WBD442 Audio Transcription
2021 Trading & On-Chain Review with Willy Woo
Interview date: Monday 27th December
Note: the following is a transcription of my interview with Willy Woo. 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 Willy Woo, an on-chain analyst and Co-Founder of Hypersheet. We discuss how the price action in 2021, what to expect in 2022 & beyond and how the market has matured.
“If we break the all time high properly, we run through the fibs and let’s face it $69k to $100k is nothing.”
— Willy Woo
Interview Transcription
Peter McCormack: How are you, man, are you well, Willy?
Willy Woo: Yeah, pretty good. It's been a great year.
Peter McCormack: Yeah, solid year, I agree. We got there, man. It's been a weird year.
Willy Woo: They all are, aren't they? Are you talking about worldwide, you mean the world turning to shit?
Peter McCormack: It's weird, yeah: (1) the world is freaking out, (2) Bitcoin's been all over the place, (3) I bought a football club!
Willy Woo: Yeah, that's awesome!
Peter McCormack: Had to drop that in there.
Willy Woo: Let's talk more about that. So, you're officially a baller now?
Peter McCormack: I am a chairman of a small, little football club in Bedford. Let's come back to that, because people keep bitching in the YouTube comments, they keep saying, "You keep getting Willy on, you don't talk about price, I come for the price". I'm like, "Yeah, but I like talking to Willy about the other stuff".
Willy Woo: Yeah, right, exactly. Price is boring unless you're trading.
Peter McCormack: Yeah, the price has been all over the place this year. I don't even know where we started the year; let's go back to January. 1 January, we were on $28,700 was the low on 1 January, so we've essentially doubled this year. But really, we're exactly where we were on 12 February, so we've kind of been up and down, but sideways.
Willy Woo: It's true, but it's certainly different from what we expected.
Peter McCormack: Yeah.
Willy Woo: I think what we expected in our naivety, maybe not Dan Held with his supercycle, but most of us were looking at past cycles, which were really very much a template of the dinosaur age of Bitcoin. What I mean by that is that there was a very, very simple ecosystem back then. You had people who'd buy it, you had people who'd trade it, they'd buy the coin, move it on exchanges, they'd buy/sell. They were all spot exchanges and you have infrastructure.
There are two kinds of infrastructure on Bitcoin: one is the network infrastructure, which is the miners; and the other one is the spot exchanges. So, whenever you have infrastructure, that means that they're providing services to the network in exchange for revenue. And that revenue obviously is in Bitcoin, and it gets sold down. So, the halving and the four-year cycles is effectively the infrastructure selling down, and the halving halves every four years. So, the sale pressure reduces every four years and it creates a very simple slosh. And the spot exchanges, they would sell; there's some amount of difference in it.
But suddenly, after 2017, 2018 comes around and BitMEX is now doing huge volumes; the majority of the trade volume is going through BitMEX, because they're using this new perpetual spot contract, which is effectively the invention of nuclear weapons.
Peter McCormack: What?
Willy Woo: It's the invention of nuclear weapons. So, if people sell down, it sells down. But now we've got a futures exchange with 100X leverage, which retail love, it's a lot of fun. So you're in your positions and you get liquidated, so that's the nuke. You get nuked, right, with a whole bunch of people on the wrong side of the bet; they get nuked. It's a strategic game that you can play as a trader to take out the other side and nuke them, and suddenly you'll see the price changes. It bats up and down, everything's weird and there's funding rates, you've got now this is the start of derivative markets.
Along comes 2020 to 2021, you've got institutions coming in, you've got Michael Saylor coming in with the corporate side. Now, 2021, you've got ETFs, which back on to futures, so it's a very sophisticated market now, so that's the big thing. It's no longer simple, it's no longer spot buying, it's no longer mainly the miners selling down; you've got a very complex ecosystem and unfortunately for some, you can't template this like a very simple demand and supply curve, which often runs away into a FOMO and a mania stage, and you just don't see this stuff on mature markets like equities.
If it overheats, there's a lot of incentives for other people to take short positions and take the heat out of the market, and we saw that leading up to May before we got a 50% correction. Effectively, what that did was it took the heat out of the market and we didn't get this mania phase and valuations on the Bitcoin that were well in excess what people had paid for those coins. That's usually quite MVRV ratio, it's a technical measurement of what people paid and what the market price is at, and we never reached those heights, and I don't think we will ever do that again, because the sophistication of the market is there and we're not getting exponential parabolic runaway tops and a blowoff; we're getting rounded tops, and that's a sign of institutions coming here and shorting it. Some of them are not actually taking positions, they're just getting yield out of it.
It's a different ball game, so this is why I think Dan Held was prescient of this kind of supercycle, I'm calling it "the last cycle", and it's just basically we're not doing this exponential thing, we're not going to blow off, we're not going to have one year of waiting for a bear market for it to cool off. We just had one. We went to $64,000 or something?
Peter McCormack: $64,000, yeah.
