WBD470 Audio Transcription
Don’t Get Bitcoin Rekt with Andy Edstrom
Interview date: Friday 4th March
Note: the following is a transcription of my interview with Andy Edstrom. 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 Andy Edstrom, author of Why Buy Bitcoin and Head of Institutional Investment at Swan Bitcoin. We discuss experiences of getting rekt, applying good leverage, the waves of Bitcoin adoption, playing offence on Bitcoin’s ESG credentials, and investing in Bitcoin for time and freedom.
“Bitcoin is this unbelievably unparalleled asset, that respects your time spent, and your labour, and it puts it into this safe and growing in value bank in cyberspace as Saylor says. But you can screw it up if you lever it... levering Bitcoin literally inverts 180 degrees the way that Bitcoin otherwise respects your time.”
— Andy Edstrom
Interview Transcription
Peter McCormack: Andy.
Andy Edstrom: Hey.
Peter McCormack: How are you doing, man?
Andy Edstrom: Great to be with you, man. Great to be with you in beautiful Malibu. We're looking out, on a Friday afternoon, into the soon-to-be-setting sun.
Peter McCormack: And we've got ourselves a nice single malt from Scotland.
Andy Edstrom: Yeah. Shoutout, actually, to Brett Morrison, who turned me onto this one. Good bitcoiner, LA guy.
Peter McCormack: I was with Brett, when was I with Brett, yesterday or the day before, when I was late?
Danny Knowles: Day before.
Peter McCormack: Day before, I was with Brett. I went and had lunch with him and Rich Roll in some vegan place up in Agoura Hills.
Andy Edstrom: Dude, perfect. So, this was a gift, actually, from Brett and I was like, "Well, I'm going to bust it open with Peter, he'll hopefully appreciate it", and of course I sampled the goods in advance, just to make sure that it was kosher; it's all good!
Peter McCormack: Yeah, you had a little sip! Brett's a good guy, man.
Andy Edstrom: Yeah, absolutely. Great bitcoiner, really smart guy, used to work for, I don't want to say his name. He used to work for a man who runs an electric car company and a space company, and I think he worked at the space company, pretty senior there.
Peter McCormack: Well, we have this mutual friend, Rich Roll, who's the reason I podcast.
Andy Edstrom: That's right, he was your original contact that was like, "Peter, you've got to do it", right?
Peter McCormack: Rich Roll was the guy whereby -- the story goes, after my divorce, I was recovering from some addictions maybe, a little bit lost in the world, and my mum had gone vegan and I went vegan with her, and I bought a new car and my friend was like, "You need to hear this podcast when you're driving". So, I was looking up veganism podcasts, I found Rich Roll, I was listening to that, and then I googled him and he was running some yoga running retreat in Italy, so I was like, "Cool, I'm going to just go".
There was one place left, so I got on this retreat, and my marriage had been a really short marriage, because it had collapsed, and he'd been through a similar situation, it was in his book, even shorter. He wrote me this note, and this week was a really weird, emotional event, like 40 people who all had some fucked-up stuff going on. And at the end of the week, we all talked about the week and spent about three hours in a circle crying our eyes out, and I was like, "I love you, Rich, man, thank you so much for this". Then he was like, "If you're ever in LA, look me up", and I was like, "Okay".
So, I got home and I was like, "Right, I'm just going to go". So, I booked a flight to LA and I was like, "Hi, I'm here, can I be your friend!" But I was like, "I really like your life. You have this cool life, you go round the world interviewing people and that's your job. I want that job, how do you do it?" and he was like, "You need a Shure mic, a Zoom H6, which we've got somewhere here, about the sixth one we've had", he said, "That's what you need", and he said, "Follow this course". What was it called? Pat Flynn's How to Podcast course, so I read that. And then I emailed or DMd Luke Martin on Twitter and said, "Hey, I'm going to launch a podcast here in LA, do you want to do it?"
Probably around, I don't know, 20 minutes from here, I met Luke Martin and recorded WBD001, four years and three months ago.
Andy Edstrom: And so it all began.
Peter McCormack: So it all began.
Andy Edstrom: Yeah, so LA's got to have a special place in your heart for that reason alone?
Peter McCormack: I mean, many reasons. We had Nik Bhatia on this morning --
Andy Edstrom: Brilliant.
Peter McCormack: -- and I was just telling him how much I love it. I mean, I love California. There's a lot of reasons not to like it if you're a professional bitcoiner, because it's a little bit more lefty, little bit more woke, got some bullshit rules, but I love California, man, and I love Los Angeles.
Andy Edstrom: This is the trade right, Peter. Taxes are outrageous, the policies are horrendous, and then, camera guys, pan if you don't mind out to the coast here on Malibu.
Peter McCormack: Out to the Pacific.
Andy Edstrom: In case anyone's not aware, it's 66° out, I believe it's February! This is why people live in LA.
Peter McCormack: And, do you know what, I've never really struggled with the traffic in LA, because I've always based myself somewhere and just stayed there. So, we're in Malibu this week and we're just going to stay here. We go to Santa Monica maybe just to go and watch some football, or usually I base myself between Santa Monica and Venice, never leave the two. Love Venice, I love the ridiculous nature of Abbot Kinney, I love paying $152 for one slice of avocado on toast! And I like going to Aviator Nation and getting a ridiculously overpriced hoodie! But no, I love it. Dude, I envy you living here, it's a beautiful part of the world. And generally speaking, I think the people here are pretty great.
Andy Edstrom: Yeah, my feeling about LA, LA sometimes gets a bad rap, and the reality is, in a city of, whatever, 20 million-plus people, I think, in greater LA, if you can't find your people, if you can't find your group, whatever you're seeking that you want, then it's kind of on you, you've kind of failed. This city contains multitudes, it contains people from all over the world, it contains everything from just Hollywood addicts to intellectuals. I grew up in Pasadena, which is 15 miles from here, which is the home of the Huntington Gardens and Caltech, some of the smartest people in the world. And you've got between that and Malibu and everything in between.
Peter McCormack: Calabasas for the hippies, Santa Monica for the VCs.
Andy Edstrom: Exactly. Silicon Beach.
Peter McCormack: Silicon Beach. You've got Venice for -- Venice has got the coolest homeless people in the world.
Andy Edstrom: Oh my God, the original, arguably, in terms of, I'm sad to say with the homeless trend through the country, I feel like it started here, which makes a decent amount of sense considering that it's a little easier to be homeless when it's 66° in February.
Peter McCormack: There's always that weird thing, though. You've got those $15 million properties on the beachfront, and right in front of them is a large homeless population, but somehow it works, everyone mixes. And I always liked it, because it's the one part of the world, well it's not the one, there's probably others, people are saying, "Shut up, Pete, you idiot"; but homeless people, they kind of find a trade on that boardwalk.
I brought my kids here, my daughter must have been about 6, so about five years ago, I brought my kids here, took them down to Venice, and we walked up and down. There was this dude who was doing, "Bad advice for $1"! And I was like, "Kids, do you want some bad advice?" and they were like, "Yeah". So, I took my daughter up and she gave him $1 and he said, "When you grow up, in about 12 years, you should become a hooker"! I was like, "Okay, that's not what I thought!" and we walked away. She's like, "Daddy, what's a hooker?" I was like, "Jesus Christ!" But all up and down Venice, you've got people, it's quite a creative, arty scene, and I love it, man, I love it here. I could live here.
Andy Edstrom: Yeah, well, it's always open to you. You can spend a lot of time, you can spend a little time. All the LA bitcoiners will be happy to see you, we'll have you to a bitcoiner barbecue.
Peter McCormack: You just want me to tell people how good your barbecues are! Andy Edstrom is an amazing host. Andy puts on a great barbecue with a great firepit.
Andy Edstrom: You're very kind. In fairness, Nic was co-host, so give him credit where due. But yeah, we had a great time with you and hope to do it again.
Peter McCormack: Yeah, man. So, how have you been, you good?
Andy Edstrom: I'm good. I mean, gosh, it's a strange time right now in Bitcoin, but when is it not. But look, I've got three kids, my youngest is almost 11 months now, she's a joy, so I'm doing my part to make more bitcoiners.
Peter McCormack: How old are you, Andy, can you say?
Andy Edstrom: I'm 40, Peter.
Peter McCormack: You're a little bit younger than me, just a smidge, but you're still at the starting end with an 11-month-old.
Andy Edstrom: Yeah, can you believe that? I just restarted the clock, right!
