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SLP233 Vijay Boyapati - Bitcoin Valuations & Cycles

by Stephan Livera
December 4th 2020

Vijay Boyapati rejoins me on the show to talk about where we’re at in the cycle. We talk through:

  • Possible valuations for bitcoin
  • Common misunderstandings
  • Errors ... More
Hi. You're listening to the Stefan Lovera podcast for Episode 233. Regular guest veejay Boy Party rejoins me on the show, and he is the author off the bullish case for Bitcoin. And so today we're talking about possible evaluations for Bitcoin, as well as some common misunderstandings and people have, and just some common errors in thinking that people have around bull runs, which I'm sure you will enjoy. This show is brought to you by swan Bitcoin dot com, the best place to order. Stack your Bitcoin in the US with incredibly easy set up and low fees. They've recently announced availability in New York's or they are now available in all 50 U. S. States. So if you've got any new coin of friends now, you don't have to worry about whether they're in the right states for it. All US states are covered and swan have some new features, like X pub support, which you can use with the hardware wallet, for example, and automatically withdraw to a new address each time Swan services built around regular stacking. But if you want to wire money

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rust proof with the cipher. Will you slide in the tiles to keep a backup version off your seat? And in doing so, you can make sure that you or your loved ones have access to your Bitcoins. If an accident occurs, so go and order yours at cipher safe dot io and use the code Lovera for a discount. V J. Welcome back to the show. Thanks, Stefan. It's great to chat with you as always and hope I'm keeping my record as being the guest who's being on your show the most. That's a very important record to me because it was my first podcast idea, and I still think it's the best big coin podcast out there. Well, thank you very much. VJ and I think you are. Although I haven't checked the numbers recently, I should run the numbers. Uh, it's gonna be it'll be between you and Pierre so quite fitting. Eso yes. So the market situation and Bitcoin has. It's been continually changing over time, and now it's, you know, we're kind of getting to that point where we

have to start thinking about what kind of market do we think Bitcoin is competing for. And so you had a great threat around evaluations. I'd love Thio, get into some of that. So I think it would be good if you could perhaps spell out what are some of the high level, you know, evaluations that we could think of for Bitcoin? Yeah, absolutely. And and to give a little bit bit of contest context. Uh, my background is in Austria economics. I'm a computer scientist by training, but I spent a lot of time studying Austrian economics. When I first came across Bitcoin in 2011, The question that most interested me was How does this have a price? It all that's this question that economists really should be studying is how how prices set and how they formed. More recently, I've become interested in evaluation frameworks, And so just how does Bitcoin have a price? But what price should you assigned to it? And so I've bean kind of thinking about

digging around What valuation frameworks are there out there? What have people used and And I came up with the four main ones that I've seen in my you know, about nine years thinking about and observing the Bitcoin market, the first framework is the one that pretty much everyone thinks off when they first come across Bitcoin, which is this is just the tulip mania. This is another huge bubble. This thing doesn't have any intrinsic value. It's, uh, some crazy token that's being created on the Internet. How can it have value? Eventually, the bubble is gonna burst on. If you If you were to believe this framework, you probably assign ah, long term price target to Bitcoin of zero. And this is the framework that you'll see still being used by people like Peter Schiff and Nouriel Roubini in Paul Krugman and the, You know, the kind of people who can't get away from that first skepticism and open their mind and

sort of see that there's an underlying innovation here that's very important. So the second framework is that Bitcoin is a new monetary good on, and it's clearly solved some problem because there are certain people who value it. But the the set of people who do value it is limited and is limited to people who are either technologically savvy or who have an ideological affinity, uh, to Bitcoin so libertarians, for instance, and it if you wouldn't believe this valuation framework, you probably assigned a price target to Bitcoin of somewhere between 10,000 and 100,000 because there are still, you know, a lot of people who fit that category libertarians and people with a technology background. And there's a lot of savings in Silicon Valley. So, uh, that that gets to you, you know, a decent price level

, but it's not sort of what I would call geopolitically significant. The third valuation framework that I found is that Bitcoin is essentially digital gold. It's a better version of gold. It has the same attributes that make gold Good is a store of value, and in fact, it's better than gold along these attributes, especially along the attribute of scarcity. It's a strictly finite supply and, uh, transmissibility or transport ability. It's It's just like gold, with teleportation built in so I can transmit $100 million with a Bitcoin across the world almost instantly. Where is doing that with gold is much more difficult now. If you believe this framework, you think that it totally makes sense for for Bitcoin to have a market capitalization that's, you know, equivalent in the same ballpark as gold. So you probably assign a price level somewhere between 300,000 U