Willy Woo: We pulled back to $29,000. It took about four to five months to cool it off and we're back up again, right, and actually structurally, we're reaccumulating, we're really very much similar to the phase we were during the late end of 2019 to the 2020; we did that re-accumulation and then we did another runup, and I think that's more of the sign to come. We're going to do a random walk of demand and supply, upwards and upwards, and probably less predictable in terms of these four-year cycles, which I don't think is valid to template anymore.
So, that's the main thing. I've learnt a lot, just from, I think a lot of the people coming to the space in the last year, well they've been here, but they've been more vocal, that have come from traditional markets and understand derivatives, cash-and-carry trades, effectively much more of the ecosystem you see around traditional assets where it's much more mature. Preston Pysh comes to mind, Plan₿, they all come from traditional backgrounds. Even SBF, he carries a lot of that information, he worked in Wall Street-type ventures before setting up Alameda and now he runs FTX. A lot of these guys have come in, and I think we've learnt a lot as bitcoiners.
I came into this as a technologist and I stumbled upon the on-chain stuff. But yeah, there's all this other stuff coming from Wall Street that has been really interesting to learn, and I think it's been a learning journey for all of us this year.
Peter McCormack: Yeah. Well, the thing I take out of that is where you said, "These things don't happen in mature markets". We've now got a mature market, and if you want those kinds of crazy wins, you can go into the altcoin market. There are always going to be these fast-moving upswings on new altcoins, but Bitcoin is now a mature market, and I've always said, Willy, I've been saying all year, I want the cycle to end, I want the cycle to break, because I want the market to mature, because these massive fluctuations in price, I think they hold back entry for certain people. I think it makes it more difficult for people to come in. So, a maturing Bitcoin market, especially as we now have nation states, I think that's a good thing.
Willy Woo: Yeah, I agree. I think that the kinds of things that we saw in 2017, well it started earlier than 2017, but that particular cycle was a 100X on Bitcoin. And of course, we weathered immense volatility and the average person on the street will think 100X in that timeframe, that's just stupid, there's something wrong with that, it's a scam. They're much more interested in lower volatility and something that's a reliable gain.
I know that particularly family offices in the US, they are much more interested in the gains that Bitcoin promises to make, not what has made, which has been high; but it promises to make roughly currently about 110% annualised per year, if you follow the trajectory that the stock-to-flow model projects going forward. So, 110% annualised, right, that's pretty high, and it's believably high as well; you can do that in exotic instruments.
But the downside risk is very -- we've just pulled back, how much is it, mid-30% in a matter of weeks? So, they're not so interested in experiencing the downside, they'd much rather have less risk and they don't care necessarily about the 100X; it's really about the risk-adjusted returns. And particularly, you can put yourself in their shoes. You're managing multiple hundreds of millions, you don't want to see your portfolio swinging downwards like that. Retail can handle that, the hardened hodlers, but imagine losing $30 million over three weeks in a particular drawdown if you're fully exposed to Bitcoin. That's not really on, managing that size of money.
So, as this thing matures, I think I agree, it becomes more attractive. And even Michael Saylor said that, that the high net worth want to buy the top. They don't want to buy Bitcoin where it's like a $4 billion asset class, they want to buy it when it's above $1 trillion, because it's sufficiently de-risked. Whereas, we just want to buy low, we want to buy at $1. But these guys are very sophisticated around risk and honestly, if you bought Bitcoin at $1, the risk was unquantifiable. Really, there was no way you could quantify that risk. You could do it numerically like, "Wow, the volatility of my returns is really off the charts", but the risks that you can't quantify is, "Will this thing not be hacked? Will the government stamp it out?" all sorts of stuff you can't even think off. It's very hard to quantify.
So, it's getting into that region where, if you look at El Salvador coming onboard, it's obviously been sufficiently de-risked for a nation state now. It's had 12 years, or maybe 13 years, it hasn't been hacked, the protocol runs, so that's good! Volatility is sufficiently low for a nation state to now adopt it; still pretty high, but the upside is good. So, yeah, it's a different round now, and that's good for, I think, the geopolitical sort of game, which so many people in retail are in degen and, "I want 100X", which is fine. And the bitcoiners that are sitting here are talking about, "This is hard money", and at a geopolitical level, we can really impact the future of the world as it goes forward.
They're two different things. One's Number Go Up, like insane for myself; the other is impact, geopolitical impact, and I think they're two different things.
Peter McCormack: Yeah. So, are we giving Dan Held the credit here; are we saying that his supercycle theory might be right? I'm trying to remember what he said. He said, "It will be a supercycle if we don't have a blowoff top 80% drawdown". I think he said, "Even if we drop 50% but carry on growing, essentially we're in a supercycle".
Willy Woo: Okay, all right. Yeah, I think he's right then. I didn't read the article, honestly, I just gathered from conversation. Yeah, I think that's right. I would have done it on not only the drawdown, but I'd do it on time to recover. So, kind of a day of single drawdown, we could actually do that through a liquidation crisis, and it bounces back up, because an exchange fails and it pulls everything else down, which has happened. Coinbase screwed up at one point in its part of index prices for the futures exchanges, for the perpetual swap contract, which is the most liquidly tradable contract.
