WBD154 Audio Transcription

Plan₿ on Bitcoin’s Stock to Flow

Interview date: Tuesday 1st October 2019

Note: the following is a transcription of my interview with Plan₿, an independant trader. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Plan₿, known for his Bitcoin stock to flow ratio analysis and the author of Modeling Bitcoin's Value with Scarcity. We discuss gold's stock to flow compared to Bitcoin, scarcity, halvings and safe-haven assets.

“The speed at which this is all going, is much underestimated. If the stock to flow model is even somewhere right… we will hit a 1 trillion dollar plus market after 2020 and a 10 trillion dollar market after [the] 2024 halving.”

— Plan₿

Interview Transcription

Peter McCormack: Plan₿ man, nice to meet you, nice to get you on the podcast!

Plan₿: Peter, thanks for being here.

Peter McCormack: Not a problem! You've become a little bit of a star recently on Twitter certainly. Also I was out in Wyoming watching Trace Mayer give a presentation and he kept going on about you, so you've got a rising star here at the moment.

Plan₿: Thank you! Well you had an amazing time in Wyoming, I followed it a little bit. Private jets, meeting Trace Mayer, excellent!

Peter McCormack: Do you know what, I feel so fortunate at times with of these things that happen. I may never go to go on a private jet again, it was my only experience, I was totally amateur. I drunk most of a bottle of champagne and ate all the M&M's! You've got to take advantage of these situations, but I'm back to normality to Bedford. But listen look, thank you for coming on, great to talk to you.

I want to learn more about this stock to flow ratio. I saw it mentioned in Saifedean's book, but it's something you've been focusing a lot of time on recently. But before we get into that, just firstly, can you tell me a little bit about your backstory, like the career stuff that's led you to this point of being a Bitcoin trader?

Plan₿: Yeah, absolutely! It's a bit unfortunate, I'm an anonymous accounts, because if not, I could go much deeper, but maybe for now, I'm in traditional finance, so I work for a listed Dutch financial institution and I work at the investment team where we invest the balance sheet of this institution. It's a big balance sheet, multiple asset classes, multi-billion dollar about on the sheet, mainly focused on fixed income.

So mortgages, loans, sovereign debt and my background is a little bit more techie, because my legal background as well is structured finance, so making structures like securitizations and also derivatives pricing. So that's my traditional finance background, if you will and it's this investment point of view that I bring to the table.

Peter McCormack: Do you get involved in Bitcoin at all in the day job?

Plan₿: Only at the coffee tables! It's one of my wishes to be a bridge between the Bitcoin world, which I'm so passionate about and the traditional finance world, but there's a big gap in between. It has to do with regulations, regulators, traditional mindset maybe and a very new asset. But I'm sure that I can build that gap, build the bridge and that's one of my goals why I'm here.

Peter McCormack: Are you the Bitcoin guy at work?

Plan₿: Yes, I am!

Peter McCormack: All right man, well listen, let's get into this. It's quite cool that you want to be that bridge. I've been kind of scratching my head at the whole institutional things recently because there's certainly been a number of plays in the market. We have institutional custody, we have Bakkt, we have futures with the CME and CBOE which came out, I think it was last year.

Yet there's never been this huge take-up and I'm always kind of scratching my head and wondering why. I still think it's too much of a weird concept for institutions to get their head around. I think it still feels kind of too risky, like it might die, have you thought about that?

Plan₿: Yes, I think most institutional investors see it as a new asset, an exotic asset with high volatility and it's not a very big asset also, so it's a very small and thin market to trade. So I think within institutions there's people who are closely watching this, people with derivatives backgrounds, quant backgrounds, so the people who make the models and do the more complex math and statistics in those institutions, I think they follow it, also at dealing rooms, especially in 2017 at the peaks, you could just hear the words Bitcoin and crypto buzzing around. 

So it's there, but yeah, it's small, it's new and that's also why I try to write this stock to flow paper in words and language that the institutions understand. So risk return with a fundamental analysis approach, instead of a technical analysis, which is more trading oriented. So yeah, I think that helps and I think that's what we're seeing at the moment, that the stock to floor idea and the mathematics behind it are understood and recognized by institutions. That could be a start for a discussion in their own language.