. S. Dollars, which is slightly below gold teeth, you know, anywhere up to maybe a million dollars, which is higher than gold's market capitalization because you believe that it serves the same purpose is gold. But it does so in a better way. And the final framework that I've seen is that Bitcoin becomes the world's, uh, monetary base, the global reserve asset that nation states and large finance financial institutions keep their savings in. And that is a model which sort of views Bitcoin as serving the same purpose that gold served in the 19th century, when gold was the reserve currency of the world. And if you were to believe this valuation model or framework, you would basically have to assign a price level to Bitcoins so that all the Bitcoins added up to the total global wealth and and that gets you to a price level somewhere in the order of 10 million dollars per Bitcoin

or higher than that as the global economy grows. Yeah, so I think it's ah, I wanna go back to the tulip mania kind of idea. So I guess talking, Thinking off what? Someone like you know, the typical skeptics nowadays, someone like Peter Schiff who just can't get past You know, this objective theory of value, I guess at the kind of if we have to push it to the maximum level, what those kinds of people could say is, Oh, well, see, you're just you're just living through this kind of bubble period and you know, it might be that, you know, it just the bubble hasn't popped yet. And I suppose our Aunt er addressed the way I would think of that is more like, Well, hold on kept where tulips able to be sent around the world where they strictly scarce, did they have all these additional qualities? And I think the other point is just that, really, with these kind of past bubbles, tulips

and southsea, etcetera. It's not that they were like it kind of died and then just re rose again and again, wouldn't you say? Yeah, I completely agree. I think the second point is really important that historically there are no bubbles that I'm aware of that burst and then came back and then you know, had had another popping and then came back. But each time they came back, they came back even bigger. I'm not aware of any such bubble, and one that continued for an entire decade. It's just, uh it would be historically unprecedented. There's clearly something valuable that's being created, created here in a clear technological and monetary innovation. Eso It's sad that after 10 years people are still using these analogies. I could understand maybe in the first two or three years someone might see it and think that way. But after a decade, you you really are not thinking critically. If you if you believe that valuation

model, yeah, and it's probably also fair to point out that just living in a Fiat money world with, you know, awash with credit expansion might be harder point to come back to, to say, Well, what if every asset is being pumped by this Fiat, you know, Central banking and fractional reserve? Could it be that Bitcoin's value is being artificially pushed up? But also everything is being pushed up by that? Yeah, I think that's a fair point. I do think that, uh, old assets of being inflated by the fact that the total amount of Fiat money out there it has increased tremendously. But when you get into a situation where the inflation gets out of control, people will flock to the most liquid goods first, things that the most tradable. So if you look at the Weimar hyper inflation, yeah, people fled. Uh, the the rent and mark to re alas, ETS

things like, Ah, our food and real estate. But the thing that they prefer the most was gold and gold skyrocketed during the hyperinflation because it was the most liquid tradable good. And I think that's what you'll see if we get into a situation where the inflation gets out of control, that people will flock to the most liquid globally traded good and Bitcoin is really fits the bill quite well. It's deeply liquid. It's traded across the entire world. It could be transmitted across the entire world gold gold, sort of similar as well. But it has a disadvantage that, um, transmitting it is very difficult. And I'll give you an example of one case where this might be important. Imagine, imagine if you're the leader of a nation state, that's not viewed very favorably by the United States, and you've essentially being kicked out of the global monetary system because the U. S doesn't like you. So for

, for instance, Venezuela and you're running out of savings, your nation's running out of savings and you want to repatriate your gold. You don't hold your own gold because you know it's hard to move gold around. And you've trusted for a long time that the gold you had in the Bank of England is your golden. You can get it when you want, and you ask them, Can I have? Can we have our gold back? They say, No, you can't have your gold back because we don't like you anymore That eyes a situation where there's a huge advantage in having Bitcoin versus gold because the goal that you have is hard to move around. It's hard to pay other nations with because you have to physically transport it. So if you're a nation which has become a prior, there are huge advantages. Toe holding, Bitcoin versus gold. Yeah, and so moving up to the next valuation category, or bucket, if you will. The new monetary tech for the tech savvy cipher punks and libertarians

. I'm curious what you think there, because some might. I guess some people would say, Oh, well, fine. Bitcoin might be this useful tool, but in reality it's difficult to use. And to may I think that ignores the reality of what this is right. If it's a better money, well, then people will make better technology and better user experience for that. And really, what's driving it is what was the better money? Not what has the best u X, if you will. But how do you think about that? Yeah, I think you're absolutely correct that the fundamental problem is making a better money. The user interface is something that takes time and the same thing applied to the Internet. For instance, As a ZA comparison, Bitcoin is only a decade old. If if we would have a look at what the Internet looked like a decade after it had, it's really begun being used in the way we think of the Internet today. That gets you to, you know, the early two thousands, and I don't think many people

back then really appreciated how important the Internet waas. It really took another decade you know, 2010 and 11 and 12 when people recognize that this is, uh, gonna be profoundly important to the way the world economy works. And I think the same thing will be true for Bitcoin to we don't fully understand how it's going to change the financial system, but it seems important and it seems a little difficult to use. And the Internet was still difficult to use in the early two thousands, and Internet penetration was still quite low. Uh, but in time, uh, the technologies to make it mawr approachable and easy to access were developed, and they were developed because the underlying thing that had been built was very, very important. And the same thing is going to be true for Bitcoin. We still see a lot of innovation and companies coming into the space trying to make it easier for people to use on. And I think one of the areas of innovation that

