WBD685 Audio Transcription
BlackRock & the Bitcoin Signal with Preston Pysh & Matt Odell Live
Release date: Wednesday 19th July
Note: the following is a transcription of my interview with Preston Pysh & Matt Odell. 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.
Preston Pysh is a co-founder of The Investor Podcast Network, and Matt Odell is host of Citadel Dispatch, co-host of Rabbit Hole Recap, managing partner at Ten31 and co-founder of OpenSats and Bitcoin Park. In this interview, we discuss Bitcoin’s impact on privacy, freedom, and the financial system. We also talk about the impact and risks of BlackRock’s involvement in Bitcoin, the challenges faced by energy companies adopting Bitcoin, and Bitcoin’s potential to massively reorganize wealth.
“If plan A fails and we can’t make tools that are convenient but also freedom-oriented, then freedom degrades to a point where people get burned so much that they finally wake up to it and start trying to improve their own situation.”
— Matt Odell
Interview Transcription
Peter McCormack: Right, welcome to What Bitcoin Did Live. Me, Peter and Danny and my good friend, Matt. So yesterday, I was hanging out with Matt, and Matt blue check shamed me. So, was it today I did it? No, yesterday I got rid of my blue check. Do we know -- should we talk about that?
Matt Odell: Allegedly.
Peter McCormack: Well, I can prove it.
Matt Odell: How can you prove it?
Peter McCormack: I assume if I go in there.
Matt Odell: If you look on Twitter, you've got a blue check.
Peter McCormack: I know because I think they keep it.
Matt Odell: Once you check, you can never go back!
Peter McCormack: Blue check, look here we go.
Matt Odell: I thought we were going to talk about Bitcoin today; we talked about the blue check yesterday, and Nostr. Who's on Nostr here; raise your hand? Look at that. Nostr is the future.
Peter McCormack: Who's not on Nostr? Shamed! Yeah, Matt shamed me into getting rid of my blue check. Hands up if you've got a blue check. Boo!
Matt Odell: Look at that pride!
Peter McCormack: Fucking degenerates! Right, that leads us to our topic. Anything that can be captured will be captured. And so, Matt, we want to talk to you about that, because this world we live in has always really been about money up until, I would say about a year ago, we started expanding outside of money and started thinking a lot more about things like communications, especially with how communications have been captured by the state quite obviously, communications companies have been captured by the state. So, do you feel like this Bitcoin movement is now much bigger than just a financial movement?
Matt Odell: Well, I mean I think that Bitcoin is part of a larger freedom tech movement, specifically this idea of free and open-source software, so this idea of code that is not owned by an individual or a company that can outlive its creator, right? The code that anyone can modify, they can distribute, they can iterate on top of, they can build on top of, and they can improve on without permission. Now this to me, I actually, when I came into Bitcoin, it was part of my Bitcoin experience, part of the paradigm shift. And I will say specifically to me was Snowden in 2013. When Snowden came out in 2013 and he said essentially, "Here are the leaked documents that show that every major tech company has either colluded willingly or unwillingly with the US Government to spy on both our citizens and every single person in the world", that just changed how my brain was wired, it changed how I thought about things, and you basically could not trust any centralised company, period. I think that is going to become more apparent to people over time.
The unfortunate reality is that we've just never been in this situation before. We've never been in a situation where an increasingly large part of our lives is lived in the digital realm and is controlled by very few gatekeepers that have an insane amount of control over what we do, what we say, how we interact with the world. And I think what happens is, basically we're going to see increasingly worse situations where that centralised control is used against us, whether that's intentionally through collusion with governments or direct action by these companies, or if it's through larger and larger leaks. And I think in America, we saw the TransUnion Equifax leak, which was like four years ago I think, people have already kind of forgotten about it, but they essentially doxed every single adult American all at once through a system that we can't even opt into; you're automatically part of this credit reporting regime. And I think we start to see things along those lines, where people get increasingly burned.
Well, obviously we've seen PayPal censorship, we've seen social media censorship, but these things get worse and worse, and then people understand, they start to realise the need to seek out these tools. They seek out tools that empower them and empower how they interact with everything in their daily lives. And the key for us, the key for people that realise this today is to help build those tools, support those tools, use those tools, and the education alongside it, because when they realise the need, they're going to be coming looking for something that solves their problem.
Peter McCormack: What is it you ultimately fear, Matt?
Matt Odell: What do I ultimately fear?
Peter McCormack: Yeah.
Matt Odell: I think you could distil it from -- it's a lack of freedom. I think it's a lack of freedom and I think what I fear is this ever-increasing lack of freedom leading to a dystopian type of situation, a very dark situation. And I think maybe anyone who has a family who has kids who is thinking about future generations, it starts to run in your head. Even if you're not thinking about these specifics, you start to think about maybe, "How do I deal with screen time with my children? How do I deal with social media?"
I mean, even if you go back, I'm decently young, I think I'm like old person in Bitcoin, but when I was growing up, I made a lot of mistakes, and those weren't recorded forever for everybody. And I don't think we fully have appreciated the repercussions of that kind of situation because we've never been in that situation before and humans, it's just hard for us to extrapolate different causes and effects down the line right?
Peter McCormack: I mean I have.
Matt Odell: What have you?
Peter McCormack: Appreciated that things are recorded!
Matt Odell: Yeah, you've drank from the fire hose in that regard. But there's an unknown there, right? There's an unknown there, and I don't think people truly appreciate that unknown. We just kind of live our lives where we think on a daily basis like, "That's the way it's always been, so of course it'll work". But that's not the way it's always been. This is all new, and we're going to see these repercussions, and let's try and build a better world before we really feel the true pain of the world that has already been created.
Peter McCormack: And there's a spectrum of how much people care about this stuff. You're kind of like my flag for the worst-case scenarios. I look to you for your opinions and your thoughts on any specific events that happen. And I fear some of the things you do, but I'm not in the same camp as you are. Yet, when I go back home, I don't know, who here is the weirdo amongst their friends when they get out, they go back home? Yeah, so we're all the weirdos, right? And we all sit here thinking, "This is bullshit what's happening with the financial system, it's bullshit what's happening with our communications, it's bullshit". I don't know about anyone here, I go home and go for a drink with my friends and I try and softly dance around some of these topics and they think I'm fucking crazy. And so, I'm finding it very difficult to communicate the risks that we talk about on my podcast, your podcast, these events. Why do you think that is?
Matt Odell: So, first of all, Peter didn't make this clear in the beginning, but we are, me, Peter and Danny are doing 30 minutes right now. And then they are going to do 30 minutes with Preston Pysh. We're very grateful to have Preston Pysh in the house, also a member of Bitcoin Park. And then we are going to be doing, all four of us will be up here for a joint Q&A. So, if you have questions, think of the questions, get them ready.
Peter McCormack: But if you have a super pressing question that has to be asked immediately, put your hand up, we might consider it!
Matt Odell: Look, it's hard. And I think what I always go back to as a metaphor -- raise your hand if you use Signal. Okay, so I really like Signal, the messaging app, the encrypted messaging app. And what is really novel about Signal is if you talk to privacy advocates, there's a bunch of different issues and different trade-offs that Signal made. But what Signal did was they made a very convenient app that's really good at sharing multimedia. You can share photos, you can share videos, you can do little emoji likes, you can share GIFs, you can create group chats. It's just a really good messenger. But it happens to have pretty strong privacy guarantees. And for most people, what they want in their daily lives is they just want something that's convenient and easy to use. And there's a trade-off balance there that they found where you can provide something that's just a better tool, regardless of privacy, but also gives you significantly better privacy and freedom.
What I'd like to see is, and a lot of my work is focused on working with builders and supporting builders, whether that's on OpenSats for open-source contributors, or Ten31 for founders that are building startups, is I want to see more tools that make best practices, make freedom best practices as convenient as possible with defaults set in that kind of vein, where the creators are making certain trade-off decisions for their users, because most people will not go out of their way to seek a more private or freedom-oriented thing. Now, that's in a world where we live with relatively good freedom guarantees, like America. In America, we can all complain about a bunch of different things, but if you compare us to the rest of the world, we live with relatively good freedom guarantees, and we live with that privilege. And as a result, we don't necessarily seek out alternatives.
Now, in places like Argentina or Venezuela or Iran, these people already realise the need for freedom-oriented tools. You don't have to convince them why they need a better tool, you just need to talk to them about the tools existing and them being able to seek them out. So, my doomer optimism kind of comes from the fact that if plan A fails and we can't make tools that are convenient but also freedom-oriented, then freedom degrades to a point where people get burned so much that they finally wake up to it and start trying to improve their own situation. And there's a little bit of frustration in the middle ground where you just can't get through to everyone. Most people will not learn until they touch the stove. And there's a reason why that exists as a phrase, because most kids don't realise the stove's hot until they touch it, and then they don't touch it again.
Peter McCormack: And that brings me back to something I mentioned to you yesterday, where I said, if we get a situation where the financial system collapses, most people in this room assume or hope they will at least be a bit protected, because they have Bitcoin. And if anybody, someone like Preston, yourself or I has a platform and they get removed from that platform, because we've called Elon a dick, we have Nostr to communicate. We have access to these communications, we're aware of these. But that's an individual ability to protect yourself, that's an individual insurance. But if you talk about heading towards a dark place, then we have a collective responsibility to try and fight back.
So, how do you think we get freedom tech on the agenda with the larger companies who own these platforms, because it never feels like the smaller platforms will ever get the real penetration?
Matt Odell: I mean, I don't think you can reason with the oligarchs of our time, they're going to want as much data and control as possible. I think that's just how it is. I think it's a false premise that these tools are based on the need for collective action. I think the empowering part, the most actionable part of these tools is that at the end of the day, it comes down to the individual. It comes down to the individual exercising their right, their natural human right, not a right that's given to them by governments, a right that they take themselves and defend themselves to improve their own situation. But at scale, it does help everybody, but it's not relying on the idea that everyone is going to collectively come together and improve the collective situation, it just will not happen that way. And I mean, if you believe it can happen that way, then maybe be more focused on politics or lobbying or sending comment cards to companies. I just do not think that's how you actually get actionable change.
I think you get actionable change by empowering individuals from a grassroots focus. It's one of the reasons that Bitcoin Park exists, to focus on grassroots freedom tech adoption. From a grassroots perspective, you start there and then as you empower individuals, the centralised actors that control a lot of our daily lives, they get disempowered, they lose power because the individuals have more power.
Peter McCormack: Okay, so you've talked about ease of use, some of these tools being easier to use, something like Signal. BlackRock is going to make buying Bitcoin easier to buy for a lot of people. Our good friend, Harry, at the back there would say, "Everything is good for Bitcoin". Is a BlackRock ETF good for Bitcoin?
Matt Odell: Well, BlackRock is not going to make it easy to buy Bitcoin, BlackRock is going to make it easy to buy IOUs.
Peter McCormack: You know what I mean.
Matt Odell: It is rug pull technology; there's a big distinction.
Peter McCormack: Yeah, but you know what I mean.
