WBD472 Audio Transcription
The Future of Bitcoin Banking with Bill Barhydt
Interview date: Tuesday 8th March
Note: the following is a transcription of my interview with Bill Barhydt. 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.
Bill Barhydt is the CEO and Founder of Abra. In this interview, we discuss institutional investment, the long term debt cycle, the end of fractional reserve banking and how Bill gave away thousands of Bitcoin.
“All those bankers we just talked about would laugh at this conversation because they would say, ‘what the fuck are you talking about? Bitcoin standard? Bitcoin is a joke.’… It’s like buying Facebook stock 15 years ago, you know, it’s going up in price. ‘I’m going to make some money. What are you guys talking about, Bitcoin banking?’”
— Bill Barhydt
Interview Transcription
Peter McCormack: Good to see you, man, it's nice to see you in person. We're back to in-person interviews, which is great. It's nice to have more than just you and me and a table and two mics.
Bill Barhydt: Yeah, you guys are growing.
Peter McCormack: We've got a team here.
Bill Barhydt: I knew you'd win.
Peter McCormack: Danny might chip in as well. Danny asks questions sometimes now.
Danny Knowles: Only sometimes.
Bill Barhydt: Oh, wow.
Peter McCormack: He asks better ones. He asked the best question in the last interview. We did one with Gladstein.
Bill Barhydt: With Gladstein?
Peter McCormack: Yeah, we were talking about the price of war, and he came in with this super-intelligent, articulate question, and I was like, "Fuck off, Danny, it's my show!" No, Danny will chip in, and it's nice to have him travelling with us. And, always good to see you, man.
Bill Barhydt: Yeah, you too.
Peter McCormack: Twice in a couple of weeks, which is great. It's good to be back here. Loads to catch up on, it's a really wild time at the moment. I feel like we bottomed out at $33,000.
Bill Barhydt: Pricewise, I think we've bottomed out for now. We'll see whether this is a channel, or whether it's really rocket fuel for the next macro/network effect-drive leg-up; I think it could be. It doesn't really matter from a long-term time horizon perspective, but we don't know yet obviously.
Peter McCormack: Yeah. We all have our long-term theses, we're all hodling for years.
Bill Barhydt: Exactly.
Peter McCormack: Can we talk a little bit about the institutional stuff we were talking about just before we started recording, because it was a conversation we had recently, in that last year we thought the institutions would come, and we were told they were coming, and maybe some did or they didn't. You've got a different perspective on this?
Bill Barhydt: Yeah, I mean we never really saw them. I mean, I think what people were seeing and calling institutional money was not really institutional money, it was what we could high-net-worth money, which is in the US maybe family offices, or rich folks, or some combination, or a trust, or again a family office which has different legal structures. And billions certainly came in via that route, and so you see that in a lot of the on-chain metrics that you talk about with others, in terms of strong hands.
I actually see those as stronger hands than the institutions that are likely to come in now, for different reasons, because those folks are likely to sell faster. But they're not in yet. A little bit, but if you look at the on-chain metrics, and even what you're seeing on exchanges, our opinion, and also in first-hand meetings that I have been doing with my team, the institutions are now the sharks in the moat circling the Bitcoin castle saying, "Okay, this looks like something that our clients want now" and it manifests itself in different ways.
Some are basically saying, "Don't want to touch Bitcoin or crypto, but I might be interested in these yield products that use Bitcoin as collateral". They call that crypto, you might not call it Bitcoin or crypto. But some are saying, "I want direct exposure to Bitcoin or Ethereum, or even the 'What's next?' stuff". So, we're seeing all of this now from the big banks that have either fund of funds, that basically choose which products can win the portfolios that are accessible to their clients; or, it may be even in balance sheet money.
So, we didn't see this in mass at all last year, and all of the large allocation conferences that just happened in Miami, we saw it across the board, so literally from zero to one in the last year. And, I don't know for sure, but anecdotally, I would say a lot of the pullback that happened from November until, I guess, last week actually created more fuel for that, because a lot of these folks are very savvy and they say, "I don't want to get in for the first time at $68,000, I'd rather get in for the first time at $40,000", and some of them may be even a little disappointed, because we really haven't had a lot more troughs within the runup over the past ten days, which I actually think could actually represent even more fuel for the next runup, when people realise that there is no pullback to get in on.
If you look at what's happening in futures, I know it's not a macro discussion, but we're looking at negative funding rates right now, while we're going up 20% off the lowest. Last time that happened, Bitcoin doubled very, very quickly. So, from a contrarian perspective, that's where you want to be. You want to see huge built-up sentiment and pessimism, while you're basically going up in price. It's just pure rocket fuel. When the futures markets are basically pricing in very high fees for taking the long side of a trade, that tends to put a wall or ceiling on price. We have the opposite right now. We have a rising floor because of this pessimism that's built up over the past few weeks.
My point is that some of the savvy institutions, they don't really totally understand Bitcoin futures yet, but they see the pessimism versus the macros versus what's happening in the broader bond markets, which should all act as rocket fuel for risk-on assets and going, "This is interesting". So, it's actually a really good time, at least in our opinion.
Peter McCormack: And, one of the things that's been quite clear over this last year is that Bitcoin seems to be very correlated to economic news, market news, the S&P. It's a correlation sometimes we don't really want, because we like to see Bitcoin as this lifeboat, this safe haven asset. Why do you think that correlation has built up?
Bill Barhydt: I see it a little differently.
Peter McCormack: Okay.
Bill Barhydt: I think there are probably two or three things happening at the same time, and the pundits, like the CMC types, they don't dig in enough to actually have a useful -- sorry, but they don't really dig in enough to have a useful explanation for what's really going on at a high level. They say, "Oh, the S&P went up, Bitcoin went up; the S&P went down, Bitcoin went down; they must be correlated". It doesn't necessarily mean that that's what's happening.
I do think when there's extreme movements and extreme pessimism in stocks, it does affect Bitcoin right now. I don't think it has anything to do with this idea of Bitcoin being a hedge against inflation. I think the interest from the maxis, and for the purposes of Bitcoin discussion, I'll put myself in that camp, even though I actually believe in other technologies; what I would say is, it's the promise that it's going to become that over time, not that it is that today. And I think more and more people, independent of this institutional investment thesis, are recognising that it's a network-effect-driven path towards becoming an inflation hedge.
It is not an inflation hedge today. Anybody who watches the price, regardless of your perspective on shitcoins versus anything else, has to accept the fact that when you have these drawdowns on the way up for an exponentially growing asset, it is not an inflation hedge. It is the price we pay for being early in what is effectively a network-driven model, exponential growth model, towards becoming that. And the network effects for Bitcoin are driven by this promise of inflation hedging, and the network effects for Ethereum are driven by this promise of the world's computer, whether you believe it or not. That's what it is.