we're gonna see a lot of working over the next day 3 to 5 years is making it easy for people to self custody and to feel confident holding their own point and sort of reduce the mental burden of managing your own private keys. And speaking of the demographics is, Well, I think even if you just looked at Libertarians, only we haven't even hit saturation even in that demographic yet, right? There are a lot of libertarians who are not into Bitcoin. Maybe they've got confused by all the B cash staff. Or maybe they hold a very small amount of Bitcoin. They haven't actually really dive deep into this and actually taken a significant position into Bitcoin, wouldn't you say? Yeah, that's a great point. I That's one I hadn't even thought about the penetration that, even amongst the demographic who should be most sympathetic to Bitcoin is still fairly low. I mean, I don't have a specific number on the top of my head. I would imagine it wouldn't be more than, say, 30%. So there's still a lot of room to grow, even

the most sympathetic demographic, and so that that gives you a sense of how much opportunity there is, how much upside there is amongst other demographic graphics who don't really even think about these issues or why they're important, right? And I think also from a cycles perspective, and I'm sure you have probably notice this, perhaps even in yourself. And also in your observations of other people who are in the Bitcoin world, it's that often times it just takes time to build some conviction. And it might need, ah, full cycle at least one, maybe even two cycles before someone has built up more of a conviction into holding significant part off their wealth into Bitcoin rather than let's say they're dipping your toe in. And so e think it fundamentally is just going to take time for enough people to have gone through a cycle. Yeah, I think this is something that we've spoken about in one of your previous podcast I talked about. I've talked about on Twitter the psychological process

of becoming open thio or curious about Bitcoin and being willing to allocate some of your savings to it. And I talk about the idea of touch points, which is a number of times you've heard about Bitcoin or someone you trust, explaining it to you or having a small allocation to it and seeing that allocation increasing value to the point where you are curious and you dive down the rabbit hole and for some people, the number of touch points they need is much higher than other people. So, for instance, I heard about Bitcoin twice. Andi, that got me interested partly because the people who told me about it I really trusted and partly because they were sort of explaining something infertile ideological ground. I was, you know, libertarian. I am a libertarian. And it was something that and I'm interested in economics and monetary theory. So you know, when something like Bitcoin comes along, I'm pretty receptive to hearing

about it. But for the average person may take 10 or 15 times before they think, Hey, I keep hearing about this from my friends. Why don't I put a little bit of time in and figure out why this is important because I don't want to be the last person on this bandwagon. Bitcoin becomes really big. Or it could be that Ah person has been gifted some Bitcoin a few years ago, and it was worth $100 a few years ago, announced worth $1000. And that alone was enough to pique their curiosity to the point where they're now going down the rabbit hole and honestly, I could tell you Put for my own personal experiences has happened among family members of people who have gifted small amounts of Bitcoin to over the years. And they've sort of their curiosity has grown with the price, which is, you know, kind of natural. A swell. Yeah, Onda. I'm curious as well, so I know you. Little while ago you went on Tom Woods show talk

about Bitcoin to his audience. And it's just a funny thing because it seems like libertarians should be all about Bitcoin, and yet so many of them are not. Why Why do you think that is? Yeah, that's a good question, and I'm going to say something controversial. I didn't expect to say something controversial on your podcast, but I'm going to assign the blame here to someone who I otherwise hold in high esteem. And that's Mari Roth barred, And I I think the problem stems back to a misinterpretation off the mission regression. The're, um, which is a theory, um, of how does money get its original value? And I think Roth barred was the first person to really take Mrs Regression the're, um and misinterpret it in a way that said, money can only evolve a something that starts as a commodity with

riel utility eso You know something that you can use to dig holes or, um, something used for jewelry or something like that. And I think that was a big mistake. And if you look in the Austrian community Ah, lot of people clung to that idea for for many years, and some of the prominent Austrian still haven't fully grappled with it and haven't fully figured out that that interpretation of the regression theory is wrong. Eso that. That's at least my thinking on what happened. Uh, in libertarian circles, there was that initial skepticism and dismissal and debate about Hey, can this thing be money? And I think a lot of people became hostile because of that debate, because debates like this can often get heated. And and I think there was some animosity that was created, um, in the libertarian community and in Austrian circles. It's unfortunate, I think, when I when I look at Roth

bods writing, I think he was a brilliant historian and a brilliant polemicist and a great sort of motivated to bring people toe libertarianism. But I didn't I don't think he was the same caliber of economist that Mrs Waas. I think Mrs was a giant and really, uh, several of the things that he worked on were revolutionary on. I think this is just a case where something that he believed was sort of, um misinterpreted and twisted a little bit. And I don't think Mrs Himself would have looked at Bitcoin and said, This can't possibly be money. This this thing is like a Ponzi scheme or something like that. I think missus would have bean much more curious and would want to have understood what it was and how it got value in the first place. Right on. And that that May that may well be true that

this confusion around the regression theory, um, was what led many Australia Bateer Ian's to not go down the Bitcoin rabbit hole as it were. But I suppose the other point there is that a lot of libertarians are not necessarily Austrian, so I guess it's for some of them that wouldn't even matter. So what about the non Austrian libertarians? Even though you and I are in that camp? What about those other non Austrian ones. Why aren't they into Bitcoin? That's a good question. I guess I can't. I don't have a general answer for you. I need to look at the specifics off particular people on DWhite. They're dismissing it. Uh, it may be that they're just slow. Some people are slow on the uptake and recognizing that something is important. It's It's kind of like investors in a way, some people are quick and they see that something is important and they move quickly, Uh, to take advantage of that. And some people are just slow on. I think probably the same thing is true in libertarian circles as well. Libertarians. On average, my guess is they're