Danny Knowles: Someone's buying the Bitcoin.
Matt Odell: I mean, BlockFi made it really easy to buy Bitcoin too, right!
Peter McCormack: There are so many things I could say about Matt. And every time he pulls this on me…!
Matt Odell: I will just say that this year, I think, has proven to a lot of people, especially newcomers, the risks of trusting a centralised third party. BlackRock is obviously a centralised third party and ETF. All that said, BlackRock is the largest asset manager in the world, they have been historically very critical of Bitcoin, they are the largest shareholder in the majority of companies that exist on this planet, and where they're not, Vanguard is, and they're the largest shareholder in Vanguard. Corruption runs our entire world. I expect a BlackRock ETF to get approved, the question is timeline. If there's going to be a Bitcoin ETF, it's going to be a BlackRock ETF approval.
That is a signalling mechanism to a lot of institutions and suits and rich family offices that have been sitting on the sidelines not considering Bitcoin as a real asset, that Bitcoin is here to stay and that it's a real asset worth paying attention to. If BlackRock wants to get a piece of it, it's a real it's a real thing. And I think most people probably are not appreciating the paradigm shift that happened just by them applying for an ETF, not even getting approved, just the signalling mechanism BlackRock is going for this has completely changed the ball game in terms of Bitcoin demand. And I think the main thesis I have about Bitcoin is, from a value accrual perspective, that as adoption increases, purchasing power should increase because it's a very scarce asset.
So, I expect BlackRock to essentially supercharge Bitcoin adoption, but I do need to reiterate whenever BlackRock comes up that first of all, they can go fuck themselves, and second of all, there's going to probably be a lot of people that buy BlackRock's ETF and get burned and learn the risks of trusting a custodian. And people should learn how to hold Bitcoin themselves, how to use Bitcoin themselves, how to use it in a freedom-oriented way. And yes, it can be daunting and overwhelming, but it's easier than it's ever been, and there's many aspects of our lives that we take immense personal responsibility and do because we need to do it, things like driving a car, things like having a kid. Having a kid is extreme personal responsibility. Every mother can self-custody Bitcoin. If they can have a child and raise a child, they can self-custody Bitcoin. It is not as difficult as people make it out to be. And you need to sit down with the tools and spend a little time on it.
If the question is, is my family able to accrue and hold purchasing power over time and have some security on a financial side? Maybe spend a couple hours on a weekend and focus on it. And I'm not trying to degrade people who have had difficulty with it. I know it can be difficult, it's hard to think about, it's daunting, it's overwhelming. But we spend a lot of time on a lot of trivial bullshit. And the time is now, the time was yesterday, but if not yesterday, today, to get your shit in order and figure it out. Don't just pull the easy route and buy the BlackRock ETF and start complaining about it in however many years when they rug you.
Danny Knowles: I think there's a few things, though. First of all, no one starts Bitcoin by self-custodying Bitcoin. I think probably everyone in this room bought Bitcoin through Coinbase or through some other exchange and left on that exchange for a while. And BlackRock ETF could be the next way of onboarding new bitcoiners. And you said that people are going to get rugged through the BlackRock ETF, which might be true, but I think it's very important to specifically say how they can get rugged.
Matt Odell: I think, first of all, even without a rug, like a full-on rug where they play paper Bitcoin games, part of my conviction on Bitcoin is that anyone who plays paper Bitcoin games will get rekt eventually, because the supply will just dwindle and dwindle with people taking self-custody and using a circular economy, and that ultimately they'll get blown out and the price will then essentially normalise on spot Bitcoin, and they will get rekt. So, even if BlackRock doesn't play paper Bitcoin games, it's important to understand what are you buying when you buy a BlackRock ETF, and you're buying price exposure to this incredibly scarce asset. You're not buying the censorship-resistant properties of Bitcoin; you're not you're definitely not buying the digital cash perspective of Bitcoin, being able to pay anyone without permission or receive money without permission; you're not getting either of those benefits.
I think there is a concern that if people buy the BlackRock ETF, they feel comfortable and safe that they have some price exposure to Bitcoin, and then that journey kind of stops there unless they get burned. And I don't know if it's necessarily an on-ramp into sovereign Bitcoin, and I think there's almost a delineation that is going to be made, and it's already kind of started maybe four years ago, where you have freedom Bitcoin and then you have investment Bitcoin. And I think the real powerful tool that empowers individuals is the freedom Bitcoin. Obviously, good money, you should be able to save it without permission, it should increase in purchasing power over time and hold your wealth. But you should also be able to spend and receive it without permission, and I think that's where the real power lies.
The Blackrock ETF, for a lot of people, will kind of delay that entry point into it. And I don't think we should settle with this idea that people don't come in with self-custody. That wasn't always the case. In the earlier days of Bitcoin, that was not the case. And I don't understand why we should necessarily settle with that now when the tools have gotten significantly better.
Peter McCormack: Is that because in the earlier days it all started with self-custody, you just had to?
Matt Odell: There just wasn't really many -- everything was very difficult.
Danny Knowles: I think it's fine to say that and I agree, it would be great if everyone onboarded through Unchained or something like that, where they're buying Bitcoin in a multisig, directly to their multisig, but that's just not the case. And so, are we not better getting people on board than leaving people behind? And you say that it might put people down the track on self-custodying their own Bitcoin, but is it going to bring them in earlier anyway?
Matt Odell: I just don't think they're not -- they have a Bitcoin IOU at price exposure; they're not on Bitcoin.
Peter McCormack: Yeah, I don't think they know what they're buying.
Matt Odell: I think I think there might even be an argument, fuck Coinbase, not your keys, not your coins; there might be an argument that if you buy Bitcoin on Coinbase and you're holding it custodial in their vault product, or whatever, at least at that point, at any moment you can press withdraw and withdraw the Bitcoin. With the BlackRock ETF, there's a whole other step. I don't even know, what is that process to the average person? Are they selling their BlackRock ETF, then paying the man their cap gains, and then registering on a KYC service, or going to a circular economy and trying to accrue Bitcoin? Like, what is that process in your head where that makes that process easier? I don't think the BlackRock ETF actually does that.
I think them signalling and launching an ETF and bringing all this money into the market will increase the price, which would then increase adoption across all these other verticals of Bitcoin, so it would supercharge it in that way. But to the actual person who's buying the BlackRock ETF, to the actual person and family office, deploys $10 million into the BlackRock ETF, are they any closer to self-custody Bitcoin than when they deployed it into the gold ETF? I don't know if that's necessarily the case. That doesn't compute in my head.
Peter McCormack: Do you think those people even care though, really?
Matt Odell: What do you mean?
Peter McCormack: Well, they just have a portfolio of things they buy because they're told to buy it, "Oh, Larry Fink says we should buy this, let's buy it".
Matt Odell: I think rich people, very wealthy people, spend a lot of their time focused on preserving their wealth, and there's a reason the Swiss banking system is so robust and so heavily used. We saw the Panama Papers, rich people will go through a lot more trouble than self-custody Bitcoin to protect their wealth, and I think they're not idiots. I think they know the BlackRock ETF wouldn't do that for them.
Peter McCormack: So, what you're basically saying is we may have a bunch of family offices, rich people, institutions, who will lead a very large-scale marketing campaign via BlackRock to advertise Bitcoin to a bunch of normies who we can introduce through better channels.
Matt Odell: Yeah, pretty much.
Peter McCormack: That's pretty cool. And also, I just think they're going to pump our bags!
Peter McCormack: The vast majority of people are happy as number go up. That half an hour went really quick. We will have Matt back in a minute.
Danny Knowles: I want to ask one more question before we stop.
Matt Odell: The better questions come from Danny!
Danny Knowles: I want to know what you think about the threat of BlackRock pushing campaigns like Tainted Bitcoin, Dark Bitcoin, whatever that might be, and whether you think that's going to be a real threat.
Matt Odell: I mean, I think they probably will. I think that's part of this idea of the delineation between freedom Bitcoin and investment Bitcoin. I think there's a large group of bitcoiners that actually would welcome greater regulation on sovereign Bitcoin and the word they're going to use on Twitter and whatnot is going to be regulatory clarity, "This has opened the floodgates, we've got regulatory clarity". But really, it's about stomping on individual rights, is really the play. I think BlackRock will obviously do that. I think BlackRock will probably say, "If you want to invest in Bitcoin in a safe way, you should buy the BlackRock ETF", which I'm kind of getting ready for that by shitting on them as much as possible. I think really that's one of three main risks that you could watch with the BlackRock ETF. You have that. Them just essentially campaigning against freedom-oriented Bitcoin usage. And that's not necessarily using privacy best practices. That might be self-custody altogether. It would be great for BlackRock if it was really hard to withdraw from exchanges and hold Bitcoin yourself, because then you have no other option, of course you're going to use them, of course you're going to, they're so trusted.
I saw Larry Fink on TV, he called BlackRock "hope". Who the fuck does he think he's kidding? He's probably kidding a couple of people, but I could totally see them petitioning for that, and you should operate under that assumption that it's going to be harder to buy Bitcoin from regulated services. That's one of the reasons why the circular economy is so important. It's a major focus we have here at Bitcoin Park.
The other two main risks, and I'll just try and go through them really quickly, is paper Bitcoin. We've already kind of covered that. I think if they do try and play paper Bitcoin games and don't have the collateral they say they have, they will get rekt and their users, their clients that are holding BlackRock ETF shares will also get rekt alongside that, and there'll be many institutions. And if that happens, there'd be a massive lesson in using self-custody. That's how people learn, touching the stove.
Then the third big risk is, maybe they campaign for a fork. What a lot of people I think got wrong out of 2017 is that anyone can fork Bitcoin if they want to, you don't need permission, you can just fork it. When we see Ripple fund the terrorist organisation that is Greenpeace, $5 million, and campaign to #ChangeTheCode, they can change the code today if they want to. They could change it yesterday, they could change it next week, they can change the code whenever they want. Now, Bitcoin is extremely resistant to change by design. And essentially, what you would need for that kind of hard fork to materialise and have actual legs and continue is an overwhelming majority of stakeholder support of Bitcoin users, Bitcoin companies; anyone who relies on Bitcoin would need to support any kind of change. And that's where the key value of Bitcoin lies, because people will not support change that is against them, that hurts them. And so this default of no change stops malicious changes from happening. But it's important to realise that anyone can fork.
So, I would not rule out, there's a much larger than zero possibility we see a BlackRock proof-of-stake fork, "It's good for the environment, Bitcoin miners hate the environment", Bitcoin miners love the environment, but that's what they would say. I think that would also fail, and I think that would be a massive lesson akin to what some of us saw in 2017, but on a much larger scale for all the newcomers that weren't around for 2017, that Bitcoin cannot be controlled by BlackRock, that BlackRock can't stop us from using Bitcoin, that we can't stop BlackRock from using Bitcoin, and that's the fucking value of Bitcoin in the first place, is that it's money without trust, it's money without permission.
Peter McCormack: Right. There you go. All right, Preston.
