Loading summary
Transcript76 lines
- [00:07]
A
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts. All, all the central banks going nuts. So it's all acting like safe haven.
- [00:19]
B
I believe that in a world where.
- [00:21]
A
Central bankers are tripping over themselves to devalue their currency, Bitcoin wins.
- [00:25]
B
In the world of fiat currencies, Bitcoin is the victor. I mean that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Probably should be Peruvian bull. Is GameStop going to buy Bitcoin?
- [00:40]
A
Well that was the subject of a three and a half hour spaces we had today.
- [00:46]
B
That's why I saw I was again apologize for being late but on the Uber back to the studio I was looking at your X page, I saw that you held that spaces. What was the discussion in there like?
- [00:59]
A
It was really heated. You know it's funny with the GameStop community it's like because GameStop went down the web three rabbit hole and the with the NFT marketplace and immutable and basically like using eth layer twos and loop ring to create like NFTs and shitcoins all the GameStop investors are essentially like or not all. A lot of them are shitcoiners and so fighting them. And then at the same time Bitcoin Max is coming in the space and saying you guys are all idiots. Why are you even buying GameStop? Why do you like who cares about this company? Just buy bitcoin. It was just like a two front war and it's kind of hilarious. But it was very, a very good discussion. I think we, we orange pill to quite a few people. So it was good. Hell yeah.
- [01:43]
B
The I mean does because they made an announcement last night. Correct. And before the announcement I think last week the CEO and Michael Saylor were pictured together. And what is the latest on GameStop leading up to the picture and the announcement? Are people still very into the stock? Are we still going to crush the shorts?
- [02:08]
A
Yeah, so I mean the story is very long obviously and complicated. But what the story has been for the last, let's say three years is really a turnaround story because when Ryan Cohen took control of the board in August or first he bought in August of 2020 with a 12% stake and then rose to chairman of the board in January of 2021 which was part of the catalyst for the initial squeeze. His role mainly was to save the company because it was verifiably going under. It was extremely levered. They had like a $400 million bond that was due in March of 2021 that they didn't have the cash to pay. They were free cash flow negative. They were losing money on essentially every single store except for the ones in major cities in North America. And so RC had to do this turnaround story where he first started with layoffs of admin staff. Then he started to reduce SGA expenses and he was able to get them down by a significant amount. I mean, the SGA as a percent of revenue went from like 36% in 2020 to like 22% now. So he almost halved the SGA expenses and he leaned the company so that they were able to pay off the debt and basically become EBITDA positive for the first time in like, you know, six years. But the problem now is that GameStop faces is, okay, so they've gotten rid of the debt issue that was threatening bankruptcy. And it seems like the short attacks are over because the bear case for the company is kind of gone. Right. The company's not going to go bankrupt tomorrow. They have $4.5 billion of cash on hand. But what are they going to do with all this money that they raised this summer in these equity ATM dilutions? And what I've been proposing, and I've been a part of, group of people that have been crafting shareholder proposals to the board as well as, as public letters to, to Ryan Cohen, is that they buy Bitcoin and follow essentially like a modified version of the Saylor strategy of turning some of their, you know, net income into like 20% of that into Bitcoin and potentially a third of their cash holdings into Bitcoin. If they don't have a major M and A, you know, purchase coming up, which it seems it's still, it's still up in the air because it's only been six or seven months since they raised all this cash. But given that they haven't, haven't telegraphed anything, you know, if they don't have a better idea of what to do with the cash. I think buying Bitcoin is an amazing answer.
- [04:39]
B
Yeah, and that's what I'm trying to think of is who would be an appropriate acquisition target for, for GameStop and I guess what are people throwing out in regards to that?
- [04:52]
A
People are thinking, you know, Bed Bath and beyond that, which is already bankrupt, that people are thinking Toys R Us. There's even Blockbuster, like bring back the 90s, kind of a, kind of a theme there. But the issue that I see with that is that none of these companies are really like, they're all other brick and mortar retailers and they might, you know, if you revive them and restructure management and get rid of like excessive store footprint, you could probably get the margins back up to a reasonable level. But I don't see how that fundamentally changes like the GameStop story. Right. That just seems like a bolt on, that helps their business, but doesn't, it doesn't catalyze growth in the same way that like Google acquiring YouTube is. And so that's why we've been writing for the last, you know, six, seven months to the board saying like, we need you have all this cash. Bitcoin is the hardest money ever, ever invented. You know, Saylor has done this strategy where he's been able to rocket the share price 2000/% in a couple of years. GameStop is already notoriously, you know, shorted. And you have a huge retail investor base. And if you adopt bitcoin, you would adopt, you'd get immediate buy in from a bunch of bitcoiners. If, if, if you guys were able to accept bitcoin payments for gaming and for, you know, streaming services or for skins or, or other modifications within a, within a gaming marketplace, I think bitcoiners would adopt them wholesale and you'd get a whole nother retail investor base. So the argument there is, I think, very potent. And again, I haven't been able to find another company that would, in my opinion, rocket the share price much as much as just them buying bitcoin.
- [06:37]
B
Yeah, it was funny seeing that picture with Ryan and Michael Saylor. It seems like he's taking the letters and the recommendations to heart. And I completely agree. If you have that much cash on the balance sheet, you're not doing anything with it. You got to put it somewhere. And it might as well be bitcoin, at least a portion of it.
- [06:59]
A
Yeah, I mean, it's like, what are they doing? Right? The funny thing with that picture is so Ryan Cohen has been tweeting, he's an Austrian, which is funny enough. And he's been tweeting Mises quotes if you follow his Twitter, since like 2022. And he, you know, so he kind of is already in this camp of people who understand economics, understand gold, and. But he got trapped on the shitcoin rabbit hole following meme coins, following immutable, following a loop ring and pushing the company into that. And they burned tens of millions of dollars with their, with their experiment. And it was like free cash flow positive for like a single quarter in 2021 of the meme stock or meme coin mania and NFT mania. And ever since then, the volume on the store has collapsed 97% and it's been burning money. And so they closed it down well over a year ago. And so it's like, you know, what are you doing? Like, why, why did it take you this long? It's kind of frustrating for some of us, but I think we're, we're seeing the early stages of, of, of Ryan Cohen's orange pilling, because right after that meeting, Michael Saylor started following Ryan Cohen on Twitter. And so it's a sign that things went well, I think.