more curious and more intelligent than the average person. But there's probably still a spectrum off levels of curiosity and, um, openness. And there's probably a whole bunch of people who are just naturally not that curious about new technologies. Yeah, yeah, and it could also just be that look, it's technology. It could be difficult for people if they're not a tech savvy person, but I anticipate a lot of those people will come in over this next cycle or so and with the gold idea of Bitcoin being something in that range evaluation. As you said something like 300 to 1 million or 300,000 to 1 million, that is, Um, I wonder then, whether we we start to get into that we could potentially hit close into that range at the top of this cycle before crashing back down again. Uh, do you have any thoughts on what changes in the broader? Let's

say, investment world. If Bitcoin were to get close to that kind of evaluation, I think it's possible. I definitely think it's possible on one of the things that I think is most fascinating, which, you know, fascinated me from the beginning when I first came across. Bitcoin is this is the first time in history that we've seen a good being monetized the process of gold. Becoming money took thousands of years, and so we get to observe this in real time, and we get toe, learn how how it happens and what it looks like. It's not a it's not a simple, straight linear process. It's messy and it's go. There are ups and downs there, booms and busts, but one of the most fascinating things that I've observed is that it sort of happens in these cycles on these cycles are like a fractal pattern. Ah, fractal pattern of increasing magnitude. And what I mean by that is, if you super into opposed the price chart off a bit Queen

Bull cycle from 2011 to 2013. If you superimpose that on the bull cycle from 2016 to the end of 2017, it looks almost identical. And that's Ah, and even crazier to me is if you superimpose that pattern on the gold price chart from 1980 to 2000 and 10, it looks pretty much the same. And what I've speculated is this might be something that's inherent to the social dynamic of monetization on day. And so if we do that again, if we take the the price chart of 2017 and superimposed on the current price chart re scaled for the current price level, that that would get you to at the end of this bull market that plays out in a similar way to the previous one to a price level of 325,000 per Bitcoin somewhere in October 2021. Uh, currently we're ahead of schedule

. That is the price now is higher than it should be if you were to follow exactly the 2017 bull market. So we're moving faster than we did in the last market market cycle. I personally find that very, very strange. I would have thought that this bull market would take longer to play out just because of the scale of the market. Eso I'm surprised. I I think this is pretty interesting. It's pretty, It's it's cool. And it could partly be explained by the fact that that the the people coming into the market right now, very large institutional players moving very large amounts of money. And that's perhaps why things are moving more quickly than they did in the last cycle. Yeah, and also on this whole idea of additional adoption, I think from your bullish case for Bitcoin, I can't remember. Or maybe it was one of your tweets. I think you're saying something like this like this whole thing might take 50 years, but it seems nowadays

the way I'm looking at it now, it might actually be 10 or 20 years from now. Do you have any thoughts on that kind of timeline idea of when you would anticipate we see this kind of final, full global adoption? Yes. So I have for a long time of being kind of agnostic. Thio Price, you know, price movements in the short to medium term, I I haven't had strong predictions on on what would happen. I've bean. I'm is bullish. Is anyone on Bitcoin in the longer term say, 50 years, I think there's almost an inevitability to it becoming, ah, global reserve asset. Um, but, you know, recently there's been a lot of analysis done by Plan B about, um Bitcoin being adopted in a in a very sort of predictable way. And to be honest, I was kind of skeptical that something like that could even

be possible because it almost violates what we, as Austrians think off as there being no statistical laws that you consort of rely on, uh, that all all action can be changed at any time and market. It's all it's all market dependent and dependent on the, um, actions of individual in the particular time period. Uh, but but the the analysis that Plan B has done is very interesting and it z eerily accurate. It's almost scary to see how accurate it is. And if anything, I think safer Dean may have said this. This might be the first sort of statistical economic law that anyone has ever created on. And if it's the case that it follows this same pattern into this ball cycle, I think I think Plan B might be up for a Nobel Prize in economics. Back to the show In a moment after this message for the sponsors off the show unchanged, Capital is building Bitcoin Native Financial

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. Huddle Huddle offers a peer to peer lending solution, ensuring a secure and transparent collateral storage system by providing a unique multi signature escrow for each deal. This is a way to grow your savings and earn attractive returns on your investment. So if you have any stable coins lying around to create your office and earn some interest by lending on a lent at Huddle huddle or if you are a Bitcoin a and you need some liquidity, you could borrow stable coins and keep on huddling with Hoddle Hoddle's land platform. You set your own terms and put up office, depending on how long you wanna borrow or lend and interest rates go and check it out at lend dot huddle huddle dot com. Right. And as you say, generally speaking in Austrian economics is not that there's like some statistical laws that we can divine through statistical analysis. But I suppose the maybe a safety nian counter to that point would be something like Now that we have this monetary set point of 21 million, Maybe that really does change some things about, you know

