Preston Pysh (04:41):

Yeah, you are getting to that point. We’re seeing the same thing here in the US with the housing crisis is just going berserk.

Plan B (04:48):

People that don’t have the money to start capital, and that’s more and more people, they can’t buy a house, they have to rent a house. But rents are going through the roof, so that people cannot get away from their parents’ houses and get into big troubles with their finances because the houses are so high. Now, they’re all making measures in the tech sphere. So, taxing house owners, et cetera, as if that were the problem.

Plan B (05:15):

No, the problem is the money printing and all that money has to go somewhere; equities, real estate, Bitcoin, gold. Well, the asset inflation and now that asset inflation is of course spilling over in consumer prices, energy prices first of course and it will go down to core inflation as well. Core inflation is the inflation baskets without the energy prices, because that’s the volatile components in the inflation index, and the core inflation is what central banks are tracking. That will go up. That’s the last thing that’s going up.

Plan B (05:48):

But yeah, everything is going up. It must be different in the US as well, but in Europe, Winter is coming, heating prices, oil, gas, electricity, double at the moment. Households are going to pay double the gas and electricity prices next year, and that will certainly cause problems. It’s very interesting.

Plan B (06:07):

Then if we look geopolitical, it’s very interesting what’s going on with China and the US at the moment. I think it’s Evergrande thing in China with the real estate debacle going on there. The US bashing China, it’s all started with the tariffs, of course, the trade tariffs under Trump, but it goes on and on. China, of course, looking at Taiwan now after it took Hong Kong. Those are big movements. And the South Sea situation militarily, it’s all very, very volatile, a very… You need one match to light the whole thing up, and it’s scary in a way.

Preston Pysh (06:49):

New people that are maybe just coming into the space would hear that, and they would say, well… I’m playing the contrarian here, I know you’re going to knock this question out of the ballpark, but I think it’s important for education purposes for people. A person would be hearing all that, and they’d say, well, you just had a global pandemic, they had to print all this money, and this is just a spike. They’re not going to be printing $4.5 trillion in the coming years like they did for, I think that was the number that you said, for COVID. Some of this stuff will start to normalize. It just needs more time. You see the big time banks, I think it was JP Morgan come out and say, oh, supply chain issue is going to be resolved here in six months from now. Why is that wrong, in your opinion?

Plan B (07:37):

First, from a logical point of view, if printing money was the solution for these problems, then like I said, Zimbabwe would be the richest country in the world, and every country would be doing it. Of course, that’s that’s not true. Through the ages as well, the Roman Empire died, part of because the debasement of the currency, the printing of the money. It was the denarius at the time. So, the silver content was diminished from 90% to 0%. That caused big, big troubles, because nobody accepted that money anymore, because it was like Monopoly money. That’s one.

Plan B (08:11):

But on the other hand, the debt that the US is creating to keep the dollar going, to keep the government going, to keep everything going, and the same in Europe, by the way, but the US, of course, is the reserve currency, that debt is someone else’s asset. The asset can be in the pension fund, it can be… Well, most of US debt, by the way, is owned by China, right? China is making all this stuff for the world, for the US, earning a lot of money, but then parking that money in the treasury bonds, so in the debt of the US government, and that debt, of course, we all know that, all institutional investors know US debt will never, ever be paid off. We all know that. But we also know there will be new debt, there will be an extra credit card, if you will to pay off the old credit card. As long as that goes on, that’s all fine, but it cannot go on.

Preston Pysh (09:05):

It requires rates to keep going down.

Plan B (09:08):

If you would increase interest rate right now the debt would be unserviceable. The US could not pay the debt when interest rises with the current tax income. It’s unsustainable, they have to keep rates low and keep decreasing them or the whole house of cards will fall down. Of course, China sees that as well, because imagine that you have all this US debt and you see that the debt is printing his own money and you know it will be worthless one day.

Plan B (09:37):

What will you do? You’ll spend it like a madman and you see them doing that. They buy every gold mine, every scarce commodity mine in Africa, they buy all the harbors in the Middle East, in Europe even, they buy everything with the US dollars that they have, except more US debt, of course. That’s a smart thing. By printing and printing more, the US is actually making China stronger and stronger every day.

Plan B (10:05):

I’m sure that the military thinkers and geopolitical thinkers will see that, but there is no alternative. They have to keep doing it. Well, Europe is in the middle, we’re watching it happen. It’s a crazy movie we’re watching.

Preston Pysh (10:20):

When we think about your statement there, that they have to keep doing this. Is most of it because you got into the government reasons of why they can’t allow interest rates to go up, because then it’s not serviceable. But even at the individual level, if interest rates on home prices go from 3% to 4.5%, you’ve just obliterated your common person, where most of their net worth, you go to your typical person, I don’t care if it’s an American, or somebody over in Europe anywhere in the world, if you raise their interest rate for home prices by 100 basis points, or 200 basis points, all of a sudden, they’re getting murdered, if they’re trying to move into a new house.

Preston Pysh (11:02):

Is it the net worth of the individual, so much of it being tied up in the value of their house, and that basically being their net worth, that interest rates just cannot afford to go up in any type of meaningful way for any type of meaningful amount of time?

Plan B (11:17):

Well, I think it’s two things. It has to do with that. If you make that brought out a wealth effect, the Federal Reserve’s always talk about the wealth effect with households. Of course, the house is the biggest asset, mostly, but the more well to do people, of course, also have the equities portfolios. If you raise interest rates, everything of value will be discounted. Discounting those higher interest rates and the value goes down.