- [08:16]
B
Well, I can understand and I agree with the consternation with the NFT meme coin meddling, but everybody's got to touch the stove. Gamestop, Ryan, they touched the stove. They've learned their lesson. They experienced the ephemeral highs of a shitcoin hype cycle and consequently the terrible lows. The bottomless pit of shitcoin ephemeral cycle ending. The new one materializing. I was talking about it with somebody this morning. It would be incredible if they adopted a bitcoin strategy, not only using some of the cash that they have to buy Bitcoin, but signaling others, like MicroStrategy, Meta Planet, similar scientific cathedra, have signaled like Bitcoin is our treasury reserve asset and our intent is to build that treasury by any means possible, whether that's bidding positive cash flow and profits into Bitcoin or tapping capital markets in prudent ways to buy more Bitcoin and the stock price because that would add like fuel because it's so heavily shorted.
- [09:29]
A
Right.
- [09:30]
B
If you start squeezing the shorts and killing the shorts, they got to go buy more stock. And you have sort of an additional fuel source to some upwards stock appreciation.
- [09:41]
A
Yeah, and this is what we were talking about in the spaces, ironically, right like right after that and that CNBC article came out saying like, according to anonymous sources within GameStop, the board is considering direct investments in Bitcoin. The stock price skyrocketed like 20% in after hours. Went up to like $32 and changed from like 25 before at the height. And then it retraced a bit. And we saw universal encouragement from the bitcoin community that this was a smart thing to do. And I think especially for the Gamestop meme stalkers, this could be extremely value accretive because as you mentioned, the stock is shorted to an absurd amount and the current short interest is 30%. But historically, it was above 100%. And we believe that not all those shorts have closed. They've just been hiding the short interest in other ways. And every time that been like a. A mini squeeze, or could say like a momentum push in the market, it always ends up in this, like, parabolic move. So when DFV came back in in May of 2024 and then again in June, we saw, you know, the price skyrocket from like $10 a share to $80 a share within like a week and a half. And all of that is just driven on hedging, gamma hedging with options and then retail investor buying. And if. If they buy bitcoin and in a real way, like just this rumor skyrocketed like 20%. If they actually buy bitcoin and the price goes up 100% within two days and then shorts actually start to cover, they can. They can dilute into that and then use those profits to buy more bitcoin. And so you could see the same strategy that Saylor does, except maybe even in a safer way, because instead of using, you know, convertible debt, which is, you know, arguably risky, you're just using cash on hand and cash raised from equity dilution, and so poses no risk to the company.
- [11:37]
B
Yeah, and it would be poetic because as you were mentioning before or no, after we hit record, there was bitcoiner saying, just buy bitcoin. You meme stalkers are idiots. But I was one of those people in 2020, 2021 screaming that as well. I understand the energy and the goals of The Wall street bet people buying GameStop, but Bitcoin is the true way to get back at the financial system if you deem it to be the enemy and a real way for the little guy to garner some power in this world, financially at least. And I think coming full circle, five years later, four years later, and sort of teaming up the meme stalkers, coming to the conclusion that a bitcoin treasury is a good idea is a bit poetic in my mind.
- [12:35]
A
Yeah, it totally is. It's funny because at the end of that space, as we had with like, you know, 2,000 people in it, at a certain point, we had this guy come up who was a bitcoiner who was just roasting us. He's like, guys, this. The meme stock is manipulated. They're shorting this. You know, they're clearly shorting it. They're clearly buying mainstream media, you know, views to. To. To push their narratives. Bitcoin's immutable. Bitcoin can't be fucked with, you know, buy Bitcoin. And we're like, wait, so isn't that the perfect argument for why GameStop should buy Bitcoin? Like, they're the most. You're right. They are extremely manipulated company. They have, you know, they've seen short attacks, we've seen wash trades, we've seen, you know, Bloomberg on the Bloomberg terminal, we've seen options positions from major institutions appear and then disappear within 24 hours and then reappear. And they all blame it on gl. Um, you know, like, we've seen all this weird shit happening with institutional shorts. And you're right that the system is rigged. And you're also right that bitcoin is a solution. And so it's like, to me, that makes sense that it's the perfect acquisition for a company that's been as manipulated as this one has. And he finally acquiesced. At the end of that talk, he's like, actually, you make a good point. I'm like, okay, so you see now why us GameStop holders who, you know, I don't hold like 90% of my portfolio in GameStop. It's much less than that. But I'm obviously mostly a bitcoin holder, but I do own GameStop and I want to see them win. And buying bitcoin with all this extra cash that they're not doing anything with currently seems like a great way to win.
- [14:11]
B
Yeah. And it's just fun to play through these scenarios. It's a big focus of ours at 10:31 on the private market side. Really encouraging and helping company founders approach a bitcoin accumulation strategy. Obviously get revenue, get the profitability as quickly as possible, then begin building that treasury. Whether or not you want to go public, get acquired in the future, we'll deal with that, but let's focus on the treasury first. Now, just applying this mindset to public markets too, especially considering the pools of capital that you can tap into. It's fascinating. So I think that trend, as it continues to grow again, MicroStrategy started, we got Semlar, we got Meta Planet, obviously the bitcoin miners, Tesla's got bitcoin on their balance sheet. And just block seeing this begin to really ingratiate the bitcoin strategy itself in public markets and how people are going to utilize it. And I can hear some of the hardcore listeners saying right now, Marty, stop shilling GameStop. I'm not shilling GameStop. I'm just having an interesting intellectual discussion about bitcoin's effect on Public equity markets. And I think GameStop getting into it again would be poetic and it would be hilarious if the stock ripped and all the shorts got blown out and the narratives that were massive in 2021 comeback and the gamestoppers are proven to be right ultimately with what has been going on with the stock.
- [15:55]
A
Yeah. And you'd see, you know, if that happened, there's like 800,000 people in the Supersonk Discord or supersonic Reddit page. You'd see most of them get orange pilled. It's like, wait, GameStop bought Bitcoin and that caused this massive squeeze. We all made money and then now we can own a bunch of bitcoin. Like, wow, maybe this thing has real value, real fundamentals to it. So I think that would be a major catalyst because again, most of these people are still stuck in the shitcoin loop ring and Ethereum phase. And so it's difficult to get them to move out of it just because they think that Ryan Cohen is still in that camp. And I think with him changing, that'll move a lot of the meme stalkers fully into the bitcoin camp.
