WBD306 Audio Transcription

The Bitcoin Supercycle with Dan Held

Interview date: Tuesday 2nd February

Note: the following is a transcription of my interview with Dan Held. 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 Dan Held, the Director of Business Development at Kraken. We discuss Bitcoin market cycles, the halving's impact, and the catalysts that could make this cycle a supercycle.

“Close to $1,000,000 is what the KPI would be for a supercycle, and why I like it is that no one is talking about it. No one even thinks that’s possible and everyone just thinks it’s going to do what it did before and it’s a very different environment.”

— Dan Held

Interview Transcription

Peter McCormack: Dan, how are you doing, brother?

Dan Held: Doing well, bro, how's it been?

Peter McCormack: Yeah, good man, good man.  As I said to you last time, it's the longest I've ever been without seeing you in person.  It's been probably over a year now.

Dan Held: I'm feeling pretty thirsty because every time we meet, I'm pretty sure we've got a pint in our hands?

Peter McCormack: Yeah, usually have, man; usually grab a beer.  The last flight I took was March last year.  It looks like we're on lockdown for another few months, but hopefully we'll come out of this.

Dan Held: Yeah, I'm definitely missing the bitcoiner community.  I mean, those conferences…  It's kind of like, if you think of Bitcoin as a religion, those were going to church, if you will!  And, San Francisco had a bunch of great Bitcoin meetups as well at BitDevs.  So, COVID's definitely a lonely experience and for bitcoiners, it's such an intense feeling of being in Bitcoin where you ride the ups and downs, not having that in-person interaction has made it a little bit more difficult for everyone.

Peter McCormack: I think I've got it almost the worst, because there's no one.  There's no one around here I can go and talk to.  I have to go and do it all online.  If I was at least in California or somewhere, I could probably somehow break the rules and meet up with you or meet up with some other people.  But, look, it is what it is, dude.  I feel like it's going to come to an end this year.  We're going to get back to a relative normal, a new normal, whatever the fuck we're going to brand it; so, hopefully, man.  I miss it, dude; I miss the conferences.

Dan Held: Same, man.  Are you going to go to the BitBlockBoom in Dallas, because that should be right at the end of when COVID restrictions lift?

Peter McCormack: When is it; do you know when it is?

Dan Held: It's in August in Dallas, Texas; the Bitcoin one.

Peter McCormack: Well, listen, if it's August, I think there will be a chance, because I think our lockdown restrictions will have ended by then.  It's whether I can get in to America will be the question, but hey, it's in Dallas, man; I'd love to hang out with you in Dallas!

Dan Held: It's my home city, man.  I grew up and spent 25 years in Dallas.  It's a fun city.  I mean, look, there's no natural beauty around it, so all there is to do is eat and drink which, if that's your forte, can be a good time.

Peter McCormack: When I went to my first South by Southwest, I flew into Dallas, because the flight was like half the price of Austin, so I flew into Dallas and hired a car.  Then, on the way back, I had one night in Dallas.  I stayed at the Omni in the centre; loved it.  I had a hell of a night; I'll tell you about that night some time, but I had a hell of a night.  I really liked Dallas, really liked the people, good atmosphere; I could live in Dallas, man.  I mean, I like Texas as you know, but I did like Dallas.

So hopefully, man, fingers crossed.  August BitBlockBoom, I'll be there, man.  Anyway, we've got a big, big topic to go through, right?

Dan Held: Yeah, we do.

Peter McCormack: So, when I first discovered Bitcoin was 2013, but didn't really properly discover it, didn't spend any time reading about it, bought some shit on the Silk Road, traded some CFDs, forgot about it, didn't really pay attention.  But, observed I was in a cycle, watched Bitcoin hit $1,200, watched in crash and just thought, "Whatever this thing is, it's dead, move on".  And then somehow, I used to check the price every now and again, and it was just going down and down again. 

Then it started going up and up again; and then, back end of 2016, early 2017, I got back in and went through another cycle, and this time I went deeper.  I learned a lot about Bitcoin, watched a podcast, spent a bit more time learning it and now, I'm going through my third cycle, but this time I'm in a cycle having properly experience a full cycle, lived through it.

But, we're going to talk about the supercycle, right?  Is this your thesis, or is this something you've been working on with other people; talk to me, Dan?

Dan Held: I'm sure there have been other bitcoiners who've talked about super big bull runs, but the term "supercycle", I believe I'm the first one to use it.  But, it's the internet; I'm sure there are other people who've probably used it in some sort of setting at one point but, to the best of my knowledge, there's no one else who's talked about this supercycle that I'm going to reference.

Peter McCormack: I did a show with Lyn Alden, I think it was the first show I did with Lyn Alden, and she was talking about boom and bust cycles, and what wraps the boom and bust cycle is a super boom and bust cycle.  So, I'm guessing ahead there's going to be something similar.  Before we get into that, I've got a lot of new listeners.  Obviously, for obvious reasons, we're in a bull market, new people are coming in. 

I know this because I say to people, "If you listen to the show, write to me, I will reply to you".  I used to get like one email every three days.  I'm getting like five to ten a day; lots of people telling me they're new listeners; the show numbers are up.  So sometimes, I don't mind going back and doing reminder bits.  I think we should go back and do a few of those bits now.  If you've listened to these shows before and listened to Dan before, you might have heard this, but bear with it.

I think a starting point should be going back and talking about Satoshi's intent.  You've done a lot of work on this.  By the way, if you haven't checked out some of Dan's writings, we'll put the links in the show notes, because Dan's done some really, really good writings referring to some original Satoshi ideas.  Planting Bitcoin was the first one, right?

Dan Held: That's correct.  Planting Bitcoin wasn't my first article, but it was the one that addressed Satoshi's intent in the origins of Bitcoin.

Peter McCormack: Was it the first ever set, though; didn't you do a set, around that time, of articles, or was that just one of them?

Dan Held: Yeah, Planting Bitcoin was the set.  So, the theme is that Satoshi's brilliance wasn't just in the species of money that he chose to plant, but the season, the soil and the gardening techniques that were all required to make it work.  It was his go-to-market strategy that was equally as brilliant as choosing Bitcoin's genetic code.

Peter McCormack: Right, so let's go back; let's start through some of that.  Let's start with Satoshi's intent.  You tell me about Satoshi's intent.  If I think you're going too deep, I'll reel you back in and get you to explain some stuff.

Dan Held: I'll try my best not to go too down the rabbit hole, so we'll stay at the higher level of the rabbit hole.

So, if you're new to Bitcoin, you've probably heard a lot about this guy named Satoshi; this pseudonymous, because he has a name which is Satoshi, he's not completely anonymous, that invented Bitcoin.  But, he's a super mysterious fellow who came, planted Bitcoin, helped create the community and then mysteriously left and hasn't touched his coins since.  All we have left are his writings; his writings on the Bitcointalk forum, on the P2P Foundation forum and via the cryptographer email list, which was compromised of the cypherpunks.

So, we have this sort of piecemeal of information that gives us an idea of his intent, his motivations, decisions that he made.  By the way, I use the word "he", because that's what he chose in his P2P Foundation profile as his gender.  So, some people like to say we don't know, but he did self-select that, so I'm going to go with that to make it easier. 

Satoshi was a really, really interesting guy, because he had a wide variety of different understandings and perceptions of the world.  This wasn't just like a computer hacker geek.  I think a lot of people think of him as that, as like a hooded -- kind of like how Peter looks here in his dark, dark room with his hood!  They think of him as this hacker type.  I don't think he was just that though.  He represented, through his writings and through how he constructed Bitcoin, he had many other disciplines that he understood, like basic human incentives, like how do you incept a money from zero people that believe in it to the world believing in it? 

