[00:02:09] Efrat Fenigson: Thank you for being with us after lunch. I’m sure you would’ve preferred being in the sun, but we are going to be just as shiny. In the past 12 to 18 months, Bitcoin has entered a clear institutional phase, ETFs, treasury companies, mainstream stacking, but Bitcoin was not originally built for Wall Street.

[00:02:28] Bitcoin evolution is being shaped at the moment, not just by ideology, but by capital flows. As someone who truly appreciates self sovereignty and freedom me, I’m opening myself up to this inevitable evolution of Bitcoin in our fiat reality, and I’m learning much about it. So I’m keen to have this discussion with these three masterminds.

[00:02:50] The overarching question here is, are we seeing a trend horse or a real tipping point? And let’s start with. What defines this phase that we’re in? How would you personally define the institutional phase of Bitcoin? What triggered it? Who wants to go first? 

[00:03:08] Willy Woo: So you can think of Bitcoin as a little Pacman, and we’ll be eating these little dots. Gobble, gobble, gobble. Now the big cheese, you dig into that, right? So, I think the tipping point, and I think it really was a tipping point, was last year when the BlackRock ETF came on board and the high priest Larry Fink said, we’re doing this ETF, and now you can talk about buying Bitcoin for the rest of the traditional world.

[00:03:33] That encapsulates $900 trillion of wealth assets. Bitcoin at this point is $1 trillion and we always hear talk about liberty separation of money and state. That means that the government can’t overspend and then taxi run through dilution effectively stealing from the porous. That doesn’t end until that Pacman gets big enough to displace the US dollar, blips gold and becomes a military standard, and that’s not going to happen until you get the large gatekeepers of capital opening up.

[00:04:04] To Bitcoin and pouring that money in and so it’s a necessary step. With it comes risks. We can talk about the fragility of centralization if big pools of Bitcoin gets stored. In one location that might get nationalized and so forth, but that’s a different discussion. This is always going to happen if we’re ever going to, effectively change the way the world uses or what we use as money.

[00:04:29] Preston Pysh: Yep. In short, I would just say that it’s in Bitcoin’s culture to be very skeptical at all times, which is a very healthy thing. And one of the main reasons why it’s done so well to date. When I think about just an image of where we were for the last, since its inception until right now, I would say imagine two galaxies.

[00:04:49] If you’ve ever seen like these memes of two galaxies. They’re like coming towards each other and then they’re hitting and it’s just particles and debris and planets and whatever, just kind of flying all over the place. I would say that we are right at that point where these two galaxies are starting to touch.

[00:05:04] You have this legacy system that has been pretty much gated off, and the flow of capital from that traditional system has been somewhat limited, pretty limited as it flows into Bitcoin and Bitcoin is really that counterforce. I would argue that all of the crypto tokens that are stable coins are actually a manifestation of the legacy system and not actually Bitcoin.

[00:05:27] And that those were like the early tentacles of the connection between the two but now you’re really starting to make impact. And I would say the thing that’s causing that impact to really take place is the massive shift in policy coming outta the United States, which is then having, repercussions all around the world that they’re also saying, okay, well if they’re doing it, and the king of the dollar that’s dominated the planet for the last however many decades, like there must be something here. And so that’s causing the policy shift with respect to, are they Trojan horsing us? I’ll give you a real simple example.

[00:06:01] The last administration, when they approved the ETFs, they purposely did not allow in-kind redemptions. I would argue that that act of Gary Ginsler and the SEC at that moment in time was very Trojan horse like in its action. As soon as the new administration came in, all of a sudden now you have, they’re pro-Bitcoin, they’re pro-everything, everything. But what I find interesting is I suspect, but I don’t know for sure that BlackRock and some of the larger banks that have the ETFs we’re actually the ones pushing for the in-kind redemption, and I find that to be extremely healthy and not a Trojan horse.

[00:06:41] For people that don’t know what the in-kind redemption is, it’s, if you have $5 million worth of iBit or some number like that, is that the right number? Willy, do you know if, is it five? It’s like a $5 million threshold and higher. If you have that many shares of iBit, you can actually go to iBit and you say, here’s the shares.