Peter McCormack: And it's a great paper. You're talking about the Medium article, right?

Plan₿: Right.

Peter McCormack: So is it 19 languages it's been translated into?

Plan₿: 20 as of today!

Peter McCormack: What was the 20th?

Plan₿: Polish.

Peter McCormack: Wow! I mean that's pretty cool man, it's a great paper. Do you know what the other thing that's great about it? It's actually really accessible, even for somebody like me, it's very easy to follow and I feel like after I read it, I'd come to a real kind of good idea of the value of scarcity in this. But let's break it down, because there will be people who've kind of heard about this, they're going to be seeing on Twitter, stock to flow, some will get it straight away, some won't, let's get into it. So firstly, where did your interest in this come from? Did it come from reading "The Bitcoin Standard?"

Plan₿: Actually it was a little before that. "The Bitcoin Standard" came later, but it brought me on the stock to flow idea, but I was involved since 2013, when I was actively looking for hedges or instruments or something that could protect assets against quantitative easing that was in full play for a couple of years by then and low and negative interest rates.

So I was scanning the market for new products, new derivative kind of things to hedge and make use of this low interest and that's how I came through the site, zerohedge.com on this Bitcoin phenomena. It was not until I read the white paper, which I think is also very accessible and readable also for non-technical public, when I read the white paper, Satoshi Nakamoto's piece, it all clicked right away. So the 21 million supply cap scarcity and how can you do that in a digital world, because I know gold is scarce and you have to dig deep into the ground to mine it, but how do you do that digitally where you can copy anything from photos to files and videos.

Why not copy a Bitcoin, especially since it is all open source and can be copied with the push of a button. So when I understood the digital scarcity aspect, I also understood that that is worth something and then the whole journey of, how do you measure it, how do you quantify it, how do you make the relation start and that's where Saifedean's book, "The Bitcoin standard" played a big role, because it brought this stock to flow concept in my mind, which I'd already heard of before, but in a traditional commodity context, so gold, silver and other precious metals.

Peter McCormack: And you were able to get over the fact that it wasn't something that you can touch, there's nothing tangible with Bitcoin in some ways, you were able to just get over that straight away? Because that's where I struggled to begin with. The first time, I didn't take it too serious because I was like, "it's not a coin, it's not a note, it's not a bar of gold, it's nothing tangible, it's just a bit of fun." I saw it almost like gaming tokens.

Plan₿: Yeah, well I can understand that. Maybe because I'm a numbers guy, that I understood that encryption and the mathematics behind encryption is really powerful. It was on the weapons list in the US as well. You can play very powerful games with that. So I understood it sort of naturally fit that the scarcity thing would be locked by encryption on one hand and a peer to peer network without a central power, so to speak, on the other hand. So yeah, that didn't bother me.

Peter McCormack: I think that's a problem a lot of people have with it though, especially with my friends as I've been trying to introduce them to it. Trying to get their head around a concept of a digital money, which isn't backed by any government, which just exists online, it's a massive leap for many people. If you don't have a background of understanding, economics or math or cryptography or if you're just a standard person who does a standard job, I think the leap that you have to take from traditional fiat money to Bitcoin, I think people sometimes underestimate that leap.

Plan₿: Yes and what might also have helped is my background in finance, so the knowledge that our current financial system is also backed by nothing physical. So it used to be backed of course by gold and stuff, but since the 15th August 1971, the US dollars is loose, it's on its own. So as soon as you know that and recognize that, that combined with quantitative easing where the money printing is going full throttle, I think that takes some of that fear away that there is nothing behind it, because it cannot be much worse than what we already have!

Peter McCormack: Yeah, I think most people have this fallacy that the fiat currency is backed by the government. They don't get into the weeds of it, they're just like, "well our government prints it and protects it, so surely this is real and there is no government behind Bitcoin, so it can't be real."

Plan₿: And I think the book, "The Bitcoin Standard" explains this very well. In fact, the first 80% of the book is about the history of money and I liked that really much. Then the last 20% is about Bitcoin. But yeah, the understanding of money and what it is and where we went wrong, maybe I shouldn't say wrong. I mean the current money system brought us where we are today, it brought us very far, all the trade, all the stuff that happened over the last 100 years, but I think this is it. What brought us here won't bring us there, so we need the next money technology, if you will and this Bitcoin thing sure looks like it.