- [16:38]
B
Sup, freaks? Do you have a credit card? Are you getting cash back or airline points or points for some other service? Guess what? Those are shitcoins. You want to be stacking bitcoin? I have some groundbreaking news for you. The team at Fold has finally released the Bitcoin rewards credit card. They have a wait list gonna be distributing the cards later this year. So you want to get on the wait list fold plus members are gonna get unlimited 2% bitcoin back on this credit card. If you get on the wait list, they're up to $200,000 in prizes. They're going to be given out. So get on it as quickly as possible. Go to TFTC IO fold and get on the wait list there. If you're on the waitlist, you have the potential to win some of the prizes. Check it out. Sup, freaks? This rip of TFTC was brought to you by our good friends at Bitkey. Bitkey makes Bitcoin easy to use and hard to lose. It is a hardware wallet that natively embeds into a two or three multisig. You have one key on the hardware wal one key on your mobile device and block stores a key in the cloud for you. This is an incredible hardware device for your friends and family or maybe yourself, who have bitcoin on exchanges and have for a long time but haven't taken a step to Self custody because they're worried about the complications of setting up a private, public key pair, securing that seed phrase, setting up a pin, setting up a passphrase. Again, BitKey makes it easy to use, hard to lose. It's the easiest zero to one step, your first step to self custody. If you have friends and family on the exchanges who haven't moved it off, tell them to pick up a bit key, go to Bitkey World, use the key TFTC20 at checkout for 20% off your order. That's Bitkey World code TFTC20. I'm not sure if you've been paying attention to this, but the dislocation between Bitcoin and the rest of broader crypto has never been as wide as it is today. I think James check from check on chain. He posted a bar chart the other day that blew my mind, which is if you took the rest of the bitcoin that hasn't been mined yet and you basically spun it out as its own asset with its own market cap, based off today's bitcoin price, it would be the fifth largest cryptocurrency. So you have the Bitcoin that's already been mined, I think Ethereum, Ripple, Solana, and then Bitcoin again, just the Bitcoin that needs to be mined. And I think, whether it's Ryan Cohen or whoever, I think it's becoming clear that Bitcoin is a completely unique beast in this very confused world of broader crypto. And I think even long term ETH bag holders and even the Solana bulls are beginning to concede. Yeah, it's different. And they're trying to create narratives of how they're differentiated and don't compete with Bitcoin.
- [19:29]
A
Yeah, absolutely. I mean, ETH is down 17% year to date and Bitcoin is up 5.3%. So it's already this year we're seeing that divergence. And if you look back on the cycles, the ETH Bitcoin ratio hit an all time high in 2021 and it's just been grinding down ever since.
- [19:47]
B
Earlier than that, it was 2017.
- [19:49]
A
Oh, actually you're right. Yeah.
- [19:50]
B
July 2017, it hit like 0.14 billion per BTC, 0.14 BTC and it's fallen since then. It tried to get back there in 2021 but didn't quite make it. I think it got like 0.1.
- [20:04]
A
Okay, yeah. I was looking at the five year chart, but actually I do remember you're right, it is 2017, but that's the problem with all these alts is that they all get ground down to zero against bitcoin just because they don't have the fundamental characteristics that bitcoin has. And we covered that in the discussion is like 50% of the block, over 50% of the blocks of ETH are OFAC compliant. So if you're going for immutable money or whatever, Bitcoin is the clear choice here because Ethereum is already captured. I mean so much of it has already been pre mined. But we also have the issue of the sound money fallacy, which is essentially they say, oh, we're ultrasound money because we have deflation. Well, you are able to change issuance and that's the definition of sound money. It doesn't matter if it's deflationary right now. It's the fact that you guys can change it from inflationary to deflationary whenever you want. And so defeating that those misconceptions was like so important for, for getting more of the gamestop retail investors to truly understand the, you know, the massive sea change that Bitcoin represents.
- [21:11]
B
Yeah, and even, I mean Ethereum is actually inflationary again now because they've so beautiful. And this is predicted by many bitcoiners, Humble brag, including myself for years is like they. Ethereum is the perfect representation of a second system problem. Like when they did the merge and transition to proof of stake, they were like, oh, we're going to make it perfect this time. And they completely made a complicated Rube Goldberg machine and could not foresee the unintended consequences of the changes they were making. And part of that was the architecture of the base layer of Ethereum is such that it gets really expensive to transact and that pushes everything up to L2s, which is big meme. And those are very centralized. So you have all the activity pushed up to the L2s and the whole meme around super sound money or whatever they're calling it. What were they calling it? Superson money? No, what were they called? Ultra ultrasound money. There we go. Different pokeball. The ultrasound money, they were like, all right, as fees go up, we're going to burn a lot of the Ethereum. But the dynamics of the system pushed all the activity up to the second layers and so there's no activity on the main chain. So now it's inflationary again and it's just been beautiful to see.
- [22:34]
A
Yeah. Vitalik Buterin himself wrote a paper in 2015 or 2016 and he created this, this concept of the blockchain trilemma where, you know, any blockchain has to optimize between two of the three corners of a triangle and the corners are scalability, decentralization and security. And so if you optimize for scalability, which is transaction, throughput and let's say security, you lose decentralization. Because that's just a SQL ledger. Like, that's what the Fed has right now with their master accounts. Like they just have a giant SQL ledger. They probably have very, very advanced encryption, but because there's only one node, they can just do everything instantly and the scalability is extremely high. And the problem that like, he understood at the time part of the issue, but he didn't fully connect the dots in that any money or any like true currency needs to be the, you know, the bottom and the, the bottom half of the triangles. It needs to be decentralized and secure. It does not need to optimize for scalability. So because by optimizing for scalability you will lose either the security, the decentralization. And you want the base layer of the monetary system to be decentralized and secure and you can build scaling solutions on top of that. And so what Ethereum did and what all these other altcoins keep doing is they keep moving towards this scalability issue and they say, well, we want the base layer to be able to transact 10,000 times per second. Well, great, guys, you can't coordinate that many nodes at once. You need to have miners with an insane Internet connection to be able to process, you know, that many transactions and then be able to do blocks like every, you know, 30 seconds or whatever you need for that to happen. So you're, you're not essentially creating a real, you know, money that's based on sound characteristics, sound, sound Austrian principles. You're, you're basically creating another SQL coin. And so that's what I just keep calling them is like whenever they keep coming at me, they're like, dude, look at Salana. Like, look at the tps. I'm like, great, guess what? You can only run it. You can only run nodes. And then in a, in an Amazon data warehouse, you can't run this thing in Africa like you can on Bitcoin. Like, this is, this is more centralized than anything you could even bring out to me. Like, this is, it's hilarious that they keep dragging the Bitcoin quote unquote, decentralization failure because BlackRock owns some and because some of the ETFs own some and Saylor owns, you know, 400,000 or whatever. And then they don't point out the same, you know, or even worse issue with, with Solana and with all these other, other meme coins that just need like basically to sit in an Amazon warehouse to even run. Yeah.