[00:06:56] Give me the Bitcoin, and they’ll exchange. So that’s, that’s a big, and the fact that that was purposely left out of the past administration just shows you they were really wanting it to be a cash settled market so that it could be compromised just like the gold market’s been compromised because it’s cash settled and not physically settled.

[00:07:14] So things like that are refreshing. It doesn’t mean that we’re like out of the gate or that you can let your guard down, but that would be my argument for why we’re not just, getting scammed. 

[00:07:26] Max Kei: I would say I would commend on the current cycle, in developed markets, they think it’s institutional bull market, right?

[00:07:33] We don’t see many retail. In developed markets, obviously, but in developing markets, it’s actually a retail bull market. So I think that, yeah, the beginning was BlackRock, ETF, and before that it was Michael Saylor. So if we look at the longer cycle than 2020, I think Michael bought first something, something Bitcoin? I don’t remember the amount. 

[00:07:56] Preston Pysh: It’s 500 million in 2020. 

[00:07:58] Max Kei: Yeah. And that kick started, but it took four years for other companies to understand. The purpose and to like Bitcoin treasury thing, and it’s only after four years now we’re seeing five years actually. We see that every day. There’s like new treasury company coming in, which is kind of unhealthy at this point, but I mean, it’s part of the game.

[00:08:20] Efrat Fenigson: It was a year ago when I interviewed Saylor and I asked him, are any other CEOs approaching you to try and copy your playbook? And he was like, maybe one here or there. It wasn’t happening in June last year, and in one year, look where we are at. It’s crazy. The acceleration of this phenomena.

[00:08:38] Okay, so the institutional that are now stacking, are they furthering Bitcoin’s mission or are they capturing it? I know you said president, that it’s not so much scamming us right now, but where do you think it’s leading us? 

[00:08:52] Preston Pysh: Well, on the treasury thing, I think the reason that it’s taken off so much just in the past six months is because I think that there was a massive realization by Michael and MicroStrategy that using preferred stock is very different than using convertible debt.

[00:09:07] And so like what’s so different about that is you don’t have to pay back the face value if it’s not convertible. He just did a new issuance the other day and he is raising $4.2 billion. He immediately sweeps that in the Bitcoin. That benefits the common shareholder, but he never has to pay back the face value of the 4.2 billion like you do if it was a bond, and even if it’s convertible, if it was a convertible bond, that face value is dilutive to the common shareholders after five years.

[00:09:34] So even if the convertible debt was running. He still gets that massive dilution factor. So I think that they kind of cracked into something that was really big, which is when you use preferred stock, you get very different economics that you’re still servicing the fixed income space in the way that they want.

[00:09:53] But you never have to pay back the face value or the preferred stock. It’s called book value. And I think that was a big unlock. And so when the space saw that you now have this big influx of Bitcoin treasury companies that are trying to do the same thing. Most of them don’t even have access to the markets yet, which is an issue for all of them.

[00:10:10] But to Max’s point that there’s concern there, and I agree, I share that concern when you have a Solana Treasury company or you have an Ethereum treasury company, it’s totally absurd what is coming to market and it’s going to be a lot of froth and there’s going to be a lot of dead bodies that kind of come out of it.

[00:10:28] With all that said, I do think that where it is healthy is in incentivizing more institutional custodians, because right now when you look at the ETFs, you could strongly make the argument that it is very captured with Coinbase being the custodian for almost all of these. And the whole reason that unfolded is the first one got through with the SEC and everybody was like, oh, well let me look at their paper.

[00:10:53] Oh, they use Coinbase. Just use Coinbase. Use Coinbase and we’ll get approved. So like everybody got Coinbase. But the Bitcoin treasury companies, like you had Adam back this morning on stage. He’s getting ready to do one with, a lot of Bitcoin in it. And if you think Adam’s going to go to Coinbase, I have no idea where Adam’s going, but if you think he’s going to Coinbase, I would be blown away that he went to Coinbase for his institutional custody.

[00:11:16] So what you could do is you could make the argument that the Bitcoin treasury companies are actually going to help decentralize institutional custody, which is something that I think is really healthy. I think that, because if you think that these publicly traded companies are going to self-custody, you don’t understand how the public companies work and how they’re auditing mechanisms work and how they’re reporting mechanisms work.