Peter McCormack: Yeah, it certainly does. I discussed this with Trace in my interview that came out, I think it was yesterday. I can't even remember the releases now, but we talked about the fact that we're not teaching money and finance in schools to kids, it's not being taught. But really I think there's as big of an argument, if not more of an argument to be teaching this now as there is to be teaching biology and physics and everything else we teach.

Plan₿: Totally agree!

Peter McCormack: So you have to teach your kids yourself, man! Let's get into this. Come on, explain what stock to flow is?

Plan₿: Stock to flow is a measure of scarcity, that's how I describe it. When you want to measure and then model with that measure scarcity, how do you do it? You can look at how much of the stuff is there, but the stock to flow ratio goes a little bit deeper and it's not easy to really understand. For example, if you look at how much of the stuff is there for palladium or platinum, there's actually less there than gold. So you could say it's scarcer than gold, but stock to flow measures the amount that's there in years of production.

So gold has 200,000 tons of gold out there in the world, that's the reserves and the yearly production is around 3,000 tons of gold. So if you divide the 200,000 by 3,000, you get about or a little bit above 60, as a stock of flow measure. There's a little bit more than 60 years of gold above the ground. If you go a little bit philosophical about it, it measures how far suppliers can inflate that stock, so do suppliers have an influence over the stock of a certain money or assets or commodity?

Of course that's not wanted, because inflating money supply, that's exactly what happened in Germany in the 1920s with the Weimar hyperinflation, it's what happened in Zimbabwe in 2008, the same day that Bitcoin came around and what happened in Venezuela. So one of the big risks of our current system is that the people in control, the central banks and the governments, can inflate the money supply and I would argue that also the US and Europe and also Japan, are all actively inflating the money supply as we speak and we call that quantitative easing.

So with gold, 60 years of supply above the ground, that a is very, very difficult thing to do. So you can put twice as much equipment on there, twice as much money, maybe you could even double the yearly production of gold, but still, it would be very small compared to the stock. So in that way you can measure scarcity and that's what I used for the model.

Peter McCormack: So interestingly though with gold, over the next 60 years there will get to a point where it's going to become scarcer and scarcer?

Plan₿: For gold you mean?

Peter McCormack: Yeah, you said there's like 200,000 tons available, 3,000 tons a year is being mined, so over the next 60 years, those last elements, those last kind of atoms of gold that are going to be mined, it's going to get harder?

Plan₿: True. But actually you see the production of gold increase every year. So if you look at the last hundred years, I think it doubled or tripled the production of gold, because of better exploration, better mining, more power for machines, so what you see in fact at the stock to flow ratio of gold, is that it's about the same over the last 100 years.

Peter McCormack: But ultimately, it will get harder and harder at some point?

Plan₿: Yeah probably, unless the technology goes with it and we can explore the bottom of the sea or some meteor or the moon. So yeah, there's always that risk. But yeah, you would expect that it will get a little bit scarcer and stock to flow will rise a little bit.

Peter McCormack: Whereas with Bitcoin we know is 21 million, there won't be more than 21 million and any attempt to increase the supply by creating a duplicate shitcoin, has proved that it has no value, it does not even impact Bitcoin.

Plan₿: Yeah, exactly and in that way, it's the first inelastic asset. So it's inelastic for supply. The supply is determined, nothing can change it. So there is no risk, no uncertainty with that and that's worth something as well. So yeah, it will get scarce for sure.

Peter McCormack: Is there a collective belief system going on here as well?

Plan₿: No, I don't think there is. If you mean belief system as in, money is an illusion and if we believe it's money, it will be money? No, I'm not from that school. I think some things are really scarce, really better in their function to be money. 

So money also is not a thing, it's a function that certain goods, certain commodities or in this case Bitcoin, can perform and certain things are really, really better if it has the highest stock to flow ratio, but also if it's durable, divisible and the classical aspects. But especially stock to flow, if there is a good, with a higher stock to flow ratio than gold, it is perfect for performing the function of money and it will be used as such.