Satoshi built Bitcoin with a 21 million hard cap in these cycles, called "halvings", which halvings induce these market cycles; but, Satoshi even hypothesised that due to the inflexible monetary policy, the fact that there is no supply response to demand increasing -- for example, if demand for gold increases, gold miners will go deeper and deeper into the earth to produce more gold.  With Bitcoin, that doesn't occur; it's a fixed issuance rate.  So we can't really change the rate of issuance and the max issuance is 21 million, which means that spikes in demand cause a spike in price because the supply doesn't change in response to that. 

Satoshi, before Bitcoin even was worth a penny, hypothesised that this would happen, which is pretty incredible that he thought, "Well, maybe there might be FOMO cycles, market cycles built on FOMO, and that could be the way that Bitcoin is brought into this world in terms of adoption", and he even talks about, he even describes FOMO where he goes, "People might buy it in anticipation of the price going higher and this increases the adoption of Bitcoin".

This is pretty mind-blowing that not only does he understand distributed systems, cryptography, money and the origins of money and why money's valuable, for example, Bitcoin's proof of work function mimic's Nick Szabo's unforgeable costliness, the idea that money should always have a cost associated when creating it, he demonstrates all this which is psychics, code, human behaviour incentive modelling.  And so, I think people really don't do him enough justice in terms of talking about him.

I mean, look, he's a human.  He's not a God, he's not someone incredible, he's not perfect; I'm sure he's got tons of flaws and I think he understood that too.  And, I think that's what even makes it even more brilliant is that Satoshi knew that, due to human flaws that are innate in every human, that he had to be pseudonymous.  That way, none of us can pick apart his faults of being from X creed, race, religion or whatever; he's a kind of faceless entity for Bitcoin and that's what a decentralised money needs.  You don't need to put a face on it, and he was humble enough to understand that, and then also humble enough to walk away.

He walked away from the project and he didn't take any of his coins that he had mined.  So, Satoshi's one of the wealthiest people in the world, but he's never touched a penny of the money.  For Satoshi, this was something much bigger than just like, he didn't care about making a buck, he didn't care about making $1 million or $1 billion; Satoshi wanted to change the world. 

So, I think his story is super fascinating and how he created Bitcoin is just, I think for me, was a personal fascination and I started to research it.  Then I wrote Planting Bitcoin; that was a very popular series of articles.  And, yeah, from then on, I've learned little bits and pieces afterwards and I've had some funny questions around, "What did Satoshi do wrong?" and whatnot, but it's been a fascinating journey.

Peter McCormack: Yeah, I mean no one should expect him to have been perfect or created the perfect system, and he certainly had help from others.  I mean, he wanted help; he put it out there he wanted help and he certainly got a lot of help.  If you go to the old Bitcointalk forums, you can see the discussions. 

Also, just as a side issue I just wanted to bring up right now, I often get asked, as you probably do, "Who is Satoshi?  Is it so-and-so?"  And I always say, Satoshi's given us this gift here; Satoshi's created this amazing thing called Bitcoin and he wants to be anonymous and we should respect that.  And I even tweeted today, if you dox him correctly or incorrectly, both are completely irresponsible.

Also, despite the brilliance of Satoshi, I think it's moved on a lot since then.  It's a new system; it's developed; other people have worked on it; it's changed.  We do not want to have this demigod person and him coming out of the woodwork.  We'd probably end up finding his flaws and so, I think it's good to move on; but at the same time, whilst paying respect to what he's done.  And, there are a couple of key things that I've learned from you that I really want to talk about as part of this before we talk about the supercycle.

I want to talk about the halving cycle, as a hype loop, as a marketing loop, because I think that's really important.  But, I think one step before there is, you've corrected me a few times and a couple of times I've come to you and said, "Yeah, but Dan, I get the digital gold narrative, but this is a pivot, because the whitepaper does say, 'a peer-to-peer cash'".  I understand why some people may have gone down the big block route because of that, but you don't agree with that, do you?

Dan Held: Yeah, that's a great question.  So, if folks go read the whitepaper, which is titled, A Peer-to-Peer Electronic Cash, they immediately go down this pathway of thinking of Bitcoin like a traditional fiat money, this medium of exchange currency, which you'd go use to pay for coffee, pay for sandwiches and buy things online.

So, the whitepaper, by the way, Satoshi is quoted to have said, "The functional details are not in the whitepaper".  He wrote the whitepaper as a marketing message to this group of people called, The Cypherpunks.  These guys mainly, actually I think it was all guys, was actually a group of individuals that were the precursor, they had written about precursor layers and components of Bitcoin and Satoshi frankensteined all those together to make Bitcoin; like, Adam Back in something like proof-of-work and Hashcash.  Then you've got Wei Dai, Hal Finney.  Satoshi leveraged all of their learnings to go build Bitcoin.

So, Satoshi goes, "Okay, cool, I've built this thing called Bitcoin.  This is a holy grail of what these cypherpunks have been looking for".  And so, he goes to this email newsletter group and then he posts it in there and he's like, "Hey, guys, by the way, I wrote this thing called Bitcoin".  So, he's got to grab them with the title right away.  And for them, they had been hunting for an Ecash, or electronic cash.  And by the way, Adam Back, on Twitter, him and I have had discussions about this and Adam largely agrees with this interpretation.

Cash, in the reference that Satoshi is using it in, which is how the cypherpunks use it, represents a final and private money; final meaning that after I give it to you, I can't take it back; and private meaning that it's somewhat -- there's no one who could censor the transaction and ideally, we would preserve privacy.  So, this is what the individuals were looking for in this group. 

The individuals in this group were not looking for -- very few of them really cared about Austrian Economics and monetary policy.  They were a group of mainly computer scientists, cryptographers, who wanted money for the internet.  So, Satoshi isn't going to go in there and ramble on and on about Keynesian Economics, Austrian Economics and the power struggle there.  He succinctly compresses his narrative for his target demographic, which are the cypherpunks. 

So, a lot of people take that whitepaper and they take it totally out of context with how he uses the word "cash", and then they don't read anything else he wrote; because, Satoshi writes a ton of other content.  There's no reason why the whitepaper is any more or less important.  And what's funny is that Satoshi even says, "The functional details are not included in the whitepaper". 

So, taking the whitepaper at face value and then not reading anything else is really disingenuous.  And, if we look at all of Satoshi's writings, how he constructed Bitcoin, you can tell that there's a much deeper intent than just becoming a cheap PayPal for the internet.

Peter McCormack: All right, cool.  So, let's move on to the next point; let's talk about the halving cycle and again, it was you that was the first person who raised this to me, but you said that created a marketing loop and that was actually one of the most clever parts of the design.  Yeah, I think most people listening, well not everyone; I'm not guaranteeing that everyone will understand that the coin issuance was 50 per block when Bitcoin launched and then we had a halving after the first four years; and then there's 25, then 12.5 and so on.  Not everyone listening will know that.  A lot of people will, but it's probably worth talking through that as I believe this is your theory?

Dan Held: Yeah, so everyone, when they observe the world, they take whatever the mental models that they have and they use that to interpret things around them.  So, I'm using a bit of my own mental model and subjectivity to interpret how Satoshi thought about increasing adoption.

So, my background is in user acquisition, or growth marketing.  So in growth marketing, what we try to do is be really clever about ways we can acquire users for our products; and, I've done all sorts of different techniques.  With my earliest Bitcoin startup, ZeroBlock, we did some wild stuff; all the way to working at companies like Uber, where we acquired hundreds of millions of customers.

So, when Satoshi built Bitcoin, and this is where it's so brilliant with how he thinks through it, he's not just a computer scientist who shits out Bitcoin and then hopes it does well; he's thought through very carefully how it might be adopted, and he knew he wasn't going to be able to predict it, but he could hypothesise as to how it might come into this world.

So, what's really interesting about Bitcoin is that Bitcoin is a 21 million fixed issuance.  As I mentioned before, there's no supply response when demand increases.  There's almost no other asset like that.  I mean, fine art would be a good example as well where you can't create copies; additional copies don't create any sort of value.  That scarcity of the 21 million is fixed.  And, Satoshi had to pick an issuance curve to issue those coins over time.

