, I think this is the market's natural force is like basically forcing miners to be more. risk averse with their companies. I don't know mining anywhere near Marty, but like what you just described sounds like this ends up in a barbell approach where anybody that looks like Riot looks like a sovereign that has access to, you know, money printer and energy at zero cost. And then the other side of the barbell, which is smaller, more modular, is that correct? Like where this all ends up trending? I think so. Yes. And I think. Just based on what you described, right? Because like, in all these are proxies to get exposure. So that's how you could get capital markets. But if nobody's going to invest. Why I pause here is because I don't know if it's like barbell, because I think it's going to be like a spectrum of different business models, right? Like you can have the demand response side of things, the revenue from pure prop mining and then revenue from selling electricity back to the grid. What we're doing, it's like a different strategy, a cathedral where it's like we get prop mining. revenue with the optionality to participate and increase revenues when Bitcoin's in a massive bull run, but we also get that steady revenue stream with the hosting and infrastructure fees that we get for building out Rackspace. I mean, Barbell in the sense like what you're describing a cathedral is probably like one 100th, if not more than Riot. And so you end up with these like two sides of strategies that make up the majority of hash rate, but there's no middle. That's what I was going to say is like, because, I don't think necessarily, I think there will be like a wide spectrum. I don't think it'll be like barbell where it's like you're either on this end or that end. I think there will be a pretty diverse mix of business models between those two size of participants. Where like you think about it for Cathedra, this proposed merger goes through, like we have that steady revenue stream and because the return on investment, invested capital is very short. Brian Cubellis (01:20:36.781) in terms of the capital outlay we do to build the infrastructure versus the revenues that pay back that infrastructure from the hosting fees. That's what Kong's Ladens done up to this point has achieved pretty good scale. Within two years, just reinvest those cash flows to build out more infrastructure. And so I think that actually, it's a much more efficient way to grow a business is just to use operating cash flow to funnel back into reinvestment of the company and expansion of infrastructure. So I think it's... again, thinking creatively like a new way to actually build a mining company to scale without having to dilute shareholders massively or go into insane amounts of debt. Obviously, there will be a mixture of all three of those things, investing, cash flow, raising money via the public markets when the opportunity presents itself and is is advantageous and then a mixture of debt. which would probably be the smallest portion, or imagine would be the smallest portion because we know due to the variability of revenue from prop mining, doesn't make sense to go into insane amounts of debt. Brian Cubellis (01:21:54.861) The world's changing. It is for the better. It's good. I mean, it's just a maturation of the mining industry. Again, like the it was very easy between 2017 and 2023. It's probably up until this year to just be like, yep, we're raising money. Price of Bitcoin's up. We're going to issue a bunch of shares. We're going to take in a bunch of cash, buy a bunch of basics, add it to our PRs and... The companies were rewarded for that during the bull market, but they overextended themselves, bought too many A6, weren't able to plug them in quickly enough. And then during the bear markets, they go, shit, this actually isn't that great of a business. Brian Cubellis (01:22:42.093) I hope that answered your question, Mitch. It did. I've learned a remarkable amount on the mining industry from you in TFTC over the last couple of months, so I appreciate it. These are just my thoughts. I'm sure there are many in the mining industry that will have a different, but that's what you like. Michael, to your point about the barbell, I mean, that's what Fred Teal is really pushing right now. Like a lot of the big box miners are saying if you don't have 10 X a hash of hashrate under management before the halving, you're not going to have a business, which I don't think is true for everybody. Certainly there are many cases where that would be true, but I don't think people are actually thinking about this creatively and thinking really smartly about. Their actual cash flows and how they're creating optionality for those cash flows. I don't think they will succumb to Go under after the having because they don't have 10x a hash I think there's a lot of posturing from the big box miners trying to project like yeah If you're not a big box miner like us, you're not going to survive basically trying to convince potential shareholders to invest in them over smaller upstarts Sounds like we need to get Tom and Drew on the pod at some point. Yeah Definitely. I got one more for us on a totally, totally other angle. But you guys see Jamie Dimon this morning saying that he'll defend your right to smoke cigarettes and defend your right to buy Bitcoin. And are we in the midst of of one of the I guess the bigger pivots in Bitcoin industry? Yeah, obviously, Larry Fink was a big one for us. But you know, Larry Fink wasn't. as vocally against us. But this seems like a slight turn, you know, starting to form from Jamie here. You know what? Life was better before the smoking ban, so it's nice to see he's going to defend our right to smoke cigarettes. Yeah, I mean, it's the slow. I mean, think about it, he's the CEO of the largest bank in the world, I believe. Is JP more the largest bank in the world or just in the US? Probably the world. Brian Cubellis (01:24:49.613) I would imagine the world. I think he has to backstep and readjust his priors if Bitcoin is going to have massive success. Like