- [25:10]
B
I feel like every three months they need to pull the Solana cartridge out of the, the gaming system, blow on it and put it back in. It goes down and then they essentially coordinate to turn it back on. It's, it's laughable in the. And I just released an episode this morning and recorded last week with Lisa Niget, who's a longtime Lightning developer. And that's, it's fascinating too because like L2 is one of the big memes of this cycle and Lightning is technically, I hate the term L2, but it's a layer two on Bitcoin. And when you compare Lightning to all the other L2s that are being spun up, whether it's ZK roll ups or whatever bases that coinbase has spun up, even once you scale via second layers on Bitcoin, what we're finding is relative to all the other L2s, lightning is extremely decentral. And then on top of that, it's a double edged sword. It's hard to know exactly what's going on, which is a privacy benefit for people as well. You can't audit Lightning without going to each individual node operator and getting them to download the JSON files of all the traffic through their nodes to understand what's going on. So you have this incredibly robust, decentralized L2 building on Bitcoin as well that people will just completely ignore.
- [26:32]
A
Yeah, exactly. And that's what we were, you know, that's what I've been pushing for, for the board to do is to realize the use case of Lightning, especially for, you know, if we're talking about GameStop or even any other company. Right. If you want to do microtransactions in a storefront, if you want to do even like POS sales, right. Like at the store, you can do all this on Lightning. Like they act as if it's impossible and they act as if, oh well, I'll have to wait 30 minutes at the store for the transaction to settle on the base layer. It's like you don't. If you're just buying a video game for 20 bucks and you got a discount code from a friend, like you can go in, pay with your Lightning, you know, open up a Lightning channel, pay it, pay the invoice, walk out and you'll be good. Like, yeah, you don't have to over complicate things.
- [27:16]
B
Guys, I bought a hat with lightning two days ago. It took me two seconds. I was like, and let's put in my credit card information and let's put in my address or any of that. Obviously for the shipping I did, but for the financial information, the billing information, just like oh point, click send me the hat. This trip is brought to you by great friends at Unchained. As Bitcoin's role in the global financial landscape evolves, understanding its potential impact on your wealth becomes increasingly crucial. Whether we see measured adoption or accelerated hyper Bitcoinization, being prepared for various scenarios can make the difference between merely participating and truly optimizing your position. This is important, freaks. This is why Unchained developed the Bitcoin Calculator, a sophisticated modeling tool that helps you visualize and prepare for multiple Bitcoin futures beyond traditional retirement planning. It offers deep insights, insights into how different adoption scenarios could transform your wealth trajectory. What sets this tool apart is the integration with the Unchained ira, the only solution that combines the tax advantages of a retirement account with the security of self custody in any future state. Maintaining direct control of your keys remains fundamental to your Bitcoin strategy. Go explore the potential futures@ Unchained.com TFTC Bitcoin is going up. Make sure you're protecting it the right way. Make sure you have a good partner that is Unchained. Go to unchained.com tftc thank you for indulging my GameStop questions because when I reached out to you initially, that's not what it was to talk about, was to talk about gold markets and what's going on there. Because that's another big thing that's going on right now that I think people really need to be paying attention to is this, I don't want to call it chaos, but you have very material things happening in the gold market, particularly the draining vaults in London where this bank of England or the lbma and an insane amount of physical gold coming to vaults in the United States.
- [29:13]
A
Yeah. And so I wrote a piece last Sunday called Gold Breaks the lbma. And I was detailing in that piece the process by which there's essentially a run on the gold markets in London specifically, but also in the US So in the month of January, we saw on comex a record 19,000, more than 19,000 deliveries of contracts and physical deliveries. And that equates to 1.9 million ounces, which is $5.2 billion. And this is record. Oh, do you want to.
- [29:49]
B
Well, I Was going to say, just clarify. So Comex, it interacts with the CME contracts, right? Calling CME futures contracts in kind.
- [29:57]
A
Yeah, exactly. And the comex, I mean the COMEX is the North American commodities exchange that is used to settle basically all commodities that you think of trading as like copper, you know, wheat, soybeans, and then obviously gold and silver as well. And comex, the thing about it is that in North America and in London, by the way, all the futures markets are primarily cash settled. So it's this giant game of paper shorting where a bullion bank can take 100 ounces of physical gold they have in the vault and they can sell forward 1,000 ounces in the futures markets. And because 97% of participants are not taking physical delivery, they take cash delivery, they're able to just continue this game and roll the futures forward continuously. And so it's a mechanism by which the bullion banks and just the structure of the exchanges can essentially suppress the price of gold in real time. And we've known about this for decades, by the way. I mean this has been written about by, there's a couple of bloggers called another and friend of another or FOA who are writing about this in the late 90s on the gold trail blogs. There are people, you know, like obviously Peter Schiff has been talking about this, Mike Maloney, this has been well known in the gold space for years. But the question is, when will the gold market break? When will the, when will all the paper shorts or paper futures owners come to the door and say, hey man, I have announced for, or have I have a contract for 100 ounces of gold. Give me the gold right now. And then the vaults are all empty and the market goes haywire and the market is completely breaks down. And I believe that this, you know, this could be a stress test for that exact scenario. Because what's been happening is we've seen this huge surge in, in current contracts on the COMEX being delivered. And like I said, month of January was the highest January month in probably like five years of deliveries. And if you look at the chart, it eclipses every other month by more than double. They had to deliver 1.9 million ounces to people who were redeeming their, their, their futures for COMEX. And COMEX responded by buying 11 million ounces of gold and filling their coffers, basically front running this surge of deliveries. Because I think they're realizing that their inventories are getting too low because especially since COVID they've been being drawn down Especially by deliveries into the west or east into Shanghai. Comex has been loading up on this gold and about half of it's been coming from producers from gold miners and then the other half has been coming from mainly the lbma. And so with this strain on the New York and US based gold markets, we've seen a draw of gold west to the US but we've seen the same simultaneous drain in the UK and that's caused this chaos because the UK market is thin and all the bullion banks and participants are trying to work on getting physical liquidity. Right. So they're trying to get the actual gold in hand to be able to make these deliveries. And the problems, they've been running out of physical gold on hand and so they've been moving to the bank of England to get a source of gold liquidity. So that's been the trend here for the last month or so and it's been increasingly playing out, especially in the price.
- [33:31]
B
Yeah, the. Because I, and it's a. Correct me if I'm wrong, but Comex physical delivery is almost at or surpassed the point of COVID when this happened in 2020. Because that, that I remember this popped up in 2020 too. Like when you had Covid come lockdowns and everybody freaked out. You had a similar, similar situation arise. And it seems to be about to or already have surpassed what happened in March and April of 2020. Which is perplexing because comparatively doesn't seem like the global economy is as uncertain. Yes, it is somewhat uncertain right now, but compared to how uncertain it was in March, April 2020, it seems to be in a much better position today. Which just brings up the question like why is this happening now?