Peter McCormack: I know, dude, you're a psychopath. Well, you never stop the clock. The first is about to fly from home.
Andy Edstrom: Yeah, wow, mixed feelings about that, right?
Peter McCormack: Yeah, definitely. I've talked about it before and I get quite emotional thinking about it, because it's a big step. They think they know everything, they think they're ready, and you know now, you realise when you're 18, you think, "Yeah, when I was 18, I knew everything". You look back and you're like, "Yeah, I was a fucking moron, I didn't know shit". So, you worry, but you also get excited for them just to go into the world and find themselves.
But yeah, mixed feelings about it. I have no idea how it happened. It doesn't feel like 18 years ago, I was in Bedford Hospital, and this little, tiny blob of flesh was given to me and I was looking at it going, "Shit!" And here we are 18 years later.
Andy Edstrom: It is a miracle, yeah, my son is 9 now, and yeah, I've no idea where the time went. Got to pay attention to that stuff. I'll say, one thing I'm grateful for about the pandemic is I spend a lot more time at home now. I don't commute as much, I don't go to the office as much, so it's a different experience actually. I'm sort of experiencing this baby, because I'm actually around, in a way that I wasn't before when I was going to the office all day.
Peter McCormack: Yeah, that's the crazy thing about this pandemic. Obviously, a lot of terrible things have happened, a lot of people got sick, a lot of people have died, a lot of breakdown in social cohesion, anger against the government, so much bullshit has happened; but there's been a lot of upside to it. The forced shift in society, where people have reconsidered what they want to do, how they want to work, how much time they want with their family, and many people are not going to go back to their old life of commutes.
I mean, I don't know where you worked, but I have friends and when you live in Bedford, you're a commuter town. You commute to London, you get up at 6.00am, you're on the train by 7.00am, then you're on the 6.00pm or 7.00pm train home and you're home by 8.00pm, 9.00pm, and you miss most of the day, you miss a lot of your kids' childhood. A lot of my friends aren't going back to that.
Andy Edstrom: That's going to be great for Bedford, right? I mean, now more people can reasonably live a bit farther out of the city, they can make their lives there, other than the bedroom community and, "That's home, but I'm in the city all day", now they can actually go to the pub in Bedford, rather than in the city.
Peter McCormack: There's a lot of good things happening in Bedford right now, my friend, a lot of good things! I'll tell you what happened today; Danny, I didn't even tell you this. Have you ever heard of the band, Don Broco? I might not have pronounced it correctly.
Danny Knowles: No.
Peter McCormack: So, that's a band that went to the same school as me. They've got the number one album in the UK charts today, a Bedford band.
Danny Knowles: No way!
Andy Edstrom: That's fantastic.
Danny Knowles: Everything is happening in Bedford!
Peter McCormack: We've got the number one band, we've got the number one Bitcoin podcast, we're going to have the number one football club.
Andy Edstrom: You are.
Peter McCormack: Bedford is basically, if we had the ocean, we'd be the LA of England!
Andy Edstrom: When are you going to book that band for the half-time show for your team?
Peter McCormack: Well, it's funny you should say that, they reached out to me on Twitter!
Andy Edstrom: That's amazing, that's awesome!
Peter McCormack: Yeah, they pinged me, and they were like, "Yeah, we think everything you're doing with this club's amazing". I was like, "Didn't we go to the same school?" and they're like, "Yeah", and I was like, "Cool!" They said, "If you ever want to come to a show, let me know". Actually, my cousin, Charlie, is a huge fan, so I messaged her on Facebook the other day and I was like, "You like Don Broco, don't you?" and she's like, "Yeah". I mean, I might be pronouncing the name wrong. She was like, "Yeah", I was like, "Do you want to go and see them? They're doing a pre-release party, I can get you on the guestlist". She was like, "Oh my God, yes!"
So, she went and she loved it, and they're going to be doing a residency. We've got a club in Bedford, called Esquires, it's quite a famous rock club if you are a growing rock or indie band; it was always on the tour. They're going to be doing a residency there, I think, for about a week. So, yeah, I'm going to have a beer with them, get to know them, and I think they're going to be the band of the club, hopefully --
Andy Edstrom: I love it!
Peter McCormack: -- come and play a show for us one time, but yeah, Bedford is an ascending town!
Andy Edstrom: Absolutely. Well, look, I had fun watching the game the other day, despite the outcome. I had a good time talking to bitcoiners. And watching the first half actually, they were decent to strong in the first half and it was fun to watch. In the second half, it was fun, because I got to talk Bitcoin with Vijay.
Peter McCormack: Well, give us some time. We are slowly, slowly nudging this thing forward, and I'm very confident this will be one of the most popular Bitcoin projects over the next few years if we get it right, so fingers crossed. But thanks for coming down. I don't know if you're coming to the game on Saturday, it's an early one, it's 7.00am.
Andy Edstrom: 7.00am? All right, I'm going to try. 7.00am tomorrow?
Peter McCormack: Yeah, basically, tomorrow.
Andy Edstrom: All right, well I'd better lay off the scotch here. It's early though!
Peter McCormack: We'll see. We can just drink through. We can have a scotch tomorrow.
Andy Edstrom: Just don't stop!
Peter McCormack: Right, let me try this. That's pretty special. Oh, that's really unique.
Andy Edstrom: It's really not bad.
Peter McCormack: This is a proper Friday afternoon show, we're just talking shit.
Andy Edstrom: I love it.
Peter McCormack: Love it, man. Listen, you wrote an article recently?
Andy Edstrom: Yeah, that's true. Basically, I wrote an article about how Bitcoin is the most ESG-friendly asset in my clients' portfolios.
Peter McCormack: Did you? That's not what I was talking about.
Andy Edstrom: Oh, that's the most recent one. Which one are you talking about?
Peter McCormack: I want to talk about the Don't Get Rekt article.
Andy Edstrom: Oh, yeah, Don't Get Rekt.
Peter McCormack: But we'll come back to that, because I want to talk about that. I'm trying to get a show in with Dan Morehead, where he wrote this article about Bitcoin ESG, and he was saying, "Everyone's focused on the E, which is directionally moving in the most positive way, for those who care about the climate". But he said, "No one focuses on the S and the G, which Bitcoin kills on", so I do want to talk to you about that.
Andy Edstrom: Exactly right.
Peter McCormack: I'm glad you said that, we'll come back to that. Let's talk about Don't Get Rekt though, just as somebody who got so fucking publicly rekt, I understand those feelings.
Andy Edstrom: Yeah. Well, you know what, so by the way, I wrote this article, I think it was March of last year, so we were probably six weeks from the epic dump, right. We were six weeks from China ban and Elon and all that stuff, and the thrust of the article was, don't get rekt. It was, "We're in a bull market, it's probably going to be great, I think we're going to go to six figures", by the way, I was wrong!
Peter McCormack: We were all wrong, all so wrong.
Andy Edstrom: We were all so wrong.
Peter McCormack: What film's that; that's from a film? Prometheus.
Andy Edstrom: Oh, I'll have to check that, revisit.
Peter McCormack: Yeah, "We were wrong!" Anyway, sorry.
Andy Edstrom: So, yeah, it was good times. And the reason I wrote the article was, it was basically a scenario for the next bear market. And the admonition of the article was, "Please, plebs; please, people; please bitcoiners who I know and love, many of you I don't know, but I still love you, don't use leverage, because leverage can crush you".
The scenario I laid out was, "Okay, you get the halving so the price moves up, then you get the follow-through, big announcements, certain new people show up", Michael Saylor, for example, "you get the follow-through in the bull market, and then eventually you get the retail pile-in and the blow-off top". So, that's usually the way it's gone in history, and then you get a reversal, and then the whales, the old-timers, the OGs say, "Oh, I've seen this movie before. I'm out", and then the pain kicks in, because those who are levered long get rekt. It didn't shape out that way exactly, because obviously we didn't get to hit six figures, but unfortunately we did get a catalyst, which was obviously China. So, we got the levered liquidation and the downward move.
So, that was almost a year ago exactly, and I still feel like I just don't know if lessons were learned. I just worry for the people using leverage, I worry for the plebs, and I'm kind of a broken record on this, but I think there is a categorical difference -- I always struggle to explain, why is it different; what is different about leverage? And I think people look at it as a matter of degree. They say, "I'm just taking incrementally more risk. I'm just posting a few coins and adding a little bit of exposure, and it's reasonable, and I'll be fine". But actually, I think it is a categorical binary difference between having leverage and having no leverage.