, the way economics works, because now the total supply is known, or at least the eventual total supply is known. Yeah, I mean, perhaps the fact that we people's expectations about that supply of becoming sort of becoming more and more confident over time is one way to explain, um, things growing belief that stock to flow is a valid model. And there may be a feedback loop here. As as, uh, more and more people believe that the model is actually correct. It follows the model even more closely, so that that would be an interesting thing. We're we're learning, and I think it's really good for us as Austrians to keep an open mind and be observant and watch the market and see how things play out. Um, I I probably am not quite as confident as Plan B in the model, uh, I'm open to it being correct, and I think it would be absolutely incredible

if it was correct. My bullishness, ISMM or for the longer term. And I personally always urge caution for anyone getting into Bitcoin to think about this is an opportunity that they should have, like a decade horizon on by some by some so that you know you don't feel uncomfortable with the amount you own and just forget about it and come back in a decade and see where you're at. I think it's a little bit dangerous to think that you can buy something, and next year it's going to be up 10 X. If it is up 10 X, that's fantastic. That's great for you, and it's great for the whole community. But don't don't come into the space predicated on an assumption that that's true, because cious be patient. Andi readers much and learn a much as possible to increase your conviction so that you feel comfortable owning Bitcoin for a long period of time, right? And with this

cycle, I think the narrative has shifted as well. That, or at least it's more like people have settled down onto more like a store of value, long term narrative where perhaps historically it was a bit more confusing. On the other, there were other ideas around what possible narratives that were like, Is this a crypto world? Or is this some other thing going on? Where now I think there's a least a stronger contingent and a stronger messaging around what Bitcoin is? Yeah, I think this is the first full cycle when we have the correct narrative. They have Bean like to say, a whole bunch of narratives floating around those one. For a while, though, it was everyone's all about. Blockchain is important, but Bitcoin is not and, um, within the Bitcoin community, I think the big important debate was what is Bitcoin? Is it a is a payment technology? Is the payment rail or is it

a savings technology? Is that something more akin to digital gold? And and that debate really came to a head in 2017 with Big split of the network and I think the important thing is that that split really resolved one of the biggest risks for Bitcoin, which is what? What is it? We were not really sure what it is. And and there was a big risk at the time, uh, perceived risk amongst investors, that the whole thing could fall apart because the community couldn't get together. What happened in fact, is when the network split, the market overwhelmingly voted for Bitcoin as digital gold as a as a savings technology, a za reserve asset and the fact that that was resolved. And now we've sort of sort of gotten past the whole idea that block chains are important and Bitcoin is not. This is the first ball cycle when people, I think

now generally view Bitcoin is a fantastic store of value and they also recognize it is three only Blockchain of any significance or any value on that's incredibly important. I think having that narrative in place is going to be enough to get us from where we are now to Bitcoin attaining and eventually eclipsing golden market value. To get beyond that to get it from gold Thio being the world reserve asset that the narrative might need to expand or be, um, improved in some ways to bring along skeptical nation states or central banks. But but having the narrative we have now is enough to get us to being digital gold. In my opinion, yeah, and also this is the point I have mentioned as well around what we might call order of operations. Right? So it seems that there's a lot of if we look out into the more shit coin and crypto world they

are often talking about defy. And as though you know, you need to have all these kind of fancy, complicated financial instruments and you know you can't do that on Bitcoin. Therefore, that's why we need a shit coin for that and e mean to me. The way I've always thought about that is more like, Well, we need to get the money right first and Bitcoin has a lot more growing to do before those things are, you know, 100% necessary. Eso you can experiment with them and to some extent you know that there is some level of Bitcoin defy nowadays with things like, you know, Hoddle, Hoddle, Land Spencer, sponsor of my show, but also other things like, you know, lightning pool and this idea of, you know, getting return for being a routing note and things like that. What's your thoughts on? You know, so called Defy it. And it's, you know, potential importance to Bitcoin And when that would even become a relevant factor. Yeah, I like the way you framed that. I think you're right. You need to get the foundation set before you

start building the rest of the house. And I feel like some of these other project there really experimental. I don't I don't take them seriously at all. Um, they're sort of working on the roof before they have any kind of foundation. Um, I am I'm personally very skeptical of the whole defied movement or like building this kind of stuff on the theory. Um, because one thing I think is under appreciated is that when whenever you have any contract which, um makes reference to something in the physical world or some some entity that can be coerced by the state, then having it in a decent, decentralized system doesn't really help you much. And I'll give you an example. So in 2017. There was this huge I see. Oh, boom. When people thought, Hey, this is a really great way to build these contracts, which are on the theory. Um, and we can raise money and we can do it completely outside of the purview off any rigging relation. And

I think that was People were quickly disabused off the idea that that was possible because, you know, companies that are running and raising capital and having office can still be subpoenaed by the SEC, and they could be physically, uh, coerced. Um, and if you have a business which is using these contracts or you have some physical object which uses a contract, those things exist in the physical world and can be coerced. So I think the three use of decentralization in those exact those situations is almost like decentralization theater. It's not. It's not useful. It doesn't help that there is no advantage of doing those same things with, you know, Amazon Web services and using a post grass database. I don't see the advantage. There, in fact, is much less efficient to do it on something like a theory. Um, it's only in the in the world off money

