← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Mauricio Di Bartolomeo: Borrow Dollars, Hold Bitcoin - The Debasement Play with Bitcoin-Backed Loans
00:47:00
Natalie Brunell is joined by Mauricio Di Bartolomeo, Co-Founder & CSO of Ledn (), to demystify Bitcoin-backed loans. We discuss: What is a Bitcoin-backed loan? Why are the interest rates so high compared to other loans? What if Bitcoin's price...
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- [00:00]
A
I would argue that the United States and Europe live in a fantasy world. It's completely disconnected from how the rest of the world lives. Anyone listening to this that hasn't experienced what a capital control is, I would argue is like 5% of the world population. What capital control is, is you don't have financial freedom, you're repressed. That's why bitcoin is such a game changer to so many people. That's why stablecoins are such a game changer for so many people.
- [00:31]
B
Hey everyone. Welcome back to the show. Joining me this week is Maurizio Di Bartolomeo. He is the co founder and chief sales officer at ledn. Thank you so much for joining me, Maurizio.
- [00:42]
A
It's a pleasure, Natalie. Very happy to be here. Big fan of the show.
- [00:45]
B
Thank you so much. You came all the way from the Cayman Islands. I want to learn more about your backstory, but first let's just talk about Leden because I really want to take out a bitcoin backed loan. But I've been a little nervous. I'll be candid. The interest rates are higher than, you know, some of the interest rates that are out there on maybe traditional loans. So I get, I get nervous because I can always take out like a 0% APR credit card for 12 months. So I want you to sell me on this and I want to take out my first bitcoin backed loan. But first talk about the company.
- [01:14]
A
Yeah. So let in is a very simple business. We issue bitcoin backed loans and what that means is we give you a dollar loan and we use your bitcoin as collateral. It's in most jurisdictions it's not a taxable event. So you're not selling the bitcoin. So it's beneficial from a tax perspective. And the other main major advantage is that you get to keep the upside of the bitcoin. If bitcoin goes up in price, is still your bitcoin. Now in terms of the cost of the or the cost of the capital, the rates that we put out in the market today are a function of our cost of capital. And if you look at the evolution of traditional financing markets like for example, Adam, the co founder led, my best friend and CEO, he comes from the renewable energy financing world. And back when solar panels first came out, people that wanted to invest or finance those projects didn't understand solar panels. They didn't know how long they were going to last. So the cost of financing them was really, really high because there was a lot of unknowns. Yeah, but over time, as people realize how the system works and the value of the underlying security or collateral, then they start bidding down the price over time. And that's exactly what you're starting to see happen in the bitcoin backed loan world. When we came into the market, these loans were priced somewhere between 16 to 18%.
- [02:30]
B
Oh wow.
- [02:31]
A
And this was, keep in mind, at an, at a, in an environment with fed funds rates was at zero. So the spread over fed funds rate back at that time was somewhere in the 14 to 18% range. Today those loans are going out at 12.4% and fed funds is at four and a quarter. So the spread on the actual cost of the funding is trending in the direction we all want it to go. That said, and I do think that they're going to be bitcoin backed loans are going to be the best, cheapest and most convenient way to access capital globally in a long enough time frame. And the other point that I'll make when you're comparing interest rates, listen, if you can get zero percent debt from anyone, take it. If you can get sub 5% debt from anyone, take it. Why? The US dollar is getting debased at approximately 8.5 to 10% year over year. And how you get there is you look at the projected deficit which is roughly 2 trillion over the M2 money supply, which is 20 some trillion. 20, 22 trillion. So that's basically 8 to 10% that's getting debased. And if you look at other free markets, free markets meaning not manipulated by the government because mortgages are. The government has a heavy hand on the rates that mortgages go out at because they control the curve. If you look at free market products, that is Michael Saylor's or strategies latest offering, SDRC, that's going out at a 9% coupon. So he and this secured by Bitcoin.
- [04:03]
B
Yep.
- [04:03]
A
In a publicly listed entity worth billions. And he's paying 9% plus administrative fees and carrying costs of the transaction, which would probably add another one point to that. So Michael is taking out money at 10 roughly and most people out in the world. Also keep in mind, Michael's product is only available to a select group of people. My product or our product is available to everyone.
- [04:29]
B
Yeah.
- [04:29]
A
And you're not that far off. So that's, that's number one. And like I said, you know, if you compare, if you look at mortgages or if you look at unsecured, a lot of these companies, they'll have these promos to get you to roll your balance of your credit card, or they want to take your first loan and they'll give you a really sexy promotional rate. Take it. Take it. Because if you know that the US Dollar is getting debased at more than what they're charging you, if you invest that loan properly into a hard asset, you're likely going to do well. And the reason I feel so much conviction on this is because when the Venezuelan Bolivar was hyper inflating, my best trade ever, before going long, Bitcoin was going short the Venezuelan Bolivar, using a dollar as an anchor.