- [34:29]
A
So there's a couple different theories. The first one is the trade war and the tariffs. It seems that there is fear that the current administration will submit significant tariffs to gold and that has caused these bullion bank traders, especially in New York, to rush to take physical delivery of their holdings in London. Because the problem is a lot of these institutions actually hold their physical gold with London based custodians. So for example, the GLD etf, which holds well over a million ounces of gold, has all their holdings in hsbc, all their gold holdings custodied by HSBC and all those are in London. And so if they want to front run some sort of tariff threat of moving gold from one country to the next, we'll have 20% fee attached to it. Then they have to move the gold. Right. Now I think that that's part of it. I also think we're seeing massive gold demand from institutions. I mean 2024 was another record year for central bank gold buying. Especially Q1 was the highest gold buying Q1 in history that we have recorded for central banks. So there's been this pull of liquidity in general from the exchanges to the central banks. And that's especially true for Asian countries like China where you've seen not only the central bank continue to buy all throughout 2022, 2023 and 2024, but you've seen huge retail demand. And that retail demand has been in mainly physical because the differentiator between the COMEX and the LBMA and the sgei which is the Shanghai exchange, is that the Shanghai exchange is physically settled only. So if you buy a contract, you are taking delivery no matter what. It's like it's not really an option. And that means that if there's a price differential between Shanghai and the COMEX or the lbma, you can go to the LBMA and buy gold and then take to physical delivery and then ship it to Shanghai and sell it for a higher price. And ever since around late 2022 I covered this in another subsect piece. But ever since late 2022 we've seen $30 to $50 price divergence between physical gold prices, spot gold in Shanghai and spot gold in the COMEX and in lbma. And so that's caused this drain of this institutional and retail drain of gold from west to east as China enters this, I think kind of deflationary crisis that they've sleepwalked into.
- [37:13]
B
Yeah. What are your thoughts on the other theory hanging out there about Scott Besant, how he's been talking particularly over the last 18 months about this need for like a Bretton woods or Plaza Accords. Excuse me soon. Which would necessitate like a repricing of the gold the treasury holds at the Federal Reserve from $42 an ounce to maybe spot price today. Or some people even saying just mark it up even higher than that.
- [37:50]
A
Well I think that, that that could be part of the catalyst. I mean it word. Brent Johnson says this best, right? Like words are easy, action is what counts. So same thing with BRICs with their prognostications that they're going to be starting a currency block and basing it on gold and sil all the Mike Maloney's and the Peter Schiffs of the world have an aneurysm and go on Twitter to celebrate every time there's a headline like that to do it in practice is much more difficult. And as you know, gold, especially if it's pegged to a certain dollar amount per ounce, it provides structure to the monetary system, but it also limits the amount of money, at least ostensibly, that they can print. And as we're going to a cycle where Federal debt to GDP is 132%, the fed funds rate is still above 4%, inflation is rising again, I think the practical ability of them to convince enough stakeholders to actually restart the gold standard is very low. I mean, I think it's more speculation and hopium on their part.
- [39:03]
B
Yeah, that's a good point. Great quote. Much easier to talk than it is to act.
- [39:09]
A
Yeah.
- [39:10]
B
Where do you think this goes? Do you think this is the, the big event that everybody's been talking about? Because you mentioned the gold bugs have.
- [39:18]
A
Been.
- [39:20]
B
Screaming from the rooftops about these paper trades suppressing the price for, for decades. And I think it's safe to say they've been cast aside, I think somewhat wrongly as just nut job conspiracy theorists is like what maybe the other way to phrase it is like how long does this have to continue before something truly breaks in the eye of like true price discovery in gold?
- [39:46]
A
Well, the, from the LBMA's own data records we know that there's about a billion physical ounces of gold in London and around 800 million of that is already claimed. And so these stresses we've seen in the markets have been indicative that, that we're starting to near a breaking point. Right, And a breaking point doesn't mean necessarily like oh okay, all the banks collapse and the end of the world. It just means gold getting repriced upwards like dramatically like several hundred or even a thousand dollar move in spot gold markets within a week or something like that. The indicators have been numerous and I'll go through a couple of them. First off, like we said, around 80% of the gold in London is claimed. And the bullion banks are kind of panicking because they've been trading this paper credit version of gold, basically unallocated paper ounces between each other. And it looks like the markets that facilitate that are starting to freeze up. The bullion banks and the dealers are not wanting to make those trades or to even try to redeem the paper unallocated gold. And they've been going to the BOE because they themselves are running out of physical gold. So they've been trying to find other sources. And the bank of England has a sizable amount of physical gold, I think over 40 tons. And so they want to have some sort of liquidity. And the BOE has a leasing program where they can lend you gold at different rates, obviously for different maturities, and you just have to give it back to them. So to get this liquidity, because it's mainly a liquidity issue, all these bullion banks have been going to the boe. The problem is that the BOE is not set up currently to manage this kind of demand and this kind of logistical constraint or pressure. And so that's meant that the weights at the BOE have extended to like four to eight weeks for even authorized participants to get physical redemptions of gold. And the BOE also sells these paper unallocated gold certificates, basically promises to get gold and the delta between those papers paper promises for gold. And the real spot market is now widened to several hundred times larger than what it normally was. For reference, it's only a $5 price differential. But normally the boe's gold, at least their paper promises, their IOUs, their gold certs trade within a few cents of spot and they've blown out to $5. So this is a massive, massive dislocation in the price for the boe's paper gold. And it's showing that, that the market essentially doesn't believe that they have all the gold that they've claimed.
- [42:28]
B
Yeah, I think the weight, this is essentially you have a bank run in the beginning stage of bank run, the wait times persist and God forbid they get longer. You have the social element that creeps in where it just feeds on itself.
- [42:45]
A
Yeah, no, totally. And we've seen the contagion spread so late January we saw, that's when the first, basically the first warning signs of the boe's logistical constraints started to show up. Where they started putting delays on physical deliveries of gold. Where their paper search started trading below market value. Then we saw obviously refusal of redemptions for retail investors and for non authorized participants, which are authorized participants are just the large institutions and banks that own gold. Then we saw this move to even the ETFs. So GLD ETF, like I mentioned earlier, they custody well over a million ounces in, in HSBC in London. And the GLD ETF restricted short selling on their stock or on their, on their ETF shares at the end of January. And then they also saw a like a 6% rise in the borrow rate of their shares. Because what authorized participants were doing was they would take GLD shares and you could redeem them for the physical gold, but only redeem them in London. And you had to be obviously A bank or a broker dealer and then they were taking physical delivery. So they're using the ETF shares, they're borrowing them, they're redeeming them and then they're taking physical delivery of the ETF's gold that's stored in London itself. And so the pressure you can see is building and it's substantial because again I don't think we've seen this kind of stress in the markets since COVID or even before. So it is significant it for sure.
- [44:20]
B
Where are we trading right now for gold?
- [44:23]
A
Yeah, gold hit like 2880. Yes. Or at least I guess that'd be Wednesday. It was an all time high and then now I think it's like in, in the low 28 hundreds but it's been hitting all time highs for the last three weeks or so.
