[00:02:43] Andy Edstrom: And I’m like, Oh, no problem. Baby will be out. He’ll have 24 hours to recover. Yeah. And then 40 almost two full days of labor. So, you know, my goodness, Jesse’s a trooper. He doesn’t look-

[00:02:54] Preston Pysh: his wife is the trooper.

[00:02:56] Andy Edstrom: That’s right. That’s right.

[00:02:57] Jesse Myers: I mean, I have already cracked jokes about how I did most of the work, but I didn’t do.

[00:03:04] Preston Pysh: She’s in a backhand.

[00:03:05] Preston Pysh: Yeah. Oh, my. Okay. All right. Let’s go ahead and get down the business here. Guys, what are your overall thoughts as we look to just how Bitcoin has performed? The general markets have performed since the start of 2024. Anything that you guys find noteworthy or surprising that maybe you weren’t expecting or maybe that you were at the start of the year till here we are at the end of May.

[00:03:30] Andy Edstrom: Yeah, you go first, Jesse. I definitely have some thoughts there.

[00:03:32] Jesse Myers: I think even though we’re not talking about it a ton lately, I think 2024 is for Bitcoin is all about the ETFs still. And the pattern of what has happened with the ETFs is very interesting and very promising in my opinion about going forward because, you know, we, we had the ETFs rollout, the wall street expectations about the net inflows for the first year were modest.

[00:03:59] Jesse Myers: Way different than what we saw and they’ve already been blown out of the water. So there’s already a ton more demand than everyone expected.

[00:04:08] Preston Pysh: What is it about, five X more than what some of the, you know, the, the mainstream analysts were saying, are we five, 10 X? What is it? Would you say?

[00:04:17] Jesse Myers: I think it is something like five X around my head.

[00:04:20] Jesse Myers: I feel like it was like a 3 billion mark and we’re at like 12 or 15, something like that. That could be totally wrong. But anyway, so, so. They roll out in January. The first month is really defined by GBTC outflows. And so net inflows to the ETFs overall are kind of zero. But then February and March. Very net positive.

[00:04:46] Jesse Myers: The GPTC outflows subsided. People who wanted to get out of GPTC took the opportunity in the first month, but then the flows we saw in the next couple of months were all inflows. People piling into BlackRock and ARK and Fidelity in particular. And the reflexivity is what I found very interesting. And I think is very promising going forward as the, the price of Bitcoin started to run up because of all these inflows.

[00:05:14] Jesse Myers: We on quite a few days, we were seeing 500 million of net inflows into the Bitcoin ETFs, which amounted to the prices. We were at 9, 000 Bitcoin a day being absorbed. And at that time, we were mining 900 Bitcoin a day. Since the having that’s dropped to 450. So we were seeing on some of those days, 10 X inflows into, into Bitcoin ETFs versus the amount of supply being created.

[00:05:41] Jesse Myers: And as the price started to run, that’s when we got those really big days. So, you know, price starts to go up. The psychology with Bitcoin has always been that when the price runs, people want to buy it more. And so we saw that with ETFs. And we had, you know, quite a, we, we pulled forward a lot of post market post having bull market rally because of the supply demand imbalance in February and March in particular.

[00:06:07] Jesse Myers: And then with the Genesis Gemini bankruptcy proceedings in March, April, we started to see a lot more GBTC outflows again, which sort of, you know, negated the inflows we were seeing from organic demand in the ETFs. And we kind of went sideways. We’ve been going sideways for the last couple months, and I think that’s in large part spurred by the Genesis Gemini bankruptcy proceedings causing the GBTC selling that made the supply demand imbalance from ETFs go away.

[00:06:39] Jesse Myers: But looking forward, we’re not going to see that kind of GBTC activity again. And so I think we’re probably just a. A bit of a rally away from kickstarting that flywheel and that reflexivity to the upside again, which is very promising for the next 12 months.

[00:06:54] Preston Pysh: Andy?

[00:06:55] Andy Edstrom: Well, well said. So I’ll throw in the latest ETF news here, which is that surprise of all surprises.

[00:07:05] Andy Edstrom: It looked like the Ethereum ETF was not going to be approved. It looked like Anytime. Anytime soon. Yeah, excuse me. Never say never. It was probably, you know, unfortunately inevitable. But people didn’t think it was going to happen soon. And then, we had this wild about face. In the political landscape, and maybe I won’t dig into the weeds on that just yet, other than to say, I feel like Gandalf in Lord of the Rings and the Two Towers, and he’s standing in front of Theon, King Theon, and the evil wizard Saruman, right, has possessed King Theon, and like drawing blood from a stone, Gandalf exercises the evil wizard.

[00:07:58] Andy Edstrom: And I feel like that’s what just happened with Elizabeth Warren and the democratic party and and and crypto policy. But what I’ll, but the other thing I’ll say about the Ethereum ETF looking forward is. I’d been thinking about scenario analysis and I’d been thinking about, okay, we had the wave of adoption of the ETFs that Jesse just described.

[00:08:20] Andy Edstrom: And now we’re in this cooling off period and we’ve been waiting for wealth managers, financial advisors to do their due diligence and start hitting the buy button more frequently in the coming months. And then I was thinking, Oh my, okay, now we got this Ethereum, eTF. Is this going to confuse them right now?

[00:08:38] Andy Edstrom: I got to, now I can get two things. I can press the buy button on for my clients, but as it turns out, correct me with if I’m wrong, it appears that what got approved don’t got yield don’t got staking. And I think that’s actually a really good fact, relatively speaking for Bitcoin price performance this year for the Bitcoin ETF, because I don’t think that a, an Ethereum ETF product that does not deliver yield to the client or to the investor is nearly as compelling as one with yield.

[00:09:15] Andy Edstrom: And yeah, it’s just kind of a, it feels like a much worse substitute. For Bitcoin, it already would have been a bad substitute, but it’s even worse.

[00:09:25] Preston Pysh: Not to mention it for anybody that would be investing in that. I think that the next question that the person would have is how many of these tokens exist?

[00:09:33] Preston Pysh: Oh, you can’t tell me. What do you mean that there, you know, we can’t figure out what, what that is or what it will ever be. I think that that’s going to raise a lot of questions for people. Now you’ve got the whole narrative of all it’s smart contracting and you know, most investors aren’t going to dig for more than three seconds in their research and they might just buy into that and say, oh, well, it’s newer.

[00:09:58] Preston Pysh: And so then I’m going to buy that cause it’s smart contracting and that’ll be the end of it. So I guess when I’m looking at it, it almost just seems like we’re just replaying everything from the previous cycles. At a higher fractal with more people and more institutions than we did on the last cycle.

[00:10:15] Preston Pysh: And it’s just, all just replicating itself all over again. Is that a fair?

[00:10:21] Andy Edstrom: Same as it ever was, yes.

[00:10:23] Jesse Myers: Yeah. And, and, and playing that forward, Preston, I think what people are probably not anticipating yet, but will probably happen is that big names like wall street names, some of them will blow up as they engage with Bitcoin or Ethereum the wrong way.

[00:10:42] Jesse Myers: Like if you take on leverage, for example. And, you know, we’ll see what happens in the next cycle, but the same hubris, the same lack of understanding of finite scarcity is, is coming into this cycle, same as it was last cycle and the cycle before last time it was FTX. We’ll see who blows up this cycle.

[00:11:04] Jesse Myers: Maybe in the future, you know, maybe this cycle, maybe it’s next cycle, but I think, you know, we’ll start to see trad five giants who engage with Bitcoin the wrong way and take on too big of a risk without realizing it go out of business.

[00:11:17] Preston Pysh: Where do they draw the line for applications of ETFs of you name it coin?

[00:11:23] Preston Pysh: I mean, yeah, like where do we, where do we go from here?

[00:11:27] Jesse Myers: That is what concerns me about Ethereum ETF, because if you’re going to ETF, there’s no reason you can’t greenlight a Solana ETF. And then to your point, Preston, like where do you draw the line? Is it, is it that you can only do an ETF for the top 10?

[00:11:44] Jesse Myers: Cryptocurrencies now that that would be completely arbitrary.