Preston Pysh: I'm in the hot seat.
Peter McCormack: How you doing, man?
Preston Pysh: Doing great.
Peter McCormack: Preston Pysh! What do you think of BlackRock?
Preston Pysh: Well, it's interesting because I agree with Matt. I think people might look at my background in covering traditional finance and think that I would probably be more in the camp of, "Oh, it's not really all that bad. People are going to put this in their portfolio, and it's good for Bitcoin", and all that. But I agree with everything you were saying. And just to kind of foot-stomp the point of how it could get away from them is, when you look at how a lot of these big entities handle just stock certificates, so many of them are rehypothecated to make money either at the exchange level or wherever. And it's way more prevalent, especially BlackRock equity and the equity that they control inside of their entity. And when you look at how prevalent that practice is and how that's just part of Wall Street, it's very concerning to think that some of those antics could potentially be happening in the background.
Now, there's certain regulations that they have to abide by when you're dealing with an ETF. As to this one, I can't speak to the nuances of how this is actually going to be set up. It's not even approved yet, so we don't even know how it's actually going to be set up. I do know that there's two different types of ETFs: one is effectively hard-line, that it's a one-to-one match for the share issuance; the other type of ETF is a little bit smushier in what they're able to actually custody versus the amount of shares and the representation that the shares are representing for the underlying. So, I don't know of those two what it's going to be. I would imagine it's going to be the first, but I really don't know.
But to Matt's point, you have no idea how they're going to be treating the rehypothecation of it. And in this new world that we're moving to, you're going from the legacy system which is all about I control the ledger, I control the rehypothecation, I control this. And if I blow up, if I'm a Silicon Valley bank situation, well then the reason I make all these political contributions and the reason I'm so active on the Hill is to get myself out of that situation and just debase the currency, everybody pays the price and you know Bill Ackman's there, tweeting about how they have to bail it out, or it's chaos in the streets.
So, my concern is you're going from that mindset of, "This is how the world works", to a mindset of what we all understand and know to be true, because we've seen it time and time again through the years, that it's ultimate responsibility. Nobody's going to bail you out, no matter what, you have to bear the consequence. And if Bitcoin collapses by 50% on the day, because whatever blew up, and people have counterparties that they've got to come up with, and that's why they're sellers, that world, I don't know that Wall Street is ready for that world. I think they're so cognitively conditioned that the world that they operate in is like, "Political favour will get me out of whatever", that it's going to be a real shell shock and it only becomes more true as the market cap runs.
So, you start getting to a price of $500,000 or $1 million on Bitcoin and you're looking at the sheer size of this thing, and then you look at what I would expect is the amount of people using a BlackRock vehicle, which is going to be a lot, I think it's going to be massive, not just BlackRock but all of these ETFs that are going to get approved, they're going to be huge. And so as that market cap blows out, and all of that Bitcoin's being shoved into a trusted Coinbase or wherever, that consolidation is a risk to all those people that are entrusting these institutions, huge risk. And then, if they're playing traditional games with that, they say, "The bigger the giant, the harder the fall", that scenario is through and through with these institutions.
So, do I think that you're going to see people that are going to learn that lesson the hard way, just like everybody learned the lesson with FTX and You-Name-It exchange over the past decade; do I think that that will continue to play out? I think there's a pretty high chance that that will continue. Now whether it's BlackRock, or whatever one of them, I don't know. But, boy, you're moving to a world of ultimate responsibility and I don't think there's many participants in society that are ready for that world right now.
Danny Knowles: So, Bitcoin's going to blow up BlackRock.
Preston Pysh: I think it could blow it up. Honestly, I would like to think that that there's people smart enough to understand that it has that potential to do that. But who knows? I mean, it comes down to sometimes you have people with massive egos that are sitting in very influential and controlling positions in some of these really large institutions, and if that person and their team that's underneath of them don't have a deep appreciation for that possibility because this thing is that immutable, then yeah, it could.
Peter McCormack: You said with your podcast, with kind of one foot in the traditional world and one foot in the Bitcoin world, and I think your podcast has done a brilliant job of orange-pilling people from the traditional world, but how big a deal is something like BlackRock to those people in the traditional world?
Preston Pysh: I think it's huge. Yeah, I think because if you're in traditional finance and you're looking at Vanguard, Fidelity, BlackRock, I mean BlackRock's at $10 trillion assets under management. So, that number is so big, it just doesn't even make sense. So, to put it in context, every single taxpayer in this country, whether you're Apple or you're just an individual, if you took every one of those tax receipts for an entire year and then took it for the next year, that's $10 trillion dollars, just to kind of put it in context of how much we're talking about.
Peter McCormack: Actually it's $12.6 trillion.
Preston Pysh: Is it $12.6 trillion? So, it's even more than that.
Peter McCormack: We looked this up today!
Preston Pysh: Did you? Okay. So, the number's huge and when you have that entity going on national TV and saying they hope BlackRock -- oh, my God, I don't think I've laughed that hard in a long time.
Matt Odell: I assume you watched Saylor, Bitcoin is Hope?
Preston Pysh: Oh, yeah. And you had the former commissioner of the SEC on CNBC Today talking with Joe Kernan and he was like, "So, what's the timeline? When's this going to happen?" And he was just like, "Yeah, this is --"
Peter McCormack: You're cheating with notes!
Preston Pysh: Yeah! I think that they're posturing and they're pumping out this message which is, "This is happening, we're going to lead the charge", and Fidelity and all the others, it was so funny to watch all the others get their paperwork updated. And it sure seems like there's something going to be approved and there's going to be a shift.
Now, where I really going to find it interesting, so you have politicians in this country that have been staunchly opposed to anything crypto, Bitcoin related, and I think we all know the politicians I'm talking about. Some of those politicians are heavily influenced with their funding through the big banks. So, now that we have the big banks messaging that, "Oh, Bitcoin's good", and from banks that were the biggest ESG, environmental, "Bitcoin's bad for the environment", and now they're coming out and they're leading the charge on, "Bitcoin is all of a sudden good", three days after Binance was sued through an emergency order, which I think is no coincidence; the fact that you have that, I'm real curious that in the coming quarter, two quarters, are you going to see those same politicians actually start to say, "Well, Bitcoin's not that bad", because their entire budget is based off of the banks, the big banks? I could totally see that happening. I know I think most people in this room would disagree with me, but I could see it happen.
Peter McCormack: Where do you think this shift has come from? Do you think it's --
Preston Pysh: I think it's been in the cards.
Peter McCormack: Well, do you think it's like there's enough people who've realised they can't defeat this thing?
Preston Pysh: I think there's a little bit of that and I think for the last year, year-and-a-half, it has been part of the, "Hey, let's throw everything we've got at this so that we can back up the train and get our ducks aligned and have a position in this". I think the whole FTX thing, I don't want to get too conspiracy theorist --
Peter McCormack: Please do.
Preston Pysh: -- but some of the stuff I read on the FTX stuff was mind blowing, the parallels and agencies and, yeah.
Peter McCormack: So, do you think this is a way to hand over Bitcoin onramps to the traditional institutions and take them away from the companies that built it?
Preston Pysh: I think the traditional institutions were looking at the Coinbases, they were looking at the large exchanges and they're saying, "We're not technically set up to handle the custody requirements from an intellectual property standpoint, the infrastructure standpoint, to be able to handle this and custody of this in a way that we're not a liability to ourselves". And so, they just want to buy it because they're looking at the market cap of what all that was worth, and they're just like, "Oh, we'll just buy this. In fact, let's clobber them, let's make them all look bad, let's collapse their stock price and their equity price. We'll swoop in, we'll start buying up the equity. Heck, we'll have the SEC, because of all of our lobbying efforts, we'll have the SEC go over there and sue them, and then we'll buy up more of their equity. And then we'll just control it, we'll own it, we'll own the custody, we'll file the ETF, we'll eventually own the custody side of it". I think that's all part of the --
Peter McCormack: All coordinated?
Preston Pysh: Well, I mean I guess if I was put in that seat as an executive in one of these big banks and I was told, "Hey, this thing's going to eat your lunch in the coming five to ten years, that's the play", you've got to somehow go and own that IP and part of that market somehow. So, their forte, I mean, Saylor's done a really good job, his speech over in Europe, he did a great job just laying out this coordination between owning the politicians and owning people that make the rules to be able to slow down a clock, to get your fingers into owning equity. And the people that sit at the top of this capitalistic structure that's been warped to no end through fiat currency, the biggest players in the country are the bankers, hands down, I think everybody in this room would agree, they're the ones that politically can just move markets in a way that no other industry can do. I guess maybe Silicon Valley tech would be in there as well.
Peter McCormack: Whilst this stuff with ETF's really interesting, we really should talk about what's happening with the economy, inflation, recessionary pressures, everything we spoke about. I mean, I think, was it here in Nashville when we talked about, we did the Monopoly board?
Preston Pysh: Oh yeah, here in Nashville.
Peter McCormack: Yeah. So, the Monopoly board, if you haven't listened to that or you haven't heard, Preston's Monopoly board analogy. Is there a TL;DR you can do very quickly now? Is it too hard?
Preston Pysh: No.
Peter McCormack: There were two monopoly boards.
Preston Pysh: Well, how many people have heard it or seen it; a few? Okay. All right, so let me see here.
Peter McCormack: It is brilliant.
Preston Pysh: Let me think about, how did we broach that?
Peter McCormack: There's two Monopoly boards.
Preston Pysh: Okay, so it was me trying to explain quantitative easing in a way that just makes it like really accessible. So, when you're playing Monopoly, the property around the board is the scarcity, like a commodity and just regular equities, right? It's a scarce thing, you can't have more of it on the board, it's only there. The money keeps getting inserted into the game. So, if you were the banker and you had four people playing the game, that banker has the optionality of inserting it via people going around Go, they give them $200 every time. That's UBI, everybody's getting that as they're playing the game. You could also accelerate that. You could give everybody $500, or you could give them $1,000, or after each turn, you could give them $100 every player. That's your UBI.
Quantitative easing is, let's say you're halfway through the game, or you're near the end of the game and you're starting to have consolidation of equity in the hands of maybe one or two of the players. But let's just assume that Pete's winning the game and he's controlling most of the equity. The banker would be like, all right, we need to get more cash into the game because the other three players are getting frustrated they're losing. So, how can we get that cash into the other players' hands? Well, let's just go to Pete, let's buy all these properties that he's sitting on, we'll give him a bunch of cash, we'll take the properties, we'll hold on to it at the bank, and then he'll play the game and that'll just sprinkle its way into the other players as they're playing the game. That's the mindset.
Obviously, you know that's not what happens when Pete starts getting all this cash. What happens with Pete when he gets all the cash is he looks at the other players and he says, "Okay, that's income-producing, that's free cash flow, income-producing. So, Danny, I want to buy the three properties that you have. I'm already sitting on all this and this boatload of cash that I just got from the bank. I'm going to buy two of your properties", and you're like, "All right, well this is all I have that's generating cash flow, so I bought it for $600, I guess I'll sell it to you for $800 or $1,000", or whatever, and he's bidding the price. And Pete's saying, "All right, well whatever, I got all this cash, so here you go". And then he claws that equity away. He has less equity, so now as he's playing the game, he's more reliant on UBI coming, because he has no income that's coming in. Same with the other player, but Pete's just crushing it. He's got even more revenue coming in, more free cash flows coming in, because he has more equity on the board.
