The Hurdle Rate Podcast

Episode 53 – Bitcoin, AI, and the New QE
March 31, 2026

Brief Overview

This episode of The Hurdle Rate brings together hosts Tim Kotsman, Ben Workman, Jeff Walton, and Matt Cole for an insightful and unfiltered discussion about the current state of macroeconomics, US Federal Reserve policy, Bitcoin’s evolving role in finance, the deflationary impact of AI, and the challenges of modern investing. As they cut through mainstream financial narratives, the team explores the tension and opportunities in today’s unique economic environment, tackling themes like monetary debasement, Federal Reserve strategy shifts, the AI-driven workforce transformation, and the future of portfolio construction.

Key Discussion Points and Insights

1. Macro Headlines & The State of Play ([00:00]–[01:38])

• Recap of major recent developments: speculation about Fed rate cuts, a new digital credit ETF application, high-profile Bitcoin endorsements (from Elon Musk and Michael Saylor), legislative proposals supporting a US Strategic Bitcoin Reserve, and regulatory shifts for Bitcoin investment in 401(k)s.
• Contextual backdrop: US debt concerns and shifting market sentiment ahead of a potentially volatile April.

2. Federal Reserve Balance Sheet & Regulatory Shifts ([01:38]–[13:39])

• Ben introduces recent Fed papers (notably, Stephen Mirren’s 56-page “User's Guide to Reducing the Federal Reserve's Balance Sheet”) and the potential appointment of Warsh as the new Fed chair.
• Rationale behind shrinking the Fed’s balance sheet: “They need to reduce… in order to provide capacity for a future potential liquidity crisis.” (Ben, [03:12])
• The group examines the historical growth of the Fed’s balance sheet and the unintended liquidity crises caused by past reductions.
• Matt points out regulatory entanglements: “If you unconstrain [big banks], there’s a massive crony capitalism problem... you basically through non-economic regulations help these banks grow way larger than they would otherwise and constrain them and then you take off the constraints.” ([07:23])
• Political and practical skepticism about deregulation: “I haven’t heard any legitimate chatter of Congress taking up a major bill to substantially reduce bank regulations.” (Matt, [09:40])
• All agree: US government’s debt issuance pace and weak treasury demand undermine efforts to materially reduce the balance sheet.

3. QE Engineering & “The New QE” ([11:12]–[16:41])

• Institutional “financial engineering” isn’t so different from Wall Street’s more criticized products—just on a massive scale.
• The Fed’s possible measures include tweaking liquidity and capital requirements to manufacture demand for treasuries.
• Jeff: “While they’re not necessarily forcing buyers, they’re giving them the economic incentive to become structural buyers. The problem is how much of that demand can you create as this problem spirals out of control?” ([11:12])
• Rate cut expectations whipsaw; now the market is pricing in hikes. Nevertheless, historical precedent suggests the Fed ultimately returns to easing when pressured by stagflation and weak job markets.

4. AI as a Deflationary Force & Labor Market Disruption ([17:37]–[23:31])

• Ben raises AI as a “deflationary technology” that’s only just beginning to show its full economic impact.
• The hosts discuss accelerating job disruption, layoffs (especially in tech), and the self-reinforcing cycle of workforce “leaning out.”
• Matt questions the sustainability of startup and venture capital models amidst AI disruption: “How can you have any confidence that you’re actually worth—no one will want [that equity]... I think the valuations are just going to go down to almost nothing.” ([19:21])
• Jeff: “The only thing that you could do before that you thought was going to be completely future proofed was software engineering... now it’s all the white-collar jobs.” ([23:21])

5. Equity Multiples, Private Equity, and Value Compression ([25:53]–[33:33])

• PE ratios and price-to-book values are historically high and potentially unsustainable in an era of AI-driven disruption.
• Jeff: “If there’s volatility in that [cash flow] figure, it comes down to how much capital you have... The price to book value of 5.4x is actually an all-time high.” ([28:45])
• The team challenges “equity as store of value” dogma, emphasizing the re-rating of risk, especially in private equity/VC.
• Reframing portfolio construction: digital credit products now rival or surpass equity returns, with less risk and less volatility.