Peter McCormack: What happened there?
Willy Woo: So effectively, Coinbase, that price started dumping, because they were inundated. The API started failing, whatever, but I know that many people couldn't buy the dip, so the price kept coming down. And because Coinbase is one of the exchanges that, when you do a perpetual swap contract, you need to know what the price of Bitcoin is. So you get a basket of exchanges, then you run some sort of average over those exchanges, and that gives you the price of Bitcoin. The price of Bitcoin on spot exchanges through their indexes versus what it's trading around on the derivative markets, that differential dictates the funding rates for long and shorts.
So, once you screw with the index, so suddenly Coinbase, which is a big part of that basket, started dumping because they had a bug, or some overload, and people couldn't buy it, the whole index got out of whack. So, all the perpetual swap guys, the guys on the derivatives markets were going, "Woah, we're trading way too high above what the real price of Bitcoin is". No, it's a broken price of Bitcoin, because Coinbase had a bug. So, they all started selling down and putting immense sale pressure, so the whole thing got out of whack and we went into a spin, downward spin, until someone bought the bottom and Coinbase fixed the bugs, or got their systems back online.
That's how fragile the ecosystem can be and sure, you can get an 80% drawdown, and then it will recover very quickly. It's more drawdown plus length of time to recover, because that long-time stuff is real, this stuff is like Wall Street where they have that big red button to stop everything, because the bots have gone berserk. This is kind of similar.
Peter McCormack: Damn. Well, it's been an interesting year. We didn't get the $100,000, like we thought. Well, I think people started even more bullish, expecting maybe $250,000, $300,000. We didn't get the $100,000. I've crushed my bet with HODL! I mean, I don't we're going to get to $300,000 in eight days; I think I've won that bet! And do you know what, I actually offered him a double-or-quits bet a couple of months back. I turned around and said, "I'll tell you what, I've probably won that bet. I'll give you double or quits it won't break $100,000", and he was like, "Ooh", and I think I would have won that as well, but obviously we didn't get --
Willy Woo: We didn't break it. Well done.
Peter McCormack: Yeah, I thought it was a good bet. I was like, "What's the lowest I would go?" and I thought maybe $85,000. Because, when we got up to $60,000, I thought, "Here we go, we're going to push to $100,000 now", but it didn't happen.
Willy Woo: No, it didn't.
Peter McCormack: So, what do you think about next year now, and has this changed the way you analyse the data? Are you having to rethink everything?
Willy Woo: Yeah, everything changes. On that topic, what the top is, currently the model says $215,000, but that's not that, "We're going to be at that price". That's the upper bound price for Bitcoin using this model, and you only get that on a runaway parabolic mania phase top, which we never got, and really I don't think we'll get that again.
The prediction was, if we have a mania phase, it'll hit the upper bound, because that's what all the mania phases have hit. And the upper bound, earlier this year, it was tracking; you didn't know what it would end up at. But I was tracking it between $200,000 and $400,000, and now we're into December and it's $216,000 right now; that's the upper bound. But we haven't had the mania, so we're actually right in the middle of the zone between the bottom and the top, and it's very cool right now.
But having said that, to answer your question going into next year, I think one thing we're going to learn is that the four-year cycles are dead, and then we're probably have to decide whether it's lengthening cycles, which I don't think. Lengthening cycle, by the way, is this idea that there's more and more weight in the system, so these oscillations of bull/bear start to be bigger momentum and longer timeframes. And maybe we won't learn that this year.
Peter McCormack: You don't think that's possible?
Willy Woo: No, I don't think that would make sense. I think on fundamentals, we have a four-year gravity orbit around the halving, so that's the mining infrastructure, so that's one wave every four years. Then, we have a macro cycle correlation, which is to traditional assets, which are like we have bull/bear markets every, what, is it ten years or so roughly? It's kind of random; it could be up to 14 years. So, that's another wave of a decade-long cycle, and that's giving a gravity pull to the correlation to traditional assets.
Then you have basic demand and supply, like we had earlier this year when there was a lot of FOMO and then that cooled off. All of that FOMO and cool-off has its own cycle within our industry, which creates a wave of demand and supply, and that's different. So, you have all these different waves on top of each other. But I think that the main one is the halving, and the other big one is correlation to traditional assets. So, we're about to escape the gravity of the halving, and we're going to enter a new orbit around traditional assets, and that is a decade-long cycle.
So, it's binary, I think it's binary. We go from four years to a correlated asset to traditional, and we have little wavelets, which are our internal infrastructure, like pulses; which are, looking at this, it looks like every six or eight months that's happening right now. So, yeah, I think it's binary, we go from four years to ten years, and little wavelets on top of that.
Peter McCormack: Damn! How does this change how you analyse the data?