The banker who clawed the equity, the first set of equity away from him, the banker is receiving that as cash flows. That's QE, instead of it being the property on the board, it's the bonds on the market. And as they're doing that, the yields are collapsing down to nothing. So, all your retirement accounts, you're getting nothing in those. Now we've obviously seen that shift since COVID, but that was leading up to the COVID event, the dynamic that's playing out between universal basic income and quantitative easing.
Then, just to add a little bit more to it, I think we did this when we talked too. If you imagine two boards, like you have a set of four people playing here, and you have a set of four people playing here, and you have two different bankers, if one banker is debasing the currency and putting more currency in there, those players on this board immediately want to go to the other board and start owning the property over there. But if the banker is in cahoots with the players and said, "As long as you guys don't tell the other board, I'm just going to keep funnelling more cash in here and then you guys can dominate the other board". But at a certain point, the players over here are looking and they're saying, why is all of our equity, "Why are all of our properties flowing over to the other table?"
So then they're saying, all right, well, they lean into the table with their banker and they're like, "I think they're cheating over there. I think you need to also be giving us cash so we can claw some of this equity back over to our side". And so this is the dynamic that you have playing out on the global stage because nothing's pegged, it's all free-floating fiat currency. And so, every central banker is incentivised to debase, but debase in a way that it's not so obvious. The US just debased at whatever percent, and now we're going to debase at whatever percent. And then you see the floating currency between, let's say we call this currency over here, the euro, and this one over here, the yen. That ratio, if you're doing an FX comparison, like it was a 1:1, then it was a 1:2, or 1.1:1.2, and then back to 1.1, it looks like the currency is not being debased because you're looking at it in terms of the other currency.
So, both boards are looking at each other like, "Nothing's getting debased, nothing's happening here". But meanwhile, if you actually add up the monetary units in both systems, they're exploding out. But if you're looking at them in terms of the other, they look like they're not moving at all.
Peter McCormack: And the scenario you just painted there is, I've talked about this on the podcast a lot, the Big Short, it's like the end of the Big Short, I don't know if everyone's seen that, but at the very end they make the whole thing very entertaining, and then you see a family pack up and they've lost their home and they're moving everything to their car; and that's the scenario that you've painted. This analogy of the Monopoly board is all well and good, but Danny was packing his car up and we've widened the wealth gap with this unfair game.
Preston Pysh: Well, so when you think about inflation now in that context, so you're going to have this element of stability that's happening as these two games are being played. Everyone's playing, the liquidity's kind of there, people are still playing, they can kind of feel like they're losing, but there's enough liquidity to still support them playing the game. But then at a certain point, you get so much consolidation of enterprise into the hands of one player, especially when you're in the multi-board dynamic, where one person over here has literally just dominated and owns all the equity, and they're so far ahead in the game that the other seven participants just cannot catch up with that one player, okay?
Now, think about if we're talking about supply chains and we're talking about the things that actually drive the inflation metrics that impact all of us on a day-to-day basis, if everything's being consolidated into this one entity, and this one entity is so incredibly wealthy that, "If the boat doesn't leave on time, whatever, I lost some money", and I use the example of a forest, right, you have all these different species of plants and that's the healthiest forest you have. But if you have just a monocrop in a forest, it's extremely unhealthy and very susceptible to change, or some type of predatory plant that could come in and literally wipe out the whole thing.
That's what you have in our economy right now, is you have this consolidation of enterprise into the hands of a few equity holders and you have this breakdown. And what happens is, the dysfunction in the supply chain starts to really start to rupture. And I think as you go further on the timeline, you're going to see that continue to unfold, because what they're doing with the policies is they're doing more of the same, which is the root cause of the systemic issue that's causing it.
Peter McCormack: It feels like we're spiralling out of control. It feels like that from the inside talking to the likes of you, Lyn and Luke Gromen. I think it was $1 trillion has been -- increasing the national debt by $1 trillion in the last month, which is a 3.2% increase. And this is why we looked up the tax receipts today, that's why we knew it, $6.3 trillion a year, because we were like, "Well, that's $1 trillion, and then Luke Gromen said he thinks they'll do $2.4 trillion by the end of the year". And we're like, "Well, how much have they done at the start of the year?" It's like, hold on, they've almost increased the national debt by the size of the tax receipts in one year. And we're like, "Where is this money going?"
Preston Pysh: And it's getting a yield, because these yields are so much higher. So, you think about the interest expense or the net present value of that compared to what you're replacing, and that's the thing that's really concerning, is because that interest expense is really high. And then when you look at the future side of that, at that yield, yeah, I mean it's getting wild. And one of the things that I've been paying close attention, I'm kind of curious because you live it. I just saw today the true -- this person does true inflation. I don't know their exact basket that they're using, but the number that he published was I think 11.7% in the UK just recently. And the government's saying it's 8%.
Interestingly, here in the US, the government is saying it's 4% and they're saying the true inflation here in the US is 2%. And so, you're having this really interesting situation where I think over in Europe and in the UK, because you're not energy-independent like we are much more so here in the US, I think that the whole Ukraine, Russia energy situation is causing the debt spiral to really manifest itself over in Europe and in the UK. And, because we're so closely tied, the US is so closely tied through NATO and all these other political forces, I don't know that you could say any of it's under control here because we're so interconnected with Europe and the UK.
Peter McCormack: I mean, inflation at the moment in the UK is not coming down. We were, what did you say, 9%?
Preston Pysh: So, the trueflation was 11.7%.
Peter McCormack: Yeah, so we've been raising interest rates, we're up to about 6.5% now and inflation is not coming down at all. We've actually also seen this week, they reported that we've had the fastest rise in wages, which adds to the fear of increased inflation. I know there's different definitions of inflation, I think the energy issue is the biggest part of this. We had our energy bills essentially triple, and to the extent that a number of companies just closed down. Like, if you were a bakery, you just couldn't afford to operate your business. Those have come down now. I think, have they not halved from the peak? But fuel cost to fill up your car, I mean it went up to one point, like £2 a litre. I think when I ran the calculation, that worked out about $11.50 a gallon for perspective. I think that's correct. That's now come down to like £1.50, but that's still what, I mean, that's still $8 a gallon. So, that adds to the cost of transporting food and goods around.
So, yeah, I mean look, inflation is a real issue in the UK. I say that, but at the same time it's definitely a class issue at the moment. It's definitely something that's really affecting the working class and I think perhaps the middle class are just burying their heads in the sand or dipping into savings, because nobody I know is changing their lifestyle very much at all. But going to do your shopping at the moment, you notice it. I mean, I don't know, when we were kids, you used to do what was called "the big shop", where you would do your weekly shop with your parents of all your food. People tend to buy on a daily basis now and you just go and buy a few things and you find out you're spending £40, £50, whereas a year ago that would be, say, £30 pounds. So, inflation is a massive issue in the UK.
Preston Pysh: So, all of this, you're going to get to a point where you're going to have this deflationary impulse because of impairment in credit and businesses are going to fail. You're going to have this fit that's going to be thrown. The central bankers are going to come back with the same solution that has got us here over decades, and what you're doing is you're just aggravating the issue, which is the consolidation of enterprise, the breakdown of supply chains, which it's going to cause. And so, where I think it gets really confusing, because people are looking at inflation and they're saying you'll have, oh, what's the gentleman's name? You've had him on your show a couple of times, he does the eurodollar stuff.
Preston Pysh: Yeah. So, Jeff will come on and he'll say, "Look, since 2008, they did all this QE. It didn't produce any inflation". He's right, inflation in the CPI or what the common person is seeing in their day-to-day prices. But what he's not talking about is what was incentivised through the policies that were in place for a decade. And what that is incentivising, going back to the Monopoly board, is the consolidation of enterprise and the breakdown of supply chains that eventually manifest something in what I would call an uncontrollable situation, where they're not able to get it under control. And the reason why they can't get it under control is because when they step in, when it starts getting bad and it starts breaking out, how are they going to solve it? What are they going to do to solve it? They're going back to the same policies that created it.
So, this is where Jeff talks about all of this manipulation of the currency and plugging it into the market to Peter in the Monopoly game, it has these technology impulses too. So, as he gets loaded and ridiculously wealthy in the monopoly game, he can now go out on the risk curve and start doing these really aggressive things from a technology investment standpoint. And then he owns that IP, and then he rolls it into all the equity that he owns. But with all of that comes systemic risk that's inherently built into it, because one person can't juggle all the strings. You have to have this diversity in the economy in order for it to function effectively and efficiently. So, you're getting there. I don't think that they're going to be able to get under control.
Now the timeline? I don't know the timeline. I just know that their solution is rupturing it and making it worse each time they do it.
Danny Knowles: So, they've gone from, well the US have gone from 9% inflation six, nine months ago, to 4% now.
Preston Pysh: Arguably 2%.
Danny Knowles: Arguably 2%. So, it's dropping really fast and it's relatively low. Do you think they're going to go into a period of deflation, and what would the implications that be?
Preston Pysh: Yeah, I think it's definitely possible, but to what extent that they would let it unravel is the point. Because okay, let's go back to the monopoly example. Let's say the banker isn't supplying the UBI or they're not doing the QE, what happens in the game? The players literally start saying, "Okay, well I'm bankrupt". "Okay, well we'll let you fail". "Well, you had obligations that you had to pay to the player over here. And if you default on yours, now they're bankrupt", so then they go boom. And let's assume there's more players, it turns into a domino effect really quickly when you're dealing with a fractional-reserve system, because the fractional-reserve system is completely based on this idea that credit is an asset on one person's balance sheet and a liability on the other. And if this person just blew up because they're bankrupt, well now it just cascades.
People will say that when the stock market goes down 50% that it was all based on emotion and that's just in my opinion total crap. It's based on mathematics and it's based on fractional-reserve banking mathematics that what I just described earlier.
Danny Knowles: But when we were getting high inflation --
Preston Pysh: So, back to answering your question which is, so what it really comes down to is, did the banker provide liquidity immediately on the impulse that something was going bad? So, "I'm suspecting that this player right here is about to go bankrupt. Well, let me just do a whole bunch of QE and then it never happens", because they just provided more and more liquidity into the system and more consolidation into his hands. So, you wouldn't see the deflationary impulse in that scenario. And so, I guess what I'm saying is, trying to predict something that's dependent on three people sitting in a room, whether they're going to add $1 trillion this month or not, is a fool's errand in my opinion.
Danny Knowles: But those three people sitting in the room couldn't stop the runaway inflation, so what's to say they could stop deflation that may be out of their control?