Plan B (11:40):

A very easy way for the US Central Bank to play this wealth effect, and to make us households think that they are rich and can spend in the economy is to decrease interest rates, and increase all the asset prices; the houses, the equity portfolios and bond portfolios, and people feel wealthy and buy stuff and the economy keeps going.

Plan B (12:05):

Of course, that’s the other way around, when you raise interest rates, everything goes down, it will crash the stock market, for sure. It will mathematically and by definition, take the bond prices down. So, portfolios, pension funds and everything will go down, and we will say in D2. But I think the more direct thing is the US government itself, it needs the money to pay its employees. I don’t know the exact number, but it’s very high. The number of people in the US that are paid by the government is about 60%, 70%. 70%, seven out of 10 people are paid by the US government, that’s a lot of money. If they don’t have the money, if they don’t print the money, because they have nothing, then that all stops, the whole story with the debt ceiling.

Plan B (12:50):

So, they just raise the debt ceiling and can print more money again. But who’s going to pay that? The world right now is okay with that, but there will be a point and the Roman Empire crossed that point. There will be a point that people do not accept the US dollar anymore.

Preston Pysh (13:07):

I think it’s even beyond just the US dollar, this is a global phenomenon. I’m looking at a post by a guy this morning out of Germany and he’s talking about the ECB pours more fuel on the inflation fire with its bond purchases. ECB balance sheet rose by another 25 billion to hit a fresh all time high of 8.3 trillion ECB total assets now equating to 77% of Eurozone GDP versus the Feds 37%.

Preston Pysh (13:35):

They’re all in trouble. They’re all doing this. I think this is where so many of the history books are hard for people to do a parity to what we’re seeing today is, you had mentioned Zimbabwe. Those scenarios in the past were these one off, domestic, one nation state type hyperinflation event, and not anything that’s ever happened globally, collectively all at the same time.

Preston Pysh (14:00):

I think that we’re seeing the latter. If it’s all happening to everybody simultaneously, it’s really hard to see, because it’s almost like you’re in a car going down the highway, going 70 miles an hour and you look to your right you can’t see any backdrop, all you can see is the car next to you and it’s going 70 miles an hour and it appears that neither one of you are moving. Every car we’re looking at is like oh, it’s just standing still because we’re not seeing any type of backdrop. But Bitcoin’s the backdrop, right?

Plan B (14:31):

yeah, Bitcoin, real estate, all the hard assets. I fully agree with you, this is what is going on, and this can go on and on gradually. Central banks-

Preston Pysh (14:42):

The cars are going faster. We’re moving at 150 now down the highway.

Plan B (14:46):

Yeah, 160, 170. But this can end very abruptly. If we look back in history, this can end in a year or two years it’s all gone. Because right now some people see this. The Chinese see this, and they’re hedging, they’re buying hard stuff. They’re buying commodity mines, gold mines, cobalt mines, lithium. They’re buying harbors. They’re buying infrastructure, geopolitical important infrastructure. Investors like you and me buy real estate, Bitcoin, of course. Buy the goods, that’s what the governments are telling us, buy the goods.

Plan B (15:22):

That’s why real estate and housing prices are rising as well. People see this, people are hedging more and more, and then comes the point of no return, because it’s a very slippery slope, when it goes, it goes. I’ve seen it so many times in my career, for example, with the introduction of the euro as well, the reason why the UK was not in the Euro, and by the way, they’re out of the European Union as well, now, of course, after the Brexit, but they were not in the Euro, because they were pushed out of the bands that they had to make to be allowed to enter, because they were pushed out by Soros first, the investor, and all the other investors that saw that England or the UK was not able to meet the criteria.

Plan B (16:05):

If it’s fundamentally wrong, they just push it and push it and they lever it and then they push it out. That’s the same thing as right now that people, they don’t accept negative interest rates, they start looking for other stuff, other stores of value, if you will. The same with us, Bitcoin investors for a reason. Even further, Satoshi Nakamoto saw this, the debasement by central banks, and the solution. Bitcoin was made as a solution for debasement. He was very, very clear about it.

Plan B (16:36):

It’s going to happen, and I think it will be going faster. The crumbling of the empire and the money that we’re using today, the final decline will go faster than we think-

Preston Pysh (16:49):

I got a question on that.

Plan B (16:50):

Yeah, I thought so.

Preston Pysh (16:53):

You know where I’m going with this, right?

Plan B (16:54):

Yeah.

Preston Pysh (16:56):

Based on that comment, your model fails, right?

Plan B (17:00):

Yeah, that’s true. Adam Back had a very nice tweet about that. Not the tweet about that Stock-to-Flow Model.

Preston Pysh (17:10):

I want to talk about that. No, I’m serious. I’m dead serious. I like that.

Plan B (17:14):

But the the one earlier about where he compared it with Asimov trilogy, the foundation trilogy written by Asimov, fantastic story, fantastic. Must read books. Yes, you could say the Stock-to-Flow Model will be killed when the dollar falls. You could also say that the Stock-to-Flow Model is actually predicting the fall of the US dollar, and it gives a time frame as well, for that, because the Stock-to-Flow Model uses the bitcoin price denominated in dollars, as we all do, the Bitcoin price is in dollars.

