Bitcoin is a solution to probably the largest, most difficult problem in finance. When it comes to these other assets, I think that almost all of it is dead on arrival. It is still the best asset to hold long-term in terms of potential return.
So, you think that President acting on a Trump mandate to basically tackle the long end of the curve?
Well, I think that he wants yields to come down for sure. He only has the tools in his toolbox. The market told him it was futile. The market went down in terms of the bond yields and then they went right back to where they were. So, obviously his ability to communicate is not going to get those yields down. Automation is the macro theme of our entire lifetime. We are kicking the frontier models' asses when it comes to finance.
Our team with less than 15 employees is able to beat the frontier models that are trillion-dollar-plus companies.
You've come out publicly and you like, you, you, you were like the world's betting against us. Why do you think that everyone's betting against you?
Well, who else is more fun to cheer against than the guy who was telling you to buy Bitcoin 10, 12 years ago and was right?
Do you think that we're going to get a crypto bull run or is it just going to be like a Bitcoin and ETH, maybe Solana bull run?
And it's so good to see you again. We haven't done this, this kind of podcast for a while and it's good to see you just after like a big green candle. I'm kind of wondering if you feel like this is the end of the bear market or if this is like just a dead cat bounce and that like how do you view this, this pump on Bitcoin?
Well, my opinion doesn't really matter. I just go and look at history and I think that we've had, I don't know, a handful of these five sigma type moves and every single time that they've happened, they have marked the bottom of a market or some sort of reversal in, in the direction of Bitcoin. And so, um, I've been talking for a couple months now just saying like don't get lulled to sleep and it's hard, right? You're so used to Bitcoin being volatile in your direction that towards the ends of these bear markets, it's very easy to kind of say, "Hey man, this thing isn't working." But, uh, here we go. And I think that not only is Best in Tech's announcement, um, kind of remind people that the money printer's not going to stop, but a move like this in Bitcoin, where it goes up, you know, about $15,000 per coin in a short period of time, reminds people that, uh, there's a reason why people like holding, you know, this volatile asset.
It's so funny because, you know, before the pump, nobody wanted Bitcoin. But, if you look at the ETF flows straight after the pump, I mean, it's literally, it's all positive, and I think $3 billion has gone into Bitcoin in, in, in the last 7 days. That's, that's, that's exactly the investor psychology.
Yeah, well, look, I, I think that, um, investors don't want to catch falling knives, and vice versa. It's like they're willing to give up a little bit of the reversal. So, let's say that Bitcoin is up, you know, selling at 20% or so, they'll give up the first 20%, uh, return in a, uh, coming out of a bear market, but it's because they think that Bitcoin's not going to go up, you know, 150, 200, 300%, whatever the number is that they have in their head. And so, that's really, I think, the way that, uh, kind of professional investors think, is they're not trying to perfectly time the top, they're not trying to perfectly time the bottom. What they want is they want to have confirmation that there has been a reversal, and then they'll go and start to, uh, build their position again.
So, before we carry on, are you hearing like a crackle, Hoddle's? Like
Yes, I am. The sound I'm trying to
There's a crackle coming, I think, from your head. Just count to 10. I think from your headphones, there's a bit of a crackle.
1 2 3 4 5 6
There's a slight crackle coming from your mic. Like every time you talk, it's like, it like static, almost.
It sounds static, kind of.
That's better. That is better. That's much better. Okay, now try again.
It, it may be, be. All right, let's see. If I go like this. 1 2 3 4 5
Not crackling. It's crackling. It's crackling.
Still there. Still there. It's like a... You don't have AirPods or something?
No, I can't hear you.
What about now? Count five?
It's a little bit better. Okay, let's try it. Let's, let's, let's, let's try pick up from there. If it crackles, I'll let you know. Um, okay. All right, so I mean, I guess that we both agree that the reason for this pump was the Scott Bessent announcement or the series of Scott Bessent announcements, which ultimately kind of told us that he's taking on the bond market to try and, to try and tackle the long end of the curve, right? How do you feel about what he's doing? There's been like some mixed feelings or maybe they haven't been some mixed feelings. I read your Substack this morning that you said that, that, you know, it wasn't Bessent versus Druckenmiller, it's Bessent and Druckenmiller. And the history there is that Druckenmiller criticized what Bessent's doing. He kind of said, "Look, he prefers for markets to price assets and not for the, the Treasury to basically get involved." What, what's the game that's being played here?
