Bitcoin Power Law Explained: Where Are We in the Cycle? | Matthew Mezinskis

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There's going to come a time in the next 20 years or so where Bitcoin is a growth rate that 40% a year that it does now, that growth rate will decline to something that is below the cost of capital or the weighted average CAGR of most stocks of the S&P 500.
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So I don't know if it's the strongest objection, but it's basically, I'll show you on a chart right
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here. So here's the same chart, but now I'm showing you the trailing 12 months and negative
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doesn't show up on log scale. This is log scale on the right, because you couldn't see it on the
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left. So the negative doesn't show up, but basically the actual trailing 12 months is here.
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But if we just put it on a curve and I'll take off the actual, which is here, here's the actual
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trailing 12 months, which are thousands of percent, hundreds of percent back in the other days,
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right? When Bitcoin, people were buying Bitcoin for a dollar or whatever. But on a curve, which
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is measuring the power law, we can see that again, it also was a thousand percent 10, 15 years ago.
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It's come down. Now it's 40 percent. By 2030 or 2031, actually, it's going to get to 30 percent.
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I'm not saying it has to be here. But what I am saying is by this time, I'm pretty sure 2041,
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where if Bitcoin's power law holds as, and I will answer your question about the greatest
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flaw here perhaps of power log basically if this general trend holds right the growth rate
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versus this declining slowly declining growth rate nice beautiful rainbow on log linear
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log linear scale if all of that holds for bitcoin and we do get to say a 20 return
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but declining.
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The next logical question is,
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well, why would I hold Bitcoin
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if the stock market
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and the S&P 500 at the time
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are now growing at 25% again?
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That would be...
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That would be a case
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where I'm going to start to wonder myself,
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would I hold Bitcoin
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or would I just invest in the stock market?
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Hello guys, welcome once again to Bitcoin podcast.
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Today we switched to English and we're going to have a very interesting episode.
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I think that you really like it.
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We always try to, as I told you, the first two years to introduce something related to the ground basis and the educational content about Bitcoin.
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So, but today I think we're going to touch a little bit more on that.
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We're pivoting a little more into macro so we can learn more about it.
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Last episode was in Spanish.
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We talked about how Bitcoin impact in Latin America.
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And that's why we brought our last guest.
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Anyways, I don't want to do a long introduction because I think there's a lot of things to
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talk about and you're going to like it.
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But first, I'm really huge of the content that he creates.
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And second of all, I think this person doesn't need much introduction because you will know who it is.
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So I just want to welcome Matthew Meschinsky to Bitcoin Our Podcast. Welcome.
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Hola, Juan. Thank you for the intro.
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And yeah, happy to be doing this.
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We've been trying to do it for many, many months now, and I'm glad we can finally chat.
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So happy to be here.
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Yeah, wow. We finally made it.
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So thank you for making the time.
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So we are here.
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I think you're one of the few people around the Bitcoin space that doesn't need much in
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interest.
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I don't mind if I do, frankly, but yeah.
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All right.
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But yeah, I want to make you a different question besides your background.
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That you have been almost, I think, a decade studying Bitcoin through monetary history.
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And then, but why money?
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What was the question that you were trying to answer before Bitcoin entered into your
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life?
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Yeah.
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For me, it was the global financial crisis.
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My old co-host is also Spanish-Portuguese speaker Fernando Ulrich, who's an Austrian economist in Brazil.
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He was a co-host for many years on my Crypto Voices podcast.
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He had a similar story.
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I think many people probably had this story, at least that are kind of my age.
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I'm early 40s now and are formative years right out of university.
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Of course, it depends on exactly which year you came out.
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But very soon after into the professional world, you see the global financial system collapse.
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And as you're young, you don't have anything else to lose.
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You, well, you could choose many ways to react to that.
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My way was mostly just through books and podcasts and things like that.
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So I did a big deep dive, discovered the Austrian school, discovered, you know, even free market
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economics, frankly, because I was not so steeped in that in my university years.
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You know, many people can, from there, you can go to a few different directions.
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I never felt like I went fully down the sort of hardcore Austrian economics rabbit hole.
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It doesn't mean that I'm not very sympathetic to all the views there, but we don't have to go into this either.
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But obviously the world's a complete place and I, you know, it's a complete place in El Salvador that I think is getting better where I live.
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It has been getting better for many, many decades after the Soviet Union.
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I live in the Baltics and Eastern Europe here, former Soviet territorial that we hate being called former Soviet states because we were illegally classified by the Russians.
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But, you know, and now this threat is back again.
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Ukraine is fighting for our freedom.
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So there's all sorts of like elements there that go into my journey about money and freedom.
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But I do think that probably a limited grasp of the monetary system is what most of politicians these days have.
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they don't really understand probably the true nature of their deficits and the debt that they
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keep compounding into, you know, into each nation's economic system. That's one thing.
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But then the other thing is you want to try to, you know, as we're individuals and you want to
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try to stay free and sovereign, there's limited escape hatches. You know, that's why a lot of
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people have traditionally found gold. Now we have Bitcoin. So I think it's just a logical progression.
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there are many people that have a similar story. But yeah, I guess to add on in case people don't
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know, since 2018, I've been publishing this update on the monetary base, which is the core
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of the financial system, which I believe, or not even believe, but I know is the economic
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analogous money supply to Bitcoin's eventual 21 million coin supply. And I've also been doing
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some work on the power law, which people have probably heard about since about that time as
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well 2018 so i do a dabble in a variety of things in the bitcoin space but yeah for me it's nice to
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have an asset that goes up the way that it does and really feeds the hodler mentality but of course
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there's a lot of other interesting interesting things that you know we can tack on to that
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geopolitical space that i try to explore as well so hopefully that answers the question yeah
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absolutely and you know what is fascinating about bitcoin is that now i'd seen for example in the
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public schools that in my country which doesn't happen for example it doesn't it didn't happen to
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me when I was a student engineering is that we don't we don't think or we don't question about
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what is exactly money or even that there's a lot of types of economy like Austrians or Kinshans
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and so many others right so but that's what we're trying to do like in my space in the podcast and
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also the bitcoin educational schools that are in my country all these amazing projects that are
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are out there so we try to to make people aware about to actually make questions about money
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and not just about that it's a way of payment right so most people think that money is simply
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something we used to pay so i want to ask you like how how do you define money yeah well i might
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disappoint you there but it is it is in my view the x factor of money is a generally accepted medium
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exchange. That is money. A generally accepted medium exchange. There have been many examples
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of monies throughout the years, throughout the centuries, obviously the millennia. We have gold
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and silver, which have proved to be very good monies, but economic theory shouldn't tell us
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that it necessarily has to be, right? But those two other characteristics that you usually hear
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in all the textbooks, right? The unit of account and the store of wealth or the store of value,
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they actually kind of fall away if you don't have the first, which is the medium exchange.
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So you do need that to be money. And some people argue, right, whether Bitcoin has achieved
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generally accepted medium exchange status. I don't really think that is applicable yet.
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And I measure that with the monetary base exercise. So in a monetary base at the moment,
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It's about $26.2 trillion equivalent.
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Bitcoin is 1.2.
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So we're less than 5% of the global monetary base.
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Gold is upwards of 30 to 40 trillion now
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with the prices that it has been at
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as far as value, right?
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All the gold that's ever been mined throughout history.
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So there's, by the way,
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if people haven't heard those numbers,
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those are the kinds of things that I track
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and try to just put hard numbers on
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because I do think one of the things that's lacking,
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critically lacking in even say the Austrian school is people like to write a lot of blogs
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and talk about, you know, theory and everything else. But I try to look at the hard data too,
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because I think that it's, it is generally there and we can, we can see like how valuable something
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is and, you know, maybe pay attention to that money. Another thing just to tack on, obviously
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the monopoly effect is crucially important too. So the fact that we have to, you know,
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And monopoly is, I'm using the old Mises definition of monopoly.
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So it doesn't mean like a big company or someone that supposedly cornered the market.
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The myth of the natural monopoly, which Mises started further.
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It just means a firm that has license by the government to operate.
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So, you know, post offices are monopolies, but also utility companies are monopolies.
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You don't have to necessarily be cloaked in the colors of that nation, of that sovereign to be operating as a monopoly.
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Right.
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You can be a firm that has special privilege by the government to operate and the other companies don't have that.
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Of course in the money supply which I sure your listeners know is extremely political fraught with danger And if you want to find yourself a spot in jail you try to counterfeit money It an extremely well system
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There is only one entity in each country
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that has a monopoly on the money supply,
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and that is the central bank.
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So that's also important.
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But they do publish data,
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and so we can sort of try to manage where those things are.
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But yeah, I'm not saying just because I study these things
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I put numbers on it that, you know, the money supply has to be governed by the Federal Reserve.
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Of course, not at all. We have plenty of history to show that, but it also might not have to be
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governed by gold. This is the interesting thing, I think, where Bitcoin comes in and technology and
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everything. But yeah, at the end of the day, having said all of those things, I actually do
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think to its core, money is a general accepted medium exchange. And if Bitcoin is going to rise
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to that status, it's going to have to be a general accepted medium exchange. If it does not,
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then it might still be like an asset an interesting asset but it would not
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classify as money if it did not have that characteristic yeah absolutely i'm gonna play
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during this podcast as a student so i'm gonna make you a little questions because this concept that
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as i as i said at the beginning of the post we have never talked about so and we want to learn
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about what you have been working through so i think where i want to start is like for most people
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And by the way, guys, we're going to increase the level little by little.
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But for most people that know you as the power law guy that published on X and all this,
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before we get into the charts and all this, what problem were you actually trying to solve?
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Were you trying to predict the price, understand that option, or you were trying to understand
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Bitcoin itself?
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What was it?
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With regard to the power law or with regard to the monetary base?
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No, regarding to the power law.
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Yeah.
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Power law was more about the price, more about understanding what it was doing.
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And it's not that miraculous to have found that.
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And I think that like, you know, so most people might have known this Giovanni, who's now the founder of Bitcoin Scientific Institute in Italy.
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A couple of months before me posted the log log chart that really showed Bitcoin operating in a power law, which was late 2018.
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I did. I found it on and I posted it on Twitter.
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So it wasn't like, it's not like something so mysterious that, you know, you don't quite know what it means.
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It's just once you chart it, and we can talk about what it means, but once you chart it,
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and you see that the price is actually following this to a pretty strong degree, a pretty strong goodness of fit.
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And you put that plot on log-log, and you look at how the price works there, and you see a straight line.
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It's something that I think you really can't unsee.
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And then this opens up the world, of course, is like, what is a power law? What is explained? What is it doing? Those are really interesting things. And when I did that in 2018 now, I wouldn't honestly have expected the implications that it has shown us in Bitcoin.