Peter McCormack: And the halvings play a big role in this. So in terms of Satoshi's design, his design was in a way which accelerated the value of Bitcoin and Dan Held talks about this being a fantastic marketing loop for adoption, but you also talk about halvings increasing the hardness?

Plan₿: Absolutely, it's a step function. So every 210,000 blocks approximately, four years, the subsidy halves, the amount of new Bitcoins in every block that's mined every 10 minutes, halves. In that way, it's pre-programmed, it's determined that the supply will approach in a step wise function this 21 million cap.

I think that yeah, there's a lot of debate, if it would have been better if that was a continuous function, where you we smoothly towards this 21 million, instead of shock wise, every four year this shock and there is speculation if this was intended by Satoshi or not, nobody knows. But with hindsight, I think it's a very clever mechanism to one, lock in the stock to flow and after this halving, you immediately see the miners with less coins and that sell pressure that naturally comes from miners selling their coins to cover their electricity costs, will halve, it's just a market dynamic that actually will change after the halving.

But second, it also creates financial market dynamics that are interesting. People are going to speculate, "oh, miners are going to get less, will this be a death spiral?" That was a narrative around the last two halvings, which of course didn't play out and other investors are going to speculate, "wow it's going to be scarcer, I might get some and maybe it increases in value."

So the whole dynamic changes also financially and that is also very interesting, because weak hands like we call them, the people that don't know and are uncertain, they sell at those points, even before the halvings things, for example right now, but strong hands, they pick them all up. You talk to one of the strong hands this week, Trace Mayer, he's the hodler of last resort and there's more of him.

So I think it's very good to have a strong hands holding Bitcoin instead of weak hands. It's also with companies and shares, you want to have strong shareholders I believe in the company and that are not going to sell or react or ask all sorts of difficult questions if there is one hump on the road. You want strong holders. So yeah, I think it's a good thing, the halvings.

Peter McCormack: My whole strategy now after making many mistakes and having far less Bitcoin than I did at one point now, is that I've rejected all shit coins around six or eight months ago. I decided to go Bitcoin only on the show, which was a great idea, I'm glad I did that. But I just sold everything and one of the cool things that's come out of that, is my Bitcoin holding has gone up since because whilst I give some away, I tend to accumulate more than I let go.

I've actually kind of stopped caring about the dollar/pound value on a short term basis. I don't check the price anymore actually because I'm trying to play a much longer timeframe and what I've said to myself is, "don't do anything for 3 halvings."

Plan₿: Yeah, same thing here! I think that's exactly the mindset you need for Bitcoin. If you're playing a short term game, it can be very much fun, but I think it's better and more profitable if you play the long term and be there for at least one halvings, but preferably two or three halvings. This is a marathon, not a sprint.

Peter McCormack: Yeah and you've spotted a very strong correlation between Bitcoin's market value and stock to flow. But one thing I want to throw in there, and one thing that just sticks in my mind, I still wonder whether the Bitcoin price itself as a single unit, is a psychological problem for people.

Plan₿: I don't know. You mean that it's $10,000 already and that's high?

Peter McCormack: Yeah, so certainly on a level with my friends, the conversation is now, "oh it's too expensive", because they see a unit price of Bitcoin at even like $10,000, $8,000. If after the next halving we get to something like $55,000, I think psychologically, especially within the retail market, it's going to be a tough pill to swallow. I think people are going to be like, "I can't get on this, it is too expensive." I'm a big fan of moving to more sat space pricings, so people don't have that psychological barrier.

Plan₿: Yeah, I think that's a good thing, moving to sats instead of Bitcoins. What you're saying, I can relate to that. It reminds me of the time I bought my first Bitcoins and that was in 2015, when they were around $400 or something. At that time I thought the same thing, I thought, "well they are very expensive right now, is this a good time to enter?" But with hindsight, it's all about the return, it's not about how much it is.

So what helped me was thinking in terms of return, and of course I'm used to that as a professional investor, risk and return. But if you map those out, the average returns and the average risks, then it doesn't matter. All that matters is that you enter and you enter fast. Yeah, of course it was much lower and cheaper a year ago and it would've been better to buy them. But the second best time is now or at least averaging in somewhere in the near future, if you want to want to go in of course.