Willy Woo: Mainly, it's the fundamental of what's going on underneath it. So, the price is the result of all the pushes and pulls, so it used to be very simple, it used to be just on-chain. But now, I have to understand how the derivatives markets are working, how the ETF is backing on to the CME on futures contracts. So, it really goes beyond just on-chain, it now needs really a good understanding of everything. I might even need to track corporate treasuries, now that we've got this wave of public companies that own Bitcoin. They don't appear as whales anymore, they have to be known public companies, and those coins are held by lots of different people. So ultimately, it means I have to track a broader ecosystem to get any kind of reliable signal from the on-chain stuff. But the on-chain stuff still works.
A lot of the indicators that were built early aren't so useful anymore, and now I really much rely on on-chain demand and supply, and I work with Glassnode and they do a lot around this thing called "liquid supply". That's a lot harder to fool as the whole ecosystem changes, because this is looking down into, effectively, the forensic history of investors. And you can actually say, "This guy's a hodler, this guy's a trader, this guy's a medium-term swing trader", and you can classify -- you look at the address spaces, but we're not looking at addresses.
We're then figuring out those addresses mean one individual investor, based on the paths of transactions between it, and we're looking at individual investors as cohorts to go, "Okay, this is like a Michael Saylor guy, he's just stacking. So, if that guy that's stacking, very seldom sells, starts to unload his coins, we're in trouble". And this cohort is like, "They'll buy, they'll sell, they're swing traders over a certain period of time, and these guys are pure speculators; they zero out all the time".
So, that kind of stuff becomes much more useful, and it's kind of a cat-and-mouse game, because so much of the blockchain has changed, so much of it has gone onto derivative markets and so forth that we're only capturing a certain part of it. So, that certain part has to be very, very accurate. The data science behind it has now improved a lot, but that's a lot of Glassnode's work.
Peter McCormack: What do you think of Saylor buying how much he's bought; what is it, there are 120,000 Bitcoin or something, and he's declared he's got 17,000? So, do you think that's a risk for Bitcoin now that he has that much, because you're basically saying it's almost like he can't sell because it will damage his own position, because if he starts unloading…? When we say unloading, does it feel like he's going to unload a lot, or do you think he can get away with like if there were small bits, he would unload?
Willy Woo: I think there's risk in it, because it's just one person that's the CEO of MicroStrategy that is in command of those coins. He's not the owner of those coins, he's in command of it. But I think, if you were to break it down a bit, his course is set, because those coins again are not owned him. Sure, he owns a lot of it, because he's got a big majority stake in the company, but a lot of the coins he owns aren't actually from the cash reserves of MicroStrategy; some of it is from convertible bond offerings. So, it's these kind of secondary derivative instruments that he's traded, and they have terms and conditions on it.
So, those coins effectively, you could say they're owned by other people, so he's got to comply with what he's got on those contracts, which is effectively, "I'm going to pay you this amount of interest and you can convert into MicroStrategy shares at a certain point", which is effectively getting claim on those Bitcoins. I think the whole plan screws up if he starts selling them. There's a five-year plan, right?
Peter McCormack: I wonder what the succession plan is? There must be some succession; somebody that powerful and important. When I had my little agency, we used to have certain things in place if certain things would ever happen to one of us, get sick, die, lose our shit; we had to have succession planning for different scenarios. I wonder what the succession planning is for that?
Willy Woo: I don't know, you should ask him.
Peter McCormack: I think I will.
Willy Woo: He does a very good interview, you do with him. But I think the course of MicroStrategy is set. You'd just buy up the company if you turned it the other way, even beyond Michael Saylor. It's essentialising to see that he's governing a few people that control it. So, it's not the most ideal. But having said that, I think people think it's MicroStrategy owning all these coins and it's not. It's a whole lot of unknown investors, and we cannot rule out, and I would say almost certainly, some of that Bitcoin exposure in other companies in the Fortune 500, but we don't know.
It's a lot easier to say, "I'm going to buy your bond offering. Thank you, done, signed", don't have to figure out anything else, like custody, etc. It's just easy, but they do this all the time, so it makes sense. So, I think that we look at the coin treasury in these public companies, and it's MicroStrategy and it's huge, then it's like, where's everyone else? Well, they probably haven't disclosed it, but they probably bought into the bond offering and they have exposure, but it's not been announced yet. It's almost like MicroStrategy is Coinbase custody for Fortune 500s.
Peter McCormack: So next year, do you think we go all-time highs, do you think we go sideways, do you think we go bear market down a bit? I know it's so hard to tell, it depends on so many things.
Willy Woo: Of course we go all-time high!
Peter McCormack: Yes!
Willy Woo: Unless Bitcoin fails, right. All-time high is $69,000; I've got to chuckle at that, but it's $69,000.
Peter McCormack: We've got to break $100,000 next year?
Willy Woo: If we break the all-time high properly, we run through the Fibs and let's face it, $69,000 to $100,000 is nothing; it's only a 50% gain for Bitcoin, which it does quite regularly. So, yeah, all-time high, sure. Where will it go? Let's have a look.