Preston Pysh (17:49):

But it’s also making an assumption that you won’t have a contagion of fear on the dollar or whatever fiat currency right?

Plan B (18:00):

I think that’s a little different. I think it’s not making that assumption explicitly, of course, maybe implicitly, but I think it’s like this, and that’s why I like the Stock-to-Flow X Model more than the Stock-to-Flow Model. If we look at the stores of value, in this weird micro economic environment we’re living on right now with negative interest rates and quantitative easing going through the roof. If we look at the stores of value that are available, then real estate is the biggest one. It’s about $100 trillion globally, and Stock-to-Flow Model is about 100 and it’s the number one store of value that people around me, at least, use as a store to put that value in. They just buy extra houses and rent them or Airbnb them or whatever.

Plan B (18:43):

That’s number one. The second store of value of course, is gold, with the stock-to-flow of 60 and a value of $10 trillion. There’s, of course, equities and bonds all the 100 trillion range. But if we look at the Stock-to-Flow X Model for Bitcoin. Bitcoin is 55 now, stock-to-flow ratio and values around 1 trillion. It’s much smaller than real estates, it’s much smaller than gold still.

Plan B (19:07):

But the good thing about that Stock-to-Flow X is that we do not have to extrapolate, like all the other models, extrapolate into the future that we do not know. No, the Stock-to-Flow X Model is stock to flow ratio on the X axis and value on the Y axis. There is no time element it’s not a time series it’s just gold, real estate, Bitcoin, silver and diamonds and we can interpolate that model. We know what a stock-to-flow 100 asset is valued at, it’s the real estate market. We know what a 60 stock-to-flow ratio value asset is valued at, it’s at $10 trillion. That’s gold.

Plan B (19:45):

I think that hyper-Bitcoinization scenario that we are talking about, breaking the model is after the stock-to-flow 100 ratio. In my point of view, the dollar will die, the empire will crumble after stock-to-flow 100 for Bitcoin. That’s where it all goes wrong. Where the model fails, but maybe the denominator of all valuable things fails, we have to replace the dollar by, I don’t know, gold, Bitcoin maybe or something else. Maybe there’s a new world reserve currency at that time, like the SDR.

Preston Pysh (20:22):

You can’t believe that.

Plan B (20:24):

Well, they’re working on it. They’re trying, that’s the alternative.

Preston Pysh (20:27):

I know it requires trust. I’m with you, it’s an option. But I think when the world’s comparing it to something that does not require any type of trust, that is just being supplied in such a decentralized kind of way, I don’t know how somebody would choose that over what we’re describing there.

Plan B (20:49):

But that’s the big battle we’re seeing at the moment, the battle is between math and thermodynamic certainties, Bitcoin, if you will, the best money ever, theoretically and mathematically, and the powers that be right, that want to protect what they have, because they’re going to lose it all, or a lot of it. It’s a political power game with the most powerful countries and armies in the world and central banks against a mathematical, physical, thermodynamical optimal solution.

Plan B (21:19):

I don’t know who wins, but it sounds like the church at the time, saying the Earth was flat, and some weird mathematician saying the Earth is round. In the end, of course, the optimal solution wins, the truth wins, but can be a lot of war and nasty times in between.

Preston Pysh (21:37):

The one thing that I would push back on, or I don’t even know if I’m pushing back, but when you’re comparing all these different stock-to-flow levels, like you were talking about real estate is whatever the number was, and then you’re comparing it to gold and then you’re talking, well, Bitcoin will eventually be at this stock-to-flow at this point in time, based on what the math is showing us.

Preston Pysh (21:56):

The thing that I don’t think is a comparison when you’re saying Bitcoin compared to real estate, real estate is not fungible in a way that you can take ownership of that real estate, physically take ownership of that real estate in a fungible kind of way, and in a way where you’re getting small units that you can then go spend at a Starbucks to buy coffee.

Preston Pysh (22:19):

I think that difference that we’re talking about a currency or something that performs like a currency, but is actual like gold in your pocket that you can spend like currency, I think puts a different level of adoption and demand for adoption than you would see with owning real estate.

Preston Pysh (22:40):

As we’re going through this transition, you were describing it earlier with China, they’re buying anything that has scarcity to it as soon as they can, with the dollars they’re receiving, because it’s going to retain their buying power as whatever this thing is that’s transitioning takes place, and on the other side, that buying power is still going to be there for whatever the scarce thing is that they purchased.

Preston Pysh (23:03):

This goes for anybody on the individual level, country level, whatever, but I really think that we’re going to eventually get to a point where there’s going to be so much demand for people to store their buying power in this thing that is everything and is nothing. Whether the stock-to-flow is slightly above real estate or slightly above gold, I think you’re just going to get to a point where there’s just total FOMO of, I can’t store $10 billion worth of buying power in this bond anymore, as it’s yielding negative whatever percent. I just see that whole fixed income $200, $300 trillion worth of buying power today just evaporating and getting sucked in like a black hole and it’s going to send the curve just in a parabolic kind of direction.

Plan B (23:53):

I agree. I fully agree. Real estate is not fungible, and it’s not portable either. All those dimensions, Bitcoin is the better money. On the other hand, the only thing where we differ, I guess, is the timing of the events. Yes, the dollar will die. Every reserve currency dies, it’s a certainty. There will be something new, something better. But when is that happening? It’s the same question as the supercycle, are we entering the supercycle now or later?