Well, if you think about the reason why they're doing this is because long-dated yields are getting too high and they want to try to get them down. So, he comes out and he says, "Look, we're going to use every tool in the toolbox and we're going to increase the number of purchases we do. We're going to try to push these yields down." On announcement, yields went down and then they went right back up. And all of a sudden, a day or two later, Druckenmiller publishes a Wall Street Journal op-ed that says, "Hey, you shouldn't do this. Um, let the market speak. I think, you know, let the bond market tell you. It's, it's a warning sign. It's telling you that there is a problem." And I don't think that Stanley Druckenmiller somehow understands this and Scott Bessent doesn't. I think that Scott Bessent has to walk a fine line between, uh, being loyal to the president and the administration and trying to get yields down. But also understands that the only way that you're really going to do that is for these politicians to stop spending so much damn money. And so, what do you do? You call up your boy and you're like, "Hey, man, let one fly in the Wall Street Journal. And, uh, who cares if it looks like you're coming after me? You're going to help me make the argument internally that, uh, we got to get, you know, much more kind of a tighter belt." And I don't know if these guys really care that much about, uh, people's perception of drama between, you know, friends. It's kind of like, uh, if you call up your friend, like phone a friend. Remember like a, how, how to be a millionaire or whatever that show was? You can phone a friend. I think Bessent was phoning a friend saying, "I need help here, but I can't say the things I want to say, but you can. Why don't you go publish this in the Wall Street Journal and, uh, and then it'll make my job easier."
So, you think that Bessent's acting on a Trump mandate to basically tackle the long end of the curve and not to really what he would probably do, what, what he'd want to do?
Well, I, I think that he wants yields to come down for sure. I mean, they've been talking about that for a while. I just think that, um, he only has the tools in his toolbox. The problem is his toolbox, you know, maybe a way to think about this is like he's got a toolbox full of hammers and nails, but you need a screwdriver. And the people who hold the screwdriver are sitting in, you know, House of Representatives and in the Senate. The people who are voting for all of this crazy spending. And so, he's saying, "Well, I guess I'll use my hammer and nails, you know, but, uh, by the way, it'd be real helpful if that screwdriver was being used cuz that's actually the tool we need." And so I just think that, you know, he, he's going to do what he can, but he also understands that it's a futile effort, and you didn't have to wait long. Like the market told him it was futile. The market went down in terms of the bond yields, and then they went right back to where they were. So, obviously his ability to communicate is not going to get those yields down.
So, if his ability to communicate doesn't get the yields down, the next step is that in September they actually start doing the, the bond repurchases. And they've got, he's indicated that they're going to use the Treasury General Account. There's about a trillion dollars in the Treasury General Account. I doubt they would empty the Treasury General Account, but do you think that he's going to actually use it? Or do you think like it's just talk at, at this stage of the game?
They're talking about such small numbers. It's like bringing a water gun to a gun fight, right? We're talking going from 2 billion to 4 billion dollars of repurchases. There's some numbers out there, you know, 20 billion, whatever. It's a rounding error. It's not going to be anywhere in terms of actually having a real impact on the general account, but it's also not going to have a material impact on the long-dated yields.
So, why do you think that Bitcoin responded so positively to it? Like if, if it's such a drop in the ocean and, and it's not so insignificant, why do you think the Bitcoin chart basically did this?
Well, because everyone realized, "Wait a minute. Doesn't matter what's going on in the short term. Like the money printer is never going to stop. These people literally are never, ever, ever going to stop printing money." And Bitcoin, for all of its warts, for all of the critiques, for all of the, the craziness that goes on in the Bitcoin industry, and you know, all of that stuff, [snorts] it is still the single most sensitive asset to global liquidity. It is still the best debasement hedge. It is still the best asset to hold long-term in terms of potential return. It still is probably the best risk-reward asset in all of finance. And sometimes you need a reminder. And I think that as soon as everyone got reminded, you saw the response. They said, "Oh man, I forgot. That's why we all hold Bitcoin." And they all ran and grabbed Bitcoin and Bitcoin went up 20%.