Peter McCormack: I feel like I want to have another bet with HODL next year, I feel like he needs a chance to win one back.
Willy Woo: Yeah, probably. I don't know, really the stock-to-flow to me is just this really nice chart that figures out the progression of the price increase. There's a good narrative model around it, around scarcity, and he's using that; but the premise of the linear regression he does on it is basically the method in which he just tracks the current growth rate of Bitcoin, and we can just continue to do that. And I would say we will be right in the middle of it, it's like $100,000, by the end of -- no, wait. Yeah, it's about $100,000 by the end of next year.
Whether we whip up or down, it could go much higher, and it could come back, but roughly the middle line is somewhere around $100,000, just idle. So, when we had that crazy run-up, late 2020, it's taken us most of this year to cool off from it. And actually, it wasn't overheated until such time as May, when everyone dumped their coins. So actually, it was a fair valuation of Bitcoin at that $60,000, but then everyone dumped their coins, which is very different.
Prior tops on-chain valuation models were, I don't know, one-third of the price that the market was trading at, so it's very different this time. Fundamentally, people dumped their coins, so the fundamental valuation dropped.
Peter McCormack: Well I've got no idea then what's going to happen next year. Basically, anything can happen.
Willy Woo: Yeah, how do you feel about the regulatory risk and the systemic risk with say the World Bank shitting on it? Honestly, when you talk to normies, they'll tell you all the fear and FUD that's coming through the media from government, central bankers, politicians shitting on Bitcoin. That's the majority, and we're in this tiny little bubble. How do you feel about that risk, because now Bitcoin is a target?
Peter McCormack: I feel like the regulatory risk is really a lot dictated by what the US does because let's be honest, they control a large part of the world and the way institutions make decisions. And I feel like we're starting to get really good regulatory protection in the US. There's a lot of senators and congressmen coming out in support of Bitcoin, and for a couple of good reasons.
There's job creation. When I was in Texas with Governor Abbott, that's what he was saying, "Bring your mining companies here. There's no income tax and we support you", so there's actually job creation. There's also a considerable amount of the Bitcoin wealth that's held in the US. Why would they want to destroy that wealth? Another thing, it makes them at a very competitively advantageous position to China, who's effectively banned Bitcoin. So, I think you get a lot of regulatory protection from the US; and if the US is, I won't say pro-Bitcoin, but kind of neutral-ish, evens out at neutral-ish, I'm less worried about the regulatory side now. I kind of think we're past that.
Willy Woo: Yeah, I think with this, I think actually 2022 onwards is pretty much a big sea change in that I think, what are the numbers, we're definitely above that, what is it, 13%, 14%, 15%, 16%, something will know, like the adoption curve, what is the early mainstream that crossed this chasm? The US is there, we're between 15% to 20% of the US population, say, depending on who you listen to, have exposure to Bitcoin. So, that's a political force and the industry's pretty mature now and it costs less than $50,000 in terms of the donation or contribution to a senator. You can now pretty much lobby and push, just like big anything industry lobbies, for their rules to be put forth.
We're in that stage now where very much a lot of bitcoiners are supporting candidates that they want and they have policies they want to push, by effectively contributing to the propulsions that are going to step up and lobby for that side of things. So, maybe 2022 was the start of bitcoins, and the crypto industry as a whole, being a political force, and that's really interesting in the US. You can't do that in China, obviously, but the US kind of has that sway. It's interesting, even though the US dollar is the main reserve currency for the world, and it stands to lose the most if it goes. I think, if it loses that reserve status, it loses a lot, it loses its business model.
Peter McCormack: All right, well listen, next year we'll just figure it out, we'll just see what happens. I'm sure it will be a fucking rollercoaster as ever, up and down, crazy stuff happening, mad stories, more countries, more companies, who knows, man, but I'm all for the stable price. I would take a very stable price happily, because I think that would be good for adoption. But then, if it's good for adoption, it's going to push the price up.
But these big swings, I'm over it now, I don't even enjoy it. Yeah, the upside's good, but I would sacrifice those for a more stable price. I think we can get a lot more done with a more stable price.
Willy Woo: Do you think it's getting boring?
Peter McCormack: Hopefully, yes, and hopefully so. But I think -- it's a good question. Is it getting boring? I think compared to the world of NFTs and crypto it is boring, it does look boring. It was in Miami when Basel was on, and it was NFT hell. Everywhere you went, there were people in Hawaiian shirts going to events in warehouses and talking about NFTs, and honestly I fucking hated it. But at the same time, I was like, "They're having so much fun; these people are having fun".
So, I was thinking about it, do we need to have fun? Yeah, we do, but at the same time, Bitcoin itself being boring is good for Bitcoin. Do you see my conflict with this?
Willy Woo: Yeah, I'd phrase it as maybe four years and earlier ago, even eight years ago, was more ideal. You felt like you were part of something, there was a secret the world had not understood yet. The Bitcoin Meetups were so engaged, and were talking about big ideas. And the filter in itself, where you run in there and the room, they had interesting thoughts just to even make it that far and go down the rabbit hole.