Preston Pysh: Because deflation, these deflationary impulses, are based on their supply of liquidity and monetary units into the system. So, like Silicon Valley Bank, if they didn't step in and do that, you would have had massive deflationary pressures that would have just ruptured everywhere. Bill Ackman was accurate in that. And I don't like that guy. If I can disagree with that guy on anything, I will. But his description there was accurate. It could have, I don't want to say for sure, but I would say there was a real strong tendency that that would have turned into a big deflationary spiral. But that didn't happen because they stepped in and plugged the hole.
But as they continue to do these policies, the one thing that is assured is they're going to continue to consolidate, they're going to create this Franken-economy. And this goes to Gladstein's piece on a much bigger scale than what I'm talking about on a nation state or individual country level. And at a global level, this is what the World Bank and the IMF have been doing to every like developing economy out there, is this exact scenario. It's like they've created this monocrop scenario where the country is only good at one thing. You have a warlord, which is preferred in their scenario, because they're going to keep everybody, through physical violence or whatever, do it on task to produce that monocrop. From the global perspective, everybody loves it because they're getting that monocrop at a cheaper price. But for that individual country, it's a Franken-economy. There's nothing real there. It's like total plastic, the whole thing.
Peter McCormack: Conscious of time, and I'm sure people have got lots of questions for you and Matt. But just to finish off, Preston, before we go to that, we sat down recently with Arthur Hayes and we were asking him about the various scenarios, various options. A default is completely off the table, but he came down to the bare fact that a debt jubilee would be the best solution for the state of the economy. What do you think?
Preston Pysh: Of course. And I don't think it's going to be by choice. I'm a bitcoiner, I think Bitcoin's going to naturally supply it because most people are all in debt up to their eyeballs, or close to it, and you go through a situation where Bitcoin becomes the new unit of account that everybody's using to value everything on the planet. And all of a sudden all the hundreds of trillions of dollars of debt that's out there, I don't know the pace of what that looks like, but over our lifetime it melts away and that provides relief to people, especially that are heavily indebted, So, yeah, I think that's what Bitcoin is supplying whether people like it or not, it's supplying a debt jubilee to the to the planet, and most would not call it that, but that's how I view it optically, like mechanically, what's happening.
Peter McCormack: So, we're very lucky to have both Matt Odell and Preston Pysh here available to answer questions if you have any. I'll have more questions than Danny will if you don't, but I'm sure some of you will have some questions for them. So, don't be shy. Put your hands up.
Matt Odell: And I just wanted to say real quick that, first of all, it's a pleasure having you all in town and joining us here at the park.
Peter McCormack: By the way, Harry had a question. He put his hand up. I thought he was telling me five minutes, but he actually had a question. So, wherever Harry is, he's left.
Matt Odell: Well, Alex has the mic. Let's go to Alex.
Audience member 1: It's day one, I'm already losing my voice, not sure what's happening. So, we saw earlier today, I think that Vanguard announced a 10% stake in Riot. And you guys have been talking of course about the ETFs and all that. So, I'm wondering, especially I guess this question is for Matt, I'm wondering, we see the way things are headed where they might not be able to, or they might not even want to destroy Bitcoin, but perhaps trying to co-opt it or control it, which was I guess the theme of Peter's original questions early on.
I guess my question for you is, especially with Ten31, you're talking to a lot of founders, and whatnot, and it might be early for that, but do you foresee a future where they're going to have to be conscious of how they operate from a regulatory perspective, more so in the sense that, sure, America right now is a great place to do business and to build, certainly for miners in terms of regulatory clarity, but is there a possibility of an almost Atlas Shrugged perspective, where the builders have their own tools and products and whatnot turned against them, against their own will, by the state and get co-opted?
Matt Odell: I mean, I think that's a really good question and perspective that I mostly echo. And I think fortunately, one of the great things about Bitcoin's adoption being maybe as slow as it has been, is that there's a lot of bitcoiners, yourself included, that have operated in this space for a decent amount of time and have thought about many, many different possibilities. And I think when you talk to founders, the smart ones realise that there is a very real regulatory threat and that always exists, as long as there is a state that you're operating in. And I think it depends on what type of business that is. Obviously, the large, publicly traded warehouse miners are particularly vulnerable. I would put in that same group any of the regulated onramps or offramps, depending on your perspective. They are interacting with the fiat banking system, a very historically corrupt banking system, that is controlled by very few and is under the watching eye of the strongest regulatory body in the world financially. I mean, we saw, it doesn't matter if you're based in the United States, US regulators believe that if you're operating a financial company anywhere in the world, you're under their jurisdiction.
So, I think the prudent founders realise this is a real risk, it's specifically a risk to their companies. I think as individual bitcoiners, it's important for us to realise that that we need tools that are resilient and robust, even if the companies that we might prefer to rely on are compromised or shut down. That's why the free and open-source movement within Bitcoin is so critically important to everybody. I think a lot of the prudent founders realise that that freedom movement within Bitcoin that might be directly independent of their company, is indirectly part of the value prop of their business. It protects these businesses and their operators by knowing that there are these tools that bitcoiners can choose to use that are completely independent of them.
I think if you talk to, for instance, some of the founders that are operating Bitcoin-only exchanges and allowing you to buy Bitcoin with fiat rails, they would say that the fact that self-custody tools are easier than ever to use and that people are actually practising it and using self-custody does protect them to a degree on the regulatory side, because they don't become centralised points of failure. And I think when you start to see, there's a bit of dichotomy there with Bitcoin founders and the greater crypto space, where in the greater crypto space there's been a very strong push towards trying to centralise as much as possible, to try and eke out as much profits as possible, and we haven't necessarily seen that in the Bitcoin space. There are some cases where we've seen that. And I think part of the reason is because people with that mentality chase the short-term gains of tokens and dumping them on retail and taking that easy VC money, and it kind of self-selected.
So, a little bit of my worry might be further down the line, now that investors are more interested in investing in Bitcoin infrastructure companies, who do you choose to put on your cap table, which kind of founders are lifted up? But yeah, I think Bitcoin is resilient and robust to that kind of state capture of companies, that's why I have conviction in it. And if I just used the mining as a microcosm, we need to be aware of public, large warehouse miners that are very easy to control and pressure, taking up too much of the hashrate. But we've seen a massive boom and just so many people seeking out opportunity on much smaller mining operations located all throughout the world, a lot of them off-grid. And yeah, I think Bitcoin is resilient to that, but it is a risk. It's a risk to the individual founders. It's a risk to clients that might trust those companies and give them custody of assets or rely on them in some kind of trusted, entrusted way. And it's obviously a risk to investors that might invest in those companies. But that's also one of the reasons why there's potentially substantial reward in investing in them, is because there is still risk there.
Peter McCormack: Matt, just to add to that, do you also think there's a potential, with the likes of BlackRock and Vanguard and Fidelity, these traditional institutions get involved in Bitcoin, that the regulatory landscape will change in a way that we might end up with a kind of regulatory friendly Bitcoin world and then like a shadow Bitcoin world, where it's almost we have clean Bitcoin, we have dirty Bitcoin, we have approved Bitcoin, we have unapproved Bitcoin?
Matt Odell: I think that's kind of the direction we're going into, which is why it's important that people can use Bitcoin as freedom money, which is why the circular economy is important, and it's why these sovereign tools are important as a hedge to that kind of regulatory bifurcation. It's a potential. I think if that kind of situation does happen, it's a short-term thing. It's a short-term painful thing, try and control the exits.
I mean look, when the banking system starts to fail, what happens? It's not substantial improvements to the banking system, it's prevent withdrawals, prevent access to your money, close the banks on holiday. We saw that in Lebanon. I think the bank holiday is still going on right now. You try and stamp on individual freedom to try and correct the ills, these institutional ills, that your system has kind of built up over time. But the beauty of Bitcoin is that it should be able to blast through that. It might be painful, it might make people's lives more difficult, that's the unfortunate reality, but Bitcoin should be resilient through that. Otherwise, Bitcoin never really had a chance in the first place.
Peter McCormack: All right.
Audience member 2: Preston and Pete, you guys were both a huge part of my orange-pilling. I had met CJ Wilson. You had done an interview with him and Jimmy Song about their work, and I was following Balaji Srinivasan pretty closely and looking at his back catalogue. So, kind of two questions. One, Preston, did you guys ever see CJ's final work? They put together this book. I brought you both a copy in case you didn't have it.
Preston Pysh: Yeah, it's great.
Audience member 2: Do you have a copy, Pete?
Peter McCormack: No, I don't.
Audience member 2: I'll give you and Danny one.
Peter McCormack: Thank you.
Audience member 2: But then I'll try to leave a quick question. I was watching Balaji, because I was afraid America was going to fail and we were going to have to start a new country. So, Pete, what do you think of Vivek Ramaswamy? Is he going to have a chance; is America going to survive; what do you think of that candidate?
Peter McCormack: So, when we interview Vivek, that was prior to him announcing that he was going to run for president.
Danny Knowles: That was in Nashville.
Peter McCormack: That was in Nashville, and I'm going to give Danny the credit here. We did the interview it was, what, a couple of hours long? And when he left, Danny turned around to me said, "He's going to run for president". Danny called it, so fair play to Danny on that. I don't take him as a serious candidate, not that I don't take him seriously, but I don't think Vivek is somebody who cares about the electorate. And I don't mean this to hugely discredit him, I consider him just another career politician. It's an extension of what he wants to do, and that's nothing against him. A lot of people do that and that's absolutely fine, but I think he will say what the electorate wants to hear.
I don't think he's a full-on bitcoiner, I think he sees Bitcoin as a voting bloc, which is again, totally fine. Whereas, I look at someone like RFK, and again, I don't agree with everything he says, but I do think of him as somebody who actually does care about freedom, cares about people. Historically, you can look at his track record. For years, he's been challenging the status quo on a range of issues. So, I don't take Vivek seriously, I don't think he can gain much ground, I think there's too many stronger contenders ahead of him. That doesn't mean he doesn't say things I don't agree with.
Matt Odell: Do you have an opinion on his donation pyramid scheme?
Peter McCormack: I don't even know about his donation payment scheme, tell me about it.
Matt Odell: Vivek has, you get a ref link now if you solicit donations for him. You get 10% of all donations you solicit.
Peter McCormack: What?
Danny Knowles: Are we meant to be shocked that a politician is full of shit?
Peter McCormack: I mean look, the good thing is every single leading contender, whether it's Democrat or Republican, has put Bitcoin on the agenda, whether it's DeSantis whether it's RFK whether it's Vivek, they're all talking about Bitcoin, and that's because the Bitcoin voting bloc is significant, and also interestingly, across a range of political views. So, I just think if you cannot ignore Bitcoin now. I think you look like a weirdo if you're against Bitcoin as somebody who's trying to challenge for the presidency, and I think what a weird place we've found ourselves in compared to where we were just four years ago; think where we may be in four years.
So, the politicians are meant to represent the electorate and in terms of their opinions on should Bitcoin exist, they're representing the electorate now, so I think that's a positive. We don't have anything like that in the UK. It's depressingly bad how far behind we are. There's almost no one supporting Bitcoin.