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first because again i'm a i'm an applied statistics guy myself you know i'm not a phd or anything but
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i i'm pretty good at running numbers and i did that a lot in business a lot of financial consulting
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a lot of stuff which you know chat gpt now can get done in five minutes so that's that's a wild
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thought but once you run through the numbers and you start to see a pattern it's more than just a
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pattern and it can start to explain things that bitcoin is doing so we could talk about what that
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means yeah for me it was just sort of pattern recognition looking at the price and then when
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you see that it's moving in power and it's not moving in exponential which basically every other
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asset in the world moves in stocks bonds gold silver you start to ask more questions like what's
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actually going on here so and there's a yeah yeah absolutely so but i think this is also related to
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the other question that is that you compare bitcoin to the global monetary monetary base
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instead of comparing it to stocks or gold.
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So if you can go a little bit deeper,
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why are you comparing it here
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and not with other of these benchmarks?
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Yeah.
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Yeah, so that's a good question.
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Very good question, very fundamental.
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And it's something that, again, now,
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getting close to nine years,
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I've been doing.
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In the early days,
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whether on Bitcoin Talk
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or eventually moved over to Twitter,
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people were trying to answer this question.
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And, you know,
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would Bitcoin really rise to something
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like as prominent as the dollar?
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And then you're going to start to ask, well, what is the dollar?
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Is the dollar the piece of paper?
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Is it the coins?
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Is it the gold that backs the dollar, which is very controversial in itself?
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Is it U.S. treasuries that back the dollar, right?
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And why the dollar?
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Maybe it's the euro.
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Euro is a pretty big currency.
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So those are like the first level questions.
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And then people will say, well, you know, it goes back to this question.
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Can I buy my coffee with Bitcoin?
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If you want to buy your coffee with Bitcoin, that's such a big deal.
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How are you actually doing that?
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Typically, how do you buy coffee?
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And the answer mostly today, although it used to be more mixed in truth, mostly today is you don't use base money at all to buy coffee.
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There's a slight asterisk there, which we can come back to, but mostly you don't use base money at all.
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You use your checking account or your savings account or more likely a credit card, which isn't even money at all.
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That confuses people.
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Yeah, but credit is a pure debt that trades around these receipts, but it's actually not part of the money supply at all. Credit card debt is not part of any money supply, not M1, M2, M3. That's another confusing thing about money.
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But regardless, what we can say about all these things, whether it's savings, checking, credit, is these are layers and layers and layers on top of what the fundamental core of the financial system is.
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So as people are trying to go through this exercise and, you know, again, a million blog posts have been written about this.
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Podcasts have been done about this.
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People talk about scaling.
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They talk about this, that.
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I was just trying to answer the question, like, what fundamentally is, are we trying to compare here with Bitcoin's UTXO, Bitcoin's on-chain UTXO?
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and what i came up with was monetary base which comprises two things so it comprises the actual
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physical notes that a central bank issues and the treasury issues for the coins because sometimes
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depending on legal precedent and the way things used to go for old banks including the k and the
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u.s the coins were actually issued on the treasury minted at the treasury and then you just count them
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up separately as part of the monetary base so that's a that's another thing because the bankers
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for sure wanted to get a hold of the notes because the notes were easier. People wanted
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old notes than coins. Even back in like the 1800s, people wanted old notes more than coins.
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So they wanted to get a hold of that. So anyway, the physical, the physical notes,
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physical coins, that's a part of base money in the modern sense of the word.
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And the other thing is what you call the banker reserve or the site deposit at the central bank.
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So it's basically each bank's checking account or deposit account, site deposit with the central
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bank, the master accounts called in the US. So those two things, the physical currency and the
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banker's reserve income as the monetary base. Now, if central bank digital currency would truly come
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into effect, that would also be a third component of base money, pure base money. It's issued by
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the central bank and it goes into the system. Now, a couple of caveats. Note how I said we don't
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usually buy our coffee with base money, but if you pay cash, and this was of course done more in the
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past than now. But if you would buy your coffee with, with, you know, dollars or euros or yen or
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yuan that you would be using base money. So it's not all, it's not all these clean cut,
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dry delineations. You have to sort of get through it, but your demand deposit, bank deposit,
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a credit card, all that stuff is only, those are extractions of the base and how you actually,
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and how the banking system settles all that at the end of the day, literally at the end of the day,
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as they go back to the reserve account and they trade those liabilities back and forth with banks.
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And you can add all that together.
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So that, if you add all that together, that is the physical currency plus the bankers' reserves.
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That adds up to that $26.2 trillion that I was talking about.
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And that took me a long time to get to that number.
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But that is the latest number that we have as of Q1 only in 2026.
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Many banks, I got like 136 currencies now included in the set.
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But many banks are very slow with that.
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And so it's a little bit of a delayed factor.
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But we can look at more recent, say, the Federal Reserve's balance sheet to see something more current. But in any event, is it? That is it. That's what the monetary base is. So I tried to, I was trying to understand, okay, at the core of the system, that's really the best way to say it is. Fernando used to say ultimate settlement, right? It's the asset of ultimate settlement. Like when, at the end of the day, if you want to settle a debt or settle a payment in finality that no one could really dispute, that would be either an on-chain UTXO or it would be settling with base money, either physical cash.
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or coin or your bank settling your credit card debt or check or whatever, some payment that you
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made online with another bank at the central bank. So hopefully that makes sense. Yeah,
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monopoly money. But there's, it's the core, the point is that it's the core, core, core of the
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system. That's what Bitcoin will represent. And then from there, everything should start to make
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sense, right? Like buying your coffee really, other than a little bit of base money, which people can
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use. And you could use Bitcoin in certain stores, of course. It's more of a layered structure after
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that. Once you understand that there is money at the core of the system, the base money or
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monetary base, that makes a lot more sense comparing Bitcoin's market cap with that
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than it does with a stock or a bond or a checking account or a savings account or a credit card
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company. So hopefully that makes sense. Again, you can go as detailed or not as you want,
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But that's that's what I was trying to do with the base money stuff.
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I was trying to create a taxonomy of of all the currencies in the world
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and see how they stacked up against Bitcoin.
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And so right now, it's quite small under 5%.
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Yeah. Yeah.
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Well, that's why I want to talk about that.
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Do you think that governments that who adopted Bitcoin somehow, like my country
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used to have it as legal tender now, we're using it not as legal tender
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officially, but we're still using it.
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or governments that use it as a treasury and their own treasuries or even private company.
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Now that we see the Bitcoin company, do you think that they actually understand what Bitcoin
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is or they're still trying to use it like a speculative asset just to have it?
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Yeah probably the latter Like you said I think number go up is a great thing It attracts a lot of people in And for some people they just stop there right They think of it like their stock portfolio going up or they think of it like the gold price going up So I say probably not
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Answer to your question.
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Whether El Salvador, whether Bukele
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and the people at El Salvador understood it or not,
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I don't know at all,
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but it was certainly a smart move
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to do what they were doing.
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Is it not legal tender anymore?
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I don't keep up to date on all these different things.
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So I'm just curious.
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Did they remove it actually from that classification?
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I don't know if we've passed a law about this,
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But the news was that when we do the new dev with the World Bank or the IMF,
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we needed to, one of the things, it was to remove it as legal tender.
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So I know that a lot of Bitcoiners that are listening right now will be saying like,
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yeah, that was a move, whatever.
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But what I want to say about this is that even when we have it as a legal tender,
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most people didn't add it immediately.
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Most people thought that first, that's why we have a lot of Bitcoin educational schools, if you want to call it, or projects like mine, like the podcast.
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Because people thought that when Bitcoin was launched, it was something that Bukele invented, you know, like a cryptocurrency that Bukele came up.
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So, of course, we were like, no, and we need to explain that.
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And then the second thing is that because in the past in 2001, before 2001, we had our own currency that it was colonists and then we adopted the dollar.
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So the memory that we have about that is that, for example, my grandparents, all the savings was divided by almost nine.
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You know, like it was one dollar.
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It was a point 75 colonists.
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So people say, OK, and then they see the price of Bitcoin.
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So I say, whoa, what's going on?
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What's going to what's going to happen with my savings?
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So my point here is that even if we didn't use it, even if it is legal tender or not,
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the truth is that the adoption was not total.
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And that's why we are doing all these efforts because I think the grassroots efforts are really important.
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Although the government wants to do up the bottom, right?
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But I think that the most adoptions, what we have seen comes when people are in needs.
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So if you're actually in needs, you will adopt it.
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For example, here in Europe, you see that they're seeing it more as probably a treasury
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or they want to have it in their own treasury companies on a national level, but people want
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to adopt it as much as in Latin America, for example, like places like Argentina or Venezuela
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or even us, because either way, Europe is spoiled somehow by the European Central Bank.
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So, of course, we know the problem, but we don't see it because it's going slowly.
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Yeah.
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Yeah.
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No, I agree with all those points.
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And it's organic at the end of the day.
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I would agree with you or I would suggest, as I think you were implying, that at the end of the
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day, of course, most people aren't twiddling their thumbs like I am and trying to think about the
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best way to define Bitcoin as an economic good in the economy. But at the end of the day, of course,
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it has a price. It's an incredibly liquid asset. It's worldwide. So there's a lot of characteristics
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that even if you don't understand much, you could see its price moving and you can see the
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characteristics that it has. And you can say, okay, even if I buy this on a layer, like even
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if I just buy it on exchange, which again, an exchange is a perfect example of not base money
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Bitcoin, right? The exchange, once you deposit that Bitcoin, right? It's non-custodial as they
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say, right? So you don't hold it anymore. Basically, when you see whatever you see on your
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screen, on your exchange, even if they audit it, even if they audit the reserves, you don't hold
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the Bitcoin. You hold a claim on the Bitcoin. That's the key. So it's just like a bank account.
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So again, we could keep going down those rabbit holes.
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I don't know how far you want to go, but it's absolutely the case that probably at the end of the day, it doesn't matter.
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And probably at the end of the day, people don't even quite understand it, but they do understand number go up.
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They understand some of the characteristics.
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And I'm just trying to drill down on the really how the picture looks with Bitcoin as a base money compared with, you know, what government's actual currencies are valued at.
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And that's a harder job.
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Easier said than done, let's say, because, you know, there's black market rates everywhere.
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It's hard to kind of get it fully lined up, but I got something like that.
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So we can talk about that too if you want.
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I could show you the list, the latest list.
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Actually, yeah, that would be great.
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It's not just your own bank, you can take control of your Bitcoin, you can avoid the
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risks in necessary to traders.
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You can also use your Bitcoin in custody of traders, like exchanges, can attack actors
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of governments or investors who only want to get rid of your money.
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00:25:43,746 --> 00:25:48,986
The hardware hardware increases your security because your private keys are stored in a
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specialized device that is not always connected to the internet.
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00:25:53,186 --> 00:26:00,146
As I said before, keeping your keys in a line-up can be exposed to additional factors of attack,
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00:26:00,146 --> 00:26:04,786
so it is recommended to use a hardware billet when you use a large amount of bitcoin during
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long periods of time.
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I personally use it to almacen my bitcoin, I feel much more secure keeping my bitcoin
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00:26:20,506 --> 00:26:24,506
in a free billet than in a store, for example, on my phone.
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So I want to address this in the way that you can explain us a little bit of charts.
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So you often talk about Bitcoin following a power curve rather than an exponential path.