[00:11:47] Andy Edstrom: I’m going to push back, I’m going to push back a little bit though. I mean, not having yield matters a lot. I mean, no analogy is perfect, but like, imagine this version of Ethereum, ETF, Ethereum, the kind that doesn’t pay the yield.

[00:12:02] Andy Edstrom: Imagine it’s like buying a us treasury. It’s like buying an ETF that has us treasury securities. Except for the U. S. Treasury Securities don’t pay the coupon.

[00:12:12] Preston Pysh: That’s a great point, Andy. Because that’s, that’s baked into the debasement. Like, because they have to continually debase it, that, the debasement is paid to the validators, and if you can’t participate in that part of it, well then it, yeah, I see exactly what you’re saying.

[00:12:28] Preston Pysh: It’s even worse than the fiat rails because of now you’re going to have, because of the really small market cap, there’s going to be a lot of people that get duped into it as just more money enters this quote unquote space in the short term, but in the longterm, that’s exactly right. It’s worse than a treasury, which is a very interesting point. Now, as you guys just look to the space, how about you? The question proposed Andy on like, where do they draw the line? And, and I think the second question I got for you is what in the world changed in Washington in what appears to be the snap of a finger where everybody was like, Oh my God, we need to approve this.

[00:13:04] Preston Pysh: I have a theory, but I want to hear your theory.

[00:13:06] Andy Edstrom: I have a, I have a theory too. So the short answer is a bunch of politicians on both sides of the aisle found a way to remove their craniums from their rectums. And what I mean is let’s call a crypto, you know, I have to talk about crypto, not just Bitcoin, but the majority of politicians had either been ignoring it, or fighting it for so long. And then it appears that Biden was going to, well, there was this proposal to reverse SOB 121, SOB 121 was this dumb rule that basically kept banks out of Bitcoin and crypto. That’s the short version. And then the House decided to pass an action to reverse that. And the President, forgive me if I get the order wrong, by the way, the order of events, said he was going to veto it.

[00:14:02] Andy Edstrom: Biden said he was going to veto it. But the Senate passed it anyway. And then, also candidate for Re election Donald Trump talked positively about crypto assets. I think it was literally the same day, maybe that it passed in the house, either house or Senate. And then you saw poll movements. So it appeared that Trump was gaining significantly on Biden.

[00:14:31] Andy Edstrom: And it seems to be that the administration realized that anti crypto is bad politics. And so we had the largest sea change in the attitude of politicians to crypto assets and Bitcoin, frankly. That we’ve seen, I think, in the entire history of the space in the last 15 years. So basically it was politics and it was electioneering and Trump figured out that this is something you want to be on the right side of not the wrong side.

[00:15:02] Andy Edstrom: And then Dems figured out in short order that that was also the way they wanted to go and that they had an opportunity to lose the election based on alienating young people who are into Bitcoin and crypto and they tried to avoid that outcome.

[00:15:20] Jesse Myers: Perfect summary. Yeah, I mean, it comes down to we’re a large enough cohort.

[00:15:26] Jesse Myers: Now, maybe it’s 1 percent of voters like that’s their number 1 issue. Yeah. Maybe and you, you know, and in the election that we’re coming up to Democrats can’t afford to alienate 1 percent of their, their young voter base that happened to also be in the crypto. That’s how you lose an election and it seems like it seems like some pollsters and political consultants got the message out to the democratic party at the top level and overnight, everybody changed their tune.

[00:16:00] Preston Pysh: I’m curious if you guys have read the prospectus or the, these initial filings as to the validators and collecting the what do we call it? When they’re plugging it into the validators, they’re getting the yield off of the yield.

[00:16:15] Preston Pysh: The yield are like if I’m BlackRock and I’m doing this on behalf of all these, these people that are buying the ETF, can I still plug this into a validator, collect the yield and just not pay it out and be within compliance of the ETF filing?

[00:16:28] Andy Edstrom: This is an interesting question. I have not read the prospectus.

[00:16:31] Andy Edstrom: I think it’s the legal question is the interesting one though, because. The notion which is sort of a novel legal concept. I mean, it comes from the from the Hinman speech. I don’t know 2018. I want to say Bill Hinman was then senior at the SEC. I think head of corporate finance enforcement. And I think he presented this notion that you know, the whiskey barrel that you make the whiskey in is not, that’s a security or you can sell it as a security, but once you’ve made the whiskey, then it’s the commodity.

[00:17:03] Andy Edstrom: Okay, so that’s sort of the notion with with aetherium and another notion with aetherium is, is, yeah, if there’s someone paying you a yield from your activity, is that therefore a security? I don’t know the answer though as to whether the validator can withhold that yield and therefore it’s like a commodity from the perspective of the ETF holder, the investor, because there’s no yield.

[00:17:31] Andy Edstrom: But the issuer gets to, gets to scalp that. I mean, that would, that would be a pretty interesting, a pretty interesting outcome. I have to admit that’s not the scenario that I had thought about in advance, but that’d be pretty wild.

[00:17:45] Preston Pysh: If you’re Wall Street, wouldn’t you be campaigning for that with the SEC?

[00:17:48] Preston Pysh: Is that, Oh yeah, we’re not going to pay this out as yield, but you know, we can basically keep it. So, this is my opinion on like what the, the swift tide change was. First of all, I think the fees that they collected on the Bitcoin ETF were astronomical, like way higher than they ever expected. And they’re just looking at this space very generically and saying, Hey, let’s roll out another one of these things and make a whole bunch more fees.

[00:18:13] Preston Pysh: And all we have to do is just go bang a couple of these politicians over the head to get this approved, and then we’re golden. And I think that’s what they did. The other thing that I think it’s, it’s just become politically popular. I think for, for anybody, it’s just politically popular, regardless of what party you are to support this.

[00:18:30] Preston Pysh: So like, why battle it? Here’s another one, the dollar stable coin. I think they’re finally starting to figure out that the only buyer of all of this treasury issuance is going to be dollar stable coins. And if they know that Ethereum, Tron, or whatever is the turnkey way in which you can get these private institutions to basically become buyers of all these treasuries.

[00:18:54] Preston Pysh: Well, they need to somehow support this and embrace it because it’s the only way out. Especially when they’re looking, I mean, they can, they can clearly do the math at this point and they’re looking at like what they’re going to have to print in the coming 5 to 10 years. And I’m sorry, the only buyer for this, the only buyer for this becomes short duration issuance of a stable coin into the entity that would buy this up all this garbage.

[00:19:18] Preston Pysh: So I think they’re looking at it from that perspective. I’m sure you guys saw the Paul Ryan clip that went out, which I just had to take a step back and watch as I was like, Oh, my God, they finally like figured out like where this is all going. And so I think that’s another piece of why they’re maybe embracing this.

[00:19:36] Preston Pysh: And then I guess the last one, this would be, this would be assume that they have a really deep understanding of everything that’s happening. And I’m not so sure that they’re there, but if they don’t approve any other ETF and where I think this is going in the coming year to two years with the amount of printing, that’s like on deck.

[00:19:54] Preston Pysh: I think they almost need something else. Some other, you know, sailor calls it the ETF, like an API to plug into the traditional rails to plug into the new Bitcoin ecosystem. If they don’t have something else there to almost act as a distraction or an additional API to plug into, you’re just going to see an ungodly amount of flows go into Bitcoin, and it’s just going to maybe rip the face off of, of the entire traditional Fiat system.

[00:20:24] Preston Pysh: So maybe the approval is, and I think that this is more tinfoil hat, but I’m still throwing it out there as an idea. Maybe the approval of this and anything else is to slow that bleed out of traditional finance directly into right into the veins of Bitcoin. Those are, you know, a couple of my theories as to why they just had this sudden realization like, Oh my God, we got to get something else approved.

[00:20:49] Andy Edstrom: I agree with you completely on all fronts and I’ll throw one more in there, which is just taking the perspective of the banks. You mentioned stable coins, like, yes, somebody has got to Hoover up all this treasury debt.

[00:21:04] Preston Pysh: Who’s going to buy that right?

[00:21:05] Andy Edstrom: Well, they talked about the supplementary leverage ratio, right?

[00:21:09] Andy Edstrom: And allowing the banks to hoover up more of the stuff with no capital charge.

[00:21:14] Preston Pysh: Which they don’t want to do, which they don’t want to do Andy.