- [05:12]
B
Oh, wow.
- [05:13]
A
So I would borrow dollars from the bank at 30%. Bolivar is. I would borrow bolivar from the bank at 30%, and I would invest them in dollars. And dollars are appreciating 1000% year over year.
- [05:24]
B
Oh, my God.
- [05:24]
A
So for me, the 30% was a rounding.
- [05:26]
B
Exactly.
- [05:27]
A
Now, it's not as dramatic in this example, but it's the same principle, right? You're borrowing a weak asset that is, by design, getting debased and you're using the proceeds to buy something that cannot be printed.
- [05:39]
B
Right?
- [05:39]
A
And that is no different than a mortgage, because in a mortgage, you're taking a massive short on the dollar. You're buying a house with it. Yeah. You don't print the house. The house goes up 8% year over year. Your mortgage is between 5 and 6. 2% of that accrues to your equity value every year. Every year. Every year. And then five years from now, you think you're a genius.
- [06:00]
B
Yeah. Coin Stories is proudly brought to you by Gemini. Start your Bitcoin savings account today. Plus, investing in Bitcoin has never been easier than with Gemini's orange Bitcoin credit card. Earn up to 4% back in Bitcoin on everyday purchases like gas, dining, groceries and more with no annual fee, no foreign transaction fees and no exchange fees on your rewards. Plus, sign up today and get a $200 Bitcoin bonus when you spend 3,000 in your first 90 days. Apply now@gemini.com Natalie and if you want to stay on top of Bitcoin without getting lost in all the noise, check out the weekly CIO memo from Bitwise Asset Management. CIO Matt Hogan puts together a quick five minute memo that breaks the biggest stories in digital assets each week. Bitwise has been around since 2017 and manages more than $10 billion across 30 plus strategies. The weekly CIO memo is bold, sharp and totally free. Just go to bitwiseinvestments.com CIO MEMO. And always, of course, carefully consider the extreme Risks associated with crypto coin stories is also brought to you by Leden. Need cash but don't want to sell your bitcoin? Leden is the global leader in Bitcoin backed loans, issuing over $9 billion in loans since 2018. And they were the first to offer proof of reserves. With Leden, you get custody loans, no monthly payments and more. Visit Ledin IO Natalie and get a quarter percentage point off your first loan. And finally, make sure to get your copy of my upcoming Bitcoin 101 book, Bitcoin is for everyone. The book explains why money is broken and how bitcoin help you build lasting wealth and freedom. It makes the perfect gift for those new to bitcoin. Just visit the link in my show notes. The book comes out November 18th. I mean Michael Saylor always says short the currency, go long property and Bitcoin is the best property. So I'm actually hearing a lot of people take on Bitcoin backed loans. It's getting more popular. You guys have been around since like 2018. You were the first to have proof of reserves. How have you grown to the scale that you have? Like how, how is there so much demand for this product?
- [07:57]
A
Well, two things. One, the product works. So every. If you look at the price chart since Leden's been in business since 2018, every single person that has used their loans responsibly has done well because of the price appreciation of the underlying asset that they didn't sell. So the reason people use Leadn and keep coming back to Leaden is because Letin works for them and it's because they took out a loan. I'll give you an example. I had a client that needed to close on a house in the, in fall of 2021 when everything was collapsing, when there were so many questions, everybody was nervous. But he really wanted the house and he had been with us for years and he want. He was planning to take a loan and even though there was a lot of uncertainty in the market, he came and he took it because he didn't want to sell his Bitcoin at 16K. Yeah, took the loan, closing the house, kept it, still has a loan, but he kept it in. Over the next two years, the bitcoin collateral appreciated by more than what he paid for the house. Wow. And so now he has the house and he has the bitcoin, is a very happy client. And he tells his friends what happened. And so his friends come to me and they say, I want to buy, I want to sell my bitcoin. To buy a house. Don't you dare check out Lennon first before you do that. And so that's why the product is captivating the minds of so many people, because the mortgage, the mortgage that we just discussed, created the wealth of basically all of the boomers. And so keep in mind, only boomers living in America, born in the right place at the right time, had access to that product. Now anyone from Medellin to Miami can use my product to do a very similar transaction. Why is Lennon seeing so much growth? Lennon seeing so much growth? Because we have proof of work. We've been. It's. You don't. You don't define a good lender by how they're doing when things are up and to the right. That's not what makes a good lender. A lot of guys look great a few years ago and said all the right things and put all the right ads, only to let their clients down and. And set the industry back half a decade. Right. We were never the loudest, the biggest spenders. We come from a culture of we couldn't afford to make any mistakes in the beginning because we were always the little guy. And that gave us a discipline that I think is unmatched in the way an operational discipline is something that I'm immensely proud of. We were adding proof of reserves in 2019 when people were adding tokens and people asked. Adding proof of reserves doesn't get you more revenue. Right. It's not something I can go and sell, but it's the right thing to do, and it's the right thing to do early. Because when you lay proof of reserves at the foundation of the business, everything else you build on top of it has to fit into the product, into the process, or the program. I'm shocked that we're seeing some lending companies come out in the market today without proof of reserves in 2025. I'm shocked. And when people look for a lender, given the experience of 2021, their main concern is, are they tested? Have they been through. Have. Have they been through the fire? Have they come out the rate? You know, I lost clients to Celsius way back because Celsius was lending money at 1%. So if you just decide based on the rate.