[00:11:39] It will be institutional custody, whether people like these changes. I would help you go back to the visualization of the two galaxies coming together and they’re colliding. And now there’s just a different environment we’re operating in a different, as it grows up, things are going to change and people might be comfortable with that.

[00:11:57] Other people are going to be looking at the old way that things were done and saying it needs to still be done like that. And I would argue things are changing. 

[00:12:04] Efrat Fenigson: So Willy, your take on that. 

[00:12:07] Willy Woo: I don’t think centralization around Coinbase and that being hacked is the danger. I think it’s really the nationalization path which happened with gold and it’s happened before, and if the US dollar is structurally getting weak and China’s coming in, I think it’s a fair point that the US might do an offer to all the treasury companies, I think it’s a fair point that the US might do an offer to all the treasury companies, incentivize them, and it could then be put into a digital Fort Knox.

[00:12:32] Create a new, gold standard. Like what happened in 1971 and it’s all centralized around this digital Bitcoin. The whole history repeats again and we’re back to fiat again. And then it’s, now we’re in this position where we tried this Bitcoin thing, but that didn’t work. So it makes the second temp harder. I think that is the centralization risk when it comes to very big and powerful nation state. 

[00:12:53] Efrat Fenigson: So do you think it’s more probable that the US may acquire an existing company with a lot of Bitcoin and treasury rather than holding their own treasury? 

[00:13:03] Willy Woo: Yeah, I think that if you were like, say you wanted to get, say 4% of the 4 million of the Bitcoins you’re going to buy on the open market and drive the price to Infinity, and Michael Saylor becomes probably the richest person alive and therefore, well, let’s say most powerful person in life because it’s common stock held.

[00:13:24] Or you just going to like do a share offer and effectively nationalize in a very free market fair way. You’ve got this big bag of X million by then Bitcoin, you haven’t run up the price. And then everyone who’s just sold their market Strategy stock, let’s say now has to buy back their Bitcoins and then it runs up.

[00:13:42] I think that would be the smarter way to do it. But just thinking about the dynamics of how would you get a big bag of Bitcoin and then create. Dollars trading off it or backed by it. And then how do you rug that into fi it? I think that’s a path that’s been done before. 

[00:13:56] Preston Pysh: If you want to try to predict the future, you start with the incentives and you try to deeply understand how the incentives are going to interact. So when I look at every developed nation state in the world right now, they’ve got a massive addiction. And that addiction is to spend way more than they actually bring in or the value that they add. And that trend is only accelerating. It is only becoming more popular to promise a bunch of money. Hey, I know you went to college and you made these decisions and you were going to pay back this debt, but don’t worry about it.

[00:14:31] We’re going to just print some money. We’re going to pay off that debt for you. Even though people that went to school five years ago paid for their debts, right? because they want the political vote. So that trend against Bitcoin is a massive issue because where this is going to go is they’re going to be so in debt up to their eyeballs.

[00:14:51] And more importantly, their collective cognitive decision making is to just get more votes by wishing away, more printing. Right? And you’re up against this thing that is immutable. And so once the politicians eventually get to the point where they realize, oh no, like it’s literally an oh shit moment that’s that’s on the horizon.

[00:15:13] And that moment is going to be, well, who can we rob? Okay, where can we get the Bitcoin to Rob? And this is thinking through their incentives. How does a politician think? How can I get the most amount of Bitcoin with impacting the least amount of people possible? And what I would argue is. Number one on that list is a private entity that has a lot of Bitcoin.

[00:15:37] That’s like number one on the list. Okay. because you can scrape that Bitcoin and you might have impact. You’ve made it made 20 people upset. But when you’re doing it with a public company, now you have to ask yourself, is that public company in the S&P 500 and how many people in the S&P 500 own it?

[00:15:54] And I’m not saying that they won’t r it. That might be the first place they go. You never know, but I’m thinking through the incentives of the politician and the politicians want, they’re going to rug somebody. I can tell you that right now, they’re going to take the Bitcoin because it’s going to have an institutional custodian that does not want to go to jail.

[00:16:11] So that’s their incentives. I don’t want to go to jail. So yes, I’ll give you the Bitcoin. Okay? And then after they give you the Bitcoin, you know what they’re going to do? They’re going to jam dollar bills down your throat. And Bitcoin’s going to be moving like that. Okay. And the Bitcoin’s gone, but you got the dollar bills and you got ’em here and now they’re that compared to Bitcoin.