So, I read this tweet from, from Luke Martin. He says that institutional flows are pivoting from AI, AI to crypto and gold, basically. And that comes off of a, a tweet by Eric Balchunas, who basically said that since Scott Bessent spoke, the, the gold ETF and the Bitcoin ETF went back into the top 10, and the flow started to flow out of the, the AI, the, the semiconductor ETFs and the AI-centric ETFs. Do you think that we got, we're about to see that trade basically closing? In other words, you know, AI and, and Bitcoin diverged for a while. AI went exponential, Bitcoin went straight back down. Do you think that like there's any truth to this? Do you think that this is the beginning of like a flow from the one to the other?
You know, it's funny because I'm looking for the tweet to tell you the date, but a couple weeks ago I tweeted something that got everyone all worked up. Everyone was so upset, but I basically said something to, to the effect of it's going to be glorious when the... Here, on June 29th, I tweeted and I said, "It is going to be glorious when all the profits from AI investing rotate back into Bitcoin and gold." Obviously, that's what was going to happen. Everyone was chasing the shiny thing at the bar, and it was running around. They were all going after their AI stocks. But at the end of the day, the productive assets of public equities do not outperform Bitcoin and gold. You got to come home at some point. You can go speculate all you want, but you got to store that value somewhere. And Bitcoin and gold were going to be the home of all global capital. These assets are going to do incredibly well over the next 25 years. And so, June 29th, I said that. We're in late August. Two months later, here we are. That's exactly what's happening.
It is what it is. Okay, so I mean, I know the, I mean, I hear you and I do believe that we're, we're, we're, we're just beginning the new cycle. I'm kind of keen to get your view as to how you see this crypto cycle. And the reason why I said that is I know for sure it's a much more institutional cycle. What does that actually mean? Where's the money going to flow? Is it going to be a Bitcoin cycle? Is it going to be a crypto cycle? Is it only going to be Bitcoin, Ether, Solana? I know that you're much more in touch with the institutional flows than I am. Like how do you see the cycle playing out? Where do you see the money flowing to?
Well, I think that investors ultimately are trying to do two things. There is a group of investors who fundamentally believe that the AI trade is real. I agree with them. I think that AI is very real. I think that it's underestimated the impact it's going to have. I think that people misunderstand some of the areas where value's going to accrue. And then there's investors who say this stuff's way too hard. I don't need to be a genius. I don't need to go and do individual stock selection and equity selection. I got a small brain, but I got big balls. And what I'm going to do is I'm going to go full portfolio into Bitcoin, gold, land, things that are going to benefit from the US government printing money and pushing asset prices higher. And I think that that group is actually way better off. Historically, look over the last 10 years, they've done better than the equity investors have done. But also, if you look at probably for the next 10, 15, 25 years, we have a major problem in the United States specifically. We have interest expenses that are now over a trillion dollars a year. We have a $40 trillion debt. We have promised a bunch of people a ton of entitlements that we do not have the money for currently. And we are still making those promises today. So, if we had serious people on Republican and Democrat leadership, what they would do is they would say, "Hey, we got a major problem on our hands. We are not going to keep making the promise to the people today that are young because we can't even pay the people who are old." But the problem they have is that it's a Ponzi scheme. You can't shut off the new capital coming in or then you got to go deal with the people who are expecting to actually have the benefit. And so they're just caught, right? That there's nothing that they can do other than print money, continue to kick the can down the road, and hope that some miracle occurs whether it's through economic growth or something else. But there's no miracle coming. Like the only way you address this problem is you either balance the budget, you stop, uh, the entitlement programs and, and make changes to them to, to edit them in a way that will actually address this issue. Or you debase the currency. And if you debase the currency, investors will win, people who don't have investment assets will get punished, we'll get a widening, you know, K-shaped economy, socialism, communism, all this stuff will try to, uh, go and adopt all the people who feel left behind, uh, by the capitalist system. Story is old as time.