Plan B (24:23):

I think the supercycle will be there, it’s inevitable, but not now. I think it will happen after next halfing, if you will, after the stock-to-flow of Bitcoins will be higher than gold and higher than real estate. Because until that point of stock-to-flow of 100, real estate will, for whatever reason, be the preferred asset as we’re seeing right now.

Plan B (24:46):

I’m seeing around me, people put more money in real estate like hundreds of millions. BlackRock, for example is buying the entire city of Amsterdam because those companies and the money right now is with old people. They have real estate and the gold, the physical world and not the digital world. The digital scarcity is a next generation thing.

Plan B (25:06):

I think it will happen. But I also see, in my own model, that there is a linear relationship between scarcity and value. I agree that is one of the dimensions of money, fungibility is the other one, portability is another one, divisibility is another one. That’s also a very problematic with houses, divisibility. But scarcity is, in my view, the most important factor, causing that linear relationship and causing people to put more money in real estate now, that will change next to divisibility, fungibility, portability, also the scarcity of Bitcoin will be better than real estate.

Plan B (25:46):

My guess would be, I’m probably going into that question right now, are we going into this FOMO hyperbolic scenario right now or next year, or the year after, or are we going to drop 80% first have a big war with the powers that be, the central banks, the US dollar, et cetera, et cetera, and go into that hyperbolic scenario, or a US dollar scenario, if you will where Bitcoin is the best store of value after the next halfing. So, say 2024, or ’28, that will be the period or maybe a little bit after that. Let’s say somewhere between 2024 and 2032. Yes, I think we both agree there will be this hyperbolic scenario. Bitcoin will be by far the best asset physically, dynamically, mathematically, above all other, but the powers that be, with the largest armies, the biggest balance sheets, and all the political power, they will fight, they will fight till the death.

Preston Pysh (26:49):

When you’re saying that, I don’t know that that’s what we’ve seen, though, today. It’s interesting, and I’ve been a little bit surprised by the reaction that we’ve seen in the last six months for proof of work, specifically. I was expecting a bigger battle on that front. We’re not seeing it, especially here in the States, there’s some states that are very pro-proof of work, bring your mining rigs here and start harvesting as much of this energy as you want kind of activities, and its surprised me quite a bit.

Plan B (27:19):

Yeah, me too, and that was hopeful. But it was a big battle. China banning all mining, is a network losing 50%. The value, by the way, the value of Bitcoin losing 50%, we went from over 60K to under 30K in a month. People that think we cannot see another minus 80% crash, think again, because we just had a minus 50% crash caused by a very tiny, little battle. This wasn’t a full scale war of countries coordinating. This was just China doing its thing again. Well, China has now played out, it’s not a factor anymore, because they gave up their most strategic asset.

Preston Pysh (28:00):

I just saw today, literally right before we started recording this, that the United States now has the most hash rate of any country in the world, and I think it’s around 35% or something like that of the hash rates now in the United States?

Plan B (28:15):

Yeah, I saw that too. Like you said, there’s some very innovative and forward thinking states in the US, there’s also some very backward thinking and dumb states in the US. But it’s very-

Preston Pysh (28:29):

So true.

Plan B (28:30):

It’s almost like there will be a new revolution or a civil war, but not the north and south, the east or west coast versus the center or something. It’s very interesting to see that diverse stability in states in the US.

Preston Pysh (28:45):

How about in Europe as far as mining goes, and proof of work, acceptance of that, politically?

Plan B (28:50):

Europe is under the regime of the central banks. The European Central Bank, Lagarde and the presidents before that, they are very, very much against Bitcoin and discouraging banks and institutional investors from investing in it. They’re punishing it with severe capital regimes. You have to hold capital one-to-one for each Bitcoin investment. They’re pushing it into the criminal corner. Anti-money laundering, know your customer, they’re trying to kill it.

Preston Pysh (29:20):

On the capitalization piece there, the one-to-one, I listened to an interview with Caitlin Long and she was like, because it clears so fast, relative to the legacy system, which, adjudicates the books at nighttime each day, a one-to-one ratio, in her opinion, she actually thought it was warranted. In fact, she thought maybe may even require more than that, because there’s not some type of stable coin that immediately clears next to it. There’s these banks that have this on their books, and they’re not capitalized in a manner that they’ve derisked by not having enough capitalization behind it.

Plan B (29:57):

I think that’s true. It’s not an unfair point to make from the central banks at all because the implied volatility of Bitcoin, of course is 100%, around 100%, can be higher. Discouraging leverage, if you will, of a Bitcoin position because that is, of course, what banks are doing normally, they have their pension money from other people or bank saving from other people that they put next to their well, 3%, 4%, 5% of equity into all those assets, and you should not do that with Bitcoin because you will be wiped out and the money of your customers with it.

Plan B (30:34):

It’s not an unfair point. But I don’t know, maybe there is hope, of course, and the truth will always win, the earth is round and not flat like the church used to say. But I see a lot of pushback from SEC okay-ish now with Gary Gensler. But well, the infrastructure bill thing, the Senate, the Fed, Yellen, the Congress, I think there’s a lot of voices that of course, are bank subsidized voices, those politicians, they’re all captured or linked to bank… For example, Yellen, the Central Bank, she gets a lot of money for speeches from all the banks.