If you can support your lifestyle, either with your fiat job or your cash savings, what have you, if you have enough runway, you are truly bulletproof, at least with respect to Bitcoin price risk. You can ride through that cycle, you can ride up the highs, ride down the lows, and not get pushed off your stack.
Peter McCormack: Well, you can't leverage in cold storage.
Andy Edstrom: Also true, which is all the more reason to not lever. I'm only talking about economic risk right now. I'm only talking about the risk that your stack gets yanked. But, add that fact, that you have to post collateral, you have to hand your coins to some third party, who may or may not lose them, may or may not get hacked; if and when they get hacked or stolen from, either inside job or outside hack, may or may not disclose it, could be running fractional reserve, may or may not be able to accept more collateral if you try to post more collateral to defend your position in a downturn --
Peter McCormack: Which we know has happened to very popular bitcoiners. There's a specific case with BitMEX of a fund. What was the name of the guy who did a show with Pomp? Disappeared, did that really great show with Pomp. Anyway, their fund, they were leveraged, they tried to post. Because the market was cascading down, they could not get onto BitMEX.
Andy Edstrom: That's right, literally they were like, "Here, please take my coins", and the counterparty said, "I don't know, our site's down". And by the way, I know numerous cases. I'm not going to name names, but I'm reminded I met some great bitcoiners at Bitcoin 2019, some of whom have lived in LA, some of whom got utterly rekt who were running funds, who were levered long in March 2020, one of whom may have been on your show, or more! And yeah, it's just no way to live.
Your downside, people forget, what I hear constantly is, "I'll just borrow little. I'll post 10 coins and I'll borrow 1 coin". All that does is open up the, albeit low probability, that you lose your whole stack, because flash crash down 90%.
Peter McCormack: Wick down.
Andy Edstrom: Wick down and they end the collateral. I have lived personally, Peter, I can talk about this if you want, I have personally gotten rekt before, never personal bankruptcy or anything that extreme, but there were times earlier in my career when I thought it was a good idea to speculate in FX markets, euros and yen.
The first decade of my career was bottoms-up security analysis, fundamental investing. Then the second half was wealth management, which was much more macro, investing across asset classes all across the world. So, like every newb macro investor, I found currencies, and I found the yen trade, classic trade, Japan, "Japan has too much debt, so either they're going to default, or they're going to devalue the currency, because they print so much of it to solve the debt problem. So, I'm going to short Japan".
The first day I figured this out, I called my broker, this is Interactive Brokers, to get set up to trade futures, and I wanted to trade bond futures and I wanted trade currency futures. And for whatever reason, they got the bond futures set up first. So, I was so excited, I was going to trade JGB futures. So, I put on the position at 10.00pm at night, and I wake up the next morning and I'm down $10,000! I wanted to put on the FX position, the JPY position, but I wasn't enabled for that, so I was like, "Well, I'm bearish on Japan, so I'll put on the bond trade". Okay, immediately down $10,000.
So, eventually I figured out how to put on the FX position, and then I decided that I heard Stan Druckenmiller, who was bearish on the euro, I decided I'd put on a euro trade. That got margin-called. So, I basically risked most of my taxable savings with leverage, and I got margin-called on part of it. I can't remember if it was ECB or the Fed came out with some announcement, and it moved against me.
So, I went to the bank, where I had my home equity line of credit, and I drew it completely, probably $150,000.
Peter McCormack: How much were you already down?
Andy Edstrom: I don't know, somewhere between $50,000 and $100,000.
Peter McCormack: What, in a handful of days?
Andy Edstrom: Oh, yeah, in a day. And this, by the way, was almost ten years ago.
Peter McCormack: You were gambling?
Andy Edstrom: Basically, I was gambling. I had a thesis, and what you just said, basically you're gambling, yeah. I had a thesis, and yet you learn when you're levered, it is gambling. So, I took out the home equity line, probably somewhere between $150,000 and $200,000, doubled down on the position, thank God it reverted, which is something that happens in foreign exchange markets, as people know. You get an overshoot, then you get a retracement.
Peter McCormack: The dead cat bounce.
Andy Edstrom: Well, because I had doubled down and increased my exposure, and I had only gotten stopped out of part of my stack, I ended up with a nice profit.
Peter McCormack: So, you took it out, you withdrew, you took your profits and you said, "I did well here", and you walked away?
Andy Edstrom: Yeah, if only that were true! And so then, in around 2016, in November, I decided to get bearish on the yen again, and something happened in November 2016. There was an election, and I was on the road at the time visiting clients, and I had my open position, short yen, when Donald Trump won the election, and it was risk-off, and literally that trade reversed. It would have been profitable within a day, but the overnight panic, the wick down, bitcoiners know how this works, stopped me up. That one, I think I lost, I don't know, $40,000 or $50,000 in a night.
Peter McCormack: Okay.
Andy Edstrom: Long story, what's the point? The point is, leverage will stop you up and will lose you money, and that's just in pairs like euros and yen and dollars, where a 2% move is big. And we're talking about Bitcoin, which is the most volatile major asset in the world. So, leveraging Bitcoin, I feel, is a ticket to pain, and it doesn't hurt to be reminded of these things now and then.
Peter McCormack: What was your total rekt position; did you keep going back and lose everything?
Andy Edstrom: No. Well, first of all, I gave you some numbers there, and this was between ten and eight years ago. So this was, to me, real money, to most people real money, but no, I didn't lose my whole stack. I didn't go levered long in the internet bubble and literally lose the whole thing. I don't know, I guess maybe I have some level of risk aversion and some level of fear of my wife, Peter, that I didn't bet the farm!
Peter McCormack: Back in, I think it was about 2014; no, it was before then, 2013, I think it was, I discovered Plus500 and trading CFDs.
Andy Edstrom: Oh my God!
Peter McCormack: I did quite well to begin with, and I was like, "This is easy". I was on a train journey down to the south coast of the UK to see my family, and I had my laptop, and I had my phone by my laptop, I was connected to the internet. And what I noticed, this was the first time I was really trading stocks, and I was trading Tesla back then, because it was when Tesla first started to shoot. I was like, "It seems to go up about a thumb, and then seems to come down about a thumb". So, what I would do is I would go long, short, long, short. I was like, "This is easy!" Occasionally, I'd get it slightly wrong. But on this train journey, I turned, I don't know, £2,000 into £4,000, then £4,000 into £6,000, etc.
Andy Edstrom: Feels good.
Peter McCormack: Get to the end of the day and I'm holding, I don't close out, I'd gone to a short position, and then the day closes.
Andy Edstrom: Overnight?
Peter McCormack: Yeah. So, I'd got this short position, not just overnight, over a weekend; it was Friday. And I wasn't thinking anything of it, I was like, "This is sweet", made all this money on this train journey, thousands of pounds. Get in the train to work on the Monday, get to work, and then obviously, we're in the UK, time's ahead, and there's the pre-hours' trading, whatever it is, the pre-market. And some news comes out about Tesla, their numbers, and the pre-market shoots up and I'm looking at my account and it says what I'm down, and then the market opens, done, whole account wiped out. It was thousands of pounds.
I felt sick to my stomach. I remember going outside at work, and I phoned my wife at the time, ex-wife now, and I said, "I need to tell you something, because I feel sick, really sick", and I explained it to her, and she was very cool about it. I went home and we talked about it, and I agreed I wouldn't do it again. Obviously I did, because I'm a degenerate. But I learnt so much from that moment, that utter awful feeling of getting financially fucked. And it's not the total amount of money, it's going from a lump to a nothing. It could have been £1,000, £10,000, it didn't matter, but it's gone in a second, and I felt shit.
Andy Edstrom: That's pain, as you say, you feel it in your gut. And the one silver lining of learning those hard lessons, and again I bang on about don't use leverage, etc, grandpa shaking his finger at you, and the reason I do that is because I've lost money that way; and the one silver lining that some people get is hopefully, you find the casino, the leverage casino early in life and rek yourself early before you have real assets at risk.
Peter McCormack: And real opportunity.
Andy Edstrom: And real opportunity, exactly. So, that is the one benefit. That is the one thing I do like about this whole Robinhood generation, YOLOing levered options, because hopefully, knock on wood, a decent number of these guys will be playing with money that isn't accumulated life savings, it's not their nest egg they've been scraping together for a couple of decades; it's what they earned in their 20s, and they can afford the losses, and they'll go through the cycle and they'll say, "I learned some lessons, and at least I won't put myself in a position where I can literally get zeroed out". So, hopefully that's how it goes, that's the optimistic take.