Neither is there yet. Both have the promise of that. I believe in that promise, and so I put my money where my mouth is accordingly. And I think that's why we see these big volatility swings, nothing to do with this macro thesis that there's a 0.7 -- and we show this too, but there's a 0.7 correlation between Bitcoin and the S&P 500. Well, at the extremes, it looks like that's true. But all of a sudden, when you're not in the extremes, when you're on the way up or in the middle of the channel on the way down, those correlations don't seem to be true anymore.
Maybe the point is, we just made them up at the extremes, and it just kind of worked out, and so we went with it! So, my point is, there's a much better explanation of that. So, at the very extreme, when people are risk-off, I think people who aren't investing via long-term conviction for where the network effects are going, may reallocate. People who have conviction for those network effects I keep harping on are not going to reallocate.
So, I do think that there are going to be a few different dimensions to what happens to Bitcoin over time. The first is, as the price goes up, the effects of leverage will actually come down over time, because the price will simply devalue, the asset will simply be too large for any small number of investors to move the market via leverage. Whereas, those of us who've been in for six or seven years know, especially when BitMEX first started, it had a massive effect. I mean, they can literally just screw with you, move the markets and make sure everybody loses money except for them; literally that was what was happening, in some cases. That is unlikely to happen three or four years out, if Bitcoin really goes where I think it's going, so that's part one.
I would say part two is that that'll be offset by some of these institutions being willing to come in and out, meaning they won't have the conviction of you or I in the short term. They may long term, but many of them are just going to basically look for buy-and-sell opportunities and optimising tax strategies, and other things that cause them to come in and out. So, you may see dips on the way, but it won't be the same as the volatility-driven dips of excessive leverage in the system.
Peter McCormack: I have to ask you, because you just said, "Where I think Bitcoin's going"; where's Bitcoin going, Bill?
Bill Barhydt: I think Bitcoin is going to $1 million, from a dollar price perspective, but at that point, it really doesn't matter what Bitcoin is worth in dollar terms, because you're going to have a whole group of people who basically do their economic thought basis in Bitcoin. We don't have that yet, so I realise that you and I know some people who think that way, but that's a round-off error to zero. But we are going to have a cadre of people on this planet who start to think in Bitcoin-centric terms. They're going to still spend dollars, they'll borrow in dollars in real time.
A future big part of Abra's business is going to be enabling real-time borrow of Bitcoin collateral to live, because those people are thinking in Bitcoin terms. Now today, we have a lot of those people, but they're doing it for different reasons. They just don't want to sell Bitcoin, and they know that it's going up in value, and they're just all in.
Peter McCormack: What's the difference?
Bill Barhydt: The difference is that today, they're still thinking about their net worth in dollar terms, and what I'm saying is that, when Bitcoin hits $1 million, a lot of those people are no longer going to think about their net worth in dollar terms, because it won't matter to them. It's like saying to me, "What are you telling me, Neo, that I can stop bullets?" And Neo says, "No, when the time comes, it won't matter". And I'm saying that, when Bitcoin reaches $1 million for a lot of people, that value won't matter, because they're just going to think in Bitcoin-centric terms, but they're not today. I don't know if the nuance of that point is getting lost or not!
Peter McCormack: No, I understand it. I think one of the trickiest things is, when you look at something priced in Bitcoin, it isn't intuitive, you do the calculations. It's a bit like when you go on holiday and you go to Thailand, and you get the --
Bill Barhydt: It's a pointless exercise, because you're dealing with an asset that's basically experiencing exponential growth because of network effects, not because of its value for being able to buy things. And I'm a big believer in where we can go with the Lightning Network, but it's just too early to be thinking in those terms for the average person.
So, I do think that we're going to get there, I think that you're going to basically see, like I say, a huge banking network emerge that enables people to spend in dollars, treat Bitcoin as their personal reserve currency, regardless of what governments tell them they should think about Bitcoin versus the dollar or anything else, because it's just going to make sense. It is going to become stable, you're not going to see 200% year dollar appreciation forever. Well you could, I guess, if the Federal Reserve keeps going what they're doing, but on the assumption that they don't act stupid forever, I don't see why it would appreciate at 200% forever.
But independent of that, if it becomes a stable store of value in ten years, which is what I believe will happen, then a significant number, probably millions of people by then, will be looking at this as their personal reserve asset. In India, people pass gold on from generation to generation, because it's a store of value of wealth. But the irony is, they don't tap that wealth, they just pass it on. So, when you think about it, as somebody who doesn't do that, you're like, "Well, on the surface, that doesn't really make a lot of sense". I understand passing down a home from generation to generation, which may look like wealth, but you're also living in the home.
So, what if that generational wealth was Bitcoin and you could access that wealth as you go? You're borrowing against it, you're able to move it around in a way that is for economic value, as opposed to just, "Here's my gold jewellery", and maybe the value goes up over time, but so what? Here, we're talking about passing on generational wealth that people will access, via dollar borrow, credit cards. People complain about their credit store, but we actually pride ourselves on having a great credit system in the US, where a bank can quickly determine whether or not they should lend you money.
Well, I would actually posit that having Bitcoin as collateral is a way better way to make those decisions for 8 billion people that don't have access to the kind of credit-scoring system that we do, and I think that's the future of credit at retail on the planet meaning, "How much Bitcoin am I holding? Do I borrow maybe in some stablecoin in my country that I spend?" so maybe put it in your audience terms, I'm spending the shitcoin and I'm holding the Bitcoin, and that becomes a revolver for me. And I don't have to worry about somebody's credit worthiness, because I'll tell you the way I look at it is, is I want to get to the point where, and we already have it, we will lend you at Abra 10% of the value of your Bitcoin today for free forever.
Peter McCormack: 10% of the value of your Bitcoin for free forever?
Bill Barhydt: Right.
Peter McCormack: So, if you had $1 million of Bitcoin --
Bill Barhydt: I will lend you $100,000 right now at 0% interest and I'll role it over forever.
Peter McCormack: But I have to leave that with you?
Bill Barhydt: You do.
Peter McCormack: Okay.
Bill Barhydt: But this is the point I'm making about the India example. If I'm willing to park my family jewellery, which is now Bitcoin, at a crypto bank, like Abra, I now have a personal revolver credit, but using a base asset that in theory is still mine. Now, if I can't pay back the loan for whatever reason and I want to liquidate, they're not going to liquidate 100% of my Bitcoin, they're going to liquidate the 10% that I need to pay back the loan, which is what we would do today.
So, that is a significantly better model for credit and banking, if you believe in the Bitcoin standard as we do, for the future; as opposed to arbitrarily deciding, "I have no assets, but the bank arbitrarily decides that my creditworthiness is $40,000, which is my black card credit", or whatever, I just made that up. But now, it's actually based on something tangible, something real.
Peter McCormack: But hold on, no interest and it can roll over forever. So essentially, you can take out $100,000 line of credit that you never have to pay back, as long as you leave the Bitcoin with you. But if Bitcoin does a 10X, you can then withdraw and still have that?
Bill Barhydt: Exactly, correct.