So, he could have had them all issued immediately, or he could have had them all issued over a very long time, or he could have had them issued over XYZ sort of time period.  And, he chose this one which every four years, the amount of newly minted Bitcoins in each block drops in half.  And that moment in which it switches over is called a "halving".  And, the halving is really interesting.

Bitcoin's a new money, right; no one's ever seen this before.  We can't play back the origins of how gold became a money in this world; it happened like 4,000 years ago; there's no data from back then.  And, when we look at Bitcoin, we look at the 2012, 2016 and 2020 halvings and what's really interesting is we see a corresponding bull run, which is wild.

So, the basics of any market are supply and demand.  If there's more demand than supply, the price goes up.  If there's more supply than demand, the price goes demand.  That's how it works for everything in this world.

Peter McCormack: Everything.

Dan Held: Every single thing that's traded; everything in life.  And with Bitcoin, these halving cycles, what they create is a moment of a supply shock to the system where now, there is less supply being sold every day; which means that demand, if it stays constant, let's say you have constant supply and demand; if that supply gets cut in half and there's the same amount of demand, then the price starts to creep up.  And when the price creeps up, as Satoshi hypothesised, more people will become aware of it and buy in anticipation of the price going up, which therefore increases the awareness and continues to build up the adoption cycle.

That's what we've seen with Bitcoin.  I've been building products in this space since January 2013 and with these cycles what happens is, you build and build and build, then the Bitcoin price cycle increases the awareness of Bitcoin and more people come and they sign up for wallets and exchanges and price trackers.  And, it's this virtuous loop of Satoshi tapping in to the most fundamental nature of humans, which is being greedy.  And he hoped that that would essentially create this viral loop of more people becoming greedy and then telling other people about it and that would bring Bitcoin into existence.  And, it largely has.

What's really interesting too is that, people come for the speculation, but stay for the sound money.  So, not everyone who's drawn in by that human greed sticks around.  That's why we see a bear market.  But, there's enough to where Bitcoin has never broken that essentially high or low levels.  It's where Bitcoin continually builds believers in it that create the floor of Bitcoin's price, because Bitcoin doesn't have a central bank or investment bank that backs Bitcoin.  Bitcoin's value is basically based on all of our belief in it.  But, it's really interesting to see how that played out over time.

Back in 2013, we weren't exactly sure how this all worked.  I mean, we'd only had one halving; bitcoiners are a very small group of people; the exchange infrastructure was very weak.  So, I think this theory over time, we thought about it, and there wasn't almost any content in this space.  I mean, Tuur Demeester was the first piece of content I ever read, Tuur's research reports on Bitcoin, and he was like the Bitcoin economist back then.  And then a two-bit idiot, Ryan Selkis, over at Messari; I had the first newsfeed aggregator in this space and he, I remember him emailing me and being like, "Hey, can you add my blog?" and I think he had the only blog in crypto.  There wasn't even CoinDesk or Cointelegraph or any of these companies.

Peter McCormack: Or, What Bitcoin Did?

Dan Held: Where would we be without What Bitcoin Did?!  So, we didn't really -- I think the compression of Bitcoin's narrative and the understanding of these cycles and all the analysis of on-chain data; that really came after 2017.  We were kind of operating in the dark, and there was Willy Woo, who did some analysis back then; but, I think he was the only one.  I mean, Tuur was the only Bitcoin economist; Willy was the only on-chain data guy.  It was a very, very niche space.

Now, we've got so much more information; we have got so much better understanding of how Bitcoin works, how everything works behind it, from the social consensus to proof of work.  It's incredible to see it.  I think a lot of us back then just had to really believe in it and understand some of the basic values of it, but there just wasn't a lot of content.

Peter McCormack: Well, these cycles teach you a lot as well.  I mean, I remember my first cycle.  The price would shoot up, you think it's going to go up higher, then it would drop, then you get fearful and you maybe sell.  Then it goes back up and it's like, "Shit, I've got to rebuy back in".  The biggest lesson you can learn I think, early lesson, is managing and being okay with volatility.  We had a $12,000 drop over the space of a few days recently and I was a bit like, "Okay"; whereas, four years ago, let's say the same proportional drop, that would have worried me; and the first time round, it definitely would.  So, you learn a lot about that. 

But also, I think you learn a lot during a bear market.  You spend a lot of time in a bear market consolidating your ideas and building your conviction, to the point where, look, I'd be lying if I said, "Dan, I don't look at the price in dollars"; but at the same time, I'm not looking at when I'm going to sell.  I know at some point I will sell bits in the future and I'll be kind of mildly regretting it or disappointed, but you have to go through a full cycle to learn all this as well.  So, whilst they hype cycles are great for Bitcoin adoption, they're also great for the individual to build their own conviction.

Dan Held: Yeah, that's a really, really nice way of putting it.  A lot of people think I'm the perfect hodler; they think, "Oh, his name is Dan Held, so he's been hodling for a long time"!  Look, no one's a perfect hodler.  I day traded back in 2013 poorly.  I would have had a bigger stack if I hadn't.  I also mined Primecoin because I'm like, "Oh, maybe proof of work could do something more useful".  Everyone goes through their understanding and experimentation with the space, and so I don't fault people for ever buying shitcoins in one lot; I mean, it's just a natural part of the journey. 

For me though, for about a year of that, I was like, "Okay", I was always still 90% Bitcoin.  I was like, "Okay, Bitcoin is what the innovation is here".  So, I didn't totally sell all my coins or anything for another coin; I largely was into Bitcoin the entire time and then, basically, 100% for the rest of the time, past like 2014.

So, for me, it's really interesting to see how I've personally developed with that, and I think that's what you're touching on, and Bitcoin is kind of like a hero's journey.  You go through these catalysts and moments that change you as a person.  For those who have seen Batman, it's like, and I'm using the Bane voice here where he's like, "I was born in the volatility"; that's how you feel after Bitcoin!  You're like, "I was moulded by it, I was born in the volatility". 

That's how I feel after eight years of Bitcoin is that, I have endured the most volatile asset in human history, and volatility isn't inherently a bad thing, but it definitely makes you really have to double down on your beliefs and really understand it to be convicted in the trade.  And that's where hodling is this life philosophy, this learning that you learn of foregoing short-term pleasures and looking at your long-term outlook, and making sure to make decisions for the long term. 

I think that hodling is a life philosophy you could actually apply to personal relationships and to other business and other investments.  I don't enter any other investment unless I'm planning on holding it for five to ten years.  Everyone should have that philosophy.  You shouldn't be looking at a day-to-day process of, "I'm going to quickly enter and exit position; I have no conviction".  You should have conviction over something, believe in something, and use a lot of research to build that belief; it shouldn't just be based out of thin air.

But ultimately, you have to make a decision and stick with it.  It's part of being a mature person and Bitcoin is a core part of that.

Peter McCormack: Dude, listen, I mean I'm trying to remember, it was back in 2013; I'm pretty sure the first Bitcoin I bought was under $100 and at the time I was, "Shit, this thing's expensive.  $100 for made-up internet money; what?"  And then, like I say, I traded those CFDs, bought some stuff on the Silk Road, but I didn't end up with any Bitcoin in the end of 2013, when the cycle dropped; I just didn't have any; I didn't care about it.

Then, 2017, I bought a few; I think I bought 3 or 4 at the start and then did some trading and whatever.  I've been essentially in Bitcoin properly, let's say properly, for four, four and a half years now.  The most Bitcoin, actual Bitcoins themselves, I've bought have been over $10,000.  So, I've been through that entire cycle a couple of times, properly once, I've had all the opportunity to buy at $4,000, $5,000.  It was only when it kind of broke out from that $10,000 I was like, "Okay, now I get it", and I bought at $10,000, at $12,000, at $17,000, at $22,000, and I suddenly realised.  But, it took that breakup for me to get it.