- [44:39]
B
Yeah, I don't even say like because again in 2020 I remember I recorded it with Roy Sabog while this was going on. He's a long time gold trader. I think he has very good knowledge on the bullion markets. And at that time it was like ah, things could really get out of hand here and obviously things settled down. Now it's bubbling up again only five years later it's like all right, is this just another sort of temporary bubble up like it was in 2020 or do things get more serious this time around? And you have a different confluence of variables contributing to this whether it's the tariffs or just people calling more physical because they don't trust that the, the paper is representative of all the gold that that exists in these vaults.
- [45:40]
A
Yeah, and there's also been regulatory changes. Right. We saw adopt change to the NSFR which is the net staple funding ratio with Basel III in 2021 that allowed gold, but only physically, physically, physically held and unallocated gold holdings to be counted as 0% haircut assets under Basel. So basically allowing them to be treated as like a reserve asset like just like Treasuries or mbs or whatever other high quality bond. So those changes have happened and there's been also a categorical shift with institutions view of gold obviously. So we've talked about with central bank buying and with retail and institutions buying especially in China there's been a demand for gold but I think we're both in agreement that gold is the old boomer Bitcoin and it's just better to buy Bitcoin because you don't have this settlement issue in the trust me bro IOU problem that the physical gold market has and it's systemic, it's structural to the market itself. There's something else that some of the gold bugs I think they misunderstand is they apply their Austrian economics on how the world should work. The gold should be the money that everyone uses. And everyone should walk around with flakes of gold in their pocket and gold bars and be shaving off a little bit for a coffee and shave off a little bit for your groceries and get a bigger chunk for your car repair. The problem with that again is that gold has this settlement and centralization issue where it's impossible obviously for microtransactions to be conducted in gold. So it gets centralized and stored and it's just like a physical, this is just a mechanistic physical law that is impeding gold. And then once you do that, once you centralize the gold and issue paper promises to transact in it, you get this issue of okay, well do they really have the gold? Can we trust the auditor even if they are audited? And then some banks obviously, like the Boeing has been refusing audits and the Fed has famously refused audits. So no one really knows if they actually have the gold or if they're just holding gold credit with other institutions that also say they have the gold. So this issue is systemic to the market and it's structural. And even if we reset the system today back to 100% gold reserves, it would eventually start to perpetuate itself again. It would eventually start to see more paper gold trading than physical. We start to see more and more promises. Taking delivery is, is difficult. Right at the COMEX it's 100 ounce bars. And so if you're a retail investor, that's $280,000 or whatever. Like you're not going to take that physical 100 ounce bar and delivery so you just settle it for cash. And you would just see the system perpetuate itself again and explode to the current, you know, ten to one paper to gold leverage ratio. And it would just, it would just happen again.
- [48:32]
B
Yeah, gold's physical nature really cucks it in some regards. That's what it's been fascinating to watch as a bitcoiner. What you just described would be chaotic for our gold bugs. I'm very sympathetic to our gold bug brethren in the sound money community here, the broader sound money community. And that's what bitcoiners have been beating the drum on for the last few weeks as gold has been consistently hitting new all time highs. And bitcoin's been range bound between like 95,000 and 103,000 is gold's going to lead the way, Bitcoin's going to follow, but it's going to outperform by multiples in terms of how much it appreciates comparatively. And I, I do think there is a lot of credence in that idea. I think at least in the short term history post 2020, it's traded that way, that sort of correlation, that lagging correlation and outperformance that bitcoin has with gold. But you can feel it like in the bitcoin world today you had Abu Dhabi announced that they have a 430, or maybe not announced. It was disclosed that they have a $430 million position in Bitcoin ETFs. Obviously the Trump administration is very pro bitcoin at the very least from a regulatory perspective to let it flourish and potentially at a strategic reserve level. And it feels like the tailwinds are building and then and bitcoin is just range bound and the range is getting tighter and tighter and something's going to happen at some point I think in the relatively near future where it breaks one way or the other and my belief is going to be up. Granted. Anybody listening new to the show, my bias is bitcoin up always. So take that with a grain of salt. But it feels like things are coiling for a big move.
- [50:23]
A
Oh for sure. And generally again I'm not a chartist, I'm not a technical day to day trader, but I have read those books and I have traded before. Generally if you see a narrowing range and increasing volume within that range, it's coiling up for a big move. Either way I agree. I think that the move is going to be eventually to the upside because gold has historically. And again I wrote another substack piece about this called Printer is coming back in October of last year. But gold has historically front run waves of QE by about about 12 to 18 months. So if you go back to the first gold bull market, or Maybe not the first but the first major one in this century In 2005-2011, Gold Front ran the first major waves of QE first in 2008 and then the next QE2 that started in 2011, 2012 and even QE3. And then once QE was seen to not be like the balance sheet was stabilized, gold started to get ground down again and fall to its all time lows of like 1050 an ounce or whatever or I guess 10 year lows. And then we saw it front run even before COVID we saw in December 2018 gold start to enter a bull market rally and basically front run the QE and run all the way up to $2,000 and 2070 announced in August of while the Fed was just starting qe. And then obviously it started to retrace as the Fed was doing more qe. But what it was doing was it was foretelling of the taper cycle, which you follow it. August 2020, 18 months later is roughly when the Fed started to do their taper, which is March 2022. So this cycle has been seen again and again. And obviously like you said, gold has much less sensitivity to changes in global liquidity than Bitcoin does. Like we're talking orders of orders of magnitude, but multiples less. If net liquidity grows by a dollar, gold might go up by $1.50 and Bitcoin might go up by $5. It's that severe. But gold has historically been this front runner of global liquidity. And so if you take the gold chart and you, I guess you push it forward or push it back to the price of Bitcoin, it also foretells of a massive rise in the bitcoin price in the next six months or so. And so if the gold price is correct right now, which I think it is, and signaling that there's essentially another wave of QE coming and that wave is going to be pretty substantial and that will result in obviously higher bitcoin prices.
- [53:14]
B
Yeah, and that's the many people are surmising that QE is coming, something's going to break in terms of liquidity in the system where it's exactly unclear. I guess throw that to you like we're looking at the markets right now. Reverse repo is draining. I believe it's under 80 billion right now available in the reverse repo markets, falling all the way from 2 trillion in 2022 I believe. So that is a significant alarm bell. I think that's going off. And then on top of that, obviously you have a bunch of debt rolling over right now here in the US and I believe tomorrow the 2015, there's a block of $66 billion worth of 201510 year treasury set to roll over. They were issued at 2% and they'll roll over tomorrow at like 4 1/2 percent. And so that represents I believe like $130 billion of additional interest expense on the debt annually just for this one block of 10 year treasuries. And we have 6 trillion of treasury notes, bonds and bills to roll over. I believe the first half of this year. And so whether it's an overt liquidity crisis caused by something like reverse repo draining and banks not being able to trade reserves, or somebody looking at treasury issuance and the rollover and saying, hey, we need to figure out a way to lower rates to bring these yields down so that we're not rolling over and adding $500 billion annually to our interest expense.