Now, the problems that Bitcoin solves, all the stuff that we talked about years ago, now comes to fruition, and I think most of those people would not believe it's gone that far. But they're very much these kind of suit-and-tie problems amongst typically politicians and world banks. It's that geopolitical, liberal stuff and it's not as engaging for the ordinary person. It's more important for the majority of the world.
But NFT stuff, that's really early and no one understands it, and that's the exciting bit. Whereas, Bitcoin's pretty well understood now. There's this financialisation that we've learnt, but we kind of understand it very well and maybe in the Bitcoin world, it's the Lightning Network, some of the technology we don't really -- there's some amount of pathfinding there. But yeah, I feel, as a guy that got into it from the tech perspective and curious about stuff that's not known about it, that's gone. That subculture we had as bitcoiners in the early phase, it was really exciting; everything was unknown and the mystery was the best bit. But now, it's different.
Peter McCormack: We're mainstream.
Willy Woo: It's mainstream, right. Are you bored? You're not bored?
Peter McCormack: I'm not bored for a different reason.
Willy Woo: Yeah, you're flying around and meeting presidents and making an impact.
Peter McCormack: Yeah, which is cool. But what I think is now, bitcoiners have a lot of capital to do things. They can go out and do things with their capital, genuinely do this that are going to make a difference, and make people look and go, "Wow!" like, I don't know, buy a football club!
Willy Woo: Yeah, well there's a discussion.
Peter McCormack: Oh, you want to talk about that? Okay, cool!
Willy Woo: No, not yet! I'm just like, the fact that you've become a baller and you've bought a football club, what makes us different from any other rich bastard? Every rich bastard has a lot of leverage and everyone's just doing the same thing, which is putting a dent in the world how they see fit, how they think, "This is my world view. I want to make that happen". What make us any different, and what makes us better, or what makes us create a better future for other people, over the current plutocratic system, the other rich bastards that are changing things for better for themselves? What makes it different?
Peter McCormack: I don't know. What makes it different? Because we do things in a slightly more rebel, hopefully, a slightly more rebel, don't-give-a-fuck way. So, for example, we've got fuck you money, so I've got a fuck you football club. We're just going to do things our way, we're going to leave that kind of imprint on the world.
The boring part is the Bitcoin standard kind of things, that we're going to operate businesses with a different financial model, which can end up becoming infectious. So for example, I think the Michael Saylor thing's going to become infectious to other companies soon. Not now, it hasn't worked, but I think once he gets his solid 5X on his billions, others are going to be, "Huh!" And I also think, when El Salvador gets their 5X, or they close their bond, other countries are going to be looking and going, "Huh!" and looking up to that. And I think very similar, if it can take a football club and make it successful, based on a Bitcoin standard, other football clubs might be going, "Huh!"
So we have a chance, whilst Bitcoin is mainstream, I think its awareness is mainstream; its usage isn't. But I think its awareness is entirely mainstream. You don't meet people now who haven't heard of Bitcoin; everyone's heard of it. The chasm is people understanding it and wanting to use it themselves, flipping that switch and going, "Okay, I'm going to go on a low time preference", and that's going to come from stories of people who've done it, the Michael Saylors, the Bukeles. People are going to see that, and that's when it's exciting, when it really starts to take over.
Willy Woo: Yeah, I think you're right with that. Everyone I've seen that has -- well, there's two types of people: the types that get orange pilled and go down the rabbit hole, and then they come out as Austrian Economics educated, people that try to educate others; and then there's others that just hold it because it's an investment. I have a lot of family that does that, and they don't really care; they haven't changed their minds on anything.
So, it might be different. Maybe only 5% of the people figure it out and the rest, the 95% say, "Oh, okay, we're on a Bitcoin standard. That's just like a new kind of money and I'll change to that". We were just exposed to the early phase where people came onboard, had to understand what it is, and then they had this economic awakening. And you see that even from the younger generation, "Woah, is that how the world works; oh my God!" But a lot of people are just, "I have a little Bitcoin. It doesn't mean anything other than an investment". And that's actually, I think, the majority of people.
If you go onto crypto Twitter, Plan₿ has got 1.5 million followers. Top guys in crypto are around the 1 million to 2 million followers, and the numbers are currently between 150 million to 200 million that have exposure to Bitcoin. So it's really 1% are what you see on crypto Twitter. The rest have probably just got exposure and that's fine, they get on with their day jobs. So, we're really in a very distorted bubble of thought here.
So, I just think that how we think about things and what matters to us is not really the real consensus of what the entire crowd are thinking.
Peter McCormack: Well, I think we have a lot of fun now. I think we have to go out as bitcoiners, we have to kind of control the narrative as well. Like, you said it's boring, I think we possibly have to try and make it fun again. We want people to be excited about this.