I think that's why I say, these cycles teach you a lot about yourself.  It's also readjusted -- I don't want to be hyperbolic or sound religious about it.  Some people are like -- I'm sure if my -- some people, like Bitcoin detractors, will listen to this and they'll be like, "Oh, you're just being like a religious core bitcoiner.  But, it certainly does teach you a lot about money and discipline during these periods.  And, that financial discipline also is something that has been transferred across to the way I run my business as well.

So, I think these cycles are super important.  I've learned more about money in the last 4 years than the 36 previous to that and I'm grateful for that.  But, the point is, we are talking about cycles now, and you're talking about a supercycle.  So, what is different this time, Dan?  When you talk about a supercycle, tell me what your thesis is?

Dan Held: I've been around eight years in Bitcoin, which is like a fucking eternity.  I've actually got a picture coming out that I'm going to show you.  I won't show you on the show, but I actually have some grey hairs coming in on my beard, and I'm only 33.  So, this is what eight years of hodling does to you; it doesn't come without risks!

Peter McCormack: Do you know what; let's just talk about this actually, just very quickly, before you do that.  It is stressful and it is a rollercoaster, basically, it is, because it's sometimes stressful and sometimes exciting.  It is a rollercoaster.  I've been through some fucking stressful times over the last four years.  I've been wealthy, nearly bankrupt, and back to comfortable.  It can be stressful because of those stupid decisions.

If you're new and you've got people giving you advice about Bitcoin and they've been in it for years, take that fucking advice; listen to people!

Dan Held: Yeah, learn from our mistakes, learn from the stresses that we went through and hopefully you don't make the same.

But for me, being around eight years has shown me a ton.  I've seen so many narratives come and go.  All these altcoins from 2014, 2017 and now; people go, "Oh, you're just close-minded because you believe in Bitcoin".  I'm like, "I've tried a lot of different things; I'm not".  I didn't just start with Bitcoin, I started with Bitcoin, played around with a bunch of other stuff, then came back to Bitcoin.

That's what most journeys are for Bitcoin maximalists; they do that.  I actually don't even consider myself a Bitcoin maximalist.  I consider myself a Bitcoin realist.  It's practical; it's based on, if you look at total addressable market, product market fit for the protocol, Bitcoin is a great investment.  The other ones are much more speculative. 

When I look at these cycles though, what makes me very excited about this upcoming one, which could be, and I'll go into this in a little bit, a supercycle, is that this time is different.  The 2013 bull run, the 2017 bull run; it was mainly based on retail-driven speculation.  The macro markets, the rest of the world, were doing fine.  It was a large bull run, and these were mainly speculative cycles run by retail with a very shaky infrastructure, especially in 2013.  You had Mt Gox, which was a horrible infrastructure and a horrible critical component that broke down at the peak.

With this bull run, we've got a lot of different things lined up.  One, we have COVID which occurred.  COVID was the catalyst moment that makes Bitcoin shine.  With the COVID lens, when we look at Bitcoin, for most people who had dismissed it previously, now it makes sense.  And that's where we see this echoed by the institutions.  The managers of all the wealth in the world, a large portion of the wealth in the world, they look at Bitcoin as a store of value, as a Gold 2.0, which was my investment thesis back in 2012.  That's what Bitcoin represents; it's a Gold 2.0

That is a huge value for the world.  As we saw, the governments had their response to COVID being money printing.  That will devalue these currencies eventually and folks are looking at the 21 million fixed hard cap of Bitcoin; they're looking at this monetary policy; they're looking at Bitcoin's construction and how decentralised it is.  Now, you can store value in it and no one can take that value away from you, as this incredible lifeboat.

It's hard for people to really understand that you need a lifeboat until your ship is sinking and you're like, "Oh, shit, I need a lifeboat".  But, selling lifeboats when there are no ships sinking, there's not a big market for that.  And so, Bitcoin's demand, or people believing in Bitcoin; that market has grown tremendously to where now we have institutions.

We also have a much more vast retail customer segment.  So, retail buyers can now buy Bitcoin in PayPal, Robinhood, Cash App.  They can buy it everywhere and eventually, that's going to reach brokerages like Fidelity, like, within a retail brokerage, Fidelity or E-Trade and Interactive Brokers.  Eventually, you're going to be able to buy Bitcoin everywhere, which means that Bitcoin can now tap into all demand that wants it.

Additionally, retail can better understand Bitcoin, due to podcasts like What Bitcoin Did, some of my writings, hundreds of other bitcoiners' writings; we've now compressed the narrative where we convert someone from a notecoiner to a bitcoiner much more rapidly than before.  Before, you'd have to spend tons of time reading about it; now, you can just listen to two podcasts, watch one YouTube video and read one article and boom; you might be convicted.

So, we've got institutional demand, retail demand, the macro backdrop of this whole world aflame. And then, within the crypto community, we only really have one narrative right now; Gold 2.0, store of value.  Bitcoin totally dominates that narrative whereas, before that narrative was dominated, like in the 2017 cycle, by Ethereum and ICOs.  So, that really diminished Bitcoin's resounding narrative of store of value, and that's where we're seeing Bitcoin's purpose for why it was built shown in this cycle as like, in the macro world, Bitcoin stands out as this safe store of value.  We've got more ways to buy it than ever.  Bitcoin's not going to look like the other cycles.

People go, "Oh, well, it's just going to have a typical cycle.  It's going to go from this, up this 10X, 20X, and then we'll have a bear market", and I'm like, "I don't think so".  The world didn't realise why they needed Bitcoin back then; they just speculated on it.  Now, they realise why they need it.  I mean, governments across the world are engaging in huge, money printing operations, they're doing wealth confiscation; there is no better moment for Bitcoin than this moment.

And then, if you look at fundamentals, in the 2017 cycle, we hit a Civil War.

Peter McCormack: Well, yeah.  I was going to throw two more things in there.  I was going to say, firstly, the amount of things that should have killed Bitcoin; the amount of things it's been through, Silk Road, Mt Gox, it's resilience now is proven; it's just pure resilience is proven now.  When somebody like Schiff talks about it going to zero, and then somebody will retort back, "Well, it's got more chance of going to $1 million than zero", they're entirely right, actually.  The case for Bitcoin hitting zero is to me very, very tiny.  I try and imagine the scenarios for zero and I just can't figure them out.

But, a second and more important point is that I feel like we have this regulatory moat around it.  So definitely, in 2013, I was like, "What the hell is this thing; I don't really get it; it just sounds dumb".  In 2017, I was definitely concerned; I was like, "They could ban this".  China banned it; I know it's banned in Bolivia; I think it's banned in Pakistan; I was like, "They could ban this".  I mean, it would be difficult and it could still exist being banned, but if it was illegal in Europe and the US to use Bitcoin, yes, it could be this kind of underground cypherpunk tool, but it wouldn't be what it is now, right?  It would have difficulties.

I feel like it's got this regulatory moat around it now.  I think so many companies are invested.  So much of the infrastructure, especially in the US, exists; actually, so many of the wealth exists in US hands.  I certainly don't feel like the US is going to ban it.  And, if the US isn't going to ban it, I feel that a lot of other western nations aren't going to ban it.  I also think they'll face a massive regulatory challenge.  I think they'll find there'll be a massive fight back against it.

I feel like, I think, on the regulatory side, whilst we might have prying eyes who want to know more about what we're doing, who it is holding the Bitcoin, I do still feel like we have this regulatory moat now and I just don't see it getting banned; I don't see that as a narrative.  I thought that was a viable argument in 2017 that you had to defend, because it was a possibility.  I don't see that anymore.

Dan Held: Yeah, that's a really interesting question around, will governments ban Bitcoin; and, I actually wrote an article about this in my newsletter, where it explored how would a government go about banning Bitcoin.  Bitcoin was meant to be state level resistant, which Satoshi architect Bitcoin to survive attacks by governments, making it one of the most resilient pieces of software ever created.  I think it is the most resilient piece of software ever created.