you don't keep a job if you if you're fighting against if you Peter shift your way towards a million dollars. I don't think that's going to look good for him. I don't think the third, fourth and fifth order effects of what the ETF being announced were not contemplated and known before being announced, i .e. the banks. Remember, Marty, when you had a call one March, Chris morning, we were in California and there was things happening. I think this ETF thing was once it's there, it's like all lights go. Banks are here. What Mitch was talking about, they're going to roll back the requirements like custody. It's just going to take some steps. And what that means is very high Bitcoin. And then that means that banks have to participate and they have to get fees. And that whole game, you just had to take out a couple of CZs and a couple, you know, little slap Brian Armstrong on the hand, you're mine now, but you look like you're independent. Just get it all locked and loaded and you're, it's, you know, like you said, things are gonna get weird. I think like the things that are gonna happen, at least like the perceived like, like now it's gonna get weird. It's like, I don't think it's like that. They knew the demand before. Like we know this, that people, institutional investors were interested in BlackRock. To Blackrock to get exposure to Bitcoin, but they were apprehensive because of the market structure So they knew who was gonna come in before it was launched, right? And so that's why we don't hear like from retail Because the retail is not buying Bitcoin right now. I mean some is some are but Just point of like a lot of this stuff that's gonna happen and I don't think it's just like gonna like surprise a bunch of people including banks the the fascinating from my like vantage point of bit go is I So you've got all the banking sector and traditional finance starting to wake up to the space, starting to build their own infrastructure, starting to, you know, if SAP 121 gets ever appealed, they'll start doing some of the things that BitGo does right now. At the same time, your platforms, you know, anyone from your Bitcoin exchanges to the on -ramps of the world, you've got to stay one step ahead to differentiate. And obviously, you know, pushing the narrative of Brian Cubellis (01:27:16.397) actually owning your Bitcoin and I am of the camp that one day you will be able to withdraw your Bitcoin from an ETF. But it's just a question mark down the road. But at the same time, you've got to keep innovating and staying those couple steps ahead of the ETF. So how do you do it? Whether it's the multi -institution custody being an absolutely differentiated product and better than how the ETFs are custodyed. be building products and withdrawals on Lightning, which, you know, even if it gets worryable, I think it'll be politically popular, not for a couple years. But obviously, you've got the chance of and obviously the fears that everybody has that US government can go knock on BlackRock's door and take your Bitcoin. But at the same time, I do think it will be politically popular to withdraw and to, you know, and the BlackRock's and Fidelity's of the world are going to want to open that up because, you know, maybe the fees should be that much higher to actually withdraw that coin, there will be money in this. And I think money is going to drive that behavior. And I know that's not exactly a popular point. But I do think it's more likely than not that this sort of closed loop does open up. But I think largely, I'm excited for the innovation that takes place to that bad. rebels against the traditional finance route to getting your Bitcoin. And I think we're only just starting to see that. Yeah. Again, it's going to take time. My neighbor last night, it's going to take nine months. Then it comes in and then we get the sovereigns coming into the meeting between. Was that UAE Prince? Yeah, very interesting. Very interesting. Wonder what they talked about. Very deliberate Twitter post with just from from Bukele with just the eyeballs looking. And that was it in a video. And that that. Brian Cubellis (01:29:23.341) That's saying something. Here's how you play. You got sailor on yachts with Bezos. yeah. I forgot about that. Did you see that Marty? I did. Yeah. And you know, like I was thinking about that recently that if you're Bezos, you probably don't respect a ton of people, just generally, but you, you're a peer group. is like minds who understood the internet early and then did heroic things to build a business and make a fortune in that space. And Sailor is in that small group. Bezos has got to respect Sailor's vision and what he says is important. So, you know, that puts a little more weight behind it when you think about it that way. Yeah, it's just Sailor. We're getting in the Bezos circle. I mean, they've both been around for a while. And what do you think? He's just been market selling billions of dollars in Amazon stock. Like, I wonder what is he buying? Eight billion dollars worth, I believe. And everyone was watching that thinking it was a top signal for the market. And it potentially could have been because, you know, a lot of the tech execs were doing that in 21. You know, Elon was doing it too. And... Perhaps he's doing it not as a market top signal, but as a exit valve signal. Brian Cubellis (01:31:07.533) Jeff, you're very well off, man. You've got billions of dollars. You've built an empire. It would be terrible to see you end up poor because you get caught in this. They'd probably welcome you on the pod to talk about it. Jeff, if you want to come talk. It's just exciting. I don't know. We have a pretty full calendar on this podcast. I don't think we can fit Jeff Bezos in. Yeah, you know what? Maybe next year. Or Sailor. or sailor. I don't think we can hear him talk about, you know, MSTR ripping. If you cancel me next time for for sailor or Jeff Bezos, I'll give you that. We have it. We're going to need that. We're going to need a we got like the yin and yang because I think sailor, you know, is is favorable to Jesse and his charts