[00:16:29] So there’s a lot of people that are going to have a really, and so when we talk about treasury companies can, and this goes back to what I said this morning, can they outperform Bitcoin? Yes. Do they come with more risk? Yes. Are you accounting for the nationalization of a treasury company in your risk assessment of your position, size of Bitcoin versus owning a treasury company?

[00:16:52] I would argue most aren’t. And that’s why my, from a sizing standpoint, I think the sizing should be pretty minimal, relatively speaking, if you want to try to outperform Bitcoin at least today, because we just, like all the incentives are pointing to what Willy just described in, and I would tell you, I think that’s a very probable event.

[00:17:12] It’s just how it actually unfolds. Is the question, and we might be five years, we might be 10 years. I don’t know when that happens, but based on the incentives that I’m looking at and how they’re going to interact, it leads there pretty quickly. 

[00:17:26] Efrat Fenigson: No words of wisdom to add to that? 

[00:17:27] Preston Pysh: No, nothing to add. 

[00:17:28] Efrat Fenigson: I get you.

[00:17:29] Saylor’s model. Is debt fueled Bitcoin stacking? Is this innovation or risk to Bitcoin’s? Fundamentals? 

[00:17:39] Preston Pysh: I don’t see it any different than borrowing and lending for the individual. Only it’s happening at an institutional level. So if he’s over collateralizing Bitcoin by five x and he can kind of peg it between like four x and five x, if you go and you wanna take out a loan and you put Bitcoin on the deposit at the LTV on it, right, and it’s, you’re depositing $200 worth of Bitcoin to borrow a hundred.

[00:18:04] That’s over collateralization of two and he’s over collateralizing at a five. But he is doing it at an institutional like size, like the sizing’s, just different. And for a lot of people that don’t understand the financial terminology, they just can’t wrap their head around like what he’s doing. But when we say these ratios, like he’s over collateralized five to one.

[00:18:25] What else I think is really interesting is those dividend payments are denominated in fiat. If you run the power law, let’s just say power law is valid. We had Mr. Mki up here earlier today talking to you about the power law and the R squared values and all that. If we take that model and we take the dividends on preferred stock and you model it out for the next 10 years.

[00:18:48] Those dividends. if it’s issued at a hundred and he’s paying a $10 dividend annually, do you know what that $10 looks like 10 years later? If you swept all the book value in the Bitcoin, it’s almost zero in relative value. He’s still paying the 10 bucks per share. But you know what the value is in Bitcoin terms, it’s almost zero.

[00:19:08] After the first year. It’s like six bucks. It’s not $10, it’s $6. So there’s something to be said for a person who understands the idea of stacking your assets in Bitcoin. In Denominating, your liabilities in Fiat. It’s a very powerful concept if you really understand it, and I would argue it’s maybe even, and this is very controversial, but I’ll say it anyway, I would argue that the backing is better than five to one, simply because he’s of this assets or Bitcoin liabilities are fiat. 

[00:19:43] Willy Woo: Well, Strategy is probably the most robust of these companies. And you see in this cycle, everyone’s following the model, but it’s not the exact model. We have to be careful of the risks that are being taken. Strategy originally when they were doing the convertible debt was I think it was a five year out debt.

[00:20:02] And so, I think Market Australia might have been close to liquidation in the last beer market, had the debt not been pushed out five years. So. I see a lot of these companies now have quite short dated debt using the older model of convertibles where Strategy went to eight to 12 years, and now they’re doing preferred stock.

[00:20:21] You look at Meta Planet and doing this sort of hedge fund play where there’s a hedge fund that they’re doing a back and forth, back and forth to simulate a at the market offering to effectively simulate the ATMs that market Strategy are doing, but they’re taking big trenches of debt. 300 million at a time and then selling that into the market to replenish, to then pay off the debt.

[00:20:45] If the market turns on that at the wrong time and they cannot do this market operation, you’re going to get liquidated. And it’s not four year debt, it’s not eight year debt, it’s immediate debt. And so you really need to look at the copycats and look at the dangers in the debt structuring. And liquidation risk.