6. Portfolio Construction, Risk, and Digital Credit ([35:45]–[44:37])

• Individual risk tolerance has changed—AI increases career risk, which changes prudent asset allocation.
• Matt recalls going all-in on Bitcoin while at CalPERS due to job security, and contrasts it with today’s more precarious job outlook in the AI era: “People have to start looking at [the fact that] your career risk might be higher now. And so then your portfolio… may need to be reduced.” ([35:45])
• Digital credit—low volatility, high yield, moderate duration assets—could now serve as the new foundational reserve in portfolios.
• “Historically, digital credit never existed... And now this is a reserve to protect your capital for moderate duration, something that's never really existed.” (Jeff, [41:04])

7. Survival, Optionality, and Industry Selection in Uncertain Times ([44:37]–[51:28])

• Ben, Tim, and Matt discuss what kind of companies—if not Bitcoin or AI—they’d want to hold equity in for the next decade.
• Consensus: “Things that would be needed in a mass rollout of data centers... things you would never get rid of... consumer staples... companies that are more ‘hard’ in nature.” (Matt, [46:21])
• On personal employability: prioritize closeness to revenue generation, essential goods/services, and risk-taking sectors like insurance.
• Recognition that the landscape may look completely different in five years, emphasizing adaptability.

8. Bearish Sentiment, Bullish Outlook: Lessons from February 2020 ([51:28]–[58:19])

• Despite the bearish overtones, the panel pivots to optimism—history suggests post-crisis periods (like March 2020) are powerful entry points.
• Matt: “If you believed you had less than a year to buy an asset under a certain price and a price you would probably never see again in your life, what would be the right mindset? The right mindset would be I’m going to use this time… to buy every single Bitcoin I possibly can.” ([54:26])
• Ben: “If you’re bearish on their ability to control the debt and control the balance sheet, then you should be bullish—bullish fixed supply.” ([58:19])
• All agree: despite macro uncertainty, the fundamental long-term thesis for Bitcoin and digital scarcity assets remains stronger than ever.

Notable Quotes & Memorable Moments

• “They need to reduce [the balance sheet] in order to provide capacity for a future potential liquidity crisis.”
  — Ben ([03:12])

• “If you unconstrain them [the big banks], there’s a massive crony capitalism problem in that... why does Bitcoin even exist?”
  — Matt ([07:23])

• “While they’re not necessarily forcing buyers, they’re giving economic incentive to become structural buyers.”
  — Jeff ([11:12])

• “AI is a deflationary technology... if you just look at what’s been happening in the markets, every time AI comes out with a new layer of innovation, you can see how drastic that impact is.”
  — Ben ([17:37])

• “How can you have any confidence that you’re actually worth—no one will want [that equity]... I think the valuations are just going to go down to almost nothing.”
  — Matt ([19:21])

• “All analysis used to rest on the idea that the future is going to be more or less the same as today. It doesn’t look anything like what we’ve seen in the last three years.”
  — Jeff ([23:21])

• “Historically, digital credit never existed... There's never been a great moderate duration instrument with decent liquidity and high yield.”
  — Jeff ([41:04])

• “I think you have less than 12 months to buy Bitcoin under $75,000. ...and a price that you would probably never see again in your life. ...I'm going to use this time... to buy every single Bitcoin I possibly can.”
  — Matt ([54:26])

• “If you’re bearish on their ability to control the debt and the balance sheet, then you should be bullish—bullish fixed supply.... bullish scarcity.”
  — Ben & Tim ([58:19])

Key Timestamps

• [00:00]–[01:38] – Macro headlines & Fed transition, Bitcoin policy developments
• [01:38]–[13:39] – Fed balance sheet, regulatory maneuvering, liquidity crises
• [13:40]–[16:41] – Financial engineering and the future of QE
• [17:37]–[23:31] – AI innovation, deflation, and the crumbling of startup economics
• [25:53]–[33:33] – Equity value compression, multi-decade PE expansion, digital credit’s ascent
• [35:45]–[44:37] – Portfolio construction in the AI era, resilience, risk, and cash reserves
• [44:38]–[51:28] – Industry selection, employability, essential services, insurance as a paradigm
• [51:28]–[58:19] – Turning bear cases into bull theses, historical analogies, long-term Bitcoin optimism

Conclusion

The episode deftly combines rigorous macro analysis, grounded skepticism about fiscal and monetary policy, and a clear-eyed appreciation for disruptive technological change. Challenging traditional equity dogma, the hosts underscore the need for risk-aware, flexible portfolio construction in a future marked by volatility, AI-driven disruption, and explicit monetary debasement. Ultimately, while the short-term environment is fraught with uncertainty, the Hurdle Rate team makes a compelling case for the relentless logic—and opportunity—of digital scarcity, especially Bitcoin.

For listeners and investors alike: in a world where nothing stays the same, ingenuity, adaptability, and a willingness to challenge orthodoxy are your greatest assets.