and his leverage them in some of his discussions. But then our good buddy Marty and him have a little bit of a contentious relationship since the mind touches. But. I've only had Michael Saylor on TFTC once and it was in 2020, 2021. And we basically fought the whole episode because he was pushing ESG. I was telling him like - It was deep 2020. It was COVID. I remember because it was literally like everybody's locked down. No, it was 2021 because he didn't get into Bitcoin until 2020. yeah. 2021. And then - With Feinstein, right? Yeah. And they, yeah, I got, I got attacked. I love I love everybody involved. We had a gentleman's disagreement. He was saying like, just eat the burger Marty like he is. He's good. Like we're yes. And I was like, she's terrible. I don't want to be associated with all and for what it's worth. I mean, Michael Saylor's Bitcoin buying strategy been validated over the years. I think my comments on that podcast have been validated. Yes, she's complete horseshit and the market is running away from it. You don't see Michael currency. He says it's also not. So you gotta like look what they do and then look what they say and you gotta like take them with grains of salt. You can't, you know, he doesn't think Bitcoin's money. Brian Cubellis (01:33:08.365) I think he does. I think he's well, no, I mean, I'm joking. Like he knows he can't say he can't say it publicly. Like he can't say it. Yeah. And again, going back to what we're saying, like, to muffin them, like had the balls to say it. We're in control. We're not in there with them. They're in there with us. Sack up. Yes, she's bad. Bitcoin is going to be money. There's nothing you can do about it. Get used to it. We're going to win. That's true. We straddle the straddle the line here. on some of that stuff, but that is actually pure alpha. There's conversation, I mean, that was a bad trade. For anybody that was buying anything ESG related, that was not a good trade, even though 24 months ago they would have called you a crazy person. Why don't you care about the environment, Marty? Why don't you care about equality? I do. That's the thing, ESG. I sent this tweet out yesterday, it was hilarious. that over the last five years people have been calling Bitcoin a tulip bubble craze while one of the biggest tulip bubble crazes was actually inflating in front of them and it was ESG which told you that it was a wise investment strategy to neglect reliable energy infrastructure and target diversity quotas. That's how you're gonna get a return on your money. Just decommission all the reliable energy that got us here and just make sure your board's constructed of people who do not have merit but check off some boxes. We're gonna win. They're in here with us. We're not in there with them. I'm not gonna be apologetic. Bitcoin is taking over the world. We're gonna consume more energy. It's gonna be used as money. The government is overspending. They're wasting our money. I do not respect them at all. Bitcoin. Gives us the tool to just give them the big middle finger and say, huh, your tires are over. You're completely right. You're completely right, Marty. But I'm glad that Sailor is taking these. Bitcoin's just property. Don't worry about it. No, no. It's weak. It's weak. No, no, but it is the meeting the people were there at because it goes back to if Sailor told everybody that, then you wouldn't have the next. Yeah, you wouldn't get Bezos on board. You wouldn't get Bezos. But going back real quick, just as a funny anecdote. I think it's a big assumption. Brian Cubellis (01:35:23.853) The world is looking for high T. The world is looking for alpha. And you just basically say, the government is messing up everything. Bitcoin's here to fix it. Like if you don't believe it, have fun staying poor. We're going to the moon. This is at the end, so hopefully, like, either we don't have to clip it, most people won't make it to the end. There's this anecdote, and it's great. I don't know if you guys feel it, but I talked to my, like, wife or in -laws about, you know, like things going. good and you bring up all this stuff and I get so excited and all they say and they say is, maybe, they like say, maybe or they're just very like even keel like you just explain it and in 2021 or whenever this all this stuff started on ramp I brought up all this stuff ETFs and my mother -in -law goes, you know, just have a question. Could you ever go work for BlackRock or like Fidelity if it doesn't all work out? Like she meant in the most like. Compassionate way it's like maybe this doesn't work. Can you go right now? Like you think of is like what you're saying right? It's like they'll never let us work there They'll just like never let us worry I mean obviously we'll never go we never think anybody wants to do it's just a funny thing It's like it just pulled the clip. They're like, yeah, you remember Marty just like literally went on a monologue about how we're all It's like no, we can't we can't go work at BlackRock raise your t -levels gentlemen, come on We have the truth on our side. The truth prevails. I mean, you know, there is a objectively, I think lower T levels across, you know, all populations in the world. So I think that these are just facts. Yes. I do have to run here. I got somebody hopping in this room in five minutes. Gentlemen, Mitch. We all have to run before we get canceled. I'm not gonna get canceled. That's the thing. They can't be, can't be fearful. This is a buttoned up crowd, Marty. We're, we're speaking to, We're meeting people where they are. Anybody listening who's still here, loosen your buttons up a little bit. Live a little. It's gonna be fun winning. Winning is fun. It's gonna be incredibly fun. We're gonna have a lot of fun. And also stay humble. Stay humble and send us notes. It was nice to get all the emails from branches. If you're interested in getting involved in anything we do or working in the space, we appreciate it. So send us a note. We'll respond and get you in touch with the right people. Do that. We'll be back next week to read your notes. Enjoy.