[00:21:17] Andy Edstrom: Exactly. Exactly. So imagine you’re a bank CEO. Yeah. And you’re looking at your congressman. You’re like, guys, you’re delivering all this business to Coinbase. Yeah.

[00:21:27] Andy Edstrom: You know, SOB 21 prevents me from making my rake. Oh, and you want me to take down all this worthless treasury debt. You’re out of your mind. You got to let me play this crypto game again. This is from the perspective of the bank CEO. So I think that’s another angle.

[00:21:43] Preston Pysh: And, and they’re also like, when we look back, what was it a month ago, how they all want to become custodians and they’re working that into the politics as well tells goes perfectly aligned with what you just said, which is we want to play in this space and Elizabeth Warren, just shut your mouth and like support this or else we’re going to start pulling all your funding.

[00:22:02] Preston Pysh: And it’s so funny to me how, like, she acts like she’s against the big bankers, but she literally have their arm. You know, like she’s a dang puppet, man. So she’s just going to, you know, it’s funny when we were out in in California, I had made the comment that I think within the year, people like her, we’re going to actually flip and become pro crypto or whatever, by the end of the, you know, within a year’s timeframe and sure enough, what did it take like six months and here we are.

[00:22:29] Preston Pysh: They’re already flipping. Yeah. Because it’s just incentives, right? Like, it’s not hard to like, see that that’s what’s coming next when you just understand where the incentives are going. But did you guys see the news? I think it just rolled out today with Kenya and Mara, the mining relationship.

[00:22:46] Preston Pysh: Did you guys know you guys didn’t see that? Yeah, I haven’t seen much news the last few days. Yeah, I guess that’s true, Jesse. Evidently there’s a private public partnership with respect to mining that’s happening in the country of Kenya. I think that we’re going to see a lot more of this. I’m curious if you guys would agree a lot more of this from a miner’s perspective, because like one of the core pillars for them is they have to have some type of stability or understanding as to, Hey, if we’re going to spend all this money on infrastructure, to get this cheap energy that’s locked up inside of your country.

[00:23:19] Preston Pysh: Like we have to have some type of assurance that you’re not going to the, the political winds are going to shift in six months from now. And we’re going to have to spend a ton of money, like moving all these rigs somewhere else. So I find this really interesting. I think this is one of the, I don’t know if it’s the first bit.

[00:23:34] Preston Pysh: One of the very early public partner relationships that we’re finding between minors, and I would suspect that this should pick up. I’m curious, any of your thoughts on that?

[00:23:44] Andy Edstrom: So I have mixed feelings and thoughts on this. So one perspective, I completely agree with you. Countries need to Expertise to help them deploy mining capacity.

[00:23:56] Andy Edstrom: And also they need, as you say, you know, flexibility and for, it makes tremendous sense from the corporate perspective, from Mars perspective. Yeah. They have a whole fleet of basics and the more jurisdictions they can operate in and move between it, you know, and and widen their revenue base. It’s great for them.

[00:24:14] Andy Edstrom: I wonder a little bit, though, from the perspective of this foreign sovereign from the foreign government, because really, like, yes, they want coins, and so the miner can help them acquire coins, but also what they really want is. A way to surely and safely transact outside the dollar system. So the strategic element there, I think is really important for sovereigns.

[00:24:40] Andy Edstrom: And I don’t know that you get that by hiring a U S domiciled mining company. Right. To do your deployment, because the long arm of the U S government and the whole jurisdictional apparatus, right. I think still owns you even if those facilities are offshore. So I think it’s sort of a mixed bag. It sort of surprises me a little bit that us domiciled miners would have a big role in those foreign domiciled deployments of mining capacity, but we’ll see what happens.

[00:25:18] Preston Pysh: Yeah. Good point. Jesse.

[00:25:20] Jesse Myers: Yeah. I think this is just kind of an interesting evolution. I haven’t seen the. Press release on that. So I don’t know the details, but it’s been very interesting to watch from afar. What has been going on with Bitcoin mining in Africa. I’m thinking in particular of gridless compute, a very interesting company that’s been doing some super exciting work in Africa, going in and putting in micro hydro power installations.

[00:25:46] Jesse Myers: So small hydro power generating electricity, generating installations, and then mining Bitcoin, because. The incentives are there basically, like there’s untapped hydropower there. You just need a use case. You need the economics to be there in order to go and put the capex into building that installation to generate the electricity because you need a buyer for that electricity and you need, you need it to be local because electricity is hard to transport.

[00:26:15] Jesse Myers: And Bitcoin solves that problem becomes the buyer of last resort that makes the economics make sense to put that hydro micro hydropower installation in and boom, you’re installing electricity production in remote regions of Africa that have never had energy production because it makes economic sense.

[00:26:34] Jesse Myers: The incentives are there. And so it makes sense that, you know, sovereign level players are recognizing, you know what, I could be incorporating that myself. I could be using this playbook. We have untapped resources. We just need expertise. And rolling that out at a nation state level. It’s just the next evolution of, you know, as we know with Bitcoin, the incentives are there at every single level, the individual corporate nation state level.

[00:27:02] Jesse Myers: And it’s all about tapping electricity production and turning that into economics and so long as the incentives are there, somebody is going to entrepreneurial. Entrepreneurially do that, and that can be a nation state as well. So. I think that’s this sort of public private partnership is probably. A sign of many more to come in particular in regions and countries where they have untapped.

[00:27:27] Jesse Myers: Energy production resources, yeah.

[00:27:29] Preston Pysh: For a lot of these countries, I think they need to have some type of policy in place in order to attract foreign investment, because I think right now from a venture standpoint or any type of investor that’s from the U. S. or Europe or wherever that’s looking to take advantage of these opportunities that are all over the world.

[00:27:49] Preston Pysh: And you know, this one in Kenya, for example, or any other country for investors, they’re very suspect or very worried about the return on their capital and not getting rug pulled by the local government through laws and regulations that don’t necessarily protect their interests. So if somebody is listening to this from any one of these countries, that would be the thing that I would really try to press upon them.

[00:28:12] Preston Pysh: Is in order to attract foreign investment into your country, there has to be some type of legal structure that puts those investors at ease. And I think that you can turn on the floodgates on a lot of this infrastructure, especially if you got energy prices below 4 cents per kilowatt and you have excess abundant energy there because maybe the world bank and the IMF went in there and build a bunch of stuff and then never fully you know, utilize that energy.

[00:28:36] Preston Pysh: I think there’s just huge opportunities, massive opportunities all over for this kind of stuff.

[00:28:41] Andy Edstrom: It’s going to be a big opportunity here for mining consultants. I’m talking about like traditional metals, mining, like oil and gas drilling us businesses and European companies, some of the biggest companies in the world have been in the business of figuring out how to safely profit on the extraction of resources in foreign countries.

[00:29:08] Andy Edstrom: Developing countries for, you know, as long as there’s been history, at least since colonial period and and including you know, the more, more recent century and decades. And so, yeah, it’s a tricky, you know, it’s a tricky business. There are different ways of doing business and opening doors for big Western foreign companies in African and Asian countries.

[00:29:33] Andy Edstrom: And yeah, it’s an unusual art. It’s partly a dark art, but those who have been doing it successfully to extract normal, traditional commodities that are developing countries probably will have a big opportunity to do it here again with Bitcoin mining.

[00:29:50] Preston Pysh: Yeah. Here’s one that’s off topic, but I just have to ask you guys.

[00:29:54] Preston Pysh: Holy moly. I mean, it’s insane. It’s totally insane what they’re doing. And like the growth is just absurd. I here’s the thing that’s that, that has me so confused. So I saw Stan Druckenmiller had sold his NVIDIA position. What a week ago, a week and a half ago or something like that.

[00:30:15] Preston Pysh: And when I saw that, I was like, oh, boy, this next earnings is going to be just destructive. Like, if I, if I, if I had a position, which I, I don’t, unfortunately, but if I had-

[00:30:27] Andy Edstrom: His own admission, Stan Druckenmiller talks about in interviews, he talks about. Historically, he has made most of his money on the bear side.

[00:30:36] Andy Edstrom: He has made most of his money trading over decades by buying bonds, often buying duration at just the right time when things fall apart. So, you know, I’m not going to tell you that he’s a Bad stock trader. And it sounds like he missed this one. And he may be kicking himself, but on the other hand, he himself would admit that he’s made most of his money.