[00:21:04] And my opinion a meta planner is that they are quite expert at timing the market. Maybe that’s the game that they played. They absolutely bought the bottom wick of the last major dip and unloaded almost 300 million in that one buy. So maybe they’re proving they can time the market, but that’s what you’re buying.

[00:21:22] You’re buying a treasury that is opted to time the market and they think they can unwind the debt at the top from the looks of how they’ve structured things. And there’s a lot of these treasury companies, a lot of paperwork to work through. You wanna know what you’re buying. There’s risks in it.

[00:21:37] Mike Strategy is the blue chip. Very, very robust. still risks, obviously with everything. My concern is the copycats that aren’t doing it at the same level or have, how many of these guys can offer preferred stock? What are their options? A lot of the latest vogue is to really start small and run up the leverage, get the yield rate up and grow fast.

[00:21:59] We’re tail end of a bull market right now. So I think a lot of people are going to get hurt and we will have massive M nav compression. We’re going to have liquidations of some of the weakest treasury companies and we’ll see who’s, who’s going to survive and what’s going to break over the next beer market.

[00:22:16] And I’m wondering about what the commentary from Trade Fire will be is I look at those Bitcoin or crypto people, look what they did there and look what broke and. Another cycle of jokes on us. 

[00:22:28] Efrat Fenigson: Yep. There’ll be survival of the fittest and a lot of fud around that. Right? So in terms of adoption, Willy, you’ve estimated 1 billion Bitcoin users by 2030.

[00:22:38] Do you see treasury companies in corporate adoption accelerate this space? 

[00:22:43] Willy Woo: I’m not sure, to be honest. I’m not even sure if that projection will, it’s very hard to count a lake. What do you call an adopter?

[00:22:51] Efrat Fenigson: Like, today it’s hard to say. 

[00:22:54] Preston Pysh: Well, to your point, it’s like if Strategy gets included into the S&P 500, exactly.

[00:22:59] How many people own SPY index? With the de facto, they have Bitcoin through, 

[00:23:05] Efrat Fenigson: You call it surrogate, right? 

[00:23:07] Willy Woo: Yeah. So it’s very blurry right now. We are in a lot of assets. Everyone pretty much has exposures to S&P 500. Even if it’s in a pension fund, you’re receiving retirement. You don’t know what you’re own owning, but it’s going to be the S&P 500 in there, so that means Bitcoin’s in there.

[00:23:22] So I think these metrics have become a little bit more clouded. I was tracking self-custody and exchange custody, so, but that’s, it’s growing at a, a decent clip. Almost 5% of the world population has exposure to this asset, excluding the sort of S&P 500 patent. So yeah, it’s, and given that it’s still quite early, I think it’s still quite early.

[00:23:44] Efrat Fenigson: Yeah, we’re still early. 

[00:23:46] Willy Woo: We’re still early, but I’m thinking in terms of generational sort of times. We’re 16 years into this asset and it’s only $2 trillion. I mean, it’s probably gone a hundred x to grow, and it’s probably going to take decades to get there. 

[00:23:58] Efrat Fenigson: What about longer term projections, because I’ve heard you speak about thousands of years from now, like 10,000 years. I’ve heard you give really long projections about Bitcoin. 

[00:24:11] Willy Woo: Well, I value long-term thinking, that’s for sure. And we are trapped inside. Think inside the fiat world in 1971 to now, and I think of that as a patronization of a liquidity crisis. And we had gold and silver as money for 6,000 years and it’s been the agrarian age, the industrial age.

[00:24:28] We’re in a digital age and I think the Viet will blow up eventually. The only thing that’s special about now is the whole world got rugged all at once. So we’re all sort of debasing ourselves to oblivion where when one kingdom debased. They blew up really quick because everyone ran to the gold-backed kingdoms.

[00:24:45] So this will blow up. And then what replaces gold? And it’s not going to be gold again because you can’t get, it’s no longer scarce. And not in a hundred years, not a thousand years. I mean, gosh, who knows what technology will have then? And it’s, only a few decades away to mine asteroids, given the pace of that technology.