Peter McCormack: And at what point do you margin call somebody?
Bill Barhydt: It depends upon which LTV, Loan-to-value ratio, they choose.
Peter McCormack: On that 10%?
Bill Barhydt: I don't know the exact number, but it's very unlikely to happen. Even with the history of Bitcoin over the last five years, I'm not 100% sure this is correct, but I don't think it would have happened.
Peter McCormack: So, I mean you have counterparty risk, but that's the risk you take, but it's kind of interesting, because it gets to that point whereby, if you were somebody who had $10 million of Bitcoin, and if you're happy with counterparty risk, and your outgoings were £200,000 a year, you might never have to work again, you can just take the money.
Bill Barhydt: That's my point, this is the future of banking. So, as long as we can borrow in the shitcoin.
Peter McCormack: Well, that's the thing, you need the shitcoin.
Bill Barhydt: We do, and you do too, in the model I'm describing. And Michael Saylor is very adept at making this point in a self-serving way, given somebody whose books are reconciled in dollars, to say, "I don't want the dollar to go away, because as long as I'm alive, it is to my advantage that eventually, I'll be able to borrow in dollars". He knows that, he knows exactly where this is going. He's not stupid, he doesn't want the dollar to die. He's highly incentivised, even though he's holding Bitcoin, for the dollar not to die.
Even if he ends up with the most Bitcoin of anybody in the world, he still doesn't want the dollar to die and this is why. From a spend perspective, everything that's ephemeral is dollars, everything that's permanent is Bitcoin, he wins, because he can borrow, to your point, against that forever. And as long as the value of the Bitcoin increments at a faster rate than the interest on the dollars, he's basically borrowing for free.
Peter McCormack: So, Danny, $3 million of Bitcoin, you can go and get yourself a Lambo!
Danny Knowles: No, I'm going to get a Rolex!
Peter McCormack: You're going to get a Rolex, are you?! No, it's super-interesting. But while that's happening, people who choose not to accept Bitcoin, there's this weird new wealth divide being created, between the Bitcoin-havers and Bitcoin-not-havers.
Bill Barhydt: Sure, but this is not an unexpected thing.
Peter McCormack: Of course.
Bill Barhydt: So, if you go back to Hayek's writing on private money, he said before Bitcoin, before the internet, that if you had private money that was deflationary in nature, fixed value, no print button, this is exactly what would happen. It would be hoarded first by the people who get it and they would not spend it, because they knew that the value, via the network effects, would drive the value, especially when people realise the scarcity.
That's exactly what's happening with Bitcoin. The only reason we have these values is what we discussed before, which is you basically get, in a logarithmic exponential growth, you get some shocks to the system, whether it's China bans, or S&P 500 corrections when the Fed hints that they might raise rates; it's all noise, "When in doubt, zoom out". I mean, if you look at the log chart, it looks like it's up to the right for a reason, because it is, from a logarithmic growth perspective.
So, I think that other noise just won't matter long term, when we are at a point where everybody can just borrow in dollars or rupees, or whatever they're holding against Bitcoin.
Peter McCormack: That's fascinating. I've not ever actually borrowed against my Bitcoin yet. That's not to say I wouldn't, but I could think of scenarios, where if you had enough Bitcoin and you want to buy your house.
Bill Barhydt: Sure, we do those loans every day. I did it myself, and by the way, that's a huge problem, because most banks in this country, they'll take the yacht, at least on paper, as collateral; they'll take another house; they'll take your Lambo; but they won't recognise the value of Bitcoin.
Peter McCormack: Well, I know this right now. So, I'm buying a house right now, and my mortgage broker, he asked me, because it's a nice house, he's like, "Can you explain how you're going to pay for it?" because I have to pay stamp duty and the deposit to get to the house. I said to him, "I want the longest mortgage with the most borrowing possible, that's what I want", and he said, "Why?" I said, "Well, I'm a bitcoiner --"
Bill Barhydt: Well, you probably didn't want to answer the question accurately, but we all know the answer!
Peter McCormack: Well, he's just my broker.
Bill Barhydt: His incentives are aligned. You can't say that to the bank, because they'll close the door immediately.
Peter McCormack: Well, that's what I'm coming to. He said, "Why?" I said, "Because I'm a bitcoiner. My Bitcoin will outperform the loan I'm taking for the bank. For me, that's cheap credit for holding Bitcoin". He didn't fully get it. But he said, "Anyway, by the by, Pete, there's how much money you've got in the bank and there's the deposit. For you to get the mortgage, you have to explain, how can you afford this?" I've got this added complexity because I've got a podcast. I've got so many bits I could tell you about this! I work for myself, so if I'd have worked for you, Bill, for a month and you'd written me a letter saying, "Pete earns this much", they'll give me the mortgage. Because I work for myself, I have to show three years.
Bill Barhydt: Exactly.
Peter McCormack: Do they have similar --
Bill Barhydt: Absolutely. It's a little bit different as a CEO and founder, because even though I'm technically an employee of a USC Corp, the banks don't understand or have a model for addressing the fact that I am an employee.
Peter McCormack: The last one to get fired.
Bill Barhydt: Right. Well, not necessarily, but it doesn't matter from the bank's perspective; I work for myself. So, yes, Abra's been around long enough where at least that one point is not an issue. But look, here's my prediction as it relates to us in crypto banking, okay two things. One, we'll do loans up to $1 million for the right amount of collateral, depending on which state, which country you're in. We do this in 43 US states, 50 countries today. Now, that's not enough if you live on the coasts to buy a house, or to pay for most mortgages. In the middle of the country, it is, but unfortunately there's a little bit less adoption to Bitcoin in the middle of the country.
Those two will converge to the point where we are in the primary mortgage business, Abra, I promise you it's going to happen, I just don't see any way out of it. The banks are too slow.
Peter McCormack: Hold on, sorry, let me finish telling you my story, because I want to finish it and tell you what came to my mind. So, I sent them three years of accounts, and the podcast has been very successful.
Bill Barhydt: But they didn't care.
Peter McCormack: Well, no, the podcast has been very successful, I'm not going to share the exact revenues now, but we're in seven figures, and every year it doubles. They said, "We need an explanation of why growth has been so fast, and is it sustainable?"
Bill Barhydt: Right! They don't ask Bernie Madoff to explain why the returns basically double like clockwork, but they ask Peter McCormack!
Peter McCormack: Well, so we did that, and then my broker said, "They just want a list of assets", so I said, "I've got this and this and I've got this Bitcoin". He said, "We're not going to put the Bitcoin in". I said, "Why? The Bitcoin would pay for the house itself. I'm not selling it, but the Bitcoin would pay for the house". He said, "Because, when they see the Bitcoin, they'll be suspicious and they think you can't afford the house". I'm like, "This doesn't make any fucking sense".
Bill Barhydt: Of course not.