, which is sort of ethereal and doesn't have, doesn't need to have physical form and can be transmitted and transported around the world That I think it makes sense to use Ah, Blockchain I see. And so I guess one interesting counter example There might be something like Bitcoin DLC's right. But I suppose if I if I interpreted your view right there you e guess you're kind of viewing that, like, that's a bit more of a sideshow compared to the, you know, the main stage, which is Bitcoin as money. Yeah, I think so. And I think there are, you know, businesses that are building a Bitcoin in building, um, sort of financial products on Bitcoin like lending and derivatives and things like that. Uh, I have not yet seen an example where that's being done in a truly decentralized way on top of Bitcoin. So something like block Fi, uh, that's a company that's

building these products, lending products on Bitcoin those products, I think totally fine. And, uh but But I think also block fire is a company that could be coerced in the future if the if the government says we don't want these products to exist. They could just go shut down block fire. Um, it will be interesting to see if someone could build a truly decentralized lending market on top of Bitcoin and have, uh, you know, market interest rates being set, uh, in a decentralized way, If that's possible, that's fantastic. I just I didn't believe I've seen that yet, right? Typically, it's needed some kind of entity to help facilitate Onda. Maybe that is good enough in terms of people having service and having someone they can talk to and figure out how to use it with, um so yeah, yeah, that's it. I just want to sort of cover what you said

just now. Ah, little bit more. There's an example of something called wrapped Bitcoin where you can wrap a Bitcoin and trade it, uh, on some ethereum markets. But the wrapping process actually requires you to set up an account with, um, what's the business Big go eso Already The whole point of having a decentralized system of trading wrapped Bitcoin as it's called on ethereum is kind of ah, fast because you're you're dealing with the centralized authority already. And if big, bigger gets rated, then that is gone. Your that the wrapped Bitcoin that you're trading on theory, um, is gone. So it's kind of theater to do that and to do it on a theory and when you could do the same thing just by creating, you know, a Web app, uh, on day and just using a database to track trade Bitcoins back and forth just like you could trade Bitcoins back and forth with

someone on coin base. Yeah, and I'm also sort of related, but I'm also curious to get your perspectives on stable coins here. So obviously I you know, I don't view stable coins as any kind of monetary competitors with Bitcoin, but I guess I've seen different perspectives in the communities. I'm a bearish summer bullish. Some view stable coins mawr like they might be the grease that enables people to kind of get in and out of different exchanges or a stepping stone for people who want to try and start with those before then getting into Bitcoin. Do you fundamentally view stable coins in a similar way, or are you kind of bullish or bearish on them? I think they sort of, uh they aid the on ramps, they aid people and being able to get Fiat money into Bitcoin, especially in places where it's not easy to get. Ah, you know, if there's an exchange which only takes dollars, it might be easy to use tether in a place where dollars are not available

in your country. Uh, in general, though, I I just sort of see them as money substitutes for Fiat currency. I don't think they're particularly interesting. Uh, it's just that you can trade them digitally. There's still completely centralized, which is that they're missing. The the property that makes Bitcoin interesting and makes it useful as a nonsensical digital store value is that, uh, they're not. It's not centralized. There's no central party that can roll back your savings in Bitcoin if they wanted to. With something like te ver. I don't believe that at all. I I don't It's entirely possible that the company that runs tether could be shut down and all your savings have taken away. So I'm only I'm only positive on them in the sense that they make it easier for some people to get their Fiat savings into Bitcoin right? And

, uh Yeah, from? Yeah. From what I know, it seems like exchanges typically like having it Justus away to help people in and out as well. And there are some people who just view it like I just want to be temporarily in that stable coin and so on on dso they're trying to minimize the amount of time that the unit. But I suppose there might be all those who actually try Thio hold some of their value and tether because they would rather not hold it in their local Fiat. That kind of thing. That's I guess that's kind of a different. Yeah, yeah, I think. One other comment. I think there's people. There are people who, uh, do arbitrage and try. Thio make profits from the spread between various exchanges, and it's easier for them to transmit dollar value tradable dollar value between exchanges, using something like tether, then going through the banking system because the banking system is so old and antiquated and terrible that everything takes so long. And if you're trying trying to arbitrage, say, a $10 spread between

coin base and finance and you're trying to move dollars between them is much easier to use something like tether than it is to do it through the banking system. Yeah, for sure. Um, also, I guess a few might be interesting to talk about a few insights in terms of how these bull cycles go. Just for maybe some listeners are a little newer, their artist familiar. Or maybe they weren't paying as much attention during the 2016 and 17 runs. But I think it's interesting to point out and note that there will just be Pullbacks along the way and people might get get. They might end up losing a lot of money. They're trying to call tops and bottoms and trying to trade in and out. Yeah, if you if you look at previous bull market cycles, nothing happens. The process of monetization we've already learned does not happen in a straight line. It happens in in sort of. It's

a very bumpy ride. And if you look at previous the previous bull market cycle, there were several tops called through the cycle. I mean, they're people calling the top of 8000, 9000, 15,000 on every one of those was wrong. Um, so? So if If you want to sort of see the big gains over the long term? You're not gonna be trying to trade these things because trade these tops because it's very easy to get tricked and see something. See, a price movement to, let's say, in this cycle it gets to 75,000 and then it drops down 30 or 40%. It drops down to 40,000. A lot of people are going to panic and sell out because I think this is the end. Bitcoin is gonna drop all the way back down to 3000 or something like that. Um, but you should in any bull cycle, you should expect that they're going to