Matt Odell: So, you're not going to show your ref link on the podcast?
Peter McCormack: No, I don't have a ref link.
Audience member 3: Okay, so not to keep bringing up BlackRock, since they already occupy enough real estate, they don't need to occupy more brain space, but do you find that, both of you guys, is there any concern of greater price manipulation in the market with these bigger entities getting involved?
Preston Pysh: Yeah, I would think so. I think that they're the pros of that. I say that and at the same time, I'm thinking about who holds most of the Bitcoin, and it's hardcore zealots, and I use that term in a positive way, I would refer to myself as a hardcore zealot, that when you just look at the sheer amount of coins that sit in these people's hands and have been sitting there for the amount of years that they've been sitting there, and you look at what they're doing with their fiat free cash flows and that they're just buying more, they can try to manipulate the price, the big Wall Street firms. But that's the one thing that they cannot overcome, that you do get in traditional financial equity markets, in my opinion, is people will hold on to Tesla stock, or they'll hold on to You-Name-It company, but if it goes down 50%, they are gone, they're running for the hills, and there's a huge amount of turnover in who owns that underlying equity.
When you look at Bitcoin, it's just drastically different from that. And I suspect that a lot of the big legacy entities and the head executives at a lot of these firms, when they looked at what happened on this last bear market, and they looked at that metric of like, "Hey, this thing sold off, but a majority of the market participants, the people that are holding these coins, they didn't go anywhere, they didn't even blink. In fact, they were buyers", I think that's so different than anything they've ever seen. And so, maybe they have an appreciation for maybe the limitations of what they're going to be able to manipulate in the spot market.
Audience member 3: That's kind of what I wanted to get at, because I mean in the long run I agree with you, but in the next 10, 15 years with this paper Bitcoin that is basically what's going to happen, that's more my concern; I just wanted to clarify.
Preston Pysh: And it was mine as well. But I think with BlackRock saying that they're going to do a spot ETF and that they're going to have physical custody, you now have a competition on a global level to provide a product that can compete with that, and I think that's a good thing. If we're going to talk about -- I mean, I'm with Matt. Buy Bitcoin, don't buy these -- these products are crap compared to owning Bitcoin outright. But what we can't control is how people interact with Bitcoin and how they're going to interact with their customer base, with them being the interface to Bitcoin. We can't control that.
So, I think that the fact that you don't have a cash-settled derivative futures-like thing that the government is saying, "No, this is the only thing that will ever be approved", and in Europe, in the US, and in the major economies, I think that would be a much scarier situation than what we're seeing right now with respect to manipulation.
Matt Odell: Yeah, I mean I'd echo what Preston said, I think attempts will be made. I will say that Bitcoin, the global Bitcoin market, is the closest thing to a free market that we've ever seen in modern humanity. It's going to be very hard to control that on a large scale. And I think to what Preston said earlier, that's part of the reason why they went after Binance, why the SEC went after Binance, because you really can't do it if this -- no one even knows what jurisdiction Binance is in. It controls 50% of the market, but it even goes further than that, and that's the global P2P Bitcoin market in the circular economy.
What we might see is there might be a situation where what we see in failed states, like Argentina right now, where you have two different exchange rates, that might be a short-term situation that we see if heavy manipulation is attempted, where if you go through the banking system, you go through traditional rails, you get one Bitcoin price; and then if you go out into the real world, you get the real Bitcoin price. But yeah, Bitcoin is a wonderful beast and the permissionless market that it enables has been, if you study Bitcoin history, has been absolutely fascinating to watch. And there's been many people that thought they can control the Bitcoin price and move it in different directions. Some of them have gotten fantastically rich, but most of them have gotten absolutely rekt.
Preston Pysh: Something that I think people underestimate with what's to come in the future with these different products, is when people make 100% return on an investment and they're accustomed to a 10% or 20% return being really good on an annualised basis, and let's just say it's even more than 100%, let's say it's 200% or 300%, all of a sudden, they want to learn as much as they possibly can about whatever that thing is. And if they started off in some BlackRock vehicle and this thing did 300%, they're saying, "God, I want to read more about this, I want to read every book I can consume", and that's going to take them down this path of trying to fully understand why I don't sell at $150,000 or $500,000 and that it's actually getting de-risked at some of those prices moving forward.
Because, look at everybody in this room. I think somebody said it when we started off, I think you said it, Danny, where it's like, "Hey, people come into this from all different vantage points". And it doesn't mean that that vantage point that they're coming in is right or wrong, but you become really incentivised to just start doing your homework after you start to see it work in your favour. And boy, Bitcoin, if you can hold it for four years, it's demonstrated one hell of a performance for that person that can hold it for a longer duration.
Audience member 4: So, kind of back on the point of self-custody versus not self-custody and the BlackRock ETF, I think we can all agree that there's things that we should be doing or shouldn't be doing as far as a mass populace. Like, none of us exercise as much as we should or drink as much water as we should, or whatever. We all know what we should be doing, but rarely on a scale of all 8 billion of us on this planet, realistically, it's not going to occur, we're not going to do what we're supposed to do the majority of the time. So, wouldn't you agree it's probably just a timing or technology issue with self-custody, the ease or lack of ease from a general populace understanding versus, I mean you're making a point as to everyone just take a weekend, take three hours, figure it out. But I think even us in this room had moments where we go, "My seeds, you know, concerned about self-custody", but hopefully in the future, technology will rid us of that. Would you agree?
Matt Odell: The thing is, if the friction that's holding you back from self-custody is concern over storing it securely and you might lose it, that is completely reasonable concern. But there should also be concern of trusting custodians with not just your Bitcoin, but your dollars. And I mean, it's practically impossible to self-custody dollars, because even if you hold cash, you can get debased at will. But for whatever reason, there's a disconnect between people where they're extremely concerned about learning how to do self-custody and the personal responsibility that comes with it, but there's no concern whatsoever with their 401(k) that they're keeping with Fidelity. And that's the disconnect that I hope to get through to people, that yes, concern is healthy, but at some point, no one is going to save you. You have to figure out, you have to figure it out yourself and save yourself, the tools are easier than ever.
In terms of the BlackRock ETF being an onramp to Bitcoin custody, and I talked to Preston about this on your podcast because it's interesting when you came into Bitcoin versus when I came into Bitcoin, because my rabbit hole with Bitcoin was because I was down 95% and I was trying to prove I wasn't an idiot, it wasn't the opposite! But it's just timing, it's timing.
Preston Pysh: Mine was just luck.
Matt Odell: We all just got lucky. But comparing the BlackRock ETF just to my driving metaphor, driving requires insane personal responsibility. We drive one-ton vehicles 60 miles an hour and we trust every other person on the road, but we do it because we need to get places. Does riding an Uber get you closer to driving? Because that's probably going to be the reality for a lot of people. I think a lot of people probably will not even -- we're trying to get rid of personal responsibility throughout our society. Most people will probably not even own a car and drive a car in ten years. That's the unfortunate reality. But does riding an Uber actually get you any closer to driving; or at some point do you have to actually make that decision that I don't want to be reliant on this big corporation to get me places and I'm going to do it myself?
Peter McCormack: I think you can echo what Preston just said a moment ago as well, is that when you first discover or look into Bitcoin, it's a whole different world. There's a whole number of things you have to learn about, understand, that you don't even know you have to learn about; so, the idea that this is a bearer asset; the idea that a wallet on your phone actually holds that Bitcoin. You're used to something digital being something that's with the bank and it's this whole new paradigm. And so from that day one to learning about Bitcoin, deciding to buy some, to suddenly realise that there's all these issues with self-custody with the bank, that you need to hold it in a hardware wallet, perhaps you need to think about multisig, that's a lot to get from day one.
But like I think Preston says, the more this asset goes up, the more you want to learn about it. Everyone here has decided to come to events this evening about Bitcoin, to hear things they've probably heard a hundred times before, to chat about them again, because they care about it because they've been down that rabbit hole. And so I don't think it matters if anyone custodies Bitcoin on day one, it's that they go on and they start on a journey and they learn what Bitcoin is. Because once you learn what Bitcoin is, then you learn you need to self-custody and then you learn everything else. So, I think like Preston says, once number goes up and people start making money, they're going to go down that rabbit hole, they're going to read the books and listen to the podcasts and eventually get there. And they've got an amazing group of advocates in here who can hold their hands and explain it to them.
Matt Odell: I mean, some might, but many will also think they're absolutely fucking geniuses and buy more BlackRock ETF because it keeps going up.
Peter McCormack: Of course, and that will happen. But with every painful experience, you lose some people and you get some people to become hardened. You know, we can't --
Matt Odell: I agree with that though. The rugs will continue until self-custody improves.
Peter McCormack: Yeah.
Matt Odell: That's it right there.
Peter McCormack: And the easier you make self-custody, the problem with that is, the easier you make it, the more likely it is to have some kind of flaw in it. I mean, we had the discussions about Bitkey at BitDevs earlier, you know, it's a great device, maybe if you got a $500, $1,000 of Bitcoin, maybe $10,000, but you wouldn't want to store $10 million of Bitcoin on it. So, there's just a lot of different journeys people have to go on. And I don't think we can magically change it, we can all just contribute to helping educate people.
Preston Pysh: You can learn through other people's experiences or you can learn through pain. And I think part of it that also gets wrapped into those two scenarios is, when people don't think they're actually in control, they just kind of put their hands up and they say, "Oh, whatever, I'm just going to buy this thing", and they don't like actually dig in. But when you actually feel like you're on the controls and you're wanting to learn through other people's experiences, the reason everybody in this room knows why self-custody is so important is because you either sought out somebody that you really trusted intellectually to learn from so that you didn't have to go through that painful experience, or you went through that painful experience; it's one of the two.
So, when I look at society at large on a net basis and I'm saying most people are not in control, they're not able to get ahead, they have this victim mindset. It's like, "Well, it's just going to be bad", a very negative mindset because they're not able to get ahead. I think that you're going to have, on a net basis, probably a whole lot more people that are going to trust and learn through pain instead of other people's experience and knowledge. And I don't mean to sound like a pessimist on that, I'm just trying to look at it objectively and realistically as to how I kind of observe the reality of it.
Peter McCormack: Another hand-holding exercise. Hands up if you haven't had any painful Bitcoin experiences, either lost or haven't made a mis-trade or haven't played with a shitcoin; hands up if you've not had any Bitcoin painful experiences. None! I mean, look, most of us learn through pain. We've learned through some shitcoin we bought that thought it would go up when we first discovered it or some mistake in custody, or even seeing Bitcoin drop to $15,000, you think, "I should buy more but it might go to $10,000 or $5,000 and then it's suddenly back to $30,000". We've all been through the pain and we've all learned just to stack, humbly stack sats.
Matt Odell: The humble part's important.
Peter McCormack: The humble part, I should have learnt that!