Willy Woo: The technology and thinking about the future is getting boring, but the fuck off money's getting fun, like you and your football team and XYZ with their super yacht!
Peter McCormack: Well, it was like when Eric Weinstein said to me, when I did the interview; he said, "I believe in you guys, you are the ones I could get behind, but what are you doing? It's all laser eyes and lambos. What are you doing? Get out there and do something".
Willy Woo: He was really bored with the conversation. He wanted to talk about big things, and what we wanted to talk about was Austrian Economics and shit that he understood. But he wanted new, original creative thought, and he was scared that this cohort would not -- we're very good at chaos, we're rebels. We're very good at chaos, but he was saying, "What are you going to build? Cut off the chaos and tearing shit down, what are you going to build?"
We don't have an answer for that. We have an answer with the economics and what's wrong with the world, and I have yet to see a Bitcoin citadel; that's the thing I want to see. That's going to be mayhem. You'll get a bunch of anarchists, practically, wanting to build something! So, it's unproven whether or not -- I think that the economics are good, are better than what we've currently had. But as far as how we think about the world and building something, yet to be proven; it's not been proven yet. Now that there's the fuck off money on the table, it's like, "What's going to happen now?"
So, Jack Mallers has done something pretty cool, right? He's building shit, right, it's great.
Peter McCormack: Yeah, he's making shit happen, he's taking on the institutions.
Willy Woo: Well, maybe it's like the younger generations, the Gen Zs that are going to take this and actually build something out of it, and we should just shut up.
Peter McCormack: Well, we need more Jack Mallers, but he's created a fuck you company and I love it, I'm here for Jack. And do you know what, not just him. Jack Dorsey this last week, he's been on fucking fire. Have you been following him on Twitter?
Willy Woo: Oh, yeah, he's great. He's shitting on VCs being blocked by a16z, etc. Even CZ was like, "Yeah, yeah, we're building a decentralised future and funding things ourselves" whatever it was; and he just replied, "Words, just words"!
Peter McCormack: He is out there with a fucking machine gun, spraying fire at everyone, and I love it. And I'm like, is this now because he's out of the Twitter position, he can do that?
Willy Woo: Did he quit because he wanted to be unleashed and he wanted to go full bore Bitcoin, which he could do with Square/Block? But yeah, maybe that was it, it just affords a freedom.
Peter McCormack: He's been unleashed.
Willy Woo: Yeah, unleashed. And then Twitter's gone and accepted Ethereum, so it's no longer maximalist. It's not really Bitcoin talk, but you see a lot of people being banned, etc. I kind of wonder whether or not the speech platform for Bitcoin will stay on Twitter. I guess it has to, because there's no way bitcoiners will ever support a decentralised Twitter, because it will have a token involved.
Peter McCormack: Well, isn't Jack building one with Bluesky?
Willy Woo: Is he? Oh, I didn't realise.
Peter McCormack: Yeah, I think he is. I think Bluesky's his new decentralised Twitter, which I can't wait to see.
Willy Woo: Oh, okay, I mean he's about one of the few that would have a shot at doing this.
Peter McCormack: Well, he'll bring people across.
Willy Woo: Yeah, exactly. And I think there's enough outrage over Twitter.
Peter McCormack: Well, I just think the problem is, Willy, I think fighting against shitcoins is almost a losing battle right now. I get the principles, I have them too, I absolutely support it, but these things aren't going away. Ethereum isn't going away, Solana isn't going away. These things are here now and they're being used, and how much energy am I wasting fighting these people, when I really could focus my energy on just promoting Bitcoin? Just accept, half my listeners probably own shitcoins. Fine, whatever, as long as they support Bitcoin and you promote Bitcoin.
We don't want to get lost as, when you say boring, it does make me think, "Do we just get lost as being boring?" Does that mean we can't be effective? Do we want everyone to be in this cool club?
Willy Woo: I don't know of one Bitcoin maximalist that has not done shitcoins, not one. So, you can say they're all hypocrites, or some of them say, "Yeah, I own shitcoins, or I have", but not one. Everyone shitcoins. I'm not a maximalist, I hold shitcoins; well, I trade them at least. So, I think there's a hypocrisy amongst maximalists, and they're very this and that and defending it, etc. Yeah, I agree, I say, "What are you defending against? You're defending against people to have their own free will? Do you want to create a nanny state? Do you want to say that's right and that's wrong and not let people make up their own minds? Do you want to protect them from getting rekt, because getting rekt is part of the education? And some of them, they make shitpiles, right. It's useful, actually".
I know Ethereum gets a lot of bullshit about, "It's a platform for creating scams", but actually there are a few useful apps there. And, you know, some of the stuff is fun, like the gaming, the CryptoKitties; that's just fun experiments. And those experiments, you learn just as much as being scammed and begin rugged, you learn. We're learning about how to build smart contracts that are -- well really, the stuff is not very safe, but I think we've learnt a lot in DeFi, I think we've learnt a lot with the Ethereum ecosystem. I think a lot of money has been scammed, a lot of money has been lost, but they're just learning experiments.