When we look back at the 2013, 2017 cycles, that was definitely a concern.  Back in 2013, I thought I was going to have my door knocked in, or kicked in, sorry.  I thought they were going to go, "Oh, you guys are undermining confidence in the US dollar, and Bitcoin is meant to be a world reserve currency, a new Gold 2.0; we're going to come after you guys".  And they didn't.  And I realised that I've seen this future, but almost no one else had. 

So, most of the rest of the world considered us to be lunatics, "These bitcoiners are a weird bunch; they're a weird bunch of people".  And I still think we're kind of perceived as that.  The establishment is slowly waking up to Bitcoin; that Bitcoin's purpose is to be a store of value, and that is a threat to fiat currencies across the world.  But, if they take it seriously, that means they're actually scared of it.  So, Bitcoin has this really weird game theory model with it.

Bitcoin is protected by all of us believing in it.  That's what enables Bitcoin to survive; all of us believing in it and storing value in it.  If Bitcoin's market penetration, in terms of how many people in the population own Bitcoin; if that percentage goes above a certain level, Bitcoin becomes very hard to ban, as the politicians, the businesses, the hedge funds, the wealthy, the poor all own it.  It makes it very hard to ban it, or penalise it, because if you're a politician who voted for that, you would then be immediately voted out of office, because people would be pissed because you just made them lose a bunch of money.

Also, these politicians would likely own it, which makes them, you know, politicians are typically -- they're not exactly what they would call public servants; most politicians look after their own self-interest.  So, if they own Bitcoin, that's a good thing because then, they won't attack it.  So, Bitcoin is protected by adoption.  It's based on how many people own it and you mentioned, we mentioned that PayPal, Robinhood, Cash App have it.  I mean, these are big companies and more and more of these will come in.  That makes it very hard to ban it. 

Also, you'd have to ban it in every country in the world, which that has never worked for drug enforcement, nor has it worked for climate change.  You know, governments across the world haven't come together to ban something or rally behind something, because governments are inherently against each other on a variety of other issues.

Peter McCormack: Well, the other point Dan, sorry to interrupt you, but I'm not sure if you listened to Nic Carter's discussion on Grant Williams' podcast with Mike Green yet; very interesting discussion.  But, when Mike mentioned about the US Government banning it, Nic Carter said, "Well I'll become a dissident.  I mean, that's the reality. 

If the UK banned it, it would almost certainly now make me reconsider my residential status in the UK, if they went to ban it.  I'm like, "Well, this is my life, this is what I do; I'm off".  And, I will go to one of the environments where it's supported; somewhere like Malta or, I don't know, but I would go somewhere else.

Dan Held: Yeah, we've become citizens of Bitcoin in a way.  Bitcoin supersedes national boundaries and by storing value in Bitcoin, now we're all incentivised to keep it alive and to protect it.  And also, when you believe in Bitcoin, you start to question the nature of your reality.  You start to look around and you're like, "Wait, why do these laws exist?  Why am I having to provide an ID at the bank to withdraw my own cash?" and you start going down this rabbit hole of questioning everything.  And, once you start doing that, there's no way to go back.

You've seen the world for what it is.  You've woken up to the Matrix; you've woken up to the world, these governments being largely ineffective.  I think with COVID as well, COVID highlighted how ineffective governments were at doing their core job of doing the basics.  They didn't use a ton of rigour and they didn't use a ton of -- for example, I live in San Francisco and we don't have outdoor dining right now, which is bizarre.  There's no data that outdoor transmission occurs between parties that are that far apart.

I do believe that COVID is a real threat and people need to respond to it, but it's certainly not this, you know, the responses from these different governments to it were insane.  I mean, in California too, the California Governor dined without a mask with his friends and family, and so did the Mayor of San Francisco.  So did the Senator; she had a hair cut without a mask, and Nancy Pelosi.  So, it's literally 1984, where you've got the privileged animals and you've got the rest of the animals and they're like, "Well, those rules don't apply to us.

Bitcoin is part of that process of, once you understand that and once you understand Bitcoin, you start to question everything else, and then you see how ridiculous the rest of this system is.  So, yeah, I think once you believe in Bitcoin, you're like, "I believe in my freedom and I think I deserve that; and, I've decided to store my wealth in that.  And, you can try and take that away from me, but you're going to create a rebel; you're going to create a movement that will move against you because inherently, we deserve to be free".

We were born with that freedom.  Governments, immediately after you're born, they put chains around you and go, "Oh, now you belong to us".  But, you weren't that way.  No one was born to be owned by anyone else; we were all born free and Bitcoin gives us that right back.

Peter McCormack: Yes.  Well, listen, I'm going to pull you up on one thing then.  So, you said earlier you think this cycle's going to be like no other previous.  It might not have the same bear market playout.  So, if it does play out like other cycles, I think I'm even getting this from one of your tweets, you think it will be in about 250 days from now will be the peak.

Now, if it plays like other cycles, we'll hit whatever price.  Let's say, for the sake of making this argument easy, it hits $100k; could be $200k, could be $300k, could be $1 million, but let's say $100k.  Then perhaps, we will see a 70% to 80% drawdown, which means we could drop down to $20k, $30k; that's the potential.  Do you see that possibly not happening this cycle then; do you see something different happening?

Dan Held: Yeah, you're talking from peak to trough, so that wouldn't happen instantly.  That would happen from the top of the bull to the bottom of the bear?

Peter McCormack: Yes.

Dan Held: I don't think so and the reason why is that this time, people understand it much better.  So, when I talked about those cycles before where you had people come for the speculation and stay for the sound money; well, more people now understand why it's sound money.  Because of COVID, they better understand why Bitcoin is valuable, and they're not just in it for the quick flip of a 1X, 2X return; they're in it because they need to flee policies with their local governments, where local governments are printing tons of money and devaluing the currency.

That's where I've seen the narrative shift with friends and family who never believed in Bitcoin before.  Now they're like, "I need to get my money the hell out of here.  This is a way to escape".  So, when that happens, I don't think we see a bear, because the bear before was just all the speculators leaving.  But now, these speculators are largely people fleeing for a good reason.

So, I see the bear market being much more mild this time around, as people wake up to Bitcoin's value and they come in and they store value in there permanently.  And so, I just don't think we're going to see that previous cycle from both a bear perspective, so how much drawdown we have from the peak; and also the bull.  A lot of people reference the 2017 cycle, because that drew in the most folks before this cycle, and they reference that as their anchor point for how a bull run looks.

Well, in 2013, we actually had two bull runs.  It went from $10 to $260 down to $100 in March 2013.  And then later that year, from like October through December, it went from $100 to $1,200.  So, we could see something like that, and I would consider that to be a supercycle.  I would say that that, plus a much more mild bear, would constitute my description of a supercycle.

How probably do I think this is; who knows?  I think we look at how these cycles play out; no one exactly knows how it's going to play out, I just know that this one is different.  And, if this one is different, I think it's in a positive way, which would be a more intense bull run and a more mild bear market.

Peter McCormack: Let me tell you about another mindset shift I've had with this one as well.  So previously, where I've calculated my Bitcoin wealth in pounds and dollars; I've looked at it and always thought, "What could this next cycle do?"  And, I often refer to my personal trainer, John.  I should get him on one day and let people talk about it, because this guy's just a guy who bought a bit of Bitcoin; he doesn't understand xPubs or any stuff like that.

But, he was saying to me when we were training last time, he was like, "What's your number; what's your target number and when do you think you'll sell some, because just tell me and I'll sell at the same time?" and I talked about different numbers with him.  But the last conversation I had with him was, "Do you know what?  I don't think I've got a target number to sell", and I'll tell you why.

