WBD487 Audio Transcription
End of the Long-Term Debt Cycle with Dylan LeClair
Interview date: Monday 11th April
Note: the following is a transcription of my interview with Dylan LeClair. 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.
Dylan LeClair is a Bitcoin and macro analyst working for Bitcoin Magazine. In this interview, we discuss the playing out of the long term debt cycle, the coming commodity wars, how Bitcoin is a lifeboat, and transitionary investments.
“There’s some pretty big stuff happening behind the scenes. I’m no commodities expert, I’m not in this every day, but I’ve been watching the charts and it’s like, my god, there’s something’s breaking. You see volatility across commodities, equities, credit markets, foreign exchange. I think it’s going to intensify, there’s no happy ending here over the short term.”
— Dylan LeClair
Interview Transcription
Peter McCormack: Yo, Dylan LeClair, how are you doing, man?
Dylan LeClair: I’m doing great, Peter. Happy to be here.
Peter McCormack: Nice to see you in Bitcoin colours.
Dylan LeClair: Yeah, shout out to my mom. Bitcoin orange, as she says.
Peter McCormack: Shout out to your mum. Is she orange pilled?
Dylan LeClair: Yeah, she’s on Bitcoin Twitter too.
Peter McCormack: Is she?
Dylan LeClair: Yeah.
Peter McCormack: I think I know this. Hold on, I think I know this. What’s her account?
Peter McCormack: Here she is. Yeah, that’s a picture of a dog; yeah, she follows me. Right, let’s do this. Shall we send her a picture?
Danny Knowles: Yeah, I'm getting one.
Peter McCormack: I've got it, I've got it. We're going to send this out to your mum.
Dylan LeClair: Perfect.
Peter McCormack: All right. How are you doing, brother?
Dylan LeClair: Doing great, living the dream. Austin’s beautiful; it’s a lot better temperatures, a lot warmer than where I’m at in Vermont.
Peter McCormack: Can we talk about how old you are or are you keeping secret?
Dylan LeClair: No, we can talk about it.
Peter McCormack: Your birthday when, two days, Saturday, what day?
Dylan LeClair: Exact date TBD, but turning 21 pretty close.
Peter McCormack: Pretty soon. Why are you not in college?
Dylan LeClair: Well sorry, but I dropped out of Freshman year. I think we talked about it in one of the first shows.
Peter McCormack: We did.
Dylan LeClair: I was orange pilled in the midst of COVID, coronavirus, market crash, Zoom University, studying economics, business, finance and I said, "Screw it". I dropped out and YOLOd student loan money into Bitcoin and took on a manual labour job.
Peter McCormack: Still got the manual labour job?
Dylan LeClair: No. I was doing that until I found my role with Bitcoin Magazine part time, went into full time and now doing that.
Peter McCormack: What an amazing decision you made, right.
Dylan LeClair: Yeah, a definite leap of faith. My parents, although they believed in me, were a little sceptical.
Peter McCormack: They get it now?
Dylan LeClair: Yeah, they get it now.
Peter McCormack: Listen, fair play to you, that's a massive move. You've absolutely crushed it since you've been in. You're one of my favourite followers now.
Dylan LeClair: Appreciate it.
Peter McCormack: I think you're smart as shit, I think you add a lot of value and I'm really glad to get to do this with you in person and talk a little bit more Bitcoin with you. But I do also want to talk about that this must give you some perspective on higher education now and we have this historic road map that a lot of people have is that you go to school and then you go to -- well, we call it school and then we call it university; you call it high school and then school?
Dylan LeClair: It's college.
Peter McCormack: College.
Dylan LeClair: Yeah.
Peter McCormack: Don't some people call college school?
Dylan LeClair: Yeah.
Peter McCormack: But anyway there's this traditional path and now people are getting into a shit-load of debt, they're getting a vocation when they can't get a job to pay it off and there's a lot of people like you going, "Fuck this, I don't need this shit".
Dylan LeClair: Yeah, I think it's maybe a little unfair to say college is unnecessary for everyone. There's obviously still totally reasonable reasons to go, engineering, medical school or anything else.
Peter McCormack: Sure.
Dylan LeClair: Even like certain business or finance degrees maybe. But just in terms of the walled garden of secondary education and just like, I guess, the access to information that I've grown up in, in terms of the internet and a quick Google search or Twitter, it's unparalleled and I think a lot of people haven't really understood that kind of change in environment, what we're living through.
Peter McCormack: I don't think everybody needs a degree these days to get a decent job.
Dylan LeClair: No, you're proof of this. You can make money on the internet just with hustle.
Peter McCormack: Being a dumbass!
Dylan LeClair: And just staying on the grind, you know.
Peter McCormack: Yeah, staying on the grind; yeah, we grind. But you're doing it, man, so listen, that's very cool. Weird times, Dylan, very weird times and trying to interpret what's happening is super difficult. I know you spend a lot of time looking at the macro environment, I am trying my best to always understand it and most of the time, when I'm making shows, it's so I can understand how best to plan my finances. I'm significantly older than you, so I haven't got many years left where I can actually plan a retirement and it's like, "Do I want my money in Bitcoin? Should I have some more in gold? Should I have some more in property? What's happening in the macro environment?"
It's always good to get someone like you on to just talk about that and talk about what's going on. We're in very weird times, we have a cancelled country, we have Treasury Bills now being essentially 2% or something, with 7.9% inflation so some people are buying those and give away 7% on the table, 8% on the table, 5% on the table. It's weird fucking times. What are you looking at?
Dylan LeClair: Yeah, I mean I think first off is we have, or I mean I have, but I think we kind of agree that we have this thesis that Bitcoin is the best money the world's ever seen and it's undergoing its monetisation process that will be very volatile; but ultimately the endgame is whether you believe Bitcoin is just a reserve asset or digital gold, I think we think that it'll eventually be a unit of account for value in the world and that's the kind of multiyear, multidecade thesis. We're not there obviously but yeah, totally, totally weird times.
I think we're at the end of this long-term debt super cycle where craziness, not only in financial markets, but just the world in general is going to ramp up. The 2020s are going to be probably looked back in history as when a lot of crazy shit went down, starting obviously with COVID. We've talked about this. We had a show with Greg Foss and I and we talked about the everything bubble and Bitcoin's role in that and things have ramped up since then. I think that was last April, Bitcoin was cruising at all-time highs but now we see broad-based consumer inflation.
But when inflation is hidden in the asset prices, the policymakers, central bankers can get away with it. Now it's hitting consumers' pockets, it's hitting energy markets, commodities and people are upset, rightfully so. So, the Fed and really interestingly the credit markets are in a really tough place where they're starting to sell off and you have rising yields and an historically over-indebted economy. I think that leads to some pretty crazy places if we continue on this path.
Peter McCormack: Explain that credit markets thing, what actually is happening so people can understand.