Preston Pysh: You've got to seek the right mentors. So, when you look in the space, you could go out there and be following BitBoy and listen to what he's putting out, and it's interesting to me that the type of people that are attracted to that type of guidance are very representative of the person that they're following. And so, if you have family members or you have friends, or whoever, you just have to be really realistic as to whether their personality is going to harmonise with where we all believe we're looking at the sound guidance of really thoughtful people in the space, and try to direct them to those people to listen to their interviews or read the things that they're writing and see the deep critical thinking. Come on, a lot of people aren't going to go out there and read a 20-page post that goes into deep critical thinking on a particular piece of the Lightning Network, or whatever.
So, that's part of the challenge. If you don't have people that are willing to put in the proof of work, they're probably not going to be your self-custody, they're going to be your BlackRock-type person. And that might be the best-case scenario, because who knows, it's going to be AI crypto scams in the next round, or whatever, there's probably going to be something.
Harry Sudock: Hello, gentlemen.
Peter McCormack: Hello, Harry.
Harry Sudock: I have a comment and a question to react to.
Peter McCormack: There's always one!
Harry Sudock: The comment is that, just forcing us to talk more about BlackRock, I think that what you guys have done a little bit of is conflate the message and the messenger. I think all the analysis about what the product's going to do in the market is very reasonable, but I think that the signal of having Larry Fink get on all the programs and say the word, "Bitcoin", is more than Brian Armstrong could do in the last couple of years. So, I think that there's something to be said that the CEO of the big asset manager is saying the word and talking about the thing in the place where all the conversations happen. And I don't want to lose that in our bearishness on the flaws of the financial instrument that they're offering. You know, Shell sponsored the Bitcoin conference, I think two years ago, but the CEO of Shell isn't saying, "Bitcoin". And so I think it's important to think about the message and the messenger in the context of this.
The second is just, you guys invest in Bitcoin startups. And so could you just talk a little bit about what's out there getting built that's exciting about, you know, we're talking a lot about self-custody is hard as this default position, but you're still deploying capital into companies that are interacting natively with Bitcoin. What's the landscape of that; why is that important; why is that interesting; and why have you chosen to spend your time on it?
Preston Pysh: So, I interviewed this guy, his name was Harry Sudock. And Harry, I asked Harry, I said, "Why are these energy companies not getting this? It just seems so obvious to me that whatever powerplant they're setting up, that this should be just naturally part of the infrastructure right next door". And he said, "Oh, that's easy". He goes, "It's the volatility on the price and the fact that they're not getting paid for 60, 90 days later, and they don't know what that miner's doing with the thing, this digital magic internet money that they're mining. Are they out there speculating with it and doing all these fancy things, and are they going to blow up in the meantime that we service them and send electrons down the line 30 days ago or 45 days ago that scares the living hell out of them". I said, "Okay, well that's a good answer".
So, to answer your question on technology that just seems really simple, it's just there's a company, Synota, they're immediately settling as the electrons go down the line, they're sending sats right back to the energy company. And think about it, from the miners' perspective, they don't have that volatility risk that they even have to think about, they just settled so they're happy; the energy company loves miners but they hate miners for the reason that I just mentioned, but they love it because they're shutting down and they're turning on at the exact opposite time of everybody else. So, you just took this entity that they love, but the reason they're risky is because of the volatility and the underlining that they're mining and the settlement delay, and you literally just made that instantaneous.
So now, if you're an energy company and you're using a service like that, they just literally became your best customer because they're soaking up everything and you're immediately settling with them, and you've been completely de-risked from any type of risk that's associated with servicing that person. So, that's one that's one company that I would just name and I think that's really exciting, because you can't be a real energy executive and not recognise how powerful something like that is.
Peter McCormack: I think there's a really exciting opportunity of the cross-section of Bitcoin and sports!
Matt Odell: You guys have been crushing it over there in Bedford.
Peter McCormack: We won a league and cup double.
Matt Odell: You somehow made a business model around it, which is pretty impressive, I have to say.
Peter McCormack: We have meetups now in Bedford, which is a tiny little town in the UK. I think we've had one about this -- actually slightly bigger than the amount of people we have here. So, we have a focal point in the UK. Some people are like, "Stop talking about fucking football in your podcast, I hate football". I'm like, "Forget about it, it's a Bitcoin project". We have politicians looking after the mayor of Bedford. I've now spoken to the mayor of Bedford. There's a solar farm in Bedford, we just found out that's, how much was it? Like, we've got a massive solar farm there where they're curtailing 50% of the power. So, we talked to the mayor of Bedford about putting a mining operation there.
So, yeah, just forget the fact it's football if you don't like football, we're actually orange-pilling a town and we've got politicians looking at it, we've got companies looking at it. I've had two football teams write to me this week saying they want to put Bitcoin in their Treasury, one in Wales. Bitcoin Racing Team got in touch, a netball team's been in touch, a rugby league -- it's just spreading like wildfire.
Matt Odell: So, everyone's favourite Australian baseball team, Perth Heat.
Peter McCormack: Yeah, Perth Heat, yeah.
Matt Odell: How do I know an Australian baseball team?
Peter McCormack: Because it's the cheat code.
Matt Odell: No, that's impressive. I mean, first of all, I would just say I agree with you about BlackRock. When I say it's a paradigm shift in Bitcoin's adoption cycle, I do not say that lightly. On the Bitcoin startup side, we've had basically a single proven successful model in the Bitcoin industry, which is exchanging dollars for Bitcoin, and you just collect a fee and you collect that fee in dollars. You're very exposed to regulators, you're very exposed to third parties that you have to trust on the banking system side. I mean, we could talk about companies controlling their own infrastructure; it's impossible to control your own infrastructure on the dollar side. So, I mean that side continues to be successful, but that's not as interesting to me.
What's really interesting to me is this new crop of Bitcoin native companies that are focused on achieving Bitcoin revenue and just getting as much Bitcoin sats flow as possible and keeping that on their balance sheet, and there's a lot of companies doing that in very creative ways. A lot of them are freedom-oriented, they collect their revenue directly in Bitcoin, they hold it in Bitcoin, they're not necessarily exposed as much to regulators and the traditional financial system. Companies like Mutiny Wallet, I think, could be incredibly powerful for people. I think it could help the whole industry, but it also could be very profitable. We could actually see a sovereign, FOSS, completely open-source wallet actually make a sustainable revenue stream, which would be relatively new.
We've seen the CoinJoin companies, both Wasabi and Samourai have figured out their own revenue model where they charge you CoinJoin transaction fees. But for the most part, if you look at the wallet space, it's been really hard for sustainable monetisation that didn't involve either integrating a KYC exchange and taking a piece of that 1% fee, or whatever that transaction fee is, or adding shitcoin support and having some kind of crazy shitcoin whatever system in place to try and eke out some money. So, I think that should be really interesting. I mean, I'm very excited about COLDCARD. I think COLDCARD's been way ahead of the game for years now, and the trend's kind of meeting them where they already were. Fedi is a very novel, interesting business that is based on this open-source Fedimint protocol that I think could be very powerful.
But just the general concept is, in a fiat standard, you do growth at all costs, we can monetise later if the money is cheap. On a Bitcoin standard, the money is extremely hard, it's hard to borrow money, it's hard to get new capital. Rather than grow at all costs and lose money and try and monetise later, you try and earn as much revenue early on, and almost, in effect, bootstrap the company. It's going back to the basics of how companies were built back in the day, with these really solid foundations where they're revenue positive very early on, and they just grow alongside that, and that's very interesting to me.
Audience member 5: Thanks to all of you for being here, it's been incredible. My question builds upon Preston's Monopoly example. And one thing I've wrestled with is, do you view that the same phenomenon can occur in Bitcoin where you get consolidation of coins and wealth into too few people, and that causes this effect of, roll forward five, ten years, and I think we all probably have a conviction a lot of wealth will be pegged to Bitcoin or move into Bitcoin; and people that are in it now, whether it be institutional or even Saylor and MicroStrategy, or just people like us that are stacking sats that mathematically people will never be able to get to in the future, what does that look like in the future? And how do you think people that maybe are late to adopt feel about that?
Preston Pysh: It's kind of like, you ever see the meme or the jpeg of two universes colliding and there's just this massive amount of entropy that's happening after they collide? That's what's taking place right now. So, when you look at the people that are holding Bitcoin, your hodlers, the people that were first in, or Michael Saylors that are showing up late and coming with billions, so you've got that universe which is really quite small but getting more mass to it as it's getting closer to the collision with the legacy system, which is massive, it's huge. As they impact, you're going to have both of them kind of about the same size. And then, it's just going to be this total reorg of who owns all the equity in the world.
So, think of it like this. So, like a Larry Fink, right? He's a billionaire. I don't know what his net worth is, but it's over $1 billion. If you would look at his portfolio, a substantial portion of that is equity of all sorts. I would imagine he owns a lot of his iShares products, but just all that equity that he owns, to the tune of billions, is how his net worth is currently measured, if he has any Bitcoin, let's just assume that he doesn't, right? Then you go over into the Bitcoin world, like a Michael Saylor, for example, and just his whole net worth is wrapped up into Bitcoin itself, either through the MicroStrategy shell, which all the Bitcoin's inside of it, or what he's holding personally.
As those two universes collide and they're just representations of like most of the population is in the Larry Fink side, but only a few people are holding all that equity, and then in the Bitcoin side very similar. As they collide, what you're going to have is that equity over there, which is priced at 35 times earnings today in fiat terms; but if you would price it in Bitcoin terms, if you would look at the free cash flows of that equity, which is going down in Bitcoin terms, like you take Apple stock, you could look at the revenue in Bitcoin terms, or you could look at the net income in Bitcoin terms, and it's going like this, it's going straight down.
So, if you're going to value that equity in Bitcoin terms, you're going to come up with -- I mean, I know personally I wouldn't even think about owning equity unless I could compound it in Bitcoin terms at at least 20%; that would be the hurdle rate for me, which puts it at a PE of 5. And that's assuming the company would be denominating all their free cash flows in Bitcoin and earning revenue in Bitcoin. So, if I'm not willing to depart with my Bitcoin until it gets priced to that, what happens to that legacy system and all that equity is it has to go from PEs of 35 to PEs of 5. So, what does that mean if you have a $100 stock? Now it's like a $15 stock, right, before bitcoiners are willing to buy it.
So now, Larry Fink is giving up all this equity that he owns and it's getting redistributed to people that own Bitcoin, and then Larry's getting the Bitcoin in exchange for, because he's going to have to pay for whatever, in Bitcoin terms, in his life, in his daily life. That's how it gets re-orged and the entropy actually happens and you don't have that consolidation of all the Bitcoin into the hands of just a few people. But you're definitely going to have winners. I mean, Michael's going to, my opinion, I think he'll be one of the richest people on the planet, maybe one of the richest people that's ever lived. You're going to have some bitcoiners that control a whole lot of buying power in the world. But there's going to be a massive reorg, massive reorg.
Matt Odell: I would just add two things. First of all, very doubtful that Larry Fink did not buy Bitcoin before he announced his ETF.
Preston Pysh: Totally agree.