Plan B (31:20):

Of course, she’s there for the banks, the Central Bank is for the banks. They will fight hard. That’s what their mission is. There is hope. There are states, there is the truth, of course, but there’s also the powers that be. I’m prepared for that next battle. I really think we’re going to see AI top first, because right now, the scarcity is so enormously the supply shortage, the lack of sellers on chain, and not on the exchanges, but it’s so enormous and growing, this will come to a point where the all time high will be maybe somewhere next year, but after that, I expect the central banks and the governments and the banks to come in, knock it down again, minus 80%, after which there will be a new equilibrium that has to be found. That might be the foundation for the New World, if you will, the Bitcoin world, the hyperBitcoinization. But that will be 2024, 2032 something around that period.

Preston Pysh (32:20):

I don’t think that the argument is for these people that the stock-to-FOMO, I think it’s the name of this is hilarious. I think for that crowd. I don’t know that they’re necessarily trying to say that, that, if you even want to call it a model is based on any type of mathematics or anything. I think all that they’re putting out is that this thing ends with a hyperbolic push. The timing, who knows? It could be, like you said, the timeframe that you threw out there.

Preston Pysh (32:47):

I don’t think anybody’s trying to model when the bend or the hyperbolic phase of it goes. I think all they’re really saying and maybe I’m… I have no idea, I don’t even know who’s behind it, I don’t think that they’re trying to time it. I think they’re just trying to say that this is how this ends.

Plan B (33:02):

To be honest, I haven’t taken a good look at it. I interpret it as a meme, as a joke to bash stock-to-flow.

Preston Pysh (33:10):

I don’t see it as bashing it at all. I really don’t.

Plan B (33:14):

It’s called stock-to-FOMO, and the only input there is time, it’s basically a nonlinear time model. So, it has nothing to do with stock or FOMO. It is a time model.

Preston Pysh (33:26):

You’ve got to leverage the brand if you’re going to get it out there.

Plan B (33:29):

It also looks like my model on that. It’s like the rainbow model, but then rebranded. I like this bashing, and this memeing. But don’t take it too serious, right?

Preston Pysh (33:41):

I think there’s a lot of merit to the idea that it is going to end that way. But who knows when the timing is? The timing could be faster than what either one of us really expect. But who knows what the heck’s going to… Emotions can get crazy, and if you get a few whales that manage massive bond trenches, or whatever that this really starts to click for them as to where this is all going, who knows what can take place? You have a couple more El Salvadors that enter the fold, and then you got every small country in the world that’s been a victim of these policies for decades.

Preston Pysh (34:16):

I guess that’s my next question for you is, at what price point do we see more El Salvadors enter the fold? Is it $5 trillion market cap in Bitcoin that we start seeing five other nation states that say, hey, we’ve got remittance problems here as well. I think we’re going to do the exact same thing that appears to be working really well in El Salvador here in our country.

Plan B (34:41):

That’s a tough one. Actually, it amazes me that there’s not a next El Salvador yet because the benefits are so obvious, and of course, it takes a lot of courage to do it.

Preston Pysh (34:54):

But it’s been done. Now, there’s a template.

Plan B (34:56):

But compare El Salvador to MicroStrategy law. Like Michael Sailor, the CEO and owner of-

Preston Pysh (35:05):

Nobody else has done it.

Plan B (35:05):

But he has total, full power over the company. He doesn’t have like other big shareholders, well some, of course, but he has the voting rights so he can do it with his small company. Microsoft is not Google, it’s not Amazon, so he can do it. It had to be a micro strategy kind of company that went full Bitcoin and put Bitcoin on the balance sheet, and the same with El Salvador. I wouldn’t expect the Netherlands, which is also small, by the way, or Europe or US to do it, but the small country with a leader that has almost all the power, yeah, they can do that.

Plan B (35:41):

Like hedge funds, by the way, banks and pension funds are under the regime of the central banks. Hedge funds are in a much looser regime because they don’t play with other people’s money, or not with a banking or pension money, but with high risk money. So, they can do it more easily, or family office, they can go into Bitcoin, not banks, not pension funds easily.

Plan B (36:05):

I really expected another country to enter already, and maybe what we’re seeing in Brazil, that’s very interesting. Brazil, I don’t think it’s legal tender like in El Salvador, my Portuguese is not that well, can’t read the official stuff. But if that becomes legal, at least, and supported by the government, that’s a big thing, because Brazil has over 200 million population. That’s two thirds of the US. It’s a really big country, if they go, that’s a big thing. Or Africa, Africa is another continent that would benefit hugely because they’re under the regime of the IMF at the moment there. They got their blood sucked out every day by the IMF by more debt and debt and debt. So, they could do the El Salvador thing. I think Nigeria or some country… I think it was Nigeria is well in the way to do what El Salvador did.

Preston Pysh (37:03):

If the price runs to $100,000, everyone in the world is going to be looking at El Salvador saying, maybe we should be doing what those guys are doing.

Plan B (37:12):

On the other end, $100,000, you can bet on it now at $50,000, and then later at $100,000 or $200,000. It’s certainly one of the things that I’m watching like a hawk, how the countries that are most suffering from IMF, how they’re acting. Very interesting, even more interesting than the ETF maybe.

Preston Pysh (37:33):

That was where I was going next. Is that even important?