Dylan LeClair: Yeah, essentially everyone likes to look at equities or maybe Bitcoin but really the driver of a lot of things under the surface is the fixed income markets. So, the key thing to understand is that price of these bonds or these securities are inverse to yields. As people sell fixed-income instruments, say because you're receiving a fixed 2% payment when inflation's at 8%, people sell you securities and what happens is the price falls and the yields go up. For say a Treasury bond, people are selling Treasuries, whether it's long dated or short dated and because of that, you see these yields starting to rise, same with corporate debt or anything else, mortgage-backed securities.
Right now, because of this inflationary environment, because inflation was not transitory like all of the policymakers and "experts" said, we see yields really almost going vertical, selling off in a big, big way. So, the second-order effects of that is that everybody with debt in this economy, in a credit-based fiat system, everybody is basically incentivised to be up to their eyeballs in debt, everybody is now facing increasingly-so higher financing costs, basically a higher cost to roll over all this debt, whether you're corporates, whether you're the US Government, everybody.
So, it'll be interesting because there's traditionally somewhat of a breaking point in terms of liquidity, in terms of this slow but gradually, then suddenly deleveraging process that we're in, where the Fed will be essentially forced to monetise a bunch of debt and implement yield curve control probably into an inflationary spike or let the house of cards collapse. I think it's somewhat binary at this point.
Peter McCormack: Let's go through both. Explain what yield curve control is.
Dylan LeClair: Yeah, so essentially the Fed's traditional buckets of monetary policy is interest rate monetary policy, moving the Fed's funds rate up and down. They exhausted that weapon back in the Great Financial Crisis when the rates hit zero and so they turned to quantitative easing; so they just went and bought securities, bought debt securities on the open market, stuffed markets with cash. It's a little more complex than that but that's essentially what happened. They did that on and off for ten years, tried to wean markets off of it and the markets had a tantrum.
We get to COVID, there's this unprecedented economic slowdown that's a result of forced lockdowns, and a result of that is governments, households, corporates, because of how much funny money they threw at this coronavirus problem, now we have debt at all-time highs across the economy, across the economic sectors. So, because they exhausted their first bucket, their first tool, which is that interest rate policy and they really, over the last decade, but over the last two years especially exhausted their quantitative easing, which is a fixed amount of purchases at any price, I think over this next day or two, I guess, they're going to try to officially end that programme at the same time that credit markets are really selling off.
So, yield curve control is, in theory, an unlimited amount of purchases at any price to keep bonds at a certain price level. Saying that, we're going to be a buyer at any price of the security, whether it's Treasuries or mortgage-backed or corporates. I think that's ultimately probably the endgame and you see central banks like Japan already doing this. The difference is Japan, or other central banks that have implemented this, aren't a world reserve currency and they're just not the size of the US credit markets, they're not the risk-free rate in the world. We're seeing that dynamic change, but I think ultimately that's when Bitcoin probably bids to infinity, if and when we get to that point.
Peter McCormack: We also have, as you mentioned, the chance that the house of cards will collapse. I'm not sure if somebody allows that to happen. My assumption is there would be avoidance, but I don't know what a collapse would feel like or look like. I could argue we're in the early days of a collapse. I've done the basic research of reading When Money Dies and you feel like we're living through the first chapters of that book.
Dylan LeClair: Yeah. Essentially, we've seen plenty of debt bubbles, and no doubt we are in a debt bubble, throughout history and how those debt bubbles are resolved is depending on the circumstances. Right now, we have a fully fiat-based system. So, say in the Great Depression when there was a huge private debt bubble, all that credit contracted, it burst, that malinvestment was liquidated, but ultimately there was that gold collateral that it kind of collapsed back on to and there were bank runs and all the like, but those fiat promises, those IOUs could collapse back onto a hard monetary asset.
Now, there's nothing backing the currency except the credit itself, and so the solution for the last 40 years to any debt bubble burst was more stimulus, lower rates, a Keynesian economic response. But now we're at a point where the Fed's fund rate is at zero, inflation is at 40-year, soon to be 50-year highs and everyone is up to their eyeballs in debt; approximately 400% debt-to-GDP. Federal government debt-to-GDP is over 100%. So, basically there's no way that we can get out of this and they can let it collapse.
But what a collapse would look like is that essentially, when commercial banks or money's created, it's through credit expansion, it's through lending. When a commercial bank lends money, it actually creates money. But when a default happens or a repayment, that money's destroyed. The reason why things like the Great Financial Crisis or COVID or potentially what is coming in 2022, it happened so fast and the volatility explodes and the leverage cascades, is because money is destroyed and so the asset liability mismatch, all of a sudden, you're less creditworthy because the asset you thought you had isn't actually there. So, you have to sell additional assets to cover your liabilities and it just compounds across the entire economy.
Ultimately that leads to literally everything going to zero and a societal -- it sounds very dark, but it leads to a complete economic collapse and ultimately it's not politically feasible, which is why the response will be eventually more printing, more stimulus, more monetary expansion. How far they let it get, we'll see.
Peter McCormack: But could that not lead to a different kind of collapse or do you think that is a way of pushing the burden onto other people, onto pensions?
Dylan LeClair: Yeah, I guess really when you're talking about a fiat currency and if you look at, say, government debt, you can look at private sector debt or corporate debt or anything else, but with government debt, what a fiat currency history has shown and just political incentives show, are that creditors, debtors, governments won't nominally default, meaning they won't just say, "Oh, you're not going to get paid" because they have a printing press. The Fed is supposedly independent but not really.
Peter McCormack: Nominally paid and purchasing-power paid are very different things.
Dylan LeClair: Yeah, you'll be paid out. Whatever that funny money dollar buys you is an entirely different discussion.
Peter McCormack: Maybe you should get paid out in Bitcoin.
Dylan LeClair: Yeah, I think that's the endgame here. If you can hold through volatility, then Bitcoin is probably going to outperform every asset on the planet.
Peter McCormack: You're fully convinced of this now, are you?
Dylan LeClair: Yeah. People ask me all the time. Just because my job isn't market analyst, I do daily research for Bitcoin Magazine's premium product, I give advice for a hedge fund and that's a Bitcoin fund. So, they ask, "What are your intermediate-term, short-term market predictions?" The reality is it's entirely dependent on this macroeconomic outlook, on liquidity; to say with certainty what's going to happen is a fool's errand. But over the long term, we can look at these binary paths but really it's not binary, there's only one option and it's additional credit expansion, additional monetary expansion and know where this is going.
But even in the other scenario where we see a deflationary collapse, you don't want to hold money in the bank, you don't want to hold bonds, you want to hold something -- and this is going to the Ray Dalio framework. Why do you hold gold in a debt crisis? Well, you hold something with a production cost, you hold something that is not someone else's liability, and you hold something that you can secure yourself and is very hard to produce; you can think of that as a stock-to-flow ratio. Well, the good news is Bitcoin is all of those things and it's actually way better than gold. In either kind of case at the end of a debt crisis, I ultimately think Bitcoin is that asset you need to own.
Peter McCormack: Yeah, that's the thesis that a lot of bitcoiners support, but the thesis hasn't fully played out yet. You could argue that a lot of people don't consider that when some people argue that Bitcoin is risk off; so if we see a crash, some people think that Bitcoin might crash. Part of my own portfolio management is a consideration that I'm irresponsibly long Bitcoin, I'm 95% Bitcoin.