- [11:42]
B
Yeah. You might get in trouble.
- [11:43]
A
Most likely you're gonna end up in trouble. Right. There is no free lunch. If it looks too good to be true, it likely is.
- [11:50]
B
Right.
- [11:51]
A
And because a lot of the newer companies aren't able to compete with let in on track record or on experience or on proof of reserves, where do they have to go? They have to basically try to show a sexy rate to get you to even consider moving.
- [12:07]
B
Right.
- [12:07]
A
But they're giving you all those sexy rates. But where are the proof of reserves?
- [12:10]
B
Right. No, I think it's so important because transparency is so core to the ethos of Bitcoin. And after what we saw in the last couple of years with the FTXs and the Celsius, people want to know that there's no rehypothecation, that the bitcoin's actually there. Can you just talk a little bit about the process and mechanically how these loans work? If someone decided to put up their Bitcoin as collateral, is it a very quick and easy process? And how much, how much do they have to put up and what's the risk if the price is volatile to the downside?
- [12:41]
A
Great question. So the process is incredibly simple. You have to register or create an account in the leadin. We are a regulated business, so as such we have. You have to complete kyc, so you have to give us your ID or a proof of address once you get through the kyc, which, if all goes well, it can get approved within minutes. Once you go through the kyc, submitting a loan application takes two minutes. You have to tell us how much you want to borrow. The way the product works, we ask you to pledge two times the amount or the value of the money you want to borrow. So if you want to borrow $50,000, you have to put up $100,000 worth of bitcoin. So you get to borrow half of the value of the Bitcoin you pledge as collateral. And when the loan, you apply for your loan, the loan is approved. It tells you the corresponding amount of Bitcoin you need to send to that loan address. You send the bitcoin to the address. Our disbursements typically take somewhere between four and six hours if done on a weekday. And if it's fiat, we're very fast. And that's something really, really proud of. If it's in stable coins, it's even faster. So most clients, again, if everything goes smoothly, can be, you know, created an account, applied for a loan and have their funds in their account by the end, before the end of the day, if they do it in the morning.
- [14:02]
B
And they can exchange it for any currency they can.
- [14:05]
A
So the loans are denominated in US dollars, but we can disperse in your local currency. So if you want peso argentino, if you want Colombian pesos, if you want euros, yeah, we'll we'll disperse in the currency of your choice. But the. The loan itself is denominated in USD. And then the question about the risks of the downside.
- [14:22]
B
Yes.
- [14:23]
A
So the main, two main risks when you're taking a Bitcoin back. Loan number one is counterparty risk. Do you trust the person you're engaging with or the group you're engaging with? Let's assume you're over that threshold because you're, you know, you've already now applied for a loan. From that point on, the biggest risk is loan management. Because my loans don't. I don't check your credit history. I don't. I don't ask you for your income. I have no other.
- [14:47]
B
Why don't you. Because you, you don't need it.
- [14:50]
A
Your Bitcoin is your credit worthiness.
- [14:51]
B
Okay.
- [14:52]
A
I don't need to know anything else about you.
- [14:53]
B
Bitcoin is your credit worthiness.
- [14:55]
A
I already have your credit worthiness. So what else do I need?
- [15:00]
B
Okay.
- [15:01]
A
I have two to one what I lent you. Right. So that's really all I need to watch is the fact is making sure that the money I lent to you is not, does not go above the value of the collateral you've pledged me.
- [15:13]
B
Okay.
- [15:14]
A
So there is a. The way we protect against that is through a liquidation system. So if you're. If price starts dropping and your LTV starts creeping higher, if. Once it reaches 70%, let us start sending you notifications. Hey, Natalie, your loan is getting close to critical ltv. Please keep a healthy incentive or Bitcoin.
- [15:32]
B
You have to put up more collateral, send more Bitcoin.
- [15:35]
A
You're not obligated, but you can if you want to protect your loan. Because the hard and fast rule at leadn is if and when the loan LTV reaches 80%, the system automatically sells however much Bitcoin is needed to repay the loan and returns any excess Bitcoin back to you.
- [15:53]
B
Oh, wow.