Peter McCormack: But what it did make me think is one of funniest things is, I don't think I want to borrow, say from Abra, the entire house, I don't have enough Bitcoin for that. But what I could do is every month, let's pick a number out the air, £2,000, you borrow the payments.
Bill Barhydt: You borrow the payments, absolutely.
Peter McCormack: Because what would happen is, yes, I would keep giving you more and more Bitcoin, but you know that maybe in a year or two years -- so, say my mortgage payment was £2,000 a month, I would have to leave £20,000 of Bitcoin to you. So, I do that every month, every month. But we know at some point, I'm going to be able to withdraw back. So, I might never have to make a mortgage payment.
Bill Barhydt: Yeah, totally agree. Look, without giving it all away, because my team will kill me --
Peter McCormack: Give it all away, Bill!
Bill Barhydt: -- I'll go on a limb and say, we are going to get in the primary mortgage business, because there's no way around the problem you're describing, which I just went through, living here in the Bay area, in a place where homes cost unfortunately millions of dollars, which is more than what I can lend you today. I can lend you the down payment for a home in the Bay area, or in Miami or New York, and a lot of people are doing that; but in order to address the problem that you and I had, which is not going away any time soon, we will have to get into the primary mortgage business.
To me, think about it for a second, right. What is worth to you on the primary mortgage? Let's say, to your point, you still wanted to sell, or borrow monthly, to make the payments, but you needed to borrow more than what I could lend you today to make the down payments, let's say to borrow $1.7 million. Figuring it out via a traditional broker that wouldn't deal with your Bitcoin cost you X, and dealing with Abra, a company that would basically fully recognise the Bitcoin, Ethereum, or whatever collateral, would cost you maybe X plus 30 basis points. Given your thesis about where Bitcoin is going, you'd probably pay the 30 basis points and not even blink an eye.
Well, in the aggregate, in the mortgage industry, those 30 basis points are probably worth $1 trillion, globally.
Peter McCormack: Jesus!
Bill Barhydt: And, keeping in mind that outside the US, most people don't have access to credit anyway, because the systems aren't set up to basically decide who has credit and who doesn't, unless you have basically a guaranteed 24/7 liquid collateral.
Peter McCormack: You see, the other thing is that I would be thinking about this, Bill, is that the only problem with the current lending market is the need to over-collateralise. For me, it's always a bit of a pain. I can't buy the house I want, cash, because I don't have enough collateral in Bitcoin to do it with you. But an interesting mortgage product for me would be, say the house is $1 million.
Bill Barhydt: But it changes with the mortgage product, you have to think differently with it, because we also have the house.
Peter McCormack: Well, no, this is what I was going to say. So, say the house is $1 million, deposit is 10%, $100,000, so I put that down, and then I want the mortgage with you, you might be able to take 10% collateral to provide the mortgage, but you also then are in the business of dealing with foreclosures. But would you deal with foreclosures?
Bill Barhydt: Absolutely, because there's so much extra money on the table. And people who want to borrow for the down payment won't be able to go the next step to buy the damn house anyway, but that's my point.
Peter McCormack: But maybe if it was like 10% in Bitcoin or 20% in Bitcoin, that gets you around credit checks, because you have the house and then you have the Bitcoin, which is much better than a scenario where you only have the house.
Bill Barhydt: I know.
Peter McCormack: It's so obvious.
Bill Barhydt: By necessity, the banks will eventually get it, because they will have no choice.
Peter McCormack: It will be too late. You'll be buying them.
Bill Barhydt: Exactly. So, I've said this publicly. My prediction is, independent of what Abra's doing, that one of the top 20 exchanges will try to buy a Fortune 500 bank in the next five years. Now, the FDIC may say, "No way", because they have to approve it, but they're going to try. And they may be forced to do the first acquisition outside the US, but it's going to happen.
I would do it for different reasons than what an exchange would do. They would just do it for compliance. I want to do it for the kind of business that you and I are describing, because I need the capital base at that point. Obviously, I'm hoping we'll get it via billions and billions of dollars in consumer deposits, who want to make yield, so it becomes a reciprocal, symbiotic relationship, which is banking, just crypto-centric now. So, that's where I think this is headed.
The other part of this is just day-to-day payments. Now, you mentioned borrowing to be able to make that mortgage payment. The downside of that is you've got to sell, which means you've got capital gains on an ongoing basis. So, I wouldn't do it that way.
Peter McCormack: No, I wouldn't sell, I would just borrow from you. You pay my mortgage.
Bill Barhydt: Okay, so that's what I was going to say. So, that's something that we're also doing this year. So, we had an amazing year last year, but the one thing that I wanted to have happen last year that didn't happen, is I wanted to shut off my last bank account.
Peter McCormack: Yes, you told me that, you did tell me that.
Bill Barhydt: It didn't happen. Now, there's a couple of reasons why, and the single biggest reason why it hasn't happened is I have to pay my bills. We will be rolling out a solution for that this summer. I'm not giving any more away, and I will be standing in line as the first customer, and when that happens, my bank account will be shut off, and I will see how hard it is, if we really can accomplish what I want to do.
Cheque-writing in this country is ridiculous. I actually had to write a cheque yesterday, I hadn't written one in five years, because I had a land surveyor in my house, who's basically been in business since 1965, and he didn't know what Zelle, or any of these products is, or whatever! That's the big variable, is can you basically pay bills without having to write a paper cheque. Most people under the age of 25 have never written a cheque.
Anyway, we're really close, and this is what drives me right now. I believe that Bitcoin becomes the personal collateral, it becomes the personal reserve currency, and there's this kind of, I'll use the term "DeFi" kind of oriented infrastructure around you, software, internet, whatever that enables the ephemeral banking world of payments via dollar shitcoins going forward, in a way that preserves the Bitcoin collateral for all time.
Peter McCormack: It just makes so much more sense. I know the banks recognise Bitcoin exists. They're probably thinking about it, they're probably talking about it, but I don't think many of them, if any of them, really understand what it means as collateral to support something like a house buy, maybe even a car. But they don't understand it, and it's going to take them too long to get there. Essentially, when you get into this market, your entire book will be bitcoiners.
Bill Barhydt: Yes, absolutely. So, it's going to be this symbiotic relationship between retailers like ourselves, large funds and family offices, miners needing to borrow to expand their facilities. We're already seeing this kind of traditional banking symbiotic relationship between business and consumer banking evolve in our world. There's a few, five or six of us companies, that are heavy into the lending space in crypto, that are basically also driven by consumer storage and deposits. So, there's a lending side, borrow side, yield side, etc. They all play off of each other, you can't have one without the other, and banking will evolve the same way.
So, I've got a huge legal team now that spends all their time thinking about how to make this work, meaning we think about us as the round peg and banking as the oval hole, and we've got to put the round peg -- so, they will fit, but we've got to do it in a way that works for them, and I think we've figured it out now. So, that's the pieces of the puzzle that we're kind of laying now for the next 15 years of banking.
Peter McCormack: But we need the shitcoin dollar.