Peter McCormack: Danny, do you remember back in 2018, that couple from New Zealand who phoned me up who got rekt?
Danny Knowles: No, I don't remember that at all?
Peter McCormack: So 2018, I got this email from this lady. She was like, "I know you got rekt", because I did a Twitter thread on how I'd got rekt, quite a popular thread at the time; I'll come back to what happened there. But she got in touch and she said, "We're in a tricky position and we need some advice, can you talk to me?" I was like, "Sure, I'll talk to you, I'm not sure what advice I can give". Basically, they'd got into Bitcoin, got into shitcoins, made some money, re-mortgaged their house, put all their savings in, and they kind of lost everything. As the market dumped, they would double down and wait, and double down.
I forget, because the call was so long ago, but I feel like it was $250,000 went down to thousands. They lost everything, got rekt on shitcoins, and they had a young baby, and they destroyed everything they'd taken years to accumulate, the whole life they'd wanted to build. So, I'm with you, I completely agree. I actually think getting rekt is a super-important lesson.
Andy Edstrom: It is.
Peter McCormack: I've had it three times in three different ways. The little Tesla story I told you there; my company crashing after my divorce, and a company I'd spent eight years building died within a year, a company that could have sold for millions; and then my 2017 crypto reckoning, well 2017/18. The last one was the best one, and it led me, Andy, to when people say, "How do I do this; how do I trade?" I'm like, "Firstly, you don't trade. The best thing you can do is stack, hodl, deep storage, don't leverage, don't do shitcoins. Then find a job you like, work hard, earn money, keep working hard, keep earning money and keep stacking". To me, that's the only play in town.
Andy Edstrom: I agree. The story you just described, the couple that had saved presumably for years and then lost it all, I mean they did it in altcoins, but they could have done it in Bitcoin. When you lever Bitcoin, you turn it into a shitcoin, right, you turn it into an altcoin, at least in terms of the downside risk. So, you save your time. Bitcoin is this unbelievably unparalleled asset that respects your time spent and your labour, and it puts it into this safe and growing-in-value bank in cyberspace, as Saylor says, but you can screw it up if you lever it; because if you lever it, that doesn't respect your time. Levering Bitcoin literally inverts 180 degrees the way that Bitcoin otherwise respects your time.
Peter McCormack: Danny, do you have a getting-rekt story?
Danny Knowles: I've got two getting-rekt stories.
Peter McCormack: You know I'm talking about one specifically!
Danny Knowles: Yeah, I know, we can get to that! But in 2017, I got pretty rekt. I didn't have that much money at the time, but I got into ICOs, all that bullshit, and turned everything I'd done quite well throughout the year into basically nothing and started again. But then, earlier last year in May, I was away for my birthday, and my problem is I get super-bullish, I get way too bullish.
Peter McCormack: He gives me a call, he says, "Pete, I need to talk to you about something"!
Danny Knowles: So, I should have known it was a top, because I'd just bought myself a watch! So, it was only quite a small leverage. I wasn't super-leverage, but I was leverage long. I went to sleep and it was that day when it went from like $60,000 to $52,000 or something, got wiped out. It was bad, but I hadn't put my whole stack on there. But it fucking hurts.
Andy Edstrom: It's brutal, it's a pain.
Peter McCormack: It was your Christmas bonus!
Andy Edstrom: And this is what I'd say to people, "Look, if you want to lever part of your stack, first of all don't assume you're going to follow your money". Don't say, "I'm going to post again", and I'm using round numbers, "I'm going to post 10 coins and I'm going to borrow another 10, so I'm 50% levered. But it's okay, because if price goes down, I'll just post more collateral". That's, I think, a bad way to go.
Danny Knowles: And that's kind of what happened to me.
Andy Edstrom: Right, there you go. What you should say instead is, pick the leverage level that you're going to pick, be ready to walk away from it, assume it's going to get vapourised immediately, in an instant and just be okay with that. You want to do that with 10% of your stack? You want to gamble? Okay, have at it. And, yeah, just expect that it's a zero.
Peter McCormack: I have two different types of leverage I use. I've got essentially one leverage position open and a different type of leverage, and these are the ones I think… The first one, I don't think everyone should do, but some can do. So, during the bull run of last year, we went up to something like $30,000 and we crashed to something like $17,500. I'd just got out of bed and I was like, "This is a buying opportunity, I've got no dry powder, went online, went onto the bank and I was like, "How much money will you give me right now?" "£35,000". I was like, "Great, 2.55 Bitcoin", took the loan, bought the Bitcoin, pushed to cold storage, and I'm doubled up at least there. What am I? 150% up.
Andy Edstrom: Great trade.
Peter McCormack: That's a trade, and that's a leverage trade I can make, (1) it's early stage bull market, but (2) I will always have that Bitcoin, because it's in cold storage. Can I service the loan? I can service the loan, I've got a successful company business. Now, I posted that on Twitter and other people have come to me and said, "I'm thinking of doing this. Do you think I should?" I'm like, "I cannot tell you what to do. The reason I could do this is because I can service the loan easily". I can pay the loan off in one lump if I want now, but one of the things I've learnt is, taking long-term debt to buy Bitcoin is actually a very good trade.
The other leverage position I take is I get paid in Bitcoin by some of my sponsors and I keep it in Bitcoin. Again, that's a different kind of leverage trade. So one of them, last year, they paid the whole year upfront in Bitcoin, and I've got another sponsorship renewal coming, and I offered them, and I offered both times, "You pay the whole year upfront in Bitcoin, it's a 10% discount". So, they get their 10% discount, I get it in Bitcoin. Now, these are cycle- and price-dependent, but they're the only leverage trades I make now.
Andy Edstrom: Now we're talking. So, I like this discount.
Peter McCormack: Actually, let me throw in a third one, sorry, it's similar to the first one. I'm buying a new house, and to my mortgage broker I said, "I want the longest-term mortgage with the most borrowed money possible. I want to have the smallest deposit possible, and I want it over the longest term, because I am long Bitcoin for life". So, they are the ones I do make.
Andy Edstrom: And these are the good types of leverage, so I agree with your strategy. Term debt is completely different, it's night and day from margin debt. The margin debt, where you've got your Bitcoin collateral posted, where they can yank the rug on you, completely different from term debt. Like you described, you borrow from the bank, as long as you can make that interest payment, which is, because interest rates are so low, is a tiny fraction of the total principal, as long as you can fund that, you're fine.
This is why mortgage debt is amazing. I mean, it's also government subsidised, but as long as you can make that mortgage payment and it's a multiyear term, you're good. So, I believe in that type of debt. That, by the way, as people know, is what Michael Saylor does. Yes, his convertible bonds mostly are in the money. However if, God forbid, price goes down, he still is going to have to pay that debt back, if it doesn't go his direction. But five-year maturity, he's got a halving cycle plus, and that is kind of -- I give him credit. I don't know if it's coincidental, or if it's Michael Saylor genius or both, which is five-year maturity is actually pretty standard in the corporate bond market, and also in the convert market. And five years is a little more than a halving, so that's a good way to go.
Peter McCormack: If the halvings play out, because this year's been very different.
Andy Edstrom: Yeah, who knows, because this is all making assumptions, it's true.
Peter McCormack: I am questioning this year, me and Danny talk a lot about this stuff, why is this year different? One of the conclusions I came to is that the market never really does what you want or expect, it always seems to go against you. I know that's not the case for everyone, because we have successful traders, but it kind of does, you always get that feeling. 2013 cycle, I experienced it in part, only mildly, but I experienced it. Then, 2017 was essentially a repeat, very similar, massive blow-off top.
But 2021, Bitcoin is known by everyone. Everyone knows it exists, lots of people own it, and I think everyone expected the same, and my expectation is this is why we didn't get the same, this is why we have a different market.
Andy Edstrom: There's a very good case to be made exactly as you stated it, and that case is true in most other financial markets. The obvious trade is usually wrong. It's the second-order and third-order effects and trades that tend to pay off. I hate to say it, throwing my clients under the bus, but when I start to get the same phone call from multiple clients asking about something, it's often a sign that the opposite is about to happen. I don't want to say the "retail trade", but basically, when the crowd is all thinking alike, then you're on thin ice. So, I agree with you and there's two frameworks, I think, in terms of it.