- [15:54]
A
The key is, and mind you, we've built many tools to prevent this because the liquidation is not the outcome you're coming to us for. And it's not the outcome we want because it decreases our book and gives you crappy user experience.
- [16:07]
B
Yeah.
- [16:08]
A
So we make it very easy for you to send Bitcoin to the loan, whether it is internally, externally. And we also built a feature called Auto top up. For example, we had a lot of clients that took out a loan and went to their cabin for a month and didn't bring their hardware wallets. And they said, mao, I'm not going to have Access to my hardware wallet, and I don't want you to liquidate me. How can I protect myself? And we said, okay, well we, we, you know, we got together as a team and we said, okay, we already have a transaction account that led in where you can keep bitcoin in, in basically in, in, in custody, in cold storage. It doesn't move, it just sits there to manage your loans. Yeah, you can leave extra bitcoin in that account just in case. And turn on this feature called auto top up.
- [16:52]
B
Okay.
- [16:52]
A
Auto top up means that if your loan ever reaches 70% and is and triggers a notification, you've already authorized us to sweep some of that bitcoin balance into your loan to make it, to keep it healthy.
- [17:03]
B
Okay.
- [17:04]
A
And so that means that the system will respond on your behalf while you're at the cabin. And the flip side to that is, okay, now you make it really easy for me to send more bitcoin to the loan. What happens if the price goes in my favor? And the answer is you can take off the excess bitcoin back.
- [17:21]
B
Got it.
- [17:21]
A
So I'd let in when your loans go below 30% LTV automatically it lights up, redeem excess collateral, you can take the bitcoin back to self custody, you can use it for another loan, you can do whatever you want with it. But the point is, it's fair. We asked you to send us more on the way down, on the way up, you should be able to get it back. Right? And you are. So that's in a nutshell, the sort of risk protection mechanisms in there.
- [17:49]
B
I know this might be a little bit elementary for some of my viewers and listeners, but can you kind of just explain loan to value L to V? I mean, some people haven't taken on a mortgage or a big loan, and so they're not really sure about these dynamics.
- [18:00]
A
No, perfect. It's a great question. So a loan to value really just is just a dividing the amount you've borrowed by the collateral you've pledged. So if you've borrowed $50,000 and you've pledged $100,000 worth of collateral, your loan to value is 50 over, over 100, which is 50%. Right. If the value of your collateral starts dropping, that the denominator starts dropping. And so the, the, the equation, the result of the equation starts going up. Right. And so, for example, let's use this. You know, an example. If you borrowed that same 50 and the value of that bitcoin went to say, you know, 75K, your LTV should be somewhere on 66%, if I'm doing.
- [18:46]
B
My math right, it keeps creeping higher. You don't want a high loan to value.
- [18:51]
A
And then when it hits 70, you start getting the notifications that say, hey Nat, your loan is approaching that 80% level.
- [18:58]
B
Got it.
- [18:59]
A
You know, send us more bitcoin. So when you send more bitcoin, the value of your collateral grows there means your LTV starts dropping.
- [19:05]
B
Yeah.
- [19:05]
A
And so the opposite is also true. You borrowed 50, you put 100 worth of Bitcoin. Bitcoin doubled.
- [19:11]
B
Yeah.
- [19:11]
A
Your LTV is now 25.
- [19:13]
B
Which happens a lot.
- [19:14]
A
Right? Which happens a lot. And I've had a. No, just last year, I don't have, I don't have the data year to date, but 2024, we had over a thousand bitcoins redeemed to self custody from our loans from clients that became over collateralized and they just scooped the excess bitcoin off the top and brought it back. That's exactly what we want. That's exactly what you came to us for. And so for us it's a, it's a huge. I think it's, I'm actually talking to the team because I think we should make it more of a celebratory thing when you, when you get it, you know, the ability to redeem it. Um, but yes, the, the, that is an option and that's something deliberately we make or intentionally we make. Very, very easy for you to do.
- [19:57]
B
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- [22:05]
A
Well, the first thing I say, I'd say is you're thinking it the right way because you're thinking to protect the downside. A big part of having a great borrowing experience is planning and making sure you're playing out the right scenarios. So Atlantin, before you borrow, we have a little calculator that shows that you can play with and says, okay, I'm going to borrow $1,000. If the price goes to this level, how much more bitcoin will I have to send? And so you can play out your scenarios and size the loan accordingly to you. I always suggest to people, let alone start at $500. And the point of that, it was twofold when we did it at the beginning. Number one, we have a lot of clients in emerging markets where $500, I know it sounds like dinner to some people in North America, but like $500 in LATAM to some people is a month, like months of work.
- [23:01]
B
Yeah.
- [23:01]
A
And not only that, if, if I, if I try to, if I'm building a bitcoin product that is not being built for the masses, what are we really doing here?
- [23:16]
B
Right, right.