[00:25:05] So you have to secure the scarcity, the ledger. With something that grows with technology and that’s the energy. And Bitcoin’s had the 5% adoption. Very hard to catch something like that for money. There’s only two properties of money. One is it’s accepted, and number two. It’s secure and robust. And that was the scarcity element of gold and all the other stuff was just people thinking about gold.

[00:25:29] It should be divisible, it should be durable. And that was us using atoms to secure the ledger. But that doesn’t apply anymore. And so you pan this for a thousand years of technology, it’s have got to be an energy coin. And we’ve got one and it’s reached hundreds of millions of people already soon to be a billion.

[00:25:46] Preston Pysh: Just something that I’ve noticed recently on the future and Bitcoin adoption. Has anybody noticed Grok is an absolute hardcore Bitcoin maxi. Has anybody else noticed that? I really mean it. So much so that like you see the typical trade fi people that just don’t understand Bitcoin, they’ve been around for.

[00:26:06] Eons. And it seems like every day there’s more of ’em. And I remember in the early days I would go in and I would reply, I would take my time trying to explain it and all that. And nowadays it’s just like, Hey, Grok, tell this person why they’re wrong. And just like I’m gone, like I just don’t have time to like sit there.

[00:26:22] And what’s amazing is Grock just like lays it all out. And then what’s really funny is then the person starts arguing with GR and Grok is coming back. It just kind of just hammering the next point and the next point, and then other people were chiming and it’s turned into like this array of just Grok orange, peeling everybody in the thread.

[00:26:41] And the reason why I think that this is, we’re just on the cusp of something really, really big, which is today we look at the AI and we’re like, it’s usually Right? It’s pretty good, right? Five years from now, if you’re arguing with an ai, I think you’re just going to kind of be stupid for the most part.

[00:26:59] Unless you’re just like a leading expert in something that’s like really deep, you might have a keen insight that’s better than the ai. Which gets into this whole idea of like localized intelligence is the thing that really kind of discovers new things. But for a person who’s just kind of like a casual observer or somebody who doesn’t really understand a topic and they’re interacting with ai, and AI is giving them these answers, and they thought Bitcoin was a Ponzi scheme in their mind, and this AI is just like lighting them up.

[00:27:28] And then all the crowd, and everybody’s laughing at them as they’re interacting with the ai. I mean, I literally saw this with, Jim Chinos. He literally made his name in shorting Enron. I mean, he is the real deal, and he’s shorting MicroStrategy right now. And Grok was in there and he’s there arguing with Grok and Grok is just tearing him apart.

[00:27:47] So I think this is a big, important thing that’s going to help in the education process because people at a certain point are just going to say, okay, well this thing’s like really smart, and here I am arguing with it, so I must be wrong and it’s going to be a little bit different. because you’re dealing with something that’s of super intelligence.

[00:28:03] You’re not just dealing with this guy who’s, got a mohawk who’s got all these followers and you’re like, yeah, he’s probably stupid.

[00:28:10] Max Kei: I mean, to continue on the AI topic, I think there’s a good synergy between AI and Bitcoin because if you think about it, what kind of money AI will use in the future AI agents, it’s not only about educating, but also like working capital, et cetera, et cetera.

[00:28:26] Obviously it’s Bitcoin. There’s no other option. Because it’s like digital agents, digital minds working with digital money. So that’s a very powerful thing that a lot of Bitcoiners even don’t understand yet. Whether there will be bear market, bull market, whatever. It’s a very bright future in a way that we have a huge opportunity.

[00:28:45] We don’t know actually yet the full capabilities of ai and they’re going to use digital form of money, and it’s definitely not going to be a fiat. 

[00:28:53] Willy Woo: Why won’t it be ultrasound money? Ethereum? 

[00:28:56] Max Kei: No. No way. I think if Grok got it. So I mean the rest of AI will get it as well. 

[00:29:03] Efrat Fenigson: So here’s a question that’s like close to my heart because I like covering this topic of CBDC.

[00:29:09] So do you think, are you with me on this camp thinking that those states and governments and global organizations are going to be running around trying to implement those CBD CS in different countries around the world in the next few years? While Bitcoin continues to do what it does, while the US has taken the lead on integrating that into the traditional finance, and those two things are going to be happening in parallel around the world and whether they like it or not, all their experimentation is going to fail because Bitcoin’s going to prevail.