Peter McCormack: Tell me about this strong correlation though that you've spotted. What's the pattern that's going on?

Plan₿: Yeah, the correlation that I first spotted was with the market values of gold, silver, Bitcoin and the stock to flow values that were related to that. So you see an almost $10 trillion gold market and a very high 60+ stock to flow and you see all of those commodities with stock to flows around 1 and very low, $10 billion, $100 billion range market values. So that that was the first hunch that there was a correlation between stock to flow and market value.

Then when you map it out, you get this weird high 95% correlation that you seldom see. I mean in real life I don't see that, but maybe it's also good to point out that it's not so much the correlation, but the co-integration that is interesting and that's a technical term, I'll try to explain it. A correlation means that the two variables, stock to flow and the price, move together. So stock to flow goes up, price goes up and if that goes lockstep, you have a correlation of 100% and 95% is of course very high already.

But we also know if stock to flow goes up after a halving, price doesn't go up right away. It usually lags a little bit and maybe in the future we'll front run it, who knows? But it's not lockstep up and down and especially in the four year period off a halving thing, the halving increases slightly, but the price can fluctuate wildly around it. So the correlation there is also not perfect. But what's even more interesting is the co-integration.

Co-integration means that the difference between the stock to flow and the Bitcoin price is constant, well not constant, but the distribution is stationary. So today they move together, like if they're connected with a rubber band or something. So if the price can go far away from the stock to flow, but it will always return. It can go below the stock to flow, but it will return to the model value and that's exactly what you see.

So every single year for last 10 years, the actual Bitcoin price was above the model price and below the model price every single year. So that's what you can expect for the future and it doesn't matter if the price goes right away after the halving up or half year later, you know it will go up.

At least that's the hypothesis, that's also what the math and the statistics say. So yeah, I have very high confidence in that. But the next halving will of course, be the big test, the big outer sample test for this hypothesis. But yeah, it's good to know that it's the co-integration and not so much the correlation that is interesting from an investment point of view.

Peter McCormack: You've got a bold kind of price prediction after the May 2020 halving, around $55,000, so I'm trying to imagine in the cycle where that relates to say, the previous halving. There's been very key kind of price points, there was the $1,200 price point we reached and then dropped and then there was kind of like a time around $3,000, then the run up to $20,000, back to $3,000 and now settling kind of near $10,000. That $55,000, are you putting a marker against a similar trajectory from the previous halving? Is that the equivalent of the $1,200 run up or is that the equivalent of the $20,000 run up?

Plan₿: Yeah, so the $50,000, which is actually a little bit conservative for the parameter. I found it a little bit high myself, so I thought I'd better be on the conservative side. So I rounded the parameters downside, very round numbers in the model now and the data I used until December 2018, of course we have nine more months to put in there. If you use those, you get a little bit higher! So it would be the $60,000 to $90,000 range and of course I also have this new model based on yearly data.

So less data instead of monthly data, which even gets us at about a $100,000. But anyway, let's say it's between $50,000 and $100,000, if you look at past predicted numbers, it would have been after the 2016 halving, the model predicted $7,000, so that's a conservative number again and you can compare that with the $50,000. After the 2012 halving, it was a little bit above $700 the model value, which is pretty close.

Peter McCormack: See the interesting thing here is thinking, "oh God, how am I going to play this? How am I going to trade it?" If it hits that $55,000, do I then sell, wait for it to drop back down to $20,000 and buy it again? If it does that, then you see it shoot up, maybe you're right and it goes up to $100,000. I've come back to that conclusion that I'm just not even going to play it. I'm personally not going to try and predict or try and guess this game because I think it's too complicated. I think this is why I go back to the, "I'm not a trader". I make podcasts, I'll learn my income and I will just keep stacking sats.

Plan₿: That's right and that's how I do it as well. I mean, the urge to trade is big, especially if you see those big swings around the model. But no, I think that the long game is the best game to play, especially for non-professional investors that don't have access to information or high speed trading equipment. So yeah, I would do the same but let me add one thing.