- [23:17]
A
Like what, we just want to give, what, like wealthy wall street people, one more club and their golf set. Like, I don't. It's not really what I'm here for. Right. Don't worry. Don't get me wrong, I love clients of all sizes, but I love more the fact that anyone, virtually anyone, can access the product. And our loans go from 500 to two and a half million dollars. And you can have multiple loans. So you know, we have clients with 10, 20, and you know, they're fine. We also have clients with 500 loans.
- [23:49]
B
And how long does it take? How long do you have to pay it back?
- [23:53]
A
So the loan term is one year. And importantly, and this is another thing that we did by design from day one, our loans do not require monthly interest payments. All interest accrues on the amount outstanding until you decide to repay the loan. Okay. And you can do that at any time. And you can make partial repayments and full repayments at any time, but there's no obligation for you to make those monthly interest payments under the LED agreement. So why is that important? Well, one, if you're coming to us to borrow dollars is because you're short dollars. And the last thing we want to ask you is to come up with more dollars every month to send us back a small clip. And the second part of that is if you are a person borrowing $500 in Colombia and I'm asking you to send me $5 and that wire fee is $45.
- [24:53]
B
Yeah, right.
- [24:55]
A
What am I doing? Right. And so the product was designed in a way that it was just easy and you didn't have to think about it too much. You could just get the money you need, do the thing you needed to do, and just keep your ltv, know your price levels, and just go about.
- [25:10]
B
Your life and you can roll it at the year mark. Right. What is it? What does that mean really?
- [25:13]
A
That means that if, if the loan basically say you took it out today, you took, you held it for a year, let's just say you borrow a thousand bucks at 12.4%, that's 1,100 or $1,240 at the end. At the end of the first year term, if your loan LTV is still below 60%, the loan automatically rolls into a new term.
- [25:34]
B
Oh, wow. Okay.
- [25:34]
A
So what happens is that initially you borrowed a thousand. At the end of the term, it was 1240 year two of the loan opens with a starting balance of 1,240 and then continues on from there.
- [25:46]
B
Same rate, same everything.
- [25:47]
A
Well, it renews at the then current rates.
- [25:49]
B
Okay.
- [25:51]
A
But I've had clients that have rolled loans for four and five years.
- [25:54]
B
Wow.
- [25:55]
A
And I mean those, I mean these are the guys that came to us when bitcoin was at 6,000, 10,000. Oh my gosh, they've done incredibly well. And so, you know, they've, they've managed their loans a lot of times they've scooped off the excess collateral, took out new loans, bought property. Like I said, the reason people use it is because it's worked for them.
- [26:16]
B
And we want the stuff. Jeff Booth always says this. It's like, well, obviously you love bitcoin, but you, you can't live in your bitcoin, you can't travel through your bitcoin, you can't eat your bitcoin. Right. You want the stuff that money buys you. You want what bitcoin can eventually get you. So how come let in can't offer like a 30 year mortgage?
- [26:36]
A
Well, again, because, I mean, nobody, no, nobody. I shouldn't say that. The really it's, the short answer is a function of the structure of our funding. So unless we can get 30 year committed money at a set rate, we can't be lending out that money committed for 30 years. Right. I, so that's really the, that's the limiting or the gating item is the structure on the funding side. Right. The sort of more, the sort of more fun answer to that is that nobody wants to be the guy that is getting a set yield for dollars and is committing to getting that number for 30 years. Because everybody's looking around at the deficit and you know, the accumulated deficit and the total debt. And Everybody's saying like 30 years feels like a long time to, to commit to. And so I think the reason you see the Fed recently come out with the third mandate, I don't know if you caught that, is because they need to keep the long end of the curve in check. And it's likely going to be through yield curve control. Because I find, I mean, tell me if you know any friends, but if I asked my friends, hey, would you want to lend money to the fed at, for 30 years at 5 and change, 6 and change? I would get a room full of no's.
- [27:56]
B
Exactly.
- [27:57]
A
So I don't know who really is like chomping at the bit to go lend money for 30 years. I don't know who that person is. And so that's really the thing. Right. Like in Venezuela, you know, the bank stopped lending. Like I remember when I started shorting the leo, my first loan terms were two years. Then I Went back after the initial two years and then they updated the terms because they knew they were getting just completely ho. So the max length of their, of their term was now one year. And then it kept shortening and shortening and shortening until the end it was weeks. And so by that point, you know, I had, I had had my pound of flesh and, you know, it was done. But you have to. I think, I think we will get longer durations. I don't know that we'll get 30 years anytime soon in terms of. And if it will, it'll be very expensive. But I do think, you know, two, three years are somewhere around, you know, around the corner.
- [28:58]
B
Sure.
- [28:58]
A
And I think over time, the term structures of our loans will effectively recreate the yield curve in a free market. And so that's really. And Saylor speaks now about credit and the evolution of credit. And I think this is something a lot of us are looking at. And what better asset to create that yield curve around than the world's best collateral?