[00:31:01] Andy Edstrom: Yeah. Trading FX, trading bonds trading rates, especially with going sideways. Yeah. I will say another thing though, that really interests me with respect to NVIDIA is. This other dynamic that’s now playing out in the mining spaces, besides sovereigns getting involved. Now there’s so much more competition for rack space, right?

[00:31:20] Preston Pysh: Yes. So if you have, this is really big. So yeah, lay this out for us, Andy. This is really big. And I think this is somewhat new for people that maybe haven’t heard this before, so really lay this out for everybody.

[00:31:31] Andy Edstrom: Yeah. Yeah. So, so historically the Bitcoin mining business was, you need a site, you need an energy source, you need the physical ASICs, and you need internet, you know, interconnect basically.

[00:31:48] Andy Edstrom: And when I say the site, I mean, actually you have to build the structure, you need cooling, you need all the things that keep the machines cool and running all the time. Well, that’s also true of regular way data centers for the most part, although regular way data centers have a higher requirement in terms of being close to where the data that they crunch is going to be used.

[00:32:14] Andy Edstrom: So that’s the amazing thing, of course, about Bitcoin mining. You can put them put it anywhere on earth. You got an internet connection. You can put a Bitcoin mine that doesn’t work quite as well. You know, if you’re serving up Netflix videos, right, you can’t be serving up Netflix videos from you know, from small barred or in New Zealand to the United States.

[00:32:35] Andy Edstrom: Right. Good example. Okay.

[00:32:38] Preston Pysh: For people that are not understanding that it’s just because of the speed at which you’re basically pulling that file and sending it. So, like. Let’s say we found a really great spot from an energy standpoint. That’s like 2 cents per kilowatt, but it’s down in Antarctica or whatever.

[00:32:54] Preston Pysh: And you want to then start housing and storing data and servicing that data in that same location. It’s not very. opportunistic for call it Google or you name a data center or some AI farm that’s, you know, servicing inquiries and then returning the data packets to that person from call it Chicago or wherever.

[00:33:15] Preston Pysh: So that distance poses an issue for data requests and servicing the data. Exactly right.

[00:33:21] Jesse Myers: Okay. And now spell that out a little bit more that it’s specifically the 10 minute block time that makes that makes it fine because you know, you’re not, you don’t have to meet like a hundred millisecond requirement or something like that for latency.

[00:33:34] Jesse Myers: You can, you can be 10 minutes and it’s okay.

[00:33:37] Preston Pysh: Yeah. On the Bitcoin side. Yeah.

[00:33:39] Jesse Myers: On the Bitcoin side.

[00:33:40] Andy Edstrom: So now enter machine learning and AI and specifically LLMs. And foundation models. So now there’s huge incremental demand for good data site capacity. So there’s a competition between Bitcoin miners and guys running machine learning models for similar sites, but then it’s further complicated by the following to train models to do training.

[00:34:08] Andy Edstrom: Actually, you kind of can do that remotely and I’m no expert on the requirements here. But like, you could have a data center in, I don’t know, Morocco, the desert of Morocco where you’re, where you’re doing, you’re training these models, but then when you’re doing inference, you’re actually serving customers like, you know, your chat GPT, and you’re asking it a question for it to answer the question.

[00:34:32] Andy Edstrom: Now you have to reduce that latency, like we just talked about. And so as the large language models develop, and as more of the overall work is. Inference. And as the, as that data center capacity has to move toward the user, you get a shift in the mix of how these data centers are built and constructed and how the equipment is moving through them.

[00:34:59] Andy Edstrom: So it’s all very complicated. I don’t pretend to know how it’s going to play out, but clearly there’s sort of a, a competitive dynamic here, but there may be a complementarity aspect as well. You know, if you can build a data site where, oh, you’ve got some curtail, you got to keep the machine learning algos running all the time, but maybe you have some, you know, swing curtailment capacity on the Bitcoin mining side.

[00:35:25] Andy Edstrom: So, sorry, that was a long winded answer, but those are some of the issues that I see.

[00:35:30] Preston Pysh: So, to give just a little bit more context on what Andy was describing, so when you’re training the data or you’re training the AI model. You’re pulling all of the data that you’re ingesting into it to train it. And that’s all fixed data.

[00:35:43] Preston Pysh: Like you’re, there’s no time requirement where you are, you have to pull this piece of data in within three seconds and service it back to the original person that was, that was requesting the return on the, on the initial send of the data. And so when we’re looking at AI, you could literally store all of the files and all of the indexes of, of the information that you’re pulling when you’re training it.

[00:36:08] Preston Pysh: And so you can do that remotely. You could do that from very far distances from where you have major population sources after you train the model, then it’s a single file. And for, for example, I just pulled this up GPT three, I asked what it was for four, but it wouldn’t provide me the information, but just to kind of give people an idea of GPT three had 175 billion parameters.

[00:36:32] Preston Pysh: And the file size, the output file size was 350 gigabytes. Okay. Think about how insane this is that you could ask any question to GPT 3. Now it’s not as good as four, but you could ask GPT 3 any question and get a pretty dang good response. And the file size, let’s say you have a one terabyte laptop, you know, sitting on, it’s only taking up a third of the memory on that entire laptop to answer any question.

[00:37:05] Preston Pysh: That’s insane. It’s mind boggling. So how, how much bigger is four? I don’t know, but I would be surprised and I’m no AI expert, but I would be really surprised if it was larger than half of a Tara in size for GPT four. Okay. So the sizes that we’re talking about here, so now you can take that file and let’s say you stick that file, obviously they have to keep all this stuff encrypted.

[00:37:27] Preston Pysh: They don’t want the file to get out, but let’s just say that they stick that in Chicago after they developed it remotely offsite, which is what Andy’s describing of why. There’s going to be like this relationship between training models and Bitcoin in remote locations is because you can do it in remote locations without having to worry about servicing the data packet responses.

[00:37:50] Preston Pysh: But then you can take that file. Let’s say it’s a 500 gigabyte file and you could put it in you could put it in Chicago, you could put it in LA or whatever, which is close to where the population hubs are and they’re getting pinged. And it’s just, it’s spitting out the answers to all these things.

[00:38:03] Preston Pysh: It’s totally nuts. The relationship, the, what’s the word I’m looking for? The symbiosis between Bitcoin mining in an AI training is somewhat miraculous and mind blowing. If you ask me.

[00:38:17] Andy Edstrom: Yeah, the data center managers, people in the data center management business. Are going to be pretty busy for the next few years.

[00:38:27] Andy Edstrom: It also reminds me of, I remember when the news came out, it’s like a decade ago that Google had first implemented AI systems to optimize energy usage in their own data sites, right? In their own data centers, they cut energy usage by like 30 percent by implementing their own machine learning algorithms.

[00:38:46] Andy Edstrom: So it’s going to be the algos that are doing the optimization work. Right to shift capacity around the world between these different you know, load bearing facilities. It’s going to be wild to see my understanding.

[00:39:01] Preston Pysh: Oh, go ahead, Jesse.

[00:39:03] Jesse Myers: Oh, Preston, you, you, you struck me with that comment about the miraculous link between the AI processing and Bitcoin mining.

[00:39:11] Jesse Myers: But I think it, I guess it makes sense in the, in the context of, you know, we’re legit living through the digitization of everything. And with the internet to date, it has historically been like how we call and retrieve information, but as we progress through. Digitization of everything that is now including security of money and also processing and thinking, you know, and and stuff.

[00:39:36] Jesse Myers: That’s not call and response. And so I guess it fits in with that sort of mental model of, of the Internet is just the tip of the spear of digitization of all functions. And and some of those later functions are not call and response. And so it goes together.

[00:39:53] Andy Edstrom: Which gets us just back to the first principle.

[00:39:55] Andy Edstrom: I mean, it’s Andreas Antonopoulos stuff, right? It’s like internet of money. It’s like, yes, Bitcoin is special and amazing. Oh, but also it’s just the inner, you know, the digitization of everything. And it’s just kind of joining the rest of the pack for some reason. People think of Bitcoin as this strange animal.