One is that it's just all noise. In other words, if you ask me, Peter, how do I think about my investment thesis in Bitcoin, I think that I really don't know what's going to happen short term. If we're at $40,000 now, I don't know if we go to six figures, or if we go down by half first; I don't know what the path is. I do have the long-term, multiyear thesis that Bitcoin is severely undervalued today compared to where it's likely to be in the future. And everything between now and then, on that zig-zag path between where we are today in price and future price, nobody knows.
We try to tell stories, we look at charts, we try to do analysis of which holders are doing what, and what long-term holders are accumulating and what the retail's doing, and sometimes it's right, maybe it's right more than 50% of the time, but that just means that the other 46% of the time is wrong, and you just live with that risk and that volatility. So, I can make a case that, "Actually this cycle looked very similar, because we had the halving and we went up a multiple, but we didn't get the blow-off top". So, it was the same except for no blow-off top.
But that's kind of like saying, "It's the same, except it was different", which is kind of a BS excuse, right.
Peter McCormack: Or, perhaps the market is too mature for us to have that blow-off top?
Andy Edstrom: Yeah, and this is where people try to speculate. So, people talk about the institutional money and they say, "Okay, where is it?"
Peter McCormack: Where the fuck is the institutional money, man?
Andy Edstrom: I'm somewhat persuaded by this argument that our friend Bitcoin TINA makes, which is market structure has changed because of who the participants are. I think that's true, and the problem is, who are the participants? Maybe it's just Degens trading hedge funds. Maybe the "institutions" that have gotten in are three pensions, the one that Pomp sold and the one that the blue-collar Bitcoin guys, maybe they're punching, and then one other; and then, maybe the rest of the institutional money is just a bunch of hedge fund traders that couldn't care a less about the long-term prospects about Bitcoin, and took their 5X when they aped into the trade, because of Paul Tudor Jones, and rode it from $10,000 to $50,000, and now they're out!
Peter McCormack: Well, I think there's a lot of validity to the idea that money was taken off the table. Because, if you've got a plus-5X on your money, and you're a trader and you're judged on that, that's going to be one of your best trades of the year. We saw it with that gold fund, Ruffer, or whatever its name was.
Andy Edstrom: Yes, the one that took a BTC position as well, and then they just traded out of it. They were like, "Great, we've got a multiple. We'll take our principal off the table and some profit".
Peter McCormack: Yeah, and probably everyone was tweeting, "Have fun staying poor", and they're probably, "Well, that was a good trade!"
Andy Edstrom: They're saying, "We are having fun!"
Peter McCormack: That was a shame for the signal though, like a gold fund having a Bitcoin position was a strong signal for them to take it off was just… I mean look, Andy, the way I look at it now is, I don't look at any trade or any model that makes a prediction in the next year and think with any confidence it will happen. The way I see it, in a decade, I'm 95% sure every bit of Bitcoin I own now is going to be worth more; hopefully, significantly more, but more. I'm 80% sure in five years, the same is true. I have no idea what's going to happen in the next year, so I just keep stacking that beast, keep stacking.
Andy Edstrom: That's the right framework. High confidence in the long term, moderate confidence in the mid term; and in the short term, it's just rolling dice at the casino table.
Danny Knowles: But that's what sucks for everyone who's getting rekt going long Bitcoin, because you know, over the long term, every one of those sats is going to be harder to get, all the ones you lost are only going to be harder to get back. That's the thing that really hurts, more than the money, I think; that's the hardest thing to get your head around.
Andy Edstrom: I agree, which it's such a diabolical game, isn't it? This is why people keep levering. They keep saying, "Oh my God, this is my chance to grab territory on this network", and then they get out over their skis. Or maybe they just say, YOLO. Maybe they just say, "I think there's a 30% chance that I get rekt and stopped out, but I'm willing to take the 2:1 odds that I'll be a baller, I'll be a player, because I'll be rich, because I'll have made more". Maybe that's the answer, maybe that's the psychology of it.
Peter McCormack: Yeah, maybe. Well, listen, it's been a fun year, it's been an interesting year, and I'm still super-bullish, and I'm super-bullish for different reasons now though, not because of all the traditional stuff it's obvious to talk about; but one of the things that's making me super-bullish is that I think that we are right at the early stages of other countries showing their hands.
I think it's super-bullish for the US, because it's beyond the point of banning, and yes, I know they want -- I mean, I had the conversation with Nik Bhatia earlier. He was like, "There's massive companies here, lots of people own Bitcoin, there's a futures ETF, there's multiple institutional-grade products". He said, "We're beyond that point of banning". And there's that new rule that's been discussed of, "Transactions under $200 won't be taxed", which again is a super-bullish thing. Yes, the USG is going to want to surveil it and make sure people are paying their taxes, etc, but it's not going to get banned here.
There's lots of rumours of a second South or Central American country adopting it. We're at that point where the nation state race for Bitcoin is about to begin, and that's going to really kick off between now and the next ten years.
Andy Edstrom: Yes. So, that framework and that timeline, I think, are crucial, and this is one of the hard lessons I've learned with Bitcoin, which is that you get these waves of adoption. First, it was the Cypherpunks, and then it was the libertarians, as well as some hardcore coders. Then we got retail in, then you got family offices and then hedge funds and then pensions and then governments.
Peter McCormack: And then football clubs!
Andy Edstrom: And then football clubs, yes! And every one of these sectors of society or piles of money, really, pockets of money, has its own view of the world and has its own timeline, and has its own unique dynamics with respect to herd behaviour and group behaviour. So, it's generally hard to be first, although in the early days you get paid so well to be first that it's worth taking the fire.
Peter McCormack: You don't want to be last.
Andy Edstrom: You don't want to be last, but the bigger the organisation of course, and the more committee group behaviour it is, the more career risk you have as a decision-maker. Now obviously, I'm getting into funds and/or pensions and "institutional money", and then governments are the ultimate institution, you know, organisation that's run by committee, unless you're a small country that's basically run by an executive that for the most part, does what he wants.
So, when you look at it through that lens, it becomes clear who the early adopters will be. I mean, we say all this in retrospect, right. It's like, "Of course it was Bukele", but there's some truth to that. And then the clock has started, as you say, and the game theory plays out. Then the question is, what is the timeline? We Bitcoin believers, who have a long-term thesis, and know that Bitcoin is fundamentally severely undervalued today, and of course we should be taking as much territory on this network as we can afford to, without blowing ourselves up, what we sometimes forget is how long these cycles of adoption for those different segments of buyers and adopters take to play out.
I've been humbled in that regard. I was in the camp of -- so, I didn't come until 2017, or I didn't buy until 2017. I was one of those guys who was like, "Oh my God, it's happening now; hyperbitcoinisation is happening now!" in late 2017, and it didn't. And eventually, you come to realise that it could happen at any point. You don't know, there is that upside risk of the giant green candle, and just mayhem. But unless and until that happens, it just looks like regular adoption curves across all these segments, and how long do these segments take to adopt?
I did not anticipate a government getting in last year, so that was awesome. But likewise, with corporations, Saylor fired the starting gun and then he publicised the playbook. He had the conference. I'm having déjà vu, because he just did his recent conference, which happened a year ago, and everybody was excited that it was happening, the old Ron Paul meme, "It's happening!" and it just takes time.
Peter McCormack: We got a small allocation from Twitter, we got a large allocation from Tesla. But do you know what I think we got, which is the right way? I think we got a mass amount of small companies investing, because I know the emails I get. I've always explained that the podcast, we operate a Bitcoin standard. We don't hold a lot of fiat; when we're in a good cash position, beyond 6 to 12 weeks of cash, it goes into Bitcoin, always has done, I've talked about that a lot. I get the emails in, but it's like, "I run a sporting goods store, I want to have Bitcoin treasury", "I run a chain of restaurants, I want a Bitcoin treasury", because it's a one-man decision.
MicroStrategy's kind of a one-man decision. These are one-man decisions, or one-woman decisions. These are individuals who go, "I can do it". I think it's a lot harder for a board to collectively agree to make those decisions.
Andy Edstrom: So much harder.
Peter McCormack: I imagine the conversations have happened, and lots and lots of them have just written them off. Twitter, it's a Jack Dorsey decision. Tesla, it's an Elon Musk decision. So, I think we've had a lot of, I don't know if you can call them institutions, but institutional adoption from little companies, and I think that's the right way and that's a good thing. We just haven't had what we expected, all the blue chips coming in, S&P companies coming in and putting down $100 million, $500 million, $1 billion. I think that's what people expected, and maybe that's just not going to be the case.
Andy Edstrom: And, as you said, that's a better outcome.
Peter McCormack: Of course, you've got a better distribution of coins.