Bill Barhydt: We do. Look, the alternative, of course, is that the dollar dies, and I've heard varying degrees of opinion on this. So, some folks like Michael Saylor will say, "No, the dollar is not going to die, it's going to be the dollar, RMB, maybe euros, and that will be the ephemeral transaction currency. I'll be able to borrow against it". I actually agree with Michael, even though it's self-serving, I actually do agree that we're going to need that to be able to pay.
By the way, whether it ultimately becomes something like Lightning is Layer 2 for payments, and it is Bitcoin, it doesn't really matter that much. But it does make a big difference in terms of the base collateral and being able to borrow against it. Those who figure that out earliest, that will be the new wealthy for the next 50 to 100 years, in my opinion.
Peter McCormack: But it's not going to happen next year, maybe the next five years, ten.
Bill Barhydt: No.
Peter McCormack: So, there is a period of time where there is so much market that you can go out and capture in the short term.
Bill Barhydt: Absolutely.
Peter McCormack: Yeah, it's fascinating trying to get your head around it, starting to think about, well firstly, I'm thinking about all the Bitcoin I've sold, fucking idiot!
Bill Barhydt: Or the Bitcoin that I've given away!
Peter McCormack: Well, yeah.
Bill Barhydt: I mean, I was mining in -- this week is the ten-year anniversary of the TED Talk I gave. After that, I probably gave away 1,000 Bitcoin.
Peter McCormack: Holy shit!!
Bill Barhydt: I don't know. I don't even know what that's worth now.
Peter McCormack: Is that $400 million?
Bill Barhydt: I don't even know. I mean, it was worthless at the time, literally worthless, and it was worth it to me to just expose people to what I was talking about.
Peter McCormack: Is that $40 million or $400 million, I haven't done the maths.
Bill Barhydt: I don't want to know; please don't do the maths. You can text me later.
Peter McCormack: I think it's $400 million. Well, Max Keiser gave Alex Jones 10,000 Bitcoin on a laptop! But like you say, nobody was to know.
Bill Barhydt: I mean, I probably haven't thought about it more than twice until this conversation. It just doesn't matter.
Peter McCormack: Are you going to ask for it back?! It's funny, Bill, I've had so many conversations this last week starting to think about the things that Bitcoin does beyond just being peer-to-peer decentralised money. We had Alex Gladstein in here this morning, and he really went through the thesis of how Bitcoin defunds wars. It doesn't get rid of it, but it defunds wars, because we've moved to this world where, rather than having war bonds, where the population decides whether they want to pay the tax for the war, is it a just war, the Fed just prints money for the war.
So, I had a conversation, we talked about mining and how mining is now changing the energy grid. There are so many things that are coming out of this that's it's kind of mind-blowing.
Bill Barhydt: Yeah, so the big question related to funding war really becomes, what happens with this debt cycle? I think he's right for the next debt cycle, but we're right at the cusp of this debt cycle ending, and this is what Ray Dalio's new book talks about, and what he explains in the book is this never ends well, never. And you can see that now, with all this stuff about fighting over shit island that nobody's ever heard of in the South China Sea, Russia amassing troops. I don't know if this really means this is it, but it doesn't sound good to me, and there's really no basis in reality for it other than bond markets, which have traditionally been the reason that these wars have happened.
So the question is, can we get out of it now in this cycle with the model he's describing; or, is it too late this cycle and it's just basically the basis for the gold standard utopia for the future for those of us who don't die? Now, that sounds horrible when I say it that way, but I think it's the truth; that's what I don't know. I believe Dalio, I think the maths he describes is sound. It has happened like clockwork in 80-year cycles for hundreds of years, it has nothing to do with technology, it's driven by human frailty, which is why you can get off a gold standard. It shouldn't be possible to get off a gold standard, that's why it's called a gold standard, but we've done it time and again, it's invariably led to war because the bond markets go to shit.
If he's right soon, it's great. If he's right in a little while, it could be a big problem. Does that make sense?
Peter McCormack: No, I'm going to have to you walk it through.
Bill Barhydt: If we are in a late-stage debt cycle, which means historically war is coming, because just late-stage debt cycle, Lyn's talked about it, bond markets go to shit; Dalio talks about it all the time and it has invariably led to war, for whatever reason. Somebody basically is left holding the bag, and they don't want to be left holding the bag, and it leads to war, Germany after Versailles, etc.
So, I believe Alex's point about not being able to fund war via a Bitcoin standard the way I believe he was describing it to you in your talk this morning. I wasn't there, but I get his point; I've seen him make the point before. The question is, there's a time vector on top, meaning do we have enough time to get out of this cycle now using a Bitcoin standard --
Peter McCormack: Oh, I see what you're saying.
Bill Barhydt: -- or is it too late in this debt cycle, because this debt cycle is not going to be here in 25 years.
Peter McCormack: Can Bitcoin lessen the impact.
Bill Barhydt: Soon enough. I think it's a binary thing, you either go to war or you don't. And in all of the previous debt cycles, we've gone to war.
Peter McCormack: But what has to happen with Bitcoin to stop --
Bill Barhydt: I don't know, nobody knows.
Peter McCormack: Fine.
Bill Barhydt: That's why Dalio doesn't address it. Dalio doesn't say in his book, "How do we avoid war in this debt cycle?" He just tells you as an asset manager what has happened, and what he does to address the fact that we're in late-stage debt cycle, bond yields are going to shit, or at least certain prices are about to plummet again, and here's what that implies from a fund management perspective. He has no thesis about how to stop the war, if it's going to happen, he just tells us what's happened.
Alex tells us, "This is what would happen if you had the Bitcoin standard". What I'm saying is, we don't know what that transition is going to look like that would prevent the war before we go onto a Bitcoin standard. And, keeping in mind that all of those bankers we just talked about would laugh at this conversation, because they would say, "What the fact are you talking about? Bitcoin standard? Bitcoin is a joke", still, even at $2 trillion. From a traditional banker's perspective, it's like buying Facebook stock 15 years ago. It's going up in price and I'm going to make some money, "What are you guys talking about with Bitcoin banking?"
Peter McCormack: Well, I know this already, because you know I bought this football club?
Bill Barhydt: Yeah.
Peter McCormack: So, if I sit down with a bitcoiner and I explain my thesis, they're like, "Yeah, that's fucking brilliant, I get it". I sit down to talk to a football person, they're like, "This is a scam".
Bill Barhydt: Yeah, you're just some rich cuck who made some money and decided to invest in a football club.
Peter McCormack: Yeah, I actually walked him through it. It's a 10th-tier football team, nobody goes to watch them, and I'm saying I can get them in the Premier League. I spoke to this journalist and he said, "How are you going to do it?" and I said, "I'll walk you through it". I said, "I'm going to get a leverage of audience so we have a revenue model now, so we're good now, we've made a lot of money now which is great. But the way we get in the Premier League is, I want to borrow £50 million now, I want to hold it in Bitcoin and I'm not going to touch that for eight years. Then, in eight years' time, when we're in the football league, I will start dipping into that so we can go towards the Premier League".