[00:40:15] Andy Edstrom: They just can’t get their heads around it. And Oh yeah, no, it’s just you know, it’s just the internet implementation of money.

[00:40:22] Preston Pysh: Yeah. It’s so weird to me also that when you think about like these, you know, all of this Nvidia and AI training happening in concert in the same location as call it a Bitcoin miner.

[00:40:36] Preston Pysh: You literally have both poles happening. You have deep pattern, the synthesis synthesizing patterns into a 350 gigabyte or 500 gigabyte file that can answer any question, right? And then on the other side of the pole, you have Bitcoin mining, which is absurd amounts of entropy. That is just guessing at, you know, a solution and just, they’re literally opposite sides of the pole and they’re happening inside this thing that you, that you’re flowing tremendous, absurd amounts of energy through to perform these two actions. What the hell is that?

[00:41:15] Jesse Myers: Yeah, it’s, it’s that security needs entropy. And so that you design that system around not allowing for thought or synthesis, but then, you know, on the flip side, that’s thought or pattern recognition or, you know, processing requires the, the lack of entropy.

[00:41:35] Preston Pysh: We were ggoing totalk about Nvidia. I guess we kind of did Yeah. In a very passive of a rabbit hole there. We, we all just went right back to Bitcoin, but yeah. No, some, some crazy, crazy, just thought.

[00:41:44] Jesse Myers: What a time to, to be alive. Yeah. It is what it comes back to. And like the, the most incredible time to be alive. Yeah. I think that I feel like everyone, even Bitcoiners fails to recognize that like the internet revolution isn’t over.

[00:42:00] Preston Pysh: Yeah.

[00:42:00] Jesse Myers: Like, it feels like the internet is done. It feels like, oh, wow, like the dot com era and then, you know, what Google and Apple have done over the last couple of decades that that’ll never happen again. But that was just the call and response information. And now we’re entering into, you know, we’re still in the early stages of that happening to money.

[00:42:18] Jesse Myers: And then thought with AI.

[00:42:21] Preston Pysh: You could, you could argue the whole Google, like the last 20 years was really kind of the initial organization of all the thoughts and patterns and data so that it can then be ingested into these AI models for further consolidations. Like creating the library that is then going to be used for all of the work.

[00:42:39] Preston Pysh: Yeah. By the way I literally have this sitting on my desk, this book A Brief History of Intelligence. I cannot recommend this book is so good by Max Bennett, really, really good. All right.

[00:42:51] Jesse Myers: If you haven’t read this one.

[00:42:52] Preston Pysh: That’s good too. Yeah.

[00:42:53] Jesse Myers: Super Intelligence..

[00:42:54] Preston Pysh: It’s a little dark for me.

[00:42:56] Jesse Myers: It is a little dark.

[00:42:57] Andy Edstrom: Yeah. Yeah. This is extremely dark. That was the book that I read in 2016. That was the book that put me into my first bout of depression that I’ve experienced related to AI.

[00:43:10] Preston Pysh: Elon was a very big fan of that book, the Super Intelligence book. And I think that might’ve jaded his, like why he’s so deeply.

[00:43:18] Preston Pysh: Not that, that I don’t think I’m not trying to suggest that we shouldn’t be concerned or, or that it can’t go in a dark direction, but yeah, this one here just does real fast for, cause this book just came out. It’s basically this history on the evolution of like how the human brain evolved, and then looking, looking at other animals and how their brains have evolved in the pattern that was constructed in order to get to the neocortex with like this deep, basically modeling capacity, and then how they’re using their, their understanding of the biological brain in order to do all the AI stuff that they’re doing right now.

[00:43:55] Preston Pysh: It’s, it is amazing.

[00:43:57] Jesse Myers: I love that. Holding up the physiology of behavior, which is the best textbook for my neuroscience degree. Love learning about it.

[00:44:04] Preston Pysh: Jesse, I totally forgot about this. Yeah. This is right up your alley, man.

[00:44:08] Jesse Myers: Yeah. That’s my whole, my whole, that whole shelf is all neuroscience. Yeah. We forget about that part too, about, about the, the brain is the lens through which we see the world.

[00:44:20] Jesse Myers: And it’s the, today it’s the, it’s, it’s matter making sense of the world. The universe which is beautiful and crazy to, to think about. It’s the only matter that strives to make sense of the world of the universe.

[00:44:33] Andy Edstrom: And part of the reason for the reason, you know, we can even scratch the surface of understanding is because we’ve evolved those.

[00:44:40] Andy Edstrom: Big brains and congrats on your kids. A big brain, Jesse. And of course the downside by the way, is that’s how you end up with with 41 hours of labor, a big brain does not an easy delivery make random anecdote.

[00:44:56] Preston Pysh: Daddy was a neuroscientist. So unfortunately, it’s going to be 41 hours for you, sweetie.

[00:45:00] Jesse Myers: Sorry, honey. We’re basically kangaroos or marsupials in that sense. We’re not supposed to be born when we’re born. Think about any other mammal, like, like any deer or wildebeest or anything like that. They come out functioning, able to walk and run. Within hours, but for a human baby, it takes 18 months and the reason is because we can’t stay in the womb any longer.

[00:45:25] Jesse Myers: Our brains get too big. Our heads get too big. So we have to come out and then we’re useless for 12 to 18 months and we’re basically like a kangaroo, you know, go in the pouch and be carried around and then you can function, so.

[00:45:38] Andy Edstrom: Just wrapping it all together. So I’ve seen will the beast being born on the Serengeti, you know, and stand up within minutes.

[00:45:47] Andy Edstrom: And so I highly recommend people take a trip. You could see two things. You could see this miracle of nature we’re describing in action. And also you could go see the mining deployment that Marathon is doing so.

[00:46:00] Jesse Myers: Nice combo there.

[00:46:02] Andy Edstrom: Two birds with one stone. Bring you back to Bitcoin, baby.

[00:46:05] Preston Pysh: So I’m going to take it back to the, to the brain and AI here.

[00:46:08] Preston Pysh: Okay. So Jesse, I’m curious after, you know, I’m not complete, I’m almost done with this book. There’s a couple different courtesies and things like that, that have just kind of blown my mind as I’m reading this. As somebody who’s studied this deeply, what is, you know, what is a region in the brain or something that you had studied that just kind of blew your mind and it just continues to stay with you that that is.

[00:46:30] Preston Pysh: Like for me, when I’m reading this book, like the relationship with information or modeling coming out of the neocortex into the basal ganglia over to the thalamus and then back up again was just fascinating to me. So go ahead. I’m, I’m curious what you would say.

[00:46:45] Jesse Myers: Oh boy. It’s, it’s impossible. Cause that’s, that’s, we, we know so little about the brain ultimately.

[00:46:51] Jesse Myers: Like we, yeah. We know about the brain because of when things go wrong. So, we, we literally learn about the brain because of brain damaged patients. Yes. And then you figure out, okay, so this region of the brain is ablated. Yeah. And, and then they, one of the best authors In my opinion, then the kind of in the neuroscience basis, Oliver Sacks, he was yeah, he would write beautiful stories about his patients.

[00:47:17] Jesse Myers: And, you know, this most famous book is the man who mistook his wife for a hat because that’s a literal problem that one guy faced when a certain region of his brain had brain damage. He mistook his wife. For being a hat, how does that happen? What has to go wrong? And it also reveals how weird the inner functions of the brain are, but to your to your question, I mean, everything you learn about in neuroscience is like, wow, that’s a weird system for how that connects to that.

[00:47:47] Jesse Myers: And how you process like, like, visual spatial processing is this very strange matrix of areas of, you know, the surface of that portion of the brain. Right. And each one does a different thing and processes the patterns and macro and micro and colors and puts it all together. And it’s like, you know, you have a little bit of damage in 1 area.

[00:48:09] Jesse Myers: That’s what you don’t see. There’s a thing called a left right blindness where you can you can look at a plate with. Food on the left side and on the right side, and you can literally not see the left side of the plate. You can think that the left side of the plate is empty just because a certain little spot is busted.

[00:48:30] Jesse Myers: That’s the story of every region of the brain. And yeah.

[00:48:34] Preston Pysh: Awesome. Okay. Let’s talk about Onramp. So for people that aren’t familiar with Onramp, explain what that is and then tell us what you guys are passionately working on.