Say it's $100k and what am I going to do; sell 25% of my Bitcoin, 50% of my Bitcoin; what am I going to do?  And then what; put those pounds in the bank?  What if it then overshoots that by even like 50%?  I've suddenly lost out on a lot of it.  Okay, so what if I said my target was $150k and it overshoots that?  Or, say it hits $150k and then suddenly drops down to $80?  I'm like, "Oh, shit, $150k was the top; I'd better sell some because it might go lower", and then it goes up again.

It's like I'm back to trying to pick the tops and bottoms of markets, which I just can't predict.  So, I'm not going to sell my Bitcoin and the reason being is that, I talk to people now about you need to work out your Bitcoin score, you know.  You work out the percentage of the 21 million you've got and that's your score.  I think I want to keep that as high as possible.

So, my future use case for Bitcoin is to use it.  We both get challenged on this, but we both agree with the idea of using our Bitcoin to loan, to make interest.  I also would happily take a loan out against my Bitcoin and let my Bitcoin work for me.  But the reality is, why sell any of it; what's the point?  You could play those tops and bottoms wrong and you could end up with a lower stack of Bitcoin and then a pile of dollars or pounds, which we already know are fucking useless!

So, I've had a mind shift change now that I just have this goal, Dan.  Every month, I want more Bitcoin than the previous month, and I accept that sometimes, it's going to shoot up and then sometimes, it's going to shoot down.  But, this is like my vault, which is setting me up for life and setting my family up for life.  I've just got no need to sell it unless I need to sell it.

Dan Held: And, that's what's so funny.  In the previous cycles, there were a lot of early bitcoiners who didn't really understand Bitcoin or appreciate it.  They just randomly had 1,000 Bitcoin.  Then, when Bitcoin hit $1,000, they were like, "I'm a millionaire", and they sold everything.  I actually know a couple of friends who did this.

A lot of the OGs sold everything they had, because they were just in it for the speculation.  Not many really loved it or really appreciated it like I did.  There were tens of thousands of others who did, but a lot of the very public folks didn't really get it.  Why would you sell it if you've come to this conclusion that it will be the next Gold 2.0?  Sure, there are a lot of risks in holding it, but I think when you look at its value prop and where it can go, the return of Bitcoin far outstrips anything else; and I would say Bitcoin's risk is lower than almost every traditional asset.

With a company, the company could go under.  If I buy Apple, if I buy Google, is that probability high?  No, but there's still a probability of that; whereas Bitcoin isn't a company; it's a protocol.  That risk profile is much, much smaller.  As Bitcoin has survived over time, over 12 years, we build more and more faith in it over time.  You're being paid for it to take on the risk, the early adopter risk of believing in something before others believed in it.

With this cycle, I think it's going to be funny, because you're going to see a lot of these older bitcoiners who might want to cash out and look, if you want to buy a house, if you've got a partner who goes, "Look, if we don't buy this house, I'm going to leave you", you've got to do what you've got to do, you know!

Peter McCormack: Well, do you know what?  That thing's okay as well.  Look, the other thing you can't buy is time, right.  You can have as much Bitcoin as you want, but you can't buy time.  And, look, that's one thing I would maybe do.  I mean, we have just a normal, British, detached house, right; nothing special at all.  You know, if I could get a slightly nicer house and I felt like me and the kids would have a great 10, 20 years' use of that, that's worth it; that's something that's worth doing.  So, I don't take that away from anyone.

Dan Held: Totally.  And so, everyone's got their own time preference.  You only live once.  If you hodl until you die, then sure, you're free to do that but ultimately, you'd like to either generate a yield from it, borrow against it, or sell it.  I have become recently fascinated with the idea of never selling, just like yourself.  If the ship is sinking, why the hell would you sell your seat on the lifeboat?  I don't care how much the seat is, then you're on the sinking ship with a bunch of dollars and nowhere to go.

So for me, I think it will be really funny if some of these bitcoiners who've been around for a while, and who don't fully get why Bitcoin's valuable, sell their seat on these lifeboats, right when the whole world is trying to get in.  That's the reason why the price is going higher, is that the whole world is waking up to Bitcoin's value and trying to get some.

Now, there are a couple of different really cool ways to minimise especially the worry that when you sell, you'll sell and Bitcoin keeps going higher; and also the idea that you'll have less of a Bitcoin stack.  There are three ways that I think are really cool.  You and I have both covered earning yield on your Bitcoin.  That comes with risk.  People pay you to lend your Bitcoin out to folks; they use it for your front trading activities and you earn a yield on it.  So, you can earn sort of like an income stream from your coins.  This comes with risk; that's why you're earning the yield.  It is not risk-free.

The two other ways: borrowing against your Bitcoin, and I'm going to announce this here first on this show, because you and I were in a recent thread with Pompliano and Willy Woo, where you and I last year were making fun of Pomp for his Bitcoin percentage allocation.

Peter McCormack: Yeah, yeah.

Dan Held: Then, Willy hopped into that little thread a couple of days ago and made fun of you and I.  I'm actually at over 100%.

Peter McCormack: You're over now?

Dan Held: I'm over.  So, I did this a year ago.  I got an Unchained Capital loan, and this isn't a show; I don't actually earn any affiliate revenue from Unchained Capital.  I took out an Unchained Capital loan on Bitcoin at $7,000 and used that to buy more Bitcoin.

Peter McCormack: You didn't tell me this?

Dan Held: I haven't told almost anyone about this, because I sound like a frigging --

Peter McCormack: Well, no, because I did it, right.  I did it when it was at $17,500.  I was just lying in bed and I was like, "How much will the bank give me?"  "$35,000".  Right, 2.55 Bitcoin; done.  Yeah, I've done that; I wish I'd have done a lot more previously, but you know…

Dan Held: So, this is a way you can minimise selling your Bitcoin, or you could add more to your Bitcoin stack now.  This comes with a very dangerous proposition.  Price at $3,800; I did not get margin call, but it was getting pretty damn close and I don't think I've ever had a more stressful moment in my life.

Peter McCormack: Okay.

Dan Held: When you borrow dollars against your Bitcoin, if the value of your Bitcoin drops and gets close to the loan value, you could be margin called, which means you either have to post more collateral, or pay back the loan.  So, going on margin or borrowing dollars against your Bitcoin is not a risk-free operation either.  It could be extremely stressful, especially with Bitcoin's volatility.

Now, given my perception of what the future bull and bear market will be, if you set the parameter really, really low and you borrow a very low amount of dollars versus the collateral you post, you should be okay.  So, that's one to minimise any sort of loss aversion when it comes to selling your Bitcoin.

Then a third would be like a covered call strategy.  You can earn a yield by selling your upside on your Bitcoin past a certain price.  So for example, if you sell the upside on your Bitcoin past $100,000 at the end of March, other traders will compensate you for that opportunity or that optionality.  It comes at a huge risk.  If you don't structure it properly, you've now sold your upside past a certain price on your coins to where you earn all of the upside from here to $100,000, but you've foregone all upside past $100,000. 

In a world where governments are entering crazy money printing operations, selling your upside past a certain point, it feels very, very risky, because folks come in and you're like, "Well, am I actually earning a yield, or am I just maintaining purchasing power and Bitcoin's price is just climbing due to how much money's being printed?"  In that regard, these yields look semi-attractive, but might not actually be an attractive opportunity.

Ultimately, the margin one, borrowing dollars against your Bitcoin, I think will become the most popular way to minimise selling your Bitcoin.  And actually, this feeds into why I think this supercycle will exist.  In the previous cycles, if you were a bitcoiner and you wanted to exit, all you could do was sell your Bitcoin; that was it.  You couldn't borrow against your Bitcoin, you couldn't lend it out to earn yield; there weren't even any options in this space.  So, this time around, there are going to be a lot less coins being sold during the bull run, which will exacerbate the scarcity element.  As scarcity becomes higher and higher, then when the demand climbs, there are less and less coins to buy.

Now, the margin side, I am very fascinated with.  I spent a bunch of time -- I first entered a margin position with Unchained Capital, but the interest rates are around 11%, which is extremely high.