But I was thinking, "Should I just take 10%, 15% and put it into gold; just hedge that Bitcoin a little bit just in case Bitcoin isn't the hedge that people it is?" It is still gold, it's still governments buying gold outside of El Salvador, Russia's stocked up on gold, China's stocked up on gold. I have done this a few times, Dylan, I've been going through that consideration. When I interviewed Cullen Roche , he was -- was Callum 25, 25, 25, 25 or was he third, third, third?
Danny Knowles: I think he was third, third, third.
Peter McCormack: Equities, scarce assets --
Danny Knowles: And fixed income.
Peter McCormack: Yeah. He was like, "Whatever happens, you've always got a bucket of the right thing, so you should be fine". That's an evens way to play, I think you can just change the dials a little bit. But I'm 100% convinced on the long-term thesis on Bitcoin, I'm not 100% convinced it plays out in the short term.
Dylan LeClair: Yeah and that's totally fair. Honestly, if you're looking for more of an asymmetric hedge, and this is a kind of paradox, because you see inflation at 50-year, 40-year highs; but honestly cash -- and Lyn Alden phrases it great, I'm not going to phrase it exactly how she does; but cash is basically a speculation over the short term, but long term, it's basically a liability. So, during these deleveraging events, whether it's March 2020 or 2008 or even 2000 or any time there's a recession, if you can hold cash, it's going to appreciate against real assets and that's what we've seen. Bitcoin is obviously volatile, it has its own market cycle. Really, since November every asset's gotten killed, most assets --
Peter McCormack: So, you think holding cash is good?
Dylan LeClair: Yeah, I hold a cash position and I've been building one, along with my Bitcoin stack. But ultimately you don't want to hold cash over the long term. Over the short term, there is an asymmetry there because during a credit unwind, which I believe we are in, you can see a rapid appreciation of your purchasing power. Long term, it's politically a guarantee that your cash is going to erode.
Peter McCormack: Just explain it again. Why, during an unwind, does your purchasing power increase?
Dylan LeClair: Because ultimately, people become foresellers of their assets, and basically that's a result of the credit system unwinding. So, risk premium unwinds, broad market liquidity in general dries up and so cash in that scenario -- although because everybody levers up during the credit expansion cycle, everybody is going risk on. But during a risk-off period, I guess cash is king.
Peter McCormack: Cash is king.
Dylan LeClair: Although the long-term game is that cash is ultimately trash.
Peter McCormack: Trash.
Dylan LeClair: I think we're in a weird spot in this economic system, this Keynesian endgame, if you want to think of it, where people are forced to play Hot Potato and Guess. But ultimately, having a stack of cash isn't a bad idea over short term, intermediate term; but think long term, if you're simply just DCAing Bitcoin with some of your disposable income as well as having maybe an emergency fund in US dollars, I wouldn't hold emerging market currency cash, because of how this global monetary system is set up.
Everybody in the world is implicitly short dollars; there's so much dollar-denominated debt out there that essentially what's happening is that during a broad-based market sell off, there's a bid for dollars and everybody is short dollars. Think of a short squeeze, that's what's happening but with the fiat currency. Ultimately, the Fed, politicians come in and they quell that short squeeze by debasing, but we're not there.
Peter McCormack: What tends to happen to property in one of these scenarios?
Dylan LeClair: Yeah, so I think in --
Peter McCormack: I ask because I'm just buying a house.
Dylan LeClair: In real purchasing power terms, I think it's obviously location-dependent and I think also Brandon Quittem has a pretty great thesis on the Fourth Turning. So property, depending on location, can be a risky bet because you don't know the political environment or jurisdiction or tax laws or how that's going to change, so there's risk there. But just in terms of fleeing from the debasement of cash over the long term, especially if you can get a really attractive fixed rate, I wouldn't take on variable rate real estate at this point.
Peter McCormack: I've taken on a very attractive fixed rate, five-year actually.
Dylan LeClair: Yeah, that's totally a good call. But anything with variable rate, especially in an environment where rates are rising pretty rapidly because of this CBI inflation, it can get pretty ugly for those that aren't prepared.
Peter McCormack: One of the big questions at the moment is whether the US Government or the Fed is about to lose the dollar as a global reserve currency and as a global store of value. The question I'm asking is not if it is, I mean it clearly is; we had Lyn Alden recently and we talked about this multipolar reserve currency world. Bitcoin is a growing reserve currency for a certain group of people. It's still small but I think for everyone in this room, it's probably a reserve currency. We know gold is certainly a reserve currency for people and growing again at the moment. We know there may be other currencies that people consider holding instead of the dollar.
The question I really have is that, is there actually a benefit for the US no longer being a global reserve currency; what is the impact of that? Have you looked into the impact of it not -- what would be the benefits of being the reserve currency and what would be the benefits of not being?
Dylan LeClair: Yeah, so essentially the big drawback, and this was predicted back in I believe the 1960s with the Triffin Dilemma, it might have been earlier than that, but this economist, Robert Triffin, was essentially like any reserve currency, basically meaning that if you have supplied the world with your currency, in this case dollars, you're going to hollow out your industrial base as a result.
Peter McCormack: Which happened.
Dylan LeClair: And it happened exactly as he predicted; it's a form of Dutch disease. Essentially, if you become so good at exporting, whether it's a certain industry and in this case our industry is exporting our Treasuries around the world, then your other industries become less competitive relatively. So, I guess that's exactly what has happened; our industrial base has completely left and we now rely on China and Taiwan and all these countries for stuff that we really, really need. So, the dollar as a reserve currency has been very good for our financial industry, it's been very good for the coastal elites, software --
Peter McCormack: Tech.
Dylan LeClair: Tech, yeah, things with high margins. But that industrial base that America was actually known for has completely hollowed out. So, over the short term, that reshoring all that manufacturing, it'll be probably painful in the sense that the US and the consumerism of the United States, it's going to be more pricey.
Peter McCormack: Is there any argument that there's a need for this though, in that one of the outputs of COVID is that people have become less location-dependent for their jobs? We know there's now distributed companies that have happened because of COVID; people shut down their offices and not re-opened them, and then suddenly realised that people can work anywhere in the world. Danny's in one time zone, I'm in one time zone, Jeremy's in another time zone, Ben's -- our entire team crosses the planet, we're in different time zones and it just works.
A lot of people have figured that out and in figuring that out, it's like, "I don't have to have an office on the West Coast of America with engineers costing $300,000, $400,000 a year, I can actually recruit engineers around the world at a lower rate". Is there any argument that the software and the roles in the financial industry have been affected by this, and therefore there is a need now to start bringing back manufacturing? I'm trying to imagine, are there scenarios where people want this to happen, because it almost feels like, especially with what Jerome Powell said about moving to a multi-reserve-currency world, is there an incentive to do this?