Andy Edstrom: Exactly. You've got the small businesses who've gotten royally screwed, especially in the last couple of years in the pandemic, forced to shut down while these other big businesses continue to mint record profits. So in that respect, it is a distribution-of-coins issue, it is a wider wealth distribution. It's also a solo-shop, small-proprietorship, small-business story, and you've got to love that. I love that, just as a citizen, just as an average guy. I think that's way better than Facebook taking a big position and claiming their territory on the Bitcoin blockchain, and writing it up and getting however many more tens of billions of dollars richer for Zuckerberg.
Peter McCormack: They may not have the money right now to make that investment. A lot of people would have got rekt this week on Facebook.
Andy Edstrom: Facebook's a funny thing. I don't follow it that closely, other than I'm quite confident that I'm happy when there's alternatives to Facebook, I am happy to not live in the country of Facebook, aka the metaverse. That verse is not the verse that I want to live in and fortunately, I think we're going to have choices, and hopefully Bitcoin will be the coin of the realm.
Peter McCormack: This is a fantastic whiskey, by the way.
Andy Edstrom: I'm enjoying it.
Peter McCormack: It's good. So, before we change topics, predictions for this year?
Andy Edstrom: Oh, boy, predictions for this year.
Peter McCormack: I think it's binary actually. I think we either go up, we stay the same or go down! No, we're either in a bear market, or we're in a, like Dan Held talks about, this lengthening cycle, and that's all it is and we've not seen the top.
Andy Edstrom: I think that I had a personal realisation which is, it's just long-term money and it's the long-term play, and you allocate accordingly, and that's all that matters. In other words, the only reason I care about what price does in the next 11 months is if I plan to exit in the next 11 months.
Peter McCormack: Which you don't.
Andy Edstrom: Which I don't. Although, here's what I'll allow for, Peter. I will allow for the possibility that if you're literally all-in Bitcoin, your entire net worth, then after you've made a multiple, maybe you want to pull some chips out the table, maybe you do feel pain when number goes down, maybe you don't have allocator blood, maybe your veins don't run cold with ice. So, this is, by the way, how coins get distributed. I mean, I know this is heresy, but if everyone just hodls forever, then nobody else gets any coins.
Now, fortunately we don't have to worry about that practically, because there will always be sellers in the market; but as a practical matter, I don't fault folks who find it, go in heavy, make a multiple, and then make a decision that, "Okay, I really don't want to screw this up. I've changed my life for the better, I've really made either generational wealth, or enough wealth that I can change my life and not be a wage slave, and maybe I'm okay taking some off the table, with the caveat of taxes, or no taxes".
Let's bring it back to Southern California, shall we? End of discussion! If you're a Californian taxpayer, you're not selling Bitcoin. Let me phrase that differently. I'm a California taxpayer, I am not probably going to sell any Bitcoin that's taxable hopefully ever, because the tax burden is so substantial.
Peter McCormack: How bad is it?
Andy Edstrom: Okay, 20% federal, plus 3.8% Medicare surcharge. California income tax falls the same for ordinary earned income as for capital gains. So, max bracket California is 13.3%. Not saying that I'm max bracket, but if hypothetically I were --
Peter McCormack: What are we up to, 36% here?
Andy Edstrom: Yeah, basically we're around 37%.
Peter McCormack: 37%? Jesus.
Andy Edstrom: So, more than a third. And if you've made a multiple on your investment, then basically the whole piece of what you sell is getting taxed, or substantially all of it. And so, you've got to really get the timing right if you're trying to trade that.
Peter McCormack: Yeah. We get 20% cap gains in the UK.
Andy Edstrom: Yeah, you see that's substantially better.
Peter McCormack: What happens if you move state; does California follow you?
Andy Edstrom: Paging Elon Musk! He moved to Texas. If you can demonstrate that you've actually left, so for example you're spending most of your time in the new place, ideally you sell your residence, you don't keep your house in California, facts and circumstances matter. But yeah, under current law, once you leave, if you sell subsequent, you're subject to the state that you move to, like Texas, as a hypothetical. There have been proposals in the legislature here in California --
Peter McCormack: I think you told me this over the barbecue.
Andy Edstrom: Yeah, exactly, to basically make it retroactive, or put a tail on it, so it's like, "Oh, no, when you lived here, you owed the taxes. And even if you leave, that liability follows you".
Peter McCormack: Can they do that?
Andy Edstrom: I think we're going to find out, and I think the reason we're going to find out is because we've got this insane competition going on, which I love. I love Texas and I love Florida and I love Wyoming saying, "Come here, wave them in, we'll take all the bitcoiners, we'll take all the entrepreneurs, we'll take all the guys that don't want to pay 13.3% to the State of California. Come here, make your business, we've got a lot to offer", is what they're saying, and they do have a lot to offer.
I think the reality is, we're going to see substantial competition, because we can, within this union of states, and there's going to be reactions. There's going to be one punch thrown from one side and a reaction from the other, and it's going to be all fun to watch. And look, if it gets bad enough taxwise here, I'll leave. I love LA, my family's here, I grew up here, my parents are here, my in-laws are here; but if they turn the screws tight enough, you've got to cry uncle and vote with your feet, right?
Peter McCormack: Balaji would be proud of you.
Andy Edstrom: As he says, you've got your ballot and you've got your wallet and you've got your feet, and you get to vote with all three, and you make your choices.
Peter McCormack: And two of them are effective in a place like California.
Andy Edstrom: That's right. The ballot is completely useless. Although, I will say I have done my small part to help out Aarika Rhodes, I hope she wins. Winning the primary is an interesting dynamic. I would love to see the backside, not literally, figuratively, of Brad Sherman.
Peter McCormack: He's a bit of a, well, I don't want to say the C-word, but he's not friendly to the bitcoiners.
Andy Edstrom: He's not at all.
Peter McCormack: He likes the bankers.
Andy Edstrom: Do you know what's really interesting, Peter, is I accidentally spoke with a client about this, because as an advisor, I'm not supposed to pitch political stuff to my clients, and I got some feedback. There are other people who are not happy about Brad Sherman for other reasons. There are plenty of people who dislike Brad Sherman, who hate him, to be honest, other than bitcoiners, many reasons to want to see him out of office.
Peter McCormack: Well, I've interviewed Aarika Rhodes. I think she's got fantastic energy, I think she's a breath of fresh air, I think she's doing a Live Spaces tonight with Jack Dorsey about UBI. I hope she wins, she's a wonderful human. If you're listening, Aarika, I love you, good luck tonight and good luck, I hope you do it, she's wonderful.
Andy Edstrom: I agree completely. Her energy's unparalleled, her heart's in the right spot, and she's the type of person I want to see running things in Washington.
Peter McCormack: Do you know who else I think is kind of interesting? Josh Mandel.
Andy Edstrom: I don't know anything about Josh Mandel, tell me.
Peter McCormack: So, Morgan Harper's up against him, and Danny, see if you can find this video of Josh Mandel debating Morgan Harper about Bitcoin. He's pro-Bitcoin, he put out this great speech. He was talking about, "If you're for big government and small people, then you should be against Bitcoin. But if you're for small government and big people, you should be for Bitcoin". I was just like, "Wow! That's the kind of shit we want to hear".
Andy Edstrom: I love that, that's a great framing.
Peter McCormack: Yeah. So, okay, let's talk ESG. I haven't read this article, clearly, because when I asked you about your latest article, I thought we were talking about Don't Get Rekt!
Andy Edstrom: No worries. It's a short one, it's on Bitcoin Magazine, so I think it came out Monday, and it is exactly what you said, which is ESG is three letters, not one, and the Energy, I'm not going to dwell on the energy, because that's been well covered.
Peter McCormack: It's directionally going the right way.
Andy Edstrom: It is, and the narrative is going the right way, and we're winning. And actually, it's funny, when you and I published our article a year ago, a separate one, I was quite worried about the environmental narrative, and it feels like, yeah, it feels like we're winning. So anyway, the S and the G, the Social and the Governance, I mean this stuff's kind of obvious, but I guess I'll start with governance first, which is, okay, you've got an algorithm, that's Bitcoin.
Peter McCormack: Uncorruptible.
Andy Edstrom: Uncorruptible. Anyone can enter, literally if you have internet access, which actually is a barrier that some don't acknowledge. I mean, if you look over the entire world, not everyone has a smartphone, not everyone has high-speed internet, although you don't even need high-bandwidth internet, you just need low-bandwidth internet, but not everyone has internet access. Nevertheless, billions of people do, and so that opens up the field, and that's what fairness is all about.