Plan B (37:37):

Yeah, it’s very important. It’s very important. I think that, that will… For us, it’s like well, you can Bitcoin now, why would I do it through an ETF and pay 1% or 2% service fee. But for pops and moms and people that don’t want to hustle with keys-

Preston Pysh (37:52):

Here in the US, you can already go and buy GBTC. We know it’s not the best vehicle, but it’s there for somebody, if you got a TD Ameritrade account or whatever.

Plan B (38:03):

But like you say, it’s not the best vehicle. I think people with a lot of money, maybe older people that don’t have the digital know how and I think the whole key thing is a bit scary, which it is, the old people will never put millions or tens of millions in some vehicle that’s not as good as ETF. ETF has 24 hour prices or listed prices, and not end of the day voodoo calculated prices, it’s much more transparent and much more legal protection. ETF is really a thing. I think that would open the market for also a lot of banks and other companies to advertise and publish this investment to their client.

Preston Pysh (38:43):

Okay. Back to a comment we were talking about earlier about the May drop and China taking the hash power offline. Now that we can look at this, like Monday morning quarterback reviewing the tapes, was that drop really induced by the big hashing migration, or was there something else that you’re seeing in the data or information that you think was important through that period of time that caused that? What do you think was the root cause?

Plan B (39:12):

Interesting. I think the China thing was the bigger thing, because all those miners, of course, and all those miners had to relocate to the US or to Afghanistan, or all the other countries around China, and that costs money to put the miners in containers to fly them over to America, that costs money. So, they had to sell Bitcoins.

Plan B (39:33):

I think there was a lot of fear as well that China would go even further and not only ban mining, but also possessing or trading Bitcoins. The fear was high that the government would ban further. I guess some Chinese people, miners as well, were selling at that moment. But the other thing, of course, there was this Elon Musk tweet thing going on at the same time-

Preston Pysh (39:57):

Tons of long leverage.

Plan B (39:58):

That was the third thing I would like to mention, the leverage was enormous. Of course, if you leverage Bitcoin, if you leverage by Bitcoin will be killed by the exchanges. Your position is known by the exchanges, you probably have a stop loss put in there to, “protect yourself”, but that same stop loss is visible to all the exchanges, it will kill you, they will push it through the stop loss levels and liquidate an entire group of leverage longs or leverage shorts, and then the whole casino goes again.

Preston Pysh (40:33):

Is there offices dedicated to that specific trade that you just described?

Plan B (40:38):

Oh, yeah. I do it myself as well. You can see the order books, you can buy the order book information from some exchanges. It’s mostly round numbers. They never put their stop loss at 5999, they always put it at 60,000 or something. That’s how people get killed.

Plan B (41:00):

It’s a tragic thing, but that was going on as well during the crash in, what was it, May, June. All those leverage longs, all those people that thought the hyperbolic phase was already going on, because Tesla was in, and El Salvador was coming, all those people were killed. Of course, if you just bought Bitcoin spot price and kept it in gold starch, you went through a minus 50% drop, but you’re back about the same levels as what it was at that time right now, at 55, or where are we? Never ever leverage your Bitcoin buys. That would be really my advice, not financial advice of growth, but for the noobs, don’t do it.

Preston Pysh (41:43):

One of the things I wanted to talk to you about… Recently, I set up my own full node, and I’ve been opening channels on Lightning, adding liquidity into the Lightning Network, and just learning. This process has been just amazing, just seeing how it all works. In the process of doing this, and just opening these channels, and then trying to strategically think about, all right, should I open a channel to this node? Because they have 1,000 channels that they’re connected to? Then how much capacity, or how much Bitcoin should I lock in that channel strategically? Is there money to be made here in a fee kind of way in the future? Obviously, not today, because the fees are just… If you’re doing it for the fees today, you’re doing it, not for the right reasons.

Preston Pysh (42:29):

But when I’m thinking about this long term, and I think about more El Salvadors coming online, and the transaction throughput that’s going to be going through these rails in every direction, that velocity of money that would be going through these pipes could potentially be a risk free rate in the future. I’m curious, if you opened any channels, because I know you run your own full node, have you opened any channels, what are your thoughts on this idea of locking Bitcoin into channels for a price appreciation on layer one. What are your thoughts on the… I know this is like a three part question, but what are your thoughts on this risk free rate idea of the fees that would be collected on layer two Lightning becoming that standard someday?

Plan B (43:17):

To be honest, I have not done much with Lightning today. I read the white paper, I understood it. I think it’s a great concept. It will work. But I tried to do a Lightning wallet. I don’t even know which one it was, last year, I failed. There was this on Twitter that you could have… Was a donations or something, people could donate some money and then PayPal to multiply… I don’t know. But it was in Lightning. Well, there was a couple of hundred bucks in there. I’ll collect it to see how that works. I never made it. I didn’t succeed in doing it. I guess it’s a lot easier right now.

Preston Pysh (43:54):

It’s way easier if you have the right software, yeah.

Plan B (43:58):

It’s probably like running a Bitcoin node, which is also very easy.

Preston Pysh (44:01):

It is.

Plan B (44:01):

But one should know what to do. But no, I haven’t found the time to do it. Yes, I’m running my own node and most of my time now is allocated to crunching that data and searching for patterns and making algorithmic trading bots that scout the market for “arbitrage opportunities”, statistical arbitrage, of course. That’s where most of my time is allocated at the moment, together with it, by the way, a great team of programmers and ones growing fast and the opportunities are enormous. Even the cash and carry which is low at the moment because you’re at 10% per year, which is phenomenal, if you look at the minus 1.5% in Europe at the moment. We’re arbitraging those Fiat Bitcoin-

Preston Pysh (44:47):

You’re going after real yields. You don’t want to talk about 0.001% [inaudible 00:44:54] by opening channels on Lightning. For people that are listening, the yields in opening channels on the Lightning Network, I’m doing it, I’m having a lot of fun. You are not doing this for the money, at least today you’re not doing it for the money. I’m just curious whether you think that, that could maybe mature into something in the future?