For myself and that's a very personal thing, if you made a 10x or even more, it's not a bad thing to take some money off the table to make sure you do something nice with it or set yourself up for the bear market that will also follow at a certain time. I would never sell it all, I will not run that risk, because yeah, you could miss the whole market up move. But yeah, there's no shame in selling a little bit once in a while, after you've gone 10x.

Peter McCormack: Well it depends where the inflows come in as well because we talked about there hasn't really been this institutional inflow, but the mechanisms and the infrastructure is there now if it does happen. So if the price starts shooting up again and the media start covering it, any institutions who have an interest now have the infrastructure required to invest.

Plus we're starting to see the state level involvement. It tends to be more the rogue states that are wanting to avoid sanctions as such, but we are seeing news about Venezuela and North Korea, what would it take for a less rogue state to be involved and maybe it's already happening. If there is another big run and the institutions and the states start to take it more seriously, then God knows what kind of run we can see up.

Plan₿: Oh yeah and it will get very, very interesting in my opinion. It's not only the rogue states, there's also states like Malta or Iceland or Portugal and Europe that are really pro-Bitcoin. So I guess that will be some sort of competition among governments for passports and the inhabitants. Yeah, you can't have governments that are very much against Bitcoin or even banned Bitcoin, but that only means that brains and money is going to leak from that country and go to the more progressive countries.

I think the speed at which this is all going, is much underestimated, because if the stock to flow model is even somewhere right, even a little bit right and we go, we will see the predicted levels next halving and the halving after that. We will hit $1 trillion+ market after 2020 and $10 trillion market after the 2024 halving. Those are numbers that are big enough to make a lot of governments very scared, even the US monetary base is only $3 trillion. So I think we will get very interesting times, also very bad times. So once in a while with bans and legal action. We haven't seen nothing yet!

Peter McCormack: Yeah, I think it could be crazy. Another thing that I've also found very interesting is there are previous detractors, who have now flipped and you've also got gold bugs and also macro speakers who are very interested in Bitcoin. I really enjoy Raoul Pal's take on it and he's been on my show.

Also Dan Tapiero recently, he's been talking a lot more about Bitcoin and he's a gold bug. So that kind of flip that is starting to happen with people who are seen as experts in the macro economy and also experts in gold, that flip must also be something that's going to start to convince people.

If you then fold into the fact that the global economy is fragile right now, if we do start to see a currency collapse, you will see millionaires and billionaires as you've noted within your own document, fearing quantitative easing, fearing the effect of inflation on their wealth. A billionaire doesn't have to put too much into Bitcoin to move the needle.

Plan₿: You're absolutely right. This army of Bitcoin investors and holders will grow steadily, but it will grow. Yeah I've talked to Raoul Pal as well, I recently recorded a video with him on especially this topic, gold and Bitcoin. I see a lot of gold bugs, old gold bugs being interested in this digital gold.

In fact, I was an old gold bug interested in gold, having gold and turning to the new gold if you will. You don't have to go all the way, like you said, you can hedge yourself, expose yourself a little bit to it, that would be even a prudent thing to do. If you look at the people that Raoul Pal talks to, that is really the creme de la creme of the old finance.

Those are not the traditional bankers in some village in the Netherlands or the US, those are the big dogs of the hedge fund industry, the progressive people and if you listen to him, he actually says that everybody's already in. I mean maybe not much, maybe not with the millions for those guys, but they are in and getting their toe in the water and I see that around my friends and colleagues as well. There are also even central bank friends that are buying Bitcoin, just a little bit to see what it is, to protect against, well something maybe. The probability is very small, but the impact is huge. So yeah, it's what I see as well.

Peter McCormack: We just need Peter Shiff to turn now! Once he turns, I think a little...

Plan₿: Yeah, a good point. What I learned to do, is to ignore those people. So there's people that are against it for maybe good reasons, because they have a gold business or they have something to lose. You have the haters, the trolls, the whatever. But I am not going to waste energy on those people, so I'm going to focus on this steadily growing army of interested people, who want to buy Bitcoin and want to know more, who want to run their own full node and that's really a lot of people. So yeah, I don't bother with the Peter Shiffs and all the others.