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To answer your question, yeah, about sort of the basic tenets of the power law.
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Actually, let me show you this one first.
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So this is a trend comparison.
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Here I have three basic trends.
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Okay.
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Okay.
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Price.
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I'll just flash them here.
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The price, obviously looking at, you know, roughly six, eight years of data here.
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Here's a linear trend.
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If we draw a linear trend on Bitcoin, we're looking at linear scale, right?
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You can see it's the second one I'm highlighting.
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The logarithmic trend.
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It's the lowest, lowest trend line.
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And now I'm going to show you, that's the second from the top.
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And then the other one I'm going to show you is exponential.
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That leaves this one.
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Obviously we can see it's a massive, very exciting.
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this is exponential growth, right? Which goes faster is actually the rate of growth is the same,
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but the net of the projection is a very, very fast clip compared to the others. So those are
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four basic types of growth, linear log exponential power without getting too much into the math
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of what each means. Let's focus on exponential and power. So I'm going to take linear and
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logarithmic off. These are two types of growth. Notice how the power is clearly less strong.
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Let's say it's clearly not growing as fast as the exponential.
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All right.
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Yeah, it is.
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So the first step would be in this chart.
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Let's just take it on log linear.
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All right.
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Log linear.
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Okay.
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So now we're on linear, linear chart.
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There's just basically standard zero to 500K.
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All right.
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And the 500K wouldn't even be there if I didn't have the exponential.
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It would only go to like 140K, but let's take it to 500K.
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Let's go log linear.
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All right.
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So what happens?
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We don't even need to look at the whole history to see it.
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But what we see in log linear is exponential turns into a straight line.
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So if your next guest, Thunder, wants to know the easiest way to describe, say, an exponential trend, it would be with a straight line on log linear.
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If it's a straight line on log linear, you know you're looking at an exponential trend.
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It means constant growth.
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You see Bitcoin, or not Bitcoin, I should say, but the power trend is not a straight line.
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It's kind of this rough, gently sloping curve.
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but it's, you can see that it's not growing as fast as exponential. So that's what a power
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curve does. But how you know you're looking at a power curve is you go a straight line on log,
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log. So if I go log, log, notice how it switches. All right. And now actually the power curve is a
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straight line. So I'll take log, log off, log linear is a straight line for exponential,
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log, log, actually the power becomes a straight line. If we back that up, all right, we can start
426
00:30:07,066 --> 00:30:12,026
to see things. So now we're just looking at an exponential trend, power trend, and the price.
427
00:30:12,706 --> 00:30:18,886
If Bitcoin was going exponential, right? And the clear caveat I should say here is
428
00:30:18,886 --> 00:30:24,886
everything goes exponential in the financial world. Stocks, bonds, gold, they go. It might
429
00:30:24,886 --> 00:30:31,346
not be a rate that you like. In fact, gold since 1971 has not even gone at like 6% on a trend,
430
00:30:31,346 --> 00:30:37,266
on a trend we can get back but everything goes exponential so i.e it is actually straight line on
431
00:30:37,266 --> 00:30:42,306
log linear but if we look at bitcoin and this is where we'll get back to this chart which is this
432
00:30:42,306 --> 00:30:46,386
famous sort of kind of i don't know people draw it different ways but you can you can generally tell
433
00:30:46,386 --> 00:30:50,786
on a log linear chart with bitcoin you have this nice rainbow looking thing but if we look at just
434
00:30:50,786 --> 00:30:55,266
if we look at just the trend line and we look on log linear so now we're looking at exponential
435
00:30:55,266 --> 00:31:01,026
is the straight line you can see that really the expo trend has not passed through bitcoin's
436
00:31:01,026 --> 00:31:03,646
price since mid 2022.
437
00:31:03,646 --> 00:31:05,706
Since mid 2022, it hasn't been there.
438
00:31:05,706 --> 00:31:20,959
And if we just project out till even what the exponential trend should be today the exponential trend tells us that Bitcoin should be about or We can clearly see that it not even close to that What does the power trend say Well the power trend says about
439
00:31:20,959 --> 00:31:28,199
$142,000, which of course is well over the price, well over the price itself. The price itself is
440
00:31:28,199 --> 00:31:34,719
40% of that, but it's, so that is not a perfect correlation, a perfect goodness of fit,
441
00:31:34,959 --> 00:31:38,639
but it's definitely better than exponential. So that's really the first thing I just like to say.
442
00:31:38,639 --> 00:31:50,659
And as we go out in time, you can kind of see the absurdity based at least on how Bitcoin is growing, how it would have to be if it would get back on an exponential trend, at least the exponential trend that fits all of the data.
443
00:31:50,659 --> 00:31:56,819
It's true that Bitcoin could possibly go exponential at a different rate of growth in the future compared to the all time rate.
444
00:31:57,179 --> 00:32:04,899
But the all time rate by 2030 would show us that we should have, you know, seven, eight million dollar Bitcoin, which we would all like, of course.
445
00:32:04,899 --> 00:32:10,199
but the power curve shows a much more modest by the end of 2030 in fact let's go to the end because
446
00:32:10,199 --> 00:32:15,479
i quote that number a lot low 500k all right so low 500k versus actually and look at the difference
447
00:32:15,479 --> 00:32:21,359
between start of 2030 i said eight nine versus end of 2030 or seven eight whatever i said end of
448
00:32:21,359 --> 00:32:28,119
2030 exponential projection is 15 million dollars so here you see a lot of different things first
449
00:32:28,119 --> 00:32:32,619
of all you see the sensitivity of projections you know predicting the future is predicting is hard
450
00:32:32,619 --> 00:32:37,959
especially about the future as the saying goes. But we can see there's a clear discrepancy in
451
00:32:37,959 --> 00:32:41,539
these two types of projections. And then you just want to answer or you want to ask yourself, okay,
452
00:32:41,559 --> 00:32:46,719
well, which one's better? And we can look at things like R squared with Bitcoin power law.
453
00:32:46,899 --> 00:32:50,919
It's a 96% R squared, which basically just means 96% better than moving around the average.
454
00:32:51,399 --> 00:32:57,339
Exponential is only 85, only 85. It's not a terrible R squared, but it's 11 percentage
455
00:32:57,339 --> 00:33:03,279
points worse than exponential and if you just use your eye test you can see that it just looks very
456
00:33:03,279 --> 00:33:11,119
aggressive so that is the basis of looking at and again i started looking at this in 2018 giovanni
457
00:33:11,119 --> 00:33:16,319
as well so it's actually all the way back here somewhere around here and even in 2018 now i want
458
00:33:16,319 --> 00:33:20,379
to show you how it would actually look at the time so we'll get back to the to the quantiles but i'm
459
00:33:20,379 --> 00:33:26,619
going to show you a few different things we can even throw in stock to flow here so i did a similar
460
00:33:26,619 --> 00:33:33,259
chart on this on marty's show recently but i'll show you even sensitivity here so here is price
461
00:33:33,259 --> 00:33:38,799
which everybody knows i have it my data goes back to bitcoin pizza day all right 20 seconds 2010
462
00:33:38,799 --> 00:33:44,639
yeah yeah so let's put the old power trend through until today same thing that you saw
463
00:33:44,639 --> 00:33:50,839
on the other chart okay this nice black line goes right through it nice beautifully let's put on
464
00:33:50,839 --> 00:33:56,219
nb's 2020 no actually no let's put on exponential first all right so there's that same exponential
465
00:33:56,219 --> 00:33:59,379
trend colored differently now. So you can see it a little bit different. It's this brown
466
00:33:59,379 --> 00:34:07,579
dotted line. Same deal. 600,000 versus 140 some thousand. Now let's put on plan B's 2020 stock to
467
00:34:07,579 --> 00:34:12,179
flow. All right. It's going to be this red line, even more aggressive than Bitcoin's exponential
468
00:34:12,179 --> 00:34:17,119
all time exponential trend shoehorned into the price. All right. So the stock to flow would say
469
00:34:17,119 --> 00:34:23,799
if exponential was predicting 650,000 by today, stock to flow would predict 6.67 million,
470
00:34:23,799 --> 00:34:29,039
his 2020 model. So it's way wrong. Let's look at his 2019 model, which is actually his first model,
471
00:34:29,119 --> 00:34:33,159
which is after I was looking at the power. It's pretty close to the exponential trend itself.
472
00:34:33,159 --> 00:34:39,839
And it's 822,000. Now, why does it do that? The simple answer is he was being sort of deluded by
473
00:34:39,839 --> 00:34:45,199
the idea of Bitcoin having a lower stock to flow than gold and silver. But the thing is gold and
474
00:34:45,199 --> 00:34:50,559
silver are exponential assets. So the stock to flow that they have, which is about 1.8% for gold
475
00:34:50,559 --> 00:35:17,779
And silver is actually less. It's about 1.5%. But he was trying to play around with that. And it would mess with his model, of course, because he would try to claim that silver had a worse stock to flow than gold. But it's actually not true. Silver's stock to flow is better than gold. But anyway, he was trying to line it up and he was actually using a power curve. But the long and short of it is he was trying to take an asset that was moving exponentially like gold and silver with an asset that was moving in power like Bitcoin. And it doesn't work that way. Bitcoin moves in power.
476
00:35:17,779 --> 00:35:25,299
So the very nature of what Bitcoin does, why it's a straight line on log log, is it the growth rate declines over time.
477
00:35:25,459 --> 00:35:28,699
I don't know if I've said that clear enough. I should have. The growth rate declines.
478
00:35:29,119 --> 00:35:32,059
Right. Exponential growth is constant. Let's just go back, take this off.
479
00:35:32,319 --> 00:35:36,079
Same thing. Exponential versus power. This is a constant growth every year.
480
00:35:36,119 --> 00:35:39,679
Doesn't matter where you would go on the line, this dotted line, you would see constant, constant growth.
481
00:35:40,179 --> 00:35:45,079
Bitcoin's growth declines. All right. Trailing 12 month, 40 percent.
482
00:35:45,079 --> 00:35:50,599
okay that's trailing to a month of the black line this this exponential line if it was really moving
483
00:35:50,599 --> 00:35:57,979
exponential right would be 108 it's not doing that it's not moving at 108 but it is moving about
484
00:35:57,979 --> 00:36:04,139
40 which is doubling every two years so bottom line is the statistics fit the math works and it
485
00:36:04,139 --> 00:36:08,959
makes a lot of sense and his earlier stock to flow models were way more exponential than they were
486
00:36:08,959 --> 00:36:13,459
power so that's why it sort of follows something like an exponential trend you can actually see it
487
00:36:13,459 --> 00:36:18,859
on the chart. Now, let's say we ignore his goofy calculations with the gold and silver and trying
488
00:36:18,859 --> 00:36:24,519
to shoehorn an exponential asset or sorry, a power asset, which is Bitcoin into an exponential
489
00:36:24,519 --> 00:36:30,939
coefficients, which is gold and silver. You can do an all time stock to flow trend, which will
490
00:36:30,939 --> 00:36:35,659
look better. We ignore all the prior calculations, but it's still not going to be great. So that's
491
00:36:35,659 --> 00:36:39,679
the line I'm going to show here. Okay. It's better. Let's take off plan B. Now it's better.