Plan B (45:13):

I do, and I think Jack Mallers with Strike is doing fantastic stuff.

Preston Pysh (45:17):

It’s unreal.

Plan B (45:18):

Yeah, it’s unreal. Of course, there’s the El Salvador connection as well. Strike is not yet available in Europe so we’re waiting for that. I understand why he chooses to put other countries first on the list, by the way. I think that chapter is opening once Strike is opened here and that there’s more shops accepting it, et cetera. Or maybe it’s just the inertia in myself that I know how to do Bitcoin. I really have to learn, and I’m learning every day about the fee of Bitcoin arbitrage and unchained stuff that is possible, which is an entire world, you can spend 24 hours a day there.

Plan B (45:57):

I haven’t found the time but I really do think that the level two stuff and not only Lightning, by the way, also liquid and the programming layer rootstock is very, very interesting, and certainly next level stuff that Bitcoin needs. Stuff will happen there. But I guess, and I’ll be very honest there, that takes new people, like Jack Mallers to front run that. I don’t see myself as having a role or having the expertise there to lead that or bring that forward I think other people have to rise and make that happen.

Preston Pysh (46:31):

This was a question that came from Twitter. I am curious to hear your response, would you ever reveal yourself?

Plan B (46:39):

No, I don’t think so.

Preston Pysh (46:43):

The insanity on Twitter has conditioned you to realize that you don’t ever want to do that, right?

Plan B (46:49):

Well it’s funny, because having a second virtual persona is really interesting, because you can say things that you would normally not say.

Preston Pysh (47:00):

You’re enjoying that.

Plan B (47:02):

I’m really enjoying… My job’s institutional investor and certainly in the structured finance area that I was in with a legal and economical background, it’s like we’re doing the wet works for the banks, the dirty stuff, and it’s always in the shadows, it’s not in the spotlight. So that the board is saying this, but we’re structuring deals, making investments through a lot of SPVs.

Plan B (47:30):

I’m used to being in the dark, working at night and not be in the spotlight and now with $100 trillion Plan B’s doing interviews like we’re doing right now, channels are blocked because the words that I’m saying are dangerous and harmful, people are getting mad because I said something the whole online thing is both-

Preston Pysh (47:54):

You got Snoop Dogg following you.

Plan B (47:56):

Snoop Dogg is following me, with this 20 million followers. There’s actually 30 people following me with more than a million followers themselves. My reach, it’s getting crazy actually. What did I do? It’s only a model, a linear model, for Christ’s sakes. Well, I understand the institutional background brings some new views and maybe interesting stuff but 1 million followers, come on, it’s crazy. But I like it, but I have to get used to it as well. All the compliment, the man, the myth, the legend. That’s all very nice to hear. But there’s also a lot of, when the model goes wrong, it will go wrong. There will be a month that I miss. I watched those same people that… Well, not those, but other people take me down like nothing happened before. I’m very aware of that. I want to-

Preston Pysh (48:48):

If you don’t have haters you’re not doing anything.

Plan B (48:55):

Yeah, right. Then that’s okay, people not agreeing or even bashing and then all the… That’s part of the online presence. But all the spammers, all the scammers, all the impersonators-

Preston Pysh (49:06):

Oh my God, it’s crazy.

Plan B (49:08):

I get all those people that are scammed, right? They think because they’re scammed, because they think it’s me. It’s not me, and then they lose their money and they come complaining with me. I get all those complainers and people that are scammed. It’s not something I was prepared for. I think it’s one of my best choices in my life to keep the virtual presence and the real life persona different.

Plan B (49:31):

In the beginning I thought that was hindering me, because I could not go to conferences, I could not have my face in the interviews.

Preston Pysh (49:40):

You can go, you just can’t talk.

Plan B (49:44):

I might have gone already.

Preston Pysh (49:45):

There you, I like that. I’m there already.

Plan B (49:51):

I don’t think I will go public ever. I think it’s more probable that I will go dark one day. One of the things I’m really struggling with right now, I said it in a podcast as well, I had my own chain indicators. They are from data of my own node. You can get the blocks, get the transactions, you can see when the latest transactions were, if it’s from big addresses small addresses, you can see all sorts of stuff and you can cluster, you can see what kind of transactions are taking place.

Plan B (50:22):

The other thing is, I don’t ask money for anything, for the tweets or the articles, or interviews, whatever, I do it because I like it, and I earn my money with investing. I’m an investor, the money works for me. There’s a bit of a dilemma about, for example, the floor indicator that’s very successful at the moment, [inaudible 00:50:42] the 47 and 43, and maybe to 63K this month, and the on chain stuff that people are asking about. How do you calculate it, and can I find it on glass node? No, you can’t.

Plan B (50:54):

But that’s the stuff that I earn my money with. That’s proprietary, I don’t want to disclose that. I have three kinds of models, as you know. The stock-to-flow model, which is fundamental, which is more like a very rough thing that says scarce assets, scarce stores of value that are recognized as stores of value are worth more than less scarce assets.