We had the same thing in Bitcoin. We had people losing -- well, one-eighth of all the Bitcoins were stolen in Mt. Gox alone. There's all sorts of scams that run on Bitcoin, and we had to learn all of that through the past ten years. And now bitcoiners are saying, "Don't do that shit, you'll get scammed!", which is honourable. But I think the technologies that are being explored are valid, they are valid, and they add to the ecosystem.
Even from my perspective, looking at the economic side of it, it's a much richer economic system with shitcoins. The liquidity base is great when you can buy and sell maybe 50 or 100 leading altcoins, you can do some really interesting financial instruments by compositing them together. Yeah, it's cool. You can build yield vehicles, because now you've got 200, well thousands, but let's say 200 that are useful, markets that are highly volatile and relatively inefficient, so you can come and do arbitrage trades to get yield from it.
Now, you've got players like Celsius, BlockFi, many more that are giving retail consumers access to getting a 10% return on their US dollars when you can't get that from a bank. And effectively, they're leveraging all of the crypto markets, including all of the inefficiencies that you can close through arbitrage, market making, all this sort of stuff, to close all the gaps and make it much more of a mature market. And everybody gets these things that are on offer in this world, which the banks certainly aren't offering you.
What do you do in a world when the money's being printed at 25% per annum and you've got no hope of getting more than a fraction of 1% interest? So, if we were to nuke all shitcoins, you'd probably find these kind of BlockFi loans, the yields start to drop out, because these emerging markets, which are first exploring new technologies and they're very volatile, the exploration is lost and the volatility, which of an emerging market creates an opportunity for efficiency to be made, and the ordinary person to get this kind of gain. So, I think it's a great thing. I don't like scams, but we need to be sovereign and self-responsible in this ecosystem.
Peter McCormack: So, what are your plans for 2022 then, Willy, what's going on, man?
Willy Woo: Well, I'm in Hong Kong here, I'm looking to get out of here, just to travel and see… I haven't been to a Bitcoin Conference in 18 months, 2 years.
Peter McCormack: Are you going to come to Miami?
Willy Woo: I'd love to.
Peter McCormack: Come to Miami, man.
Willy Woo: It will have to be the next one, because I won't be out of here by then.
Peter McCormack: It's April.
Willy Woo: Is it? I thought it was earlier.
Peter McCormack: No, it's April.
Willy Woo: Well, if it works, it works. That would be great.
Peter McCormack: Man, I would love to see you there.
Willy Woo: Yeah, me too. I'm much more focused on funds now, involved in three funds. My thing has always been democratisation. Even the newsletter I run, it's like you've got a lot of data and lot of quantitative researchers, and they're privy to the institutional world, and the letter was this thing, "Okay, $50 a month, you can get access to institutional grade analysis", but they're now thinking, "We'll get a project done where I want to get access to some of the better investments that only the high net worth get access to and restructure it".
There's regulatory structures you can go through to allow retail to get access to it, so I'm quite interested in seeing where that goes. I'm going to create a fund that's open to retail, so it's highly regulated.
Peter McCormack: Nice.
Willy Woo: Actually, I'm going to flip it so that high net worth can't get access, I'm going to cap it, and then effectively create vehicles for the Gen Zs who have been locked out of everything, because houses are so expensive, everything's so expensive; just cap it so it's useful for them and they can get some crazy high yields, but not for the high net worth.
I'm interested in doing stuff like that right now, so next year that's probably going to be my core focus. So, everything that was learned in 2021 will be applied in 2022, this financialisation of the markets; I think I learnt enough to start to do some interesting things here.
Peter McCormack: Amazing, man. Well, listen, it's been a good year, I've enjoyed our monthly chats, and I've enjoyed when we get away from talking about price! I like talking about everything else with you. I know it pisses off the listeners, but fuck them; I like it! I like it, man, I like it!
Willy Woo: We haven't been cancelled yet, right! I was like, this is great, it's the first time I hadn't had to jump on a talk about price, but I don't mind that, because that's what I do. But yeah, it's all this other stuff.
Peter McCormack: We've got to do one in person, man.
Willy Woo: Exactly, yeah.
Peter McCormack: We've got to do one with a bottle of whiskey, sit across the table, talk shit for a couple of hours, that's what I want to do. I got to do one with Lyn in person recently and that was awesome, but we've got to find the time next year, man, we've got to do this.
Willy Woo: Okay, well I'll see in the US, or maybe I'll come over to the UK, to Bedford. Be there for the Bitcoin football team.
Peter McCormack: Come and watch them play?
Willy Woo: Yeah, why not. That will be fun.
Peter McCormack: Let's get you over, man.
Willy Woo: Okay.
Peter McCormack: Well listen, Willy, have a wicked Christmas, have a great New Year, appreciate you so much, man. Appreciate all these shows. Peace out, much love, everything to the fam and see you soon.
Willy Woo: Yeah, Merry Christmas, happy holidays, see you in the New Year.