[00:48:44] Jesse Myers: Yeah, Onramp is a company that I co founded about two years ago with Michael Tanguma from previously from Unchained Capital.

[00:48:53] Jesse Myers: And it is a multi sig, multi institution custody company. And so, so that takes the idea of multi sig, which is inherently a self custody sort of idea of you, you split your Bitcoin custody. Between 3 hardware devices and those 3 keys control the vault that holds your, your funds. And you need 2 of 3 of those keys to sign in order to move funds.

[00:49:22] Jesse Myers: But ultimately you are in control of 2 or 3 of those keys. So it’s a self custody thing that you’ve set up and you maintain and security is on you. Multi institution custody is taking that idea and saying, Hey, Let’s have institutions hold those keys on behalf of the end user. And the important part here is that each key is held by a different institution.

[00:49:47] Jesse Myers: So no, no single institution has a quorum of the keys necessary to control the funds in the vault. Instead, it’s the end user who the vault is in their name that has a legal relationship with each of those key holding institutions. And those key holding institutions can only sign at the direction of that end user.

[00:50:09] Jesse Myers: So it’s a way to have multi sig without having to set up and maintain your own keys while still maintaining control of your keys, because you know, the, the not your keys, not your coins mantra is, is, is right. But really what that’s trying to get at is not your control, not your coins and multi institution custody manages to have a system where you don’t have to become a pro or proficient, even at setting up and maintaining your own keys.

[00:50:41] Jesse Myers: But you can maintain control through the, the system of relying on 3 different institutions, holding keys on your behalf and Onramps cases. The, the 3 key holding institutions are Onramp BitGo and coin cover, which are, you know, Bitcoin coin cover have been fantastic partners for us. Some of the best my opinion, the best companies in the industry for key management.

[00:51:05] Jesse Myers: And the infrastructure from Bitcoin has been fantastic. And so that’s where we’ve been working on building and scaling up. And it’s been a great ride that Andy’s been a part of. And it’s been great to have Andy along for that ride as we onboard more and more Bitcoin and help people solve the problems that they face.

[00:51:23] Jesse Myers: With having to figure out what’s the right custody solution for me and a lot of people have the tension of, you know, I don’t trust myself enough, or I don’t want to have vulnerability to a wrench attack by having unilateral control of my funds. At home, or, you know, within driving distance, and this solves for that.

[00:51:43] Jesse Myers: It also solves for the inheritance problem that many people face when. You know, storing their funds. How do you ensure that in the, you know, in the event you get hit by a bus that your beneficiaries can access your funds? You know, if you set up a treasure map with hardware wallets, that may not, that may not be accessible, but with a legal relationship with multi institution custody, it’s a pretty seamless transition from you to your beneficiaries.

[00:52:13] Preston Pysh: I want to share a chart. Oh, sorry. Go ahead. Andy. What?

[00:52:16] Andy Edstrom: Well, no, no, no. That’s that’s well said. I was just going to say a couple of things. First of all, yeah, the wrench tech, you know, issue is big. Okay. By the way, remember when you could buy a wrench for 5, remember when it really was a 5 wrench? What are you up to now?

[00:52:29] Andy Edstrom: Like 8, 9? Yeah, I gotta believe. More like 20. So that’s one thing. And then, yeah, just, you know, in terms of my role at OnRamp, you know, it’s been my mission for a while. I did it for Swan, you know, doing it for, helping out with OnRamp as well. To just try and divert some small percentage of buying power for Bitcoin, you know, away from.

[00:52:52] Andy Edstrom: The roach motel paper Bitcoin structures like the ETFs and into actual coins. And if it’s going to be in the actual coins, you know, that means that those coins can be withdrawn to self custody in the future. You know, I suspect that U. S. citizens, but not exclusively U. S. citizens, people, the corners that have a significant stack, you know, a lot of them have their roll your own ninja self custody set up, but they’re a little bit worried that not all those coins are going to make it to their wives and kids if something happens to them. And so kind of makes sense to have part of the stack and multi institution custody, and I think it makes sense for managed wealth as well.

[00:53:39] Andy Edstrom: And then of course, as part of that effort, we you know, we’ve been, we’ve been having some fun, me and Jesse running the scarce assets podcast. We had an amazing launch of that show because of course episode one was you, Preston, and it was a lot of fun. We had Jeff Booth and we had Lynn Alden and Pierre and Morgan Richard and Alex Gleidstein and you know, VJ and and a bunch and it’s just been a blast. So I just want to thank you for helping us launch as strongly as we possible possibly could. There’s no one else I would rather have started it with than you. And it was a lot of fun.

[00:54:19] Preston Pysh: Love it. No, I was aggressive. We had a fun conversation. I remember we did.

[00:54:23] Preston Pysh: I’ve got one more question for you. So, sailor was up on stage. I don’t know where this was at, but he was presenting a slide that Jesse had created. I love this slide because I think it, it really allows a person to zoom way out and see the really, really, really big picture. And I am sharing this slide right now that Jesse created.

[00:54:47] Preston Pysh: And for the listener, if you’re, if you’re not, you know, on YouTube, on YouTube, watching this, and you’re listening, just listening to it. It lays out all the buying power in the entire world, whether it’s equities, real estate bonds the, just the currency itself, art, gold collectibles, you name it. And it shows that the total value of all of this stuff is 900 trillion US dollars today.

[00:55:13] Preston Pysh: And, you know, at a 10%, we’ll just call it a 10 percent growth rate of M2, which I think it’s even global M2 is a faster pace than 10%, but well, let’s just say it’s 10%. Next year, this should be a quadrillion. So walk us through how a person, what, what, when we’re looking at this, Jesse, obviously you think Bitcoin’s going to continue to grow past the 1 trillion, but what is contracting or what is shrinking in size on all these different asset classes as we’re looking at this chart?

[00:55:48] Jesse Myers: Yeah that’s awesome. Thank you. Preston. Yeah. Saylor has been using this, this chart because what, what it helps tee up for him is as he, as he phrases it all assets are in a constant, continuous competition. And that is to say that some of these asset buckets are growing, and some of them are shrinking based on how investors are allocating their capital.

[00:56:13] Jesse Myers: Any day, month, year, decade. When I see this, this lens, when, when I put together these numbers and assembled it all and put it on a page, and you see Bitcoin as as $1 trillion asset class, that’s 0.1%, one 1000th of the total asset landscape, and gold is 12, arguably 16 trillion. So, you know, that’s kind of your closest competitor.

[00:56:39] Jesse Myers: It’s a 12 to 16 X from where we are with Bitcoin. And that’s small potatoes in the grand scheme. When you look at all of these asset classes, to me, the thing that really sticks out is bonds. We were talking earlier about what it means to be holding bonds now and into the future. I think that because of the amount of sovereign debt levels, 35 trillion in the U. S. and and our deficits in the U. S. now normalizing 2 trillion dollar annual deficits. We haven’t balanced the budget in 22 years. We’re going to keep adding to those deficits and that means we’re going to keep adding to our national debt and we’re printing to do all that. So we’re adding more bonds and what that amounts to is that the nominal yield on a bond, I don’t think will outpace inflation over the coming decades.

[00:57:39] Jesse Myers: 10, 20 plus years, it’s, it’s already not. And so holding bonds today, in my opinion, is a, is a net negative proposition. You are, you are losing purchasing power by holding bonds and receiving that nominal yield of 4%, which sure might be above the stated CPI numbers, but I think is actually below the true inflation rate.

[00:58:08] Jesse Myers: So if you’re holding bonds and everybody is right, like, if you go look in your Vanguard account and see what percent of of your, your 401k is tucked away and you know, safe, quote unquote, safe, low risk bonds. It’s going to be a significant portion, 20, 40, 60, 80%, and that’s losing in real purchasing power every year, in my opinion.

[00:58:33] Jesse Myers: So, and that contrasts with Bitcoin, which, in my view, the secret sauce of Bitcoin is it’s increasing scarcity. The function that’s built into it every 4 years, that the amount of Bitcoin being created gets cut in half. You know, every day, every month, every year. And, you know, we just dropped from 1. 8 percent annual supply growth to 0. 9%, which means that we’re now lower than gold because gold is 2 percent annual supply growth every year. So on this page, you know, Bitcoin just became a better store of value asset, a more attractive store of value asset, and it has reason to get better into the future versus gold. The fact that it’s still not as large as gold is a lagging function of the world’s recognition that Bitcoin is a better store of value asset, a better savings technology, ultimately than gold, because people don’t recognize that it has increasing scarcity built into it.