Plan B (51:18):

Yeah, it’s very logical, everybody knows that, and it’s quantifying that very, very roughly. I publish that. The on chain stuff is wow, that’s the unique thing for Bitcoin to have that data available, and crunching the 400 gigs of data is not an easy task. It’s very interesting thing to do, and you find stuff, you find stuff. But that’s great for tops and bottoms, in my opinion.

Plan B (51:44):

Then the floor model is the third model that I use, and I’ll talk about it in a bit. But together with those three models, I can triangulate the market. It’s not like oh, stock-to-flow says this, no, stock-to-flow and on chain, and floor model, they all say the same thing, and that gives me extra confidence, if you will, opening up about the on chain stuff and the floor model that brings me in a difficult position. Because then I open up the trade secrets, and that impacts my earnings.

Plan B (52:14):

Since I don’t have a newsletter or anything else that makes me any money anymore. That’s a bit of a problem. But the floor model, not on chain, it’s not stock-to-flow, it’s pure price. It’s a technical analysis thing. You could say it’s price, but it’s a mathematical thing. It’s capturing a classical error, mathematical error, that it’s not Bitcoin related at all. I won’t disclose it right now.

Preston Pysh (52:41):

Well, it’s interesting that you have a model, I know that you’re posting charts as to what that floor price is. I’m curious what it is right now, because I don’t know.

Plan B (52:51):

Exactly, and I can’t tell you exactly what it is. But it’s a mathematical thing. It’s just another way of looking at the same price data that everybody is looking at. We all know the moving averages, the RSIs, all the technical indicators. But they all make, in my view, a classical mathematical error that is typical to the sort of price data that Bitcoin is, the distribution of Bitcoin prices is not normal. It’s following power law. You would like to have other kinds of metrics than the standard metrics, and it’s making use of that error, if you will. The whole world is looking at the standard technical analysis tool set to an asset. They’re using that standard technical analysis tool set to look at an asset that is not standard, and not normal at all, but more following a power law. You would have to look at things like fractal dimensions or hearse components, or just mentioning a few things.

Preston Pysh (53:51):

My generic floor model, which isn’t fancy at all. But sometimes simplicity works, right? It’s just the 200 week moving average. It’s never penetrated the 200 week moving average. What I also find interesting about that, it’s a month shy of four years. If you’re dealing with a four year cycle, it’s interesting that you’ve never had the price come down and penetrate that moving average.

Plan B (54:18):

Yeah, and it always goes up-

Preston Pysh (54:19):

It always goes up since inception.

Plan B (54:23):

Before the floor model is the next generation 200 week’s moving average. Before I had the floor model, I had the 200 week’s moving average, exactly for the reasons that you mentioned, it’s flawless, but it’s, of course, very simple, very rough.

Preston Pysh (54:40):

It gets the job done.

Plan B (54:42):

It gets the job done, but it can be done much more eloquently and much more tightly because it’s not very tight, right?

Preston Pysh (54:51):

Yeah, most of the time, it’s nowhere close to it.

Plan B (54:54):

The floor model, it’s also very simple. If you see it, you would laugh at it, but it works beautifully. It’s almost like the stock-to-flow model. But let’s see if it hits 63 and then God knows what happens because I see that every time I hit one of those marks, I get like 50,000 followers in a day.

Preston Pysh (55:15):

Keep crushing it, man. Love having you on the show, love these conversations. You’ve got a website, Plan BTC, where everything’s curated, and that’s the right domain, correct? Plan BTC?

Plan B (55:27):

Absolutely.

Preston Pysh (55:29):

If people want to see your past interviews, they want to see some of your writings on stock-to-flow or anything else that you’ve published, it’s all on there, it’s curated on there. What else do you have? Do you have any other handoffs for people?

Plan B (55:41):

Maybe the whole banning of YouTube thing make me aware that I need other channels of communication in case of emergency, if the $100 trillion account on Twitter is deleted with a push of a button, then I need to be able to communicate to you, and of course, Preston, we know each other and I have my other friends with direct lines that could communicate my new handle.

Plan B (56:09):

I’ve been thinking about that, and the planbtc.com Website, of course, can be very useful in such an emergency event. As most of you have seen, I also introduced the other account, the 100 trillion Euro account on Twitter that’s Louise@100 trillion… Louise is my COO, she’s managing all the business lines that are under the Plan B brand, and helps me with planning and managing all that stuff. She’ll be functional as well as being the backup channel in communicating in case of emergency, in case, well, something I said, maybe today, Preston, in your podcast, causes somebody to push the button and cancel me.

Preston Pysh (56:50):

What was my response when you reached out to me and said, “Hey, pomp, just got canceled on YouTube. Are you sure you want to do the interview with me?” What was my response?

Plan B (57:01):

Hell yeah, I think it was.

Preston Pysh (57:06):

Hell yeah. Please cancel me.

Plan B (57:08):

Yeah, yeah. Exactly.

Preston Pysh (57:11):

Dude, always a pleasure. Always a pleasure.

Plan B (57:13):

Pleasure was mine. Thanks, Preston.

Preston Pysh (57:16):

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. Anything you can do to help out with a review, we would just greatly appreciate. With that, thanks for listening, and I’ll catch you again next week.

Outro (57:48):

Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network, written permission must be granted before syndication or rebroadcasting.