Peter McCormack: But we do have the Bitcoin bugs as well who are also anti-gold and one of the things that I keep thinking is that it's not either or, I actually see a role for both gold and Bitcoin. Especially if you think at state level, I can't see states dropping gold and only holding Bitcoin. I see them adopting Bitcoin, but I actually see a role for both.

Plan₿: Yeah, you can argue both ways. So from a diversification point of view, yeah, you would hold both. You will own gold, digital gold Bitcoin, property, sovereign debt, whatever. But if you take the purest view about money and as sound money, the hardest money there is, and it is a bit of a winner takes all game, because look at [Inaudible] central banks in the same extent as gold 100 years ago, but it totally lost its value. I think it was around 1960 that the US central bank sold all its silver.

So they kept the gold, but they sold the silver, everything. If you look at the stock to flow of silver, it has dropped from gold levels 60 to 3 right now. So it's now an industrial thing used for solar cells, solar panels, electricity and electrical equipment, it's an industrial assets and no longer a monetary hard money that is held by central banks. If you make the parallel, if Bitcoin will be better than gold, maybe they will dump gold as well, because everybody who has gold or has had gold knows it's a pain in the ass to have gold.

It's heavy, if you want to send it, you have to transfer... You don't even know if it's real! You can't verify it, you need special equipment or trust guys like Peter Schiff. Well I'll have my Bitcoin every day!

Peter McCormack: Well, I think they face different risks and threats though, because on the other side, gold doesn't have a 51% attack threat, it doesn't have an inflation bug threat or any kind of bug threat. Also it faces different regulatory environments, so that's why I don't see it's one or the other.

I do see different people will have different kind of, whether you're a state, an institution or an individual, you'll have a different kind of weighting of the value you give to both. Yes, to us Bitcoin bugs who consider Bitcoin to be a harder money and better money than gold will probably be more weighted in Bitcoin. Actually I've never owned gold, not as a investment, but I don't see it being either or.

Plan₿: Yeah and time will tell. I don't know, of course nobody knows and we will see. It will be very interesting.

Peter McCormack: Okay, let me ask you about another thing because I asked a question on Twitter the other day and I got derided as a moron for asking the question, but I was asking about liquidity, because one of the things about Bitcoin at times, if it's only a speculative asset, if it's not being used much, I was wondering if liquidity would change it. I got called a moron or whatever again, but one of the things that came out, is that liquidity comes from hodling and I still can't get my head around that, because for me hodling changes scarcity, but for me, liquidity came from buyers. What am I missing?

Plan₿: I missed your tweet, obviously I haven't read it. But if I look at liquidity, just for normal investments in my day to day job, liquidity is very important, but it will be the depth of the market. So is it a big market? Can I sell my stuff? That's basically what you'll ask yourself. I'm going to do this investment of X dollars and how fast, how easy can I get out?

If it's a very liquid market like a US treasury market or even the stock markets, that's very easy to get out. But if you're in a small market that you cannot get out, you have to be prepared to sit it out if something bad happens, some distress, some recession or something. So if I look at for example, the Bitcoin market versus the altcoins, then you clearly see, what is it, Bitcoin trades $10 billion every day in the spot markets and then a little bit less in the futures markets.

But those are really big numbers already, that's what I would consider pretty liquid. It's not as liquid as the US dollar markets, which is the most liquid market in the world. But if you look at other altcoins, that would not be a comfortable investment for an institutional investor. Even things like Ethereum or Ripple, just look at the daily traded volumes and those are really small and that is what I would call liquidity.

Peter McCormack: Okay, interesting. All right, so the last thing I want to finish on with you is just a observation of the global macro economy and people are posturing that Bitcoin might become a safe haven asset. I'm still not sure, certainly the reasons I don't think it is, is because I think the majority of the market is still retail. So I think if the market tightens, I think there might be a flight to dollars or fiat, because I think people fear and they probably just want money in the bank for whatever reason. I'm not utterly convinced yet that it is a safe haven asset. How do you feel about that?