492
00:36:39,679 --> 00:36:45,259
This takes all the data up until today. It's better. But notice it's as we're trying to think
493
00:36:45,259 --> 00:36:49,739
about where this thing could go in the future, it runs away. And to show you the same idea,
494
00:36:50,199 --> 00:36:54,799
once we were... What is a good model? A good model is something that is going to help you
495
00:36:54,799 --> 00:37:00,379
project the future. Of course, we're not going to be right to the 1th percentile. We're not going
496
00:37:00,379 --> 00:37:08,079
to be very close as far as value, but we might be, I don't know, 10% off versus being 10X off.
497
00:37:08,079 --> 00:37:13,359
right so the stock to flow model exponential models saying bitcoin is exponential there's no
498
00:37:13,359 --> 00:37:18,639
model that will get you close in the future to being what bitcoin's price is today there are
499
00:37:18,639 --> 00:37:23,839
orders of magnitude off that's that's the key there so that's what makes a good model so what
500
00:37:23,839 --> 00:37:29,039
let's take off again plan b's confusing projections and let's take off exponential let's just take a
501
00:37:29,039 --> 00:37:34,079
look at this is stock to flow as it has as it manifests itself with the data up until today but
502
00:37:34,079 --> 00:37:37,739
notice again it moves away from the power curve but then let's say okay well let's measure stock
503
00:37:37,739 --> 00:37:41,599
to flow 10 years ago. All right. So that's this curve. Here's stock to flow 10 years ago.
504
00:37:41,799 --> 00:37:48,559
If we had only looked at Bitcoin's pricing data from May 22nd, 2010 until July 2016,
505
00:37:49,039 --> 00:37:54,019
literally 10 years ago, it would project today $700,000 Bitcoin. It's very similar plan B. I
506
00:37:54,019 --> 00:38:00,239
mean, it's a similar idea, right? Of Bitcoin, of plan B's models. Okay. Their point is their
507
00:38:00,239 --> 00:38:06,579
orders of magnitude off from the actual price. Actual price today is 600,000 or sorry, 60,000,
508
00:38:06,579 --> 00:38:12,979
right? Roughly. So a 600, $700,000 projection from 10 years ago is an order of, you know,
509
00:38:13,019 --> 00:38:18,879
it's 10X off. That's too much. That's not a good model. So that's why stock to flow fails. That's
510
00:38:18,879 --> 00:38:24,079
why exponential models fail on Bitcoin. And even if you can see that, okay, actually over time,
511
00:38:24,099 --> 00:38:28,619
we can revise the model. You can see that both of them run away from the power trend and they run
512
00:38:28,619 --> 00:38:32,539
away from the price. So they're just not good models. Even if we try to shoehorn them in the
513
00:38:32,539 --> 00:38:36,819
best way. Plan B's models are even worse, which again, I need to color these differently, but
514
00:38:36,819 --> 00:38:41,379
they're even worse. Okay. Hopefully that all, hopefully that all makes sense. Now, now let's
515
00:38:41,379 --> 00:38:49,239
look at the power trend today, which is 143,000. The price, which is 60,000. Now let's, this is the,
516
00:38:49,319 --> 00:38:53,659
this is the kicker. This is the coup d'etat of this, of this chart. Let's, coup de grace, I should
517
00:38:53,659 --> 00:39:01,099
say. This is, let's stop calculating this projection 10 years ago. So July, 2016, and then
518
00:39:01,099 --> 00:39:06,999
let's draw it out and see where it fits. And as you can see, it's much better, much better. Now,
519
00:39:07,499 --> 00:39:12,519
again, this is very sensitive. I actually did this on Marty's episode of TFDC last week and
520
00:39:12,519 --> 00:39:19,319
I showed it from December, 2016. Yeah. Thank you. Thank you. Just try to educate, but I showed it
521
00:39:19,319 --> 00:39:25,459
from December, 2016 and it was even closer. It was like 160,000. This shows you that it's, of course,
522
00:39:25,759 --> 00:39:30,379
we can't be, no one knows the future, but if I go, I wanted to, for you, I just wanted to get
523
00:39:30,379 --> 00:39:35,579
a straight 10 years on all of them, just so you'd see. So if we go July, July, 2026 to July,
524
00:39:35,679 --> 00:39:42,119
2016, it's actually a little bit more off, but still we're only 50, 60 K off. We're not as if
525
00:39:42,119 --> 00:39:47,739
we put say the stock to flow trend versus it's 2016 trend. You know, we're not orders of magnitude
526
00:39:47,739 --> 00:39:53,839
off. We're not orders of magnitude off of the today's price, you know, 10 X off. We're still,
527
00:39:53,979 --> 00:39:59,579
you know, two or three off, but we're not orders of magnitude off. So hopefully again, this exercise
528
00:39:59,579 --> 00:40:04,959
can just show. You can measure anything, you can put any regression on it, but the power trend
529
00:40:04,959 --> 00:40:11,099
way better fits the performance of Bitcoin's price and what Bitcoin is doing than other trends.
530
00:40:11,279 --> 00:40:15,619
And then you would say, okay, fine. What does that mean for Bitcoin? What is the power trend
531
00:40:15,619 --> 00:40:23,159
really saying? Well, it's saying, it says that Bitcoin's price, all right, it scales differently
532
00:40:23,159 --> 00:40:29,019
than the prices of other assets in the marketplace. Other assets in the marketplace scale exponentially,
533
00:40:29,019 --> 00:40:35,659
they grow exponentially. Bitcoin's actually, the rate of growth declines over time. That might at
534
00:40:35,659 --> 00:40:40,759
first sound bad, but then you should start to say, okay, well, first of all, it's still very fast
535
00:40:40,759 --> 00:40:45,159
compared to another asset, right? It's 40% per year at the moment. Although that rate will come
536
00:40:45,159 --> 00:40:50,759
down, that rate will come down, but you have to start saying, okay, well then what is that actually,
537
00:40:51,619 --> 00:40:55,539
is there anything that I can fundamentally understand from a power law? And there is.
538
00:40:55,539 --> 00:41:04,299
So this would be another answer I would accept from the question that I asked for the next guest is, how does Bitcoin's price double according to a power law?
539
00:41:04,639 --> 00:41:04,799
Okay.
540
00:41:04,859 --> 00:41:10,959
So according to an exponential law, and we can just use our eyes and see that Bitcoin is not growing exponentially.
541
00:41:11,579 --> 00:41:17,459
But the exponential trend that we could try to shoehorn on Bitcoin is that it doubles less than every year.
542
00:41:18,099 --> 00:41:18,359
All right.
543
00:41:18,379 --> 00:41:19,419
108% CAGR.
544
00:41:19,599 --> 00:41:20,619
You see that they match there.
545
00:41:20,919 --> 00:41:21,059
Okay.
546
00:41:21,379 --> 00:41:21,659
No.
547
00:41:21,659 --> 00:41:25,539
But in reality, Bitcoin only grows at about 40% per year.
548
00:41:25,539 --> 00:41:27,539
So in this chart, I have to actually zoom in and show you.
549
00:41:27,539 --> 00:41:28,699
So here you go back to the power.
550
00:41:28,699 --> 00:41:30,659
It's right there, 40% per year.
551
00:41:30,659 --> 00:41:34,739
TTM, it's different than the CAGR because the CAGR is declining, doubling every two years.
552
00:41:35,139 --> 00:41:39,479
But how would I define that even further to like a mathematical equation?
553
00:41:39,479 --> 00:41:39,979
And the answer is
554
00:41:39,997 --> 00:41:43,937
You have to calculate through to get this number.
555
00:41:44,037 --> 00:41:47,757
There's no way that your next guess would get this, which is fine.
556
00:41:48,057 --> 00:41:53,577
But the answer is that for every 13% increase in the life of Bitcoin, the price doubles.
557
00:41:53,977 --> 00:41:57,377
For every 13% increase in the life of Bitcoin, the price doubles.
558
00:41:57,857 --> 00:42:01,617
So notice that is not a constant expression.
559
00:42:02,257 --> 00:42:03,617
It's not a constant mathematical expression.
560
00:42:03,737 --> 00:42:08,797
What it is showing is as Bitcoin gets larger to the tune of 13, the price doubles.
561
00:42:08,797 --> 00:42:26,157
And then presumably from there, we can say, okay, well, what else doubles? Adoption, understanding, usage, all those things. So it's a proxy for network adoption when we look at it with the price, which is very, very different than any other asset, which my, and I've developed my own understanding of all this over time.
562
00:42:26,157 --> 00:42:35,337
I actually think that more than value itself, and there is a lot of value, of course, in certain companies in the stock market, but most of the companies in the stock market go bankrupt.
563
00:42:35,877 --> 00:42:41,457
So what I actually think the stock market is telling us when you look at, okay, I need 10% return for my broker.
564
00:42:41,577 --> 00:42:43,437
I need 11, 13, 15, whatever.
565
00:42:43,737 --> 00:42:45,257
And you usually have a constant number.
566
00:42:45,537 --> 00:42:47,517
And by the way, that number is getting faster than it used to be.
567
00:42:47,717 --> 00:42:49,257
But that's another topic.
568
00:42:49,337 --> 00:42:50,057
Let's hold off on that.
569
00:42:50,057 --> 00:42:57,717
in general, let's just say exponential growth, 10% a year, right? What is that? What is that
570
00:42:57,717 --> 00:43:04,917
telling me? I think that that's actually more an explanation of a decrease in the purchasing power
571
00:43:04,917 --> 00:43:11,157
of the currency and be the actual leverage of a company, their actual, their costs of capital,
572
00:43:11,277 --> 00:43:16,157
their interest rate. You put those two things together, it should roughly equal, you know,
573
00:43:16,157 --> 00:43:19,637
the weighted average cost of capital on the asset side.
574
00:43:19,917 --> 00:43:23,317
So it's really, it's an expression of debt, right?
575
00:43:23,397 --> 00:43:25,637
I mean, companies to scale, they need to take debt.
576
00:43:25,777 --> 00:43:27,037
There's very few companies.
577
00:43:27,237 --> 00:43:28,477
In fact, I don't think we can find,
578
00:43:28,637 --> 00:43:34,497
I mean, we can kind of find it for some of the big cap stocks,
579
00:43:34,777 --> 00:43:37,417
software companies or like new AI companies in early phase.
580
00:43:37,417 --> 00:43:40,417
But usually, it's a definition of their debt
581
00:43:40,417 --> 00:43:44,437
and how much debt there is in the system.
582
00:43:44,437 --> 00:43:48,257
And that, I think, is what we're actually seeing in the stock market.
583
00:43:48,677 --> 00:43:51,237
It's some expression of the interest rate.
584
00:43:51,637 --> 00:43:54,737
So that's how the stock market grows.
585
00:43:54,897 --> 00:43:56,877
That's how gold grows.
586
00:43:57,197 --> 00:43:59,997
Gold companies, of course, need to take on debt to get more gold out of the ground.