be at least three or four drops, which at least 30%. And if you haven't experienced it before, 30% drop is very, very painful. Uh, and the only way you're gonna survive this is if you have conviction, you you go down the rabbit hole and understand why Bitcoin is long term really valuable. And you should go through and listen to every one of Stephen's podcast to get reaching, uh, and and maybe put your Bitcoin somewhere where it's hard to get it out. So it's hard Thio. Trade it to put it in cold storage, put it in, ah, lockbox somewhere and just forget about it. And don't even look at the price. That's that's what I tell people by some amount of Bitcoin that you feel comfortable about on. Just hold it for 5 to 10 years and don't even look at the price until then, right? And I think it's a common tendency for not for everyone, but for some people to feel like they can try to pick the tops and the bottoms or that. Okay, if there's a drop, it might

only be 20% drops. And then they might leave her into a certain position and then actually get wrecked because it dropped more than they thought it would. And, you know, then there's tears at the end, whereas it's much it's so much more simple to just simply, you know, take a position on Do you know if you're able to and you've got income and you're happy, you know? And then keep, you know, dollar cost averaging or stacking sat order stacking. Whatever you wanna call it. Um, just play it like that And that's a simple way that, you know, people who have done that strategy have done well. Yeah, another missed. A common mistaking bull markets is I don't wanna buy now because it's already gone up so much. And it's funny. I a friend, reminded me just yesterday often email exchange we had going back to. I think it was 2012 and he said, I don't I just I really don't wanna buy Bitcoin here. It's $13. It's gone up so much in the last few days. I just feel really uncomfortable. And he reminded

me of that and how how painful it was to look at that and think, Whoa, I I was like, um, I was getting worked up over a few dollars. I didn't see the big picture here, and I think Bitcoin is still an asymmetric bet. I still think it has massive upside from here. Eso a mistake people make is I don't wanna buy it now because it's gone up a lot. So I'm gonna wait for a pullback and buy it on the pullback. But let's say the price is 15,000. You wait for a pullback, it could get up to 25,000 and pull back to 20,000 and then you've you haven't bought in that the better way to think about it is not. I'm trying to find the exact right price that the right way to think about it is what fraction of my portfolio am I comfortable owning in Bitcoin and just by that fraction, and just sit on it for a long as you can? Yeah. And obviously, as this cycle plays out, I'm sure we will see the same characters, right? Peter Schiff, Nouriel Krugman. Whoever

else, they'll come out every time there's a drop. And one thing that I've noticed really is that they're very short term focus, right? They look at things short term, drop off, you know, 20% 30%. And then they weren't. Look back at the actual long term where we've seen, you know, multiple multiples. Literally. Bitcoin has gone to multiples of what it used to be. And it's almost like this this selection bias of people who are able to be long term thinkers versus the people who only see things in the short term. Yeah, I joked about this on Twitter when Bitcoin recently dropped. I think it was from, like 18,500 to 17,000. I was like, See, Peter Schiff is right. Uh, you know, obviously, uh, they have totally missed the forest for the trees. They haven't seen the big picture on, I think just a little more cynically, I I think in the case of Peter Schiff and Nouriel Roubini, I I think this is a motivated dishonesty

. I think they see that they get a lot of engagement from this, and it's good for their brand. And so some of Peter Shifts tweets are so inherently dishonest that I am still find it hard to figure out if he's either a dishonest person or he's just stupid. And I keep sort of going back and forth between those two, Uh, but it may be that he's actually really smart. He's figured out that he mentioned on Twitter that he's number of followers has gone from, like 200 to 300,000 just by tweeting about Bitcoin. That's all he tweets about. Even though he's a a sort of used gold salesman, Um, he's found that we could get a lot of engagement by talking about Twitter because the Bitcoin community is very active, passionate community, and you tweet anything about Bitcoin. You're going to get a lot of people engaging with you. And I think this is gonna be, uh

, the first cycle when you see a lot of celebrities getting involved in Bitcoin too. So this this bull run is gonna have a lot of attention. It's gonna be It's gonna be crazier than anything you've ever seen. It's gonna be like a circus. Eso prepare your body for 2021. It's gonna be a very wild ride on. I remember even in the 2017 cycle there were, you know, it was like Katy Perry is coming out with their own coin or something. I can't remember exactly. Right. They were all coming out with their own coin. That was the thing, right? Whereas maybe this time it'll be more like, you know, Bitcoin bling or I don't know who knows who knows what's gonna happen? Yeah, I almost forgot about that. You're absolutely correct. It sort of illustrates how we've finally, um, holding down to the correct narrative. Back then, it was like all about Blockchain. So everyone had their own Blockchain, and that was cool. But I mean, of course, that idea is completely absurd. You don't wanna have one money for buying bread and another money for paying gas. You want one money