Peter McCormack: Wow!

Dan Held: Yeah, I mean very painful to service that debt.

Peter McCormack: I mean, that period, I guess, where it sits around $10,000 for quite a while; that's expensive?

Dan Held: Yeah, it was painful.

Peter McCormack: But an easy way, yeah.

Dan Held: Especially when it dropped to $3,800!

Peter McCormack: Yeah, dude.

Dan Held: Yeah, so you had to be really convicted.  I mean, I'm more convicted than many people, but I think Bitcoin, as a piece of collateral, is a pristine piece of collateral.  You can borrow dollars against your equities, so say you have an interactive brokers account and you borrow dollars against your Tesla stock, that rate is 1% to 2% a year.  Because they have collateral, they can instantly liquidate that and pay back the loan if you don't pay back the loan.

Now, with a mortgage, you have the same thing; you have a home.  But, a home is a really shitty piece of collateral.  They're not fungible, one home does not equal one home; they have high maintenance costs; they have all sorts of damages that can occur to it; you have property insurance.  You have all these things, and then it takes a while to process a sale of the home. 

Bitcoin is a pristine of fungible collateral and so, the interest rate that you pay on a Bitcoin loan in the future, I would say should be close to 0% almost.  I would say, in the future when you borrow dollars against your Bitcoin, that is such a phenomenally risk-free trade for the counterparty who's lending you the dollars that they will likely accept a very low rate of return in the future.

Peter McCormack: I mean, the financialisation of the Bitcoin's very early yet and also, not everyone's a fan of it.  You know that, I know that, I've got some shit, Pomp's got some this, you have; I still think these are optional products and they're useful to people.  But, it's interesting, out of those things, because I've thought of borrowing against my Bitcoin and then to buy more Bitcoin, but that made me nervous.

What I said in my approach was to borrow against -- I was essentially borrowing against my business.  I knew I had the cash flow to support it.  I mean, $800 a month payment is nothing compared to the business cash flow, so I knew I could easily support that and I didn't have to risk my Bitcoin, but acquired more Bitcoin through it.  And, it was a bit of an experiment.  I actually kind of wish I'd borrowed a lot more, but you know; by the by, it is what it is.

But the point being is that, I think when we're talking about this idea of a supercycle, it just adds into the truer narrative that we've got professional institutional-grade custody; we've got great onboarding products; we've got Bitcoin in nearly every market in the world; we've now got the financialisation through companies like Unchained and BlockFi; we've got the regulatory moat; we have COVID; we have governments printing money at ridiculous rates.  Like you say, everything's feeding into this cycle, this supercycle.

I think we've got one think working against us, just one thing, and I think it's unit price.  I think it's the only thing that works against us?

Dan Held: Let me touch on one more point around borrowing and margin, and then we'll go to unit denomination?

Peter McCormack: Yeah, go on.

Dan Held: So, Pierre Rochard and others have described this as a speculative attack with the Fed and other central banks holding interest rates so low, it's really cheap to borrow fiat.  Well, if you can borrow fiat at a super low rate, like 2% a year, 3% a year, Bitcoin becomes an incredibly interesting opportunity. 

So, there's a speculative attack where folks start to borrow as many dollars or euros or yen as they can to buy Bitcoin, and Bitcoin just gets pushed up by that sort of momentum, which is sort of, I think, what we'll see in this cycle as people look at really cheap dollars to borrow and go, "When, Bitcoin's return is phenomenal and I can borrow dollars for 2%".  So, I think that's a really interesting speculative attack that Pierre hypothesised back in the day, and I think we're going to see in this cycle where all this debt will be generated just to buy Bitcoin.

But to go to what you're asking about, which is around the unit denomination, like, is that --

Peter McCormack: And, by the way, I think the unit denomination is mainly a retail issue, not an institutional issue.  I think institutions will be looking and some people will go, "Oh, this is too expensive", but they can easily be sold on it.  I think it's primarily a retail issue.

Dan Held: Yeah.  I think it's definitely a more retail issue.  This is why folks like to buy stocks that are cheaper per share price.  And, most fractional shares didn't really exist until a few years ago, in terms of popularity; so folks before had to buy whole shares.  That's why I think there's a lot of confusion with retail around Bitcoin, because they're used to have to buy whole shares of a company.

Bitcoin you can buy one one-hundred-millionth of a Bitcoin, a satoshi, and it's funny because people ask me, "What do you think Satoshi did wrong?" and so, I do agree with you Bitcoin has a denomination problem.  I don't think it's like, in terms of Bitcoin's outcome, like how much more would it have been adopted if we'd had changed this; I think it's sub-double digit percentage of adoption.  I don't think it would have been huge; I think it definitely would have changed it.

So, Satoshi, why did he pick 21 million versus 21 billion or 210 billion?  I'm not sure if he -- he doesn't really talk about this at all, so this is largely an extrapolation.  I think Satoshi was cautiously optimistic about Bitcoin.  I think he wanted it to break dollar parity sooner than later, which would then give it interest value to people where they go, "Oh, Bitcoin's worth more than a dollar".  So, I think that's why he put the decimal where he did.

With currencies like Ripple, we can definitely see the effect of moving that decimal.  You make people feel wealthier, especially like Dogecoin too.  Dogecoin was one of the first currencies to do that where they had, initially, it went to billions of the currency, like units of the currency.  So, I definitely think it's a negative thing that we have to fight against.

I think exchanges like Kraken, which I work at Kraken and Coinbase and others, we could do a better job around maybe having smaller denominations where we go, "Hey, you don't know what the word 'sats' are, so we're not going to say that, but we might show you that you can buy $100 worth of Bitcoin".  That might be a way for us to more easily convey that Bitcoin is granular; that you can buy a lower denomination of it.  I think sats are helpful, I like sats, but I don't think mainstream knows what sats are.

Peter McCormack: But I think that's coming, and I'll tell you why I think that's coming; because, once you get over $100k Bitcoin, it actually becomes a little bit pointless to price things in Bitcoin.  Like before, Silk Road, right, you want to buy a bag of weed, it was 2.4 Bitcoin; it makes sense, right.  Even now if you, I don't know, you want to buy a Lambo; 6 Bitcoin. 

But, once they're over $100, and you want to buy, like a Trezor, it's not going to make sense.  But, it makes a lot more sense to say, "It's 50,000 sats [or] 500,000 sats", whatever the number is; it starts to make sense.  And, I think we'll see that transition into sats, just because it makes sense to price things in sats.

Dan Held: I totally agree.  Sats will be the standard.  Me and Adam Back, we've poked some fun, we triggered some people on Twitter, that we were into "bits".  At first, I was a fan of bits back in 2014, so a little bit of history here.  Bits, as a denomination, was a movement that was started in 2014.  I personally backed it as well.  It wasn't about repricing Bitcoin; it was having a smaller denomination called "bits".  Ultimately, they didn't pan out.

I liked bits personally, because it's Bitcoin and bits; it makes sense, right?  Bits is a portion of Bitcoin.  It doesn't matter, because sats became the standard.  Sats became what everyone recognised as the smaller denomination.  It's also the smallest denomination on chain, which makes it scalable for the future.  So, if Bitcoin succeeds and has a supercycle, bits actually maybe not the right denomination, because we might quickly pass that moment, where it's worth dollar parity, and sats would be a much better longer-term denomination to choose.  So, yes, the future will be in sats.

I do think on the exchange level though, like right now in 2021, folks don't know what sats are, who are knew to Bitcoin.  Over the next decade they will, but for them you'd probably want to just show them, "Hey, you can buy $100 worth of Bitcoin".  For them, that's much more approachable.  So, I think that's definitely -- I mean, I know at Kraken we're always looking to make user experiences easier, or trying to make it easier to buy Bitcoin and understand Bitcoin; so I'm sure us and others, everyone's probably exploring how to solve this problem.