587
00:44:00,497 --> 00:44:06,937
It's an expression of the cost of capital or something to do with the cost of the lending rate, the interest rate.
588
00:44:07,597 --> 00:44:08,777
But Bitcoin doesn't do that.
589
00:44:08,777 --> 00:44:15,057
Bitcoin has this nice scalable declining rate, which gives us this. Now we'll go back to this
590
00:44:15,057 --> 00:44:19,717
chart. Here's a log linear. Look at the power law and now we'll go log, log. You have a nice,
591
00:44:19,717 --> 00:44:23,897
beautiful straight line. And so this is what I mean when I talk about the power law being something
592
00:44:23,897 --> 00:44:29,337
you can't really unsee is, yeah, we can draw bands around this. We can look at probabilities.
593
00:44:29,337 --> 00:44:33,617
We can say, okay, sometimes we're below the median. Sometimes we're above the median.
594
00:44:33,877 --> 00:44:38,737
Sometimes we're below the OLS. Sometimes we're above the OLS. But by and large, if you charted
595
00:44:38,737 --> 00:44:42,897
out, you see a straight line on log-log scale. And what that means is a power curve. And what
596
00:44:42,897 --> 00:44:49,277
that means by definition is the old, there's a, there's a proportionality to Bitcoin's growth,
597
00:44:49,357 --> 00:44:54,657
which is something like 13% where the network effect doubles. All right. So another way to
598
00:44:54,657 --> 00:45:00,917
explain it again, like I said, the 13% number of Bitcoin is less than 7,000 days old or close to
599
00:45:00,917 --> 00:45:06,077
7,000 days old. I should say, I don't remember the exact number at the moment. 13% of 7,000 days
600
00:45:06,077 --> 00:45:11,997
gets you close to 800 days. All right. I.e. every two years, just extreme round numbers I'm using
601
00:45:11,997 --> 00:45:16,717
here. So at the moment, it's that 40% CAGR. Like I said, at the moment, Bitcoin's price doubles
602
00:45:16,717 --> 00:45:23,617
every two years. But as Bitcoin gets older, 13 of 7,000 will be a larger and larger number.
603
00:45:23,957 --> 00:45:28,757
So that's what a power line is. It will take longer and longer to double. Thus, you will have
604
00:45:28,757 --> 00:45:35,517
that longer doubling time, but the proportionality stays the same. It still is a pretty constant rate
605
00:45:35,517 --> 00:45:41,257
for 10 years now, which is about a 13% increase in the life of the network.
606
00:45:41,537 --> 00:45:42,237
Can I make this question?
607
00:45:42,537 --> 00:45:42,737
Yeah.
608
00:45:43,337 --> 00:45:47,697
Like, how will you characterize this moment then?
609
00:45:48,437 --> 00:45:53,457
Are we in a weird discount zone or is it still like a normal oscillation between this?
610
00:45:53,817 --> 00:45:55,837
Extremely, extremely discounted.
611
00:45:55,917 --> 00:45:56,077
Yeah.
612
00:45:56,237 --> 00:45:59,357
For people that are watching, hopefully you can just see here and this is where you can,
613
00:45:59,357 --> 00:46:03,037
you know, after going through all the theory, you can look at the raw numbers.
614
00:46:03,037 --> 00:46:07,737
were extremely low as far as all the realm of probabilities.
615
00:46:07,837 --> 00:46:09,017
Now, one thing to say about this chart,
616
00:46:09,097 --> 00:46:11,557
this is not a, this is why I like math.
617
00:46:11,697 --> 00:46:13,337
This is why I'm an applied statistics guy.
618
00:46:13,397 --> 00:46:14,017
I'm not a trader.
619
00:46:14,237 --> 00:46:15,037
I'm not a trading viewer.
620
00:46:15,037 --> 00:46:19,137
So this band, all these bands that I made here,
621
00:46:19,217 --> 00:46:20,717
they're made only with math.
622
00:46:20,817 --> 00:46:22,257
They're made only with Bitcoin price.
623
00:46:22,337 --> 00:46:23,817
There's nothing else that goes into them.
624
00:46:24,317 --> 00:46:27,657
Traders, Elliott Wave guys, ABC123, all that stuff.
625
00:46:27,897 --> 00:46:29,617
They're trying to draw lines.
626
00:46:29,837 --> 00:46:32,637
They're drawing lines on charts on an asset.
627
00:46:32,637 --> 00:46:38,277
that they expect, because everybody expects now, as I said earlier, for assets to grow exponentially
628
00:46:38,277 --> 00:46:42,897
because of the interest rate, because of debt, they expect that asset to grow exponentially.
629
00:46:42,897 --> 00:46:48,997
And then there's a bunch of trading tools that, I don't know, maybe 51% of the time work out.
630
00:46:49,117 --> 00:46:55,337
And maybe 51% if you're lucky. But here is a completely different analysis. And this is just
631
00:46:55,337 --> 00:46:59,857
looking at the Bitcoin asset with only price. Price is the pure signal that we're using.
632
00:46:59,857 --> 00:47:04,477
and we can see this nice, beautiful straight line out in the future. We can project, you know,
633
00:47:04,557 --> 00:47:08,857
for, for Hopium, we can, I can show you the value of these numbers, right out to 2030 or 2050.
634
00:47:08,857 --> 00:47:16,537
But clearly, as you can see, compared to say 2017 or 2022 or 2013, if you understand the power curve,
635
00:47:16,657 --> 00:47:20,497
you see the strength of the power curve. You see the goodness of fit of the power curve.
636
00:47:20,617 --> 00:47:27,117
Again, always, I should say never financial advice, right? But this is a pretty strong
637
00:47:27,117 --> 00:47:32,877
mathematical signal that what Bitcoin is doing right now is growing like a power asset, which
638
00:47:32,877 --> 00:47:37,217
means it's growing in a very scalable, sustainable way. We can talk about what other things in nature
639
00:47:37,217 --> 00:47:42,197
grow as a power asset, but it's growing in a very scalable, sustainable way. And if we would assume
640
00:47:42,197 --> 00:47:46,737
the realm of probabilities relative to the power law are literally at almost their lowest they've
641
00:47:46,737 --> 00:47:54,417
ever been, then it's a pretty good deal at $60,000 a coin, $64,000. It could go down to $59,000.
642
00:47:54,417 --> 00:47:58,777
Again, it could go to 58. Who knows? Doing this little Bart Simpson, as I said on Marty's show,
643
00:47:58,877 --> 00:48:03,797
right? Might go back down. We do that all the time. But this is just, again, statistically
644
00:48:03,797 --> 00:48:10,117
macro, big, big, big picture. I would say for HODLers, for people that long-term believe in
645
00:48:10,117 --> 00:48:14,837
Bitcoin, this is a great time to accumulate. It could be even better in three months,
646
00:48:14,997 --> 00:48:19,057
but this is still a great time, all things considered. Whether you buy Bitcoin at 60,000,
647
00:48:19,057 --> 00:48:25,837
65, 55 compared to say where the power curve shows us it's going to be five years from now,
648
00:48:25,837 --> 00:48:33,777
where the Q0 is 280,000 and the Q100 is 1.5 million. Admittedly, it's still a big delta.
649
00:48:34,037 --> 00:48:39,877
We're very early in the development of this asset. It doesn't matter if you buy it at 55,000 or 60,000
650
00:48:39,877 --> 00:48:45,537
or 65,000 or 70,000. So that's the idea of looking at this quantile regression and these different
651
00:48:45,537 --> 00:48:50,657
percentiles to make decisions. I'm curious now, what are other things that grows up power assets
652
00:48:50,657 --> 00:48:55,577
that you mentioned? Yeah. So cities is a good one. Cities is a really good one. I said this
653
00:48:55,577 --> 00:49:00,897
on Marty's show, but just to repeat. So, and it's very elegant for Bitcoin because basically the
654
00:49:00,897 --> 00:49:07,017
nation state, GDP, population, debt, kind of the main things that we think about a nation state,
655
00:49:07,017 --> 00:49:21,778
they all grow exponentially All right The debt of the UK the debt of the US Let me see if I I have charts in a power trend or not sorry not in an exponential trend And I do I show you the debt of the US Let me see if I have charts in a power trend or not sorry not in an exponential trend And I do I show you the debt of the US but everything in a nation state level
656
00:49:21,858 --> 00:49:25,838
it happens to grow exponentially, just like stocks, just like bonds, just like the gold price,
657
00:49:25,838 --> 00:49:30,278
just like the gold coming out of the ground or silver. So it's constant growth. But what you
658
00:49:30,278 --> 00:49:34,778
notice with exponential curves are, is they're very unstable. And this is where, again, bringing
659
00:49:34,778 --> 00:49:39,798
it back to the start of our discussion about how I was trying to understand how markets work and
660
00:49:39,798 --> 00:49:42,918
everything in light of global financial crisis, how money works and everything.
661
00:49:43,338 --> 00:49:48,158
It's a very elegant thing. Once you start to really grasp what an exponential trend means,
662
00:49:48,438 --> 00:49:55,638
what a power trend means, because that stuff that we talk about in the Austrian school or
663
00:49:55,638 --> 00:50:01,618
free market economics, that stuff that grows very fast and is unstable and is at the behest of a
664
00:50:01,618 --> 00:50:06,758
monopolized central bank usually, that all grows exponentially. And it makes sense that it would
665
00:50:06,758 --> 00:50:12,358
be unstable that we would have these booms and busts because exponential trends are actually
666
00:50:12,358 --> 00:50:17,838
unstable. And so it's very elegant because, you know, for example, the UK has been bankrupt many
667
00:50:17,838 --> 00:50:23,038
times. It still exists as a polity, exists as a state, but it's had to redo its credit entirely.
668
00:50:23,638 --> 00:50:28,418
The US has never been bankrupt. They did pay it off. Andrew Jackson actually did pay off the debt
669
00:50:28,418 --> 00:50:34,078
in the 1830s. And the US has gone, the backing of the dollar, as we know, has gone through
670
00:50:34,078 --> 00:50:39,258
different amalgamations through the years of gold. And now it's just really just treasuries
671
00:50:39,258 --> 00:50:44,838
that back the monetary base. But the point is, the US has not yet had a nationwide default,
672
00:50:44,978 --> 00:50:50,218
but plenty of other countries have. I mean, the graveyard of those currencies is thousands. I
673
00:50:50,218 --> 00:50:53,878
remember the exact numbers, tens of thousands of currencies that have gone bankrupt throughout the
674
00:50:53,878 --> 00:50:58,778
millennia, basically. Now, it's always about what are you comparing it with? So we just talked about
675
00:50:58,778 --> 00:51:02,858
Debt, deficits, GDP, the nation state, all grows exponentially.
676
00:51:03,338 --> 00:51:03,978
What about cities?
677
00:51:04,178 --> 00:51:06,278
So cities grow in power.
678
00:51:06,658 --> 00:51:13,018
And if you looked at, say, the growth rate of Paris or London now, it might seem, or Madrid,
679
00:51:13,378 --> 00:51:16,618
it might seem that they're growing at sort of a stable 2% per year or whatever.