- [29:23]
B
Exactly.
- [29:24]
A
There's no second best.
- [29:25]
B
Yeah. I want to learn more about your origin story and your life in Venezuela because you essentially understood firsthand what it means when money dies. So tell us where you come from and how you got to co found Leaden.
- [29:38]
A
Great question. So I was born and raised in Venezuela. I grew up in Venezuela in the late 80s and 90s. And it was a really nice, really beautiful place to grow up. Venezuela has the issue that many commodity markets or economies have, which is there's a. The country economy dances to the beat of the underlying commodity.
- [30:00]
B
And in this case, this is oil.
- [30:01]
A
This is oil. Correct. And so towards the late 90s, towards around the 90s, there was a boom, bust cycles in oil. And this created a lot of frustration in the Venezuelan society. And that led to one rogue military guy trying to overthrow the government. He tried once, failed, tried the second time, failed. And when he was about to try the third time, the incumbent president gave him a presidential part so that he could run in the polls. You know who that person was? Hugo Chavez.
- [30:36]
B
Oh, wow.
- [30:37]
A
So Hugo Chavez gets a presidential pardon in 98 and the first thing he does is gets on a plane, goes to Cuba, got his training, comes back with a middle of the road campaign, Kumbaya. Let's all be happy businesses. I get it, people, I get it. We're going to come together anyway. Wins the election and rewrites the constitution, changes the name of the country, changes the flag, changes the coat of arms, changes the time zone, starts basically ravaging our Constitution and my family and many others decided that this was going to be a one term guy. We were going to go spend a few years in Florida while this blew over. And I remember when I got to Florida, I met a bunch of Cubans and I told them where we were coming from and what was happening in Venezuela. And they gave me this look and they hugged me and they said, you better get comfortable here, man. I don't think you know what just happened to your country. And we would joke and they were like, no, it's not going to happen to us.
- [31:43]
B
This is the communist experiment that's failed all over and people don't listen.
- [31:47]
A
We're like, us. No, we have oil, we're mainland. Anyway. So as he starts doing this, Chavez starts expropriating businesses on national television, buildings, takes over the state oil company, replaces all the professionals with his friends, and he basically starts ripping apart the economy. Removes the licenses from any media outlet, radio, TV that oppose him. The playbook.
- [32:18]
B
It's the playbook and prints a bunch of money right to the point that you guys are like holding wheelbarrows. Bolivar and inflation must have been what, three triple digits?
- [32:29]
A
Yeah. And so Chavez, when Chavez was around, oil markets were still okay. And so there was like a bit of an illusion in Venezuela of wealth because he was ravaging the economy. But oil prices were ripping. So it created this cognitive dissonance where people said, communism is amazing. Right? Like, look at all these great things that I'm getting now. He started subsidizing the price of prime beef. He started subsidizing the price of imported liquor. So Venezuela was paradise to a lot of people because everything was so cheap.
- [33:03]
B
Wow.
- [33:04]
A
And so meanwhile, all of us that understood what was happening were just pulling our hair and screaming to the void, but nobody was listening.
- [33:11]
B
Yeah.
- [33:12]
A
And then Chavez dies of cancer in 2013. This triggered the election that all of us thought was going to get the country back. So we all fly back and that was the first election that the Chavista regime basically stole, like, knowingly that they didn't win, they still went out and they said, no, we did win. And I remember going to the protests because there were protests afterwards. And that was the first time I had ever been to a protest where I had, where I had heard and seen the government shoot real bullets back at us. And I saw people drop. I saw guys I knew drop. And it was that night my mom and my now wife pulled me back, pulled me aside at home and basically there was like an intervention. Like, you have to leave, you have to leave.
- [34:05]
B
Yeah.
- [34:06]
A
And so I left. And. But my youngest brother was still there. He didn't want to leave, and he was just finishing university, and he really wanted to start a business in Venezuela. And I come from an entrepreneurial family. My dad supported all of us to take a crack at the bat when he came out of school. And so my youngest brother kept pitching them ideas, and my dad says, no, no, no, leave you. I want you to leave. And he goes, dad, no. I'm doing this whether you support me or not. And if you don't support me, I'm leaving the house, I'm selling my car. And so my dad flips me the pitch, which is my brother's proposing to buy bitcoin miners.
- [34:43]
B
Wow. Really?
- [34:44]
A
Yeah. So this is late 2014. And so this is the first time I ever read the white paper, and this is the first time I ever see a link to Bitmain.
- [34:52]
B
So your brother already knew about bitcoin? Your brother found it?
- [34:54]
A
My youngest brother found it.
- [34:55]
B
That's incredible.