[00:29:43] Are you with me on that or do you see it going any other way?

[00:29:47] Max Kei: Not only because of Bitcoin, because the private sector actually gets stable coins and does stable coins better. So it’s not CBDC that it’s not Bitcoin versus CBDC. It’s like Tesla versus CBDC or any other private entity that works with stable coins because it’s already like a huge market, huge amount of liquidity there.

[00:30:06] And it’s really hard to outperform like something like desert that has 160 billion worth of stable coin. And it’s like the adoption is increasing. People are using it, and I guess there’s no way for them to capture that market as well. But Bitcoin plus private stable coins. I think unbeatable in a way. 

[00:30:25] Preston Pysh: I would just, you talk to people that look at Tether or any large stable coin and they just say it’s a de facto CBDC.

[00:30:33] If they need to stop a transaction, tether or circle or whoever can get a tap on the shoulder from the US government and they can say, Hey, we didn’t like that transaction. We want you to reverse it. And if you don’t think that they would reverse it, you’re really naive. I mean, it’s just an extension of the dollar system is all it is.

[00:30:51] And so like why is the CBDC always going to fail against Bitcoin? Well, it’s always going to fail against Bitcoin because at the core of what that stable coin represents, it’s just a manifestation of government overspending. And expanding the money supply and needing to pay for their taxes by continuing to expand the M two at 10% a year.

[00:31:09] So like that’s what that representation is. Whether they can peer into whatever, as far down as the Nats as detail, I have no idea, but I think anybody using one of those should just assume that they are. 

[00:31:22] Willy Woo: Well, I think it’s ironic because the bank shut down banking for the exchanges back in 20, early days in 20 13, 14, roughly when TE came to be because there was no banking to be had.

[00:31:33] So they were the defacto banking, and they got so big that they’re now on track to displaced China’s buying of treasuries when Bitcoin hits a million dollars, and therefore the us But government becomes dependent on Bitcoin because how it works is. There’s an order book on the exchange. You’ve got Bitcoin on one side, you’ve got us dollars on the other side, but it wasn’t US dollars, it was Tether.

[00:31:55] So as the liquidity increases, there’s more and more expansion of Tether to trade for it. And now it’s at the point we’re displacing the largest nation states to buy the US treasuries. It’s quite a, and it’s ironic. 

[00:32:08] Preston Pysh: They were tripping over themselves to pass the Genius Act. And you have to ask yourself why.

[00:32:13] Why were these politicians tripping over themselves to get this thing passed? And the answer’s really simple. They needed a buyer for all their debt, and the buyer is the stable coin issuers. And it’s really kind of interesting to see how that all really transpired and really kind of came to a head is the government had to start issuing shorter and shorter duration paper because there was no buyers for anything that was long duration because there was so much inflation risk.

[00:32:39] They’re down there like issuing like one month money. And it’s like, well, who’s going to buy all this one month money? Well, you know what? The stablecoin issuers literally like, they love that because they can back everything. They can gobble up all this new issuance. They don’t have the inflation risk that if they were buying 30 year paper, they don’t want that inflation risk because they don’t know if it’s going to be fully backed.

[00:33:02] Right? Or they’d have to keep rolling it to try to like manage that. But if it’s really short duration, it’s actually perfect for them. And then the really smart ones, what are they going to do with all the coupons that they’re receiving? They’re just going to sweep it into Bitcoin and then it’s really backed.

[00:33:16] because that thing’s going up at 40 to 50% annualized. It’s like extra over collateralized. What I find so interesting with all of this is you literally have BlackRock and all these other banks that are playing a fractional reserve game. They don’t even have what they’re issuing in the vault. But yet you have a company that’s fully collateralized with extra Bitcoin in the vault, and they’re making more profit than the ones that are playing the Ponzi game, and they’re getting the issue like literally from thin air and they’re making more money than them.

[00:33:49] If that doesn’t show you like the natural. Market forces that nature is trying to heal itself. I don’t know what does, because it’s just, it’s miraculous to me that you can have something that’s over collateralized, just whipping the pants off of the ones that are literally cheating, as if it’s a total Ponzi scheme.