That is one of the beauties of the internet, which has been true from day one, except for the internet giants that have taken over, but aside from that it is an accessible platform. And Bitcoin doesn't care what you look like, how old you are, where you're from, what language you speak, how much money you have.
Peter McCormack: What you eat.
Andy Edstrom: What you eat, what you drink. Bitcoin doesn't care, so that's huge. In contrast, the dollar is run by, depending on whether you count it, a 12- or 16-person committee. Average age, I don't remember the stats, I have them in the article, but it's not young people, it's old people. I almost don't want to get into what colour they are, but they're not very colourful.
Peter McCormack: You're talking about old, white men, aren't you?
Andy Edstrom: Basically, I'm talking about old, white dudes.
Peter McCormack: I think we can say that.
Andy Edstrom: You know what's interesting though, I think we can say that. I will give credit, at least there's more female representation. So, if I was up making the progressive case, the progressive case for the Federal Reserve!
Peter McCormack: That's a show title, Danny! Yeah, the Progressive Case for the Fed!
Andy Edstrom: What's Going Right with the Fed?! I guess you could say that what's going right with the Fed is that there are women on the FOMC.
Peter McCormack: Are they old, white women?
Andy Edstrom: Basically, yes! So, that's what it comes to. In addition to the old, white men, you have old, white women, generally speaking. So, that's the contrast. And then, obviously you've got the, "By the way, what are these guys doing on the side?" and they are mostly guys. They're day-trading their accounts, we've just had multiple cases, resignations!
Peter McCormack: I know!
Andy Edstrom: These guys trading, and one of the guys was trading one of the levered REITs, mortgage REITs, Real Estate Investment Trusts. And this is like, if you were to pick a stock in the universe that is most sensitive to Federal Reserve policy, this is the stock you would trade!
Peter McCormack: I mean, it's kind of obvious.
Andy Edstrom: It's kind of obvious, it's so obvious. So, that's where you end up. So, anyway, I guess the bright side is, it was two old, white guys who were day trading, and are not there anymore.
Peter McCormack: But they've probably been replaced by two old, white guys.
Andy Edstrom: Well, we'll see, there's open seats there. We're going to find out who their replacements are. And then on the social angle, and this is stuff people understand, which is yes, early bitcoiners hold more, if they held onto their coins, which is a big "if". If they didn't sell them in the upmarket, if they didn't panic and sell them in the downmarket, if they didn't lever them and get the rug yanked, all these ifs. If somehow, by some miracle, you were an early adopter of Bitcoin and you held onto your coins, then yes, you have a big stake in this new economic system.
Nevertheless, as people accumulate wealth, as I described before, once they've made multiples, they start to peel off pieces, because they do want to live their lives. Maybe they do want to buy a house, maybe they do want to live reasonably, maybe they do want to own a chair. Maybe they sold all their chairs so they could stack, but now they want to have a chair.
Peter McCormack: Just one chair.
Andy Edstrom: Just one. They don't want to stand when they're doing their podcast recordings.
Peter McCormack: We've got a lot of chairs in here. How many? We've got a lot of chairs in here, there's like 15 chairs in here.
Andy Edstrom: So many chairs.
Peter McCormack: The owner of this place is definitely not a bitcoiner, with 15 chairs.
Andy Edstrom: Definitely not. So, coins get distributed. And then, when we're living in a system where there's actual economic signal coming out of the monetary system, rather than just 12 or 16 older, Caucasian PhDs in economics deciding what the price of money's going to be, then yeah, maybe people can save their time, maybe they can accumulate wealth. Maybe they don't have to pay financial advisors like me to try and beat inflation. I get to be the house that takes a rake on that investment plan. Maybe that won't be necessary. I think that will be a better world, I think that will be people being able to save.
Then of course, just the whole, how many billions of people live outside of systems that have actual effective property rights, where someone's going to steal your cash, because you live in a place where it's hard to secure your property? Bitcoin fixes that too.
Peter McCormack: You see, this is the point on the SG. We've got a great defensive line when people come on the attack. When Senator Warren comes out and starts rambling bullshit about proof of work, we've got a great defensive line. We work hard, but where's our offensive line? Why are we not out there talking about the S and the G, communicating the benefits across society that Bitcoin will bring? How do we land that message? Let's get that offensive line out there.
Andy Edstrom: I think that's huge, I agree completely. Bitcoin is always playing defence on the narrative in general. In fact, it's hard for me to see where we've been ahead of it. When have we been ahead of it? I'm trying to think of specific examples. I guess it's always been the inflation-proof asset. That's where we've been ahead of the existing system. But yeah, who's telling the positive story, and who's listening.
I guess the good news, this is what's good about number go up. When number goes up, people have money, I mean bitcoiners have money, and they can afford to spend a few sats to support those in government. Now, there's a problem with that too, though, which is something I sometimes worry about which is, it's a really hard -- well, first of all, X% of bitcoiners just don't believe in politics, so they're like, "I'm out, I'm not participating, I'm not playing this game, I'm just going to hodl and they can't take it away from me, they can't take my coins, so screw them".
Peter McCormack: Fine, yeah, fine.
Andy Edstrom: For the rest of us who live in the real world, we would prefer this not go the hard way, and instead go the easy way. That's something you and I have --
Peter McCormack: Hard path, easy path.
Andy Edstrom: Exactly. Let's take the easier path, and that costs money, and it's really hard to part with your sats when you're so sure that Bitcoin's going to $100,000 this year, says every man in this room, if we wind back the clock six months or nine months!
Peter McCormack: I don't know, I'm a Bitcoin spender.
Andy Edstrom: Good on you.
Peter McCormack: I mean, the way I look at it is, if calculated correctly, I can remember the exact percentages, but measured in pounds or dollars, whatever you want, I can spend probably 5% to 10% of my stack every year and never run out.
Andy Edstrom: That's the right way to look at it, slow spending of the stack. You've got income, you've got a job, this is what -- I get a lot of inbound, a lot of enquiry, folks especially in legacy finance, guys working in investment banks, guys working in funds, guys working in wealth management, they're like, "I've figured it out, Bitcoin's the thing, what do I do? Do I quit my job? My current firm isn't keen on Bitcoin, so I can't do it here. I can work away in the fiat mines, stacking Bitcoin over time, but it's soul-sucking. So, what am I to do?" And it's not an easy answer.
I mean, I'd love to tell them, "Leave it all behind, quit tomorrow, screw the fiat world, go get a Bitcoin job". The reality is, to get a job in Bitcoin that's going to pay you even a reasonable fraction, in fiat terms, of what you're making in fiat land, you've got to really hustle, you've probably got to get lucky and it's not so easy. So, for the majority of people, there's a range of outcomes.
For many people, the answer is, "Keep working your fiat job, keep doing that, stack sats, educate your peers, do your small part basically to help people that you touch adopt Bitcoin". For some section of people, maybe you can go a little farther, maybe side-hustle it, that's how a lot of people get in. They start doing something in Bitcoin, or they work part time in Bitcoin, while they're also working their existing fiat job. Then, if you're ready, if you can afford it or if you don't have too many dependents, or if you can go a couple of years without things working out, yeah, maybe you do quit tomorrow and just go for it. It also comes down to conviction. If you've got the long-term view and fiat don't matter to you, go for it.
Peter McCormack: Do you want me to tell you my thesis on it?
Andy Edstrom: Yeah, I do.
Peter McCormack: We have two primary scarce resources, which is Bitcoin and time, and I'm 43. I don't know if I'm going to live to 44, 54, 64, 74, no idea. But people who say money doesn't buy happiness, there's a caveat to that. Being broke is shit.
Andy Edstrom: It sucks.
Peter McCormack: Being broke and getting rekt and thinking you're going to lose your house sucks. I've been there, I've been very close. During the history of doing this podcast, I've come very close to losing my house. So, being broke sucks. But once you get to that point where it's like, I can pay my bills, I can go to the supermarket, Walmart, Tesco, whatever, and I can do my shopping and I don't have to have a budget; if my buddies call me up and want to go for a drink, I can go; if I need to get on a flight tomorrow, I can get on that flight; if you can cover all your basics and you're okay, that's great.
Everything after that is lumpy. It's, do I want this car; do I want this house; do I want this jet; do I want this island? It's all lumps. I personally don't care about the lumps and I've got the basics sorted, so what I care about is maximum use of time to have the most fun. So, what I want to do is, I want to travel, I want to treat people, if there's a concert on and it's sold out and it's $400 a ticket, I want to go on an get it; if there's a football match I want to go to, I want to get it. So, I want to live the experiences.