He said, "What do you mean you're going to hold £50 million in Bitcoin?" I said, "Well because probably, at some point in the next eight to ten years, Bitcoin is going to be worth certainly hundreds of thousands, maybe £500,000 to £1 million. But if it is, I'll be holding a treasury of around £0.5 billion and I'll be the most well-capitalised club in the world". He's like, "What the fuck are you on about?" If you're on the inside, every one of these models, whether it's a mortgage, whether it's war, or whether it's a football club, if you're a bitcoiner, you understand it. Everyone on the outside doesn't, and that leap is only recently, because I've spent the last four years doing this and spending time with bitcoiners, that I forgot there are a bunch of people that don't get this.
Now I've come back out and I'm spending time with people that don't, there's a massive gulf of an understanding, and our knowledge is getting deeper. We're talking about mortgage products. We still haven't got them to the door of even thinking about it.
Bill Barhydt: That's right. I mean, I heard Balaji on your show, I forget the journalist's name that he was with --
Peter McCormack: Greenwald.
Bill Barhydt: Greenwald, thank you, awesome interview. And by the way, just letting them go was brilliant. And, he talked about the pendulum swinging towards anarchy. I think a lot about, if that pendulum does swing, that could save us, because it means less government, but somebody is going to be left holding the bag on all of this worthless debt. That has never ended well, so that's the part that I don't have an answer for that keeps me up sometimes when I really think about where it's all going.
Peter McCormack: It depends where the transfer of wealth is from and to, and who it affects.
Bill Barhydt: Well, right now it's China, which holds an insane amount of our debt. They don't want anymore, they know it's worthless. They're talking about basically settling what used to be a petrodollar now in a eurodollar --
Peter McCormack: Yeah, the euro.
Bill Barhydt: -- with Russia. Again, it's exactly what's happened before. I think he's right in terms of the pendulum swinging towards anarchy, and overswinging in the short term. Like you, I think a right-sized government, very right-sized versus what we have now makes sense. But we're going to have to overshoot the mark in order to get there, most likely.
Peter McCormack: By the way, Greenwald and Balaji wasn't about me just letting them talk, it was about me going, "I don't know what I can add here"! Two great minds talking away!
Bill Barhydt: I listened to it twice.
Peter McCormack: Wow, thank you.
Bill Barhydt: Yeah, well it was really good.
Peter McCormack: I'd actually like to get Greenwald on his own.
Bill Barhydt: I think you should have the follow-up conversation you guys mentioned at the end for sure.
Peter McCormack: No, we're definitely going to do that, because Balaji's got some great ideas there. But what I want is a separate one with Greenwald where we will talk about his observations externally of the Bitcoin community, because I thought he had that quite astute observation that maybe bitcoiners aren't always good at selling Bitcoin to the wider community, because you have to make that leap into libertarianism, which is a long way from where some people are, and I think he makes a good point. Wow, interesting times! Danny, these conversations are getting deeper and deeper.
In terms of, there's this fundamental shift in banking as well, in that Chase Manhattan, is it called Chase Manhattan?
Bill Barhydt: Just Chase.
Peter McCormack: Was it called Chase Manhattan?
Bill Barhydt: It was. These banks have merged so many times.
Peter McCormack: Wells Fargo.
Bill Barhydt: JPMorgan Chase.
Peter McCormack: Yeah.
Bill Barhydt: I don't remember which part is name and which part is history. Who knows?
Peter McCormack: Wells Fargo, or Lloyds and Barclays in the UK, there's another thing going on. They've made life difficult to do business with them, onerous KYC. Today, I've had two different transfers I couldn't make: one a business one, that it turns out I had a limit on my account I didn't know I could do; then on a personal account, I can't remember what was the reason it wouldn't allow me to do that. Everyone knows I lost my Lloyds bank, because I wouldn't tell them what I'm spending my money on, and here we are in the background.
Abra is just building, and new competitors are just building these completely new banks and models that these people just don't understand. How has the face of, let's call it financial services as well as banking, how has the face of that changed in the time you've been doing Abra, and what has surprised you about it all?
Bill Barhydt: Yeah, when I started Abra, I thought we would be able to use Bitcoin quickly to be able to move money around, and eliminate middlemen on remittances. I had developed a stablecoin-like model, almost like Dai, but based on Bitcoin for Abra.
Peter McCormack: I remember that.
Bill Barhydt: It worked, technically it worked, financially it worked, and I remember sitting in a meeting with one of our early investors and he said to me, "This is brilliant". He said, "You know, I've been reading about how Bitcoin works. The one thing I don't understand is, there's this mining fee you pay and it's a couple of pennies right now", because this is 2014, and he said, "What happens when that turns into $10?" I said, "That can't happen, because Satoshi laid out the way, 'Here's how you basically increase the block size, and the network grows', and he laid out in some posts some Metcalfe's law and how it all works, and how Bitcoin will be able to scale over time", and boy was I wrong!
So, I had this vision that payments would come first, because we could solve immediate global problems. At the time, I was running a foundation in Haiti, I'd spent a lot of times in the Philippines, rural Mexico, Guatemala, etc. And, it just wouldn't work technically, there was just no way. It was too expensive. The first time Bitcoin shot up to $15,000, we were subsidising mining fees, there was one month where we paid over $1 million in mining fees.
Peter McCormack: Holy shit!
Bill Barhydt: Exactly. So, we shut that off real quick, at least in terms of us subsidising those, but it didn't make sense to our users, because they saw dollars. Remember, these were stablecoins based on Bitcoin. And so anyway, we had no choice but to back out of that business model, and so we decided that wealth management would be the right way to start the banking model, and then move into payments, vis-à-vis all the better model.
I also came into Bitcoin with that payments hat on. So, we talked about how much Bitcoin I may have given away; I had no interest in what it was worth, because even though I was an Austrian at heart who had read Hayek and Von Mises and all these books years ago, I didn't associate Bitcoin with that yet, because I was associating it with peer-to-peer electronic money, to be able to move money around quickly. That was my interest in Bitcoin out of the gate.
I realised that if I was going to do this, I had to layer the timing of the market and where Bitcoin was going onto my thesis, regardless of what I wanted to have happened, meaning I can't force a timing for a product. So, because Bitcoin was going to be hoarded, I started to embrace it for what it was, which is basically an asset which was going to be hoarded, if at all, because it was still early, and started to embrace it from that perspective.
Then realised, "Okay, I can build a wealth management system around this, I can build a lending business around this. That will segue into payments. That will work its way down the socioeconomic pyramid, so that I can enable person-to-person money transfer in war zones, remittance zones", and do all those great things that were originally exciting for me, but get there in a different path from what I thought was going to happen.