Dylan LeClair: Yeah, I think in terms of political incentives, it's tough because of the incentive structure for, I guess, all global politics, but if you're thinking about the United States and election cycles it's very short-term. The incentives aren't very aligned to plan for these long-term kinds of things. So, it's tough and Powell's comments on the reserve currency and there potentially being multiple reserve currencies was very telling. With all that said, I think the US dollar is still, despite talks with China and Saudi Arabia coming out today about oil trade for the yuan, stuff like that, the long-term significance of that is real.
Peter McCormack: What came out today?
Dylan LeClair: I didn't even read it in full, but it was a Wall Street Journal article about Saudi Arabia and China talking about energy deals in yuan.
Peter McCormack: Wow.
Dylan LeClair: China exports, or imports about 85% of their energy, so just in terms of China obviously exporting things all over the world, but they don't have energy markets themselves.
Peter McCormack: People listening, we've just got it up on the screen, "Saudi Arabia is in active talks with Beijing to price some of its oil assets to China in yuan. People familiar with the matter say the move would dent the US dollar's dominance as a global petroleum market and mark another shift by the world's top crude exporter towards Asia". Interesting.
Dylan LeClair: Yeah, so essentially the reason the US financial markets have been just so globally dominant, whether you're looking at Treasuries or also just equity performance since the Great Financial Crisis, it's anybody with a current account surplus with energy exports or really anything that it's selling them to the US, well they get dollars in return. Then what do they do with those dollars? Well, for the longest time it was just pummel that cash back into Treasuries to get a yield.
Well now, with that real yield with inflation at 50-year highs, there's no incentive or less of an incentive to buy Treasuries that are basically eroding your purchasing power. So, what do they do? They pummel the cash into equities, into US equities and that was a really big driver over the last two years of equity performance. So, the US has this artificially engorged financial system as a result of this petrodollar dynamic.
Peter McCormack: Right, okay. Do we know what the inflation rates are in China, with the yuan?
Dylan LeClair: Yeah, I'm not sure off the top of my head but I do know the data is very -- I don't know, I wouldn't say it's too dependable.
Peter McCormack: Like I say, I'm well out of my depth, but I would wonder is this China potentially making an offer to Saudi Arabia saying, "Look, we want it priced in yuan" because they want to grow the strength of the yuan with the Belt and Road Initiative, they want to have other countries using the yuan as a global reserve currency; or whether this is Saudi Arabia who are nervous about what's happening with the dollar, I wouldn't know, I wouldn't know.
But I guess China would face this issue, that it is a manufacturing base but if they want to become a global reserve currency, they're going to also suffer from the Triffin Dilemma.
Dylan LeClair: Yeah, I'm definitely no geopolitical expert but just on a surface level, I think if China as a reserve currency is challenging, because to be a reserve currency you have to open up your capital markets and open capital flows. I don't think that's something that the CCP wants. So, it's really interesting because there is no -- there's talks of maybe it's the yuan or maybe it's the euro, but there really isn't a viable second option.
For the longest time post Great Financial Crisis there was chatter amongst central banks, IMF, the World Bank saying, "We've got to do something about this dollar, something has broken" and now they're doing massive quantitative easing programmes, what's the viable alternative? And there was none, and the reality is they haven't really figured it out. Bitcoin at whatever it is, $800 billion market cap, isn't globally liquid enough or even close to big enough to filling that role. But increasingly individuals like you and me, institutions, corporations are saying, "No, this is our reserve currency and we're moving first" but you know, the big boys haven't figured it out or haven't moved yet.
Peter McCormack: When would Bitcoin be big enough? Does it need to be $10 trillion; does it need to be $50 trillion? Is there even a number you can put it at?
Dylan LeClair: Yeah, I would say multi-trillion-dollar market cap, it starts to get serious in terms of being a viable asset class to take over -- I think ultimately it takes oil; energy is priced in Bitcoin terms long term. How long that takes is up for discussion, it's ultimately just a total guess. But yeah, I think around $5 trillion to $10 trillion and ultimately it's going to be probably an order of magnitude larger than that.
Peter McCormack: I find this thing fascinating. I've been back into Bitcoin seriously for five years, but I would say I've been consciously on a Bitcoin standard for about two years now, both the podcast and personally. When I say I'm on a Bitcoin standard, it doesn't mean I hold all my assets in Bitcoin, I am holding cash as well, like you; more so on the business side, less so personally, but I am holding cash. But I am making decisions based on understanding Bitcoin.
So, I've mentioned I've bought a house. To my broker, I was very clear, "I want the longest mortgage possible with the lowest deposit with the longest possible low interest rate". So, I think I've got a five-year, around 1.99% on a 25-year mortgage, so I've got a five-year fix where I have to renegotiate and I think the deposit's like, I can tell you, I'm just trying to figure it out. It's about 15%. That's the best I could get on that. Now, I could have paid a higher deposit and a lower interest rate or change the term, but that was the best one because in my head I'm, "If you're giving me a five-year 1.99% interest rate, you're essentially giving me money".
Dylan LeClair: Yeah.
Peter McCormack: That's how I started to think and so I'm on that standard, I'm prepared for it. What's really super interesting is I know Danny's on it, I know you're kind of on it, and I know all my friends in Bitcoin are kind of on that. But it's us in Bitcoin and it's Michael Saylor and it's a little bit of Tesla. But I feel like with everything that's happened this year -- you have just met Adam Curry, what you were talking about with him. Danny's going to give me a really weird look; he says, "Don't mention that interview, Peter. We're going to release them at different times". Sorry, everyone! But, where was I going with that, Danny?
Danny Knowles: Bitcoin being part of every story.
Peter McCormack: Oh yeah, Bitcoin being part of every fucking major story that happens right now. It doesn't matter what the story is, there's now this Bitcoin angle. Our podcast downloads are going insane. I feel like we're about to go through that next growth curve where we've gone past the nerves and the financially interested, we're just now getting into people who are, "I don't know why but I know I need this shit.
Dylan LeClair: Yeah, it's going to be part of the geopolitical discussion and whether that's public or not, it's happening. I talked with Jason Lowery and he said he's talking with FBI, CIA, all the -- and he said this on Twitter space, I'm not disclosing private information -- Department of Defence and they're not laughing at him. So, people are paying attention, Bitcoin is definitely part of the debate.
Obviously, the market has taken a hit since the November all-time highs, or whatever it is, but the volatility is nothing but a thing. Ultimately, I think the interest and the capital in Bitcoin, especially since the market's been getting hit in 2022, I think there's some interesting bidders under the surface; maybe they're public, maybe they're not, but they're understanding this endgame. If we see some sort of deleveraging event, if we see some broad-based liquidity crisis in the traditional financial markets, well Bitcoin is still going to be probably around an order of magnitude larger than it was during the last huge crisis two years ago.
It's like, "Okay and what's the response going to be if we see any sort of crash happen?" Then people are going to say, "Bitcoin is not a store of value, it's dead. It's not an inflation hedge" etc. But it's still 5X, 10X higher than it was at the bottom of March 2020.
Peter McCormack: Dude, we're at $39,000. What are we saying, $39,000?
Dylan LeClair: Two year ago it was at $3,800 at the bottom.
Peter McCormack: Yeah.