- [34:56]
A
And so he sends me the white paper. Venezuelan hydro electricity was heavily subsidized. So the main inputs were subsidized outside of the chips. Yeah. And you could sell the bitcoin for dollars outside of the country. So out of everything else that he had pitched, I was like, that. This doesn't seem too bad. So my brother buys bitcoin miners, and then he starts mining bitcoin. And keep in mind, Venezuela had these horrible capital controls at the time. So I fly down six months after all of my friends are liquidating their assets, leaving, trying to figure out where they can get a job, houses for sale, businesses closed, depressed. And along comes my brother with a smile, and he goes, I heard your friends are leaving. Are any of them leaving any industrial sites? You think they're willing to rent? Because I need more space. And I look at him and I go, the hell do you mean you need more space? The country's falling apart. It's like, no, no. Like, I need more space for my mines. And so I'm like. And I'm like, oh, I'm gonna go check out your mines. And I want to check out the mines. And they had. And he had almost double the machines originally were supposed to be there. So I go to my dad, and I was like, how did he get double the machines? Did you give him more money? He's like, no, he paid me back.
- [36:11]
B
Because the bitcoin went up because he.
- [36:13]
A
Was mining with free energy.
- [36:14]
B
Yeah.
- [36:14]
A
And so.
- [36:15]
B
And where did he even, like, Supply. Were they allowing those to be imported, the A6?
- [36:21]
A
Yes. Because Venezuela had so much things coming in from China back then. There was no. Nobody was aware of. It was computers. It was just like bringing computers.
- [36:29]
B
That's incredible.
- [36:30]
A
And so, you know, he starts doing very, very well. And, you know, now that we have found a way of sheltering our bolivares from inflation without even needing the dollar, it was. It was. It was groundbreaking. And so our friends were very curious that I. Can I go see what you're doing? Our family. So our cousins started mining. Uncles, aunts, my friends. Back then, you could still use GPU rigs because you could connect them to nice hash and get bitcoin for that. So people were repurposing old computers. And so it was like the golden age of Venezuelan mining was 2015 to 2017. Wow. And then mining. When mining, I learned a couple of interesting things. One is, once you get a taste of bitcoin revenue, oh, boy. You don't want to sell that thing. Right. But you keep getting the bills. And so immediately I said, why am I selling the thing? That's appreciating. I would rather use it as collateral and meet my expenses and keep the upside. And I had already done really well shorting the Oliver with the dollar. So this concept of borrowing weak and holding hard asset felt natural.
- [37:44]
B
What a great story.
- [37:46]
A
And so at the time, I was like, no one in Venezuela is ever going to do this. But then I started building my mind, my first mine in Canada, thanks to Francis Pulio, because we were getting basically kicked out of Venezuela, where it was getting very difficult to. And I'll. I'll get to that story later, but my brother's facility eventually got raided by the regime, and he. They were extorting him. That's horrible. Yeah. And. And. But basically that led to him having to escape the country overnight. Being able to take basically only his two kids, his wife, his passports, and his bitcoin.
- [38:25]
B
But he could flee with his bitcoin. That's so critical.
- [38:27]
A
But that was. And it's not even just fleeing, even being in the mindset that you can make that decision because he had to leave his house behind, he had to leave his business behind. His cash balances at the bank were worthless. Everything. Every other asset he had in that. In that situation, he would have lost everything. Zero.
- [38:46]
B
Exactly.
- [38:47]
A
Thank God he had enough bitcoin of a bitcoin cushion to get his family out and basically support them while he rebuilt.
- [38:55]
B
That's incredible.
- [38:56]
A
So he did that. And while I was building the Mine in Canada. I basically, you know, we got tired of selling our bitcoin and Adam and I just said, no, let's solve this problem. Let's do Canada's first bitcoin backed loan and let's do it the bitcoiner way.
- [39:12]
B
I love that.
- [39:12]
A
Like proof of reserves, no token, no other assets. Like the way I would want to feel comfortable.
- [39:18]
B
So help me understand something. I mean the UAE that's built on oil as well, but they seem to have created, I mean, massive wealth for the entire nation. They've, they're building up skyscrapers. It looks like Vegas times 10 on steroids. Like, why can't Venezuela be like that?
- [39:35]
A
So to answer your question, your comparison is directionally correct. Venezuela has the largest crude oil reserves in the world. The answer is corruption. And it's corruption because there's just no, the leadership is just completely inefficient and swimming out of their depth in Venezuela. When Chavez took office, Venezuela produced three and a half million barrels of oil per day. Today it produces 680,000. They've decimated the productive apparatus. And the other thing is the way they spend the money and they just award the money to their friends. I mentioned this to you earlier. There's, I think the year is 2015 in the Venezuelan budget. There's a $16 billion gap.
- [40:25]
B
So they just, the money disappeared. They just gave it to money.