[00:34:05] Efrat Fenigson: So wrapping up and going back to our initial question of whether this institutional phase is a trend horse or tipping point, what are your last thoughts about this? Where are we going to see Bitcoin going over the next couple of years to five years? How do you see that evolving? 

[00:34:22] Max Kei: I think the institutional phase is just a logical step in evolution of Bitcoin.

[00:34:27] We cannot avoid that. So whether you like it or not, I mean, there’s a saying that Bitcoin is good because even your enemies can use that. 

[00:34:34] Efrat Fenigson: And I’ll add to that. And what’s an advice you would give the plebs? Us that are watching this unfolding? 

[00:34:40] Max Kei: No, just educate yourself. That’s the best advice. I mean, do your own research, educate yourself. Self-custody, I mean, always about that, but yeah, sorry. I don’t like paper Bitcoin, but I do understand that it’s a path. It’s just a phase in the market and I guess institutions going there and buying more and more Bitcoin in the end, it’s like better for us as well, because first it’s CTF, then it’s treasury companies, then it’s banks.

[00:35:06] And banks serve the end customers, which we are. So at some point, I just envisioned that as soon as banks will get comfortable with Bitcoin, you’ll be able to go into your local bank and borrow against your Bitcoin. I don’t know, trade it, sell it by it. So I think the institutional adoption is inevitable and it’s happening already, but hopefully it’s happening for good.

[00:35:29] Preston Pysh: When I just look at, if you would talk to a Bitcoin or back in 2015 and you say, all right, take us 20, 30 years into the future, how do you see this? They would say, well, I think Bitcoin’s the new medium of exchange. It’s the store of value. The whole world is using it. People, businesses, governments, like that’s like the Utopias.

[00:35:50] Bitcoin has completely supplanted the dollar. So when we’re at this moment in time and institutions are starting to use it, governments are playing around with it, having a strategic reserve, and they’re all upset and all up in arms, I’m looking at them saying. Okay. Like how in the world did you ever think we were going to go from there to here?

[00:36:08] And so it doesn’t mean it’s safe, it doesn’t mean that everything is going exactly like it should. I’m not trying to imply that. I’m just saying if we’re going from nothing to the whole world, using this as the unit to settle all exchange, like at some point the institutions are going to start coming. At some point the governments are going to start using it.

[00:36:27] The one thing that I’ve learned through the years in the space is there’s going to be some that do it really well, and there’s going to be some that do it really stupidly, and they’re going to blow up and they’re going to hurt a bunch of people. And you know what? That’s a free market. That’s a free market. We want free markets.

[00:36:43] We’re Bitcoiners, we want free markets. When we were up on stage earlier, max in Switzerland, the gentleman from Switzerland, he was talking about how everything has to be over collateralized in borrowing lending. I’m looking at him. I’m saying there’s a country that gets it. That doesn’t mean every country in the world’s going to get it.

[00:36:58] But with all that said, my advice to the crowd is if you just take self-custody of Bitcoin. If you have the technical competence to do that, you are going to do very, very well based on where I think all of this is heading. And you don’t have to like, as long as you don’t have like a really lavish lifestyle, that should be good enough, right?

[00:37:17] If you want to get fancy and you wanna do all this short, buy a treasury company, just make sure it’s not a lot. Like just be smart about it if you want to have fun or whatever, I don’t know. But yeah, self-custody, Bitcoin is all there is to it.

[00:37:29] Willy Woo: Yeah, I don’t think it’s anything’s changed really. It’s the self-custody, hold your own keys.

[00:37:35] Everything else has been just on-ramps, more and more capital coming in, and now it’s institutional phase, meaning bigger capital is coming in and just please make Bitcoin undruggable, which means self-custody. If we’re not self-custodying, then it’s totally rugg bull and what we just talked about earlier in the bad path.

[00:37:55] Bitcoin can be rugged if everyone’s starting to put everything into institutions, so keep it simple. self-custody, nothing’s changed. Unwraps are bigger. That’s all. It’s complicated little stuff around the edges. Every cycle, there’s complicated stuff that you can get rugged on. Things to digest we can learn, but nothing’s really changed. Self-custody. 

[00:38:16] Efrat Fenigson: Preston, Max, stay open. Stay curious. Stay humble. Stack SATs. 

[00:38:26] Outro: Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com.

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