Dylan LeClair: It's like, "Okay, let's have some perspective here". What's the response? Are they going to stop expanding the money supply?
Peter McCormack: But this is what people need to get their head around and it comes back to time preference and patience and building up with your DCA. Because you say, "Well, two years ago it was $3,800". When I bought my first Bitcoin, when I got back in -- I can't remember if it was end of 2016, start of 2017, it was around that December/January time, it was about $800 I bought a Bitcoin for. I remember it going to $2,000 being like, "Fucking wild!" Then it went to 2020 and came back down. We know the endgame for this; this could drop back down, but we still know it's going higher.
Dylan LeClair: Yeah, yeah.
Peter McCormack: You've just got to be able to play that long game and be patient, DCA in. In four years' time, do you think it's higher or lower than that?
Dylan LeClair: Probably an order of magnitude higher.
Peter McCormack: Exactly.
Danny Knowles: The BlockClock might not have enough space.
Peter McCormack: It can't do six figures, can it?
Dylan LeClair: It can, it can say $1, million or whatever. You can put it in different currencies and it can say that. NVK's got it figured out.
Peter McCormack: Has he?
Dylan LeClair: Yeah.
Peter McCormack: I think he's just going to have to release a new one.
Danny Knowles: Just get longer and longer.
Peter McCormack: What was the first price you came in at, ish?
Dylan LeClair: When I turned 18, it was basically the end of the $3,000 bottom, so I got some sats in there.
Peter McCormack: Were you in your first tour of duty, your first four years?
Dylan LeClair: Yeah, still haven't -- actually, I'm about to -- yeah, I still haven't completed it actually.
Peter McCormack: I always think you do a four-year tour of duty. We're in our second one, aren't we, Danny?
Danny Knowles: Yes.
Peter McCormack: Yeah, that's all fascinating. What are you monitoring with regards to commodities as well? There was a show we wanted to make at one point discussing, essentially, commodity wars. So we had Lyn Alden, I mentioned, on the show. Actually, we had her on a couple of months ago; we did a show called Currency Wars, talking about the future of currency wars. Then bang, a fucking war kicks off and we're essentially in a currency war and people are using the financial system as a weapon of war alongside bombs and propaganda and we've now got a financial war.
Then we got her back on the other day to discuss the reality of what's happening, but it feels like we're going into commodity wars now. It's like, who controls what energy production where and what are the implications of that? How much of that are you tracking?
Dylan LeClair: A good amount. First off, how great is Lyn Alden?
Peter McCormack: She is the fucking best.
Dylan LeClair: Yeah, it's unreal and I should have paid more attention. She was a loud commodities bull and obviously, who could have predicted a war but…
Peter McCormack: Do you get her newsletter?
Dylan LeClair: Yeah, yeah; a premium subscriber, no doubt.
Peter McCormack: $199 a year, it's ridiculous! I'll just interrupt. So, I put out this Tweet a couple of years ago, because people were fucking ragging on me for the show. I said, "Listen, there's three types of podcasts. There's a smart person and a smart person, a moron and a smart person and two morons". I said, "My show is a moron and a smart person, I'm cool with that". But with Lyn Alden, that's our biggest spread!
Dylan LeClair: Yeah, Lyn is fantastic, she's been documenting it out. When I listen to Peter Zeihan, he's an expert global macroeconomist. Definitely not going to say I'm some commodities expert, but I definitely follow it just to understand the implications of what's happening. Part of the reason is I guess I'm notably bearish on the legacy system and warning of somewhat of a liquidity crunch, deleveraging and just looking at previous recession periods and what's happened leading up to that with energy prices, commodities. There's a real big impact on the consumer balance sheet, on corporate margins, on just a slowdown on the economy in general.
Last time we saw energy prices rip like this was leading up to the Great Financial Crisis and obviously there was a contagion in subprime. But all this commodity shortage, like the whole Russia/Ukraine thing, the implications of that are massive. Russia produces, off the top of my head, I think 15% of the world's natural gas, 40% of that goes to Europe. What's the prices at the pump where you live? Nuts?
Peter McCormack: Hold my fucking beer. People are putting photographs up of $5, $6 a gallon and I'm, "Okay, let's do the maths. How many litres per gallon?"
Dylan LeClair: It's nearly ten.
Peter McCormack: It's $10.
Dylan LeClair: Yeah.
Peter McCormack: It's actually more now, it's over $10. My car is usually about £80 to fill up. When I left, it was the first time ever I went over £100 and I remember the number. It was £100.13. I was, "Fucking hell, I'm over £100". Now, when I get back, it's going to be £120.
Dylan LeClair: Yeah.
Peter McCormack: It's fucking insane. I don't mean to be a dick about this, okay I can afford to do it and I'm not doing this as a flag or to look down on people, but I know there are people where this materially affects them, where they're going to have to make a decision like, "Shit, can I afford to fill my car up? Do I now have to get a bus to work?" We were speaking to Nic Carter and Nic Carter said, "Humans flourish when commodity prices are low".
Dylan LeClair: Yeah.
Peter McCormack: For obvious reasons.
Dylan LeClair: Yeah. The crazy thing is and why the policymakers are so trapped, is we're seeing broad-based inflation but it's not really a result of monetary policy. I guess you could backtrack it and say it's a result of multiple decades of monetary policy. But right now, the inflation is because we have a commodity shortage, commodities across the board, energy. Now, the knock-off effects of, say, natural gas, Russia's natural gas supply being cut off, that happens to produce fertiliser. Now, we're going to essentially see food shortages all over the world in the third and fourth quarter.
I'm not meaning to be dark, but this is just the reality that we're facing. So, it's basic supply and demand. What happens? Prices go up and there's going to be not enough food, not enough energy, people are going to have to cut back. A recession is not even really a result of the financial conditions, it's a result of a shortage of real goods. When that happens, what's a policymaker's -- with COVID, say, everybody got locked down, there was a demand shock, really a lack of demand. They could throw a bunch of money at people, oil went negative because all the reserves were full.
So they threw a bunch of money at people; it was relatively fine and you could buy your services, you could buy your goods. There was inflation but there was such a lack of demand that you could make up for it. Well, the supply chains kind of got shattered because of that and now the economy is heating up, going back into full swing, and we throw this war in the mix, along with just the trillions of dollars that were printed, and now there's a huge shortage of all the stuff that we need, and just throw Putin in, I think whether it's strategic or not, there's huge implications of the West just boycotting all of Russia's exports.
They produce so many precious metals, they produce natural gas, energy and so really we're looking at kind of a bleak outlook over the coming 6 to 12 months, maybe further; and maybe a lot of Russia's oil supply, I think it's 10 million barrels a day they supply the world, if that production goes offline, it's not like a Bitcoin mine where you can flip it back on, it's gone. It's not gone for the next year, it's gone for decades. There is some pretty big stuff happening behind the scenes. Again, I'm no commodities expert, I'm not in this every day, but I've been watching the charts and it's, "My God, something's breaking". You see volatility across commodities, equities, credit markets, foreign exchange. I think it's going to intensify and there's no happy ending here over the short term.