680
00:51:16,958 --> 00:51:21,938
But in fact, if you looked over a long enough timeframe, if you went back to when Paris was
681
00:51:21,938 --> 00:51:26,358
a greenfield and London was a greenfield and Madrid was a green desert or whatever it was,
682
00:51:26,358 --> 00:51:32,318
Those early days, I'm talking 200 years ago, 300 years ago, whatever, a thousand years ago,
683
00:51:32,518 --> 00:51:38,178
the growth actually at those times every year was way faster. It could have been a thousand
684
00:51:38,178 --> 00:51:42,858
percent a year. It could have been 800 percent a year. So it would look precisely like the
685
00:51:42,858 --> 00:51:48,578
Bitcoin's growth rate was basically the inverse of this curve like this. So the growth rate,
686
00:51:49,078 --> 00:51:53,258
if I just draw a trend here, it would be opposite. I could show you a chart of that.
687
00:51:53,258 --> 00:51:57,638
I don't have it up, but basically, you know, Bitcoin's growth in the early days was thousands
688
00:51:57,638 --> 00:52:02,218
of percent a year. Now it's 40% a year. It's come down. It's this exact same for cities.
689
00:52:02,898 --> 00:52:07,678
So again, these are very, in my view, very elegant comparisons to how we can actually
690
00:52:07,678 --> 00:52:12,598
think about how Bitcoin grows versus the rest of the financial world. And I think it's really
691
00:52:12,598 --> 00:52:16,938
important, actually. I think it's really illuminating to why Bitcoin is so special
692
00:52:16,938 --> 00:52:22,938
and so interesting is that the growth follows this very stable, different than what we often
693
00:52:22,938 --> 00:52:28,078
think of as exponential growth, it follows this very stable, declining growth rate power law.
694
00:52:28,438 --> 00:52:34,158
So I can stop there if you have any questions on that. But cities, here's the thing. Nation states
695
00:52:34,158 --> 00:52:40,718
are temporary and they grow exponentially. Cities are eternal. They last much longer
696
00:52:40,718 --> 00:52:46,478
than nation states and they grow in power. So nation states over the long enough time horizon,
697
00:52:46,718 --> 00:52:50,718
right? The United Kingdom was not the United Kingdom a thousand years ago, but London was there.
698
00:52:50,718 --> 00:52:56,438
so nation states are temporary and grow exponentially cities are eternal they grow
699
00:52:56,438 --> 00:53:03,158
in power bitcoin is like a city yeah okay sorry yeah good no i understand that analogy i want to
700
00:53:03,158 --> 00:53:07,458
ask you also about that because i'm always thinking about what a student can ask you and
701
00:53:07,458 --> 00:53:13,558
i think yes now that you that you who they explain your model i think that someone could
702
00:53:13,558 --> 00:53:17,618
ask you like what's the strongest argument against your own model the power of the model
703
00:53:17,618 --> 00:53:21,478
or something that you reconsider.
704
00:53:22,198 --> 00:53:25,238
Yeah. So the strongest argument against the model,
705
00:53:25,398 --> 00:53:28,458
or at least what the model might do in the future is,
706
00:53:28,638 --> 00:53:30,798
and I don't know if we want to go through the whole thing,
707
00:53:30,858 --> 00:53:32,558
but it's kind of, it goes back to this grand theory
708
00:53:32,558 --> 00:53:34,358
that I talked about with Marty on his show is,
709
00:53:34,678 --> 00:53:36,318
basically, there's going to come a time
710
00:53:36,318 --> 00:53:40,338
in the next 20 years or so where Bitcoin is a growth rate
711
00:53:40,338 --> 00:53:42,518
that 40% a year that it does now,
712
00:53:42,518 --> 00:53:45,458
that growth rate will decline to something
713
00:53:45,458 --> 00:53:53,438
that is below the cost of capital or the weighted average of most stocks of the S&P 500. So I don't
714
00:53:53,438 --> 00:53:57,758
know if it's the strongest objection, but it's basically, I'll show you on a chart right here.
715
00:53:57,978 --> 00:54:01,898
So here's the same chart, but now I'm showing you the trailing 12 months and negative doesn't show
716
00:54:01,898 --> 00:54:05,098
up on log scale. This is log scale on the right because you couldn't see it on the left. So the
717
00:54:05,098 --> 00:54:10,278
negative doesn't show up, but basically the actual trailing 12 months is here. But if we just put it
718
00:54:10,278 --> 00:54:16,298
on a curve and I'll take off the actual, which is here. Here's the actual trailing 12 month,
719
00:54:16,518 --> 00:54:20,778
right? Which are thousands of percent, hundreds of percent back in the other days, right? When
720
00:54:20,778 --> 00:54:25,458
people were buying Bitcoin for a dollar or whatever, but on a curve, which is measuring
721
00:54:25,458 --> 00:54:31,318
the power law, we can see that again, it also was a thousand percent 15 years ago. It's come down.
722
00:54:31,598 --> 00:54:38,078
Now it's 40 by 2030 or 2031. Actually, it's going to be get to 30%. You see that in the tool tip,
723
00:54:38,078 --> 00:54:44,398
30% during the 12 month return. And by 2041, it's going to get to 20%. I'm not saying it has to
724
00:54:44,398 --> 00:54:48,738
happen on the round numbers. In fact, using round numbers can often be a fallacy, you know, like
725
00:54:48,738 --> 00:54:54,098
a hundred trillion or 20% growth. So I'm not saying it has to be here, but what I am saying is
726
00:54:54,098 --> 00:55:00,878
by this time, I'm pretty sure 2041, where if Bitcoin's power law holds as, and I will answer
727
00:55:00,878 --> 00:55:04,798
your question about the greatest flaw here, perhaps of the power law, but basically if this
728
00:55:04,798 --> 00:55:10,778
general trend holds, right? The growth rate versus this declining, slowly declining growth rate,
729
00:55:10,958 --> 00:55:18,398
nice, beautiful rainbow on log linear scale. If all of that holds for Bitcoin and we do get to
730
00:55:18,398 --> 00:55:24,978
say a 20% return, but declining, the next logical question is, well, why would I hold Bitcoin
731
00:55:24,978 --> 00:55:31,518
if the stock market and the S&P 500 at the time are now growing at 25% a year? That would be a
732
00:55:31,518 --> 00:55:36,358
case where I'm going to start to wonder myself, would I hold Bitcoin? I just invest in the stock.
733
00:55:36,818 --> 00:55:40,998
I have answers to this. We can talk about it. This is all part of the grand theory that I have
734
00:55:40,998 --> 00:55:45,798
about the power law, but it could be, it could be in my view, the very simply to try to explain
735
00:55:45,798 --> 00:55:50,558
this is it could be at this point, the financial system is super regulated, super monopolized,
736
00:55:50,758 --> 00:55:55,058
you know, the major countries, polity blocks around the world, whether they're capitalists
737
00:55:55,058 --> 00:56:00,338
or communists still have us use their currencies. We can't withdraw Bitcoin, you know, by and large,
738
00:56:00,338 --> 00:56:04,538
right? Bitcoin's a very underground asset. It could be that all those things are true.
739
00:56:05,258 --> 00:56:10,138
And in that case, then Bitcoin just becomes like gold, right? Like gold is a totally risky asset.
740
00:56:10,358 --> 00:56:16,178
In fact, if you want to use it as a store of value that can also be like a medium of exchange
741
00:56:16,178 --> 00:56:22,178
that is nicely transportable. For example, I live in Eastern Europe, never know what might happen
742
00:56:22,178 --> 00:56:28,438
with the crazy Russians invading. So if I and my family have to leave, I can't take any gold rocks
743
00:56:28,438 --> 00:56:30,558
across the border, or I'm not going to risk it,
744
00:56:30,558 --> 00:56:32,058
taking gold rocks across the border.
745
00:56:32,058 --> 00:56:34,018
I can easily take Bitcoin across the border.
746
00:56:34,018 --> 00:56:37,198
So the point is, Bitcoin is for sure good money.
747
00:56:37,198 --> 00:56:38,938
All those things I think will hold.
748
00:56:38,938 --> 00:56:41,358
But if the global financial system says,
749
00:56:41,358 --> 00:56:43,778
you know what, that's just black market Bitcoin,
750
00:56:43,778 --> 00:56:44,738
we're not gonna allow that,
751
00:56:44,738 --> 00:56:46,558
you have to go through mountains of KYC,
752
00:56:46,558 --> 00:56:59,698
which is the direction we going obviously Then Bitcoin actually in some way may turn out to be like gold And it might not be disappointing by the way if you in the system I said this many times if the power law breaks it not going to break to the downside It going
753
00:56:59,698 --> 00:57:04,058
to break to the upside. It means Bitcoin's going exponential if the power law breaks.
754
00:57:04,418 --> 00:57:08,718
But going exponential, we might not be happy with what the project actually looks like when it goes
755
00:57:08,718 --> 00:57:14,558
exponential. This could be a world where we're locked into, like I said, all the KYC nightmare,
756
00:57:14,558 --> 00:57:19,978
the financial panopticon, everything that basically gold is now could be like Bitcoin in 20 years.
757
00:57:20,338 --> 00:57:25,218
So if in 15, 20 years we have that, then I would say the power law has, I don't want to say it could
758
00:57:25,218 --> 00:57:29,958
fail because basically the power law has not failed. It is, Bitcoin is moving in power right
759
00:57:29,958 --> 00:57:33,778
now. But that would be, again, back to your question, what's my greatest argument against
760
00:57:33,778 --> 00:57:39,158
the power law? It's basically what happens in 10 to 15 years when that declining rate of the Bitcoin
761
00:57:39,158 --> 00:57:46,478
price growth is below what a monopolized, fully regulated financial system does. Which by the way,
762
00:57:46,538 --> 00:57:50,378
we know that they print more and more currency units. So the rate of growth has to be faster and
763
00:57:50,378 --> 00:57:54,718
faster each year, which it is over the long enough time horizon. And you could just make more money,
764
00:57:55,038 --> 00:58:01,218
make more fiat units, which we have to use investing in an index fund or an ETF or even a
765
00:58:01,218 --> 00:58:07,858
Bitcoin ETF. And then Bitcoin could go exponential. So I hope that's clear. That's my answer. By the
766
00:58:07,858 --> 00:58:13,158
way back to the grand theory, just to say one more thing, I think it's totally possible in the future
767
00:58:13,158 --> 00:58:20,578
if Bitcoin's project stays decentralized, it stays, let's say the cypher puck ethos sticks around,
768
00:58:20,838 --> 00:58:25,978
right? There's all sorts of layering that works in a trustless decentralized manner.