- [54:59]
A
Yeah, exactly. I mean, you said it right. There's 6 trillion in the first six months. I think the total 2024 is around $10 trillion of debt to be rolled over. Right. Almost a third of the entire federal debt load. This is an extremely debt heavy year. And that's part of the reason why I've been arguing why the Fed is actually easing. Right. Despite the fact that we're not in a recession, we're not fighting a direct war, even though we're funding two wars, obviously indirectly, we're not fighting a direct war. There's no major banking panic, at least on the surface. So why is the Fed cutting if everything's so great and the economy inflation's not solved? Yeah, yeah, you're right. CPI inflation has been rising since September of last year, has been going up for each consecutive month. And then this month, obviously January, we saw CPI rise to 3% and PPI rise to three and a half. And that's a major warning bell that things are going wrong, that inflation's moving in the wrong direction. And yet the Fed, all they've done is to say, okay, we'll still cut, but we'll just cut a little less. And historically the problem with that is that obviously first of all, the Fed has never done a cutting cycle without doing QE ever since 2008. So if we're going to be doing this cutting cycle and not doing qe, it would be a break from the historical norm. And also I think operationally it'd be next to impossible because if you're going to cut rates, especially to zero on the Fed funds rate, you have to have the entire yield curve follow you there, there. And without Fed buying, it's going to be impossible to move the yield curve to be especially the short end or the front end to be on par with around where Fed funds is at. So if you're operationally thinking and you're a Fed governor, how do you do this? How do you pull this magic rabbit out of the hat? How do you lower rates without causing more inflation and without doing qe? I think you can't do it. And if you have to choose between treasury market solvency and more QE and just getting yelled at on tv, I think you're going to choose the latter.
- [57:10]
B
Yeah, I figured it was earlier this week or last week, but Jerome Powell's comments post FOMC meeting were pretty interesting where he explicitly said we can't do QE until interest rates are by the zero bound. So I think that's where my, my memory serves me correctly. It was something of that like sort.
- [57:30]
A
Of choreographing like yeah, yeah, historically he's right. But he's also here's the other thing that people should notice is that we haven't had a slow, steady cutting cycle since the 1980s. So every cutting cycle since, you know, mid-80s post Volcker shock has been basically like very quickly down. Within 12 to 18 months the rate goes down 5%. Right. You saw that in the 90s. You saw that in the 2000s with the tech bubble burst where if fed funds rate fell all the way to 2% from like you know, five and a half or 6% before. You saw it again in 2008. Obviously we went from five and a quarter all the way to zero post 2008. And then again we saw this in 2020 with COVID We saw the fed funds rate dropped to zero within very, very short, short amount of time. So with them talking about this slow and steady cutting cycle again, I think it is going to be slow and steady until there's an issue or until just the funding needs of the government are too much. And once that funding need becomes too much, they just don't have a choice. They're just like, okay, we have to lower rates to zero, we have to do qe, we have to grow our balance sheet again. And they'll create another reason why they'll talk about this is transitory, it's a temporary government program, et cetera, et cetera, et cetera. But the end result will be more liquidity, more bond buying and more monetization of the debt.
- [58:50]
B
Yeah, that's what I think. Obviously the Trump admin has to be aware of what's going on, particularly in treasury markets and all the debt that needs to be rolled over where yields are and I guess is that and I think people are hoping for a saving grace and doge and all this cutting publicly is being positioned as, and rightfully so to a certain degree as a way to root out corruption and wasteful spending that Washington has engaged in in recent years and decades. If we're being honest, it is had. It has been interesting like since Trump's gotten to office without cuts. The yield's been coming down. And I think that's because bond buyers are saying it looks like, at least on the fiscal side, the US Is putting an honest foot forward to try to get things under control. Start with usaid, move to Medicare, Medicaid. The IRS is getting audited and there are hopes that eventually they'll get to Defense, which is a large part of our spending. And maybe the probability I would put on this is very low. But is there a way that the Trump admin could thread the needle with all this cost savings on the fiscal side by essentially sending Elon and his crack team of autist in to figure out where the money's being wasted and cut it out as quickly as possible to signal to potential bond buyers like, hey, we're getting our act in order, like you should be buying our bonds.
- [60:23]
A
Well, I think editing, you know, auditing the Defense Department is a very quick way to get yourself suicided on, you know, in your car on a Sunday. But I'm, I'm, look, I'm hopeful Doge has done much more than I initially thought with finding corruption and waste, obviously. But I also know, you know, as a pragmatist and as someone who, you know, has studied the, the federal budget, the real, the real, you know, monster in the room, elephant in the room is the non discretionary spending. Social Security, it's the Medicare Medicaid, it's, you know, defense, it's those things. And those things are extremely hard to cut. And like, let's say, let's say 10% or even 20% of that spending is fraud and we can just, just cut it out completely without having an adverse effect politically, the rest of it is not. And if the lion's share is fundamental spending that's going to voters, they're not going to vote for their own paychecks to be turned off, their own Social Security checks or their Medicaid Medicare assistance to be halted. And so what that means is that politically it's next to impossible for them to cut that spending. And I think unless Trump is able to get a coalition of Republicans together that have enough willpower to become essentially like Tea Party participants and Ron Paul's and just slash the budget and ax all their political careers and be out of politics forever, I think that the budget problem is not going to be solved just by Doge. You know, they might cut a few percent, but him talking that he's going to cut, you know, 2 trillion of spending a year. I mean, you've got to go after Social Security in defense for that. There's no other way around it. Yeah.
- [62:08]
B
And even if we're being generous and saying, ah, maybe all this will happen and you can do that, like, they're still. The clock's still ticking in the sense that we need to roll over this debt. Yields are where they're at. And the market reaction to the spending cuts may not happen until after his first year in office, after which point, like, all that debt sort of been rolled over at higher rates and you're stuck with that interest expense.