- [40:27]
A
They disappeared. And the other thing is, the other thing that cost the Venezuelan government a lot of money was defending their fake exchange rate. Because when the government instills capital controls, they set the exchange rate. And typically they set this exchange rate artificially low so that their development metrics look great. For example, if I set the exchange rate at 2 bolivares per dollar and my minimum wage is 1000 bolivares a month, then you have a minimum wage of $500 a month. That's fantastic. But if you're still getting $1,000 a month and the exchange rate is not 2, but 100, you're getting $10,000 a month. That's poverty line, below the poverty line. So you would be triggering all the UN poverty things. So they create these artificially low dollar rates and in order to make them believable, they have to be able to sell those dollars to somebody at that rate. So they do it to their buddies. And so basically they're selling dollars for pennies to their friends who are then just turning around and reselling it at full pop.
- [41:37]
B
So what's the inflation rate today in Venezuela?
- [41:39]
A
200%.
- [41:40]
B
200% per year?
- [41:41]
A
Yes.
- [41:42]
B
So we complain about our 2 to 3%, which is really, as you mentioned, to your point, they're increasing M2 money supply by like 27, 8, 9% a year. That we're lucky compared to other nations.
- [41:54]
A
You're incredibly privileged. And I would argue that the United States and Europe live in a fantasy world. It's completely disconnected from how the rest of the world lives. And anyone listening to this that hasn't experienced what a capital control is, I would argue is like 5% of the world population. The majority of us have experienced capital controls. China, Nigeria, Venezuela, Colombia, Brazil, like, you go down the list and what capital control is, is you're not. You don't have freedom to. You don't have financial freedom. You're repressed. And that's how most of the world lives. That's why bitcoin is such a game changer to so many people. That's why stablecoins are such a game changer for so many people. Most people aren't even allowed to hold dollars in their local banks. What did you do before stablecoins? Hoard cash.
- [42:49]
B
This is so true.
- [42:51]
A
If you make. This is another point that sometimes goes unnoticed. If you're a person making $50 a month, okay, and you get paid at the end of the month and you try to get your boliores, get rid of them, and you have to buy cash because there's nothing else you can buy. You don't have a Wells Fargo account or bank of America account to get digital dollars into. So your only option is really cash. So say you go out there, you're a Maria, you're a nurse, you got paid on Friday and you went and got rid of your bolivar and somebody on the street gave you a fake 50. What happens to Maria?
- [43:26]
B
This is horrible.
- [43:27]
A
Her whole month's work gone. And I've seen this.
- [43:32]
B
And people prey on each other in these weak moments.
- [43:35]
A
100% because desperation leads to you making rational decisions.
- [43:40]
B
No wonder this is so personal for you. It's amazing.
- [43:43]
A
Hugely personal for me. Like, I. This is, to me, this is the biggest fight that I want to help win. I don't think there's a bigger fight.
- [43:54]
B
So I could talk to you for hours, but before we wrap up, I would just love to get kind of your vision for both the company and also really this growing industry. Because to our earlier points, it seems like a lot more people are going to want to take advantage of the appreciation in their bitcoin. They don't want to sell it. And so the solution is Borrow against it.
- [44:12]
A
Yes. So in terms of vision, I think that this is going to be a Bitcoin backed loans is going to be a trillion dollar market. And I think that for the first time in modern human history, you have an asset that a person in Barcelona can use to get a loan in the same way a person in Bogota can use it to get a loan. And today someone in Colombia can borrow from Lenin with the same quality of service, same rate, same terms, same everything as somebody in, you know, Spain, as somebody in the US that is inclusion, that is financial inclusion today at play. And mortgages have been wildly successful for Americans. Stocks have been widely successful for Americans. I'm not saying that those are bad things, but I'm saying that for not right now, the scale of the transaction or the scale of this activity, which is borrowing dollars using a hard asset for the first time, you're doing it with a hard asset that anyone can own and move in real time. So for us, we, we just want to do this better than anyone else. And will there be others? Sure. That you can come and, you know, try to offer bitcoin back loans, but we will be the best and we will maintain our lead. That is our job, that is our mission, to deliver the best bitcoin by loan experience out there. And that's all we do.
- [45:48]
B
I love it. Thank you so much for joining me on the show. I am going to take out a loan against my bitcoin. Maybe I'll take you guys on the process with me. We'll make it really simple. You've certainly convinced me and actually for my followers, Leden, you've been a great partner. I really appreciate it. You can go to Leden IO Natalie and get 25 basis points off of your first loan for my followers only. I really appreciate the time. I've learned so much and I would love to have you back on as this industry grows and learn a little bit more and hopefully by then I will have experienced this process myself. Thanks Mo.
- [46:25]
A
Let's do it. Thanks Nat.
- [46:26]
B
Thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. And if you can turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@the newsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as official investment advice and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach out@infoalkingbitcoin.com I'll see you next time.