769
00:58:26,618 --> 00:58:30,398
You know, there's Fedimance, there's Lightning, there's L2, 3, whatever, and we don't have to
770
00:58:30,398 --> 00:58:36,658
ask 50,000 different governing bodies to use it. Then I think Bitcoin actually could continue to
771
00:58:36,658 --> 00:58:41,898
stay on this nice power law growth, but probably what will happen is Bitcoin is going to turn the
772
00:58:41,898 --> 00:58:47,278
whole world power. But then if we do that, if Bitcoin is turning the whole world to grow in
773
00:58:47,278 --> 00:58:52,198
power, we're going to have to rethink the way we think about debt contracts and loan contracts
774
00:58:52,198 --> 00:58:56,098
because they don't work in a power system. By nature, they must be constant or go up.
775
00:58:56,498 --> 00:59:01,819
They must be, you know, you must keep that loan at 5% a year. You know, negative interest rates,
776
00:59:01,998 --> 00:59:06,079
although they're trying to do it, they don't really work over a long enough time horizon.
777
00:59:06,658 --> 00:59:14,059
So yeah, that's sort of the grand theory is basically either the world turns Bitcoin exponential or Bitcoin turns the world power.
778
00:59:14,378 --> 00:59:16,958
That's how I'm looking at it mathematically in 10 to 15 years.
779
00:59:17,319 --> 00:59:20,319
And if you're a HODLer, you probably do fine, frankly, in either scenario.
780
00:59:20,518 --> 00:59:25,838
But the former, the TradFi world turns Bitcoin exponential is not the cypherpunk ethos.
781
00:59:25,919 --> 00:59:32,978
That is not the decentralized, trust minimized, secure global liquid system that we all have in mind.
782
00:59:32,978 --> 00:59:35,198
So this is where I think the battle is going to be.
783
00:59:35,299 --> 00:59:38,579
And this is where we're going to see if Bitcoin is really a nice,
784
00:59:39,218 --> 00:59:41,498
scalable network power asset or not,
785
00:59:41,799 --> 00:59:44,218
whether it gets pulled in this exponential trajectory.
786
00:59:44,559 --> 00:59:49,079
Actually, I was trying, I wanted to make you a similar question on this.
787
00:59:49,319 --> 00:59:50,919
Like if you think that in the end,
788
00:59:51,498 --> 00:59:54,898
Bitcoin price will be manipulated or is currently manipulated
789
00:59:54,898 --> 00:59:56,919
the same way that it was gold manipulated.
790
00:59:58,238 --> 01:00:00,618
If it is, if, you know,
791
01:00:00,618 --> 01:00:04,458
I think it's something like 3 million Bitcoin treasuries at the moment.
792
01:00:05,098 --> 01:00:05,358
I don't know.
793
01:00:05,398 --> 01:00:07,118
I haven't looked at the latest Bitcoin treasuries,
794
01:00:07,838 --> 01:00:11,018
but those are for sure whitelisted Bitcoins, let's say.
795
01:00:11,538 --> 01:00:13,698
So we have close to 20 million Bitcoin.
796
01:00:14,458 --> 01:00:16,438
Basically, we have 20 million Bitcoin, right?
797
01:00:16,538 --> 01:00:16,919
Outstanding.
798
01:00:17,618 --> 01:00:20,758
If really we can only start to trade around,
799
01:00:20,898 --> 01:00:22,858
like I say we as in the populace in 10 years,
800
01:00:22,878 --> 01:00:25,758
we can only start to trade those 3 million that are in Bitcoin treasuries
801
01:00:25,758 --> 01:00:28,478
and everything else is like just immediately shunned in the market
802
01:00:28,478 --> 01:00:30,438
is not acceptable by any exchange.
803
01:00:30,618 --> 01:00:35,679
whatever, let's just say that happens, then that's a manipulated Bitcoin. That's a manipulated
804
01:00:35,679 --> 01:00:42,458
Bitcoin system. And that means that there could be endless amounts of fiat, trillions and billions
805
01:00:42,458 --> 01:00:48,938
and gazillions of fiat interest stacked up and debt stacked up on top of a limited amount of
806
01:00:48,938 --> 01:00:52,878
Bitcoin that they control. In that scenario, they could do anything they want. So that would be the
807
01:00:52,878 --> 01:00:58,518
value. And yes, they could. People say like maybe they can or Bitcoin can, that maybe the state
808
01:00:58,518 --> 01:01:03,898
level threat to Bitcoin was gone once Trump got in. I don't think that's gone at all. I think
809
01:01:03,898 --> 01:01:07,958
they're going to keep coming after it one way or another. And they want to keep their monopoly on
810
01:01:07,958 --> 01:01:13,158
those fiat currency units. Yeah, I believe so. I think we're going to start, wrap it up, because
811
01:01:13,158 --> 01:01:19,998
we're almost one out of 30. I just want to make you want to ask probably one or two questions,
812
01:01:20,098 --> 01:01:24,598
the same question. Before we started talking, recording the podcast, we also talked a little
813
01:01:24,598 --> 01:01:29,538
bit about geopolitics because i asked you about my country you told me about europe so and i know
814
01:01:29,538 --> 01:01:36,158
that you have studied this so i want to ask you like what does geopolitics teach us or teach you
815
01:01:36,158 --> 01:01:43,498
taught you about money and living so close to geopolitical tensions a fundamentally change how
816
01:01:43,498 --> 01:01:50,018
you think about sovereignty yeah well your second question is interesting about sovereignty and
817
01:01:50,018 --> 01:01:57,738
there's real tension there from say i don't know how hardcore anarcho-capitalist mosesian your
818
01:01:57,738 --> 01:02:03,098
audience is but there's real tension there if you say that well and i notice this a lot by the way
819
01:02:03,098 --> 01:02:09,698
from people that are even in bitcoin talking about you know freedom just go to wherever you can to be
820
01:02:09,698 --> 01:02:15,059
free the state's always gonna maybe come after you or something i think that there's a bit too
821
01:02:15,059 --> 01:02:18,839
much cynicism actually in that view we talked about this a little bit with marty too it's like
822
01:02:18,839 --> 01:02:23,418
He was coming from the perspective of someone of an American and saying, look, we don't have a pure free market in America.
823
01:02:23,598 --> 01:02:24,658
And I would agree with that, frankly.
824
01:02:24,718 --> 01:02:25,278
I would agree with that.
825
01:02:25,278 --> 01:02:31,878
But you also don't, thank God, have a communistic, hellscape, fascist market either in America.
826
01:02:32,098 --> 01:02:33,638
Now, it's not great right now.
827
01:02:33,799 --> 01:02:34,358
I would agree.
828
01:02:34,698 --> 01:02:43,218
There's a lot of problems in America, the largest, most capitalistic, let's say, country in terms of GDP so far.
829
01:02:43,498 --> 01:02:45,638
So far at this current point in time.
830
01:02:45,638 --> 01:02:49,758
Maybe overtaken by a communist country in the next five, 10 years.
831
01:02:49,819 --> 01:02:50,618
Maybe not. We'll see.
832
01:02:50,998 --> 01:02:52,438
But I think it's too cynical.
833
01:02:52,898 --> 01:02:55,718
And I would actually say, like where we live, for example,
834
01:02:55,958 --> 01:02:59,478
it's much more the view of, say, a dictator, Vladimir Putin, to say,
835
01:02:59,559 --> 01:03:01,638
you know what, you're not sovereign in Latvia.
836
01:03:01,858 --> 01:03:03,718
You're not sovereign in Estonia or in Poland.
837
01:03:03,978 --> 01:03:06,098
You need to do what we say you do.
838
01:03:06,218 --> 01:03:07,278
You need to do, right?
839
01:03:07,358 --> 01:03:09,799
And that's what he's trying to do to Ukraine right now.
840
01:03:10,079 --> 01:03:11,978
He's been trying for four and a half years.
841
01:03:11,978 --> 01:03:16,638
You know, it's the first four and a half years of your three day special military operation are always the hardest.
842
01:03:17,038 --> 01:03:19,518
Right. So dictators are delusional.
843
01:03:19,919 --> 01:03:23,059
They will think about themselves only and the cronies.
844
01:03:23,118 --> 01:03:24,098
And that's what's happening in Russia.
845
01:03:24,338 --> 01:03:30,538
But I think it's too cynical to say that to me, it sounds very dictator ish to say, well, you know what?
846
01:03:30,679 --> 01:03:32,358
The state is always going to stop us.
847
01:03:32,698 --> 01:03:34,378
Just run away or just go to somewhere.
848
01:03:34,658 --> 01:03:35,919
I don't know. Go to Latin America.
849
01:03:36,018 --> 01:03:39,518
Often, often in the Anglosphere, it's Latin America's used as the safe place.
850
01:03:39,518 --> 01:03:41,079
Right. Which may or may not be true.
851
01:03:41,079 --> 01:03:45,679
I don't know, as far as getting away from the crazy European dictators or moon or whatever.
852
01:03:46,059 --> 01:03:50,778
What's that? Yeah, depending on where, sure. But El Salvador, of course, the Bitcoin paradise for
853
01:03:50,778 --> 01:03:56,919
many. And I'm sure that it is. But here's the thing. If like I grew up in the US, I came of age
854
01:03:56,919 --> 01:04:02,758
when the Berlin Wall fell. It was I came back to Latvia to live full time in 2006. So I've been in
855
01:04:02,758 --> 01:04:09,778
the Baltics now for 20 years. And it's too cynical to me to say that, you know, if Vladimir Putin
856
01:04:09,778 --> 01:04:14,098
just wants to, and he wants to assert his dominance over Eastern Europe again and say,
857
01:04:14,098 --> 01:04:19,618
we have more nukes than you. And actually your freedom ends at the, you know, the scope of a
858
01:04:19,618 --> 01:04:36,679
nuclear missile launcher And since we can target you very easily in Eastern Europe then basically you do have to do what we say I think that actually too cynical One can easily say oh you know there the mad nuclear doctrine or whatever but you know it more complicated than that And it more I think it actually more democratic
859
01:04:36,679 --> 01:04:43,999
than a lot of people agree. Nukes are, it's way deeper than maybe we all even know. And I think
860
01:04:43,999 --> 01:04:49,179
what technology might even show in the future, like nukes are 1940s technology. We see this
861
01:04:49,179 --> 01:04:53,519
with the war in Iran. I mean, we all say like Iran can't get a nuke. And I would agree that
862
01:04:53,519 --> 01:04:59,279
would not be a good thing based on their crazy policy. But we've also seen that the U.S. and
863
01:04:59,279 --> 01:05:04,579
Israel have a pretty difficult time stopping them. But in any event, nukes are 1940s technology.
864
01:05:04,919 --> 01:05:09,439
And if Iran gets a nuke, Saudi Arabia is going to get a nuke. We already see rumblings of this
865
01:05:09,439 --> 01:05:16,299
with the Trump-Saudi nuclear deal, right? It's already like the train is already rolling. And
866
01:05:16,299 --> 01:05:18,379
And so far, I haven't seen anybody got nuked yet.
867
01:05:18,579 --> 01:05:21,579
And I've seen Ukraine be relentlessly attacked,
868
01:05:21,859 --> 01:05:23,779
never started war once in the nation's history
869
01:05:23,779 --> 01:05:26,719
by a nuclear power for four and a half years.
870
01:05:26,939 --> 01:05:30,859
And even for a time, they invaded that nuclear power.