? Just a single good, uh, hard money and that's Bitcoin. So this cycle is going to be completely Bitcoin dominated and and everyone, every celebrity and their dog is gonna want to talk about Bitcoin. So it's going to be very, very exciting and interesting. And, um, everyone's gonna be talking about it good or bad on people who have been talking about Bitcoin like yourself for a long time, I'm going to get a lot of inbound media attention. Yeah, there we will see. I mean, I guess if everyone wants their own Blockchain in their own their own coin, there might be, You know, it may be it may be that, you know, Bitcoin obviously will grow a lot and we will see less as a percentage who get fooled by shit coins. But it might actually still be bigger in absolute terms, right? Just because of the numbers involved here, So there may still be a lot of people who get confused and go, you know, buy shit coins and etcetera. Yeah, you're right. That's that's a good point. Um, in

relative terms, I think it will get much smaller. But a za Bitcoin becomes massive. There will still be some sort of fraction off people who own Bitcoin who would degenerate gamblers and who will? I wanna, you know, try their luck in in some of the old coins. And because the all coins are so small and so a liquid, any small fraction of Bitcoin moving into them can massively spike their price. So move them from, like, a quarter of a penny toe, like nine or 10 pennies. Uh, so and that can get certain people excited. Like, Wow, I can make 50 x on this old coins, but really only a few people could make that because it's so a liquid. Anyone who was coming in with, you know, a large amount of capital would completely lose all of their capital doing that. But there will be some fraction of people who sort of fall for this. And it's unfortunate because, you know, we've gone through a couple of these cycles

where we try and we care about people and their savings, and we don't want them to be hurt. And much as you want people beforehand, there will still be some fraction who fall for this nonsense. Yes, unfortunate to see. But I guess you know, just got to try to keep putting out good material and hope that people catch on to it. Um, also, I was interested to get your thoughts around some of the Let's call it platform risks or technological risks around things like Ethereum because I think it's important to just kind of spell out for people. What's the difference between, you know, Bitcoin that's built and engineered toe last for the long term? Versus you know, the way people are building on things like Ethereum. What are some of the practices that you're seeing over there? Well, Bitcoin sorry, Ethereum is exciting toe a certain mindset, the engineering mindset, people who like writing code and scripting and things like that sort of a Silicon Valley mindset and engineering

mindset which is obsessed with direct utility. And so they see a theory. Um, and they think I can build all these things on top of it that therefore it must be useful. It's not thinking about it from a monetary perspective. And, uh, the value comes from, uh, stability and credibility of monetary policy. And in that regard, I think there is no old coin that comes anywhere close to Bitcoin and that that includes Ethereum. There is no credibility to the monetary policy of Ethereum. And you can see that because in the early days, uh, they had a contract on the ethereum, which was kind of like a they they sort of touted as a decentralized venture capital fund. And then someone figured out a hole in the contract where they could steal money from this fund, and what they did was they essentially rolled it back. They forked the theory and Blockchain so that that, uh

, that bug was kind of the theft of the funds was wiped out. And that really tells you that there's no credibility to the theory ums, um, protocol being immutable, they can change it at any time. And, uh, and part of the problem there is that you have a founder. You have one person who has enormous influence over the development of a theory, which is Batalik Budarin. And that's totally fine is a software project, but it's not fine as a monetary good. It's not something that you can trust eso in regards to the credibility of monetary policy. I think there's only one coin that's that has that credibility. And that's Bitcoin. Absolutely. And you know, that's why I you know, I stay Bitcoin only and I, you know, encourage listeners Thio, you know, just a Bitcoin only and don't get tricked. Um, with some of these, uh, sort of Charlotte and esque, uh, scam projects going on eso

I guess Probably a good spot to wrap up here. VJ Do you have any closing thoughts for the listeners? I think it's way still haven't gotten into the frenzy phase off the bull market, Um, when it's gonna become really hard to concentrate and pay attention. Anyone who's been interested in Bitcoin for a while will know the feeling that when you're going through a bull market, it's it's hard to concentrate on work. It's hard to concentrate on anything. I think this is the best time to if you're building things, sort of batten down the hatches and build this fasters. You can if you're interested in investing, then spend as much time and you can digging into the important materials and and how Thio Self custody, Andi, things that will help you with your conviction during a bull market. One of the things I like to say is that people's conviction is tested much more in a bull market than in a bear market. Because you see this, you know, some fraction of your savings

growing enormously, and it's really hard to hold on to it unless you have that long term conviction. So before we get into the crazy phase, which I think is probably gonna happen in the next few months, now is the time. Just you spend time learning or building or doing the things they're important. Before you know, you'll be completely distracted. All of us will be completely distracted once we get to the parabolic phase of the bull market. Yeah, definitely. I think it's gonna bringing back memories. Uh, listen to make sure you follow VJ riel underscore VJ on Twitter. And if you haven't already gone, read his article. The bullish case for Bitcoin. Thanks VJ I hope you enjoy the show. And just as we're going into this big run, I'd really appreciate any reviews. You can leave me on the podcasting or podcast platform that you're listening on. Thanks very much for that. Make sure you subscribe because I've got a very big episode coming. Very soon you could get the show notes that Stefan Lovera dot com Thanks. And I'll see you in The Citadel's mhm

, yeah.

SLP233 Vijay Boyapati - Bitcoin Valuations & Cycles
SLP233 Vijay Boyapati - Bitcoin Valuations & Cycles
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