I still think that Lightning is going to work, but you can't turn on 100 million people on Lightning right now, it's not possible. Even with Cash App saying they're going to turn on Lightning, unless they're acting as the node for every single user right now, it won't work, not yet. It will work eventually but, like I said, not yet. So, we realised that we had to get there via a different path, and that's the path we're taking.
Peter McCormack: And, as you start to take market share from traditional banks, and I know Caitlin Long with Avanti is building what she says is a fully reserved bank, and it isn't a universal view that fractional-reserve banking is bad, some people agree it is good. Credit expansion is good, it supports the growth in the economy, for example. Under a Bitcoin standard, that's not really going to be possible.
Bill Barhydt: Well, back to the question about, what is the dollar's role?
Peter McCormack: We need the dollar again!
Bill Barhydt: Well, no, we don't need the dollar, I'm openly saying it depends on what the dollar's role is. So, for example, if the dollar acts as the basis for ephemeral money movement, ephemeral money movement is you have a start and an end to a transaction, then the dollar's role is gone, because you've gone back to your Bitcoin reserves for that, which is held long term, fractional-reserve banking doesn't really make a lot of sense. If we still believe that to grow an economy, you do need a Keynesian perspective on growing that dollar by 2% a year, that is completely wrong by the way, that is not what needs to happen.
Peter McCormack: It's what they need to happen.
Bill Barhydt: Right, but even coming out of this debt cycle, the question remains, what will people believe? Because, they believed coming out of the last debt cycle that we needed a gold standard, but the way they implemented it was completely wrong. It allowed human frailty to still fuck it up, and that's what Dalio is correctly pointing to that transcends technology. This debt cycle, and what inevitably is going to happen is going to happen independent of the fact that we're so much more technically advanced than the people who screwed it up 250 years ago; it's the same human frailty.
So, we need a model with the next debt cycle that eliminates the possibility of human frailty screwing it up, if we believe that that's important. We may decide as a society, it's okay to have debt cycles. Now, that doesn't make a lot of sense to me on the surface, but I don't know everything. So, it may be that it makes more sense to actually have debt cycles. Remember the Matrix, you keep rebuilding it over and over again? Well, maybe that's what a debt cycle is, it's like the Matrix that you keep rebuilding over and over again; nobody knows.
My preference is that fractional-reserve banking, to your question, goes away, we have a model where you can borrow ephemerally in dollars, pay what you have to pay, and you live that way. And the value of a deflationary asset, on a purchasing power basis, continues to increase over time, because there's a fixed float, which is what should happen when you have a true gold standard. If that happens, the model I'm describing should allow for societal growth, even if the population continues to grow, even though some people think that won't happen.
Peter McCormack: And, humans can't fuck it up, because the Bitcoin standard's decentralised.
Bill Barhydt: Correct.
Peter McCormack: It's amazing Ray Dalio doesn't get this, or maybe he hasn't sat down with the right person.
Bill Barhydt: I don't think he's incentivised to care right now, because his focus is not, "How do we get out of this mess?", it's what's happening and how do I invest appropriately, because his job is CIO of a traditional asset management firm, rooted in today's system. So, I think about the boundary layer between the old and the new, because I'm incentivised to think about it; it affects my business, it also affects how I sell my business and what is my conviction for. And so, I don't think his conviction overlaps totally with mine yet.
Peter McCormack: Please don't bring war; that's the part I don't want. Okay, what are the other parts of the banking sector that you see that you guys were taking over, or the other parts of the financial sector that you'll be taking over. We talked about mortgages, we know you already do interest accounts, you do loans; how does this affect other parts of the financial sector?
Bill Barhydt: Yeah, I mean look, payments is a big part of it at the interplay. So, we have to think a little bit differently outside of the US and the UK. Because we have credit infrastructure, we can actually say, "Okay, I'll extend you, without collateral, a few thousand dollars' or pounds' worth of credit". That's not happening in India and China and Bangladesh and Turkey and the Philippines, all these places where we're seeing huge growth in Abra, where people are tired of holding the shitcoins that are worse even than the dollar shitcoin.
So, they'd rather hold Bitcoin and dollars in Abra, so they're actually holding dollars in Abra, because they know that even though the dollar may be going to shit, it's going to shit less fast than that which the government is telling them to hold.
Peter McCormack: Well, that's another thing Gladstein talks about. He talks about how important Tether is around the world in places like Turkey.
Bill Barhydt: Absolutely.
Peter McCormack: I mean, Bitcoin's great, you can tell people in Turkey to hedge with Bitcoin; but if Bitcoin drops 50% in a short period of time, that doesn't really help them. Tether gives them the stability that they need.
Bill Barhydt: Or USDC, or any other one, but for sure. Dai is probably the one that I'm most interested in long term, because it actually represents a way to hold the dollar without actually having the dollars in reserve. That represents a better hedge to the existing system. But regardless of how you're doing it, he's absolutely right.
So, you think about credit in those countries, it's going to evolve differently, because they're going to leapfrog us, that's what I'm trying to say. They're going to leapfrog us in a way where they're going to use Bitcoin as collateral to do personal loans for real-time payment, because they don't have another way to do it. Their entire economy is debit based. Everything is debit card based where it's electronic, because there's no way to extend short-term ephemeral credit, which we take for granted with purchase protection and all these things that they've invented to fight over our business for. That's the only reason this stuff exists.
The only reason we have purchase protection and all this other stuff, is because Visa issuers, Mastercard issuers, Amex, they're trying to fight over our short-term payment business, because the merchant's willing to pay 2% to 3% for the right to make it easy for us to pay in the first place. It's a whacky incentive system that has evolved, that doesn't exist outside of these five or six countries, where everything is based upon a lack of trust; meaning, you can pay with what you have in the moment, that's it. That's a debit model versus a credit model.
Bitcoin completely changes that, 180-degree change. For the first time, people in developing markets are going to have instant, real-time credit. And I'm willing to do the same, exact 10% instant on zero-fee credit line for them that I am here. So, think about it for a second. That means that you're going to have a credit card, not a debit card, a credit card, where if you're willing to park $1,000 or $500, you can spend up to $50, if it's $500 that month, completely for free, zero interest. And I want everyone in the world to have that instant on, most likely android, global pay link via whatever issuer we choose, and that's going to happen, I promise you.
Peter McCormack: Is there any risk that we can't get Bitcoin evenly spread enough, or into enough people's hands, that it creates a kind of wonky global economy?
Bill Barhydt: Yes, I have to say. Is there a non-zero chance? Yes. But back to the playbook. Remember I said, why did I basically miss, even though I was an Austrian at heart, why did I miss this? Well, I read the white paper and the title said, "Peer-to-peer electronic money". And as somebody who was in the remittance business I said, "Wait a minute. This is remittances without the middleman, I'm all about that". I didn't focus on the playbook, which is store of value wealth first.