Matt Odell: And then second of all, I mean it just comes down to your key concept that it doesn't matter if you own more Bitcoin, you don't have more control over the network, which is a fundamental shift to the traditional system.
Preston Pysh: Because, your performance in society is going to come down to your fitness as opposed to who you're sitting next to, and that's what makes it in harmony with nature itself. If you're the fastest tiger, you're the best insect, whatever, you're going to dominate, and it should be no different for the human species. And that's the world we're moving to. If you are cognitively like a Michael Saylor and you can do these calculations and you can understand what value is and you can understand competitive moats and you can understand a business that's actually adding value to society, and you own that equity, well, you're going to benefit from that.
Audience member 6: So, to push back on what you just said, Matt, there's some hard forks in the future that we know are coming, there's at least one, there will likely be more. If you have an entity that has 1 million Bitcoin sitting inside of it and they get to choose which fork of Bitcoin they're going to call Bitcoin and they're holding a bunch of other people's money, how do we come to consensus on which Bitcoin is Bitcoin in that highly concentrated, centralised, regulated environment?
Matt Odell: I think that's a very good question. First of all, David, thank you for joining us, it's a pleasure to have you here. Look, I mean to call a spade a spade, BlackRock is the granddaddy of ESG. They may try and do a proof-of-stake fork in the future, particularly since if they control a large amount of Bitcoin, moving to proof of stake actually does give them more control over the network, so they might use the environment as the excuse, or rising energy costs, or whatever excuse they want to use; but the real reason is so that they have more control over the network. That is the real reason most shitcoins have moved to proof of stake, even though they pretend it's for the environment.
First of all, anyone can fork if they want to fork, so no one can stop them from trying to do a fork. It could be very painful for people that are holding the BlackRock ETF because they will have no choice in a fork situation. People that hold self-custody, particularly people who also use their own node, will essentially have the ability to choose which fork they want to proceed with. When you have a fork, you essentially have the historical Bitcoin ledger; that Bitcoin blockchain is the same up until the fork point; the rules change, and at that point you have two ledgers that go forward and you have equivalent amount of Bitcoin on both ledgers.
In the short term in that type of situation, this would be a fork that is way more sophisticated than our 2017 fork that is led by Jihan Wu and a bunch of smaller Bitcoin companies. So, they'd be very sophisticated, they'd have a lot of money behind them. In the short term, that fork might actually trade at a significant premium to existing Bitcoin. People are going to have essentially two choices. They're going to have a choice of selling that forked Bitcoin for the existing Bitcoin. I guess they have three choices. Selling the opposite chain for the new chain, or just sitting and just waiting and seeing what happens. And I think a lot of people sit and wait and that's probably the most prudent decision.
But there's a strong argument. So, I mean when Bitcoin Cash happened in 2017, there were a lot of people that bet really big that Bitcoin Cash was going to be successful. And what did we see? We saw markets develop around the world to allow people to trade these assets, because it was a money-making opportunity. It's one of the beautiful parts of Bitcoin incentives is that it doesn't rely on people being benevolent, it relies on them being greedy and selfish and seeking out profit. So, there was all these different markets that allowed people to trade it, some were more rigged than others. I mean, I remember Coinbase's Bcash launch, where it was like on a Tuesday night they launched Bcash and it went to some ridiculously unfathomable number momentarily for a couple hours. And you could have even crazier shenanigans than that when you have a player like BlackRock come into it.
I think freedom Bitcoin wins. I think proof of work and the fact that Bitcoin is incredibly difficult to change is where that underlying value prop is, and I think a lot of allocators will realise that, I think a lot of users will realise that. And I think what happens is actually, even if you have a situation where ESG proof-of-stake Bitcoin, or whatever, is trading at 5X freedom Bitcoin, that's it. I mean, there was a lot of bitcoiners that were very happy with their 20% increase in Bitcoin holdings because they sold it to Bcashers, they sold their Bcash, the Bitcoin Cash to Bcashers. I mean, imagine if instead the dividend is, you know, 5X your Bitcoin holdings that you can get out of a BlackRock, or one of these companies, and people that take that risk might do significantly better.
So, I mean there's also a situation where in that situation, you don't have conflicting mining interests with Bitcoin Cash. With Bitcoin Cash, the conflicting mining interest meant they were both using SHA-256, they were both using the same kind of ASICs. In this case, one would be proof of stake, one would not. Maybe they both exist for a while. But I think long term, in a free market of competing monies, the hardest money will win, it will dominate all the other currencies. And I think Bitcoin is the hardest money and it's not something you can necessarily manufacture, because one of the properties that makes it so hard is the fact that it's incredibly difficult to change.
Peter McCormack: Futures markets will be helpful for --
Preston Pysh: If I was going to try to clarify his concern and his risk a little bit more, it would be, Larry Fink is onboarded and Vanguard has onboarded this obscene amount of people through an ETF vehicle as their trusted custodian, they're buying up all the equity of all the major miners in the US, whatever market share that they could possibly control; and then as they try to spin off another, and I think the only way that they could even have a shot, which I don't think, I'm talking about what I think is a long shot here, I don't know how many standard deviation event, it would have to be some type of proof-of-work fork, because if they get proof of stake, I think they're dead on arrival. It would have to be a proof-of-work fork, and since they're controlling the equity of all these miners, that's what they're mining, is they're mining the new fork.
Then you have all these millions and millions of pension fund people that are just drones, right, that are saying, "Oh, yeah, we agree with them because this is what Larry Fink's behind, and all the miners are mining that chain and not this other chain", which is the one that everyone in this room would be for; that's his risk he's describing. I don't know that I have a good answer for you, but I do appreciate the risk.
Peter McCormack: But they're going to be fighting over a very limited liquid supply of Bitcoin. The first 19.5 million mined Bitcoin are with freedom bitcoiners. And so, whatever the liquid supply is on exchange, I don't know what it is now, like a couple of million, we've got another million and a half to be mined, the majority of Bitcoin is going to still be held by freedom bitcoiners.
Preston Pysh: The concern is the cooperation between these entities that are massive in size, they're cross-country. I'm not saying I think it can happen, I'm just trying to define his risk. I suspect that's what you're trying to describe.
Audience member 6: That's exactly what I'm saying. And if you had, let's say, a million freedom Bitcoins to sell, then you could dramatically impact the price of Bitcoin. And in the past, we've looked at which chain has the most collective work done, which chain's the longest. Those signals wouldn't work because if BlackRock Bitcoin, proof-of-work chain was ten times more valuable, it's going to have a lot more worth.
Matt Odell: But we have that too.
Audience member 6: What do you mean?
Matt Odell: If you dump the price of -- I'm just going to keep going in freedom Bitcoin. You dump the price of freedom Bitcoin --
Audience member 6: Blackrock sells your freedom Bitcoin on your behalf.
Matt Odell: Right, but then I can buy the freedom Bitcoin with my cucked Bitcoin. So, I have a bunch of dry powder that Blackrock just made out of thin air for me, and I have an amazing buying opportunity. And then the question is, I mean, who blinks first? Because Jihan blinked, right, Jihan never moved his hashrate over. He could have moved a significant portion of hashrate over.
Audience member 6: The Bitcoin cash scenario was an option, it was a choice that they had, but I mean there's going to be hard forks in the future. Like there's the accidental hard fork we had in the past, there'll be hard forks in the future where the user will have to choose. And it won't be as simple as someone's trying to change the consensus rules. It'll be the consensus rules don't work and you have to pick a new a new chain. So, I don't know, I just feel like concentrating one person holding so many people's other Bitcoin seems like a big negative for long-term Bitcoin if we don't have a mechanism to generate consensus outside of collective work done.
Peter McCormack: We have the collective power of Bitcoin Magazine, We study billionaires, Rabbit Hole Recap.
Audience member 6: So, is the question whether freedom Bitcoin's destiny is Ethereum classic? Like, are we all just going to fade into oblivion?
Preston Pysh: I don't know that I have an answer for anything relating to this. I think all we can really do is just quantify the potential risk that would be associated with it, guard against it, have conversations, make sure that the community understands the risk. I think that David's highlight is an important one, and I think it's one that everybody should take seriously because I think one of the biggest fears that I have is just the complacency in the space, and just saying, "Oh, well Bitcoin's the greatest money that's ever been created and nobody can ever defeat it". That is the polar opposite of what we need to be thinking as a culture and as a community.
The thing that's made it so great to date has been this relentless pursuit of making sure that it can't be messed with, right? So, I fear Larry Fink way more than I fear Bitcoin Jesus, what the hell's his name?
Matt Odell: Roger.
Preston Pysh: Roger, thank you.
Matt Odell: I mean, Roger still has a lot of Bitcoin left, because Roger blinked.
Peter McCormack: Are we sure?
Matt Odell: I agree with both you and David that I think everyone should have an adversarial mindset. I think the concern with the BlackRock ETF should mostly be with potential clients who could get rugged. Obviously there's a non-zero risk they try and attack the network and exert some kind of influence, but I think it's being overamplified. And I think that --
Preston Pysh: I mean, I think it's a low risk. I don't think that that's what they're going to do.
Peter McCormack: And it would be an expensive misstep for them.
Preston Pysh: Oh God, yeah.
Matt Odell: Yeah, if they fuck it up, they're going to have a lot less Bitcoin.
Peter McCormack: I mean, how much Bitcoin did Jihan Wu lose?
Preston Pysh: And they need something to solve their fixed income situation as well. You get down this path a certain way and they're going to start looking at this and be like, "Why are we fighting this thing? This thing's actually solving our behemoth elephant in the room issue that we have here, which is all this fixed income".
Matt Odell: It's easier to pump Bitcoin than kill it.
Preston Pysh: Yes. And we've seen that at a microscale the whole way up. So, why would you think that that would start to be different? I guess because you're starting to get the state involved.
Matt Odell: And not only would they have way less Bitcoin, I don't know, part of me kind of like fantasises a BlackRock fork, because first of all, I think I would have way more Bitcoin at the end. But if they fail, not only would they have way less Bitcoin, imagine the real-world learning experience for people that, Blackrock, they control the world, they can't control Bitcoin? That would be the most ridiculous wake-up call to people. If they don't kill it, then it's fucking insane.
Peter McCormack: Any more questions? I think we're about done. So, thank you to Matt, to Rod, to Harry for hosting us here at Bitcoin Park. If you're a national local and you're not a member, I encourage you to join. Again, collectively if we all support this project, it will stay and it will grow and this is a huge asset to Bitcoin. I think Nashville's become the most important -- I was making jokes earlier, but this is the centre of Bitcoin in the world right now, I think we can all admit that. So, thank you for having us. Please join Bitcoin Park. Preston, thank you for joining us.
Preston Pysh: Thanks for having me.
Peter McCormack: Love you, man. Danny, thank you.
Danny Knowles: Thank you.
Peter McCormack: Thank you everyone here. Thanks to the sponsor, Iris, who's paid for us to go and do these events. Yeah, good luck to all of you and we'll see you all soon.
Matt Odell: Thanks guys.