[00:59:30] Jesse Myers: It will grow and the price will appreciate every 4 years because of that increasing scarcity function. And that’s Bitcoin versus gold, but then there’s bonds and bonds are already a negative real return, in my opinion. So, those are the 3 buckets that stand out to me. Andy, you actually summarized this on the show in a nice way when you were talking about how you’re viewing it for 3 asset categories.

[00:59:59] Jesse Myers: Do you want to tee that up?

[01:00:00] Andy Edstrom: Yeah, yeah, absolutely. So, first I want to say, I love this analysis Jesse. You know, I did my own version of this analysis in 2019 when I was writing why buy Bitcoin and of course you improved on it, Jesse, by putting it into beautiful, beautiful graphical format. So I love this.

[01:00:17] Andy Edstrom: I love this version of it. And yeah, 1 of the ways, 1st of all, 1 of the ways I pitch it to clients, I can’t remember where I got this, got this, but basically Bitcoin is the new gold. And gold is the new bonds, right? So it’s like the bonds as Jesse so eloquently pointed out are going to lose you money in terms of real purchasing power over, over the long run.

[01:00:40] Andy Edstrom: And so gold is better than that. And gold is taking share. By the way, the way I implemented that as a practitioner for my clients was first back in 2016 in the then 30 year history or almost 30 year history of my firm, my wealth management firm. We had never owned what I call hard money assets, right?

[01:01:00] Andy Edstrom: We’d never owned gold for clients ever, right? It was a pet rock that didn’t generate cash flows, but we started to figure out what was going on with the bigger picture macro. And so we bought gold for the first time. And then of course, Bitcoin raised its hand, so to speak, it had shown up earlier, of course, but, but I found it when I found it some years ago.

[01:01:22] Andy Edstrom: And so that for my clients has been taking share out of gold. So it’s a little bit, the, you know, the, the Pac Man eating the Pac Man eating the Pac Man where the ultimate eater of everything, of course, is Bitcoin, but the intermediate eater of bonds is gold.

[01:01:40] Jesse Myers: I think that perhaps the simplification of where this chart I think is heading is.

[01:01:47] Jesse Myers: Bitcoin is a better asset than gold and gold is a better asset than bonds. And right now the current valuation of those three buckets is reflects the opposite. And I think that economic reality and the size of our fiat structure because of the debt levels that we’ve taken on will osmotically organically cause people to realize that they’re better off putting their capital in Bitcoin.

[01:02:16] Jesse Myers: Rather than leaving it in bonds to continue generating a negative real return. And I think the end state of this, if we’re only looking at those 3 buckets, is that Bitcoin flips bonds in the general role and size of those categories, those buckets here in the global asset landscape. Which is to say that, you know, in my Bitcoin’s full potential valuation piece, where this Chart comes from I landed at what I think is a probably conservative end state of Bitcoin siphoning off capital from all of these buckets most of all from bonds and eventually growing to become 200 trillion of the 900 trillion in global asset value which would mean Bitcoin in today’s dollars.

[01:03:11] Jesse Myers: And I think that’s where we’re heading.

[01:03:13] Andy Edstrom: The only thing I’d add to there, besides, as if that wasn’t enough of a mic drop, is, oh yeah, don’t forget the largest box on that graphic, which is real estate. Yep. And, you know, I was giving a chat to the local office of Berkshire Hathaway Realty about a month ago, And that conversation to your average realtor would have been outlandish and or offensive until very recently.

[01:03:41] Preston Pysh: Yeah. They just laughed you out of the room.

[01:03:43] Andy Edstrom: Exactly. Well, this time was not the case. It was well attended. People were listening very carefully. They’re asking really good questions. And I think there is more than ever a realization that taking the Bitcoin taking a bite out of that giant piece of the pie real estate is is also likely to happen.

[01:04:04] Preston Pysh: Because the cap rate on all that real estate changes.

[01:04:07] Preston Pysh: And I mean, it’s so drastically mispriced right now because of fixed income, it being a premium above the fixed income quote unquote risk free rate. So, you know, whatever that multiple turns out to be. As that, as the cap rate changes on all real estate. I mean, Andy, what do you think? Are we talking a multiple of three?

[01:04:27] Preston Pysh: Is it going to, is it going to be cut into a third of where it’s capped today because of those discount rates and what hurdle rate you’re going to need by just holding Bitcoin and, and, and because equities are going to, because equities get repriced, right? And so then of course the cap rate on, on real estate gets repriced.

[01:04:44] Preston Pysh: So what, what is it?

[01:04:46] Andy Edstrom: Yeah, exactly. I think. You know, order of magnitude, I think of 50 percent ish, and it easily could be because you’re conservative. It could be more than that. Yeah, exactly.

[01:04:59] Jesse Myers: Yeah. And this gets back to Preston’s whole thing here, which is, you know, from a, from a value investor point of view, nothing makes sense out there.

[01:05:09] Jesse Myers: And the thing that I think will restore sanity is Bitcoin being such a better asset to hold that it sucks capital away from all of these. Insane premium asset categories until there’s, there’s a natural equilibrium again.

[01:05:30] Andy Edstrom: Sorry, I think there’s a reason what we’re trying to say here is there’s a reason that Preston launched the Bitcoin Fundamentals podcast, not the Gold Fundamentals podcast or the Fixed Income Bonds Treasuries Fundamentals podcast.

[01:05:45] Preston Pysh: Correct. So, so all of that is basically saying that your 10 million is a conservative number, but that’s really saying-

[01:05:54] Jesse Myers: That’s right. I mean, in that article, I put together a table and, and I didn’t know that that Andy had done, had done this exact exercise the years before me. So props to Andy, you did it better.

[01:06:05] Jesse Myers: It’s okay. You did it better.

[01:06:06] Preston Pysh: Well, what does is Saylor saying? 200 trillion? Or is he saying 300 trillion?

[01:06:10] Jesse Myers: Saylor hasn’t said what he, you know, he hasn’t. Put a flag in the ground on, on a number like that, but he has, I actually like very kind about my analysis and put it forward as, you know, very interesting, thought provoking bit of analysis that I, you know, reading between the lines, he tends to agree with.

[01:06:30] Preston Pysh: So, I mean, when I’m looking at the buckets, it’s like, and something that I did while you were talking there, Jesse, is I converted all of those numbers from a percentage as to like how much Bitcoin that would be. So the Bitcoin, which was 1 trillion of the 900 trillion total pot, there would only be 23, 000 Bitcoin of the 21 million percentage wise the bond, the bond size, which was, what was it?

[01:06:56] Preston Pysh: 300 a trillion would be 7 million of the 21 million Bitcoin, assuming all the Bitcoin are still there and haven’t been lost. We’re just assuming all 21 million are there. That would be 7 million of the 21 million Bitcoin would all be representing the value of the bond market. The real estate market, it would be 7. 7 million Bitcoin and then stocks would be 2. 7 million Bitcoin.

[01:07:21] Jesse Myers: Yeah, that’s, that’s an awesome, those numbers are very thought provoking. I do think that this, this was one of the reasons I wrote that piece of ultimately, I don’t think we end up in a world where there’s 21 million Bitcoin worth of Value, I think we end up weird as it is in a world where there’s 50 million Bitcoin worth of value, or maybe it’s 30 million Bitcoin worth of value because of cap rates.

[01:07:48] Jesse Myers: And because it’s because there’s, there’s always going to be value in other assets. Yeah. And if you price it in your unit of account of Bitcoin. You’re, you’re saying, well, I’ve, I’ve got one Bitcoin worth of real estate, but that’s not included in the 21 million of Bitcoin because you own the real estate.

[01:08:07] Jesse Myers: You don’t own the Bitcoin at that moment in time.

[01:08:09] Preston Pysh: Because the illiquidity of the equity and what the market is trading it out as a multiple of earnings is why you’re seeing in excess of 21 million. Correct?