I don't think it's a hugely detrimental issue.  I thought Bitcoin had this denomination problem when Bitcoin was $10!  So, you get $100, $1,000, $10,000, $100,000, it doesn't seem to have affected it too much.

Peter McCormack: So, let me ask you, Dan; through the cycle, what are you looking at; what makes this a supercycle?   Have you got certain metrics?  Are you like, okay, it's the length of the bull market; is it whether we have a drawdown; is it how high it goes?  I mean, like I say, I've seen these range of predictions.  PlanB's got the famous $288,000 one.  I think I've seen Willy Woo put it at something like $400,000.  I think Dan at Pantera has got a more conservative $126,000.  Raoul Pal did one that it could go up to $1.2 million.  There's a range, a big range out there!

Is it the price that makes it a super cycle; what makes this a supercycle?

Dan Held: That's a great question.  I think the price is the cleanest distillation of all of the narratives.  So, I think price is what we look at to define a supercycle.  Yes, sure, there are a lot of on-chain metrics and volume and everything else, but the price is the cleanest distillation or, as product folks might call it, the KPI.

I think there's a whole bunch of ways to look at this, right.  If we look at what a traditional cycle would look like, people are looking at anywhere between $100,000 and $250,000.  That's using historical price action; that's looking at a decaying rate of return with the cycles.  There's a million ways to slice this.  So, I think between $100k and $400k, or between $100k and $300k would be defined as a classic cycle.  A supercycle would maybe take that a little bit higher, to like +$800k, right.  So, that's where maybe a supercycle, I would use that as the definition of one, as going past $800,000 or closer to $1 million.  I think that would be…

Oh, and by the way, a supercycle's more of a fun idea to throw around and think through.  The reason why I like it too is that almost every single time I've looked at Bitcoin over the last either years and every single market, the status quo is typically wrong.  Whatever everyone's predicting, it's probably not going to do that.  And no one's predicting a supercycle; no one's really thinking about, "Oh, wait, this time is very different"; people are like, "Let's look at the last two bull runs".  I'm like, "Yeah, but the last two bull runs didn't have COVID or anything".

So I think that, yeah, I would say that close to $1 million is what the KPI would be for a supercycle.  And why I like it is no one's talking about it.  No one even thinks that's possible and everyone just thinks it's going to do what it did before; and, it's a very different environment.

Peter McCormack: Let me throw another thing in there; one more thing.  So, Nic Carter and Mike Green's conversation; Mike Green focussed on that Bitcoin is a potential national security threat.  I disagree with him, but he's saying that essentially, because countries like Iran and Russia have access to -- if the state wants to mine Bitcoin, like they have in Venezuela, they essentially have free power.  Essentially, they can print free money, in some ways.

Obviously, there is a certain amount of cost, but I think it will be negligible in terms of impact upon inflation.  But, they can essentially print free money.  He talks about them printing free dollars.  I actually think they're talking about printing free Bitcoin, and it actually proves the strength of Bitcoin, but by the by.

If other countries start to see this and start saying, "Hold on, we have access --" and any country which has a struggling economy; I mean, Argentina.  Why isn't the government in Argentina mining Bitcoin?  I mean, they all own the power grids within their country.  But also, could even the USG look at this?  I mean, I don't know if this is taking it too far and say, "Well, hold on, we should be mining if everyone else is".  That is the real scenario where we start to see Bitcoin being a race among states to accumulate?

Dan Held: Totally, and this is one of the final stages of Bitcoin's success, is when central banks start to buy Bitcoin; when sovereign wealth funds by Bitcoin; and when governments start to enter mining.  This would be considered a very late stage of Bitcoin being successful.

Peter McCormack: Well, they've entered mining.  Venezuela's mining, Iran is mining, Russia's mining.

Dan Held: Yeah, we're starting to see glimmers of this.  And, what's really wild though is, when you look at governments, they have control over their population; they also typically have control over energy, which means that they probably want to harness that and utilise that to print more coins.  What's interesting is, governments in the future could create bonds based on this as well, where they buy a bunch of miners and then create like a government bond, where you can buy into this mining operation; a huge $100 billion operation or something, you know, something really massive.

But, yeah, in the future, it will be a combination of both companies and governments that mine, or some sort of quasi in between.  If it's a more free market society, they'll be mainly companies; if it's like a mixture of both, maybe governments contract with companies to go mine for them.  But, yeah, essentially you're going to see Bitcoin harnessing all the excess electricity in the world, and there's a lot of it.  And, governments are going to look at Bitcoin's rising price and go, "Well, how do we get more of this?" and they're likely going to want to tap into this free energy that they have.

So, yeah, Bitcoin increasingly starts to get woven throughout the fabric of both governments, companies and people.

Peter McCormack: Damn, Dan!  It's going to be a wild few more years for us on this Bitcoin train.  Is there any part of this supercycle I've not asked you about, or any part of it that I've not covered with you?

Dan Held: We didn't spend a ton of time on narrative.  I think we could have touched on it earlier, about Bitcoin being the singular narrative, but I don't think people really understood how confusing 2017 was.  You had Bitcoin and you had Bcash, and that was pretty confusing for folks like, "What's the real Bitcoin?" and there's a lot of muddying of the waters on the confederates' side, which I would consider the bcashers. 

The confederates ultimately lost this battle, but there's a lot of confusion there.  They tried to muddy the waters.  Certain wealthy individuals tried to pay off companies and people, and that was a huge head win for Bitcoin, a massive one.  That was one of the most stressful moments in Bitcoin for me, because you had the community fight itself; it was a civil war.

Peter McCormack: Well, better it happened then than now?

Dan Held: Totally, and we got that out of the way.  And, Bitcoin survived that, which was an incredible thing.  Ethereum and none of these other coins really have had that moment.  Yeah, sure, Ethereum has Ethereum Classic, but no one's on that; no one cares about Ethereum Classic.  So, Bitcoin had a huge head win then, and the ICOs and the Ethereum craze.  Bitcoin doesn't have any of that.

The institutions are only buying Bitcoin, and Bitcoin's narrative is perfectly highlighted by this macro environment.  I think that that means Bitcoin really accrues a lot of the demand that had previously gone to other alts.  And that makes me really, really excited, because it's just such a nice crystallization, a compression of the only, what I would consider, the only meaningful narrative in this space, which is that Bitcoin's a great store of value and that, I think, will be huge.

So, I don't think we can underestimate how beneficial a singular narrative will be for Bitcoin.

Peter McCormack: Massive, man.  All right, Dan.  Well listen, always a pleasure to talk to you.  I'm going to be talking to you a couple of times over the next week, which I'm really going to enjoy; appreciate you coming on to cover this with me.  Just let people know where to find out more about all this amazing content you're producing.  I was on your YouTube today; I was watching your video regarding Tether, which was great, so thank you for that.  But, just tell people where to find your work.

Dan Held: So, this is an interesting question.  If you're on Twitter, I'm @danheld.  If you like longer-form newsletter style content, check out danheld.substack.com; that's where my email newsletter is.  I send that out every Thursday.  I've got some fresh takes on different Bitcoin topics.  And then, if you like video content, I actually take that newsletter and then turn it into a video on YouTube, so same there, Dan Held. 

Pretty easy, if you just google Dan Held; whichever way you like to ingest content, Twitter, short-form, longer-form newsletter or video, that's where you can find everything that I talk about, which is mainly a bunch of different Bitcoin topics explained very simply.

Peter McCormack: Well, I'll put it all in the show notes.  Your email's become a real pleasure of mine.  The email touches always on a specific topic, so each one's like a lesson.  So, very cool, man.  I appreciate all the work you do, I appreciate you as a friend.  Thanks for coming on and doing this, dude, and yeah, I'm sure I'm going to chat to you in the next few days.

Dan Held: I had a blast and I can't wait to record the other episodes.  Cheers.

Peter McCormack: All right, brother.