Peter McCormack: Are you prepping?
Dylan LeClair: Yeah, a little bit. I'd say I'm definitely going to stuff my freezer with some meat. I think it may be even a little late for that, but definitely financially prepping. I'm getting my Bitcoin stack and saving some cash as well as on the food side, maybe energy as well; it's not a bad idea.
Peter McCormack: It's a real wild time for you to come into this as a career and job. You've gone straight into the fire.
Dylan LeClair: Yeah, no doubt. It's exciting, I definitely have just taken a step back. I think we're living through some historic times and so from that sense, from that perspective it's fascinating. I think I'm going to look back and say, "Wow, I was really thrown into the fire there". But we're all living through it; it's historic times.
Peter McCormack: Yeah.
Danny Knowles: What do you think happens if commodities and fuel just keep going up; price controls?
Dylan LeClair: Well, price controls, history tells us that's the worst idea that can happen because ultimately it leads to massive shortages and it disincentivises production, because if you're not profitable -- the prices are going up not because, as Elizabeth Warren says, of greedy corporations but because there's just not enough supply to meet demand. Supply shortages happened in the Great Depression; it leads to famine, it leads to catastrophes. So, central planning, price controls, horrible idea. I hope policymakers don't do it, but…
Peter McCormack: Bet they do.
Dylan LeClair: Probably will do, which is going to be tragic, but I guess we'll wait and see.
Danny Knowles: Yeah. France have announced that they're going to rebate petrol, put a €2 billion deal in to rebate people's petrol prices.
Peter McCormack: How do they do that? How do they execute it?
Danny Knowles: I don't know.
Peter McCormack: Look it up, because we've also seen a massive increase in energy prices. I talked about it and one of the things with moving house, I had to go and transition my energy suppliers, because I have to do a close-out. I'm supplied by Shell, I think, for gas and electric and I hadn't checked. I'd gone in there and you've got the monthly price and it ranges from summer months maybe £60 to £80, to winter months maybe £120. The most current month when I went in was £350-ish. I was like, "What the fuck?"
It's because energy prices have gone up, gas has gone up. We heat the house with gas, we cook with gas, which was a massively scary moment to go through to see that happen. Now we found out and it was announced in Scotland, they're providing grants to people, grants or subsidies to support the massive increase in energy prices. By the way, when I was looking at those prices, that was pre-Ukraine/Russia. What have you found there, Danny?
Danny Knowles: Introducing a rebate, 15 cent -- is it cents in euros -- per litre for transport fuel.
Peter McCormack: Yeah, "15 cents to $16 per litre of transport fuel to help drivers cope with soaring pump prices. Prime Minister Jean Castex" I don’t know how to pronounce that, "said in interview with daily newspaper Le Parisien, 'The measure to apply for four months from 1 April'" April Fool's Day. Do you have April Fool's Day here?
Dylan LeClair: Yeah.
Peter McCormack: Yeah. "'Expected to cost the government just over €2 billion' he said. Retail gasoline and diesel prices soared to record highs in many countries across the world", etc.
Danny Knowles: That last sentence is interesting.
Peter McCormack: "The measure which he said --"
Danny Knowles: No, sorry. "Macron said his government have ringfenced €20 billion a year to moderate gas and power costs."
Peter McCormack: Jesus fuck. I wonder what that is, because 15 cents, if you're at €2 a litre that doesn't take it back to when it was €1.50-ish. It's only a small -- I wonder if the incentive there is the fear that people can't go to work. Is it to keep the wheels of the economy turning?
Dylan LeClair: It's to quell social unrest, ultimately. I think that's what we're going to see in the 2020s and we see this at the end of these debt cycles, fourth turnings; the plebs revolt and oftentimes it gets ugly. So, the political incentives are aligned to quell this unrest anyway, if that's possible.
I think one of the things we didn't even mention is that a lot of countries around the world, exporters of these commodities, are becoming protectionist with their exports. You're seeing South American countries saying, "We're not going to export our soybeans or our wheat. We're going to make sure we're good first". So, there's probably a decent chance that the US does that with their energy, and what are the implications of that in the global economy if that happens? It's an "if" not a "when". All this protectionism leads to even higher prices, which is where things get really crazy.
Peter McCormack: That's where Lyn brought it up as well. She was saying, "One of the issues though with that is, do you have the refineries to refine the oil that you're mining in your country, that you're extracting from your country?" That is an issue and I wonder if we're going to go through a phase of essentially deglobalisation. Globalisation has its obvious benefits in that some countries are better at producing certain things than other countries, but it's also shown, and with COVID it showed how fragile this -- what happens to supply chains.
In COVID we had shortages on the shelves, we had a massive run on -- when we were away, we had a massive run on the petrol pumps; the pumps ran dry, people could not fill their tanks because people got scared. I wonder if there's now this incentive --
Danny Knowles: I've got a story about that. I was in London when that happened.
Peter McCormack: Okay.
Danny Knowles: I queued for about two and a half hours with my sister to get petrol.
Peter McCormack: Wow.
Danny Knowles: We got to the pump and I only had my phone to pay on and it only had a credit card.
Peter McCormack: Holy shit. What did you do?
Danny Knowles: I had to leave.
Peter McCormack: Oh, that's bollocks!
Danny Knowles: After a two-and-a-half-hour wait for petrol!
Peter McCormack: Were you angry?
Danny Knowles: I was so angry. My sister cried.
Peter McCormack: I've experienced one in the UK and at that time, I'd refused to join the freak-out and I accepted I'm not going to drive my car, and I just didn't; I stayed at home and refused to be part of it. But it is a reality of that situation. You've talked about potential food shortages, I know what will happen. People won't be prepping now, there'll be a few people, but when it really hits, it'll hit hard and the shelves will be empty. Then what they'll do, they'll introduce the equivalent of a price control in a supermarket, which is a bulk order control; you can only buy one or two packs of pasta, etc. That stuff's coming. Can you look up the Scotland thing, the rebates on the gas energy, because I'm sure that's a thing?
Danny Knowles: It's definitely a thing, I've seen that.
Peter McCormack: But where does that money come from? Do they print money to do that and, therefore, does it exacerbate the problem?
Dylan LeClair: Anything that's financed by the government, obviously there's a tax base, but ultimately if they're deficit spending, which most governments are at this point, then yeah, it's funded by the printing press. With ECB, the eurozone, it's technically not the sovereign but this eurozone governing body, it's still the same. The monetising debt, balance sheet expanding and they're running deficits.
Peter McCormack: I've never actually fully understood how it worked in Europe on a single currency because if you have a sovereign currency, it's obvious you can just print more of your own currency. I don't fully understand how it happens in Europe when there's a single currency across it.
Dylan LeClair: Yeah, the eurozone almost blew up in the 2000s and 2010s with the debt crisis that happened. Ultimately, it just ended up basically saying, "All right, we're just going to buy your debt and we're going to push down these yields and you're not going to go insolvent". But definitely not as smooth of a process as, say, just the Fed working in tandem with Congress; more or less TLDR, they're printing more.