[01:08:20] Jesse Myers: Yeah. Yeah. And yeah, I think that’s a different way of thinking about it is. One of the things that I disagree with in Bitcoin in the Bitcoin landscape, meme land, landscape really is infinity divided by 21 million.

[01:08:34] Jesse Myers: I think that’s directionally correct, but wrong. I think it’s a, it’s a very helpful meme for thinking about Bitcoin as. You know, all important, but I think that Bitcoin doesn’t become everything. You’re still going to value a Monet painting. You’re still going to value a thousand acre ranch.

[01:08:55] Andy Edstrom: It turns out you can’t, you can’t live in your Bitcoin.

[01:08:58] Jesse Myers: Yeah. Right.

[01:08:59] Andy Edstrom: It turns out. Some people would like to, many would like to. So for, there is a difference between forever and infinity divided by 21 million.

[01:09:09] Preston Pysh: Well, let’s just take NVIDIA. Like if you were going, let’s say the whole world has been Bitcoinized, right? And we’re, that’s the only unit that anybody wants to accept or wants to deal in.

[01:09:18] Preston Pysh: And you’re looking at, well, NVIDIA just banged out this many, this many Bitcoin on an annualized basis. And I’m going to pay 10 times that those earnings in order to own this equity. So if you’re paying 10 times the number of Bitcoin units that are flowing through it from an income statement standpoint, top line revenue standpoint, or, or bottom, I guess it would be, have to be measured off of the top line.

[01:09:43] Preston Pysh: To start getting the multiples above 21 million, that’s how it happens. Correct?

[01:09:48] Andy Edstrom: Yeah, and there’s, and there’s, yeah, and there’s, you know, there’s the other reality here. Another way to frame it is there is money in the system and what percent of the total value is the money and money plus the credit, right?

[01:10:00] Andy Edstrom: So the the pyramid of the credit in the banking system on top of the base money. So yes, the world is full of productive assets that are worth something. They should be worth more than the monetary asset that doesn’t generate cash flows when that monetary asset, you know, reaches its valuation potential, which is happening before our very eyes over a period of years and years and years.

[01:10:27] Andy Edstrom: And some days I wake up and think it’s, I can’t believe how it happened, how quickly it’s happening. And other days I can’t believe how slowly, because it’s so obvious what’s going on. Yeah, exactly. But that’s, that’s another way to frame this, you know, total potential of, oh, it’s the unit of account. But there are other valuable and productive assets.

[01:10:48] Andy Edstrom: And yes, someday Preston will put in a bid on Nvidia stock or whatever other stock that generates cash flows, but the valuation may not be at, you know, whatever, 50 times two year forward earnings.

[01:11:02] Preston Pysh: I’m already buying equity MicroStrategy. Or at least I could, I haven’t like added to the position, but like I do have an equity po I would buy the I, I, if I was smart, I would’ve bought the Dylan LeClaire thing at the the Japanese equity that he’s doing the same MicroStrategy.

[01:11:16] Preston Pysh: Meta moving meta. Yeah, meta planete. I, if I was smart, I would’ve done it right during the announcement, but now I’m like, you know, I, I’d have to go in there and look at the treasury and. Market price right now, but there’s another one that it’s just like, Hey, that, that is something that actually might make sense.

[01:11:30] Preston Pysh: Now, my, my position size with MicroStrategy has taken on a much larger percent than I would like in my overall portfolio, just because of the 6, 102 risks that I, you know, I, I waited at, but. I am if a, if a company is demonstrating that they are making money, they have a Bitcoin balance sheet initiative and it’s actually priced.

[01:11:53] Preston Pysh: And I think they have some type of competitive mode to continue to make money. I’ll buy it today. I’ll buy it today. If the numbers make sense. It’s just math. It’s just math.

[01:12:02] Jesse Myers: It means there’s, it means there’s now a. A strategy that meets your criteria as a Bitcoin value investor to generate Bitcoin in excess of what holding Bitcoin will do.

[01:12:14] Andy Edstrom: And moreover, the investable universe of companies that meet your criteria, Preston, can only grow. It can only go up. There are more. There’s only going to be more and more names, more and more tickers, more and more companies that are meeting Preston Pysh’s value investor.

[01:12:33] Preston Pysh: Bitcoin value investor, I’m a Bitcoin, but boy, there’s some value investors that their stomachs are turning hearing me say that.

[01:12:39] Jesse Myers: That’s, that’s the winning formula is to hurry up and figure out that you have to be a Bitcoin value investor in order to outperform Bitcoin.

[01:12:50] Jesse Myers: Otherwise, just hold Bitcoin.

[01:12:52] Preston Pysh: Amen. Amen. We’re trying to do it on the VC side too. I mean, it’s. I don’t know where else you could outperform it to be quite honest with you unless you are getting it at a discount to the treasury and you’re making money as a publicly, a large publicly traded company, or you’re stepping into an industry that is ripe for disruption and you can get it in early stage and you think it can, you know, a hundred X from, from the purchase.

[01:13:15] Preston Pysh: If you have the luxury of stepping in and buying it at that price, I don’t know how else you can outperform it. But so I’m trying to be in both of those spaces in addition to obviously holding Bitcoin, but.

[01:13:24] Andy Edstrom: Risk adjusted, a thing. Yeah, a thing probably each of us said years ago was on a risk adjusted basis.

[01:13:32] Andy Edstrom: I haven’t found a better investment opportunity than Bitcoin ever. And on a risk adjusted basis, I still haven’t found a better investment opportunity than Bitcoin.

[01:13:43] Preston Pysh: Wonder what the risk adjusted would have been on NVIDIA over the last decade. Cause I know, I think somebody just posted a chart today that the last 10 years NVIDIA has outperformed Bitcoin.

[01:13:53] Andy Edstrom: Yes, it has. Oh, it definitely has. It is the one asset that has outperformed Bitcoin. I, I found this earlier this year. It’s like the one thing basically that’s, that’s outstripped Bitcoin’s performance. There’s no way, but the inverse, the inverse of that, remember dear listeners, it’s now a, what, two and a half or 3 trillion market cap company.

[01:14:14] Andy Edstrom: And the tree does not grow to the sky. If you’re a company. But if you’re a monetary protocol, it does the tree can grow much farther into the sky to this guy.

[01:14:25] Preston Pysh: Yeah, much higher, not forever, but much higher to infinity. That’s a great point. Andy. I love that. Yeah. No, if I had to, if I had to bet Nvidia versus Bitcoin in the next 5, 10 years, Bitcoin is going to obliterate it.

[01:14:39] Andy Edstrom: Does it right? What company can 5x from a multi trillion dollar valuation, much, much harder, not impossible, but very difficult.

[01:14:47] Preston Pysh: Very tethered to physical reality. And good luck with those supply chains. Good luck with long lead items. Good luck with all the sub components and the proper coordination and the timing and the, the lack of, or the potential competition and the, yep, the governance of, you know, this country trying to take over your, you know, your chip manufacturing or whatever.

[01:15:09] Preston Pysh: Good luck competing against Bitcoin. Guys, this was a blast. This was good. Jesse, what were you going to say?

[01:15:14] Jesse Myers: I was just going to say Bitcoin is a whole lot more certain because you can just go look at the supply function and know that it’s going to keep appreciating value without you having to risk anything. If you accept that it is a sound system to begin with.

[01:15:28] Preston Pysh: Yep. All right. Jesse started off tell people where they can find you and anything else that you want to highlight.

[01:15:35] Jesse Myers: Yeah. You can find me on Twitter at @Croesus_BTC . You can also come check out Onramp at onrampbitcoin. com.

[01:15:43] Jesse Myers: And yeah, to check out our episode with Preston on the Scarce Assets Podcast. You can find that on, on YouTube or any podcast app that you use.

[01:15:53] Andy Edstrom: That’s right. Scarce Assets is in the Onramp feed along with other great content that we’re producing and yeah, @edstromandrew is my Twitter handle.

[01:16:04] Preston Pysh: We will have that in the show notes.

[01:16:06] Preston Pysh: Jesse, congrats. Congrats to your wife. Massive news. So exciting. So excited for you guys. And guys, thanks for making time today.

[01:16:15] Jesse Myers: Thank you so much, Preston.

[01:16:16] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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