So, I want to make sure that when I get to that last moment and I collapse, clenching my heart, on Santa Monica Boulevard, my time is up, I want to know I've done the maximum amount of things I can in that time to enjoy myself, myself with my family and my friends. So, I have a spend-Bitcoin thesis. I've done my tour of duty, I've done my first four years, I'm in the green now. And once you're in the green, you've done your tour of duty, everything gets a bit easier. And I will keep buying Bitcoin, but I will keep spending it.
I price things in Bitcoin, so I'll give you a good example. 49ers, went to see them against the Rams. The 49ers are my team.
Andy Edstrom: Amazing.
Peter McCormack: Have you been to that stadium?
Andy Edstrom: No.
Peter McCormack: Holy shit, that is a noisy stadium. But 49ers are my team. Back when I was a kid, they were the first team that I saw play on TV, Joe Montana, Steve Young, Jerry Rice, that was my year.
Andy Edstrom: Dream team.
Peter McCormack: I was like, "They're the biggest, they're the best, I'll support them". And then, they've pretty much sucked since.
Andy Edstrom: I remember that time though, because I'm only a few years off you, and that was all anyone talked about. These guys were amazing, they were everybody's idols. They were true superstars, rockstars, unparalleled, at least in my cohort, your cohort.
Peter McCormack: So, I go to the game with, you know Culkin?
Andy Edstrom: Yeah.
Peter McCormack: I went with Culkin and we're talking through, and he was like, "If they get to the final, are you going to go?" and I was like, "I think so". And when I looked at it, it was a once-in-a-lifetime opportunity to go and see the 49ers in a Super Bowl. Would I spend $10,000 on that ticket? No fucking chance, but I will spend 0.25 Bitcoin, because I can look at my stack and go, "I'm going to sacrifice that part of that stack to have that experience, to live through that, and that's what I do.
I always look at the stack and go, "Am I happy to lose a bit this year?" and like I say, back in dollar/pound terms, 5% to 10% of the year, I imagine I can do. And the reason I do it, the moment that made me realise is, back end of, I think, 2018, 2019, I put $400 of Bitcoin in my BlueWallet, my Lightning Wallet. And then, at one point in the last year, when I went to El Salvador, that was $3,500 worth, and I can't spend it. This wallet feels like I'm never going to run out of money. I've spent a bit and every time I go to El Salvador, I'm using it constantly, and I buy my beefsteak, and I'm going to buy my Real Bedford jersey using this. But if Bitcoin continues to go up, this wallet seems like it's the never-ending wallet of money.
So, that's my thesis, is I want to fill time, because what would suck is if I wait that five or ten years -- I'll explain it in a different way. Sorry, I'm taking over the show here.
Andy Edstrom: No, it's fine. I want to respond.
Peter McCormack: But let me tell you the reason why this became really important. My dad, fucking bless him, a hard worker, he is a hard worker, his whole life, engineer, shift worker, aircraft engineer, worked, worked, worked, set his goal of retirement. He ended up retiring at 61. Him and my mum bought a place in Ireland, planned for this beautiful retirement, and he worked 20 to 61; 41 years.
Andy Edstrom: Four decades, yeah.
Peter McCormack: Four decades, he worked his absolute nuts off. And within a decade, my mum was dead. They had their two world cruises and for two and a half years of that decade, she had cancer, so she couldn't travel, she couldn't do anything. The poor fucker worked all that time, and then he got robbed of that time with my mum, that retirement time. I assume he'd expected at least two decades, hopefully three, but they essentially got one decade. But they really got seven years, and then we found out she had cancer and it's like, you don't know when this shit's going to end, or what's going to happen to you, and I want to just feel like I've lived as much as I can through that.
Andy Edstrom: I love that perspective, and I'll tell you mine as well, which rhymes, but it's a little different. So, I agree completely that time and freedom are what we buy with our assets, whatever we have, either because we've laboured and we've saved that up for years and decades, or because we inherited or got lucky, who knows what. And, the time is truly scarce, but there's also the question of, are you having fun or are you working?
Good advice from my dad, credit to him, he's also my business partner, he told me, "Yeah, find a job that doesn't feel like work, or only feels like work some of the time", because there is a hybrid there, and there are degrees of difficulty and degrees of difference between pure slogging, just going to the salt mines, maybe that's what your dad did, I don't know; and then, there's jobs that are fun, doing what you love and you get paid for it.
So, if you're lucky enough to find the latter, absolutely do that, jump on it, that may actually extend your life, that may extend your time, believe it or not, because believe me, I've seen clients, I've seen people who quit their jobs and they deteriorate and die soon after. So, if you find that passion and you can do it, and for more and more people, that's Bitcoin, so that again is hope.
If you're into this thing, if you're all in, if you've figured out that the world's going to be a better place if Bitcoin reaches its potential, and I think it will, then by all means, find that spot, find that job, take the pay cut. If you can afford it, work for a lower salary, because you are a part of this thing which is the most important thing which is happening on Planet Earth. Convince me, anyone in this room, if you dare, that there's anything more important going on than Bitcoin, in terms of its future potential. And why would you not want to take any opportunity that's given to you, if you can afford to, to make your small part, to contribute to this thing?
Peter McCormack: Well, you're taking a pay cut for a time raise.
Andy Edstrom: Yeah.
Peter McCormack: And that's a good trade.
Andy Edstrom: Yeah.
Peter McCormack: That's a really good trade.
Andy Edstrom: It is, that's exactly right, that's where we agree. And the other thing too is, it's good to think about optionality, which is to say, maybe if you leave your TradFi job, your legacy finance job, you take a 50% or more pay cut to work in Bitcoin, which is actually probably not too far off the truth today, literally. You've got the Wall Street job, now you're working for a Bitcoin company, big pay cut. Yeah, maybe get a decent slice of equity, but that's speculative, and maybe it pays off in the future.
But you're also making your resumé in Bitcoin. And this again gets to the admonition that I give to people which is like, "Look, get out there, publish, make your voice heard. You want to write something? Do it. You want to do a pod? Go for it". Anything that you can do to get out there, make your opinion heard, if it's a good opinion, and get involved with the conversation, absolutely go for it, because it's still so early.
I mean, yeah, if Bitcoin reaches its potential, which will be orders of magnitude bigger than it is today, my God, having some small role in this world will pay dividends in terms of multiples, in terms of your human capital, in terms of what you can do in the industry and for the world in the future, because it's this ever-growing, multiplying, expanding organism, and just having a piece of that; buying and hodling and stacking sats is the easiest thing, next is spending your time and your reputation and committing to it and making a career, and there's just so many ways to win and contribute to Bitcoin.
Peter McCormack: Yes, brother.
Andy Edstrom: Yeah. Get in, people, keep learning, keep adding, keep orange pilling your neighbours and your friends and your family, and don't use leverage, but do use everything else that's unlevered, and keep this thing growing. If we keep contributing and if we keep learning, we can't lose. I mean, the facts and circumstances, where Bitcoin today is in 2022, where we've got governments coming in where, as you said, there's almost zero probability of prohibition in the US or free countries, I mean the long-term potential is just so exciting.
Peter McCormack: And also, read everything that Andy Edstrom writes. His book, Why Buy Bitcoin and every article. Andy, that's a great place to end it, and I'm glad to have you as a friend here in LA when I come in, and every interview we do is a pleasure. But this, by far, the best show we've made. It's good to sit opposite you, drink a whiskey and make it. Tell people where to buy your book and where to follow you, and obviously the tailwind message that Cory Klippsten will smash you round the face if you don't do it!
Andy Edstrom: The pleasure's mine, Peter. Yeah, Why Buy Bitcoin on Amazon, swanbitcoin/andy. I didn't get to mention that we're building a product, basically, for financial advisors to get their clients into Bitcoin, so that's swanbitcoin.com/advisor. Twitter is @edstromandrew and yeah, it's been a real pleasure, Peter, and happy to be on this journey with you.
Peter McCormack: Okay, man, well listen, take care and next time I'm back here in California, I'm sure we're going to be hanging out, watching football, eating steak, talking Bitcoin. Thank you for just being around, and whenever I've needed you for a show, you've always turned around and said, "Yeah, I'll do it". So, I appreciate that, appreciate you and good luck.
Andy Edstrom: Guaranteed, Peter, come eat meat next time you're in town.
Peter McCormack: All right, man.