Also deglobalisation, if we're just saying maybe 2020, 2021, 2022, Putin's move last month, if that's the peak of this secular trend of globalisation, that's not disinflationary, the trend that we've seen, that's very, very inflationary.
Peter McCormack: Because you lose economies of scale, so therefore things get more expensive, you lose the process.
Dylan LeClair: Yeah, and so for a historically over-indebted economy, it doesn't end well; it ends with again a collapse in credit and deflationary bust, but ultimately we know that's politically not feasible. So, it ends with money printer go brrr again.
Peter McCormack: Did you find anything?
Danny Knowles: On Scotland, yeah.
Peter McCormack: Energy bills rebate. Yes, so here we go, energy bills rebate. That's actually Rishi Sunak, okay, "As UK grapples with the severe energy crisis, it's becoming increasingly rare for consumers to --" etc, yes. Yeah, "Some positive news did come from the UK's Chancellor, Rishi Sunak, earlier this month when he said, 'The government plans to rebate some of the cost of rise in energy prices to consumers. The vast majority of households are expected to receive up to £350 to help, due to a combination of council tax discount repayment or energy bill discount'". Yes, that's happening in the UK now. They're preparing for this and it does get cold in winter, and the energy prices are fucking high at the moment.
Danny Knowles: It's getting ugly.
Peter McCormack: Yeah. I try and hope and I try and be an optimist that things won't get too bad but I get to sit down with a lot of people; I can sit down with you, with Lyn, Mark Moss, Alex Gladstein and it's not good news at the moment. Part of me is, "Right, I need to go home and I need to prep, I need to fill up the freezer. I need to fill up the…". But then I want to be like, "I don't want to be that guy; is it really going to be that bad?" Are we about to go through -- it's different for you, you're half my age and Greg Foss is eight times older than you, but are we about to go through the worst moment of our lives? Is this going to be something when my kids have kids and I'm going to say, "Remember basically in the 2020s, it was bullshit"? I don't know, I hope not.
Dylan LeClair: I don't fully know what's coming either. I would say while we have been a little bit gloomy or dark on this episode --
Peter McCormack: Or there's optimism.
Dylan LeClair: I am an optimist at heart.
Peter McCormack: Yeah.
Dylan LeClair: That's one of the reasons why I'm so passionate about Bitcoin, because I think it gives me a way, really everybody a way to secure their future and not be dependent on anyone else and have that sovereign wealth, that sovereign choice.
Peter McCormack: Can well all, though? Is it a lifeboat for everyone? If everyone fled to Bitcoin at once, would suddenly the price shoot up and, therefore, some people sell off and then they trap some people? I always have to be honest about this, because a slow increase in the adoption of Bitcoin is good for price and good for everyone, but there are people who bought Bitcoin at $69,000; it's now at $39,000. They halved themselves and they've got to either wait it out and if they can't wait it out and if they sell a bit of their Bitcoin, they've lost money.
Dylan LeClair: Yeah.
Peter McCormack: I am fully behind the broad move to a Bitcoin standard. I think everyone should understand Bitcoin and move to it, but if there is a rush to Bitcoin every time there is a blow off the top, how long do we take? We've essentially been flat for a year, so anyone back in -- I don't know, when did we go to $69,000?
Danny Knowles: A few months ago, September, was it?
Peter McCormack: Yeah. We don't know when they're going to be back in green and yeah, be patient, wait, hodl. Some people cannot afford to hodl.
Dylan LeClair: Yeah, that's a totally fair point. I guess from that sense, it's not buy Bitcoin and you're completely insulated from all this stuff; it's just not true. You just said, "The long-term mindset", etc. But I think ultimately, Bitcoin offers over the medium to long term, just a way to insulate yourself from all this. So yeah, to have Bitcoin you need to have a surplus, you need to be able to produce more than you consume.
Then for a lot of people, unfortunately, that's just not the reality but for anyone that it is or whether you're living in a western country or a dictatorship, even with the volatility, or think about people with the Russia rouble, there's 150 million people that because of some belligerent dictator, are completely cut off from the rest of the world financially and had their currency collapse by 50%. From that sense, yeah, Bitcoin is volatile, but what's the weighted DCA price over the last six months or a year? It's not $69,000; it's probably above $38,000, right. But how many times have you had your net worth chopped in half over the last five years? Since I've been in Bitcoin, I've seen my net worth draw down 50% three or four times.
Peter McCormack: Dude, I've had my net worth go from rich to poor twice in the last decade; I've lost everything, pretty much. Now, it's not going to happen a third time because I've protected myself, but I've seen it, I've seen that 50%. But once you've done your first tour of duty, that 50% usually happens after a 5X or a 10X. If you haven't had that first tour of duty --
Dylan LeClair: It's tough.
Peter McCormack: Yeah, it's tough, it's really tough and I'm always conscious that we have to advise people in the right way with this.
Dylan LeClair: Yeah, 100%. Obviously from the volatility, it's don't ape 100% of your savings, if you have savings at all into this if you can't afford to watch it cut in half potentially, or if it doesn't go parabolic next week. But I think when we're talking about these endgame scenarios, I think ultimately with the craziness of the world, I think it could lead -- I said this earlier today when I was talking with Pomp. I think if you're looking at this --
Peter McCormack: Who?
Dylan LeClair: On Pomp's show.
Peter McCormack: Who's Pomp? Who is he, though?
Dylan LeClair: He has the second-best podcast in Bitcoin.
Peter McCormack: I don't look down!
Dylan LeClair: But I think these tail distributions of fiat endgames, of right side or left side or whatever, of deflationary depression, collapse, hyperinflation; I think unfortunately, and this is just my thoughts, those tail distributions aren't as improbable as most would like to believe.
Peter McCormack: Okay.
Dylan LeClair: Ultimately, it probably ends up with a currency collapse. I think the US, the dollar's the strongest currency but all the other fiats will collapse and the dollar will probably be the last on the hill. But ultimately, it will collapse and so it is somewhat irresponsible to say, "Buy Bitcoin with everything you have, lever up". I've said it, I'm transparent. I was taking student loan money in March 2020 and buying the debt. Is that irresponsible? Probably, but I did it.
Peter McCormack: Did it work out?
Dylan LeClair: Yeah, it worked out.
Peter McCormack: There you go.
Dylan LeClair: But don't do that with something you can't afford to lose. I was a reckless 18-year-old kid sitting in my dorm room. But ultimately, I think this endgame is you're going to want to be insulated at all costs and if you have any wealth, even in dollars or bonds or even probably equities, they'll maybe maintain some purchasing power in nominal terms, but in real terms you'll probably get crushed.
Peter McCormack: What's the deal with your friends, and I don't mean this in any way condescending; I just want to understand a different age cohort? Because my friends' age cohort is 40 to 45. I'm not going to say 50; 40 to 45. We're in a position where we're the tail end of careers, certainly considering I'd like to retire by 60, 55 would be ideal. I'm hopefully towards the end of a mortgage. We're at that stage in life where we need to be preparing and I have conversations about Bitcoin and they have to consider it alongside things like pensions and paying off their mortgage and stuff. At your stage in life, you're more likely to start a career, thinking about maybe wanting to get a home.