We have a playbook for this. The playbook basically says, and again go back to the 1976 paper or book from Hayek, it's basically hoarded, it reaches a certain value, it makes no sense at that point to continue to hold it once it reaches a certain value, whatever that mentally becomes based on the network effects that I've talked about. At that point, people will start to loosen up the purse strings. So my point is, we actually have a playbook that has been playing out to the letter, and I wish I'd made that correlation much sooner, or I might not have given away the 1,000 Bitcoin I gave away! But it doesn't matter, I'll be fine, thank you for your concern!
Peter McCormack: I wish I was your friend then!
Bill Barhydt: Thanks. You would have beat me with a stick. But look, the playbook, like I said, is clear. So, to your question, I do think it's going to be widely distributed over time, with a side-effect of the people who got in early will have a tremendous amount of worth. But enough, by default, has to be distributed, otherwise it's worthless, and that's what the private money playbook, that was written 40 years ago, says.
Peter McCormack: But does that work at both a micro and a macro level? I can see how here in the US, that would work, and gradually you'd get wider distribution. But I'm thinking, do some countries miss out; some choose not to -- for example, Bolivia, Bitcoin's illegal in Bolivia. And we know some people can have it anyway, because of that, but if they continue to fight and ignore it and the rest of South and Central America adopts it, by the time they choose to, could they be in not only a massively disadvantaged position, but actually in almost an unsurvivable position?
Bill Barhydt: Totalitarian systems are going to have a problem. The Great Firewall in China represents a significant problem; countries that basically have corrupt banking systems, where you can't actually enable collateralised lending against a hard asset, are going to be a problem. But the model I'm describing has been around for a very long time, it just doesn't happen with Bitcoin, it happens with stocks and other hard assets. Prime brokers, Goldman Sachs and others will lend the wealthy cash against their stocks all the time.
I know very wealthy people who live off of their Apple shares, literally off their Apple shares, never sold a share; they just borrow against it every month and it's like a revolving credit card. But instead of Bitcoin, it's Apple shares. Now, that's not a hard asset in the sense of its value. I mean, Apple could go to shit. The management team dies in a plane crash and all of a sudden, Apple shares are worthless. So, it's a little bit of a different model in terms of, what does that collateral become. But there is evidence that this idea can work for the wealthy. My point is that Hayek showed us that there's a playbook for getting there for everyone else over time.
But to your question, the countries that will come last, block internet access, have corrupt banking systems, have totalitarian governments. Now, unfortunately, they probably need this the most, but it is what it is. Now eventually, I think they're going to have no choice but to capitulate. That may take 15 years, 20 years, but if you think about it in terms of internet years, I was working in dotcom 1.0 in the mid-1990s, it feels to me like it was yesterday; it's not that long.
Peter McCormack: Actually, you can game it out. A country like Bolivia, or whoever, China themselves blocks access to Bitcoin, like the Great Firewall, the rest of the world is getting wealthier through Bitcoin, the rest of the world wants to trade in Bitcoin, they don't have any, their country becomes poorer, so the rest of the world gets richer, imports become more expensive. Gosh, so it gets to the point where when they finally have to give in, maybe they have to use natural resources to start to acquire Bitcoin. But also, at that point, they're adopting freedom money in a country which isn't free, so it just breaks down the walls of totalitarianism. Interesting.
Bill Barhydt: Yeah. The thing that was most interesting about El Salvador was, they didn't have to give up their own shitcoin in order to adopt Bitcoin as a parallel currency, meaning they had already given up, I forget what it was called, the El Salvador dollar years ago. So, that's why I'm a little sceptical that you're going to see small countries fall like dominoes, unless they are based upon some other currency. That made it very easy for the government there to accept the fact that, "Yeah, we are victim to the whims of the Federal Reserve".
Now, the reality is every government, every person on Earth right now is a victim to the whims of the Federal Reserve Bank, which is insane. It's just more acute if you've adopted a dollar standard, which El Salvador did.
Peter McCormack: So, Ecuador would be a natural next country.
Bill Barhydt: Whoever is on a dollar standard, it makes sense, at least to understand; not that they would do it, but at least they can understand the implication of going back to something that looked more like the gold standard the dollar used to be on, when it would have made more sense for us then to adopt the dollar than it does now.
Peter McCormack: It's so wild, Bill, because I remember getting seriously into Bitcoin four or five years ago, and I would read Nakamoto Institute articles, I'd hear about hyperbitcoinisation, I'd hear about a Bitcoin standard, and I was like, "Yeah, it's great in theory, but come on, man. This is just magic internet money", and we're seeing it all play out now, it's happening.
Bill Barhydt: Well, the great thing about it is that you don't have to think Bitcoin-centric. You can read the Fiat Standard book, which I just started, which so far is a good read. You can read Hayek's work, especially Hayek, because there was no internet when he came up with this idea of why private money would work. And so far, he's been 100% correct. So, it wasn't very self-serving, because the technologies that you really would need to make it work, he didn't even understand at the time, because they didn't exist.
So, I think you don't really have to dig in to what hyperbitcoinisation means, at least using the word "Bitcoin", to actually see how this could play out. You could read Dalio's new book, you could read Hayek's work, then you could read the Fiat Standard; and if you bring that all together, you're like --
Peter McCormack: That's a lot of reading!
Bill Barhydt: It's a lot of reading, but also we only have one life, we only have one planet, we only have one society. So, if you're going to educate yourself on something, maybe it's understanding why we keep killing each other every 80, 100 years, and how we can get out of it.
Peter McCormack: Let's hope we can get out of this one then.
Bill Barhydt: Yeah, we'll see.
Peter McCormack: All right, man. Well listen, this was not what we planned.
Danny Knowles: Not at all, but way better!
Peter McCormack: Way better, it was fascinating! I'm sure you want to plug Abra.
Bill Barhydt: Sure.
Peter McCormack: Tell people where to go.
Bill Barhydt: Abra.com. We're growing like a weed. Thanks for your support here, your audience has been amazing. We are operating now in 100 countries, we are managing about $1.5 billion now, we basically have the crypto brokerage, we allow you to borrow against crypto holdings, we pay yield on Bitcoin. Look for some pretty awesome payment products this year that leverage your crypto holdings, it's my number one focus right now.
Peter McCormack: I want to see this mortgage product.
Bill Barhydt: Yeah, me too. And we have funds now that allow institutions to come in using the same retail products that we've had all along.
Peter McCormack: Well, it's always good to catch up with you, Bill, I always get so much out of it, I always learn so much from you. Good luck with this, it sounds fascinating. I mean, the company's a very different one from the one when I met you the first time three years ago; well, it's a very different podcast from the one I made three years ago! But it's fascinating to see, man. Just keep crushing it, and next time I'm here in San Francisco, we'll catch up again.
Bill Barhydt: Absolutely. Or probably Miami.
Peter McCormack: Or in Miami, yeah, we've got that as well.
Bill Barhydt: Miami in April.
Peter McCormack: Miami in April. Well, listen, crush it, man. Good to see you, take care.
Bill Barhydt: Thanks, brother.
Peter McCormack: Bye.