- [62:37]
A
So, yeah, it's a. Yeah, yeah, it is a show. And, you know, that's. So that's. The irony is that I called this the Peruvian bull debt paradox. Had a tweet about it in, like, October 2022 that went kind of viral where I was basically saying, like, here's the irony is that the higher they hike, the further they move behind the curve. Because with this debt load, you're raising rates into an environment where your interest expense will blow out, out, and then your borrowing rate obviously will blow out because you have to finance that additional interest expense cost. And then that means that the curve is essentially steepened more and more because you have to borrow more and more and pay more and more interest expense. And so the debt spiral accelerates. And that means that with the next wave of qe, when you have to do the next round of easing, you're going to have to be buying more bonds than you would if you had hadn't hiked, ironically. And so there's truly no way out of this conundrum. Like, they're trapped in this black hole of their own design. There's no, you know, there's no magic button they can press that will get them out of this. They either die via inflation by cutting rates to zero and doing qe, or they die eventually by inflation by raising rates to 5% and incurring a bunch of interest expense and accelerating the national debt spiral and then lowering rates and buying a bunch of that debt that they caused in the first place. And so there's no easy solution for the Fed or for really any central bank that's facing above 120% debt to GDP. I mean, QE is really the only answer here. It's going to be infinite liquidity soon.
- [64:12]
B
How high does Bitcoin go?
- [64:14]
A
I mean, hard to put a price target right. As Max Kaiser says, bitcoin has no top because Fiat has no bottom. But I would say I this cycle, obviously, targeting 250k, hopefully up to 300, 350 potentially. But in the end game, obviously, in the next 10, 20 years, we're talking millions of dollars per Bitcoin, easily.
- [64:40]
B
Yeah. And I think things could get weird this year in the bitcoin market because of all these factors we've been discussing over the last hour. And it is with this Trump administration, with Doge, it does seem like, again, there's an honest effort to cut out the waste and spending. But as you said, this conundrum that exists with the debt that already exists, I don't want to say it's a worthless effort, because I do think it's earnest and worthwhile and virtuous to cut out all this waste and highlight the corruption and kick these parasites out of D.C. but I think the end state of the debt situation was predetermined. Once we passed a specific threshold. 120% debt to GDP is what many people like to reference as. Once you pass that, you don't come back, who knows, whatever's there. But I think wherever that line is, we crossed it a long time ago. There's nothing anybody can do to fix it, to go back on the other side of the line.
- [65:48]
A
Yeah. We crossed, as I term it, the monetary event horizon. Right. And so once you cross that 120% debt to GDP, you have this issue of any increase in GDP gets financed by additional debt and the ROI on that debt becomes negative. You have to go into more debt with each marginal dollar to produce diminishing returns of growth of, of real gdp. And so that means with diminishing growth of real gdp, you have diminishing, obviously, real tax dollars coming in. And so that's why your ability to finance that debt is collapsing. And you have to pay it by borrowing. Right. So your ability to fund it by real tax receipts falls off a cliff and you have to borrow the difference. And that increasingly means more and more money has to be borrowed. The reason why the 120% is the figure that everyone thinks of is because Hindenburg Research released a report, I think this was in 2017, where they analyzed every country since 1850 that's gone above 120% debt to GDP. And they found that 54 out of 55 countries had defaulted by either a straight out demonetization of the currency, a hyperinflation, inflation, or a depression. And the only exception out of those 55 countries was Japan. And Japan is obviously currently in its own yen crisis, slow motion, currency meltdown. And so there's really been no exceptions to this hard and fast rule. And the us, even though it's a reserve currency which grants it additional borrowing capacity and additional demand for its currency outside of its own borders, the US is not immune to math either there. And so because of that, we're, you know, we're running up on this increasing inflation, lowering rates conundrum. And I think the, you know, the price for bitcoin in that environment is, is whatever needs to be in an infinitely debased world, it needs to be.
- [67:51]
B
Way higher in an infinitely debased world. I think that's easy. Easy to say thank you for doing this. I know Friday afternoon and we sort of put this together last minute, but I saw you put out your piece on Sunday and I think it's very important, if you're listening, pay attention to the gold markets. I know this is a bitcoin podcast and many people are like, oh, bitcoin, gold's a shitcoin leading indicator, very important. And I think seeing the flows of physical gold that have materialized in the last few weeks has been very fascinating to watch play out. This is exactly what was happening in the beginning of 2020 before there was a ton of, of market volatility. And I think that alone is a canary in the coal mine that we've seen before. It's happening again. You should be paying attention to it.
- [68:35]
A
Exactly. Like I said, gold is front running liquidity like it has done in the last three cycles. If that's true, that means bitcoin is being primed for another huge move higher. And if you're a bitcoiner and you're thinking, yeah, who cares about the gold market? This thing doesn't really matter. It's anachronistic, it's a pet rock. I think that that's completely wrong because again, you have to remind yourself that these institutions function on this older standard of how things are valued. And for them, bitcoin is extremely speculative and they're just starting to get their toes in. But gold is something they understand and gold is for them the hedge against inflation and debasement.
- [69:15]
B
They literally don't have the infrastructure to have bitcoin as a reserve asset, particularly in the banking, in the banking sector specifically, like you mentioned, Basel 3 has made gold, physical gold, an asset they can hold as a reserve without taking a haircut on it. Here in the United States, at least, Europe's completely fucked. But here in the United States, we just had Hester pierce at the SEC repeal SAB121 and issue SAB122, which allows the Banks to custody Bitcoin, but they haven't built out any of that infrastructure. If they wanted to, they couldn't even do it yet. There was announcement, I believe State street and Citi have signaled that they're going to get into it. But you literally need to adopt technology, set up, processes, compliance, all that, to do it first to bring on Bitcoin as an asset, whether you hold it on behalf of your customers or the bank itself. And that infrastructure exists for gold and it's being leverage and use right now. And that's something we should be paying attention to.
- [70:17]
A
Yeah. And this is a massive opportunity, obviously, for Bitcoin companies. Right. Go start a custody service and get a bunch of bitcoiners together and teach institutions how to safely custody their Bitcoin and help this adoption curve along. Because getting institutions in the door obviously increases the flywheel effect of Bitcoin. And their ownership of individual coins doesn't affect the nodes or the miners. And so that's bullish for the price and bullish overall for the ecosystem.
- [70:47]
B
Yeah. And if you bankers out there listening to this and you're thinking, we need bitcoin infrastructure, imagine partner 1031. We have a lot of portfolio companies that could help you out. Hit me up. Okay. We can help you. Peruvian Bull. It's always a pleasure. We gotta do this more often. I think I say this every time you come on.
- [71:05]
A
This is fun. I love talking macro with you, Marty. You're very knowledgeable and you always ask really good questions that make me kind of. Of squirm in my seat to. To give a good answer.
- [71:13]
B
So maybe we should do a quarterly Peruvian Bull update. We. We'll. We'll try to mix that in.
- [71:19]
A
Let's do that. Sounds great.
- [71:21]
B
All right, you go enjoy your weekend. Happy Valentine's Day. Hope you have a good one.
- [71:26]
A
Thank you.
- [71:27]
B
Peace and love, Fre.