Dylan LeClair: Yeah.
Peter McCormack: I don't mean it in any kind of condescending way at all but what is the cohort of your friends? Are they naturally understanding things like Bitcoin, are they intrigued? Do they come to you and say, "I think I need to think about it"? What's the deal?
Dylan LeClair: Yeah, so I would say I was definitely the annoying Bitcoin guy for a while. I'm happy to say a lot of people close to me, friends have been stacking, did stack, have a nice -- and that's their savings account. I told them, I was, "Dude, this is your -- yeah, it goes up and down but this is your turbo-charged savings account for your future self. Just acquire some and sit on your hands".
So, I guess from that mindset, a lot of us -- I'm in a lucky position to have an income and not be saddled with debt and in school, but not everyone is in that position. Mostly they're low-waged jobs but I still say, "Ten bucks a week, put it away; this is for your future self". So, I think my bubble is definitely more orange pilled than the average zoomer. I think in general, there's a sense unfortunately of a nihilistic approach of just, "I'm going to ape GME calls, I'm going to throw everything, YOLO".
Peter McCormack: NFT bullshit.
Dylan LeClair: Yeah, NFTs, you know. There's people that made a lot of money with NFTs, congratulations. Honestly, I'm happy for those people.
Peter McCormack: There's also Bitcoin.
Dylan LeClair: Yeah, there's also a lot of people that lost everything in scam coins or jpegs or YOLOing in the options market without even understanding what an equity derivative is. So, I think that financial nihilism almost is a result of just being trapped out of the current system; the boomers have rode 40 years, the longest asset bubble ever, and we're saddled with six figures of debt. Like, what do I have to lose? So, from that sense, I think Bitcoin offers some hope, but it's important to keep that long picture in mind.
Peter McCormack: Fair play, man. Last thing I want to ask you about: on-chain, I'm not as convinced as I was of how useful it is. I think when too many people think something's going to happen and then use an on-chain, that gives too much information to other people to countertrade. Is it still useful? Is use changing? Where are we at with on-chain?
Dylan LeClair: I definitely think it's useful. I think during a bull market, everyone's a genius and during a bear market, Willy just hung it up. I'm not sure if that was because of performance or just because he's been in the game in a while. But it is inherently useful, I think, from the sense that you can see transparently. People will put together models and I have done my fair share of saying, "I think number goes up" and I've been right and I've been wrong. But just ultimately being able to see 61% of the supply hasn't moved in the last year, or I think it's 62%, and that's a takeaway from being its all-time high, ever. 87% hasn't moved in the last three months, something like that where you can quantify it.
I've been saying this publicly in Twitter: I think marginal selling has been because of the macro backdrop; hedge funds, whatever, guys that are correlation trading with the S&P 500, they've been marginal sellers. But the marginal buyers have been the plebs, the DCA army, etc, and ultimately every Bitcoin parabolic bull cycle that's seemingly random isn't all that random, and it's a result of under the surface, you see this wave of accumulation happen, this wave of basically a supply squeeze and then, all of a sudden, just a little wall of money hits the market and price goes parabolic.
That's why we were at $9,000 all summer. What was happening under the surface? There was just a massive accumulation occurring. All through basically after the 2017 bubble, it was a just three-year accumulation that basically concluded in 2020 when bull went parabolic.
Peter McCormack: This is the conversation we had the other day, that between $8,000 and $12,000 phase we had for ages. It feels like we're there now, but it's a bigger range where it's $36,000 to $42,00, $45,000; it feels like that's a new range we're in.
Dylan LeClair: Even if you want to look at it from $30,000 to $60,000, it's this year range and what's happening on the surface is a massive accumulation. Regardless of what happens over the next 6 to 12 months in the legacy markets, if things go to hell and hopefully not, but under the surface there's a bunch of people with a tonne of conviction that are hoarding this absolutely scarce monetary asset, if and when the hot ball of money hits Bitcoin again, and it will.
Peter McCormack: Of course.
Dylan LeClair: People aren't really ready for what comes. That's why I say it's good to get some Bitcoin. Even if pricing goes to $30,000, pricing goes to $28,000 or $25,000, it's not the end of the world. But ultimately when those money flows snap back, it's going to run probably harder than most people could comprehend.
Peter McCormack: I'm ready.
Dylan LeClair: Then the analysts or the legacy people will say, "It's speculation, it's random, it's totally volatile. Why is this happening?" But the cool thing is with on-chain we can say, "Hey, there's a really, really tight free float supply. It's maybe a couple of million coins". And we can see that and say, "You know, if anyone comes in significantly interested, scoop this up. Prices are going to run hard". I think that's why on-chain is pretty useful.
Peter McCormack: Fair play. Well listen, Dylan, it's great to see you grow your profile in Bitcoin. I think you bring an amazing depth of knowledge. Fully deserve success and it's just amazing to watch and I congratulate you and I thank you for coming in and doing this. If people want to follow you, check out what you do, where do they go?
Dylan LeClair: Yeah, you can just follow me on Twitter @DylanLeClair_. I work with Bitcoin Magazine doing some stuff with the Deep Dive and we've got a rebrand coming soon, but you can just find that in my profile link. Yeah, I appreciate you flying me out and doing this; this is an awesome show and congratulations on your success. What episode is this for you?
Peter McCormack: Where are we at? 476, 477?
Danny Knowles: 476 the next one.
Dylan LeClair: 500 coming soon.
Peter McCormack: Coming soon, yeah. I want Jack Dorsey! To be completely honest, I think that would be a great show for 500. If we don't get that, we have a choice of just get one person, get a few people on. I said actually if we don't get Jack, which we probably won't, because he's hard to get, I'll actually do it with Pomp; he's my boy, I love him to pieces.
Let me tell you something really cool about Pomp. Some people would think we're competitors because we do the same kind of thing, right. If I phone up Pomp and I say, "I need your help with something" he'll text me back within 24 hours and say, "What do you need? I'm on it". If I meet up with him whenever we sit down, and we get to do it once or twice a year, we both go, "This is what I've learned. This works, this doesn't work. I'm doing this" and we share everything; we help each other as best to be as successful as possible. So, he for me would be a great episode 500 with just a look back on the last few years and talk some shit to each other.
I'll tell you a funny story as well. The first show we ever made together was about three hours, two and a half hours; we agreed to cut it in half. But we had this rule that we said, "Every time you say Bitcoin you get a $10 fine". So, we tried to make a whole show. It ended up, I don't know, 7-5 to him and I owed him $20. But I love the guy, so maybe I'll do it with him.
Look, appreciate you, dude. Keep crushing it. Anything we can ever do for you, you just let us know. Are we out tonight?
Dylan LeClair: I'm sorry?
Danny Knowles: Tomorrow night.
Peter McCormack: Is it tomorrow night we're out? We're out tomorrow night, so we'll get to hang out again, a group of us, and talk Bitcoin and have a drink. You can have a Coke!
Dylan LeClair: Cheers.
Peter McCormack: Cheers, Dylan.