871
01:05:30,939 --> 01:05:31,879
It's embarrassing for Russia.
872
01:05:31,979 --> 01:05:33,779
There's an embarrassment of a country.
873
01:05:33,859 --> 01:05:34,819
I'm sorry if you have Russian listeners,
874
01:05:34,979 --> 01:05:38,339
but they're completely a complete hellscape
875
01:05:38,339 --> 01:05:41,059
with no, it's a mafia state, gas station,
876
01:05:41,179 --> 01:05:42,399
dressed up as a country, all the rest.
877
01:05:43,259 --> 01:05:44,619
So far, no one's been nuked.
878
01:05:44,619 --> 01:05:52,639
But to say that, like, OK, I'm just asking people to think about it from a perspective of someone who's trying to work towards freedom and also like sound money.
879
01:05:52,899 --> 01:06:03,559
I don't necessarily want to give up on the idea of democratically arriving at your defense, because if you or saying, you know what, actually, screw it all.
880
01:06:04,159 --> 01:06:08,199
Nuclear powers can do what they want, especially nuclear dictator, dictatorial powers.
881
01:06:08,199 --> 01:06:35,899
And you know what, all of you countries, you know, Czechia, Slovakia, Hungary, Poland, Latvia, Lithuania, Estonia and Finland, who Finland was always, you know, they were always sort of trying to be neutral or whatever. But actually, you know what, all of you are under the Russian nuclear umbrella and you need to do what they say. That's also not a, that's too cynical of an answer. And it's certainly not a free answer. Like none of us want to be in the communist dictatorial Soviet Union again. Not like we're never going to go back to that and we'll put up a fight if we have to. But it's certainly complicated.
882
01:06:35,899 --> 01:06:41,159
nukes complicate the situation. But to me, when I think about geopolitics, I mostly think about
883
01:06:41,159 --> 01:06:47,359
how people sort of are giving up on some democratic way of finding freedom. And I don't think that
884
01:06:47,359 --> 01:06:51,799
that is like the story is written at all. I don't think it's, you know, everything is emergent in
885
01:06:51,799 --> 01:06:55,399
market every day, new things come to light. And we're just, you know, we're going to have to see.
886
01:06:55,459 --> 01:07:00,399
I mean, it's a very tense time in the world, no doubt about it. But I'm more, when I just to answer
887
01:07:00,399 --> 01:07:03,999
your question bluntly, when I think about geopolitics, and when I think about freedom,
888
01:07:03,999 --> 01:07:06,119
or if someone is truly sovereign or not,
889
01:07:06,399 --> 01:07:07,799
I would not look at it too cynical.
890
01:07:08,019 --> 01:07:10,219
I would say, you know, history begets more history.
891
01:07:10,519 --> 01:07:13,279
And I can guarantee you that the hundreds of millions
892
01:07:13,279 --> 01:07:15,899
of people that live in Eastern Europe and Southern Europe,
893
01:07:15,899 --> 01:07:17,879
like they do not want to be under the thumb of,
894
01:07:18,299 --> 01:07:20,319
say, a nuclear power, Russia.
895
01:07:20,779 --> 01:07:21,139
And you know what?
896
01:07:21,219 --> 01:07:23,359
Nuclear technology is 1940s technology.
897
01:07:23,619 --> 01:07:24,619
And if at the end of the day,
898
01:07:24,659 --> 01:07:25,639
if Saudi Arabia gets the bomb,
899
01:07:25,799 --> 01:07:27,159
you know, maybe Poland's going to get the bomb.
900
01:07:27,559 --> 01:07:29,079
What happens if Germany gets the bomb?
901
01:07:29,459 --> 01:07:32,859
I mean, there are all sorts of things that we have.
902
01:07:32,859 --> 01:07:38,799
Like you could just not even talking about here, but I mean, nuclear powers generally don't want other nuclear powers to get the bomb.
903
01:07:38,899 --> 01:07:44,399
But we're finding out with U.S. policy that's basically becoming more of a let's say a soft touch in Europe.
904
01:07:44,539 --> 01:07:47,299
Other things are going to change and history is changing.
905
01:07:47,299 --> 01:07:56,599
But I would not say that we don't have a stake in this or we can't like arrive at these things democratically as far as, you know, how our own security works.
906
01:07:56,599 --> 01:08:02,439
And to bring it all back to the rest of our more concrete individual freedom discussions about money and whatnot.
907
01:08:02,859 --> 01:08:04,839
I think Bitcoin is going to absolutely be a part of it.
908
01:08:05,139 --> 01:08:10,579
I think the countries that get on Bitcoin now are going to be way better than the countries that wait in the future.
909
01:08:10,959 --> 01:08:15,719
And true to form, countries that take risks like El Salvador are doing much better than I think countries like Germany,
910
01:08:15,719 --> 01:08:19,779
who's like just auctions off any bit of Bitcoin that it possibly gets because it's dirty.
911
01:08:19,959 --> 01:08:21,139
All their Bitcoin territory.
912
01:08:21,399 --> 01:08:22,199
Right, right.
913
01:08:22,299 --> 01:08:25,019
And whenever they can, if they ever come across it, it's just sold off again.
914
01:08:25,639 --> 01:08:32,059
So, look, I didn't want to try to, hopefully I didn't ramble as much, but I'm coming at this from someone who, look, I grew up in the U.S.
915
01:08:32,059 --> 01:08:37,119
I live in Eastern Europe. Cynicism is not a quality that I like. I do find that, you know,
916
01:08:37,139 --> 01:08:41,259
sort of the screw it, hardcore anarcho-capitalist might be a little bit too cynical. I think that
917
01:08:41,259 --> 01:08:44,999
they don't have as much of a stake in the system than they actually have. I just think that,
918
01:08:45,159 --> 01:08:51,119
you know, we have a say. You might not feel that if you live in a country like 300 million,
919
01:08:51,179 --> 01:08:54,759
but I can tell you if you live in a country that has 2 million, you feel it more and you have the
920
01:08:54,759 --> 01:09:00,359
right to choose your security partners, providers. You also have the right to pursue 1940s technology,
921
01:09:00,359 --> 01:09:04,159
frankly, if you want. So I think there's going to be a lot of interesting things happening in that
922
01:09:04,159 --> 01:09:08,879
part of the world. And I think one more wrench in it, by the way, is of course we have a 80 year
923
01:09:08,879 --> 01:09:15,179
old beef between China and Taiwan. Both are again, which is basically the same people, but one is,
924
01:09:15,339 --> 01:09:19,079
has become a democratic nation, although they weren't originally, but they've become a democratic
925
01:09:19,079 --> 01:09:22,979
nation. The other one is still a communist nation. So we're figuring this out as we go,
926
01:09:23,059 --> 01:09:27,959
but I would not go as, I can't even remember your first question, but your second question about how
927
01:09:27,959 --> 01:09:31,959
are we really truly sovereign or are we truly sovereign if you live next to a sort of a
928
01:09:31,959 --> 01:09:37,139
hellscape? That's how I would phrase it. And yeah, I'm not like, I'm certainly not giving up on
929
01:09:37,139 --> 01:09:41,139
what we have over here, the freedom that we've gained after the fall of the Soviet Union for
930
01:09:41,139 --> 01:09:45,399
the last 35 years. Our quality of life is a hundred times better than anybody in Russia
931
01:09:45,399 --> 01:09:50,659
who lives under the communist fascist hellscape that they still have going on there. So we're
932
01:09:50,659 --> 01:09:54,519
going to try to keep it. And I think that it's more complicated. I think it's more complicated
933
01:09:54,519 --> 01:09:58,899
than just saying, I don't know, run away from an overbearing government wherever you are
934
01:09:58,899 --> 01:09:59,979
and take your Bitcoin.
935
01:10:00,459 --> 01:10:01,639
That's an option.
936
01:10:02,219 --> 01:10:03,939
A lot of Bitcoiners do that to El Salvador.
937
01:10:04,099 --> 01:10:08,559
That is an option, but that's not particularly an option that at least I'd say us in Eastern
938
01:10:08,559 --> 01:10:09,599
Europe are interested in.
939
01:10:09,659 --> 01:10:12,039
We want to preserve our freedom here, you know, at home.
940
01:10:12,319 --> 01:10:13,139
No, that makes sense.
941
01:10:13,299 --> 01:10:16,419
You always want to be free on the place where you belong.
942
01:10:16,859 --> 01:10:17,479
So, yeah.
943
01:10:17,919 --> 01:10:22,939
No, in other words, my first question was that it was somehow related that it was like,
944
01:10:22,939 --> 01:10:26,139
Like what does geopolitics talk to you about about money?
945
01:10:26,239 --> 01:10:28,019
But you kind of answered.
946
01:10:28,139 --> 01:10:29,819
Hopefully I touched on it enough. Yeah.
947
01:10:32,819 --> 01:10:34,479
Exponential trends are dangerous.
948
01:10:34,479 --> 01:10:37,579
If anybody exponential trends dangerous, we have a lot of dangerous
949
01:10:37,579 --> 01:10:38,739
exponential trends these days.
950
01:10:38,739 --> 01:10:40,019
I don't deny that at all.
951
01:10:40,019 --> 01:10:42,699
And I do think Bitcoin will be a part of the solution for sure.
952
01:10:42,699 --> 01:10:43,939
Not 100%.
953
01:10:43,939 --> 01:10:46,099
So it all lines up in my mind.
954
01:10:46,099 --> 01:10:47,139
At least it all lines up.
955
01:10:47,139 --> 01:10:49,859
Hopefully it does.
956
01:10:50,699 --> 01:10:52,779
All right, thank you so much for your time.
957
01:10:52,779 --> 01:10:56,179
We have recorded a long episode, but it's time to go.
958
01:10:56,679 --> 01:11:01,159
So yeah, I had more questions, but I think for now it's okay to start
959
01:11:01,419 --> 01:11:05,759
just to my audience learn about Power Law because it's deep.
960
01:11:05,959 --> 01:11:10,559
So and so, yeah, actually, I think the best way to finish is that
961
01:11:10,559 --> 01:11:14,639
if you can say where can people find you and continue learning more.
962
01:11:14,999 --> 01:11:15,399
Oh yeah.
963
01:11:15,399 --> 01:11:17,099
My pleasure, Juan.
964
01:11:17,099 --> 01:11:19,039
Thank you so much for having me.
965
01:11:19,039 --> 01:11:21,879
You can find me at the number one base money,
966
01:11:21,879 --> 01:11:27,239
one base money if i'm in all platforms youtube twitter nostr at the number one base money and
967
01:11:27,239 --> 01:11:31,719
then you can find all the other content that i have and like i said i've been working on this a
968
01:11:31,719 --> 01:11:36,759
long time trying to bring a lot of these charts and different the tables and the base money stuff
969
01:11:36,759 --> 01:11:41,559
to at least be able to be downloaded in a more cohesive manner so hopefully that will come later
970
01:11:41,559 --> 01:11:46,999
this fall cool that will be brilliant for all of us so thank you one
971
01:11:51,879 --> 01:11:52,879
Bye.