Plan₿: Yeah, it's a very interesting question and one of the things that we don't know. So we know that Bitcoin right now is an uncorrelated asset. So if you look at the returns of the past 10 years, it is not correlated with stocks or bonds or whatever and that's a very good thing, that looks like a safe haven asset. On the other hand, we didn't have a real crisis last 10 years, because Bitcoin was born at the height of the last big recession and crisis in 2008.

So we're sort of waiting for the big test if Bitcoin is really a safe haven asset. Normally what we know about recessions and stress is that people sell everything. They need money, so they sell everything and all correlations break. So assets that are uncorrelated or even negatively correlated, will all be correlated during times of distress and that's also how central banks and regulators see it.

So they don't count on any diversification aspects or very little at least in capital management. If Bitcoin will be the asset that everybody if flies too and that people will not sell, that will be a major turning point. So it's very interesting, especially with the recession, well I wouldn't say right around the corner, but well at least a lot of indicators pointing towards a recession coming.

Peter McCormack: Well Raoul Pal says that we're already in one.

Plan₿: Yeah, I think so too. I don't want to screw this up, but if you look at the interest rates turning, the yield curve inversing and all kinds of other indicators. If you look at German car exports, yeah. The definition of a recession is two quarters of a negative growth and of course you only know after the fact. So especially since it takes a couple of months to get the official numbers. So usually half a year, a year off after the recession has started, that you're into one. But yeah, I think chances are high that it will turn out to be that we enter the recession, summer beginning of next year.

Peter McCormack: My fear is how big a recession it is though, because it feels like we've been kicking the can down the road with quantitative easing, what happened with the repo markets, it's not stuff I fully understand, but when I read about it and I read the articles, it just feels like we're headed into something quite big and quite scary.

Plan₿: Yeah could be. On the other hand, we could print a lot more money, we could put interest rates to -5%, -10%, the proposals are already there, readily implementable. So yeah, who knows? But that will be, in any event like that, there will be wealth transfer from people that are hedged and have the right assets and people that are unhedged and ignoring a reality. So there will be wealth transfer and there will be winners and losers for sure.

Peter McCormack: Well listen look, final question. If people are kind of remotely interested in Bitcoin or they've heard of it and they've not gotten involved or just a little bit put off by it, what would you tell them to do? What advice would you give somebody?

Plan₿: I would read the white paper because I think that's very readable. That's where it all began and you read it straight from the horse's mouth, from Satoshi Nakamoto. After that, I would read a Medium article called "the bullish case for Bitcoin", by Vijay Boyapati. It's a masterpiece and a must read in my eyes.

Peter McCormack: We made a show about that.

Plan₿: Yeah and after that, if you're still interested, also read the book, "The Bitcoin Standard" from Saifedean Ammous, which has everything in it. Then if you're ready and don't get me wrong, this is not financial advice or anything, but if you're ready and you find it interesting, just buy some. Buy $20, $100 or some amount that you're prepared to lose, just pretend that it can go to zero and you lose it all, if you can still smile with that thought, then by all means do it.

Get your toes wet and just start and that will be the best learning school, because if you have skin in the game, my experience is you just read things a little bit better, you understand it a little bit better. Then maybe you can over time, if you like what you see in your small investment, you can expand that and what that's called, is dollar cost averaging.

So you get for example, say put in $100 every month and that would be a really safe way of not buying at the top. Of course you will also not buy the bottom, but you will have a very nice average price and history shows that that's an excellent way of moving into something you're unfamiliar with.

Peter McCormack: All right, well listen, Plan₿, thank you for coming on the show, really appreciate it. How do people follow your work?

Plan₿: I'm on Twitter Plan₿ at @100trillionusd. Yeah, it points towards the ultimate market cap of Bitcoin that I envision.

Peter McCormack: What's the date for that!

Plan₿: According to the model, it will be somewhere between 2028 and 2032.

Peter McCormack: Okay, I should be entering retirement about then, so that'd be good.

Plan₿: Yeah, and my DMs are open, so if you have any ideas, any questions, please ask me. I like the interaction, I like all the questions, I'm here to learn as well, so please reach out.

Peter McCormack: All right, cool. Hopefully sometime we'll get a beer in person!

Plan₿: Absolutely, thanks for having me!

Peter McCormack: All right man, take care!